EX-99.1 2 v301820_ex99-1.htm EXHIBIT 99.1

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 

MANAGEMENT REPORT – 2011

 

To our Stockholders:

 

We present the Management Report and the Financial Statements of Itaú Unibanco Holding S.A. (Itaú Unibanco) and its subsidiaries for 2011, in accordance with the regulations established by the Brazilian Corporate Law, the National Monetary Council (CMN), the Central Bank of Brazil (BACEN), the Brazilian Securities and Exchange Commission (CVM), the Superintendency of Private Insurance (SUSEP) and the National Council of Private Insurance (CNSP).

 

1)Highlights

 

The total value added of Itaú Unibanco, which shows the wealth generated for the community, reached R$ 36.8 billion in 2011, and is distributed as follows: 32.6% to the employees, 33.2% in profit reinvestment, 23.0% in taxes, fees and contributions, 8.7% in compensation to its stockholders and 2.5% as return on third parties’ assets.

 

For the eight consecutive time, the Itaú brand was recognized as the most valuable in Brazil by Interbrand consulting company, a pioneer in the development of the brand valuation method, being valued at R$ 24.3 billion, 18% higher than that posted in 2010 and 130% higher than in 2008 (year of the Itaú and Unibanco merger).

 

At December 31, 2011, Itaú Unibanco was ranked as the eight largest bank in the world based on the market value criterion (R$ 152.8 billion), according to the Bloomberg ranking. At the end of 2010, the Bank occupied the tenth position in this ranking.

 

Itaú Unibanco continued, for the seventh consecutive year, in the group of companies selected to make up the portfolio of the Business Sustainability Index of BM&FBovespa (ISE) in the 2012 review. Additionally, Itaúsa, one of the parent companies of Itaú Unibanco, was also included in ISE for the fifth year, and Redecard, a company controlled by Itaú Unibanco was chosen for the third year in a row.

 

In 2011, several campaign films, in addition to tutorials focused on the Responsible Use of Money, were disseminated with great echo in the social Networks; together they generaterd over 20 million views. Itaú Unibanco is currently on Facebook (facebook.com/itau), on Youtube (youtube.com/bancoitau) and Twitter (twitter.com/itau) and after less than 5 months on the web, the Fanpage (page) of Itaú Unibanco on Facebook exceeded 730 thousand fans, being the leader in number of followers in the whole category. Itaú still holds the leadership on Twitter, where it has over 80 thousand followers in all its profiles.

 

The remodeling process in the retail service network, based on the new relationship model with clients, which reviews concepts of service and layouts, reached the total of 1,500 units remodeled at the end of 2011, of which 440 were remodeled in 2011.

 

The expansion of Itaú Uniclass service in the retail network, started in September 2011, exceeded 1,300 branches and service centers (equivalent to 26% of the total network), which are now serving clients with dedicated managements, exclusive ATMs, revised credit limits, specialized advisory and management services over the phone in extended hours, totaling over 2,700 bank points of service. The Bank estimates that until the end of the first quarter of 2012 it will implement the Itaú Uniclass service in over 1,500 points of sale, almost reaching the whole retail network.

 

After the completion of the integration of the Itaú and Unibanco branches in 2010, we implemented the “Efficiency Project”, which favors the budget management and matrix monitoring of costs and revenues, the establishment of targets for each business unit and the dissemination of a strong culture of operational efficiency. The principles of this project establish the detailed analysis of all result indicators, sharing of best practices and matrix control. This project enables us to set the challenge of reaching the efficiency ratio that measures the relationship between operating revenues and expenses, of 41% at the end of 2013.

 

 
 

 

1.1)Corporate Events

 

In April, Itaú Unibanco Holding entered into an Agreement for Purchase and Sale of Shares with Carrefour Brazil in order to acquire 49% of Banco Carrefour for R$ 725 million. Banco Carrefour is the entity responsible for the offer and distribution, on an exclusive basis, of financial, insurance and pension plan products and services in the distribution channels of Carrefour Brazil operated under the “Carrefour” brand in Brazil (electronic channels, hypermarkets and supermarkets). The completion of the transaction depends on the approval of the Central Bank of Brazil.

 

In December, the sale of our credit card processing operations to third parties, carried out by Orbitall, a credit card processing company, was announced. The sale was made to the Stefanini Group, a Brazilian company in the IT solutions sector. The completion of this operation is scheduled for the beginning of 2012. The integration of the activities carried out after the merger made the operation feasible, since Itaú Unibanco gained scale enough to process only its own cards from all companies of the group, with competitive edge and cost efficiency.

 

In Chile: 1) We entered into an agreement with Munita, Cruzat & Claro, one of the leaders in management of third parties’ wealth, for which organized a new company for joint development of this niche; 2) We completed the acquisition of the high net worth portfolio of HSBC bank, ranking Itaú as the leader in the segment, with a network of 84 branches in that country.

 

In October, we performed a 100-to-1 reverse split of common shares (ITUB3) and preferred shares (ITUB4) and a subsequent 1-to-100 split of shares, as approved by the Shareholders’ Meeting held on April 25. The purpose of the reverse split followed by the split was to bring more efficiency to the operating system of book-entry shares due to the elimination of amounts below 100 shares from the base.

 

In 2011, we acquired 40,970,900 preferred shares of own issue, in the total amount of R$ 1.3 billion at the average price of R$ 31.79 per share. The program for repurchase of shares was renewed for another year at the Board of Directors’ meeting held on October 31, 2011. This program establishes a repurchase limit of up to 56,700,000 preferred shares and 9,000,000 common shares.

 

2)  Economic Environment

 

2011 was marked by high volatility in the international scenario, particularly from August on. The perspective of growth in developed economies worsened, influenced by the need for major tax adjustments in the following quarters, particularly by the European economy. The private credit squeeze in the international markets, a reflection of the crisis, will also be a factor that restrains growth. In December, the European Central Bank provided liquidity for a three-year period for a large number of financial institutions, thus contributing to a certain short-term relief in the financial conditions of the region. In the United States, growth above expectations in the second half of 2011 was the positive surprise. China should post a moderate slowdown over the following quarters, but the country’s external position continues sound, family indebtedness is low and consumption continues with potential to grow.

 

In the domestic scenario, the trend towards slowdown in the economic activity was consolidated. This decrease is a consequence of the tax and monetary squeeze imposed from the end of 2010 to mid-2011, but it also reflects the recent deterioration of the global economic scenario. Expectations of consumers and entrepreneurs continue lower than those recorded in the recent past. Gross domestic product (GDP) for the fourth quarter of 2011 should post a small increase of approximately 0.2%, showing a modest recovery in relation to the stability noted in the previous quarter. Thus, the GDP annual growth estimated for 2011 is 2.7%, and the growth accumulated in the first three quarters is 3.2% when compared to the same period of 2010.

 

Inflation measured by IPCA was 6.5% at the end of 2011. The economic deceleration, less pressure on commodities prices and lower increase in administered items contribute to the perspective of lower inflation in 2012.

 

 
 

 

In this context, with more uncertainties about the foreign scenario and its possible impact on the domestic activity, the Central Bank of Brazil started a process to reduce the Selic rate in August 2011. At the end of 2011, the annual basic interest rate was 11.0%, as compared to 12.5% before the reduction cycle. In addition to the relaxation of the monetary policy, the government has adopted other instruments to stimulate the economy, including the reduction in IPI for the appliances segment, a decrease in capital requirement and in the IOF rates for certain loan operations.

 

The credit market posted a reduction in growth during 2011. 2011, new loans to individuals increased 4.4% in actual terms, as compared to same period of 2010 (after a 15.4% growth in 2010 when compared to 2009). In the corporate segment, loans granted grew 1.4% in 2011 when compared to 2010, a year in which there was a 2.5% expansion as compared to 2009. Total loans as a percentage of GDP reached 49.1% in December 2011, as compared to 45.2% in December 2010. Default over 90 days reached 5.5% in December, as compared to 4.5% at the end of 2010, influenced by the increase in the loan interest rate and smaller economic growth.

 

 
 

 

3)  Information and Indicators

 

The table below shows the main information and indicators of Itaú Unibanco in 2011 as compared to the previous year. The complete financial statements and the Management’s Discussion and Analysis Report, which present further details on the results for the period, are available on the Itaú Unibanco website: www.itau-unibanco.com.br/ri > Financial Information > Financial Statements > BRGAAP > 2011.

 

   Jan to
Dec/11		   Jan to
Dec/10		   Change
(%)		   4th Q/11   3rd Q/11   Change
(%)		 
Statement of Income for the Period - R$ billion (1)                              
Gross income from financial operations   47.3    44.6    5.8%   8.8    7.6    16.7%
Expenses for allowance for loan losses   (19.9)   (15.7)   26.9%   (5.5)   (5.0)   9.7%
Income from recovery of credits written off as loss   5.5    4.2    30.4%   5.5    3.9    40.2%
Income from services, income from bank charges, and income from insurance, pension plan and capitalization   21.8    19.2    13.3%   5.9    5.5    7.4%
Personnel, administrative and other operating expenses   (31.8)   (29.3)   8.3%   (8.4)   (8.2)   2.3%
Income tax and social contribution   (3.7)   (5.5)   -32.8%   (1.5)   1.1    -239.3%
Recurring net income   14.6    13.0    12.4%   3.7    3.9    -4.9%
Net income   14.6    13.3    9.7%   3.7    3.8    -3.3%
Total dividends and interest on capital (net of taxes)   4.4    3.9    12.4%   2.3    0.7    228.6%
Shares – R$                              
Recurring net income per Share (2)   3.23    2.87    12.6%   0.83    0.87    -4.6%
Net income per share (2)   3.23    2.94    9.9%   0.82    0.84    -2.0%
Book value per share (2)   15.81    13.40    18.0%   15.81    15.12    4.6%
Number of outstanding shares – In thousands   4,514    4,544    -0.7%   4,514    4,512    0.0%
Dividends and interest on capital per share (net of taxes)   0.9727    0.8607    13.0%   0.5060    0.1648    207.0%
Price of preferred share (PN) (3)   33.85    39.53    -14.4%   33.85    29.09    16.4%
Price of preferred share (PN)/Net income   10.5    15.3    -31.4%   10.5    10.0    5.0%
Price of preferred share (PN)/Stockholders’ equity   2.1    2.7    -22.2%   2.1    1.9    10.5%
Market capitalization – R$ billion (4)(5)   152.8    179.6    -14.9%   152.8    131.3    16.4%

 

               Change (%) 
   Dec 31
2011		   Sep 30
2011		   Dec 31
2010		   Sep 30/11 to
Dec 31 /11		   Dec 31/10 to
Dec 31 /11		 
Balance Sheet - R$                         
Total assets   851.3    837.0    751.4    1.7%   13.3%
Loan portfolio with endorsements and sureties   397.0    382.2    333.4    3.9%   19.1%
Free, raised and managed own assets   1,144.9    1,117.1    1,009.6    2.5%   13.4%
Subordinated debt   39.0    37.6    33.8    3.6%   15.2%
Stockholders’ equity   71.3    68.2    60.9    4.6%   17.2%
Referential equity (Financial Conglomerate)   92.6    88.1    78.7    5.0%   17.7%
Performance Indices (%)                         
Recurring return on average equity – annualized   22.3%   22.4%   23.5%   -0.1 p.p.    -1.2 p.p. 
Return on average equity – annualized   22.3%   22.5%   24.1%   -0.2 p.p.    -1.8 p.p. 
Return on average assets - annualized   1.8%   1.8%   2.0%   0.0 p.p    -0.2 p.p 
Recurring return on average assets - annualized   1.8%   1.8%   2.0%   0.0 p.p    -0.2 p.p 
Efficiency ratio (6)   47.7%   47.8%   49.1%   -0.1 p.p    -1.4 p.p 
Basel ratio (financial conglomerate)   16.0%   15.1%   15.8%   0.9 p.p    0.2 p.p 
Fixed assets ratio (financial conglomerate)   48.6%   49.8%   37.3%   -1.2 p.p    11.3 p.p 
Significant Data                         
Employees of Conglomerate (individuals)   104,542    105,969    108,040    -1.3%   -3.2%
Employees Brazil (individuals)   98,258    99,820    102,316    -1.6%   -4.0%
Employees Abroad (Individuals)   6,284    6,149    5,724    2.2%   9.8%
Number of bank points of service   33,753    34,178    34,212    -1.2%   -1.3%
Number of branches (units)   4,072    4,005    3,967    1.7%   2.6%
Number of service centers (units)   912    943    944    -3.3%   -3.4%
Number of ATMs (units)   28,769    29,230    29,301    -1.6%   -1.8%

(1)Excludes the non-recurring effects of each period.
(2)Calculated based on the weighted average of the number of shares;
(3)Calculated based on the average quotation of preferred shares on the last day of the period;
(4)Calculated based on the average quotation of preferred shares on the last day of the period (quotation of average PN multiplied by the number of outstanding shares at the end of the period);
(5)R$ 137.4 billion considering the closing quotation of common and preferred (ON and PN shares) multiplied by total outstanding shares of each type of shares.
(6)Calculated based on international criteria defined in the Management’s Discussion & Analysis Report.

 

 
 

 

4) Performance

 

4.1) Income

 

Net income for 2011 amounted to R$ 14.6 billion, with an annualized return of 22.3% on average equity (24.1% in the previous year). Recurring net income was R$ 14.6 billion, with an annualized return of 22.3%. The increase of 5.8% in income from financial operations and 11.4% in income from services and bank charges in 2011, added to the control over personnel and administrative expenses, contributed to net income.

 

The efficiency ratio reached 47.7% in 2011, as compared to 49.1% achieved in 2010, a reduction of 1.4 percentage point as a result of the efforts started in 2010.

 

Itaú Unibanco paid or provided for its own taxes and contributions in the amount of R$ 14.5 billion in 2011. The Bank also withheld and passed on taxes in the amount of R$ 12.1 billion, which were directly levied on financial operations.

 

4.2) Assets

 

Consolidated assets totaled R$ 851.3 billion and consolidated stockholders’ equity totaled R$ 71.3 billion at December 31, 2011, with growth of 13.3% and 17.2% in the last 12 months, respectively.

 

The diversification of Itaú Unibanco's business is reflected in the composition of its funding and loan portfolio, reducing risks to specific segments, as follows:

 

4.2.1) Funding

 

Free, raised and managed assets totaled R$ 1.1 trillion at December 31, 2011, a 13.4% growth as compared to December 31, 2010. Of this total, 41.7% refer to investment funds, managed portfolios and technical provisions for insurance, pension plan and capitalization, 34.0% to deposits and debentures and funding from bills, and 24.3% to own assets, other funding and real state.

 

At the end of 2011, the balance of managed assets was R$ 403.9 billion, a 11.0% increase as compared to the previous year.

 

4.2.2) Loan Portfolio and Default

 

At December 31, 2011, the loan portfolio, including endorsements and sureties, reached R$ 397.0 billion, an increase of 19.1% as compared to December 31, 2010.

 

Individuals Segment – In Brazil, loans to individuals reached R$ 147.6 billion, 18.0% higher than that posted at December 31, 2010. Highlights:

 

·Mortgage loan reached R$ 13.5 billion, a growth of 66.7% as compared to the end of 2010. The offer of mortgage loan is marketed by the network of branches, development companies, real estate agencies and partnerships, such as with Lopes (LPS Brasil – Consultoria de Imóveis S.A.) and Coelho da Fonseca Empreendimentos Ltda.

 

·Products such as credit cards, personal loans and payroll advances posted growth of 18.0%, 50.7% and 38.5% respectively, when compared to December 31, 2010.

 

·As a leader in the vehicle financing segment, Itaú Unibanco reached a balance of R$ 60.1 billion in the loan portfolio at December 31, 2011. New vehicle leasing and financing granted totaled R$ 7.3 billion. Financing, lease and Finame operations for heavy vehicles reached a balance of R$ 8.4 billion at December 31, 2011.

 

Our loan portfolio for Mercosur operations (Argentina, Chile, Uruguay, and Paraguay) posted a growth of 28.5% as compared to December 31, 2010, reaching a balance of R$ 6.4 billion.

 

Corporate Segment – In Brazil, our portfolio of credit to companies reached R$ 228.8 billion at December 31, 2011, posting a growth of 17.9% in relation to December 31, 2010, as follows:

 

 
 

 

·The loan portfolio and joint obligations of Itaú BBA, through which we serve companies with revenue over R$ 150 million, reached the amount of R$ 139.9 billion, a 21.3% increase as compared to December 2010. Foreign trade financing posted a growth of 46.8%, as compared to December 2010.

 

·The very small, small and middle market company segment, which serves companies with annual revenue of up to 150 million, posted a balance for its loan portfolio, including endorsements and sureties, of R$ 88.9 billion at December 31, 2011, a 13.0% increase as compared to December 31, 2010.

 

In Chile, Argentina, Uruguay and Paraguay, loan operations to companies amounted to R$ 14.2 billion at December 31, 2011, 51.7% growth when compared to December 2010.

 

Default - Total default rate, considering the balance of transactions overdue for over 90 days reached 4.9% at December 31, 2011, posting a 0.7% increase as compared to December 2010. The default rate of the loans to individuals portfolio reached 6.6% in the year and reached 3.5% for the loans to companies portfolio at the end of December 2011.

 

4.2.3) Capital Strength

 

Based on the assessment of Moodys, Standard & Poors and Fitch Ratings, the bank and its subsidiaries hold the best ratings in the Brazilian Market. In 2011, the bank achieved an improvement in the rating of Long-Term Deposits in Foreign Currency from Baa2 to Baa1 from Moodys.

 

The basel ratio was 16.0% at the end of December 2011, showing the strength of the bank’s capital base. In 2011, we issued subordinated financial bills in the amount of R$ 7.4 billion, a significant increase in the capital base. Of this total, R$ 2.0 billion correspond to new funds. The bank also carried out new placements of subordinate debt tier II in the total amount of US$ 750 million.

 

5) Business

 

Commercial Bank – This segment offers banking products and services to a diversified client base, including individuals and companies. The segment includes retail clients, high income clients, high net worth clients (private bank) and very small, small and mid-sized companies.

 

At the end of 2011 we had 4,984 bank points of service, including regular branches and service centers (Postos de Atendimento Bancário - PAB), a growth of 105 branches in the one-year period.

 

In the Private Bank segment, Itaú Unibanco is the largest bank in Latin America and remains the absolute leader in the Brazilian market, with over 25% of market share, according to ANBIMA, by providing services to over 5,500 economic groups.

 

In the Assets Under Administration segment, in which Privatization Funds, Fixed Income, Equities Funds, Investment Clubs and Clients’ and the Group’s Portfolios are managed in Brazil and abroad, Itaú Unibanco has a 19.7% market share and ranks second in the global administration ranking, according to ANBIMA.

 

In the Solutions for Capital Markets area, the bank is leader in custody services and asset bookkeeping, providing services to 63.0% of the companies listed in the BM&FBovespa, and also offers solutions to companies, as follows: the fiduciary administration of investment funds and acting as guarantee agent.

 

Insurance, Life, Pension Plan and Capitalization –The operations in these businesses in terms of volume of revenue from premiums, social security contributions and capitalization certificates reached R$ 19.0 billion in 2011, and the technical provisions totaled R$ 73.8 billion at the end of December 2011, including foreign operations.

 

Noteworthy is that Itaú Unibanco holds 30% of capital of the Porto Seguro Group, the insurance company leading the residence and automobile insurance segment in Brazil.

 

Activities abroad - Itaú Unibanco is present in 18 countries, besides Brazil. In South America, we have operations in Argentina, Chile, Uruguay and Paraguay, focusing on commercial bank activities, both in banking retail and companies. Additionally, we have operations in Europe (Portugal, United Kingdom, Luxembourg and Switzerland), in the United States (Miami and New York), Middle East (Dubai) and in Asia (Hong Kong, Shangai and Tokyo), principally representing operations with institutional clients, corporate and private banking. In 2011, these businesses recorded recurring net income of R$ 2,559 million, with total assets of R$ 162.1 billion at December 31, 2011.

 

 
 

 

Itaú Unibanco started operations in Switzerland through Banco Itaú Suisse, located in Zurich. The main focus of this operation is to provide services to private segment clients, both Brazilian and Latin American, which globally seek other investment opportunities.

 

In November 2011, Itaú BBA was authorized by the Central Bank of Brazil to structure its Wholesale and Investments Bank operation in Colombia. The start of the operation is still pending approval by the local regulatory bodies. Itaú BBA’s target market is composed of institutional investors and large companies present in Brazil. The products portfolio will include loan operations, foreign trade financing, foreign exchange and derivatives, and investment bank activities, such as advisory to mergers and acquisitions and access to capital markets. This action is one more significant step towards the process of expanding the wholesale and investment bank’s operations abroad and strengthens our operation in Latin America.

 

Consumer Credit - Itaú Unibanco, the leader in the consumer credit segment in Brazil, by means of Itaucard, Hipercard, and partnerships, offers a wide range of products to accountholders and non-accountholder clients, originated in proprietary channels and through partnerships with companies that have outstanding performance in the markets they are engaged. In 2011, the total transaction amount reached R$ 154.2 billion, a 20.3% increase in relation to the previous year.

 

The segment has recently reached a volume of 1 million credit cards issued in other countries of Latin America. Operating in the Southern Cone, it is the leader in the credit cards segment in Paraguay and Uruguay, and it is the fourth largest one in Chile and it is also present in Argentina and Mexico.

 

Redecard, the company in which Itaú Unibanco holds a 50% interest, recorded net income of R$ 1,404.3 million in 2011, with a 7.3% increase in banking service fees as compared to 2010.

 

Itaú BBA – In the investment banking area, we kept our distinguished performance this year, in spite of the downturn of the economy. We highlight the following:

 

·In variable income, Itaú BBA was the underwriter of 19 out of 23 public offerings, which totaled R$ 13.5 billion and accounted for 83% of total transactions and 87% of the financial volume issued, consolidating its leading position in this market, in accordance with the Brazilian Financial and Capital Markets Association (ANBIMA) ranking of November 2011. It also provided financial advisory to 38 merger and acquisitions operations and closed the period in the second position in the Thomson ranking for volume, thus accumulating a total of US$ 22.8 billion in 2011.

 

 
 

 

·In the fixed income area, Itaú BBA took part in operations of debentures, promissory notes and securitization, that totaled R$ 15.1 billion. In the ANBIMA ranking for distribution of fixed income, Itaú BBA remained first, with a 29% market share. In international issues of fixed income, Itaú BBA acted as the joint bookrunner of offerings, with a total volume of US$ 3.1 billion, reaching the second place in quantity in the Bloomberg ranking of Capital Markets Brazilian Companies Issues for December 2011.

 

·Also noteworthy is that Itaú BBA is the leading investment bank in revenues in Brazil, according to Dealogic (global and regional investment banking platform). It was the first time a Brazilian bank reached leadership in this ranking.

 

We highlight the following operations in Wholesale banking:

 

·In Derivatives, Itaú BBA reached leadership in CETIP (Clearing House for the Custody and Financial Settlement of Securities) in over-the-counter derivative operations with companies. The focus was on operations hedging the exposures to foreign currencies, interest rates and commodities with clients.

 

·During 2011, the Project Finance area carried out 71 projects, which totaled R$ 87.1 billion in investments.

 

·The Cash Management area of Itaú BBA recorded a 28% increase in transacted volumes in the period from January to December 2011, as compared to the same period in 2010.

 

·During 2011, Itaú Corretora intermediated at BM&Bovespa a volume of R$ 191.4 billion with individual, institutional investors, corporate and foreign customers. In this period, Itaú Corretora was ranked fifth among the brokerage companies, with a 5.9% market share. In futures market, Itaú Corretora closed 2011 with a 7.9% market share, with R$ 100.7 million traded contracts, a volume 21.4% higher than in 2010.

 

6) People

 

Itaú Unibanco employed approximately 105 thousand people at the end of December 2011, including approximately 6 thousand employees in foreign units. In 2011, 15,185 employees were hired, of which 1,474 were interns, through external recruiting, aiming at meeting the business expansion and turnover requirements. Aiming at promoting the recognition of its professionals, Itaú Unibanco reallocated internally 7,932 employees in 2011, through internal vacancies, and 1,656 employees were relocated by means of the Relocation Center in this period.

 

The employees’ fixed compensation plus charges and benefits totaled R$ 11.0 billion in 2011. Welfare benefits granted to employees and their dependants totaled R$ 2.0 billion. Additionally, over R$ 258 million were invested in training programs during the period.

 

Giving continuity to the efforts to disseminate a strong meritocratic culture, in 2011 Itaú Unibanco turned its attention towards an issue fundamentally decisive for the success of institutions: the increasing widespread practice of meritocracy. Leading people, by recognizing them according to their relative performance, is the fundamental concept for deepening meritocracy in the Bank.

 

 
 

 

“Fale Francamente” (Speak Frankly) is the annual organizational climate survey conducted by Itaú Unibanco with its employees. Conducted in August 2011, with the participation and voluntary response of 89% of employees in Brazil, the survey turned out a 75% satisfaction rate in relation to the company and 83% in relation to managers, which represented an increase in the satisfaction level as compared to the survey undertaken in 2010 (69% - company and 73% - managers).

 

Itaú Unibanco was considered one of the “150 Great Places to Work”, of the Você S.A/Exame magazine (in partnership with Fundação Instituto de Administração) and is among the “100 Great Companies to Work” of Época magazine (in partnership with Great Place to Work). In addition, the bank was a Highlight in HR in the survey conducted by Você S.A/Exame magazine and the second most wanted by professionals (the most wanted among the banks), besides being the one with the highest number of new hires, according to Época magazine.

 

7) Sustainability and Corporate Governance

 

During 2011, Itaú Unibanco promoted an intense process of reflection on its sustainability strategy, involving top management, the different business areas and representatives of its stakeholders. This process has provided input for defining what sustainable performance is for the bank: generating shared value for employees, clients, stockholders and the society, by ensuring business continuity.

 

Three priority operational issues in business sustainability were also defined: Financial Education, Social and Environmental Risks and Opportunities, and Dialogue and Transparency, which have consolidated Itaú Unibanco’s initiatives since 2009, to disseminate business sustainability.

 

Itaú Unibanco was selected for the 12th consecutive year to make up the Dow Jones Sustainability World Index (DJSI), portfolio, the main sustainability index in the world, in its 2011/2012 review. It is the only Latin America bank to take part in the index since its creation. Itaúsa – Investimentos Itaú S.A., ranked for the fifth consecutive year as the leader in the financial services sector, and Redecard S.A. (present in three consecutive years), a company controlled by Itaú Unibanco Holding S.A., are also in this review of the index.

 

The Tatuapé Administrative Center was awarded the ISO 14001 certification, an international standard for environmental management that establishes requirements specific for management of environmental impact and safety of people. The ISO 14001 was implemented through a number of stages, from the designing of an Environmental management system to the regularization of processes and documentation to ensure operational efficiency and minimize environmental impacts.

 

Itaú Unibanco was elected, for the seventh time, one of the 20 role model companies in sustainability by the Guia Exame de Sustentabilidade (Sustainability Exame Guide), in its 12th review. The recognition by Exame magazine was mainly due to the social and environmental impact analysis made for companies requesting financing to the bank. This policy includes the assessment of social and environmental risks and opportunities to the developments.

 

In October we launched two more funds with quotas traded in stock exchanges, the so-called ETFs (Exchange Trade Funds) based on Socially Responsible Investments. These are ISE (Bovespa Corporate Sustainability Index) and IGTC (Corporate Governance Trade Index) funds, which will now make up the bank’s ETF family under the “It Now” brand.

 

In August 2011, we adhered to the Abrasca Code of Self-Regulation and Good Practices of Publicly-Held Companies, which establishes rules and recommendations of best corporate governance practices in place in Brazil and abroad. The adherence to this code is voluntary and evidences our commitment to the development of the Brazilian capital markets.

 

 
 

 

Strengthening Itaú Unibanco’s commitment to transparency and communication with the market, in 2011 we held 22 public meetings (APIMEC) and 8 teleconferences with investors, and capital markets professionals, among others. A total of over 4,300 people attended the events in person or via internet. Also in 2011, we attended 13 financial education events (Expo Money), which counted on approximately 50,000 participants. In addition, Itaú Unibanco attended 26 conferences and road shows abroad, which helps to strengthen the relationship with stockholders, analysts and investors.

 

8) Social and Cultural Investments

 

In 2011, Itaú Unibanco carried out significant social and cultural investments, always strengthening its purpose to be a transformation agent. It mainly had a leading role in significant transformations for the improvement of people and the country, with priority focus on quality education and the development of critical awareness, by taking part in significant issues for society that directly or indirectly impact its business sustainability.

 

Itaú Unibanco’s social and cultural investments reached the approximate amount of R$ 293.8 million in 2011, noteworthy were the investments in education and culture that reached the amount of R$ 184.2 million.

 

Fundação Itaú Social was the only Brazilian institution invited to attend the Innovation Fair at the annual meeting of the Economic and Social Council of the United Nations, held in July in Geneva, Switzerland. This event was attended by 600 participants from all around the world. Education, the chosen theme for this year, has encouraged the discussion of experiences that help to maintain and expedite the achievement of the Millennium Development Goals and the Education for All agenda, commitments assumed by the United Nations Organization. In the domestic arena, Fundação Itaú Social and Cenpec were the only civil society organizations invited by the Ministry of Education to discuss the issue of “Increasing school hours X Increasing school days” in the year.

 

In September 2011, Fundação Itaú Social launched a national campaign to encourage reading among children up to six years old. The initiative is one of the “Itaú Criança” (Itaú Child) program actions, which purpose is to contribute to high quality education, a fundamental right of all children and adolescents. Four thousand “Bibliotecas Itaú Criança” (Itaú Child libraries) will be made available, including 100 titles carefully selected for children, teenagers and adults, totaling 400 thousand books to be distributed to the organizations where these actions will take place.

 

The ninth review of the Itaú-Unicef Award, an initiative to encourage full-time education experiences in Brazil, beat the record of projects enrolled in the country: 2,922. The organizations in charge for the four local winning projects (very small, small, middle-size and large) were awarded prizes in the regional leg, whereas the great national winner was the Projeto Verde Vida, from the city of Crato, state of Ceará - CE.

 

Instituto Unibanco entered into a partnership with the Ministry of Education (MEC) and the Department of Strategic Affairs of the Presidency of the Republic (SAE) to incorporate the “Jovem de Futuro” (youth with a future) program into a federal public policy for six States, by establishing an official channel of financial support to public middle schools. This initiative is expected to benefit middle school students in 4,117 schools in Brazil in the upcoming three years.

 

In 2011, Itaú Cultural was attended by over 200 thousand visitors in its headquarters. The virtual attendance at the institute’s website totaled 12.7 million single hits. 369 events were developed, and 20 products were launched. Out of this number, 23,470 were distributed. In the “Rumos” (directions) program, 2,891 projects were enrolled in the Visual arts, education, culture and arts and cultural journalism call notices. Out of this number, 79 were selected. The Institute has assumed the management of the Auditorium Ibirapuera, by way of a public invitation process of the Municipality of São Paulo. In the next five years, it will be the manager of the Auditorium in connection with the maintenance of this architectural heritage designed by Mr. Oscar Niemeyer, its arts program, and the “Escola de Música” (music school activities). From October to December 2011, 34 events gathering approximately 70 thousand people were held.

 

 
 

 

In the period, the Institute entered into agreements with 12 new TV stations, closing the year with 193 partner stations (education, public, legislative, community, and university ones). Regarding radio stations, the Institute closed the year with 169 new partners.

 

The Bank’s collections were housed by way of 14 exhibits: “Coleção Brasiliana Itaú” (Itaú Brasiliana collection) (Fortaleza, Brasília and Curitiba), “Fotografias Modernistas” (Modernist pictures) (Belém, Paraguay and Mexico City), “Brasiliana Fauna e Flora” (Brazilian fauna and flora) (Chile, Argentina, Uruguay and Paraguay), “O Egito Sob o Olhar de Napoleão” (Egypt through Napoleon’s eyes) (Espaço Memória), “Arte Cibernética – Acervo de Arte e Tecnologia” (Cyber arts – arts and technology collection) of Itaú Cultural (Porto Alegre) and “1911-2011 Arte Brasileira e Depois” (1911 – 2011 Brazilian arts and later), in the Itaú Collection (Belo Horizonte and Rio de Janeiro). Together, these events totaled over 320 thousand visitors by the end of 2011.

 

Itaú Unibanco’s investments in Itaú Cultural, by way of article 26 of the Rouanet law, amounted to R$ 29.7 million, in addition to R$ 23.6 million from funds without counting on the incentives provided through this law. Accordingly, the total invested in the Institute in the year was R$ 53.3 million.

 

The Itaú Unibanco Group also invested R$ 54.8 million in other projects through the Rouanet law. These funds were invested in 66 projects in eight states.

 

By way of the incentive-to-sports law, Itaú Unibanco invested R$ 12 million, shared into 13 high performance sports, educational sports, and participation and leisure projects, in 12 Brazilian states.

 

9) Awards and Recognition

 

Major awards and recognitions granted to Itaú Unibanco Holding S.A. in 2011:

 

·Bank of the Year 2011 – Bank of the Year in Brazil and Latin America, organized by The Banker magazine, this award is deemed as one of the most prestigious in the global banking calendar. The winners are chosen by judging commissions independent from the magazine, which evaluate the following criteria: meeting the clients’ needs, complexity of operations, innovation capacity and performance;

 

·Itaú Unibanco was elected the World’s Most Sustainable Bank in the 2011 FT/IFC Sustainable Finance Awards, granted by the British newspaper Financial Times and the International Finance Corporation (IFC), the financial institution of the World Bank;

 

·Safest Emerging Market Banks, by Global Finance magazine. The magazine ranked the 10 Safest Emerging Market Banks in Latin America, and Itaú Unibanco was the best ranked Brazilian bank;

 

·Private Banker International Awards 2011 - Outstanding Private Banking in Latin America. Hosted by British magazine “Private Banker International”, it recognizes the best organizations in the financial industry;

 

·Global Private Banking Awards - Best Private Bank in Brazil and Latin America. This award, granted since 2009, is aimed at gathering quantitative and qualitative information from private banks with the purpose of making them stand out for the excellence of operations. The two publications that organized the award belong to the Financial Times group;

 

·As Empresas de Maior Prestígio no Brasil (the most prestigious companies in Brazil). Organized every year by Época Negócios magazine, Itaú Unibanco ranked among the 15 most prestigious companies in Brazil;

 

·As Marcas Mais Valiosas no Brasil (the most valuable brands in Brazil), the Itaú brand was deemed the second most valuable brand in the Brazilian market, and it was ranked the first among banks, according to the ranking prepared by Brand Analytics. This analysis assessed 200 brands of 150 companies operating in the country. The market survey comprised over 14.5 thousand interviews with end customers in 37 categories and 30 interviews with market analysts from investment banks;

 

·BrandZ Top 100 Most Valuable Global Brands 2011, the Itaú brand was included for the first time in the global brands ranking organized by Millward Brown Optimor. Itaú ranks 90th in the general ranking and is the first among the brands of Latin American financial institutions, with a 29% growth in its brand value in the 2010-2011 comparative analysis.

 

 
 

 

·As Empresas Mais Admiradas no Brasil (the most admired companies in Brazil), organized by Carta Capital magazine, Itaú Unibanco was the winner in the Retail banking category, and is the sixth most admired company in Brazil. Mr. Roberto Setubal, in turn, was chosen as the fifth most admired executive;

 

·IR Magazine Brazil Awards 2011, granted by IR Magazine, a global publication about investor relations. Itaú Unibanco won the Grand Prix category with the best investor relations program, considering companies with market capitalization above R$ 3 billion;

 

·Itaú Unibanco leads the ranking "The 25 Best Banks in Latin America”, published yearly by the AméricaEconomia magazine;

 

·Top of Mind in the banks category, in accordance with a survey conducted by ABA (Brazilian Advertisers Association) in partnership with Consultoria TopBrands. Itaú Unibanco was recognized for the third consecutive year;

 

·Top 1000 World Banks ranking, according to “The Banker” British magazine. Itaú Unibanco ranked first among the Brazilian financial institutions. In the global bank general rank, Itaú Unibanco occupies the 34th position;

 

·As Melhores da Dinheiro (The Best of Dinheiro), sponsored by “Isto é Dinheiro” magazine, elects the companies excelling in each sector every year. Itaú Unibanco received the award in the Best Corporate Governance category in the banking sector;

 

·Best Investment Bank for Brazil, granted to Itaú BBA by “Latin Finance”, one of the most important publications about corporate finance in Latin America. This award assesses and recognizes the excellence of financial institutions in banking services, products and investments;

 

·The Institutional Investor magazine elected Itaú BBA’s team, for the second consecutive year, as the best research team in Brazil, and for the first time as the best sales team in Latin America;

 

·“The Institutional Investor” magazine elected Itaú Unibanco and its Investor Relations team as the best in the financial banking and services sector in five out of eight awards divided into four categories assessed in the Latin America Investor Relations Perception survey;

 

·Prêmio Intangíveis Brasil (PIB – Brazil Intangibles Award), according to Group Padrão / DOM Strategy Partners, Itaú Unibanco was the winner in the Corporate Governance category;

 

·Banker of the Year (Roberto Setubal), by “Euromoney Awards for Excellence”, granted by “Euromoney” magazine, one of the most important financial sector publications in the world. This is the first time the Chief Executive Officer of an emerging market institution is granted this award.

 

·Best “Cash Manager Brasil” to Itaú BBA by Euromoney magazine;

 

·“Deal of the Year 2011 (Américas)” by “Project Finance International” with the operation by Itaú BBA.

 

 
 

 

10) Independent Auditors – CVM Instruction No. 381

 

Procedures adopted by the Company

 

The policy adopted by Itaú Unibanco Holding S.A., its subsidiaries and parent company, to engage non-audit related services from our independent auditors is based on the applicable regulations and internationally accepted principles that preserve the auditor’s independence. These principles include the following: (a) an auditor cannot audit his or her own work, (b) an auditor cannot function in the role of management in companies where he or she provides external audit services; and (c) an auditor cannot promote the interests of its client.

 

During the period from January to December 2011, the independent auditors and related parties did not provide non-audit related services in excess of 5% of total external audit fees.

 

According to CVM Instruction No. 381, we list below the engaged services and related dates:

 

·February 02, 2011 – Service agreement related to the analysis of the accounting recording process by the Treasury flow desk of the Itaú Unibanco Financial Group - Itaú Unibanco Holding S.A – Brazil;

 

·March 17, 2011 – Advisory service agreement related to tax effects generated in Banco Itaú Chile – Banco Itaú Chile S.A - Chile;

 

·March 28, 2011 – Attendance in the training in the QI/FATCA course - Module 3 Critical Customer Groups – Banco Itaú Europa Luxembourg S.A - Luxembourg;

 

·April 5, 2011 – Professional service agreement related to the improvement of knowledge of our internal auditors regarding the practices and recommendations for the performance of the internal audit activity (THE IIA The Institute of Internal Audit) – Redecard S.A – Brazil;

 

·May 13, 2011 – Attendance in the training course Finance: Consolidation of Accounts - Banco Itaú BBA International S.A.– Portugal;

 

·May 18, 2011 – Consulting service agreement in the Asset Management International project to obtain the GIPS (Global Investment Performance Standards) certification for investment funds - Itaú USA Asset Management Inc. – United States of America;

 

·June 9 and July 11, 2011 – License for using an electronic library of international accounting standards (Comperio) – Banco Itaú Europa International – Untied States of America; Itaú Unibanco S.A. and Itaú Unibanco Holding S.A.– Brazil;

 

·August 1, 2011 – Agreement for the acquisition of macroeconomic project in reports and presentations on the progress of the national, regional and global economy offered by Club Económico – Banco Itaú Paraguay S.A.– Paraguay;

 

·August 11, 2011 – Agreement for the extension of review services of aspects related to the Business Continuity Program of Banco Itaú BBA – Banco Itaú BBA S.A.– Brazil;

 

·September 6, 2011 – Service agreement for the review of documents to be submitted to the Financial Services Authority – FSA – to open its subsidiary in the United Kingdom – Banco Itaú BBA International S.A.– Portugal;

 

·September 15, 2011 – Service agreement related to the assessment of regulatory aspects of transfer of Banco Itaú Suisse’s trading desk.– Banco Itaú Suisse S.A.– Switzerland;

 

·October 3, 2011 – Service agreement related to the assessment of requirements for the Federal Branch Charter defined by the Regulation K of the Federal Reserve and by the Office of the Comptroller of the Currency.– Banco Itaú Europa International – Miami;

 

·February 10, 2011 and December 1, 2011 – Service agreement for the limited assurance of the data of the inventory of greenhouse gas emission – Itaú Unibanco Holding– Brazil;

 

·December 8 – Service agreement for the review of documents to be submitted to the Financial Services Authority – FSA – to open its subsidiary in the United Kingdom – Banco Itaú BBA International S.A.– Portugal;

 

·August 30 and December 19, 2011 – Participation in the salary survey called Encuesta Financiera de Remuneraciones y Beneficios – Banco Itaú Paraguay S.A.– Paraguay; OCA S.A.– Uruguay.

 

 
 

 

Summary of the Independent Auditors’ justification - PricewaterhouseCoopers

 

The provision of the above described non-audit related professional services do not affect the independence or the objectivity of the external audit of Itaú Unibanco, parent and its subsidiary/affiliated companies. The policy adopted for providing non-audit related services to Itaú Unibanco is based on principles that preserve the independence of Independent Auditors, all of which were considered in the provision of the referred services.

 

11) Circular No. 3,068/01 of BACEN

 

Itaú Unibanco hereby represents to have the financial capacity and the intention to hold to maturity securities classified under the line “held-to-maturity securities” in the balance sheet, in the amount of R$ 3,1 billion, corresponding to only 1,7% of total securities held.

 

ACKNOWLEDGEMENTS

 

We thank our employees for their determination and skills which have been essential to reaching consistent and differentiated results, and our stockholders and clients for their trust.

 

(Approved at the Board of Directors' Meeting of February 06, 2012).

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.    
     
BOARD OF DIRECTORS   EXECUTIVE BOARD
Chairman   Chief Executive Officer
PEDRO MOREIRA SALLES   ROBERTO EGYDIO SETUBAL
     
Vice-Chairmen   Executive Vice-Presidents
ALFREDO EGYDIO ARRUDA VILLELA FILHO   ALFREDO EGYDIO SETUBAL (*)
ROBERTO EGYDIO SETUBAL   CANDIDO BOTELHO BRACHER
     
Members   Executive Directors
ALCIDES LOPES TÁPIAS   CAIO IBRAHIM DAVID
ALFREDO EGYDIO SETUBAL   CLAUDIA POLITANSKI
CANDIDO BOTELHO BRACHER   MARCOS DE BARROS LISBOA
FERNANDO ROBERTO MOREIRA SALLES   RICARDO BALDIN
FRANCISCO EDUARDO DE ALMEIDA PINTO   SÉRGIO RIBEIRO DA COSTA WERLANG
GUSTAVO JORGE LABOISSIÈRE LOYOLA    
HENRI PENCHAS    
ISRAEL VAINBOIM   Directors
PEDRO LUIZ BODIN DE MORAES   CARLOS EDUARDO DE SOUZA LARA
RICARDO VILLELA MARINO   EDUARDO HIROYUKI MIYAKI
    EMERSON MACEDO BORTOLOTO
    JACKSON RICARDO GOMES
AUDIT COMMITTEE   MARCO ANTONIO ANTUNES
President   RODRIGO LUÍS ROSA COUTO
GUSTAVO JORGE LABOISSIÈRE LOYOLA   ROGÉRIO PAULO CALDERÓN PERES
     
Members    
ALKIMAR RIBEIRO MOURA   (*) Investor Relations Director
EDUARDO AUGUSTO DE ALMEIDA GUIMARÃES    
GUY ALMEIDA ANDRADE    
     
FISCAL COUNCIL    
President    
IRAN SIQUEIRA LIMA    
     
Members    
ALBERTO SOZIN FURUGUEM   Accountant
ARTEMIO BERTHOLINI   CARLOS ANDRÉ HERMESINDO DA SILVA
    CRC - 1SP281528/O-1

 

 
 

 

ITAÚ UNIBANCO S.A.    
     
Chief Executive Officer and General Manager   Directors (continued)
ROBERTO EGYDIO SETUBAL   FABIO DI PACE MENEZES
    FERNANDO DELLA TORRE CHAGAS
Executive Vice-Presidents   FERNANDO JOSÉ COSTA TELES
ALEXANDRE DE BARROS   GILBERTO TRAZZI CANTERAS
ALFREDO EGYDIO SETUBAL   HENRIQUE PINTO ECHENIQUE
JOSÉ CASTRO ARAÚJO RUDGE   HENRIQUE RUTHER
JOSÉ ROBERTO HAYM   IBRAHIM JOSÉ JAMHOUR
LUÍS OTAVIO MATIAS   JACKSON RICARDO GOMES
MÁRCIO DE ANDRADE SCHETTINI   JASON PETER CRAUFORD
MARCO AMBROGIO CRESPI BONOMI   JEAN MARTIN SIGRIST JÚNIOR
MARCOS DE BARROS LISBOA   JOÃO ANTONIO DANTAS BEZERRA LEITE
RICARDO VILLELA MARINO   JOÃO LUIZ DE MEDEIROS
SÉRGIO RIBEIRO DA COSTA WERLANG   JORGE LUIZ VIEGAS RAMALHO
    JOSÉ VIRGILIO VITA NETO
Executive Directors   LEILA CRISTIANE BARBOZA BRAGA DE MELO
ANDRÉ SAPOZNIK   LUÍS EDUARDO GROSS SIQUEIRA CUNHA
CAIO IBRAHIM DAVID   LUIS TADEU MANTOVANI SASSI
CARLOS EDUARDO MONICO   LUIZ ANTONIO NOGUEIRA DE FRANÇA
CELSO SCARAMUZZA   LUIZ EDUARDO LOUREIRO VELOSO
CLAUDIA POLITANSKI   LUIZ FERNANDO OLIVEIRA BARRICHELO
DEMOSTHENES MADUREIRA DE PINHO NETO   LUIZ SEVERIANO RIBEIRO
FERNANDO MARSELLA CHACON RUIZ   MARCELO BOOCK
LUÍS ANTONIO RODRIGUES   MARCELO LUIS ORTICELLI
OSVALDO DO NASCIMENTO   MARCO ANTONIO ANTUNES
    MARCO ANTONIO SUDANO
    MARCOS ANTÔNIO VAZ DE MAGALHÃES
Directors   MARCOS AUGUSTO CAETANO DA SILVA FILHO
ADRIANO BRITO DA COSTA LIMA   MARCOS SILVA MASSUKADO
ALBERTO FERNANDES   MARCOS VANDERLEI BELINI FERREIRA
ANA CARLA ABRÃO COSTA   MARIO LUIZ AMABILE
ANDRÉA MATTEUCCI PINOTTI CORDEIRO   MESSIAS DOS SANTOS ESTEVES (*)
ANTONIO CARLOS AZZI JÚNIOR   NATACHA LITVINOV
ANTONIO CARLOS RICHECKI RIBEIRO   OSMAR MARCHINI
ARNALDO PEREIRA PINTO   OSVALDO JOSÉ DAL FABBRO
AURÉLIO JOSÉ DA SILVA PORTELLA   PAULO EIKIEVICIUS CORCHAKI
CARLOS AUGUSTO DE OLIVEIRA   PAULO MEIRELLES DE OLIVEIRA SANTOS
CARLOS EDUARDO DE CASTRO   RENATA HELENA DE OLIVEIRA TUBINI
CARLOS EDUARDO DE SOUZA LARA   RENÊ MARCELO GONÇALVES
CARLOS EDUARDO MACCARIELLO   RICARDO LIMA SOARES
CARLOS EDUARDO PEREIRA TEIXEIRA   RICARDO ORLANDO
CARLOS HENRIQUE DONEGÁ AIDAR   RICARDO RIBEIRO MANDACARU GUERRA
CARLOS ORESTES VANZO   RICARDO URQUIJO LAZCANO
CESAR PADOVAN   ROBERTO FERNANDO VICENTE
CÍCERO MARCUS DE ARAÚJO   ROBERTO MASSARU NISHIKAWA
CLAUDIO CÉSAR SANCHES   RODOLFO HENRIQUE FISCHER
CLAUDIO JOSÉ COUTINHO ARROMATTE   ROGERIO CARVALHO BRAGA
COSMO FALCO   ROGÉRIO PAULO CALDERÓN PERES
CRISTIANE MAGALHÃES TEIXEIRA PORTELLA   ROMILDO GONÇALVES VALENTE
CRISTINA CESTARI SPADA   ROONEY SILVA
DANIEL LUIZ GLEIZER   SERGIO GUILLINET FAJERMAN
EDILSON PEREIRA JARDIM   SERGIO SOUZA FERNANDES JÚNIOR
ERNESTO ANTUNES DE CARVALHO   VILMAR LIMA CARREIRO
    WAGNER BETTINI SANCHES

 

(*) elected at the ESM of 12/30/2011 – Awaiting BACEN approval

 

 
 

 

BANCO ITAÚ BBA S.A.    
     
BOARD OF DIRECTORS   Directors
    ADRIANO LIMA BORGES
Chairman   ALBERTO ZOFFMANN DO ESPÍRITO SANTO
ROBERTO EGYDIO SETUBAL   ALEXANDRE ENRICO SILVA FIGLIOLINO
    ÁLVARO DE ALVARENGA FREIRE PIMENTEL
Vice-Chairmen   ANDRÉ CARVALHO WHYTE GAILEY
FERNÃO CARLOS BOTELHO BRACHER   ANDRÉ DEL BEL CURY
PEDRO MOREIRA SALLES   ANDRÉ FERRARI
    ANTONIO JOSÉ CALHEIROS RIBEIRO FERREIRA
Members   ANTONIO SANCHEZ JUNIOR
ALFREDO EGYDIO SETUBAL   EDUARDO CARDOSO ARMONIA
ANTONIO CARLOS BARBOSA DE OLIVEIRA   EDUARDO CORSETTI
CANDIDO BOTELHO BRACHER   EMERSON SAVI JUNQUEIRA
EDUARDO MAZZILLI DE VASSIMON   FABIO MASSASHI OKUMURA
HENRI PENCHAS   FERNANDO HENRIQUE MEIRA DE CASTRO
JOÃO DIONÍSIO FILGUEIRA BARRETO AMOÊDO   FLAVIO DELFINO JUNIOR
SÉRGIO RIBEIRO DA COSTA WERLANG   GILBERTO FRUSSA
    GUSTAVO HENRIQUE PENHA TAVARES
EXECUTIVE BOARD   HENRIQUE RUTHER
Chief Executive Officer   ILAN GOLDFAJN
CANDIDO BOTELHO BRACHER   JOÃO CARLOS DE GÊNOVA
    JOÃO MARCOS PEQUENO DE BIASE
Managing Vice-Presidents   JORGE BEDRAN JETTAR
ALBERTO FERNANDES   JOSÉ AUGUSTO DURAND
DANIEL LUIZ GLEIZER   LILIAN SALA PULZATTO KIEFER
JEAN-MARC ROBERT NOGUEIRA BAPTISTA ETLIN   MARCELLO PECCININI DE CHIARO
RODOLFO HENRIQUE FISCHER   MARCELO ARIEL ROSENHEK
    MARCELO DA COSTA LOURENÇO
Executive Directors   MARCO ANTONIO SUDANO
ALEXANDRE JADALLAH AOUDE   MARCOS AUGUSTO CAETANO DA SILVA FILHO
ANDRÉ LUÍS TEIXEIRA RODRIGUES   MÁRIO LÚCIO GURGEL PIRES
ELAINE CRISTINA ZANATTA RODRIGUES VASQUINHO   MÁRIO LUÍS BRUGNETTI
FERNANDO FONTES IUNES   PAULO DE PAULA ABREU
MARCELO TREVISAN MARANGON   PAULO ROBERTO SCHIAVON DE ANDRADE
MILTON MALUHY FILHO   RODERICK SINCLAIR GREENLEES
    SOLANGE PAIVA VIEIRA
    THALES FERREIRA SILVA
     
BANCO ITAUCRED FINANCIAMENTOS S.A.   ITAÚ  SEGUROS S.A.
     
Chief Executive Officer    Chief Executive Officer
LUÍS OTÁVIO MATIAS   ROBERTO EGYDIO SETUBAL
     
Executive Vice-President   Superintendent Director
MÁRCIO DE ANDRADE SCHETTINI   MARCOS DE BARROS LISBOA
     
Directors   Executive Directors
CARLOS EDUARDO DE SOUZA LARA   ANDRÉ HORTA RUTOWITSCH
CLÁUDIO JOSÉ COUTINHO ARROMATTE   ANTONIO EDUARDO MÁRQUEZ DE FIGUEIREDO TRINDADE
EVANIR COUTINHO USSIER   JOSÉ CASTRO ARAÚJO RUDGE
FÁBIO MASSASHI OKUMURA    
FERNANDO JOSÉ COSTA TELES   Directors
FLÁVIO KITAHARA SOUSA   LUIZ FERNANDO BUTORI REIS SANTOS
JACKSON RICARDO GOMES   MARCO ANTONIO ANTUNES
JASON PETER CRAUFORD   NORBERTO GIL FERREIRA CAMARGO
LUÍS FERNANDO STAUB    
MARCO ANTONIO ANTUNES    
MARCOS ANTÔNIO VAZ DE MAGALHÃES    
MARCOS VANDERLEI BELINI FERREIRA    

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.
Consolidated Balance Sheet (Note 2a)
(In thousands of Reais)
 

 

ASSETS  NOTE   12/31/2011   12/31/2010 
CURRENT ASSETS        622,747,887    564,401,807 
CASH AND CASH EQUIVALENTS        10,633,082    10,096,540 
INTERBANK INVESTMENTS   4b and 6    113,645,149    85,662,014 
Money market        85,445,536    68,154,703 
Money market – Assets Guaranteeing Technical Provisions - SUSEP   11b   2,816,013    3,191,812 
Interbank deposits        25,383,600    14,315,499 
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS   4c, 4d and 7    147,704,470    155,987,247 
Own portfolio        46,765,192    32,938,921 
Subject to repurchase commitments        12,947,833    57,212,290 
Pledged in guarantee        8,838,992    6,952,286 
Deposited with the Central Bank        9,781,464    2,901,030 
Derivative financial instruments        5,961,548    5,588,633 
Assets guaranteeing technical provisions - PGBL/VGBL fund quotas   11b   57,733,857    46,050,748 
Assets guaranteeing technical provisions – other securities   11b   5,675,584    4,343,339 
INTERBANK ACCOUNTS        98,224,030    85,940,965 
Pending settlement        104,574    83,685 
Central Bank deposits        98,052,554    85,776,470 
National Housing System (SFH)        1,166    5,098 
Correspondents        35,047    75,712 
Interbank onlending        30,689    - 
INTERBRANCH ACCOUNTS        28,879    10,431 
LOAN, LEASE AND OTHER CREDIT OPERATIONS   8    180,492,549    158,906,454 
Operations with credit granting characteristics   4e   195,769,313    172,369,327 
 (Allowance for loan losses)   4f   (15,276,764)   (13,462,873)
OTHER RECEIVABLES        68,547,960    64,455,717 
Foreign exchange portfolio   9    26,038,027    19,525,671 
Income receivable        1,266,414    1,092,219 
Transactions with credit card issuers   4e   18,408,662    18,060,924 
Receivables from insurance and reinsurance operations    4nI and 11b    3,589,696    3,035,835 
Negotiation and intermediation of securities        1,728,168    3,079,285 
Sundry   13a   17,516,993    19,661,783 
OTHER ASSETS   4g   3,471,768    3,342,439 
Assets held for sale        138,389    150,349 
 (Valuation allowance)        (49,011)   (69,182)
Unearned premiums of reinsurance   4nI   552,950    424,362 
Prepaid expenses    4g and 13b    2,829,440    2,836,910 
LONG-TERM RECEIVABLES        216,674,506    176,062,251 
INTERBANK INVESTMENTS   4b and 6    2,436,840    696,707 
Money market        6    23,230 
Money market – Assets Guaranteeing Technical Provisions - SUSEP   11b   -    154,125 
Interbank deposits        2,436,834    519,352 
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS   4c, 4d and 7    40,175,954    30,575,168 
Own portfolio        22,040,083    15,705,664 
Subject to repurchase commitments        8,211,080    6,281,895 
Pledged in guarantee        1,889,009    2,147,948 
Deposited with the Central Bank        349,291    147,149 
Derivative financial instruments        3,584,698    2,718,556 
Assets guaranteeing technical provisions – other securities   11b   4,101,793    3,573,956 
INTERBANK ACCOUNTS - National Housing System (SFH)        669,734    572,144 
LOAN, LEASE AND OTHER CREDIT OPERATIONS   8    139,218,506    114,128,172 
Operations with credit granting characteristics   4e   149,713,469    122,683,517 
 (Allowance for loan losses)   4f   (10,494,963)   (8,555,345)
OTHER RECEIVABLES        32,688,824    29,105,844 
Foreign exchange portfolio   9    411,772    2,067,147 
Sundry   13a   32,277,052    27,038,697 
OTHER ASSETS - Prepaid expenses    4g and 13b    1,484,648    984,216 
PERMANENT ASSETS        11,909,142    10,979,052 
INVESTMENTS    4h and 15a Il    2,716,641    3,249,788 
Investments in affiliates        1,684,423    2,058,988 
Other investments        1,235,566    1,379,070 
(Allowance for loan losses)        (203,348)   (188,270)
REAL ESTATE IN USE    4i and 15b    5,286,998    4,723,791 
Real estate in use        3,453,180    3,291,742 
Other fixed assets        8,561,880    7,998,898 
(Accumulated depreciation)        (6,728,062)   (6,566,849)
OPERATING LEASE ASSETS   4j   -    3,999 
Leased assets        -    18,553 
(Accumulated depreciation)        -    (14,554)
GOODWILL    4k and 15b    95,691    67,617 
INTANGIBLE ASSETS    4l and 15b    3,809,812    2,933,857 
Acquisition of rights to credit payroll        1,647,548    2,414,697 
Other intangible assets        3,876,786    2,456,978 
(Accumulated amortization)        (1,714,522)   (1,937,818)
TOTAL ASSETS        851,331,535    751,443,110 

The accompanying notes are an integral part of these financial statements.

 

 
 

  

ITAÚ UNIBANCO HOLDING S.A.
Consolidated Balance Sheet (Note 2a)
(In thousands of Reais)
 

 

LIABILITIES  NOTE   12/31/2011   12/31/2010 
CURRENT LIABILITIES        421,618,311    400,664,566 
DEPOSITS   4b and 10b    159,455,538    139,548,607 
Demand deposits        28,932,523    25,537,134 
Savings deposits        67,169,544    57,899,455 
Interbank deposits        1,793,508    1,683,821 
Time deposits        61,559,963    53,522,521 
Other deposits        -    905,676 
DEPOSITS RECEIVED UNDER SECURITIES REPURCHASE AGREEMENTS   4b and 10c    81,813,398    122,444,995 
Own portfolio        43,471,088    98,424,824 
Third-party portfolio        36,537,645    23,069,503 
Free portfolio        1,804,665    950,668 
FUNDS FROM ACCEPTANCES AND ISSUANCE OF SECURITIES    4b and 10d    29,459,349    14,581,772 
Real estate, mortgage, credit and similar notes        18,474,079    10,967,302 
Debentures        1,038,733    292,676 
Foreign borrowings through securities        9,946,537    3,321,794 
INTERBANK ACCOUNTS        120,726    411,902 
Pending settlement        67,554    288,302 
Correspondents        53,172    123,600 
INTERBRANCH ACCOUNTS        3,927,461    3,256,170 
Third-party funds in transit        3,857,437    3,221,184 
Internal transfer of funds        70,024    34,986 
BORROWINGS AND ONLENDING   4b and 10e    29,009,787    21,777,965 
Borrowings        17,972,358    12,009,163 
Onlending        11,037,429    9,768,802 
DERIVATIVE FINANCIAL INSTRUMENTS   4d and 7h    4,139,099    3,979,057 
TECHNICAL PROVISION FOR INSURANCE, PENSION PLAN AND CAPITALIZATION   4n II and 11a    10,470,320    9,269,146 
OTHER LIABILITIES        103,222,633    85,394,952 
Collection and payment of taxes and contributions        855,975    694,359 
Foreign exchange portfolio   9    25,751,044    19,927,459 
Social and statutory   16b II    2,976,200    4,462,534 
Tax and social security contributions   4o, 4p and 14c    7,051,103    8,937,165 
Negotiation and intermediation of securities        2,503,701    3,099,347 
Credit card operations   4e   41,178,016    36,851,682 
Subordinated debt   10f   10,715,074    976,930 
Sundry   13c   12,191,520    10,445,476 
LONG-TERM LIABILITIES        355,390,776    285,621,231 
DEPOSITS   4b and 10b    83,180,884    63,139,450 
Interbank deposits        272,115    245,596 
Time deposits        82,908,769    62,893,854 
DEPOSITS RECEIVED UNDER SECURITIES REPURCHASE AGREEMENTS   4b and 10c    107,005,139    77,211,358 
Own portfolio        92,576,432    66,471,552 
Free portfolio        14,428,707    10,739,806 
FUNDS FROM ACCEPTANCES AND ISSUANCE OF SECURITIES   4b and 10d    22,097,865    11,009,947 
Real estate, mortgage, credit and similar notes        15,113,364    3,310,387 
Debentures        63    1,091,417 
Foreign borrowings through securities        6,984,438    6,608,143 
BORROWINGS AND ONLENDING   4b and 10e    27,592,273    25,559,999 
Borrowings        3,170,360    3,639,691 
Onlending        24,421,913    21,920,308 
DERIVATIVE FINANCIAL INSTRUMENTS   4d and 7h    2,668,217    1,725,778 
TECHNICAL PROVISION FOR INSURANCE, PENSION PLAN AND CAPITALIZATION   4n II and 11a    63,284,144    51,281,621 
OTHER LIABILITIES        49,562,254    55,693,078 
Foreign exchange portfolio   9    430,526    2,107,495 
Tax and social security contributions   4o, 4p and 14c    12,973,003    13,429,083 
Credit card operations        -    23,151 
Subordinated debt   10f   28,259,410    32,852,941 
Sundry   13c   7,899,315    7,280,408 
DEFERRED INCOME   4q   836,211    765,865 
MINORITY INTEREST IN SUBSIDIARIES   16e   2,138,904    3,512,903 
STOCKHOLDERS’ EQUITY   16    71,347,333    60,878,545 
Capital        45,000,000    45,000,000 
Capital reserves        763,413    594,734 
Revenue reserves        27,386,624    15,895,260 
Asset valuation adjustment   4c, 4d and 7d    (139,142)   17,128 
 (Treasury shares)        (1,663,562)   (628,577)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY        851,331,535    751,443,110 

 The accompanying notes are an integral part of these financial statements.

 

 
 

 

 
ITAÚ UNIBANCO HOLDING S.A.
Consolidated Statement of Income (Note 2a)
(In thousands of Reais)
 

 

         2nd Half of    01/01 to    01/01 to 
    NOTE     2011    12/31/2011    12/31/2010 
INCOME FROM FINANCIAL OPERATIONS        55,556,501    101,366,445    79,626,922 
Loan, lease and other credit operations        31,147,110    59,102,824    51,314,622 
Securities and derivative financial instruments        15,365,896    26,060,595    18,714,020 
Financial income from insurance, pension plan and capitalization operations   11c   3,334,178    5,929,625    4,512,672 
Foreign exchange operations        796,270    914,047    979,912 
Compulsory deposits        4,913,047    9,359,354    4,105,696 
EXPENSES OF FINANCIAL OPERATIONS        (32,613,265)   (54,107,439)   (34,979,324)
Money market        (27,626,657)   (46,249,862)   (30,082,387)
Financial expenses on technical provisions for pension plan and capitalization   11c   (2,924,624)   (5,239,459)   (3,928,147)
Borrowings and onlending        (2,061,984)   (2,618,118)   (968,790)
INCOME FROM FINANCIAL OPERATIONS BEFORE LOAN LOSSES        22,943,236    47,259,006    44,647,598 
RESULT OF ALLOWANCE FOR LOAN LOSSES   8d I    (7,536,189)   (14,423,754)   (9,911,355)
Expenses for allowance for loan losses        (10,424,778)   (19,911,948)   (14,120,560)
Income from recovery of credits written off as loss        2,888,589    5,488,194    4,209,205 
GROSS INCOME FROM FINANCIAL OPERATIONS        15,407,047    32,835,252    34,736,243 
OTHER OPERATING REVENUES (EXPENSES)        (7,159,381)   (14,545,854)   (14,480,968)
Banking service fees   13d   7,250,746    13,912,326    12,340,783 
Asset management        1,332,961    2,607,734    2,486,010 
Current account services        343,215    675,646    582,922 
Credit cards        3,233,170    6,111,133    5,284,056 
Sureties and credits granted        926,109    1,761,944    1,460,334 
Receipt services        701,857    1,332,789    1,324,525 
Other        713,434    1,423,080    1,202,936 
Income from bank charges   13e   2,657,255    5,135,371    4,759,871 
Result from insurance, pension plan and capitalization operations   11c   1,500,071    2,714,409    2,099,884 
Personnel expenses   13f   (6,778,573)   (13,356,634)   (12,451,571)
Other administrative expenses   13g   (7,417,370)   (14,099,747)   (13,597,894)
Tax expenses   4p and 14a II    (1,932,351)   (4,091,978)   (4,168,422)
Equity in earnings of affiliates and other investments   15a lll    82,567    39,497    423,093 
Other operating revenues   13h   187,006    392,528    528,633 
Other operating expenses   13i   (2,708,732)   (5,191,626)   (4,415,345)
OPERATING INCOME        8,247,666    18,289,398    20,255,275 
NON-OPERATING INCOME        63,899    191,390    80,594 
INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING        8,311,565    18,480,788    20,335,869 
INCOME TAX AND SOCIAL CONTRIBUTION   4p and 14a I    (313,498)   (2,855,428)   (5,886,043)
Due on operations for the period        (3,195,510)   (7,029,598)   (4,127,657)
Related to temporary differences        2,882,012    4,174,170    (1,758,386)
PROFIT SHARING – Management members - Statutory - Law No. 6,404 of 12/15/1976        (85,399)   (191,923)   (260,940)
MINORITY INTEREST IN SUBSIDIARIES   16e   (424,555)   (812,816)   (865,923)
NET INCOME        7,488,113    14,620,621    13,322,963 
WEIGHTED AVERAGE OF THE NUMBER OF OUTSTANDING SHARES             4,529,310,833    4,536,069,092 
NET INCOME PER SHARE – R$             3.23    2.94 
BOOK VALUE PER SHARE - R$ (OUTSTANDING AT 12/31)             15.81    13.40 
                     
EXCLUSION OF NONRECURRING EFFECTS   2a and 22k         20,369    (300,315)
NET INCOME WITHOUT NONRECURRING EFFECTS             14,640,990    13,022,648 
NET INCOME PER SHARE – R$             3.23    2.87 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Cash Flows

(In thousands of Reais)

 

 

   NOTE   2nd half of
2011		   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
ADJUSTED NET INCOME        18,140,316    38,557,686    34,421,299 
Net income        7,488,113    14,620,621    13,322,963 
Adjustments to net income:        10,652,203    23,937,065    21,098,336 
Granted options recognized        82,551    162,663    131,660 
Adjustment to market value of securities and derivative financial instruments (assets/liabilities)   7i   1,142,063    1,605,804    (658,631)
Effects of changes in exchange rates on cash and cash equivalents        (2,395,589)   (2,167,626)   629,288 
Allowance for loan losses        10,424,778    19,911,948    14,120,560 
Interest expense and foreign exchange income from variation from operations with subordinated debt        2,788,405    4,345,353    2,619,814 
Interest expense from operations with debentures        100,808    165,306    224,058 
Financial expenses on technical provisions for pension plan and capitalization        2,924,624    5,239,459    3,928,147 
Depreciation and amortization   15b   1,098,801    2,166,563    2,137,276 
Adjustment to legal liabilities – tax and social security        526,635    866,756    (1,469,652)
Adjustment to provision for contingent liabilities        173,947    228,499    1,213,319 
Deferred taxes        (2,882,012)   (4,174,170)   1,758,386 
Equity in earnings of affiliates and other investments   15a lll    (82,567)   (39,497)   (423,093)
Interest and foreign exchange income from variation from available-for-sale securities        (2,891,412)   (3,744,181)   (2,893,857)
Interest and foreign exchange income from variation from held-to-maturity securities        (223,938)   (407,973)   (444,589)
(Income) loss from sale of available-for-sale financial assets   7f   (75,821)   (301,358)   (558,920)
(Income) loss from sale of investments        (323,512)   (521,932)   (183,672)
(Income) loss from sale of foreclosed assets        (43,876)   (42,507)   (34,279)
(Gain) loss from sale of fixed assets        7,540    (44,074)   7,585 
(Gain) loss from rescission of operations of intangible assets        (43,616)   (44,418)   (55,625)
Minority interest        424,555    812,816    865,923 
Other        (80,161)   (80,366)   184,638 
CHANGE IN ASSETS AND LIABILITIES        (818,430)   (33,131,331)   (62,513,317)
(Increase) decrease in interbank investments        (4,093,285)   (31,657,183)   26,549,860 
(Increase) decrease in securities and derivative financial instruments        (649,548)   1,792,629    (64,219,394)
(Increase) decrease in compulsory deposits with the Central Bank of Brazil        (6,213,568)   (12,276,084)   (71,907,716)
(Increase) decrease in interbank and interbranch accounts (assets/liabilities)        (934,820)   257,096    548,265 
(Increase) decrease in loan, lease and other credit operations        (36,970,340)   (66,630,980)   (66,776,695)
(Increase) decrease in other receivables and other assets        838,617    1,155,240    (2,899,951)
(Increase) decrease in foreign exchange portfolio and negotiation and intermediation of securities (assets/liabilities)        (674,306)   45,106    (251,211)
(Decrease) increase in deposits        33,722,208    39,948,365    11,972,027 
(Decrease) increase in deposits received under securities repurchase agreements        (9,045,280)   (10,837,816)   67,712,790 
(Decrease) increase in funds for issuance of securities        19,263,373    26,310,792    9,679,627 
(Decrease) increase in borrowings and onlending        3,655,113    9,264,096    12,702,151 
(Decrease) increase in credit card operations (assets/liabilities)        4,613,551    3,955,445    3,262,420 
(Decrease) increase in technical provision for insurance, pension plan and capitalization        4,073,601    7,281,789    5,871,963 
(Decrease) increase in collection and payment of taxes and contributions        (8,529,489)   161,616    226,054 
(Decrease) increase in other liabilities        1,959,065    2,037,189    7,816,056 
(Decrease) increase in deferred income        7,497    70,346    313,283 
Payment of income tax and social contribution        (1,840,819)   (4,008,977)   (3,112,846)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES        17,321,886    5,426,355    (28,092,018)
Interest on capital / dividends received from affiliated companies        54,855    70,321    89,372 
Funds received from sale of available-for-sale securities        12,475,188    34,221,963    17,891,819 
Funds received from redemption of held-to-maturity securities        478,742    814,258    286,604 
Disposal of assets not for own use        76,568    146,044    369,483 
Disposal of investments        412,314    696,630    233,694 
Sale of fixed assets        70,841    184,471    70,326 
Termination of intangible asset agreements        178,425    184,048    145,473 
Purchase of available-for-sale securities        (16,954,383)   (33,599,564)   (17,030,846)
Purchase of held-to-maturity securities        (218,300)   (341,300)   (582,120)
Purchase of investments        (10,126)   (20,994)   (229,487)
Purchase of fixed assets   15b   (1,198,155)   (1,902,929)   (1,923,132)
Purchase of intangible assets   15b   (1,275,513)   (2,008,056)   (649,647)
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES        (5,909,544)   (1,555,108)   (1,328,461)
Increase in subordinated debt        2,626,925    8,850,750    9,352,093 
Decrease in subordinated debt        (3,651,339)   (8,051,490)   (180,252)
Decrease in debentures        (103,724)   (510,603)   (1,604,242)
Change in minority interest   16e   (1,257,996)   (1,522,343)   12,320 
Granting of stock options        198,367    353,036    406,084 
Purchase of treasury shares        (744,647)   (1,302,638)   - 
Dividends and interest on capital paid to minority interests        (337,121)   (664,472)   (727,591)
Dividends and interest on capital paid        (1,547,736)   (4,588,486)   (4,315,488)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES        (4,817,271)   (7,436,246)   2,942,924 
                     
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        6,595,071    (3,564,999)   (26,477,555)
                     
Cash and cash equivalents at the beginning of the period        28,626,235    39,014,268    66,121,111 
Effects of changes in exchange rates on cash and cash equivalents        2,395,589    2,167,626    (629,288)
Cash and cash equivalents at the end of the period   4a and 5    37,616,895    37,616,895    39,014,268 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Added Value

(In thousands of Reais)

 

 

      2nd half of  01/01 to  01/01 to
   NOTE  2011  12/31/2011  12/31/2010
INCOME        59,662,036    109,288,715    89,525,332 
Financial operations        55,556,504    101,366,445    79,626,922 
Banking services        9,908,001    19,047,697    17,100,654 
Result from insurance, pension plan and capitalization operations        1,500,071    2,714,409    2,099,884 
Result of loan losses   8d   (7,536,189)   (14,423,754)   (9,911,355)
Other        233,649    583,918    609,227 
EXPENSES        (35,304,739)   (59,299,065)   (39,394,669)
Financial operations        (32,613,266)   (54,107,439)   (34,979,324)
Other        (2,691,473)   (5,191,626)   (4,415,345)
INPUTS PURCHASED FROM THIRD PARTIES        (6,210,738)   (11,764,138)   (11,405,491)
Materials, energy and others   13g   (240,880)   (459,891)   (456,022)
Third-party services   13g   (1,740,025)   (3,265,955)   (2,872,258)
Other        (4,229,833)   (8,038,292)   (8,077,211)
Data processing and telecommunications   13g   (1,757,043)   (3,494,837)   (3,278,980)
Advertising, promotions and publication   13g   (519,776)   (956,725)   (1,129,235)
Installations        (858,404)   (1,432,045)   (1,564,358)
Transportation   13g   (300,322)   (583,074)   (595,708)
Security   13g   (241,995)   (482,164)   (450,656)
Travel expenses   13g   (102,423)   (188,915)   (166,925)
Other        (449,870)   (900,532)   (891,349)
GROSS ADDED VALUE        18,146,559    38,225,512    38,725,172 
DEPRECIATION AND AMORTIZATION   13g   (736,995)   (1,419,141)   (1,355,070)
NET ADDED VALUE PRODUCED BY THE COMPANY        17,409,564    36,806,371    37,370,102 
ADDED VALUE RECEIVED FROM TRANSFER   15a lll    82,566    39,497    423,093 
TOTAL ADDED VALUE TO BE DISTRIBUTED        17,492,130    36,845,868    37,793,195 
DISTRIBUTION OF ADDED VALUE        17,492,130    36,845,868    37,793,195 
Personnel        6,062,382    11,997,794    11,202,027 
Compensation        4,738,755    9,485,138    8,738,556 
Benefits        986,691    1,865,882    1,898,619 
FGTS – government severance pay fund        336,936    646,774    564,852 
Taxes, fees and contributions        3,047,439    8,498,169    11,564,949 
Federal        2,681,903    7,776,266    10,934,189 
State        7,528    8,508    2,525 
Municipal        358,008    713,395    628,235 
Return on third parties’ assets - Rent        469,641    916,468    837,333 
Return on own assets        7,912,668    15,433,437    14,188,886 
Dividends and Interest on capital        1,652,749    3,207,100    4,482,550 
Retained earnings (loss) for the period        5,835,364    11,413,521    8,840,413 
Minority interest in retained earnings        424,555    812,816    865,923 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

Balance Sheet

(In thousands of Reais)

 

 

ASSETS  NOTE   12/31/2011   12/31/2010 
CURRENT ASSETS        28,646,456    3,792,477 
CASH AND CASH EQUIVALENTS        7,833    1,940 
INTERBANK INVESTMENTS   4b and 6    26,302,382    192,959 
Money market        454,176    192,959 
Interbank deposits        25,848,206    - 
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS   4c, 4d and 7    13,631    33,489 
Own portfolio        7,837    28,299 
Pledged in guarantee        5,794    5,190 
OTHER RECEIVABLES        2,318,501    3,559,575 
Income receivable   15a I    1,959,278    3,067,840 
Sundry   13a   359,223    491,735 
OTHER ASSETS – Prepaid expenses   4g   4,109    4,514 
LONG-TERM RECEIVABLES        6,097,851    14,428,183 
INTERBANK INVESTMENTS – Interbank deposits   4b and 6    5,794,144    14,176,842 
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS   4c, 4d and 7    -    6,387 
Own portfolio        -    13 
Pledged in guarantee        -    6,374 
OTHER RECEIVABLES - Sundry   13a   303,707     244,954 
PERMANENT ASSETS        56,308,737    63,030,639 
INVESTMENTS        56,308,494    63,030,331 
Investments in subsidiaries   4h and 15a I    56,308,494    63,029,924 
Other        -    407 
REAL ESTATE IN USE   4i   243    308 
TOTAL ASSETS        91,053,044    81,251,299 
LIABILITIES               
CURRENT LIABILITIES        6,226,283    2,856,800 
DEPOSITS - Interbank deposits   4b and 10b    4,832,444    - 
FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES   4b and 10d    5,542    5,542 
DERIVATIVE FINANCIAL INSTRUMENTS   4d and 7h    -    2,717 
OTHER LIABILITIES        1,388,297    2,848,541 
Social and statutory   16b II    1,288,091    2,704,993 
Tax and social security contributions   4o, 4p and 14c    4,996    25,060 
Subordinated debt   10f   85,715    47,890 
Sundry   13c   9,495    70,598 
LONG-TERM LIABILITIES        6,443,608    7,749,709 
DEPOSITS - Interbank deposits   4b and 10b    -    3,344,008 
FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES   4b and 10d    500,000    500,000 
OTHER LIABILITIES        5,943,608    3,905,701 
Tax and social security contributions   4o, 4p and 14c    816,111    576,158 
Subordinated debt   10f   5,111,734    3,304,889 
Sundry   13c   15,763    24,654 
STOCKHOLDERS’ EQUITY   16    78,383,153    70,644,790 
Capital        45,000,000    45,000,000 
Capital reserves        763,413    594,734 
Revenue reserves        34,422,444    25,661,505 
Asset valuation adjustment   4c, 4d and 7d    (139,142)   17,128 
(Treasury shares)        (1,663,562)   (628,577)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY        91,053,044    81,251,299 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.
Statement of Income
(In thousands of Reais)
 

 

       2nd Half   01/01 to   01/01 to 
   NOTE   2011   12/31/2011   12/31/2010 
INCOME FROM FINANCIAL OPERATIONS        1,603,318    2,608,483    1,021,447 
Securities and derivative financial instruments        1,603,318    2,608,483    1,021,447 
EXPENSES OF FINANCIAL OPERATIONS        (427,559)   (753,200)   (376,032)
Money market        (427,559)   (753,200)   (376,032)
GROSS INCOME FROM FINANCIAL OPERATIONS        1,175,759    1,855,283    645,415 
OTHER OPERATING REVENUES (EXPENSES)        5,336,102    9,830,784    9,557,780 
Personnel expenses        (97,414)   (190,128)   (163,300)
Other administrative expenses        (20,231)   (43,523)   (64,946)
Tax expenses   14a II    (54,411)   (185,652)   (177,081)
Equity in earnings of subsidiaries   15a I    5,538,061    10,293,030    10,048,503 
Other operating revenues (expenses)        (29,903)   (42,943)   (85,396)
OPERATING INCOME        6,511,861    11,686,067    10,203,195 
NON-OPERATING INCOME        19,753    28,868    9,763 
INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING       6,531,614    11,714,935    10,212,958 
INCOME TAX AND SOCIAL CONTRIBUTION   4p   (409,816)   178,218    64,314 
Due on operations for the period        68,784    73,198    (13,364)
Related to temporary differences        (478,600)   105,020    77,678 
PROFIT SHARING – Management members - Statutory - Law No. 6,404 of 12/15/1976        (1,227)   (2,957)   (5,257)
NET INCOME        6,120,571    11,890,196    10,272,015 
WEIGHTED AVERAGE OF THE NUMBER OF OUTSTANDING SHARES             4,529,310,833    4,536,069,092 
NET INCOME PER SHARE – R$             2.63    2.26 
BOOK VALUE PER SHARE - R$ (OUTSTANDING AT 12/31)             17.37    15.55 
                     
EXCLUSION OF NONRECURRING EFFECTS   2a and 22k         20,369    (300,315)
NET INCOME WITHOUT NONRECURRING EFFECTS             11,910,565    9,971,700 
NET INCOME PER SHARE – R$             2.63    2.20 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

Statement of Changes in Stockholders’ Equity (Note 16)

(In thousands of Reais)

 

 

       Capital       Asset valuation
adjustment (Note		   Retained   (Treasury     
   Capital   reserves   Revenue reserves   7d)   earnings   shares)   Total 
BALANCES AT 07/01/2011   45,000,000    619,297    29,946,904    (32,044)   -    (1,048,000)   74,486,157 
Purchase of treasury shares   -    -    -    -    -    (744,647)   (744,647)
Granting of stock options – exercised options   -    61,565    7,718    -    -    129,085    198,368 
Granting of options recognized   -    82,551    -    -    -    -    82,551 
Change in adjustment to market value   -    -    -    (107,098)   -    -    (107,098)
Net income   -    -    -    -    6,120,571    -    6,120,571 
Appropriations:                                   
Legal reserve   -    -    306,029    -    (306,029)   -    - 
Statutory reserves   -    -    2,314,870    -    (2,314,870)   -    - 
Dividends and Interest on capital   -    -    1,846,923    -    (3,499,672)   -    (1,652,749)
BALANCES AT 12/31/2011   45,000,000    763,413    34,422,444    (139,142)   -    (1,663,562)   78,383,153 
CHANGES IN THE PERIOD   -    144,116    4,475,540    (107,098)   -    (615,562)   3,896,996 
BALANCES AT 01/01/2010   45,000,000    640,759    18,771,151    120,031    -    (1,031,327)   63,500,614 
Employee benefits – CVM Resolution No. 600, of October 7, 2009 (Note 19)   -    -    924,424    -    -    -    924,424 
Granting of stock options – exercised options   -    (91,313)   94,647    -    -    402,750    406,084 
Granting of options recognized   -    45,288    86,372    -    -    -    131,660 
Change in adjustment to market value   -    -    (3,934)   (102,903)   -    -    (106,837)
Addition to interest on capital and paid on 03/01/2010 - Year 2009   -    -    (620)   -    -    -    (620)
Net income   -    -    -    -    10,272,015    -    10,272,015 
Appropriations:                                   
Legal reserve   -    -    513,601    -    (513,601)   -    - 
Realization of unrealized profit reserve   -    -    (357,931)   -    357,931    -    - 
Statutory reserves   -    -    5,633,795    -    (5,633,795)   -    - 
Dividends and Interest on capital   -    -    -    -    (4,482,550)   -    (4,482,550)
BALANCES AT 12/31/2010   45,000,000    594,734    25,661,505    17,128    -    (628,577)   70,644,790 
CHANGES IN THE YEAR   -    (46,025)   6,890,354    (102,903)   -    402,750    7,144,176 
BALANCES AT 01/01/2011   45,000,000    594,734    25,661,505    17,128    -    (628,577)   70,644,790 
Purchase of treasury shares        -    -    -    -    (1,302,638)   (1,302,638)
Granting of stock options – exercised options   -    6,016    79,367    -    -    267,653    353,036 
Granting of options recognized   -    162,663    -    -    -    -    162,663 
Change in adjustment to market value   -    -    -    (156,270)   -    -    (156,270)
Addition to interest on capital and paid on 03/17/2011 - Year 2010   -    -    (1,524)   -    -    -    (1,524)
Net income   -    -    -    -    11,890,196    -    11,890,196 
Appropriations:                                   
Legal reserve   -    -    594,510    -    (594,510)   -    - 
Statutory reserves   -    -    6,241,663    -    (6,241,663)   -    - 
Dividends and Interest on capital   -    -    1,846,923    -    (5,054,023)   -    (3,207,100)
BALANCES AT 12/31/2011   45,000,000    763,413    34,422,444    (139,142)   -    (1,663,562)   78,383,153 
CHANGES IN THE YEAR   -    168,679    8,760,939    (156,270)   -    (1,034,985)   7,738,363 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

Statement of Cash Flows

(In thousands of Reais)

 

 

       2nd half of   01/01 to   01/01 to 
   NOTE   2011   12/31/2011   12/31/2010 
ADJUSTED NET INCOME (LOSS)        1,965,653    2,384,283    338,123 
Net income        6,120,571    11,890,196    10,272,015 
Adjustments to net income:        (4,154,918)   (9,505,913)   (9,933,892)
Granting of options recognized        82,551    162,663    131,660 
Interest expense and foreign exchange income from variation from operations with subordinated debt        807,789    685,666    - 
Deferred taxes        478,600    (105,020)   (77,678)
Equity in earnings of subsidiaries   15a I    (5,538,061)   (10,293,030)   (10,048,503)
Amortization of goodwill        28,872    57,745    57,746 
(Income) loss from sale of investments        (12,456)   (12,456)   - 
Effects of changes in exchange rates on cash and cash equivalents        (2,258)   (1,574)   2,774 
Other        45    93    109 
CHANGE IN ASSETS AND LIABILITIES        (264,620)   291,899    322,757 
(Increase) decrease in other receivables and other assets        (43,551)   179,044    146,500 
Increase (decrease) in other liabilities        (220,840)   113,084    176,257 
Payment of income tax and social contribution        (229)   (229)   - 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES        1,701,033    2,676,182    660,880 
Interest on capital/Dividends received        1,047,764    14,047,324    4,383,005 
(Increase) decrease in interbank investments        (1,120,197)   (17,465,508)   (7,251,881)
(Increase) decrease in securities and derivative financial instruments (assets/liabilities)        211    23,944    (11,566)
(Purchase) sale of investments        11,776    3,874,270    - 
(Purchase) sale of fixed assets        (9)   (28)   (60)
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES        (60,455)   480,002    (2,880,502)
Increase (decrease) in deposits        820,221    1,488,436    2,444,784 
Increase in subordinated debt        236,025    1,406,850    3,352,779 
Decrease in subordinated debt        (170,336)   (247,846)   - 
(Increase) decrease in funds for issuance of securities        -    -    505,542 
Granting of stock options        198,367    353,036    406,084 
Purchase of treasury shares        (744,647)   (1,302,638)   - 
Dividends and interest on capital paid        (1,547,736)   (4,588,486)   (4,315,488)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES        (1,208,106)   (2,890,648)   2,393,701 
                     
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        432,472    265,536    174,079 
Cash and cash equivalents at the beginning of the period        27,279    194,899    23,594 
Effects of changes in exchange rates on cash and cash equivalents        2,258    1,574    (2,774)
Cash and cash equivalents at the end of the period   4a and 5    462,009    462,009    194,899 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

Statement of Added Value

(In thousands of Reais)

 

 

       2nd half of   01/01 to   01/01 to 
   NOTE   2011   12/31/2011   12/31/2010 
INCOME        1,603,318    2,777,631    1,051,877 
Financial operations        1,603,318    2,608,483    1,021,447 
Other        -    169,148    30,430 
EXPENSES        (838,280)   (753,200)   (376,032)
Financial operations        (427,558)   (753,200)   (376,032)
Other        (410,722)   -    - 
INPUTS PURCHASED FROM THIRD PARTIES        (19,996)   (43,048)   (75,948)
Third-party services        (11,386)   (21,438)   (26,782)
Advertising, promotions and publication        (406)   (634)   (1,643)
Expenses for financial system services        (3,637)   (6,593)   (17,752)
Insurance        (1,715)   (4,850)   (6,219)
Other        (2,852)   (9,533)   (23,552)
GROSS ADDED VALUE        745,042    1,981,383    599,897 
DEPRECIATION AND AMORTIZATION        (46)   (93)   (109)
NET ADDED VALUE PRODUCED BY THE COMPANY        744,996    1,981,290    599,788 
ADDED VALUE RECEIVED FROM TRANSFER   15a l    5,538,060    10,293,030    10,048,503 
TOTAL ADDED VALUE TO BE DISTRIBUTED        6,283,056    12,274,320    10,648,291 
DISTRIBUTION OF ADDED VALUE        6,283,056    12,274,320    10,648,291 
Personnel        96,807    189,230    165,068 
Compensation        95,645    186,088    160,944 
Benefits        690    1,920    2,726 
FGTS – government severance pay fund        472    1,222    1,398 
Taxes, fees and contributions        65,490    194,512    210,519 
Federal        65,488    194,486    210,458 
Municipal        2    26    61 
Return on third parties’ assets - Rent        188    382    689 
Return on own assets        6,120,571    11,890,196    10,272,015 
Dividends and interest on capital        1,652,749    3,207,100    4,482,550 
Retained earnings (loss) for the period        4,467,822    8,683,096    5,789,465 

The accompanying notes are an integral part of these financial statements.

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

 

NOTES TO THE FINANCIAL STATEMENTS

 

FROM JANUARY 1 TO DECEMBER 31, 2011 AND 2010

 

(In thousands of Reais)

 

NOTE 1 - OPERATIONS

 

Itaú Unibanco Holding S.A. (ITAÚ UNIBANCO HOLDING) is a publicly-held company which, together with its subsidiaries and affiliated companies, operates in Brazil and abroad, with all types of banking activities, through its commercial, investment, real estate loan, finance and investment credit, and lease portfolios, including foreign exchange operations, and other complementary activities, with emphasis on Insurance, Private Pension Plans, Capitalization, Securities Brokerage and Administration of Credit Cards, Consortia, Investment Funds and Managed Portfolios.

 

 
 

 

NOTE 2 – PRESENTATION OF THE FINANCIAL STATEMENTS

 

a)Presentation of the Financial Statements

 

The financial statements of ITAÚ UNIBANCO HOLDING and of its subsidiaries (ITAÚ UNIBANCO HOLDING CONSOLIDATED) have been prepared in accordance with accounting principles established by the Brazilian Corporate Law, including the amendments introduced by Laws No. 11,638, of December 28, 2007, and No. 11,941, of May 27, 2009, in conformity, when applicable, with instructions issued by the Central Bank of Brazil (BACEN), the National Monetary Council (CMN), the Brazilian Securities and Exchange Commission (CVM), and the Superintendence of Private Insurance (SUSEP), and National Council of Private Insurance (CNSP), which include the use of estimates necessary to calculate accounting provisions.

 

In order to enable the proper analysis of the net income, the heading “Net income without nonrecurring effects” is presented below the Consolidated Statement of Income, and this effect is highlighted in a heading called “Exclusion of nonrecurring effects” (Note 22k).

 

As set forth in the sole paragraph of article 7 of BACEN Circular No. 3,068, of November 8, 2001, securities classified as trading securities (Note 4c) are presented in the Balance Sheet under Current Assets regardless of their maturity dates.

 

Lease Operations are presented, at present value, in the Balance Sheet, and the related income and expenses, which represent the financial result of these operations, are presented, grouped together, under loan, lease and other credit operations in the Statement of Income. Advances on exchange contracts are reclassified from Other Liabilities – Foreign Exchange Portfolio to credit operations. The foreign exchange result is presented on an adjusted basis, with the reclassification of expenses and income, in order to represent exclusively the impact of variations and differences of rates on the balance sheet accounts denominated in foreign currencies.

 

b)Consolidation

 

As set forth in paragraph 1, article 2, of BACEN Circular Letter No. 2,804, of February 11, 1998, the financial statements of ITAÚ UNIBANCO HOLDING comprise the consolidation of its foreign branches and subsidiaries.

 

Intercompany transactions and balances and results have been eliminated on consolidation. The investments held by consolidated companies in Exclusive Investment Funds are consolidated. The investments in these fund portfolios are classified by type of transaction and were distributed by type of security, in the same categories in which these securities had been originally allocated. The effects of the Foreign Exchange Variation on investments abroad are classified in the heading Securities and Derivative Financial Instruments in the Statement of Income.

 

The difference of Net Income and Stockholders’ Equity between ITAÚ UNIBANCO HOLDING and ITAÚ UNIBANCO HOLDING CONSOLIDATED (Note 16d) results from the adoption of different criteria for the amortization of goodwill originated on purchase of investments, net of the respective deferred tax assets.

 

In ITAÚ UNIBANCO HOLDING, the goodwill recorded in subsidiaries, mainly originated from the ITAÚ UNIBANCO merger, is being amortized based on the expected future profitability and appraisal reports or upon realization of the investment, according to the rules and guidance of CMN and BACEN.

 

 
 

 

In ITAÚ UNIBANCO HOLDING CONSOLIDATED this goodwill was fully amortized up to December 31, 2009 in the periods when the investments were made, in order to: a) permit better comparability with previous periods’ consolidated financial statements; and b) permit measuring Net Income and Stockholders’ Equity based on conservative criteria.

 

From January 1, 2010, the goodwill originated from the purchase of investments is no longer fully amortized in the consolidated financial statements, for purposes of compatibility of the current accounting practices with the international financial reporting standards (Note 4k).

 

In 2011, there was a change in the basis for consolidating certain companies, particularly for the Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento, with the change from full to partial consolidation, and Porto Seguro S.A., which is now stated under the equity method, including for comparative purposes.

 

The consolidated financial statements comprise ITAÚ UNIBANCO HOLDING and its direct and indirect subsidiaries, among which we highlight:

 

       Incorporation   Interest % 
       country   12/31/2011   12/31/2010 
Afinco Americas Madeira, SGPS, Sociedade Unipessoal, Ltda.        Portugal    100.00    100.00 
Banco Dibens S.A.        Brazil    100.00    100.00 
Banco Fiat S.A.        Brazil    100.00    99.99 
Banco Itaú Argentina S.A.        Argentina    99.99    99.99 
Banco Itaú BBA S.A.        Brazil    99.99    99.99 
Banco Itaú Chile        Chile    99.99    99.99 
Banco Itaú Europa Luxembourg S.A.       Luxembourg    99.98    99.98 
Banco Itaú BBA International, S.A.   (1)   Portugal    99.99    99.99 
Banco Itaú Uruguay S.A.        Uruguay    100.00    100.00 
Banco Itaucard S.A.        Brazil    100.00    100.00 
Banco Itaucred Financiamentos S.A.        Brazil    100.00    100.00 
Banco Itauleasing S.A.        Brazil    100.00    100.00 
BIU Participações S.A.        Brazil    66.16    66.16 
Cia. Itaú de Capitalização        Brazil    99.99    99.99 
Dibens Leasing S.A. - Arrendamento Mercantil        Brazil    100.00    100.00 
FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento   (2)   Brazil    50.00    50.00 
Fiat Administradora de Consórcios Ltda.        Brazil    99.99    99.99 
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento   (2)   Brazil    50.00    50.00 
Hipercard Banco Múltiplo S.A.        Brazil    100.00    100.00 
Itaú Administradora de Consórcios Ltda.        Brazil    99.99    99.99 
Itau Bank, Ltd.   (3)   Cayman Islands    100.00    100.00 
Itaú Corretora de Valores S.A.        Brazil    100.00    100.00 
Itaú Seguros S.A.        Brazil    100.00    100.00 
Itaú Unibanco S.A.        Brazil    100.00    100.00 
Itaú Vida e Previdência  S.A.        Brazil    100.00    100.00 
Itaú Unibanco Consultoria S.A.   (4)   Brazil    -    100.00 
Luizacred S.A. Soc. Créd. Financiamento Investimento   (2)   Brazil    50.00    50.00 
OCA Casa Financiera S.A.        Uruguay    100.00    100.00 
Orbitall Serviços e Processamento de Informações Comerciais S.A.        Brazil    100.00    100.00 
Redecard S.A.   (5)   Brazil    50.00    50.00 
Unibanco Cayman Bank Ltd.        Cayman Islands    100.00    100.00 
Unibanco Participações Societárias S.A. (Note 16e)        Brazil    100.00    51.00 

 

(1)New company name of Banco Itaú Europa, S.A.;
(2)Company with shared control included proportionally in consolidation;
(3)It does not include Redeemable Preferred Shares (Note 10f);
(4)New company name of Itaúsa Export S.A, which was merged into ITB Holding Brasil controlled by Itaú Unibanco S.A.;
(5)Fully consolidated company whose share capital is 50% plus 17 shares.

 

 
 

 

 

NOTE 3 – REQUIREMENTS OF CAPITAL AND FIXED ASSET LIMITS

 

a) Basel and Fixed Asset Ratios

 

The main indicators at December 31, 2011, according to present regulation, are as follows:

 

   Financial   Economic-financial 
   conglomerate (1)   consolidated (2) 
Referential equity (3)   92,560,637    93,111,393 
Basel ratio   16.0%   16.4%
Tier I   12.3%   12.6%
Tier II   3.7%   3.8%
Fixed assets ratio (4)   48.6%   14.4%
Excess capital in relation to fixed assets   1,272,305    33,148,373 

(1)Consolidated financial statements including financial companies only;
(2)Consolidated financial statements comprising all direct and indirect subsidiary companies, including insurance, pension plan, capitalization companies and other non-financial companies, as provided for in CMN Resolution No. 2,723 of June 1, 2000, amended by CMN Resolution No. 2,743, of June 28, 2000.
(3)The CMN, through Resolution No. 3,444, of February 28, 2007, determined the Referential Equity (PR), for purposes of calculating operating limits, as being the sum of both Tier I and Tier II levels, following the international experience, each of them comprising items from stockholders' equity, as well as subordinated debt and hybrid capital and debt instruments.
(4)The difference between the fixed asset ratio of the financial conglomerate and the economic-financial consolidated arises from the inclusion of non-financial subsidiary companies, which provide high liquidity and low level of fixed asset ratio, with a consequent decrease in the fixed asset ratio of the economic and financial consolidated amounts, enabling, when necessary, the distribution of funds to the financial companies.

 

As approved by the Central Bank of Brazil on January 13, 2012, issues of subordinated debt, which total R$ 198,000, can be included in Referential Equity for Tier II.

 

In addition, issues of subordinated debt, in the amount of R$ 108,400 as of December 31, 2011, are pending approval in order to be included in the Tier II. Should we consider these issues, the Basel ratios would be affected by 0.05%.

 

Management considers the current Basel ratio (16.0%, based on financial conglomerate) to be adequate, taking into account the following:

 

a)It exceeds by 5.0 percent the minimum required by the authorities (11.0%); and

 

b)b) In view of the realizable values of assets (Note 18), the additional provision (exceeding the minimum required) (Note 8c) and unrecorded deferred tax assets (Note 14b IV), the ratio would increase to 17.0%.

 

CMN Resolution No. 3,490, of August 29, 2007, provides for the criteria for computation of the Required Referential Equity (PRE). For calculation of the risk portions, the procedures of Circular No. 3,360, of September 12, 2007 for credit risk, of Circulars Nos. 3,361, 3,362, 3,363, 3,364, 3,366 and 3,368, of September 12, 2007, 3,388, of June 4, 2008, 3,389, of June 25, 2008, 3,498, of june 28, 2010 and 3,568, of december 21, 2011 and Circular Letters Nos. 3,309 and 3,310, of April 15, 2008 for market risk, Circulars No. 3,383, of April 30, 2008 and 3,476, of December 28, 2009 and Circular Letters Nos. 3,315 and 3,316, of April 30, 2008, for operational risk were followed. For the operational risk portion, ITAÚ UNIBANCO HOLDING opted for the use of the Alternative Standardized Approach.

 

Circular No. 3,568, of December 21, 2011, changes the provisions of Circulars No 3,361, of September 12, 2007, No. 3,388, of June 4, 2008, No. 3,389, of June 25, 2008, No. 3,478 of December 24, 2009 and No. 3,498, of June 28, 2010, which set forth the procedures for calculation of the portion related to market risk. The new caculation method will be adopted gradually from January 1, 2012, taking into account that it shall be fully employed from December 31, 2012. Should the new rules already be applicable, the ratios would be reduced by about 0.7%.

 

 
 

 

The Referential Equity used for calculation of ratios and composition of risk exposures at December 31, 2011, are as follows:

 

   Financial
conglomerate		       Economic-financial
consolidated		 
Stockholders' Equity Itaú Unibanco Holding S.A. (Consolidated)   71,347,333         71,347,333      
Minority interest in subsidiaries   1,181,081         1,741,227      
Consolidated stockholders’ equity (BACEN)   72,528,414         73,088,560      
Deferred tax assets excluded from Tier I   (581,319)        (589,591)     
Deferred permanent assets excluded from Tier I   (294,295)        (295,413)     
Adjustment to market value -securities and derivative financial instruments excluded from Tier I   139,142         138,637      
Preferred shares with clause of redemption excluded from Tier I   (740,703)        (740,703)     
Tier I   71,051,239         71,601,490      
Subordinated debt   21,258,638         21,258,638      
Preferred shares with clause of redemption   444,422         444,422      
Adjustment to market value -securities and derivative financial instruments   (139,142)        (138,637)     
Tier II   21,563,918         21,564,423      
Tier I + Tier II   92,615,157         93,165,913      
Exclusions:                    
Funding instruments issued by financial institutions   (54,520)        (54,520)     
Referential equity   92,560,637         93,111,393      
Risk exposure:                    
Exposure weighted by credit risk (EPR)   538,077,718         523,898,000      
Portion required for credit risk coverage (PEPR)   59,188,549    92.9%   57,628,780    92.1%
a) Per weighting factor (FPR):                    
FPR at 20%   209,093    0.3%   348,989    0.6%
FPR at 35%   164,240    0.3%   164,236    0.3%
FPR at 50%   3,467,700    5.4%   4,671,607    7.5%
FPR at 75%   13,989,864    22.0%   13,586,910    21.7%
FPR at 100%   37,980,538    59.6%   35,391,982    56.6%
FPR at 150%   1,568,458    2.5%   1,567,586    2.5%
FPR at 300%   1,381,114    2.2%   1,466,628    2.3%
Derivatives – potential future gain   427,542    0.7%   430,842    0.7%
b) Per type:                    
Securities   2,539,902    4.0%   2,601,475    4.2%
Loan operations - Retail   11,167,056    17.5%   10,886,302    17.4%
Loan operations – Non-retail   20,141,094    31.6%   20,149,975    32.2%
Joint obligations - Retail   48,931    0.1%   48,931    0.1%
Joint obligations – Non-Retail   5,549,824    8.7%   5,546,475    8.9%
Loan commitments - Retail   2,773,876    4.4%   2,651,677    4.2%
Loan commitments – Non-retail   1,730,308    2.7%   1,730,676    2.8%
Other exposures   15,237,558    23.9%   14,013,269    22.4%
Portion required for operational risk coverage (POPR)   3,460,219    5.4%   3,851,446    6.2%
Retail   562,006    0.9%   562,006    0.9%
Commercial   920,872    1.4%   920,872    1.5%
Corporate finance   82,110    0.1%   82,110    0.1%
Negotiation and sales   1,288,706    2.0%   1,288,706    2.1%
Payments and settlements   268,814    0.4%   268,814    0.4%
Financial agent services   128,146    0.2%   128,146    0.2%
Asset management   190,583    0.3%   190,583    0.3%
Retail brokerage   18,982    0.0%   18,982    0.0%
Business plans   -    0.0%   -    0.0%
Conef additional   -    0.0%   391,227    0.6%
Portion required for market risk coverage:   1,078,447    1.7%   1,076,014    1.7%
Gold, foreign currency and operations subject to foreign exchange variation (PCAM)   -    0.0%   -    0.0%
Operations subject to interest rate variation (PJUR)   967,550    1.5%   965,117    1.5%
Fixed rate denominated in Real (PJUR1)   224,290    0.4%   224,467    0.4%
Foreign currency coupon (PJUR2)   488,310    0.8%   485,700    0.8%
Price index coupon (PJUR3)   169,912    0.3%   169,912    0.3%
Interest rate coupon (PJUR 4)   85,038    0.1%   85,038    0.1%
Operations subject to commodity price variation (PCOM)   72,345    0.1%   72,345    0.1%
Operations subject to equities price variation (PACS)   38,552    0.1%   38,552    0.1%
Required Referential Equity   63,727,215    100.0%   62,556,240    100.0%
Excess capital in relation to Required Referential Equity   28,833,422    45.2%   30,555,153    48.8%
Total exposure weighted by risk [EPR + (1/0.11 X (POPR + PCAM + PJUR + PCOM + PACS)   579,338,319         568,693,094      
Ratio (%)   16.0         16.4      
Referential equity calculated for covering the interest rate risk of operations not classified into the trading portfolio (RBAN)   1,382,613         1,604,744      

 

 
 

 

During this period, the effects of the changes in legislation and balances were as follows:

 

  Financial conglomerate   Economic-financial consolidated 
 Changes in the Basel Ratio  Referential
equity		   Weighted
exposure		   Effect   Referential
equity		   Weighted
exposure		   Effect 
                               
Ratio at 12/31/2010   78,670,791    497,468,330    15.8%   80,718,514    522,952,010    15.4%
Result for the period   14,668,577    -    3.0%   15,398,096    -    2.9%
Interest on capital and dividends   (3,208,723)   -    -0.7%   (3,208,723)   -    -0.6%
Granting of options recognized   162,663    -    0.0%   162,663    -    0.0%
Granting of stock options – exercised options in the period   353,036    -    0.1%   353,036    -    0.1%
Asset valuation adjustment   (156,270)   -    0.0%   (156,270)   -    0.0%
Subordinated debt and redeemable preferred shares   3,068,398    -    0.6%   3,068,398    -    0.6%
Treasury shares   (1,302,638)   -    -0.3%   (1,302,638)   -    -0.3%
Deferred assets excluded from Tier I of referential equity   (92,008)   (92,008)   0.0%   (94,328)   (94,328)   0.0%
Other changes in referential equity   396,811    -    0.1%   (1,827,355)   -    -0.3%
Changes in risk exposure   -    81,961,997    -2.6%   -    45,835,412    -1.4%
Ratio at 12/31/2011   92,560,637    579,338,319    16.0%   93,111,393    568,693,094    16.4%

 

 
 

     

b)   Capital for Insurance Activity

 

CNSP – Conselho Nacional de Seguros Privados, following the worldwide trend towards the strengthening of the insurance market, disclosed the Resolution No. 227 of December 6, 2010 (which revoked Resolutions No. 178 of December 28, 2007, and No. 200 of December 16, 2008), and Circular No. 411 of December 22,2010. The regulations provide for the rules on regulatory capital required for authorization and operation of insurance companies and rules for the allocation of capital from subscription risk for several insurance lines. In January 2011, CNSP Resolution No. 228 of December 6, 2010 came into effect, providing for the criteria for establishment of additional capital based on the credit risk of the supervised companies.

 

The adjusted stockholders’ equity of ITAU UNIBANCO HOLDING companies exclusively engaged in insurance activities is higher than the required regulatory capital of R$ 1,774,567 (R$ 1,436,753 at December 31, 2010) in Itaú Seguros S.A. and R$ 1,498,723 (R$ 1,198,724 at December 31, 2010) in Itaú Vida e Previdência S.A..

 

 
 

 

NOTE 4 – SUMMARY OF THE MAIN ACCOUNTING PRACTICES

 

a)  Cash and cash equivalents - For purposes of Consolidated Statement of Cash Flows, it includes cash and current accounts in banks (considered in the heading cash and cash equivalents), interbank deposits and securities purchased under agreements to resell – funded position that have original maturities of up to 90 days or less.

 

b)Interbank investments, remunerated restricted credits – Brazilian Central Bank, remunerated deposits, deposits received under securities repurchase agreements, funds from acceptance and issuance of securities, borrowings and onlendings, subordinated debt and other receivables and payables – Transactions subject to monetary correction and foreign exchange variation and operations with fixed charges are recorded at present value, net of the transaction costs incurred, calculated “pro rata die” based on the effective rate of transactions, according to CVM Resolution No. 649 of December 16, 2010.

 

c)Securities - Recorded at cost of acquisition restated by the index and/or effective interest rate and presented in the Balance Sheet, according to BACEN Circular No. 3,068, of November 8, 2001. Securities are classified into the following categories:

 

·Trading securities – acquired to be actively and frequently traded, and adjusted to market value, with a contra-entry to the results for the period;

 

·Available-for-sale securities – securities that can be negotiated but are not acquired to be actively and frequently traded. They are adjusted to their market value with a contra-entry to an account disclosed in stockholders’ equity;

 

·Held-to-maturity securities – securities, except for non-redeemable shares, for which the bank has the financial condition and intends or is required to hold them in the portfolio up to their maturity, are recorded at cost of acquisition, or market value, whenever these are transferred from another category. The securities are adjusted up to their maturity date, not being adjusted to market value.

 

Gains and losses on available-for-sale securities, when realized, are recognized at the trading date in the statement of income, with a contra-entry to a specific stockholders’ equity account.

 

Decreases in the market value of available-for-sale and held-to-maturity securities below their related costs, resulting from non-temporary reasons, are recorded in results as realized losses.

 

d)Derivative financial instruments - these are classified on the date of their acquisition, according to management's intention of using them either as a hedge or not, according to BACEN Circular No. 3,082, of January 30, 2002. Transactions involving financial instruments, carried out upon the client’s request, for their own account, or which do not comply with the hedging criteria (mainly derivatives used to manage the overall risk exposure), are stated at market value, including realized and unrealized gains and losses, which are recorded directly in the statement of income.

 

The derivatives used for protection against risk exposure or to modify the characteristics of financial assets and liabilities, which have changes in market value highly associated with those of the items being protected at the beginning and throughout the duration of the contract, and which are found effective to reduce the risk related to the exposure being protected, are classified as a hedge, in accordance with their nature:

 

·Market Risk Hedge – financial assets and liabilities, as well as their related financial instruments, are accounted for at their market value plus realized and unrealized gains and losses, which are recorded directly in the statement of income.

 

 
 
   
·Cash Flow Hedge - the effective amount of the hedge of financial assets and liabilities, as well as their related financial instruments, are accounted for at their market value plus realized and unrealized gains and losses, net of tax effects, when applicable, and recorded in a specific account in stockholders’ equity. The ineffective portion of hedge is recorded directly in the statement of income.

 

e)   Loan, Lease and Other Credit Operations (Operations with Credit Granting Characteristics) – These transactions are recorded at present value and calculated “pro rata die” based on the variation of the contracted index and interest rate, and are recorded on the accrual basis until the 60th day overdue in financial companies, according to the estimate for receipt. After the 60th day, income is recognized upon the effective receipt of installments. Credit card operations include receivables arising from the purchases made by cardholders. The funds related to these amounts are recorded in Other Liabilities – Credit Card Operations, which also include funds arising from other credits related to transactions with credit card issuers.

 

f)   Allowance for loan losses - the balance of the allowance for loan losses was recorded based on the credit risk analysis, at an amount considered sufficient to cover loan losses according to the rules determined by CMN Resolution No. 2,682 of December 21, 1999, among which are:

 

·Provisions are recorded from the date loans are granted, based on the client’s risk rating and on the periodic quality evaluation of clients and industries, and not only in the event of default;

 

·Based exclusively on delinquency, write-offs of credit operations against loss may be carried out 360 days after the due date of the credit or 540 days for operations that mature after a period of 36 months.

 

g)Other assets - these assets are mainly comprised of assets held for sale relating to real estate available for sale, own real estate not in use and real estate received as payment in kind, which are adjusted to market value through the set-up of a provision, according to current regulations, reinsurance unearned premiums (Note 4n I); and prepaid expenses, corresponding to disbursements, the benefit of which will occur in future periods.

 

h) Investments – investments in subsidiary and affiliated companies are accounted for under the equity method. The consolidated financial statements of foreign branches and subsidiaries are adapted to comply with Brazilian accounting practices and converted into Reais. Other investments are recorded at cost and adjusted to market value by setting up a provision in accordance with current standards.

 

i)Fixed assets - These assets are stated at cost of acquisition or construction, less accumulated depreciation, adjusted to market value until December 31, 2007, when applicable. For insurance, pension plan and capitalization operations, property and equipment are adjusted to market value supported by appraisal reports. They correspond to rights related to tangible assets intended for maintenance of the company’s operations or exercised for such purpose, including assets arising from transactions that transfer to the company their benefits, risks and controls. The items acquired through Lease contracts are recorded according to CVM Resolution No. 554, of November 12, 2008, as contra-entry to Lease obligations. Depreciation is calculated using the straight-line method, based on monetarily restated cost.

 

j)Operating leases – leased assets are stated at cost of acquisition less accumulated depreciation. The depreciation of leased assets is recognized under the straight-line method, based on their usual lives, taking into account that the useful life shall be decreased by 30% should it meet the conditions provided for by Ordinance No. 113 of February 26, 1988 issued by the Ministry of Finance. Receivables are recorded in lease receivable at the contractual amount, with contra-entry to unearned income accounts. The recognition in income will occur on the due date of the installments.

 

k)Goodwill – corresponds to the amount paid in excess for the purchase of investments arising from the expected future profitability. It does not have a defined useful life and is annually tested for impairment of assets.

 

 
 

 

l)Intangible assets – correspond to rights acquired whose subjects are intangible assets intended for maintenance of the company or which are exercised for such purpose, according to the CMN Resolution No. 3,642, of November 26, 2008. They are composed of rights acquired to credit payrolls and partnership agreements, amortized over the agreement terms, and software and customer portfolios, amortized over a term varying from five to ten years.

 

m)Impairment of assets – a loss is recognized when there are clear evidence that assets are stated at a non-recoverable value. This procedure is adopted semiannually.

 

n)Insurance, pension plan and capitalization operations - Insurance premiums, acceptance coinsurance and selling expenses are accounted for in accordance with the insurance effectiveness term, through the recognition and reversal of the provision for unearned premiums and deferred selling expenses. Interest arising from fractioning of insurance premiums is accounted for as incurred. Revenues from social security contributions, gross revenue from capitalization certificates and respective technical provisions are recognized upon receipt.

 

I -Credits from operations and other assets related to insurance and reinsurance operations:

 

·Insurance premiums receivable - Refer to installments of insurance premiums receivable, current and past due, in accordance with insurance policies issued;

 

·Reinsurance recoverable amounts – Refer to claims paid to the insured party pending recovery from Reinsurer, installments of unsettled claims and incurred but not reported claims - Reinsurance (IBNR), classified in assets in accordance with the criteria established by CNSP Resolution No. 162, of December 26, 2006, as amended by CNSP Resolution No. 195, of December 16, 2008, and SUSEP Circular No. 379, of December 19, 2008;

 

·Reinsurance unearned premiums – Recognized to determine the portion of reinsurance unearned premiums, calculated “pro rata die”, and for risks of policies not issued computed based on estimates, based on the actuarial technical study and in compliance with the criteria established by CNSP Resolution No. 162, of December 26, 2006, as amended by CNSP Resolution No. 195, of December 16, 2008, and SUSEP Circular No. 379, of December 19, 2008.

 

II -Technical provisions of insurance, pension plan and capitalization – technical provisions are recognized according to the technical notes approved by SUSEP and criteria established by CNSP Resolution No. 162 of December 26, 2006 and the amendments introduced by CNSP Resolution No. 181, of December 19, 2007, and CNSP Resolution No. 195, of December 16, 2008.

 

II.I-Insurance:

 

·Provision for unearned premiums (PPNG) – recognized based on premiums issued, calculated “pro rata die”, and represents the portion of premium corresponding to the policy period not yet elapsed; Provision for Unearned Premiums for Risks in Force but Not Yet Issued is recognized based on technical actuarial note, and has the objective of estimating a portion of unearned premiums related to risks assumed by insurance companies and that are in issue process;

 

·Provision for premium deficiency – recognized according to the Technical Actuarial Note if a premium deficiency is found;

 

·Provision for unsettled claims - recognized based on claims of loss in an amount sufficient to cover future commitments, awaiting judicial decision, which amounts are determined by court appointed experts and legal advisors that make assessments based on the insured amounts and technical regulations, taking into consideration the likelihood of unfavorable outcome to the insurance company.

 

·Provision for claims incurred but not reported (IBNR) – recognized for the estimated amount of claims occurred for risks assumed in the portfolio but not reported.

 

·Other provisions – recognized based on the technical provision for extension of warranty in the extended warranty line, and the calculation is made over the period from the date the insurance contract becomes effective and the risk initial coverage date, the amount to be recognized being equal to the retained commercial premium.

 

 
 

 

II.II - Pension Plan and Individual life insurance with living benefits - The mathematical provisions represent amounts of obligations assumed as insurance for living benefits, retirement plans, disability, pension and annuity, and are calculated according to the method of accounting provided for in the contract.

 

·Mathematical provisions for benefits to be granted and benefits granted – correspond to commitments assumed with participants, but for which benefits are not yet due, and to those receiving the benefits, respectively;

 

·Provision for insufficient contribution – recognized in case of insufficient premiums or contributions;

 

·Provision for unexpired risks – recognized to include the estimate of outstanding risks which have not expired;

 

·Provision for events incurred but not reported (IBNR) – recognized based on the estimated amounts of events occurred but not reported;

 

·Provision for financial surplus – recognized by the difference between the contributions adjusted daily by the Investment Portfolio and the accumulated fund set up;

 

II.III -   Capitalization:

    

·Mathematical provision for redemptions – represents capitalization certificates received to be redeemed;

 

·Provision for raffle contingencies – recognized according to the methodology provided for in the Technical Actuarial Note to cover the Provision for raffles in the event of insufficient funds.

 

o)Contingent assets and liabilities and legal liabilities – tax and social security - assessed, recognized and disclosed according to the provisions set forth in CMN Resolution No. 3,823 of December 16, 2009, and BACEN Circular Letter No. 3,429 of February 11, 2010.

 

I -Contingent assets and liabilities

 

Refer to potential rights and obligations arising from past events, the occurrence of which is dependent upon future events.

 

·Contingent assets - not recognized, except upon evidence ensuring a high reliability level of realization, usually represented by claims awarded a final and unappealable judgment and confirmation of the recoverability of the claim through receipt of amounts or offset against another liability

 

·Contingent liabilities - basically arise from administrative proceedings and lawsuits, inherent in the normal course of business, filed by third parties, former employees and governmental bodies, in connection with civil, labor, tax and social security lawsuits and other risks. These contingencies are calculated based on conservative practices, being usually recorded based on the opinion of legal advisors and considering the probability that financial resources shall be required for settling the obligation, the amount of which may be estimated with sufficient certainty. Contingencies are classified either as probable, for which provisions are recognized; possible, which are disclosed but not recognized; and remote, for which recognition or disclosure are not required Any contingent amounts are measured through the use of models and criteria which allow their adequate measurement, in spite of the uncertainty of their term and amounts.

 

Escrow deposits are restated in accordance with the current legislation.

 

Contingencies guaranteed by indemnity clauses in privatization processes and with liquidity are only recognized upon judicial notification with simultaneous recognition of receivables, without any effect on results.

 

 
 

 

II -Legal liabilities – tax and social security

 

Represented by amounts payable related to tax liabilities, the legality or constitutionality of which are subject to judicial defense, recognized at the full amount under discussion

 

Liabilities and related escrow deposits are adjusted in accordance with the current legislation.

 

p) Taxes - these provisions are calculated according to current legislation at the rates shown below, using the related calculation bases.

 

Income tax   15.00%
Additional income tax   10.00%
Social contribution (1)   15.00%
PIS (2)   0.65%
COFINS (2)   4.00%
ISS   up to 5.00% 

 

(1)For ITAÚ UNIBANCO HOLDING and its financial subsidiaries and equivalent companies, the rate corresponds to 15%. For non-financial and pension plan subsidiaries, the rate is 9%.
(2)For non-financial subsidiaries that fall into the non-cumulative calculation system, the PIS rate is 1.65% and COFINS rate is 7.6%.

 

The changes introduced by Laws No. 11,638 and No. 11,941 (articles 37 and 38), which modified the criterion for recognizing revenues, costs and expenses, computed to determine the net income for the year, did not produce effects for purposes of determining the taxable income of companies that opt for the Transition Tax Regime (RTT), so for tax purposes the rules effective on December 31, 2007 were followed, The tax effect arising from the adoption of such rules is recorded, for accounting purposes, in the corresponding deferred assets and liabilities.

 

q)Deferred income – this refers to; (i) unexpired interest received in advance that is recognized in income as earned, and (ii) the negative goodwill on acquisition of investments arising from expected future losses, which has not been absorbed in the consolidation process.

 

 
 

 

NOTE 5 - CASH AND CASH EQUIVALENTS

 

For purposes of Statement of Cash Flows, cash and cash equivalents of ITAÚ UNIBANCO HOLDING CONSOLIDATED are composed of the following:

 

   12/31/2011   12/31/2010 
Cash and cash equivalents   10,633,082    10,096,540 
Interbank deposits   18,921,241    7,639,279 
Securities purchased under agreements to resell – Funded position   8,062,572    21,278,449 
TOTAL   37,616,895    39,014,268 

 

In ITAÚ UNIBANCO HOLDING it is composed of the following:

 

   12/31/2011   12/31/2010 
Cash and cash equivalents   7,833    1,940 
Securities purchased under agreements to resell – Funded position   454,176    192,959 
TOTAL   462,009    194,899 

 

 
 

 

NOTE 6 - INTERBANK INVESTMENTS

 

   12/31/2011   12/31/2010 
   0 - 30   31 - 180   181 - 365   Over 365   Total   %   Total   % 
Money market   46,014,191    39,415,468    15,877    6    85,445,542    73.6    68,177,933    78.9 
Funded position (*)   22,110,380    10,538,334    15,877    5    32,664,596    28.1    33,443,634    38.7 
Financed position   22,851,550    14,012,549    -    1    36,864,100    31.8    25,839,519    29.9 
With free movement   1,398,159    14,005,964    -    -    15,404,123    13.3    10,744,809    12.4 
Without free movement   21,453,391    6,585    -    1    21,459,977    18.5    15,094,710    17.5 
Short position   1,052,261    14,864,585    -    -    15,916,846    13.7    8,894,780    10.3 
Money market – Assets Guaranteeing Technical Provisions - SUSEP   2,513,685    120,268    182,060    -    2,816,013    2.4    3,345,937    3.9 
Interbank deposits   18,910,835    3,225,465    3,247,300    2,436,834    27,820,434    24.0    14,834,851    17.2 
TOTAL   67,438,711    42,761,201    3,445,237    2,436,840    116,081,989         86,358,721      
% per maturity term   58.1    36.8    3.0    2.1                     
TOTAL – 12/31/2010   49,643,856    32,271,481    3,746,677    696,707    86,358,721                
% per maturity term   57.5    37.4    4.3    0.8                     

 

(*)   Includes R$ 7,226,864 (R$ 8,670,170 at 12/31/2010) related to money market with free movement, in which securities are basically restricted to guarantee transactions at the BM&FBovespa S.A. - Bolsa de Valores, Mercadorias e Futuros (Securities, Commodities and Futures Exchange) and the Central Bank of Brazil (BACEN).

 

In ITAÚ HOLDING the portfolio is composed of Money market – Funded position falling due in up to 30 days amounting to R$ 454,176 (R$ 192,959 at 12/31/2010) and Interbank deposits with maturity of 181 to 365 R$ 25,848,206 and over 365 days amounting to R$ 5,794,144 (R$ 14,176,842 at 12/31/2010).

 

 
 

 

NOTE 7 – SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS AND LIABILITIES)

 

See below the composition by Securities and Derivatives type, maturity and portfolio already adjusted to their respective market values.

 

a) Summary per maturity

 

   12/31/2011   12/31/2010 
       Provision for adjustment to market
value reflected in:		                                     
   Cost   Results   Stockholders’
equity		   Market value   %   0 - 30   31 - 90   91 - 180   181 - 365   366 - 720   Over 720
days		   Market value 
GOVERNMENT SECURITIES - DOMESTIC   83,308,252    44,810    366,437    83,719,499    44.6    2,053,572    1,386,139    238,465    14,049,096    13,251,705    52,740,522    87,283,337 
Financial Treasury Bills   31,128,410    (2,286)   (474)   31,125,650    16.6    -    1,343,990    -    2,829,362    2,921,306    24,030,992    24,966,475 
National Treasury Bills   17,526,169    (26,296)   (12,650)   17,487,223    9.3    -    -    215,650    9,938,575    2,943,468    4,389,530    30,687,390 
National Treasury Notes   27,366,936    26,692    146,965    27,540,593    14.7    1,705,740    11,569    17,290    1,271,943    7,200,693    17,333,358    25,586,072 
National Treasury/Securitization   300,100    500    (5,709)   294,891    0.2    -    15,047    4,801    3,538    5,382    266,123    324,355 
Brazilian External Debt Bonds   6,911,833    46,200    238,245    7,196,278    3.8    273,703    15,533    724    5,396    180,403    6,720,519    5,610,718 
Investments in non-exclusive funds   74,129    -    -    74,129    0.0    74,129    -    -    -    -    -    67,860 
Other   675    -    60    735    0.0    -    -    -    282    453    -    40,467 
GOVERNMENT SECURITIES - ABROAD   5,114,284    15,198    (9,375)   5,120,107    2.8    1,231,468    2,034,882    844,388    302,400    105,373    601,596    13,927,681 
Argentina   225,921    (1,013)   -    224,908    0.1    11,685    105,779    48,976    36,937    259    21,272    292,919 
Central Bank   3,044    (86)   -    2,958    0.0    -    -    -    63    -    2,895    85,546 
National Treasury   222,877    (927)   -    221,950    0.1    11,685    105,779    48,976    36,874    259    18,377    207,373 
Russia   -    -    -    -    -    -    -    -    -    -    -    44,795 
Denmark   1,949,128    -    1    1,949,129    1.0    171,778    1,432,545    344,806    -    -    -    2,013,719 
Spain   418,365    -    -    418,365    0.2    418,365    -    -    -    -    -    734,316 
Korea   295,012    -    -    295,012    0.2    -    85,990    -    209,022    -    -    236,163 
Chile   1,042,349    134    3,226    1,045,709    0.6    358,514    266,247    360,255    3,412    10,578    46,703    701,817 
Paraguay   357,914    -    (13,885)   344,029    0.2    225,220    42,155    2,046    20,943    25,311    28,354    256,673 
Uruguay   295,067    76    294    295,437    0.2    7,294    99,971    88,305    32,086    67,069    712    224,557 
United States   280,307    11,936    -    292,243    0.2    1,876    2,195    -    -    -    288,172    9,393,996 
Mexico   210,505    4,050    926    215,481    0.1    222    -    -    -    1    215,258    28,726 
Other   39,716    15    63    39,794    0.0    36,514    -    -    -    2,155    1,125    - 
CORPORATE SECURITIES   31,432,488    (33,310)   361,537    31,760,715    16.9    5,190,163    593,222    1,124,313    2,555,900    4,931,206    17,365,911    30,993,460 
Eurobonds and other   5,065,829    (15,002)   84,149    5,134,976    2.9    94,339    201,881    184,664    711,356    956,487    2,986,249    5,425,849 
Bank deposit certificates   1,359,760    -    301    1,360,061    0.7    25,026    82,478    384,041    538,128    170,147    160,241    3,009,878 
Shares   2,883,311    (34,261)   (6,230)   2,842,820    1.5    2,842,820    -    -    -    -    -    3,887,130 
Debentures   8,600,891    1,419    70,918    8,673,228    4.6    121,507    -    107,846    576,063    1,438,215    6,429,597    8,020,371 
Promissory notes   936,086    -    34    936,120    0.5    52,863    115,687    297,752    469,818    -    -    1,264,832 
Fund quotas   2,004,673    13,111    3,553    2,021,337    1.0    2,017,226    -    -    -    -    4,111    1,786,805 
Fixed income   808,470    (2,396)   (29)   806,045    0.4    801,934    -    -    -    -    4,111    640,029 
Credit rights   971,739    -    -    971,739    0.5    971,739    -    -    -    -    -    882,290 
Variable income   224,464    15,507    3,582    243,553    0.1    243,553    -    -    -    -    -    264,486 
Securitized real estate loans   7,836,108    1,423    208,421    8,045,952    4.3    36,382    91,206    150,010    244,948    704,480    6,818,926    7,586,379 
Financial bills   2,475,123    -    -    2,475,123    1.3    -    -    -    -    1,656,517    818,606    - 
Other   270,707    -    391    271,098    0.1    -    101,970    -    15,587    5,360    148,181    12,216 
PGBL/VGBL FUND QUOTAS (1)   57,733,857    -    -    57,733,857    30.7    57,733,857    -    -    -    -    -    46,050,748 
SUBTOTAL - SECURITIES   177,588,881    26,698    718,599    178,334,178    94.9    66,209,060    4,014,243    2,207,166    16,907,396    18,288,284    70,708,029    178,255,226 
Trading securities   129,672,459    26,698    -    129,699,157    69.0    61,964,079    1,494,000    729,747    13,106,274    9,167,851    43,237,206    133,215,733 
Available-for-sale securities   44,811,452    -    718,599    45,530,051    24.2    4,158,361    2,520,007    1,477,419    3,768,370    8,926,463    24,679,431    41,869,537 
Held-to-maturity securities (2)   3,104,970    -    -    3,104,970    1.7    86,620    236    -    32,752    193,970    2,791,392    3,169,956 
DERIVATIVE FINANCIAL INSTRUMENTS   8,901,667    644,579    -    9,546,246    5.1    2,265,686    1,571,716    645,290    1,478,856    982,578    2,602,120    8,307,189 
TOTAL SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS)   186,490,548    671,277    718,599    187,880,424    100.0    68,474,746    5,585,959    2,852,456    18,386,252    19,270,862    73,310,149    186,562,415 
                             23.7%   16.5%   6.8%   15.5%   10.2%   27.3%     
DERIVATIVE FINANCIAL INSTRUMENTS (LIABILITIES)   (5,504,488)   (1,272,690)   (30,138)   (6,807,316)   100.0    (1,526,453)   (631,313)   (619,382)   (1,361,951)   (916,353)   (1,751,864)   (5,704,835)

 

(1)   The PGBL and VGBL plans securities portfolios, the ownership and embedded risks of which are the customer’s responsibility, are recorded as securities – trading securities, with a contra-entry to long-term liabilities in Pension Plan Technical Provisions account, as determined by SUSEP.

(2)   Unrecorded positive adjustment to market value in the amount of R$ 596,846 (R$ 604,417 at 12/31/2010), according to Note 7e.

 

 
 

 

b) Summary by portfolio

 

   12/31/2011 
       Restricted to      Assets
     
   Own portfolio   Repurchase
agreements		   Pledging of
guarantees (*)		   Central Bank   Derivative
financial
instruments		   guaranteeing
technical
provisions (Note
11b)		   TOTAL 
GOVERNMENT SECURITIES - DOMESTIC   40,873,914    18,619,706    9,296,045    10,120,684    -    4,809,150    83,719,499 
Financial Treasury Bills   7,293,991    8,221,629    5,407,856    9,771,393    -    430,781    31,125,650 
National Treasury Bills   14,719,930    2,443,146    324,147    -    -    -    17,487,223 
National Treasury Notes   15,363,516    3,885,375    3,564,042    349,291    -    4,378,369    27,540,593 
National Treasury/Securitization   294,891    -    -    -    -    -    294,891 
Brazilian External Debt Bonds   3,126,722    4,069,556    -    -    -    -    7,196,278 
Investments in non-exclusive funds   74,129    -    -    -    -    -    74,129 
Other   735    -    -    -    -    -    735 
GOVERNMENT SECURITIES - ABROAD   3,867,331    93,411    1,136,893    10,071    -    12,401    5,120,107 
Argentina   154,060    70,848    -    -    -    -    224,908 
Central Bank   2,958    -    -    -    -    -    2,958 
National Treasury   151,102    70,848    -    -    -    -    221,950 
Denmark   893,368    -    1,055,761    -    -    -    1,949,129 
Spain   418,365    -    -    -    -    -    418,365 
Korea   295,012    -    -    -    -    -    295,012 
Chile   1,008,932    13,184    1,121    10,071    -    12,401    1,045,709 
Paraguay   344,029    -    -    -    -    -    344,029 
Uruguay   217,302    -    78,135    -    -    -    295,437 
United States   290,367    -    1,876    -    -    -    292,243 
Mexico   206,102    9,379    -    -    -    -    215,481 
Other   39,794    -    -    -    -    -    39,794 
CORPORATE SECURITIES   24,064,030    2,445,796    295,063    -    -    4,955,826    31,760,715 
Eurobonds and other   2,775,819    2,359,157    -    -    -    -    5,134,976 
Bank deposit certificates   300,701    83,980    9,814    -    -    965,566    1,360,061 
Shares   2,838,349    2,659    1,812    -    -    -    2,842,820 
Debentures   7,332,930    -    283,425    -    -    1,056,873    8,673,228 
Promissory Notes   669,110    -    -    -    -    267,010    936,120 
Fund quotas   1,635,284    -    12    -    -    386,041    2,021,337 
Fixed income   451,218    -    12    -    -    354,815    806,045 
Credit rights   940,513    -    -    -    -    31,226    971,739 
Variable income   243,553    -    -    -    -    -    243,553 
Securitized real estate loans   8,031,823    -    -    -    -    14,129    8,045,952 
Financial bills   208,916    -    -    -    -    2,266,207    2,475,123 
Other   271,098    -    -    -    -    -    271,098 
PGBL/VGBL FUND QUOTAS   -    -    -    -    -    57,733,857    57,733,857 
SUBTOTAL - SECURITIES   68,805,275    21,158,913    10,728,001    10,130,755    -    67,511,234    178,334,178 
Trading securities   36,568,072    12,474,007    7,528,867    9,771,393    -    63,356,818    129,699,157 
Available-for-sale securities   32,185,450    8,455,392    3,174,304    359,362    -    1,355,543    45,530,051 
Held-to-maturity securities   51,753    229,514    24,830    -    -    2,798,873    3,104,970 
DERIVATIVE FINANCIAL INSTRUMENTS   -    -    -    -    9,546,246    -    9,546,246 
TOTAL SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS)   68,805,275    21,158,913    10,728,001    10,130,755    9,546,246    67,511,234    187,880,424 
TOTAL SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS) – 12/31/2010   48,644,585    63,494,185    9,100,234    3,048,179    8,307,189    53,968,043    186,562,415 

 

(*)   Represent securities deposited with Contingent Liabilities (Note 12b), Stock Exchanges and the Clearing House for the Custody and Financial Settlement of Securities.

 

 
 

 

c) Trading securities

 

See below the composition of the portfolio of trading securities by type, stated at cost and market value and by maturity term.

 

   12/31/2011   12/31/2010 
   Cost   Adjustment
to market
value (in
results)		   Market value   %   0 - 30   31 - 90   91 - 180   181 - 365   366 - 720   Over 720
days		   Market value 
GOVERNMENT SECURITIES - DOMESTIC   62,338,412    44,810    62,383,222    48.1    1,946,247    1,367,422    237,401    12,270,886    6,864,777    39,696,489    69,498,510 
Financial Treasury Bills   28,089,132    (2,286)   28,086,846    21.7    -    1,326,358    -    2,501,946    970,572    23,287,970    18,935,217 
National Treasury Bills   13,497,845    (26,296)   13,471,549    10.4    -    -    215,650    8,488,716    2,262,241    2,504,942    30,636,039 
National Treasury Notes   19,592,047    26,692    19,618,739    15.1    1,684,763    11,162    16,950    1,271,290    3,558,134    13,076,440    19,116,382 
National Treasury/Securitization   35,684    500    36,184    0.0    -    15,047    4,801    3,538    5,382    7,416    60,619 
Brazilian External Debt Bonds   1,049,575    46,200    1,095,775    0.8    187,355    14,855    -    5,396    68,448    819,721    666,917 
Investments in non-exclusive funds   74,129    -    74,129    0.1    74,129    -    -    -    -    -    67,860 
Other   -    -    -    -    -    -    -    -    -    -    15,476 
GOVERNMENT SECURITIES - ABROAD   787,570    15,198    802,768    0.6    32,616    119,461    84,213    36,937    14,655    514,886    9,352,750 
Argentina   225,921    (1,013)   224,908    0.2    11,685    105,779    48,976    36,937    259    21,272    292,578 
Central Bank   3,044    (86)   2,958    0.0    -    -    -    63    -    2,895    85,546 
National Treasury   222,877    (927)   221,950    0.2    11,685    105,779    48,976    36,874    259    18,377    207,032 
Russia   -    -    -    -    -    -    -    -    -    -    44,795 
Chile   50,439    134    50,573    0.0    15,721    10,054    24,749    -    49    -    248,354 
Uruguay   27,370    76    27,446    0.0    3,334    1,433    10,488    -    12,191    -    24,007 
United States   280,307    11,936    292,243    0.2    1,876    2,195    -    -    -    288,172    8,714,290 
Mexico   200,517    4,050    204,567    0.2    -    -    -    -    1    204,566    28,726 
Other   3,016    15    3,031    0.0    -    -    -    -    2,155    876    - 
CORPORATE SECURITIES   8,812,620    (33,310)   8,779,310    6.8    2,251,359    7,117    408,133    798,451    2,288,419    3,025,831    8,313,726 
Eurobonds and other   1,446,433    (15,002)   1,431,431    1.1    377    7,117    3,962    31,379    218,600    1,169,996    1,452,703 
Bank deposit certificates   1,085,299    -    1,085,299    0.8    10,266    -    296,325    448,460    170,147    160,101    2,450,754 
Shares   887,285    (34,261)   853,024    0.7    853,024    -    -    -    -    -    1,441,937 
Debentures   1,405,331    1,419    1,406,750    1.1    119,572    -    107,846    81,180    243,155    854,997    1,355,940 
Promissory notes   290,295    -    290,295    0.2    52,863    -    -    237,432    -    -    - 
Fund quotas   1,202,146    13,111    1,215,257    1.0    1,215,257    -    -    -    -    -    1,017,242 
Fixed income   791,463    (2,396)   789,067    0.6    789,067    -    -    -    -    -    610,963 
Credit rights   216,439    -    216,439    0.2    216,439    -    -    -    -    -    189,666 
Variable income   194,244    15,507    209,751    0.2    209,751    -    -    -    -    -    216,613 
Securitized real estate loans   20,708    1,423    22,131    0.0    -    -    -    -    -    22,131    594,220 
Financial bills   2,475,123    -    2,475,123    1.9    -    -    -    -    1,656,517    818,606    930 
PGBL/VGBL FUND QUOTAS   57,733,857    -    57,733,857    44.5    57,733,857    -    -    -    -    -    46,050,748 
Total   129,672,459    26,698    129,699,157    100.0    61,964,079    1,494,000    729,747    13,106,274    9,167,851    43,237,206    133,215,734 
% per maturity term                        47.7%   1.2%   0.6%   10.1%   7.1%   33.3%     
Total 12/31/2010   132,963,390    252,344    133,215,734    100.0    71,334,402    9,310,315    7,795,412    9,097,782    8,327,250    27,350,573      
% per maturity term                       53.5%   7.0%   5.9%   6.8%   6.3%   20.5%     

 

At December 31, 2011, ITAÚ UNIBANCO HOLDING’s portfolio is composed of Government Securities – Financial Treasury Bills amounting to R$ 6,502 (R$ 5,825 at 12/31/2010 with maturity over 365 days) with maturity of 181 to 365 days.

 

 
 

 

d) Available-for-sale securities

 

See below the composition of the portfolio of available-for-sale securities by type, stated at cost and market value and by maturity term.

 

   12/31/2011   12/31/2010 
    Cost    Adjustments to
market value
(in
stockholders'
equity)		    Market value    %    0 - 30    31 - 90    91 - 180    181 - 365    366 - 720    Over 720
 days		    Market value 
GOVERNMENT SECURITIES - DOMESTIC   17,962,758    366,437    18,329,195    40.3    20,977    18,717    1,064    1,778,210    6,244,188    10,266,039    14,795,909 
Financial Treasury Bills   3,039,278    (474)   3,038,804    6.7    -    17,632    -    327,416    1,950,734    743,022    6,031,257 
National Treasury Bills   4,028,324    (12,650)   4,015,674    8.8    -    -    -    1,449,859    681,227    1,884,588    51,351 
National Treasury Notes   4,962,660    146,965    5,109,625    11.2    20,977    407    340    653    3,608,324    1,478,924    3,706,888 
National Treasury/Securitization   264,416    (5,709)   258,707    0.6    -    -    -    -    -    258,707    263,736 
Brazilian External Debt Bonds   5,667,405    238,245    5,905,650    13.0    -    678    724    -    3,450    5,900,798    4,717,694 
Other   675    60    735    0.0    -    -    -    282    453    -    24,983 
GOVERNMENT SECURITIES - ABROAD   4,326,705    (9,375)   4,317,330    9.4    1,198,852    1,915,421    760,175    265,463    90,718    86,701    4,558,738 
Argentina   -    -    -    -    -    -    -    -    -    -    341 
Denmark   1,949,128    1    1,949,129    4.3    171,778    1,432,545    344,806    -    -    -    2,013,719 
Spain   418,365    -    418,365    0.9    418,365    -    -    -    -    -    734,316 
Korea   295,012    -    295,012    0.6    -    85,990    -    209,022    -    -    236,163 
Chile   991,910    3,226    995,136    2.1    342,793    256,193    335,506    3,412    10,529    46,703    453,463 
Paraguay   357,914    (13,885)   344,029    0.8    225,220    42,155    2,046    20,943    25,311    28,354    256,673 
Uruguay   267,697    294    267,991    0.6    3,960    98,538    77,817    32,086    54,878    712    184,357 
United States   -    -    -    -    -    -    -    -    -    -    679,706 
Mexico   9,988    926    10,914    0.0    222    -    -    -    -    10,692    - 
Other   36,691    63    36,754    0.1    36,514    -    -    -    -    240    - 
CORPORATE SECURITIES   22,521,989    361,537    22,883,526    50.3    2,938,532    585,869    716,180    1,724,697    2,591,557    14,326,691    22,514,890 
Eurobonds and other   3,554,269    84,149    3,638,418    7.9    93,690    194,528    180,702    679,977    686,657    1,802,864    3,842,997 
Bank deposit certificates   274,461    301    274,762    0.6    14,760    82,478    87,716    89,668    -    140    559,124 
Shares   1,996,026    (6,230)   1,989,796    4.4    1,989,796    -    -    -    -    -    2,445,193 
Debentures   7,165,126    70,918    7,236,044    15.9    1,935    -    -    464,449    1,195,060    5,574,600    6,633,932 
Promissory notes   645,791    34    645,825    1.4    -    115,687    297,752    232,386    -    -    1,264,832 
Fund quotas   802,527    3,553    806,080    1.8    801,969    -    -    -    -    4,111    769,563 
Fixed income   17,007    (29)   16,978    0.0    12,867    -    -    -    -    4,111    29,066 
Credit rights   755,300    -    755,300    1.7    755,300    -    -    -    -    -    692,624 
Variable income   30,220    3,582    33,802    0.1    33,802    -    -    -    -    -    47,873 
Securitized real estate loans   7,813,082    208,421    8,021,503    17.7    36,382    91,206    150,010    242,630    704,480    6,796,795    6,987,961 
Other   270,707    391    271,098    0.6    -    101,970    -    15,587    5,360    148,181    11,288 
TOTAL   44,811,452    718,599    45,530,051    100.0    4,158,361    2,520,007    1,477,419    3,768,370    8,926,463    24,679,431    41,869,537 
Adjustments of securities reclassified in prior years to the held-to-maturity category        10,771              9.1%   5.5%   3.2%   8.3%   19.6%   54.3%     
Accounting adjustment - Hedge - Circular No. 3,082        (277,529)                                             
Deferred taxes        (149,026)                                             
Minority interest in subsidiaries        (28,870)                                             
Adjustment of securities of unconsolidated affiliates        (413,087)                                             
ADJUSTMENT TO MARKET VALUE – SECURITIES – 12/31/2011        (139,142)                                             
TOTAL 12/31/2010   41,415,788    453,749    41,869,537    100    4,142,818    4,502,552    3,594,303    4,658,999    2,995,733    21,975,132      
Adjustments of securities reclassified in prior years to the held-to-maturity category        12,681              9.9%   10.8%   8.6%   11.1%   7.2%   52.4%     
Accounting adjustment - Hedge - Circular No. 3,082        (51,044)                                             
Deferred taxes        (171,926)                                             
Minority interest in subsidiaries        (2,404)                                             
Adjustment of securities of unconsolidated affiliates        (223,928)                                             
ADJUSTMENT TO MARKET VALUE – SECURITIES – 12/31/2010        17,128                                              

 

At December 31, 2011, ITAÚ UNIBANCO HOLDING’s portfolio is composed of Government Securities in the amount of R$ 7,129 with maturity of 181 to 365 days (R$ 34,051 at December 31, 2010 of which the National Treasury Notes amount to R$ 27,664 with maturity between 31 and 90 days, and the Financial Treasury Bills amount to R$ 6,387 with maturity over 365 days).

 

 

 
 

 

e) Held-to-maturity securities

 

See below the composition of the portfolio of held-to-maturity securities by type, stated at cost and by maturity term. Included in the carrying value, not considered in results, are the amounts of R$ 10,771 (R$ 12,681 at December 31, 2010) relating to the market adjustment of the reclassified securities at December 31, 2003. Securities classified under this category, if stated at market value, would present a positive adjustment of R$ 596,846 at December 31, 2011 (R$ 604,417 at December 31, 2010).

 

   12/31/2011   12/31/2010 
   Carrying value   %   0 - 30   31 - 90   91 - 180   181 - 365   366 - 720   Over 720 days   Carrying value 
GOVERNMENT SECURITIES - DOMESTIC     3,007,082    96.8     86,348     -    -   -    142,740     2,777,994    2,988,917 
National Treasury Notes (*)   2,812,229    90.5    -    -    -    -    34,235    2,777,994    2,762,802 
Brazilian External Debt Bonds   194,853    6.3    86,348    -    -    -    108,505    -    226,107 
Other   -    -    -    -    -    -    -    -    8 
GOVERNMENT SECURITIES - ABROAD   9    0.0    -    -    -    -    -    9    16,193 
CORPORATE SECURITIES   97,879    3.2    272    236    -    32,752    51,230    13,389    164,846 
Eurobonds and other   65,127    2.1    272    236    -    -    51,230    13,389    130,149 
Debentures (1)   30,434    1.0    -    -    -    30,434    -    -    30,499 
Securitized real estate loans   2,318    0.1    -    -    -    2,318    -    -    4,198 
Total   3,104,970    100.0    86,620    236    -    32,752    193,970    2,791,392    3,169,956 
% per maturity term             2.8%   0.0%   -    1.1%   6.2%   89.9%     
Total 12/31/2010   3,028,933    100.0    11,188    10,227    18,774    142,994    249,770    2,595,980      
% per maturity term             0.4%   0.3%   0.5%   4.7%   8.2%   85.7%     

(*) Includes investments of Itaú Vida e Previdência S.A. in the amount of R$ 2,036,747 (R$ 2,016,807 at December 31, 2010).

 

f)   Realized and unrealized gain of securities portfolio

  

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Gain (loss) - Trading securities   (1,884,911)   97,391 
Gain (loss) – Available-for-sale securities   301,358    558,920 
Total realized gain   (1,583,553)   656,311 
Adjustment to market value of trading securities   (225,647)   (72,650)
Total   (1,809,200)   583,661 

 

g)Reclassification of securities (article 5 of BACEN Circular No. 3,068, of 11/08/2001)

 

Management sets forth guidelines to classify securities. The classification of the current portfolio of securities, as well as the securities purchased in the period, is periodically and systematically evaluated based on such guidelines.

 

As set forth in Article 5 of BACEN Circular No. 3,068, of November 8, 2008, the revaluation regarding the classification of securities can only be made upon preparation of trial balances for six-month periods. In addition, the transfer from “held-to-maturity” to the other categories can only occur in view of an isolated, unusual, nonrecurring and unexpected reason, which has occurred after the classification date.

 

No reclassifications or changes to the existing guidelines have been made in the period.

 

 
 

 

h)Derivative Financial Instruments

 

The globalization of the markets in recent years has resulted in a high level of sophistication in the financial products used. As a result of this process, there has been an increasing demand for derivative financial instruments to manage market risks, mainly arising from fluctuations in interest and exchange rates, commodities and other asset prices. Accordingly, ITAU UNIBANCO HOLDING and its subsidiaries operate in the derivative markets for meeting the growing needs of their clients, as well as carrying out their risk management policy. Such policy is based on the use of derivative instruments to minimize the risks resulting from commercial and financial operations.

 

The derivative financial instruments’ business with clients is carried out after the approval of credit limits. The process of limit approval takes into consideration potential stress scenarios.

 

Knowing the client, the sector in which it operates and its risk appetite profile, in addition to providing information on the risks involved in the transaction and the negotiated conditions, ensures transparency in the relationship between the parties and the supply of a product that better meets the needs of the client.

 

The derivative transactions carried out by ITAÚ UNIBANCO HOLDING and its subsidiaries with clients are neutralized in order to eliminate market risks.

 

Most derivative contracts traded by the institution with clients in Brazil are swap, forward, option and futures contracts, which are registered at the BM&FBovespa or at the CETIP S.A. OTC Clearing House (CETIP). Overseas transactions are carried out with futures, forwards, options and swaps with registration mainly in the Chicago, New York and London Exchanges. It should be emphasized that there are over-the-counter operations, but their risks are low as compared to the institutions’ total. Noteworthy is also the fact that there are no structured operations based on subprime assets and all operations are based on risk factors traded at stock exchanges.

 

The main risk factors of the derivatives, assumed at December 31, 2011, were related to the foreign exchange rate, interest rate, commodities, U.S. dollar coupon, Reference Rate coupon, Libor and variable income. The management of these and other market risk factors is supported by sophisticated statistical and deterministic models. Based on this management model, the institution, with the use of transactions involving derivatives, has been able to optimize the risk-return ratios, even under highly volatile situations.

 

Most derivatives included in the institution’s portfolio are traded at stock exchanges. The prices disclosed by stock exchanges are used for these derivatives, except in cases in which the low representativeness of price due to liquidity of a specific contract is identified. Derivatives typically precified like this are futures contracts. Likewise, there are other instruments whose quotations (fair prices) are directly disclosed by independent institutions and which are precified based on this direct information. A great part of the Brazilian government securities, highly-liquid international (public and private) securities and shares fit into this situation.

 

For derivatives whose prices are not directly disclosed by stock exchanges, fair prices are obtained by pricing models which use market information, deducted based on prices disclosed for higher liquidity assets. Interest and market volatility curves which provide entry data for the models are extracted from those prices. Over-the-counter derivatives, forward contracts and securities without much liquidity are in this situation.

 

The total value of margins pledged in guarantee was R$ 7,788,197 (R$ 7,550,431 at December 31, 2010) and was basically composed of government securities.

 

 
 

 

I - Derivatives by index

 

   Memorandum account
Notional amount		   Balance sheet
account receivable/
(received)(payable)/
paid		   Adjustment to market
value (in results/
stockholders’ equity)		   Market value 
   12/31/2011   12/31/2010   12/31/2011   12/31/2011   12/31/2011   12/31/2010 
Futures contracts    268,806,691    292,049,317    75,678    (49,576)    26,102     (56,197)
Purchase commitments   251,093,457    127,498,864    75,678    18,425    94,103    172,699 
Foreign currency   59,086,805    8,128,154    (861)   11,805    10,944    (115)
Interbank market   144,153,604    98,353,005    941    (34)   907    45,180 
Indices   41,365,378    19,288,222    75,487    6,652    82,139    94,688 
Securities   6,337,726    1,644,975    -    2    2    - 
Commodities   121,604    -    111    -    111    - 
Other   28,340    84,508    -    -    -    32,946 
Commitments to sell   17,713,234    164,550,453    -    (68,001)   (68,001)   (228,896)
Foreign currency   15,796,309    13,056,594    -    (62,767)   (62,767)   (14,097)
Interbank market   52,335    113,173,138    -    (362)   (362)   (45,379)
Indices   1,106,099    32,032,996    -    213    213    (126,868)
Securities   230,226    4,230,057    -    (3,008)   (3,008)   (177)
Commodities   513,005    -    -    (2,077)   (2,077)   - 
Other   15,260    2,057,668    -    -    -    (42,375)
Swap contracts   -    -    72,360    (118,802)   (46,442)   921,278 
Asset position   94,805,857    68,752,696    2,154,902    595,129    2,750,031    2,937,641 
Foreign currency   9,882,748    7,243,721    605,726    7,272    612,998    (54,461)
Interbank market   39,935,611    34,370,129    544,683    50,033    594,716    1,460,714 
Fixed rate   16,808,431    9,277,398    227,059    241,284    468,343    465,949 
Floating rate   3,808,922    864,567    2,909    (362)   2,547    19,335 
Indices   23,994,782    16,745,215    738,955    311,906    1,050,861    1,037,565 
Securities   27,711    31,910    22,827    (26,037)   (3,210)   3,122 
Commodities   3,000    -    -    -    -    - 
Other   344,652    219,756    12,743    11,033    23,776    5,417 
Liability position   94,733,497    68,493,648    (2,082,542)   (713,931)   (2,796,473)   (2,016,363)
Foreign currency   11,171,268    14,608,979    (607,984)   21,987    (585,997)   (327,791)
Interbank market   24,957,617    19,443,008    (99,646)   10,268    (89,378)   (223,480)
Fixed rate   21,732,526    7,834,574    (324,801)   (300,016)   (624,817)   (388,290)
Floating rate   6,144,340    3,272,086    (133,159)   1,906    (131,253)   (3,456)
Indices   29,224,854    23,121,546    (815,193)   (477,180)   (1,292,373)   (1,045,669)
Securities   111,595    28,783    (85,421)   34,128    (51,293)   (1,067)
Commodities   108,461    -    (999)   (4,044)   (5,043)   - 
Other   1,282,836    184,672    (15,339)   (980)   (16,319)   (26,610)
Option contracts   1,108,515,671    2,331,971,056    1,212,946    (674,057)   538,889    246,142 
Purchase commitments – long position   237,863,509    695,906,184    1,122,030    (372,975)   749,055    1,074,898 
Foreign currency   17,481,380    24,903,212    885,988    (288,605)   597,383    311,749 
Interbank market   36,910,843    530,427,631    64,834    (36,204)   28,630    468,970 
Floating rate   278,388    314,295    1,417    (1,173)   244    1,637 
Indices   181,516,985    138,085,213    124,447    (57,787)   66,660    129,007 
Securities   1,161,948    1,533,796    31,120    10,910    42,030    113,379 
Commodities   501,299    -    14,173    (310)   13,863    - 
Other   12,666    642,037    51    194    245    50,156 
Commitments to sell – long position   354,696,072    527,345,713    2,094,632    301,500    2,396,132    1,244,479 
Foreign currency   7,635,296    12,295,017    148,936    (40,531)   108,405    480,454 
Interbank market   27,211,517    404,532,475    293,440    (49,400)   244,040    99,431 
Fixed rate   1,881    -    76    1,402    1,478    - 
Floating rate   218,024    282,438    606    (260)   346    917 
Indices   315,902,581    107,033,922    913,862    (2,118)   911,744    60,627 
Securities   2,821,099    2,646,857    721,049    381,490    1,102,539    600,747 
Commodities   767,655    -    14,143    (292)   13,851    - 
Other   138,019    555,004    2,520    11,209    13,729    2,303 
Purchase commitments – short position   174,396,804    527,730,100    (779,127)   46,826    (732,301)   (1,245,324)
Foreign currency   10,324,753    26,546,754    (454,429)   (96,552)   (550,981)   (461,860)
Interbank market   23,953,704    376,481,678    (47,363)   10,551    (36,812)   (263,333)
Indices   139,247,706    123,220,607    (258,169)   144,006    (114,163)   (399,000)
Securities   794,762    864,194    (15,336)   (13,050)   (28,386)   (75,242)
Commodities   64,920    -    (3,830)   2,077    (1,753)   - 
Other   10,959    616,867    -    (206)   (206)   (45,889)
Commitments to sell – short position   341,559,286    580,989,059    (1,224,589)   (649,408)   (1,873,997)   (827,911)
Foreign currency   10,757,287    16,714,590    (308,839)   113,276    (195,563)   (545,577)
Interbank market   35,433,232    444,963,343    (178,363)   (237,990)   (416,353)   (192,745)
Fixed rate   1,881    -    (76)   (1,402)   (1,478)   - 
Floating rate   -    -    -    181    181    - 
Indices   293,394,454    118,333,496    (646,042)   (197,372)   (843,414)   (48,748)
Securities   1,635,568    825,393    (79,199)   (316,222)   (395,421)   (38,070)
Commodities   197,195    -    (9,422)   1,264    (8,158)   - 
Other   139,669    152,237    (2,648)   (11,143)   (13,791)   (2,771)
Forward contracts   17,248,256    1,445,147    1,055,571    (28,993)   1,026,578    1,369,426 
Purchases receivable   8,702,057    21,340    885,878    (61,598)   824,280    50,139 
Foreign currency   7,883,317    -    623,364    (61,547)   561,817    - 
Interbank market   519,792    -    -    -    -    - 
Floating rate   262,117    21,340    261,918    -    261,918    50,139 
Commodities   36,831    -    596    (51)   545    - 
Purchases payable   1,351,234    -    (324,514)   (8,140)   (332,654)   (49,591)
Foreign currency   1,218,300    -    (43,311)   (7,515)   (50,826)   - 
Floating rate   -    -    (261,918)   -    (261,918)   (49,591)
Commodities   130,857    -    (19,081)   (631)   (19,712)   - 
Other   2,077    -    (204)   6    (198)   - 
Sales receivable   2,230,047    1,423,807    1,011,835    7,781    1,019,616    1,397,678 
Foreign currency   1,181,390    -    24,352    9,067    33,419    - 
Interbank market   47,699    -    526    (1)   525    - 
Fixed rate   147,953    -    147,787    (639)   147,148    - 
Floating rate   110,134    -    110,002    -    110,002    - 
Indices   189    -    188    -    188    - 
Securities   731,176    -    724,891    (544)   724,347    - 
Commodities   11,506    -    4,089    (102)   3,987    - 
Other   -    1,423,807    -    -    -    1,397,678 
Sales deliverable   4,964,918    -    (517,628)   32,964    (484,664)   (28,800)
Foreign currency   4,905,297    -    (341,957)   32,400    (309,557)   - 
Interbank market   -    -    -    (8)   (8)   - 
Fixed rate   -    -    (53,661)   (258)   (53,919)   - 
Floating rate   -    -    (110,002)   -    (110,002)   (28,800)
Commodities   59,621    -    (12,008)   830    (11,178)   - 

 

 
 

 

   Memorandum account/Notional
amount		   Balance sheet
account receivable/
(received) (payable)
paid		   Adjustments to market
value (in
results/stockholders'
equity)		   Market value 
   12/31/2011   12/31/2010   12/31/2011   12/31/2011   12/31/2011   12/31/2010 
Credit derivatives   7,195,321    6,701,450    153,463    136,299    289,762    133,884 
Asset position   3,659,633    2,902,115    242,792    157,739    400,531    261,321 
Foreign currency   117,308    53,727    134    1,403    1,537    1,177 
Fixed rate   1,820,095    2,621,843    226,387    134,389    360,776    255,785 
Floating rate   -    -    4,955    11,278    16,233    - 
Indices   -    -    11,144    (1,446)   9,698    - 
Securities   1,721,101    226,545    172    12,104    12,276    4,359 
Other   1,129    -    -    11    11    - 
Liability position   3,535,688    3,799,335    (89,329)   (21,440)   (110,769)   (127,437)
Foreign currency   117,393    22,110    (121)   (1,379)   (1,500)   (812)
Fixed rate   2,899,987    3,126,150    (89,187)   (7,769)   (96,956)   (121,436)
Securities   517,179    651,075    (21)   (12,281)   (12,302)   (5,189)
Other   1,129    -    -    (11)   (11)   - 
Forwards operations   31,284,974    36,958,479    69,385    55,580    124,965    (497,630)
Asset position   16,256,768    13,832,488    421,749    29,966    451,715    612,340 
Foreign currency   15,862,100    13,121,050    415,142    29,966    445,108    556,161 
Interbank market   18,570    168    283    -    283    1 
Fixed rate   -    3,400    -    -    -    975 
Floating rate   376,098    509,024    6,324    -    6,324    7,804 
Other   -    198,846    -    -    -    47,399 
Liability position   15,028,206    23,125,991    (352,364)   25,614    (326,750)   (1,109,970)
Foreign currency   14,945,815    22,758,545    (347,767)   25,614    (322,153)   (1,086,808)
Interbank market   12,986    26,711    (486)   -    (486)   (938)
Fixed rate   69,405    273,257    (1,199)   -    (1,199)   (3,208)
Floating rate   -    -    (858)   -    (858)   - 
Indices   -    -    (2,054)   -    (2,054)   - 
Other   -    67,478    -    -    -    (19,016)
Swap with target flow   50,873    6,021    (174)   (2,306)   (2,480)   - 
Asset position – interbank market   50,873    6,021    -    -    -    - 
Liability position - interbank market   -    -    (174)   (2,306)   (2,480)   - 
Target flow of swap – asset position - foreign currency   53,488    25,384    -    4,441    4,441    - 
Other derivative financial instruments   4,894,085    4,314,876    757,950    19,166    777,116    485,451 
Asset position   4,639,716    3,394,599    892,171    32,172    924,343    728,693 
Foreign currency   607,810    258,970    55,199    30,707    85,906    191,439 
Fixed rate   973,165    697,805    520,543    (398)   520,145    377,006 
Floating rate   -    -    -    -    -    (2,919)
Securities   3,053,908    -    315,972    1,863    317,835    - 
Other   4,833    2,437,824    457    -    457    163,167 
Liability position   254,369    920,277    (134,221)   (13,006)   (147,227)   (243,242)
Foreign currency   118,279    360,296    (74,353)   (11,377)   (85,730)   (183,424)
Fixed rate   -    33    -    -    -    (36)
Securities   74,798    -    (60,059)   -    (60,059)   - 
Other   61,292    559,948    191    (1,629)   (1,438)   (59,782)
         ASSETS    8,901,667    644,579    9,546,246    8,307,189 
         LIABILITIES    (5,504,488)   (1,302,828)   (6,807,316)   (5,704,835)
         TOTAL    3,397,179    (658,249)   2,738,930    2,602,354 
Derivative contracts mature as follows (in days):                              
Memorandum account/ notional amount   0 - 30    31 - 180    181 - 365    Acima de 365    12/31/2011    12/31/2010 
Futures   75,850,339    67,789,201    36,072,308    89,094,843    268,806,691    292,049,317 
Swaps   9,938,875    16,691,512    19,678,975    46,341,593    92,650,955    66,586,199 
Options   846,275,922    58,376,764    176,964,941    26,898,044    1,108,515,671    2,331,971,056 
Forwards   3,392,768    7,970,738    3,625,680    2,259,070    17,248,256    1,445,147 
Credit derivatives   88,450    1,902,379    1,025,165    4,179,327    7,195,321    6,701,450 
Forwards   6,635,781    14,065,782    6,899,353    3,684,058    31,284,974    36,958,479 
Swaps with target flow   -    -    -    50,873    50,873    12,050 
Target flow of swap   -    -    -    53,488    53,488    25,384 
Other   111,785    1,371,902    759,963    2,650,435    4,894,085    4,314,876 

 

 
 

 

II - Derivatives by counterparty

 

See below the composition of the Derivative Financial Instruments portfolio (assets and liabilities) by type of instrument, stated at cost, market value, and maturity term.

 

   12/31/2011   12/31/2010 
   Cost   Adjustment to market value (in
results /
stockholders’ equity)		   Market value   %   0 - 30   31 - 90   91 - 180   181 - 365   366 - 720   Over 720
days		   Market 
value		 
ASSETS                                                       
Futures   75,678    (49,576)   26,102    0.3    395    51,759    4,860    (397)   (3,248)   (27,267)   - 
BM&F Bovespa   75,672    (44,806)   30,866    0.3    517    57,727    4,733    (1,243)   (3,693)   (27,175)   - 
Financial institutions   -    (4,122)   (4,122)   0.0    (122)   (2,444)   201    (1,511)   (246)   -    - 
Companies   -    (648)   (648)   0.0    -    (3,530)   (74)   2,357    691    (92)   - 
Individuals   6    -    6    0.0    -    6    -    -    -    -    - 
Option premiums   3,216,662    (71,475)   3,145,187    33.0    1,251,956    181,813    221,929    659,589    113,243    716,657    2,319,377 
BM&F Bovespa   2,091,861    (403,323)   1,688,538    17.7    1,162,296    11,080    34,765    470,611    9,786    -    1,304,670 
Financial institutions   328,182    (42,582)   285,600    3.0    44,506    67,001    58,622    87,472    27,061    938    364,018 
Companies   796,619    374,430    1,171,049    12.3    45,154    103,732    128,542    101,506    76,396    715,719    650,502 
Individuals   -    -    -    -    -    -    -    -    -    -    187 
Forwards   1,897,713    (53,817)   1,843,896    19.3    631,162    362,338    155,050    208,327    146,548    340,471    1,447,817 
BM&F Bovespa   726,726    (546)   726,180    7.6    460,227    219,170    46,631    152    -    -    1,397,678 
Financial institutions   81,976    (854)   81,122    0.8    74,394    408    1,014    1,840    3,466    -    50,139 
Companies   1,089,011    (52,417)   1,036,594    10.9    96,541    142,760    107,405    206,335    143,082    340,471    - 
Swaps - Adjustment receivable   2,154,902    595,129    2,750,031    28.8    230,034    350,694    167,437    503,337    533,970    964,559    2,937,641 
BM&F Bovespa   223,425    108,967    332,392    3.5    13,180    24,956    31,083    61,205    21,850    180,118    270,832 
Financial institutions   154,296    104,662    258,958    2.7    29,254    62,986    12,663    28,407    49,081    76,567    449,116 
Companies   1,773,662    380,420    2,154,082    22.6    186,693    261,554    122,101    413,419    462,723    707,592    2,196,090 
Individuals   3,519    1,080    4,599    0.0    907    1,198    1,590    306    316    282    21,603 
Credit derivatives   242,792    157,739    400,531    4.2    40    14,591    17,102    6,526    51,769    310,503    261,321 
Financial institutions   60,798    34,278    95,076    1.0    40    14,591    17,102    2,316    1,644    59,383    76,931 
Companies   181,994    123,461    305,455    3.2    -    -    -    4,210    50,125    251,120    184,390 
Forwards   421,749    29,966    451,715    4.7    97,407    101,331    73,318    66,727    43,652    69,280    612,340 
Financial institutions   278,731    -    278,731    2.9    84,107    72,837    44,813    30,818    7,512    38,644    151,123 
Companies   142,715    29,978    172,693    1.8    13,153    28,391    28,474    35,909    36,130    30,636    459,565 
Individuals   303    (12)   291    0.0    147    103    31    -    10    -    1,652 
Swaps with target flow - Companies   -    4,441    4,441    0.0    -    -    -    -    -    4,441    - 
Other - financial institutions   892,171    32,172    924,343    9.7    54,692    509,190    5,594    34,747    96,644    223,476    728,693 
Financial institutions   775,689    1,465    777,154    8.1    54,406    465,969    532    11,197    73,846    171,204    722,041 
Companies   116,482    30,707    147,189    1.6    286    43,221    5,062    23,550    22,798    52,272    6,652 
Total   8,901,667    644,579    9,546,246    100.0    2,265,686    1,571,716    645,290    1,478,856    982,578    2,602,120    8,307,189
% per maturity term                        23.7%   16.5%   6.8%   15.5%   10.2%   27.3%     
Total at 12/31/2010   7,518,121    789,068    8,307,189    100.0    1,686,236    2,014,656    573,176    1,314,565    753,686    1,964,870      
% per maturity term                       20.3%   24.3%   6.9%   15.8%   9.1%   23.7%     

 

 
 

 

   12/31/2011   12/31/2010 
   Cost   Adjustment to market value (in results /
stockholders’ equity)		   Market value   %   0 - 30   31 - 90   91 - 180   181 - 365   366 - 720   Over 720
days		   Market value 
LIABILITIES                                                       
Futures   -    -    -    -    -    -    -    -    -    -    (56,197)
BM&F Bovespa   -    -    -    -    -    -    -    -    -    -    (58,735)
Financial institutions   -    -    -    -    -    -    -    -    -    -    (737)
Companies   -    -    -    -    -    -    -    -    -    -    3,275 
Option premiums   (2,003,716)   (602,582)   (2,606,298)   38.3    (1,203,954)   (290,029)   (234,708)   (711,838)   (153,522)   (12,247)   (2,073,235)
BM&F Bovespa   (1,403,003)   (365,030)   (1,768,033)   26.0    (1,113,901)   (87,219)   (20,299)   (483,560)   (63,054)   -    (1,677,346)
Financial institutions   (488,895)   (198,646)   (687,541)   10.1    (85,559)   (185,347)   (179,812)   (162,022)   (63,439)   (11,362)   (298,902)
Companies   (111,692)   (39,008)   (150,700)   2.2    (4,494)   (17,439)   (34,597)   (66,256)   (27,029)   (885)   (96,256)
Individuals   (126)   102    (24)   0.0    -    (24)   -    -    -    -    (731)
Forwards   (842,142)   24,824    (817,318)   12.0    (41,886)   (91,767)   (193,303)   (55,937)   (99,004)   (335,421)   (78,391)
BM&F Bovespa   -    (8)   (8)   0.0    -    -    (8)   -    -    -    - 
Financial institutions   (70,479)   3,549    (66,930)   1.0    (5,891)   (31,092)   (29,525)   (167)   (115)   (140)   (49,591)
Companies   (771,663)   21,283    (750,380)   11.0    (35,995)   (60,675)   (163,770)   (55,770)   (98,889)   (335,281)   (28,800)
Swaps - difference payable   (2,082,542)   (713,931)   (2,796,473)   41.1    (211,414)   (177,127)   (116,146)   (532,912)   (497,274)   (1,261,600)   (2,016,363)
BM&F Bovespa   (337,082)   (180,052)   (517,134)   7.6    (6,109)   (10,625)   (24,338)   (130,538)   (101,963)   (243,561)   (388,871)
Financial institutions   (446,003)   (235,806)   (681,809)   10.0    (133,912)   (75,391)   (13,005)   (40,886)   (110,062)   (308,553)   (397,090)
Companies   (1,269,604)   (286,806)   (1,556,410)   22.9    (70,127)   (89,048)   (72,991)   (341,529)   (273,856)   (708,859)   (1,170,619)
Individuals   (29,853)   (11,267)   (41,120)   0.6    (1,266)   (2,063)   (5,812)   (19,959)   (11,393)   (627)   (59,783)
Credit derivatives   (89,329)   (21,440)   (110,769)   1.7    -    (5,127)   (8,953)   (6,760)   (8,873)   (81,056)   (127,437)
Financial institutions   (89,091)   (17,409)   (106,500)   1.6    -    (5,127)   (8,953)   (4,540)   (7,488)   (80,392)   (124,798)
Companies   (238)   (4,031)   (4,269)   0.1    -    -    -    (2,220)   (1,385)   (664)   (2,639)
Forwards   (352,364)   25,614    (326,750)   4.7    (69,029)   (67,263)   (61,015)   (48,599)   (47,031)   (33,813)   (1,109,970)
Financial institutions   (247,121)   (1)   (247,122)   3.6    (56,219)   (50,964)   (40,448)   (32,641)   (38,172)   (28,678)   (628,098)
Companies   (104,991)   25,665    (79,326)   1.1    (12,777)   (16,060)   (20,564)   (15,931)   (8,859)   (5,135)   (480,813)
Individuals   (252)   (50)   (302)   0.0    (33)   (239)   (3)   (27)   -    -    (1,059)
Swaps with target flow - Companies   (174)   (2,306)   (2,480)   0.0    -    -    -    -    -    (2,480)   - 
Other   (134,221)   (13,007)   (147,228)   2.2    (170)   -    (5,257)   (5,905)   (110,649)   (25,247)   (243,242)
BM&F Bovespa   -    -    -    -         -    -    -    -    -    (7)
Financial institutions   (75,664)   (4,345)   (80,009)   1.2    (170)   -    -    -    (79,839)   -    (174,173)
Companies   (58,557)   (8,662)   (67,219)   1.0    -    -    (5,257)   (5,905)   (30,810)   (25,247)   (69,026)
Individuals   -    -    -    -    -    -    -    -    -    -    (36)
Total   (5,504,488)   (1,302,828)   (6,807,316)   100.0    (1,526,453)   (631,313)   (619,382)   (1,361,951)   (916,353)   (1,751,864)   (5,704,835)
% per maturity term                        22.4%   9.3%   9.1%   20.0%   13.5%   25.7%     
Total at 12/31/2010   (5,667,816)   (37,019)   (5,704,835)   100.0    (1,146,305)   (837,818)   (586,321)   (1,408,613)   (744,365)   (981,413)     
% per maturity term                       20.1%   14.7%   10.3%   24.7%   13.0%   17.2%     

 

 
 

 

III - Derivatives by notional amount

 

See below the composition of the Derivative Financial Instruments portfolio by type of instrument, stated at their notional amounts, per trading location (organized or over-the-counter market) and counterparties.

 

   12/31/2011 
   Futures   Swaps   Options   Forwards   Credit derivatives   Forwards   Swap with
target flow		   Target flow of
swap		   Other 
BM&F Bovespa   207,682,736    12,905,296    1,063,857,655    1,299,979    -    -    -    -    - 
Over-the-counter market   61,123,955    79,745,659    44,658,016    15,948,277    7,195,321    31,284,974    50,873    53,488    4,894,085 
Financial institutions   6,733,113    21,225,565    36,036,706    1,735,245    5,619,795    23,657,453    -    -    3,526,457 
Companies   54,390,392    55,756,355    8,612,773    14,213,032    1,575,526    7,597,207    50,873    53,488    1,367,628 
Individuals   450    2,763,739    8,537    -    -    30,314    -    -    - 
Total   268,806,691    92,650,955    1,108,515,671    17,248,256    7,195,321    31,284,974    50,873    53,488    4,894,085 
TOTAL 12/31/2010   292,049,317    66,586,199    2,331,971,056    1,445,147    6,701,450    36,958,479    12,050    25,384    4,314,876 

 

 
 

 

IV - Credit derivatives

 

See below the composition of Credit Derivatives (assets and liabilities) portfolio stated at notional amount, and effect on calculation of Required Referential Equity.

 

   Credit risk amount 
   12/31/2011   12/31/2010 
Transferred   (3,659,633)   (3,289,161)
Credit swaps whose underlying assets are:          
Securities   (2,471,934)   (2,872,680)
Total return rate swaps whose underlying assets are:          
Securities   (1,187,699)   (416,481)
Received   3,535,688    3,412,289 
Credit swaps whose underlying assets are:          
Securities   3,526,626    3,404,240 
Total return rate swaps whose underlying assets are:          
Securities   9,062    8,049 
Total   (123,945)   123,128 

During the period, there was no occurrence of credit events related to those set forth in agreements.

According to CMN Resolution No. 3,490, which became effective on July 1, 2008 (Note 3), the effect on the calculation of the Required Referential Equity amounts to R$ 91,751 at December 31, 2011 (R$ 255,726 at December 31, 2010).

 

 
 

 

V -Accounting hedge

 

a)The purpose of the hedge relationship of ITAÚ UNIBANCO HOLDING is to protect the cash flows of payment of debt interest (CDB / Redeemable preferred shares) related to its variable interest rate risk (CDI / LIBOR), making the cash flow constant (fixed rate) and regardless of the variations of DI Cetip Over and LIBOR.

 

To protect the future cash flows of debt against exposure to variable interest rate (CDI), at December 31, 2011 ITAÚ UNIBANCO HOLDING negotiated DI Futures agreements at BM&FBOVESPA with maturity between 2012 and 2017 in the amount of R$ 30,948,192 (R$ 20,357,388 at December 31, 2010). To protect the future cash flows of debt against exposure to variable interest rate (LIBOR), at December 31, 2011 ITAÚ UNIBANCO HOLDING negotiated SWAP contracts with maturity in 2015 in the amount of R$ 737,324 (R$ 654,937 at December 31, 2010). These derivative financial instruments gave rise to adjustment to market value net of tax effects recorded in stockholders’ equity of R$ (168,455) (R$ (28,252) at December 31, 2010), of which R$ (151,774) (R$ (17,081) at December 31, 2010) refers to CDB and (R$ 16,681) (R$ (11,171) at December 31, 2010) refers to Redeemable Preferred shares. The hedged items total R$ 31,672,085 (R$ 20,419,986 at December 31, 2010), of which R$ 30,934,761 (R$ 19,765,049 at December 31, 2010) are CDB with maturities between 2012 and 2017 and R$ 737,324 (R$ 654,937 at December 31, 2010) are SWAPS of Redeemable Preferred Shares with maturity in 2015.

 

The gains or losses related to the accounting hedge of cash flows that we expect to recognize in Results in the following 12 months amount to R$ (179,954) (R$ (83,757) at December 31, 2010).

 

The effectiveness computed for hedge portfolio was in conformity with the provisions of BACEN Circular No. 3,082 of January 30, 2002.

 

In the first quarter of 2011, ITAÚ UNIBANCO HOLDING carried out a repurchase of subordinated CDBs, giving rise to an effect in stockholders’ equity of R$ 3,210.

 

b)The swap operations contracted in a negotiation associated with the funding and/or investment in the amount of R$ 40,545 (R$ 103,439 at December 31, 2010) are recorded at amounts restated in accordance with variations occurred in respective ratios (“curve”) and are not valued at their market value, as permitted by BACEN Circular No. 3,150/02.

 

 
 

 

VI - Realized and unrealized gain of the derivative financial instruments portfolio

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Swap   (475,822)   169,239 
Forwards   (139,496)   28,689 
Futures   (872,682)   1,247,597 
Options   311,738    695,155 
Credit derivatives   184,836    82,605 
Other   791,322    (301,594)
Foreign exchange variation on investments abroad   2,776,810    (1,065,833)
Total   2,576,706    855,858 

 

VII - Clearing agreements

 

Derivative operations on the over-the-counter market are carried out under derivative agreements which provide for clearing of amounts payable and receivable resulting from such derivatives, pursuant to article three of paragraph two, of CMN Resolution No. 3,263 of 02/24/2005.

 

 
 

 

i)Changes in adjustment to market value for the period

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Opening balance   1,407,096    615,862 
Adjustments with impact on:          
Results   (1,605,804)   658,631 
Trading securities   (225,647)   (72,650)
Derivative financial instruments   (1,380,157)   731,281 
Stockholders’ equity   38,365    132,603 
Available-for-sale   264,850    38,464 
Accounting Hedge – Derivative Financial Instruments   (226,485)   94,139 
Futures   (216,530)   119,363 
Swap   (9,955)   (25,224)
           
Closing balance   (160,343)   1,407,096 
Adjustment to market value   (160,343)   1,407,096 
Trading securities   26,698    252,344 
Available-for-sale securities   718,599    453,749 
Derivative financial instruments   (905,640)   701,003 
Trading securities   (628,111)   752,047 
Accounting hedge   (277,529)   (51,044)
Futures   (247,391)   (30,861)
Swap   (30,138)   (20,183)

 

For better understanding, the following table shows the unrealized gains of available-for-sale securities and held-to-maturity securities:

 

   12/31/2011   12/31/2010 
Adjustment of available-for-sale securities – stockholders’ equity   718,599    453,749 
Adjustment to held-to-maturity securities (*)   607,617    617,098 
Total unrealized gain   1,326,216    1,070,847 

(*)Includes the amount of R$ 10,771 (R$ 12,681 at December 31, 2010) regarding the adjustment to market value of securities reclassified up to December 31, 2003, not recognized in net income.

 

 
 

 

j)Sensitivity analysis (TRADING AND BANKING PORTFOLIOS)

 

In compliance with CVM Instruction No. 475 of December 17, 2008, Itaú Unibanco carried out a sensitivity analysis by market risk factors considered relevant to which the group was exposed. Each market risk factor was subject to a sensitivity level, with shock applications of 25% and 50%, both for growth and fall. The biggest losses arising, by risk factor, in each scenario, were stated with impact on result, net of tax effects, by providing a vision of the Itaú Unibanco exposure under exceptional scenarios.

 

In accordance with the operations classification criteria set forth in CMN Resolution No. 3,464 of June 26, 2007 and BACEN Circular No. 3,354 of June 27, 2007, and the New Capital Accord – Basel II, the financial instruments, including all transactions with derivatives, are segregated into Trading and Banking portfolios. The market risk measurement is made according to this segregation.

 

The sensitivity analyses shown in this report are an evaluation of an instant position of the portfolio exposure and, therefore, do not consider the management’s quick response capacity (treasury and control areas), which triggers risk mitigating measures, whenever a situation of high loss or risk is identified by minimizing the sensitivity towards significant losses. In addition, we point out that the presented results do not necessarily translate into accounting results, because the study's sole purpose is to disclose the exposure to risks and the respective protective actions, taking into account the fair value of financial instruments, irrespective of the accounting practices adopted by the institutions.

 

The trading portfolio consists of all transactions, including derivatives, which are held with the intention of being traded in the short term and intended for hedging other financial instruments of this portfolio or locking of the arbitrage results.

Amount in R$ (000)

Trading portfolio   Exposures   12/31/2011 (*)
    Scenarios
 Risk factors   Risk of variation in:    I   II   III  
Fixed rate   Fixed rates in reais     (1,118 )     (27,821 )   (55,369 )
Foreign exchange   Rates of foreign currency coupon     246       (6,207 )   (12,531 )
Foreign currency   Exchange variation     (7,486 )     (187,152 )   (374,305 )
Price indices   Rates of price index coupon     (163 )     (4,060 )   (8,083 )
Reference rate   Rate of TR coupon     367       (9,267 )   (18,706 )
Shares   Share price     525       (13,121 )   (26,243 )
    Total without correlation     (7,629 )    (247,628 )    (495,236 ) 
    Total with correlation     (5,501 )    (178,532 )    (357,049 ) 

(*) Amounts net of tax effects

 

The banking portfolio comprises transactions that do not fit into the trading portfolio. It consists of transactions held with the intention of being traded in the medium and long terms, and their respective hedges, as well as transactions intended for the active management of financial risks, which may or may not be carried out with derivative financial instruments.

 

Amount in R$ (000)

Trading and Banking portfolios   Exposures   12/31/2011 (*)
        Scenarios
Risk factors   Risk of variation in:   I     II     III  
Fixed rate   Fixed rates in reais   (4,343 )   (108,226 )   (215,754 )
Foreign exchange   Rates of foreign currency coupon   (1,068 )   (26,420 )   (52,268 )
Foreign currency   Exchange variation   (1,960 )   (49,009 )   (98,018 )
Price indices   Rates of price index coupon   (1,021 )   (25,313 )   (50,197 )
Reference rate   Rate of TR coupon   (3,355 )   (82,061 )   (160,429 )
Shares   Share price   1,381     (34,523 )   (69,046 )
    Total without correlation   (10,366 )   (325,552 )   (645,712 )
    Total with correlation   (7,474 )   (234,712 )   (465,538 )

(*) Amounts net of tax effects

 

The following scenarios are used to measure the sensitivity:

 

Scenario I: Addition of 1 base point to the fixed-rate curve, currency coupon, inflation and interest rate indices, and 1 percentage point in currency and share prices, which is based on market information (BM&F BOVESPA, Andima, etc).

 

Scenario II: Shocks at 25 base points in fixed-rate curves, currency coupon, inflation and interest rate indices, and 25 percentage points in currency and share prices, both for growth and fall, considering the largest resulting losses per risk factor.

 

Scenario III: Shocks at 50 base points in fixed-rate curves, currency coupon, inflation and interest rate indices, and 50 percentage points in currency and share prices, both for growth and fall, considering the largest resulting losses per risk factor.

 

Derivative financial instruments contracted by Itaú Unibanco are shown in the item Derivative Financial Instruments in this note.

 

 
 

 

NOTE 8 - LOAN, LEASE AND OTHER CREDIT OPERATIONS

 

a) Composition of the portfolio with credit granting characteristics

 

I – By type of operations and risk level

 

   12/31/2011   12/31/2010 
Risk levels  AA   A   B   C   D   E   F   G   H         
Loan operations   104,011,016    99,360,447    26,212,747    15,307,490    13,234,918    2,903,159    2,458,183    1,824,200    9,224,454    274,536,614    220,560,307 
Loans and discounted trade receivables   45,824,837    49,086,216    14,979,238    12,394,717    11,598,879    2,126,145    1,957,545    1,505,531    8,234,652    147,707,760    121,832,381 
Financing   38,421,370    42,816,554    10,076,213    2,609,186    1,263,106    652,964    484,580    301,037    925,638    97,550,648    76,997,354 
Farming and agribusiness financing   4,777,708    606,165    167,077    37,321    228,427    93,022    173    127    28,810    5,938,830    5,424,948 
Real estate financing   14,987,101    6,851,512    990,219    266,266    144,506    31,028    15,885    17,505    35,354    23,339,376    16,305,624 
                                                        
Lease operations   4,605,233    14,571,725    3,543,091    1,436,557    889,950    394,980    318,479    258,387    703,189    26,721,591    37,764,648 
                                                        
Credit card operations   -    31,531,377    1,436,327    1,869,329    858,933    520,045    433,703    369,902    3,160,635    40,180,251    33,685,363 
                                                        
Advance on exchange contracts (1)   2,657,957    923,474    228,154    35,208    68,418    8,539    -    2,915    10,721    3,935,386    2,860,760 
                                                        
Other sundry receivables (2)   1,288    29,497    6,239    23,690    12,310    3,606    7,478    970    23,862    108,940    181,766 
                                                        
Total operations with credit granting characteristics   111,275,494    146,416,520    31,426,558    18,672,274    15,064,529    3,830,329    3,217,843    2,456,374    13,122,861    345,482,782    295,052,844 
Endorsements and sureties (3)                                                51,529,592    38,373,987 
                                                        
Total with endorsements and sureties   111,275,494    146,416,520    31,426,558    18,672,274    15,064,529    3,830,329    3,217,843    2,456,374    13,122,861    397,012,374    333,426,831 
TOTAL – 12/31/2010   49,370,286    142,580,785    56,024,916    16,120,094    11,169,103    4,580,021    2,868,243    1,781,222    10,558,174    295,052,844      

 (1) Includes Advances on Exchange Contracts and Income Receivable from Advances Granted, reclassified from Liabilities – Foreign Exchange Portfolio/Other Receivables (Note 2a);

(2) Includes Securities and Credits Receivable, Debtors for Purchase of Assets and Endorsements and Sureties paid;

(3) Recorded in Memorandum Accounts.

 

 
 

 

II - By maturity and risk level

 

   12/31/2011   12/31/2010 
   AA   A   B   C   D   E   F   G   H   Total   Total 
   OVERDUE OPERATIONS (1) (2)     
Falling due installments   -    -    3,417,783    3,279,619    2,818,553    1,603,786    1,324,479    1,020,744    4,223,906    17,688,870    11,754,878 
01 to 30   -    -    206,281    215,961    161,529    74,863    58,602    49,154    406,496    1,172,886    636,712 
31 to  60   -    -    115,116    114,312    113,858    60,643    54,699    42,237    205,335    706,200    621,905 
61 to 90   -    -    114,292    112,769    103,699    59,693    49,531    42,138    197,779    679,901    546,108 
91 to 180   -    -    329,188    311,942    300,053    170,169    174,931    116,865    536,219    1,939,367    1,522,926 
181 to 365   -    -    605,243    568,856    553,828    312,724    260,225    214,513    915,109    3,430,498    2,581,308 
Over 365   -    -    2,047,663    1,955,779    1,585,586    925,694    726,491    555,837    1,962,968    9,760,018    5,845,919 
                                                        
Overdue installments   -    -    546,294    688,980    1,214,593    1,015,932    1,034,946    944,154    6,675,077    12,119,976    10,269,107 
01 to 14   -    -    28,013    76,267    65,269    33,478    25,760    21,116    102,923    352,826    278,195 
15 to 30   -    -    466,902    110,771    184,235    62,467    40,073    29,875    164,050    1,058,373    1,063,084 
31 to 60   -    -    51,379    444,602    308,051    156,009    162,535    61,302    287,161    1,471,039    1,362,933 
61 to 90   -    -    -    42,429    599,822    191,134    157,918    88,349    321,611    1,401,263    1,024,027 
91 to 180   -    -    -    14,911    57,216    540,131    606,291    700,985    1,324,238    3,243,772    2,668,409 
181 to 365   -    -    -    -    -    32,713    42,369    42,527    4,268,987    4,386,596    3,624,643 
Over 365   -    -    -    -    -    -    -    -    206,107    206,107    247,816 
SUBTOTAL   -    -    3,964,077    3,968,599    4,033,146    2,619,718    2,359,425    1,964,898    10,898,983    29,808,846    22,023,985 
SPECIFIC ALLOWANCE   -    -    (39,640)   (119,058)   (403,315)   (785,915)   (1,179,713)   (1,375,429)   (10,898,983)   (14,802,053)   (11,217,317)
SUBTOTAL - 12/31/2010   -    -    2,963,550    2,781,866    2,697,374    2,144,336    1,655,290    1,393,423    8,388,146    22,023,985      
    NON-OVERDUE OPERATIONS      
Falling due installments   110,471,028    145,430,455    27,233,846    14,282,454    10,819,500    1,176,575    828,410    476,225    2,173,999    312,892,492    271,070,610 
01 to 30   9,723,156    24,712,809    4,858,581    4,654,475    3,364,234    175,198    111,245    60,050    574,576    48,234,324    40,375,447 
31 to  60   9,395,845    13,507,877    1,914,979    1,084,983    640,673    67,823    45,625    30,940    232,417    26,921,162    23,426,165 
61 to 90   5,690,180    8,731,428    1,602,619    889,309    513,289    82,203    41,334    19,025    135,668    17,705,055    17,087,370 
91 to 180   12,746,155    16,051,071    2,904,421    1,655,287    1,103,358    117,661    58,833    43,480    244,987    34,925,253    31,636,386 
181 to 365   15,718,621    20,708,001    4,552,891    1,905,820    1,673,551    153,994    109,509    72,570    258,290    45,153,247    41,707,644 
Over 365   57,197,071    61,719,269    11,400,355    4,092,580    3,524,395    579,696    461,864    250,160    728,061    139,953,451    116,837,598 
                                                        
Overdue up to 14 days   804,466    986,065    228,635    421,221    211,883    34,036    30,008    15,251    49,879    2,781,444    1,958,249 
SUBTOTAL   111,275,494    146,416,520    27,462,481    14,703,675    11,031,383    1,210,611    858,418    491,476    2,223,878    315,673,936    273,028,859 
GENERIC ALLOWANCE   -    (732,082)   (274,625)   (441,111)   (1,103,138)   (363,183)   (429,209)   (344,033)   (2,223,878)   (5,911,259)   (6,269,506)
SUBTOTAL - 12/31/2010   49,370,286    142,580,785    53,061,366    13,338,228    8,471,729    2,435,685    1,212,953    387,799    2,170,028    273,028,859      
GRAND TOTAL   111,275,494    146,416,520    31,426,558    18,672,274    15,064,529    3,830,329    3,217,843    2,456,374    13,122,861    345,482,782    295,052,844 
EXISTING ALLOWANCE   -    (732,082)   (314,265)   (560,169)   (4,419,271)   (1,914,781)   (2,252,169)   (2,456,129)   (13,122,861)   (25,771,727)   (22,018,218)
Minimum allowance required (3)   -    (732,082)   (314,265)   (560,169)   (1,506,453)   (1,149,098)   (1,608,922)   (1,719,462)   (13,122,861)   (20,713,312)   (17,486,823)
Additional allowance (4)   -    -    -    -    (2,912,818)   (765,683)   (643,247)   (736,667)   -    (5,058,415)   (4,531,395)
GRAND TOTAL 12/31/2010   49,370,286    142,580,785    56,024,916    16,120,094    11,169,103    4,580,021    2,868,243    1,781,222    10,558,174    295,052,844      
EXISTING ALLOWANCE   -    (712,904)   (560,250)   (759,198)   (3,349,614)   (2,289,552)   (2,007,483)   (1,781,043)   (10,558,174)   (22,018,218)     
Minimum allowance required (3)   -    (712,904)   (560,250)   (483,603)   (1,116,910)   (1,374,006)   (1,434,121)   (1,246,855)   (10,558,174)   (17,486,823)     
Additional allowance (4)   -    -    -    (275,595)   (2,232,704)   (915,546)   (573,362)   (534,188)   -    (4,531,395)     

(1)Operations with overdue installments for more than 14 days or under responsibility of bankruptcy or in process of bankruptcy companies;
(2)The balance of non-accrual operations amounts to R$ 20,448,398 (R$ 14,850,519 at 12/31/2010);
(3)The policy of not using "AA" ratings for individuals was maintained. As a consequence, all loan operations with clients classified in these segments are charged by recording a provision upon the granting of loan;
(4)According to BACEN’s request, it is classified into risk level to show the additional amounts calculated to maintain the strength necessary for absorbing possible increases in default expected in history of scenarios of losses incurred.

 

 
 

 

III – By business sector

 

   12/31/2011   %   12/31/2010   % 
                 
PUBLIC SECTOR   2,010,353    0.6    1,165,860    0.5 
Generation, transmission and distribution of electric energy   411,774    0.1    565,373    0.2 
Chemical and petrochemical   613,367    0.2    272,565    0.1 
Other   985,212    0.3    327,922    0.1 
PRIVATE SECTOR   343,472,429    99.4    293,886,984    99.5 
COMPANIES   188,118,136    54.4    161,561,353    54.6 
INDUSTRY AND COMMERCE   99,862,499    28.9    85,113,228    28.8 
Food and beverage   16,588,060    4.8    14,344,592    4.9 
Autoparts and accessories   4,776,173    1.4    3,867,481    1.3 
Agribusiness capital assets   1,021,056    0.3    847,518    0.3 
Industrial capital assets   5,642,929    1.6    5,172,365    1.8 
Pulp and paper   2,330,319    0.7    2,361,801    0.8 
Distribution of fuels   2,195,430    0.6    1,893,279    0.6 
Electrical and electronic   6,977,488    2.0    6,945,799    2.4 
Pharmaceuticals   2,768,508    0.8    2,098,890    0.7 
Fertilizers, insecticides and crop protection   1,650,528    0.5    1,313,974    0.4 
Tobacco   275,434    0.1    373,160    0.1 
Import and export   1,894,570    0.5    1,996,909    0.7 
Hospital care materials and equipment   1,035,369    0.3    918,736    0.3 
Construction material   5,299,718    1.5    4,398,567    1.5 
Steel and metallurgy   7,534,425    2.2    6,876,259    2.3 
Wood and furniture   3,060,849    0.9    2,710,836    0.9 
Chemical and petrochemical   7,051,031    2.0    5,330,789    1.8 
Supermarkets   1,640,950    0.5    1,088,887    0.4 
Light and heavy vehicles   7,653,253    2.2    5,942,477    2.0 
Clothing   9,062,054    2.6    7,682,679    2.6 
Other - Commerce   5,858,663    1.7    4,940,944    1.7 
Other - Industry   5,545,692    1.6    4,007,286    1.4 
SERVICES   70,649,267    20.4    60,313,047    20.4 
Heavy construction (constructors)   3,737,145    1.1    3,317,358    1.1 
Financial   5,273,058    1.5    5,331,036    1.8 
Generation, transmission and distribution of electric energy   5,281,264    1.5    5,216,304    1.8 
Holding company   3,264,627    0.9    3,037,021    1.0 
Real estate agents   11,367,739    3.3    9,568,362    3.2 
Media   3,092,746    0.9    2,697,881    0.9 
Service companies   4,752,916    1.4    4,487,883    1.5 
Health care   1,730,067    0.5    1,953,773    0.7 
Telecommunications   1,175,256    0.3    1,058,677    0.4 
Transportation   15,961,549    4.6    11,931,044    4.0 
Other services   15,012,900    4.3    11,713,708    4.0 
PRIMARY SECTOR   16,109,347    4.7    13,948,391    4.7 
Agribusiness   13,729,411    4.0    11,742,958    4.0 
Mining   2,379,936    0.7    2,205,433    0.7 
Other companies   1,497,023    0.4    2,186,687    0.7 
INDIVIDUALS   155,354,293    45.0    132,325,631    44.9 
Credit cards   39,801,064    11.5    33,892,494    11.5 
Consumer loans/overdraft   38,640,877    11.2    27,518,496    9.3 
Real estate financing   16,819,163    4.9    10,790,484    3.7 
Vehicles   60,093,189    17.4    60,124,157    20.4 
                     
GRAND TOTAL   345,482,782    100.0    295,052,844    100.0 

 

 
 

 

b) Credit concentration

 

 

   12/31/2011   12/31/2010 
Loan, lease and other credit operations (*)  Risk   % of 
Total		   Risk   % of
Total		 
Largest debtor   3,099,722    0.8    2,313,377    0.7 
10 largest debtors   21,999,582    5.5    18,099,197    5.4 
20 largest debtors   36,715,537    9.3    29,008,782    8.7 
50 largest debtors   59,376,674    15.0    48,566,953    14.5 
100 largest debtors   77,454,351    19.5    64,956,470    19.4 

 

   12/31/2011   12/31/2010 
Loan, lease and other credit operations and securities of companies and 
financial institutions (*)		  Risk   % of 
Total		   Risk   % of
Total		 
Largest debtor   4,516,385    1.0    4,436,216    1.2 
10 largest debtors   30,722,398    7.0    28,567,215    7.6 
20 largest debtors   49,679,952    11.3    44,697,920    11.9 
50 largest debtors   80,560,182    18.4    69,990,469    18.7 
100 largest debtors   104,000,316    23.7    92,206,387    24.6 

(*) The amounts include endorsements and sureties.


c) Changes in allowance for loan losses

 

   01/01 to 12/31/2011   01/01 to 12/31/2010 
Opening balance   (22,018,218)   (23,702,735)
Net increase for the period   (19,911,948)   (14,120,560)
Required by Resolution No. 2,682/99   (19,384,928)   (15,693,165)
Additional allowance (3)   (527,020)   1,572,605 
Write-Off   16,158,439    15,805,077 
Closing balance   (25,771,727)   (22,018,218)
Required by Resolution No. 2,682/99   (20,713,312)   (17,486,823)
Specific allowance (1)   (14,802,053)   (11,217,317)
Generic allowance (2)   (5,911,259)   (6,269,506)
Additional allowance (3)   (5,058,415)   (4,531,395)

 

(1)Operations with overdue installments for more than 14 days or under responsibility of bankruptcy or in process of bankruptcy companies;
(2)For operations not covered in the previous item due to the classification of the client or operation;
(3)As from the first quarter of 2011, refers to the provision in excess of the minimum percentage required by CMN Resolution No. 2,682 of December 21, 1999, based on the expected loss methodology adopted in the institution’s credit risk management, which also considers the potential losses in revolving credit.

In 2010, the need for additional allowance for loan losses was reduced in view of the new Basel III guidelines, which determined that the counter-cyclical effects be buffered in the base of capital.

 

At December 31, 2011, the balance of the allowance in relation to the loan portfolio is equivalent to 7.5% (7.5% at 12/31/2010).

 

 
 

 

d)Recovery and renegotiation of credits

 

I - Composition of the result of allowance for loan losses

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Expenses for allowance for loan losses   (19,911,948)   (14,120,560)
Income from recovery of credits written off as loss   5,488,194    4,209,205 
Result of allowance for loan losses   (14,423,754)   (9,911,355)

 

II - Renegotiated credits

 

   12/31/2011   12/31/2010 
Renegotiated credits   14,570,189    9,032,483 
Allowance for loan losses   (6,105,115)   (4,214,187)
(%)   41.9    46.7 

 

 
 

 

e)Restricted operations on assets

 

We present below information related to the restricted operations on assets, in accordance with CMN Resolution No. 2,921, of January 17, 2002.

 

   12/31/2011   01/01 to
12/31/2011		 
   0 - 30   31 - 180   181 - 365   Total   Income
(expenses)		 
Restricted operations on assets                         
Loan operations   480    110,569    26,261    137,310    22,740 
Liabilities - restricted operations on assets                         
Foreign borrowings through securities   480    110,569    26,261    137,310    (22,715)
Net revenue from restricted operations                       25 

 

At December 31, 2011, there were no balances in default.

 

f) Sales operations or transfers of financial assets

 

In compliance with CMN Resolution No. 3,809, of October 28, 2009, the amount of sales operations or transfers of financial assets where the entity significantly retained the risks and benefits is R$ 554,290, composed exclusively of real estate financing R$ 534,193 and farming financing R$ 20,097, assigned with joint obligation.

 

g) Credit assignment

 

In 2011, credits were assigned without joint obligation, supported by the provisions of CMN Resolution No. 2,836, of May 30, 2001; with the Related Parties amounting to R$ 318,776, without effect on consolidated income; and those with Non-Related Parties amounting to R$ 2,271,369, with an effect of R$ 546 on income.

 

 
 

 

NOTE 9 - FOREIGN EXCHANGE PORTFOLIO

 

   12/31/2011   12/31/2010 
ASSETS – OTHER RECEIVABLES   26,449,799    21,592,818 
Exchange purchase pending settlement – foreign currency   15,486,310    10,649,825 
Exchange sale rights – local currency   11,277,758    11,204,440 
(Advances received) – local currency   (314,269)   (261,447)
LIABILITIES – OTHER LIABILITIES (Note 2a)   26,181,570    22,034,954 
Exchange sales pending settlement – foreign currency   11,130,675    10,924,697 
Liabilities from purchase of foreign currency – local currency   15,046,806    11,106,115 
Other   4,089    4,142 
MEMORANDUM ACCOUNTS   1,143,965    588,785 
Outstanding import credits – foreign currency   1,129,766    550,378 
Confirmed export credits – foreign currency   14,199    38,407 

 

 
 

 

NOTE 10 – FUNDING AND BORROWINGS AND ONLENDING

 

a) Summary

 

   12/31/2011   12/31/2010 
   0-30   31-180   181-365   Over 365   Total   %   Total   % 
Deposits   127,685,624    19,849,754    11,920,160    83,180,884    242,636,422    41.9    202,688,057    39.8 
Deposits received under securities repurchase agreement   59,279,439    11,396,283    11,137,676    107,005,139    188,818,537    32.5    199,656,353    39.1 
Funds from acceptance and issuance of securities   4,862,330    15,756,393    8,840,626    22,097,865    51,557,214    8.9    25,591,719    5.0 
Borrowings and onlending   4,025,673    12,771,562    12,212,552    27,592,273    56,602,060    9.8    47,337,964    9.3 
Subordinated debt (*)   59,547    8,157,341    2,501,565    28,996,734    39,715,187    6.9    34,487,665    6.8 
TOTAL   195,912,613    67,931,333    46,612,579    268,872,895    579,329,420         509,761,758      
% per maturity term   33.9    11.7    8.0    46.4                     
TOTAL – 12/31/2010   194,833,143    56,868,707    47,631,276    210,428,632    509,761,758                
% per maturity term   38.2    11.2    9.3    41.3                     

(*) Includes R$ 740,703 (R$ 657,794 at 12/31/2010) of Redeemable Preferred Shares classified under Minority Interest in the Balance Sheet.

 

b) Deposits

 

 

   12/31/2011   12/31/2010 
   0-30   31-180   181-365   Over 365   Total   %   Total   % 
Demand deposits   28,932,523    -    -    -    28,932,523    11.9    25,537,134    12.6 
Savings accounts   67,169,544    -    -    -    67,169,544    27.7    57,899,455    28.6 
Interbank   666,096    682,565    444,847    272,115    2,065,623    0.9    1,929,417    1.0 
Time deposits   30,917,461    19,167,189    11,475,313    82,908,769    144,468,732    59.5    116,416,375    57.4 
Other deposits   -    -    -    -    -    0.0    905,676    0.4 
TOTAL   127,685,624    19,849,754    11,920,160    83,180,884    242,636,422         202,688,057      
% per maturity term   52.6    8.2    4.9    34.3                     
TOTAL – 12/31/2010   100,018,287    17,549,791    21,980,529    63,139,450    202,688,057                
% per maturity term   49.3    8.7    10.8    31.2                     

 

ITAÚ UNIBANCO’s portfolio is composed of interbank deposits in the amount of R$ 4,832,444 (R$ 3,344,008 at 12/31/ 2010 with maturity over 365 days) with maturity of 181 to 365 days.

 

 
 

 

 

c)Deposits received under securities repurchase agreements

 

   12/31/2011   12/31/2010 
   0 - 30   31 - 180   181 - 365   Over 365   Total   %   Total   % 
Own portfolio   22,744,688    11,393,389    9,333,011    92,576,432    136,047,520    72.0    164,896,376    82.5 
Government securities   14,151,360    296,240    55,840    41,372    14,544,812    7.7    49,038,804    24.6 
Own issue   2,912,640    10,267,326    9,277,155    91,698,285    114,155,406    60.4    101,284,273    50.7 
Foreign   5,680,688    829,823    16    836,775    7,347,302    3.9    14,573,299    7.2 
Third-party portfolio   36,534,751    2,894    -    -    36,537,645    19.4    23,069,503    11.6 
Free portfolio   -    -    1,804,665    14,428,707    16,233,372    8.6    11,690,474    5.9 
TOTAL   59,279,439    11,396,283    11,137,676    107,005,139    188,818,537         199,656,353      
% per maturity term   31.4    6.0    5.9    56.7                     
TOTAL – 12/31/2010   89,009,486    21,368,715    12,066,794    77,211,358    199,656,353                
% per maturity term   44.6    10.7    6.0    38.7                     

 

 
 

 

d)Funds from acceptance and issuance of securities

 

   12/31/2011   12/31/2010 
   0-30   31-180   181-365   Over 365   Total   %   Total   % 
FUNDS FROM BILLS:   2,095,437    11,817,298    4,561,344    15,113,364    33,587,443    65.2    14,277,689    55.8 
of real estate loans   1,832,885    10,311,381    2,326,128    1,280,813    15,751,207    30.5    8,736,478    34.1 
Financial   -    600,719    1,943,400    11,763,592    14,307,711    27.8    2,465,749    9.7 
Bill of credit related to agribusiness   253,798    894,371    274,329    1,862,017    3,284,515    6.4    2,773,523    10.8 
Mortgage notes   8,754    10,827    17,487    206,942    244,010    0.5    301,939    1.2 
DEBENTURES   -    27,583    1,011,150    63    1,038,796    2.0    1,384,093    5.4 
FOREIGN SECURITIES   2,766,893    3,911,512    3,268,132    6,984,438    16,930,975    32.8    9,929,937    38.8 
Trade Related – issued abroad - Structure Note Issued   -    -    -    -    -    -    1,668,412    6.5 
Non-Trade Related – Issued abroad   2,766,893    3,911,512    3,268,132    6,984,438    16,930,975    32.8    8,261,525    32.3 
Euro Certificates of Deposits   2,649,835    2,238,669    1,870,582    37,874    6,796,960    13.2    1,327,943    5.2 
Structure Note Issued   66,257    1,281,649    1,093,844    2,453,464    4,895,214    9.5    336,113    1.3 
Brazil Risk Note Programme   18,705    288,724    238,506    2,667,112    3,213,047    6.2    4,162,533    16.3 
Bonds   6,127    13,708    19,467    1,037,424    1,076,726    2.1    -    - 
Fixed Rate Notes   1,351    60,587    22,970    463,379    548,287    1.1    279,036    1.1 
Euro Medium Term Note Programme   709    3,225    1,229    272,035    277,198    0.5    417,680    1.6 
Medium Term Note   23,103    24,594    21,210    43,481    112,388    0.2    125,798    0.5 
Eurobonds   -    356    324    9,669    10,349    0.0    1,600,668    6.3 
Other   806    -    -    -    806    0.0    11,754    0.0 
TOTAL   4,862,330    15,756,393    8,840,626    22,097,865    51,557,214         25,591,719      
% per maturity term   9.4    30.6    17.1    42.9                     
TOTAL – 12/31/2010   3,408,341    9,508,486    1,664,945    11,009,947    25,591,719                
% per maturity term   13.3    37.2    6.5    43.0                     

 

ITAÚ UNIBANCO HOLDING’s portfolio is composed of Brazil Risk Note Programme with maturity from 31 days to 180 days in the amount of R$ 5,542 (R$ 5,542 at 12/31/2010) and over 365 days in the amount of R$ 500,000 (R$ 500,000 at 12/31/2010), totaling R$ 505,542 (R$ 505,542 at 12/31/2010).

 

 
 

 

e)Borrowings and onlending

 

   12/31/2011   12/31/2010 
   0-30   31-180   181-365   Over 365   Total   %   Total   % 
BORROWINGS   3,183,594    8,780,342    6,008,422    3,170,360    21,142,718    37.3    15,648,854    33.0 
Domestic   1,308,292    1,582,450    1,615    6,264    2,898,621    5.1    1,797,094    3.8 
Foreign (*)   1,875,302    7,197,892    6,006,807    3,164,096    18,244,097    32.2    13,851,760    29.2 
ONLENDING   842,079    3,991,220    6,204,130    24,421,913    35,459,342    62.7    31,689,110    67.0 
Domestic - official institutions   842,079    3,986,835    6,199,817    23,849,081    34,877,812    61.7    31,615,059    66.8 
BNDES   242,170    1,189,945    1,261,187    7,435,745    10,129,047    17.9    10,366,702    21.9 
FINAME   561,493    2,691,039    4,835,687    16,166,482    24,254,701    42.9    20,742,484    43.8 
Other   38,416    105,851    102,943    246,854    494,064    0.9    505,873    1.1 
 Foreign   -    4,385    4,313    572,832    581,530    1.0    74,051    0.2 
TOTAL   4,025,673    12,771,562    12,212,552    27,592,273    56,602,060         47,337,964      
% per maturity term   7.1    22.6    21.6    48.7                     
TOTAL - 12/31/2010   2,369,403    8,384,114    11,024,448    25,559,999    47,337,964                
% per maturity term   5.0    17.7    23.3    54.0                     

(*)Foreign borrowings are basically represented by foreign exchange transactions related to export pre-financing and import financing.
 
 

 

f)Subordinated debt

 

Funding obtained through issuance of subordinated debt, in accordance with the conditions determined by CMN Resolution No. 3,444, of 02/28/2007, and amendments established by CMN Resolution No. 3,532, of 01/31/2008, is as follows:

 

   12/31/2011   12/31/2010 
   0-30   31-180   181-365   Over 365   Total   %   Total   % 
CDB   -    8,124,645    2,498,487    12,600,411    23,223,543    58.5    25,859,401    75.0 
Financial Treasury Bills   -    -    -    10,254,003    10,254,003    25.8    2,570,272    7.4 
Euronotes   59,547    26,167    -    5,136,238    5,221,952    13.1    4,295,636    12.5 
Bonds   -    3,150    3,078    293,096    299,324    0.8    299,624    0.9 
Eurobonds   -    -    -    -    -    -    845,583    2.4 
(-) Transaction costs incurred  (Note 4b)   -    -    -    (24,338)   (24,338)   (0.1)   (40,645)   (0.1)
TOTAL OTHER LIABILITIES   59,547    8,153,962    2,501,565    28,259,410    38,974,484         33,829,871      
Redeemable preferred shares   -    3,379    -    737,324    740,703    1.9    657,794    1.9 
GRAND TOTAL   59,547    8,157,341    2,501,565    28,996,734    39,715,187         34,487,665      
% per maturity term   0.1    20.5    6.3    73.0                     
TOTAL - 12/31/2010   27,626    57,601    894,560    33,507,878    34,487,665                
% per maturity term   0.1    0.2    2.6    97.2                     

 

 
 

 

Description
Name of security  Issue   Maturity   Return p.a.   Principal R$ 
                     
Subordinated CDB                    
    2007    2012    103.5% to 104% of CDI    4,969,704 
              100% of CDI + 0.35% to 0.45%    731,836 
              IGPM + 7.31 to 7.35%    278,350 
    2002    2012    102.5% of CDI    200,000 
    2008    2013    100% of CDI + 0.50% to 0.6%    1,558,200 
              106% to 107% of CDI    48,401 
    2003    2013    102% of CDI    40,000 
    2007    2014    100% of CDI + 0.35% to 0.6%    1,864,500 
    2007    2014    IGPM + 7.35%    33,200 
    2008    2014    112% of CDI    1,000,000 
    2008    2015    119.8% of CDI    400,000 
    2010    2015    113% of CDI    50,000 
    2006    2016    100% of CDI + 0.47% (*)    465,835 
    2010    2016    110% to 114% of CDI    2,719,268 
    2010    2016    IPCA + 7.33%    122,500 
    2010    2017    IPCA + 7.45%    366,830 
              TOTAL    14,848,624 
                     
Subordinated financial bills                    
    2010    2016    100% of CDI + 1.35% to 1.36%    365,000 
    2010    2016    112% to 112.5% of CDI    1,874,000 
    2010    2016    IPCA + 7%    30,000 
    2010    2017    IPCA + 6.95% to 7.2%    206,000 
    2011    2017    108% to 112% of CDI    3,223,500 
    2011    2017    IPCA + 6.15% to 7.8%    352,400 
    2011    2017    IGPM + 6.55% to 7.6%    138,000 
    2011    2017    100% of CDI + 1.29% to 1.52%    3,650,000 
    2011    2018     IGPM + 7%    42,000 
    2011    2018    IPCA + 7.53% to 7.7%    30,000 
    2011    2019    109% to 109.7% of CDI    2,000 
    2011    2021    109.25 to 110.5% of CDI    6,000 
              TOTAL    9,918,900 
                     
Subordinated euronotes               
    2010    2020    6.200%   1,730,600 
    2010    2021    5.750%   1,694,200 
    2011    2021    5.750%   418,350 
    2011    2021    6.200%   780,550 
              TOTAL    4,623,700 
                     
Subordinated bonds                    
    2005    2015    1.42%   193,834 
    2008    2033    3.5% to 4.5%    141,127 
              TOTAL    334,961 
                     
Preferred shares                    
    2002    2015    3.04%   1,388,841 

(*)Subordinated CDBs may be redeemed as from November 2011.

 

ITAÚ UNIBANCO HOLDING’s portfolio is composed of subordinated euronotes with maturity of up to 30 days in the amount of R$ 59,547 (R$ 26,081 at December 31, 2010), with maturity from 91 to 180 days in the amount of R$ 26,167 (R$ 21,809 at December 31, 2010) and over 365 days in the amount of R$ 5,111,734 (R$ 3,304,889 at December 31, 2010), totaling R$ 5,197,448 (R$ 3,352,779 at December 31, 2010).

 

 
 

 

NOTE 11 - INSURANCE, PENSION PLAN AND CAPITALIZATION OPERATIONS

 

a)Composition of the technical provisions per segment

 

   INSURANCE   PENSION PLAN   CAPITALIZATION   TOTAL 
   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010 
Mathematical provision of benefits to be granted and benefits granted   27,913    30,411    61,953,126    50,072,553    -    -    61,981,039    50,102,964 
Unearned premiums   3,025,552    2,456,817    -    -    -    -    3,025,552    2,456,817 
Unsettled claims   2,297,299    2,161,939    -    -    -    -    2,297,299    2,161,939 
Financial surplus   1,528    1,572    475,297    459,452    -    -    476,825    461,024 
IBNR   712,416    585,627    10,083    9,615    -    -    722,499    595,242 
Premium deficiency   312,950    271,953    -    -    -    -    312,950    271,953 
Insufficient contribution   -    296    691,816    603,073    -    -    691,816    603,369 
Mathematical provision for redemptions   -    -    -    -    2,783,686    2,553,163    2,783,686    2,553,163 
Raffle contingency   -    -    -    -    16,269    20,420    16,269    20,420 
Other   1,242,735    1,117,722    165,579    176,472    38,215    29,682    1,446,529    1,323,876 
TOTAL   7,620,393    6,626,337    63,295,901    51,321,165    2,838,170    2,603,265    73,754,464    60,550,767 

 

 
 

 

b)Assets Guaranteeing Technical Provisions - SUSEP

 

   INSURANCE   PENSION PLAN   CAPITALIZATION   TOTAL 
   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010 
Interbank investments – money market   968,945    1,284,608    793,227    822,598    1,053,841    1,238,731    2,816,013    3,345,937 
Securities and derivative financial instruments   2,905,087    1,849,988    62,811,907    50,711,040    1,794,240    1,407,015    67,511,234    53,968,043 
PGBL/VGBL FUND QUOTAS (1)   -    -    57,733,857    46,050,748    -    -    57,733,857    46,050,748 
Government securities - Domestic   -    -    37,539,235    32,408,482    -    -    37,539,235    32,408,482 
National Treasury Bills   -    -    20,107,159    20,296,305    -    -    20,107,159    20,296,305 
National Treasury Notes   -    -    14,627,549    10,527,858    -    -    14,627,549    10,527,858 
Financial Treasury Bills   -    -    2,804,527    1,584,319    -    -    2,804,527    1,584,319 
Corporate securities   -    -    20,131,251    12,960,448    -    -    20,131,251    12,960,448 
Bank deposit certificates   -    -    6,734,938    6,481,482    -    -    6,734,938    6,481,482 
Debentures   -    -    4,671,648    4,433,813    -    -    4,671,648    4,433,813 
Shares   -    -    1,661,648    1,998,819    -    -    1,661,648    1,998,819 
Fund quotas   -    -    -    43,175    -    -    -    43,175 
Promissory Notes   -    -    -    1,672    -    -    -    1,672 
Credit note   -    -    562,403    -    -    -    562,403    - 
Financial Treasury Bills   -    -    6,498,043    -    -    -    6,498,043    - 
Securitized real estate loans   -    -    2,571    1,487    -    -    2,571    1,487 
PGBL/VGBL fund quotas   -    -    49,544    620,665    -    -    49,544    620,665 
Derivative financial instruments   -    -    34,796    36,462    -    -    34,796    36,462 
Accounts receivable / (payable)   -    -    (20,969)   24,691    -    -    (20,969)   24,691 
Other assets   2,905,087    1,849,988    5,078,050    4,660,292    1,794,240    1,407,015    9,777,377    7,917,295 
Government   877,820    731,291    3,799,809    3,457,809    143,922    133,844    4,821,551    4,322,944 
Private   2,027,267    1,118,697    1,278,241    1,202,483    1,650,318    1,273,171    4,955,826    3,594,351 
Receivables from insurance and reinsurance operations (2)   4,019,679    3,526,850    -    -    -    -    4,019,679    3,526,850 
Credit rights   891,600    827,525    -    -    -    -    891,600    827,525 
Commercial – Extended guarantee   1,256,753    1,103,875    -    -    -    -    1,256,753    1,103,875 
Reinsurance   1,871,326    1,595,450    -    -    -    -    1,871,326    1,595,450 
Escrow deposits for loss   25,364    36,510     -    -    -    -    25,364     36,510 
TOTAL   7,919,075    6,697,956    63,605,134    51,533,638    2,848,081    2,645,746    74,372,290    60,877,340 

(1)The PGBL and VGBL plans securities portfolios, the ownership and embedded risks of which are the customer’s responsibility, are recorded as securities – trading securities, with a contra-entry to long-term liabilities in Pension Plan Technical Provisions account, as determined by SUSEP.
(2)Recorded under Other receivables and Other assets.

 

 
 

 

c)Financial and operating income per segment

 

   INSURANCE   PENSION PLAN   CAPITALIZATION   TOTAL 
   01/01 to   01/01 to   01/01 to   01/01 to   01/01 to   01/01 to   01/01 to   01/01 to 
   12/31/2011   12/31/2010   1/0/1900   1/0/1900   1/0/1900   1/0/1900   1/0/1900   1/0/1900 
Financial income from insurance, pension plan and capitalization operations   315,472    231,960    227,307    265,888    147,387    86,677    690,166    584,525 
Financial income   372,237    292,072    5,224,135    3,982,106    333,253    238,494    5,929,625    4,512,672 
Financial expenses   (56,765)   (60,112)   (4,996,828)   (3,716,218)   (185,866)   (151,817)   (5,239,459)   (3,928,147)
Operating income from insurance, pension plan and capitalization operations   2,177,054    1,707,602    35,199    54,244    502,156    338,038    2,714,409    2,099,884 
Premiums and contributions   5,366,322    4,904,457    11,802,283    8,732,815    1,891,485    1,626,773    19,060,090    15,264,045 
Changes in technical provisions   (615,724)   (368,831)   (11,748,552)   (8,643,688)   610    11,947    (12,363,666)   (9,000,572)
Expenses for claims, benefits, redemptions and raffles   (1,512,273)   (1,607,993)   (17,661)   (27,941)   (1,400,081)   (1,289,164)   (2,930,015)   (2,925,098)
Selling expenses   (981,676)   (977,539)   (2,246)   (14,436)   (4,624)   (11,441)   (988,546)   (1,003,416)
Other operating revenues and expenses   (79,595)   (242,492)   1,375    7,494    14,766    (77)   (63,454)   (235,075)
Total result from insurance, pension plan and capitalization operations   2,492,526    1,939,562    262,506    320,132    649,543    424,715    3,404,575    2,684,409 

 

 
 

 

NOTE 12 - CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES – TAX AND SOCIAL SECURITY

 

In the ordinary course of its businesses, ITAÚ UNIBANCO HOLDING CONSOLIDATED is involved in contingencies that may be classified as follows.

 

a) Contingent Assets: there are no contingent assets recorded.

 

b) Provisions and Contingencies: The criteria to quantify contingencies are adequate in relation to the specific characteristics of civil, labor and tax lawsuits portfolios, as well as other risks.

 

-Civil lawsuits

 

Collective lawsuits (related to claims considered similar and which each individual amount is not considered significant): contingencies are determined on a monthly basis and the expected amount of losses is accrued according to statistical references that take into account the type of lawsuit and the characteristics of the legal body (Small Claims Court or Regular Court).

 

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): determined from time to time, based on the amount claimed and the likelihood of loss, which, in turn, is estimated according to the “de facto” and “de jure” characteristics related to such lawsuit. The amounts of losses which likelihood of loss is considered probable are accrued.

 

Contingencies usually arise from revision of contracts and compensation for property damage and pain and suffering; most of these lawsuits are filed in the Small Claims Court and therefore limited to 40 minimum monthly wages. The bank is also party to specific lawsuits over the charging of understated inflation adjustment to savings accounts in connection with economic plans.

 

The case law at the Federal Supreme Court is favorable to banks in relation to an economic phenomenon similar to savings, as in the case of adjustment to time deposits and contracts in general. Additionally, the Superior Court of Justice has recently decided that the term for filing public civil actions over understated inflation is five years. In view of such decision, some of the lawsuits may be dismissed because they were filed after the five-year period.

 

In the accounting books no amount is recognized in relation to Civil Lawsuits which likelihood of loss is considered possible, which total estimated risk is R$ 602.601; the main natures of these lawsuits are as follows:

 

-Labor claims

 

Collective lawsuits (related to claims considered similar and which each individual amount is not considered significant): The expected amount of loss is determined and accrued monthly by the moving average of payments in relation to lawsuits settled in the last 12 months, plus the average cost of fees. These are adjusted to the amounts deposited as guarantee for their execution when realized.

 

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): determined from time to time, based on the amount claimed and the likelihood of loss, which, in turn, is estimated according to the “de facto” and “de jure” characteristics related to such lawsuit. The amounts of losses which likelihood of loss is considered probable are accrued.

 

Contingencies are related to lawsuits in which alleged labor rights based on labor legislation specific to the related profession, such as overtime, salary equalization, reinstatement, transfer allowance, pension plan supplement and other, are discussed;

 

There are no labor claims falling under the category of possible loss.

 

-Other Risks

 

These are quantified and accrued mainly based on the evaluation of rural credit transactions with joint liability and FCVC (salary variations compensation fund) credits assigned to Banco Nacional.

 
 

 

The table below shows the changes in the respective provisions for contingent liabilities and the respective escrow deposits balances:

 

   01/01 to 12/31/2011   01/01 to
12/31/2010		 
   Civil   Labor   Other   Total   Total 
Opening balance   2,973,630    3,985,877    173,140    7,132,647    5,734,330 
(-) Contingencies guaranteed by indemnity clauses (Note 4o I)   (308,810)   (1,112,816)   -    (1,421,626)   (671,889)
Subtotal   2,664,820    2,873,061    173,140    5,711,021    5,062,441 
Restatement/Charges   113,236    110,288    -    223,524    218,341 
Changes in the period reflected in results (Notes 13f and 13i)   1,503,150    783,972    (7,837)   2,279,285    1,772,978 
Increase (*)   1,980,677    992,237    12,279    2,985,193    2,503,136 
Reversal   (477,527)   (208,265)   (20,116)   (705,908)   (730,158)
Payment   (1,252,300)   (683,281)   -    (1,935,581)   (1,342,740)
Subtotal   3,028,906    3,084,040    165,303    6,278,249    5,711,020 
(+) Contingencies guaranteed by indemnity clauses (Note 4o I)   136,688    929,875    -    1,066,563    1,421,627 
Closing balance (Note 13c)   3,165,594    4,013,915    165,303    7,344,812    7,132,647 
Closing balance at 12/31/2010 (Note 13c)   2,973,630    3,985,877    173,140    7,132,647      
Escrow deposits at 12/31/2011 (Note 13a)   2,022,939    2,409,272    -    4,432,211      
Escrow deposits at 12/31/2010 (Note 13a)   1,619,055    2,318,091    -    3,937,146      

(*)Civil provisions include the provision for economic plans amounting to R$ 431,068 (R$ 708,194 from January 1 to December 31, 2010) (Note 22k).

 

 
 

 

-Tax and social security lawsuits

 

Contingencies are equivalent to the principal amount of taxes involved in tax, administrative or judicial challenges, subject to tax assessment notices, plus interest and, when applicable, fines and charges. The amount is accrued when it involves a legal liability, regardless of the likelihood of loss, that is, a favorable outcome to the institution is dependent upon the recognition of the unconstitutionality of the applicable law in force. In other cases, the Bank recognizes a provision whenever the likelihood of loss is probable.

 

The table below shows the changes in the provisions and respective escrow deposits for Tax and Social Security lawsuits balances:

 

   01/01 to 12/31/2011   01/01 to
12/31/2010		 
Provisions  Legal
obligation		   Contingencies   Total   Total 
Opening balance   5,091,341    2,232,315    7,323,656    7,886,402 
(-) Contingencies guaranteed by indemnity clauses   -    (44,474)   (44,474)   (35,331)
Subtotal   5,091,341    2,187,841    7,279,182    7,851,071 
Restatement/Charges   479,562    68,385    547,947    400,433 
Changes in the period reflected in results   719,151    198,313    917,464    1,072,995 
Increase   750,096    296,389    1,046,485    1,727,495 
Reversal (*)   (30,945)   (98,076)   (129,021)   (654,500)
Payment (*)   (17,041)   (140,438)   (157,479)   (2,045,318)
Subtotal   6,273,013    2,314,101    8,587,114    7,279,181 
(+) Contingencies guaranteed by indemnity clauses   -    57,438    57,438    44,475 
Closing balance (Note 13c)   6,273,013    2,371,539    8,644,552    7,323,656 

(*) ITAÚ UNIBANCO HOLDING and its subsidiaries adhered to the Program for Cash or Installment Payment of Federal Taxes, established by Law No. 11,941, of May 27, 2009. In 2010 the program included the debits administered by the Federal Reserve Service of Brazil and the main proposition included in this program was the increase in the PIS and COFINS calculation basis, as set forth by paragraph 1 of article 3 of Law 9,718 of November 27, 1998.

 

 
 

 

   01/01 to 12/31/2011   01/01 to
12/31/2010		 
Escrow deposits  Legal
obligation		   Contingencies   Total   Total 
Opening balance   3,664,570    1,011,558    4,676,128    5,076,412 
Appropriation of income   274,703    90,269    364,972    295,927 
Changes in the period   40,213    97,000    137,213    (696,211)
Deposited   152,343    113,115    265,458    496,247 
Withdrawals   (99,207)   (15,308)   (114,515)   (1,145,900)
Conversion into income   (12,923)   (807)   (13,730)   (46,558)
Closing balance   3,979,486    1,198,827    5,178,313    4,676,128 
Closing balance at 12/31/2010   3,664,570    1,011,558    4,676,128      

 

 
 

 

The main discussions related to Legal Obligations are described as follows:

 

·PIS and COFINS – Calculation basis – R$ 2,885,721: we defend the levy of contributions on revenue, understood as the revenue from sales of assets and services. The escrow deposit balance totals R$ 1,043,433.

 

·CSLL – Isonomy – R$ 1,346,413, as the law increased the CSLL rate for financial and insurance companies to 15%, we discuss the lack of constitutional support for this measure and, due to the principle of isonomy, we defend the levy at the regular rate of 9%. The escrow deposit balance totals R$ 230,873.

 

·IRPJ and CSLL –Taxation of profits earned abroad – R$ 491,236: We discuss the calculation basis for levy of these taxes on profits earned abroad and the non-applicability of Regulatory Instruction SRF No. 213-01 in which it exceeds the suitability of the legal text. The escrow deposit balance totals R$ 491,236.

 

·PIS – R$ 374,938 - Principles of anteriority over 90 days and non-retroactivity: we request the rejection of Constitutional Amendments No. 10/96 and 17/97 in view of the principle of anteriority and non-retroactivity, aiming at making payments based on Supplementary Law No. 07/70. The corresponding escrow deposit totals R$ 128,986.
 
 

 

Off-balance sheet contingencies – The amounts related to Tax and Social Security Lawsuits considered to be possible loss, which total estimated risk is R$ 5,930,276, are the following:

 

·IRPJ, CSLL, PIS and COFINS – request for offset dismissed - R$ 1,097,097: cases in which the liquidity and the offset credit certainty are discussed.

 

·INSS – Non-compensatory amounts – R$ 631,715: we defend the non-taxation of these amounts, mainly profit sharing, transportation vouchers and sole bonus.

 

·IRPJ/CSLL - Losses and discounts on receipt of credits – R$ 458,899: deductibility of effective losses as operating expense – credit assignment and renegotiation.

 

·ISS – Banking Institutions – R$ 449,835: these are banking operations, which revenue may not be interpreted as price per service rendered and/or arise from activities not listed under Supplementary Law.

 

·IRPJ, CSLL, PIS and COFINS – Usufruct of quotas and shares - R$ 372,211: we discuss the adequate accounting and tax treatment for the amount received due to the onerous recognition of usufruct.

 

·IRPJ/CSLL - Interest on capital - R$ 358,023: we defend the deductibility of interest on capital declared to stockholders based on the Brazilian long-term interest rate (TJLP) levied on the stockholders’ equity for the year and for prior years.
 
 

 

c)Receivables - Reimbursement of contingencies

 

The Receivables balance arising from reimbursements of contingencies totals R$ 626,309 (R$ 903,306 at 12/31/2010) (Note 13a), basically represented by the guarantee in the Banco Banerj S.A. privatization process occurred in 1997, in which the State of Rio de Janeiro created a fund to guarantee the equity recomposition of Civil, Labor and Tax Contingencies.

 

d)Assets pledged as Contingencies

 

Assets pledged in guarantee for contingencies are related to liability contingencies that are restricted or deposited are presented below:

 

   12/31/2011   12/31/2010 
Securities (basically Financial Treasury Bills – Note 7b)   1,511,043    1,515,750 
Deposits in guarantee   3,232,718    3,291,504 


According to the opinion of the legal advisors, ITAÚ UNIBANCO HOLDING and its subsidiary companies are not involved in any other administrative proceedings or legal lawsuits that may significantly impact the results of its operations. The combined evaluation of all existing provisions for all contingent liabilities and legal liabilities, which are recognized through the adoption of statistical models for claims involving small amounts, and individual evaluation by internal and external legal advisors of other cases, showed that the accrued amounts are sufficient, as provided for CMN Resolution No. 3,823, of December 16, 2009, and BACEN Circular Letter No. 3,429, of February 12, 2010.

 
 

 

NOTE 13 - BREAKDOWN OF ACCOUNTS

 

a)Other sundry receivables

 

   12/31/2011   12/31/2010 
Deferred tax assets (Note 14b I)   28,282,922    24,729,304 
Social contribution for offset (Note 14b I)   714,602    847,216 
Taxes and contributions for offset   3,411,936    3,381,336 
Escrow deposits for legal liabilities and tax and social security contingencies (Note 12b)   8,411,031    7,967,632 
Escrow deposits for legal liabilities – civil and labor (Note 12b)   4,432,211    4,818,101 
Escrow deposits for foreign fund raising program   573,465    1,837,020 
Receivables from reimbursement of contingent liabilities (Note 12c)   626,309    22,351 
Sundry domestic debtors   861,292    1,094,767 
Sundry foreign debtors   113,142    88,150 
Retirement plan assets (Note 19)   1,785,428    1,536,518 
Recoverable payments   34,076    33,182 
Salary advances   47,072    58,431 
Amounts receivable from related companies   16,089    9,704 
Operations without credit granting characteristics   344,913    161,824 
Securities and credits receivable   654,913    451,574 
(Allowance for loan losses)   (310,000)   (289,750)
Other   139,557    114,944 
Total   49,794,045    46,700,480 

 

At ITAÚ UNIBANCO HOLDING, Other Sundry Receivables are basically composed of Taxes and Contributions for Offset of R$ 291,271 (R$ 483,584 at December 31, 2010) and Deferred Tax Assets of R$ 332,572 (R$ 226,835 at December 31, 2010) (Note 14b I).

 
 

 

b)Prepaid expenses

 

   12/31/2011   12/31/2010 
Commissions   3,283,177    2,600,340 
Related to vehicle financing   1,047,336    817,747 
Related to insurance and pension plan   1,340,063    1,275,925 
Restricted to commissions/partnership agreements   571,863    310,345 
Other   323,915    196,323 
Fundo Garantidor de Crédito (*)   339,536    526,721 
Advertising   490,593    502,820 
Other   200,782    191,245 
Total   4,314,088    3,821,126 

(*)Refers to spontaneous payment, equivalent to the prepayment of installments of the contribution to the Fundo Garantidor de Crédito (Brazilian deposit guarantee fund), according to BACEN Circular No. 3,416, of 10/24/2008.

 

 
 

 

c)Other sundry liabilities

   12/31/2011   12/31/2010 
Provisions for contingent liabilities (Note 12b)   9,716,351    9,364,962 
Provisions for sundry payments   2,122,805    2,099,122 
Personnel provision   1,113,025    1,040,136 
Sundry creditors - local   1,312,455    896,087 
Sundry creditors - foreign   617,854    631,498 
Liabilities for official agreements and rendering of payment services   1,506,856    735,484 
Related to insurance operations   914,384    813,428 
Liabilities for purchase of assets and rights   217,638    16,137 
Creditors of funds to be released   1,100,942    886,472 
Funds from consortia participants   80,819    77,835 
Provision for Retirement Plan Benefits (Note 19)   374,180    228,716 
Provision for health insurance (*)   622,930    606,364 
Expenses for lease interests (Note 4i)   338,989    210,289 
Other   51,607    119,354 
Total   20,090,835    17,725,884 

(*)Provision set up to cover possible future deficits up to the total discontinuance of the portfolio, arising from the difference of adjustments to monthly installments, authorized annually by the regulatory body, and the actual variation of hospital costs that affect the compensation of claims (Note 13i).

 

 
 

 

d)Banking service fees

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Asset management   2,607,734    2,486,010 
Funds management fees   2,505,919    2,427,132 
Consortia management fee Consortia management fee   101,815    58,879 
Current account services   675,646    582,922 
Credit cards   6,111,133    5,284,056 
Relationship with stores   5,693,572    4,927,756 
Credit card processing   417,561    356,300 
Sureties and credits granted   1,761,944    1,460,334 
Loan operations   1,028,504    888,144 
Guarantees provided   733,440    572,189 
Receipt services   1,332,789    1,324,525 
Collection fees   1,053,162    1,075,349 
Collection services   279,627    249,176 
Other   1,423,080    1,202,936 
Custody services and management of portfolio   214,307    178,299 
Economic and financial advisory   352,873    300,244 
Foreign exchange services   83,117    71,430 
Other services   772,783    652,963 
Total   13,912,326    12,340,783 

 

 
 

 

e)Income from bank charges

  

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Loan operations/registration   1,526,972    1,350,533 
Credit cards – annual fees and other services (*)   1,385,556    1,088,920 
Deposit account   147,546    180,279 
Transfer of funds   132,721    124,223 
Income from securities brokerage (*)   422,249    461,294 
Service package fees and other   1,520,327    1,554,622 
Total   5,135,371    4,759,871 

(*) In compliance with BACEN Circular Letter No. 3,490.

 

 
 

 

f)Personnel expenses

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Compensation   (5,960,616)   (5,911,910)
Charges   (2,035,402)   (1,973,750)
Welfare benefits   (1,607,445)   (1,673,300)
Training   (258,437)   (223,859)
Labor claims and termination of employees (Note 12b)   (1,181,516)   (481,064)
Stock Option Plan   (162,663)   (131,660)
Total   (11,206,079)   (10,395,543)
Employees’ profit sharing   (2,150,555)   (2,056,028)
Total with Employees’ profit sharing   (13,356,634)   (12,451,571)

 

g)Other administrative expenses

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Data processing and telecommunications   (3,494,837)   (3,278,980)
Depreciation and amortization   (1,419,141)   (1,355,070)
Installations   (2,348,513)   (2,401,691)
Third-party services   (3,265,955)   (2,872,258)
Financial system services   (415,978)   (382,902)
Advertising, promotions and publication   (956,725)   (1,129,235)
Transportation   (583,074)   (595,708)
Materials   (459,891)   (456,022)
Security   (482,164)   (450,656)
Travel expenses   (188,915)   (166,925)
Other   (484,554)   (508,447)
Total   (14,099,747)   (13,597,894)

 

 
 

 

h)Other operating revenues

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Reversal of operating provisions   91,766    72,246 
Recovery of charges and expenses   73,743    76,600 
Other   227,019    379,787 
Total   392,528    528,633 

 

i)Other operating expenses

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Provision for contingencies (Note 12b)   (1,677,868)   (1,461,568)
Civil lawsuits   (1,503,150)   (1,183,325)
Tax and social security contributions   (182,555)   (290,234)
Other   7,837    11,991 
Selling - Credit cards   (1,652,723)   (1,616,829)
Claims   (662,372)   (508,476)
Provision for health insurance (Note 13c)   (16,565)   (10,373)
Refund of interbank costs   (212,371)   (192,510)
Other   (969,727)   (625,589)
Total   (5,191,626)   (4,415,345)

 

 
 

 

NOTE 14 - TAXES

 

a)Composition of expenses for taxes and contributions

 

I -We show below the Income Tax and Social Contribution due on the operations for the period and on temporary differences arising from additions and exclusions:

 

   01/01 to   01/01 to 
Due on operations for the period  12/31/2011   12/31/2010 
Income before income tax and social contribution   18,480,788    20,335,869 
Charges (income tax and social contribution) at the rates in effect (Note 4p)   (7,392,315)   (8,134,348)
           
Increase/decrease to income tax and social contribution charges arising from:          
Permanent additions (exclusions)   3,651,879    1,622,239 
Investments in affiliates   58,203    125,566 
Foreign exchange variation on investments abroad   1,096,927    (372,239)
Interest on capital   1,662,326    1,495,913 
Dividends, interest on external debt bonds and tax incentives   281,254    297,655 
Other (*)   553,169    75,344 
Temporary (additions) exclusions   (2,394,910)   2,079,860 
Allowance for loan losses   (2,320,453)   (972,969)
Excess (insufficiency) of depreciation of leased assets   (742,079)   720,289 
Adjustment to market value of trading securities and derivative financial instruments and adjustments from operations in futures markets   (519,551)   245,114 
Legal liabilities – tax and social security, contingent liabilities and restatement of escrow deposits   (383,572)   571,615 
Realization of goodwill on purchase of investments   1,689,552    1,707,713 
Other   (118,807)   (191,902)
(Increase) offset of tax losses/social contribution loss carryforwards   (894,252)   304,592 
Expenses for income tax and social contribution   (7,029,598)   (4,127,657)
Related to temporary differences          
Increase (reversal) for the period   3,289,162    (2,384,453)
Increase (reversal) for prior periods   885,008    626,067 
Income (expenses) from deferred taxes   4,174,170    (1,758,386)
Total income tax and social contribution   (2,855,428)   (5,886,043)

(*) It includes the effect arising from the Program for Cash or Installment Payment for Federal Taxes – Law No. 11,941/09 (Note 22k).

 

II -Composition of tax expenses:

  

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
PIS and COFINS   (3,103,082)   (3,255,874)
ISS   (640,970)   (617,445)
Other   (347,926)   (295,103)
Total (Note 4p)   (4,091,978)   (4,168,422)

 

At ITAÚ UNIBANCO HOLDING tax expenses are basically composed of PIS and COFINS in the amount of R$ 184,843 (R$ 176,906 from 01/01 to 12/31/2010).

 

 
 

 

 III-Tax effects on foreign exchange management of investments abroad

 

In order to minimize the effects on income in connection with the foreign exchange variation on investments abroad, net of respective tax effects, ITAÚ UNIBANCO HOLDING carries out derivative transactions in foreign currency (hedge), as mentioned in Note 22b.

 

Results of these transactions are considered in the calculation base of income tax and social contribution, according to their nature, while the foreign exchange variation on investments abroad is not included therein, pursuant to tax legislation in force.

   

 
 

 

b)Deferred taxes

  

I -The deferred tax asset balance and its changes, segregated based on its origin and disbursements incurred, are represented as follows:

 

   PROVISIONS   DEFERRED TAX ASSETS 
   12/31/2010   12/31/2011   12/31/2010   Realization / 
Reversal		   Increase   12/31/2011 
Reflected in income and expense accounts                              
Related to income tax and social contribution loss carryforwards             2,998,746    (1,325,152)   2,530,257    4,203,851 
Related to disbursed provisions             14,186,050    (5,864,503)   7,515,709    15,837,256 
Allowance for loan losses             8,859,857    (4,318,154)   6,948,442    11,490,145 
Adjustment to market value of securities and derivative financial instruments(assets/liabilities)             38,789    (38,789)   527,127    527,127 
Allowance for real estate             97,538    (25,101)   2,692    75,129 
Goodwill on purchase of investments             5,042,680    (1,440,414)   -    3,602,266 
Other             147,186    (42,045)   37,448    142,589 
Related to non-disbursed provisions (*)   20,488,090    22,212,855    7,428,040    (2,222,110)   2,912,450    8,118,380 
Related to the operation   15,956,695    17,154,440    5,887,366    (2,222,110)   2,733,263    6,398,519 
Legal liabilities – tax and social security   2,254,255    2,583,708    1,313,554    (39,691)   144,365    1,418,228 
Provision for contingent liabilities   7,721,774    7,220,399    2,417,799    (1,022,847)   1,370,562    2,765,514 
Civil lawsuits:   2,668,275    2,996,792    1,038,062    (348,394)   495,161    1,184,829 
Labor claims   2,349,996    2,607,421    883,981    (607,817)   708,045    984,209 
Tax and social security contributions   2,618,848    1,565,401    462,671    (53,088)   167,356    576,939 
Other   84,655    50,785    33,085    (13,548)   -    19,537 
Adjustments of operations carried out in futures settlement market   149,244    30,051    54,693    (45,006)   1,931    11,618 
Provision related to health insurance operations   606,364    622,930    242,546    -    6,626    249,172 
Other non-deductible provisions   5,225,058    6,697,352    1,858,774    (1,114,566)   1,209,779    1,953,987 
Related to provisions exceeding the minimum required not disbursed – allowance for loan losses   4,531,395    5,058,415    1,540,674    -    179,187    1,719,861 
                               
Reflected in stockholders’ equity accounts – adjustment to market value of available-for-sale securities (Note 2b)   307,371    345,745    116,468    (66,653)   73,620    123,435 
Total   20,795,461    22,558,600    24,729,304    (9,478,418)   13,032,036    28,282,922 
Social contribution for offset arising from Option established in article 8 of Provisional Measure No. 2,158-35 of 08/24/2001             847,216    (132,614)   -    714,602 

(*)From a financial point of view, rather than recording the provision of R$ 22,212,855 (R$ 20,488,090 at 12/31/2010) and deferred tax assets of R$ 8,118,380 (R$ 7,428,040 at 12/31/2010), only the net provisions of the corresponding tax effects should be considered, which would reduce the total deferred tax assets from R$ 28,282,922 (R$ 24,729,304 at 12/31/2010) to R$ 20,164,542 (R$ 17,301,264 at 12/31/2010).

 

At ITAÚ UNIBANCO HOLDING, the deferred tax assets totaled R$ 332,572 (R$ 226,835 at 12/31/2010) and are basically represented by legal liabilities – tax and social security of R$ 303,019 (R$ 208,758 at 12/31/2010), which expected realization is dependent upon the progress of the lawsuit.

 

 
 

 

 II -Provision for Deferred Income Tax and Social Contribution balance and its changes are shown as follows:

  

   12/31/2010   Realization /
Reversal		   Increase   12/31/2011 
Reflected in income and expense accounts   10,119,317    (2,934,213)   2,397,919    9,583,023 
Depreciation in excess – leasing   8,295,516    (2,365,220)   1,629,790    7,560,086 
Restatement of escrow deposits and contingent liabilities   804,109    (156,773)   287,904    935,240 
Adjustment to market value of securities and derivative financial instruments   340,340    (340,340)   178,124    178,124 
Provision for Pension Plan Benefits   458,093    -    135,710    593,803 
Adjustments of operations carried out in future settlement market   56,993    (2,725)   47,242    101,510 
Taxation of results abroad - capital gains   42,477    -    20,974    63,451 
Other   121,789    (69,155)   98,175    150,809 
Reflected in stockholders’ equity accounts – adjustment to market value of available-for-sale securities (Note 2b)   260,511    (35,518)   70,904    295,897 
Total   10,379,828    (2,969,731)   2,468,823    9,878,920 

 

At ITAÚ UNIBANCO, the Provision for deferred income tax and social contribution totals R$ 3,896 (R$ 3,051 at 12/31/2010), basically represented by Restatement of escrow deposits and contingent liabilities.

   

 
 
 III-The estimate of realization and present value of deferred tax assets and social contribution for offset, arising from Provisional Measure No. 2,158-35 of August 24, 2001 and from the Provision for Deferred Income Tax and Social Contribution existing at December 31, 2011, in accordance with the expected generation of future taxable income, based on the history of profitability and technical feasibility studies, are:

 

   Deferred tax assets       Provision for
deferred 		     
   Temporary
differences		   Tax loss/social
contribution loss
carryforwards		   Total   Social
contribution for
offset		   income tax
and social
contribution		   Net deferred
taxes		 
2012   8,346,247    820,827    9,167,074    158,602    (2,251,959)   7,073,717 
2013   5,101,217    1,062,898    6,164,115    94,471    (2,950,695)   3,307,891 
2014   3,373,662    1,488,784    4,862,446    238,512    (2,077,600)   3,023,358 
2015   2,516,543    706,055    3,222,598    223,017    (962,204)   2,483,411 
2016   1,713,417    52,714    1,766,131    -    (601,144)   1,164,987 
Over 2016   3,027,985    72,573    3,100,558    -    (1,035,318)   2,065,240 
Total   24,079,071    4,203,851    28,282,922    714,602    (9,878,920)   19,118,604 
Present value (*)   21,055,903    3,744,080    24,799,983    632,638    (8,663,398)   16,769,223 

 

(*) The average funding rate, net of tax effects, was used to determine the present value.

 

The projections of future taxable income include estimates related to macroeconomic variables, exchange rates, interest rates, volume of financial operations and services fees and others which can vary in relation to actual data and amounts.

 

Net income in the financial statements is not directly related to taxable income for income tax and social contribution, due to differences existing between accounting criteria and tax legislation, besides corporate aspects. Accordingly, we recommend that the trend of the realization of deferred tax assets arising from temporary differences, income tax and social contribution loss carryforwards be not used as an indication of future net income.

 

IV -In view of the unconstitutionality lawsuit related to the increase in the social contribution rate, established by Articles 17 and 41 of Law No. 11,727 of June 24, 2008, filed on June 26, 2008 by the National Confederation of the Financial System (CONSIF), deferred tax assets were recorded up to the amount added to the Tax Liabilities, while the amount of R$ 991,823 is unrecorded (R$ 1,630,738 at December 31, 2010).

 

 
 

  

c)Tax and social security contributions

   

   12/31/2011   12/31/2010 
Taxes and contributions on income payable   2,654,966    1,490,310 
Taxes and contributions payable (*)   1,217,207    5,404,769 
Provision for deferred income tax and social contribution (Note 14b II)   9,878,920    10,379,828 
Legal liabilities – tax and social security   6,273,013    5,091,341 
Total   20,024,106    22,366,248 

(*) At June 30, 2011, the amounts subject to installment payment under the Program for Cash or Installment Payment of Federal Taxes, introduced by Law No. 11,941 of May 27, 2009 were settled.

 

At ITAÚ UNIBANCO HOLDING, the balance of Tax and Social Security Contributions totals R$ 821,107 (R$ 601,218 at December 31, 2010) and is basically comprised of Legal Liabilities - Tax and Social Security of R$ 816,213 (R$ 573,869 at December 31, 2010), whose nature refers to PIS and COFINS – Revenue x Gross Revenue. We request either the levy of taxes only on the revenue understood as income from sale of assets and services or the levy of PIS Repique (calculated on income tax payable) (at 5% of income tax due), in lieu of the levy on total revenues recorded, by alleging the unconstitutionality of paragraph 1 of article 3 of Law No. 9,718/98.

 

 
 

 

 

d)Taxes paid or provided for and withheld from third parties

 

The amount of taxes paid or provided for is basically levied on income, revenue and payroll. In relation to the amounts withheld and collected from third parties, the Company takes into consideration the interest on capital and on the service provision, in addition to that levied on financial operation.

 

   12/31/2011   12/31/2010 
Taxes paid or provided for   14,542,246    11,768,825 
Taxes withheld and collected from third parties   12,071,088    8,644,923 
Total   26,613,334    20,413,748 

 

 
 

 

NOTE 15 – PERMANENT ASSETS

 

a)Investments

 

I -Change of investments

 

Companies    Balances at 12/31/2010   Amortization of
goodwill		   Dividends and
interest on capital
paid/provided for (1)		   Equity in earnings of
subsidiaries and
affiliates (2)		   Adjustments in marketable
securities of subsidiaries and
affiliates and Other		   Corporate restructuring   Balances at
12/31/2011		   Equity in earnings
of subsidiaries
and affiliates from
01/01 to 12/31/2010		 
Domestic       61,007,900    (6,336)   (12,916,200)   9,819,233    (160,547)   (4,019,157)   53,724,893    9,899,565 
Itaú Unibanco S.A.   (3a)(4a)(5a)(6)   45,678,429    (6,336)   (6,310,742)   5,845,294    (202,477)   -    45,004,168    5,743,086 
Banco Itaú BBA S.A.   (4b)(5b)(9)(7a)(8)   6,265,960    -    (2,867,054)   1,970,623    59,179    1,339,614    6,768,322    1,743,026 
Banco Itaucard S.A.   (4c)(5c)(9)   2,907,164    -    (3,033,862)   1,336,358    1,426    -    1,211,086    1,577,169 
Itaú Corretora de Valores S. A.   (9)   472,033    -    (92,150)   313,303    7    -    693,193    157,960 
Itaú-BBA Participações S.A.   (10)   1,750,799    -    (612,392)   266,001    (16,670)   (1,339,614)   48,124    462,231 
Itauseg Participações S.A.   (11)   3,933,515    -    -    87,654    (2,012)   (4,019,157)   -    216,093 
Foreign       2,022,024    (51,409)   (22,563)   473,797    4,002    157,750    2,583,601    148,938 
Itaú Chile Holding, INC.   (3b)(7b)(12)   1,686,391    (45,242)   -    372,167    4,142    157,750    2,175,208    112,325 
Banco Itaú Uruguay S.A.   (3c)   225,982    (4,712)   -    48,792    (140)   -    269,922    13,381 
OCA S.A.   (3d)   75,184    (1,252)   (22,563)   47,116    (1)   -    98,484    22,482 
OCA Casa Financiera S.A.   (3e)   32,168    (182)   -    5,357    -    -    37,343    811 
ACO Ltda.   (3f)   2,299    (21)   -    365    1    -    2,644    (61)
GRAND TOTAL      63,029,924    (57,745)   (12,938,763)   10,293,030    (156,545)   (3,861,407)   56,308,494    10,048,503 

(1) Dividends approved and not paid are recorded as Dividends receivable;

(2) At December 31, 2011, includes foreign exchange variation in the amount of R$ 265,783;

(3) At December 31, 2011, includes goodwill in the amounts of: (a) R$ 43,293; (b) R$ 226,206; (c) R$ 23,563; (d) R$ 6,261; (e) R$ 909; (f) R$ 106;

(4) At December 31, 2011, includes Adjustments of unrealized results in the results of operations and in investments, respectively, in the amounts of: (a) R$ 1,881 and R$ (6,443); (b) R$ 88 and R$ 0; (c) R$ 47,062 and R$ (53,308);

(5) At December 31, 2011, includes adjustments to standardize procedures under the scope of the investor in the results of operations and investments, respectively, in the amounts of: (a) R$ (9,531) and R$ (2,492); (b) R$ 13,700 and R$ (63,469); and

(c) R$ 135,573 and R$ 13;

(6) At December 31, 2011, includes installment of dividends provided for in the amount of R$ 49,145;

(7) At December 31, 2011, Equity in earnings includes adjustment of securities arising from variation in interest during the period in the amount of: (a) R$ (20,740) and (b) R$ 4;

(8) Equity in earnings does not reflect the current interest in results of subsidiary company, due to variation in interest for the period.

(9) The investment and the equity in earnings reflect the different interest in preferred shares, profit sharing and dividends;

(10) At September 30, 2011 the reduction of capital of Itaú BBA Participações S.A. was determined, delivering the respective investment in Banco Itaú BBA S.A. to the parent company ITAÚ UNIBANCO;

(11) Investment sold to Banco Itaucard S.A. at April 11, 2011;

(12) Capital increase made on 06/08/2011.

 

           Net income for    Number of shares/quotas owned by ITAÚ UNIBANCO   Equity share in voting    Equity share in 
Companies  Capital   Stockholders’ equity   the period   Common   Preferred   Quotas   capital (%)   capital (%) 
Domestic                                        
Itaú Unibanco S.A.   39,676,320    44,920,665    5,852,938    2,081,169,523    2,014,258,290    -    100.00    100.00 
Banco Itaú BBA S.A.   4,224,086    6,831,791    2,219,441    5,284,526    5,284,526    -    99.99    99.99 
Banco Itaucard S.A.  15,553,776    17,241,019    1,275,906    3,592,433,657    1,277,933,118    -    1.51    2.04 
Itaú Corretora de Valores S. A.   1,046,841    1,858,014    346,778    -    811,503    -    -    1.94 
Itaú-BBA Participações S.A.   25,196    48,124    266,002    12,953    25,906    -    100.00    100.00 
Foreign                                 -    - 
Itaú Chile Holding, INC.   524,209    1,949,002    146,464    100    -    -    100.00    100.00 
Banco Itaú Uruguay S.A.   155,320    246,359    23,241    1,639,430,739    -    -    100.00    100.00 
OCA S.A.   14,232    92,223    36,787    1,502,176,740    -    -    100.00    100.00 
OCA Casa Financiera S.A.   18,366    36,434    1,432    646    -    -    100.00    100.00 
ACO Ltda.   13    2,557    87    -    -    131    99.24    99.24 

 

 
 

 

II - Composition of investments

 

   12/31/2011   12/31/2010 
Investment in affiliates   1,684,423    2,058,988 
Domestic   1,464,935    1,376,262 
Serasa S.A.   271,636    254,379 
Porto Seguro Itaú Unibanco Participações S.A.   1,155,677    1,079,773 
Tecnologia Bancária S.A.   37,534    42,009 
Other   88    101 
Foreign   219,488    682,726 
Banco BPI, S.A. (BPI) (*)   218,763    682,346 
Other   725    380 
Other investments   1,235,566    1,379,070 
Investments through tax incentives   166,946    160,575 
Equity securities   11,800    9,903 
Shares and quotas   310,735    395,717 
Interest in Instituto de Resseguros do Brasil - IRB   227,170    227,170 
Other   518,915    585,705 
(Allowance for loan losses)   (203,348)   (188,270)
Total   2,716,641    3,249,788 

(*)In 2011 an impairment of the investment was recognized in the amount of R$ 276,794, which was calculated based on market value in relation to its book value.

 

III- Equity in earnings of affiliates and other investments

 

   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Investment in affiliates - Domestic   275,875    272,783 
Investment in affiliates – Foreign (Note 15a II)   (342,744)   72,153 
Dividends received from Other investments   119,363    84,820 
Other   (12,997)   (6,663)
Total   39,497    423,093 

 

 
 

 

b) Fixed assets, goodwill and intangible assets

 

I) Fixed assets

 

           CHANGES     
   Annual
depreciation/
amortization
rates (%)		   Balance at
12/31/2010		   Acquisitions   Depreciation
and
amortization
expenses		   Impairment   Disposals   Exchange
variation		   Other   Balance at
12/31/2011		 
REAL ESTATE IN USE (1)                                             
REAL ESTATE IN USE (2)(3)        1,769,523    247,438    (95,787)   -    (57,856)   (9,750)   16,210    1,869,778 
Land        971,170    166,779    -    -    (17,222)   2,483    (9,839)   1,113,371 
Buildings        798,353    80,659    (95,787)   -    (40,634)   (12,233)   26,049    756,407 
Cost        2,320,572    80,659    -    -    (67,268)   (10,516)   16,362    2,339,809 
Accumulated depreciation   4    (1,522,219)   -    (95,787)   -    26,634    (1,717)   9,687    (1,583,402)
OTHER FIXED ASSETS (3)        2,954,268    1,655,491    (1,087,709)   (14,784)   (82,541)   15,295    (22,800)   3,417,220 
Improvements        625,257    228,682    (241,708)   -    (3,889)   (4,373)   33,641    637,610 
Cost        1,108,895    228,682    -    -    (129,939)   (856)   32,007    1,238,789 
Accumulated depreciation   10    (483,638)   -    (241,708)   -    126,050    (3,517)   1,634    (601,179)
Installations        266,520    179,411    (52,982)   -    (743)   8,564    (9,866)   390,904 
Cost        769,685    179,411    -    -    (17,871)   5,153    954    937,332 
Accumulated depreciation   10 to 20    (503,165)   -    (52,982)   -    17,128    3,411    (10,820)   (546,428)
Furniture and equipment        428,408    220,303    (63,152)   (14,784)   (17,089)   (18,886)   (47,735)   487,065 
Cost        843,615    220,303    -    (14,784)   (145,732)   (13,037)   (42,343)   848,022 
Accumulated depreciation   10 to 20    (415,207)   -    (63,152)   -    128,643    (5,849)   (5,392)   (360,957)
EDP systems (4)        1,404,459    941,865    (676,532)   -    (55,898)   27,922    3,042    1,644,858 
Cost        4,746,283    941,865    -    -    (670,513)   38,925    (68,327)   4,988,233 
Accumulated depreciation   20 to 50    (3,341,824)   -    (676,532)   -    614,615    (11,003)   71,369    (3,343,375)
                                              
Other (communication, security and transportation)        229,624    85,230    (53,335)   -    (4,922)   2,068    (1,882)   256,783 
Cost        530,420    85,230    -    -    (65,661)   2,351    (2,836)   549,504 
Accumulated depreciation   10 to 20    (300,796)   -    (53,335)   -    60,739    (283)   954    (292,721)
TOTAL REAL ESTATE IN USE        4,723,791    1,902,929    (1,183,496)   (14,784)   (140,397)   5,545    (6,590)   5,286,998 
Cost        11,290,640    1,902,929    -    (14,784)   (1,114,206)   24,503    (74,022)   12,015,060 
Accumulated depreciation        (6,566,849)   -    (1,183,496)   -    973,809    (18,958)   67,432    (6,728,062)

(1) There is the contractual commitment for the purchase of fixed assets in the amount of R$ 166,315 thousand;

(2) Includes amounts pledged in guarantee of voluntary deposits (Note 12b);

(3) Includes the amount of R$ 2,203 thousand related to attached real estate; fixed assets under construction in the amount of R$ 130,958 thousand, consisting of R$ 56,139 thousand in real estate in use; R$ 50,965 thousand in improvements, and R$ 23,855 thousand in equipment;

(4) Includes lease contracts, mainly related to data processing equipment, which are accounted for as finance lease. Pursuant to this method, assets and liabilities are accounted for in the financial statements, and assets are depreciated consistently with the depreciation criteria usually adopt for own assets. These contracts amount to R$ 302,531 thousand at December 31, 2011.

 

 
 

 

II) Goodwill

 

       CHANGES     
   Balance at
12/31/2010		   Acquisitions   Other   Balance at
12/31/2011		 
GOODWILL (Notes 2b and 4k) (*)   67,617    52,169    (24,095)   95,691 

(*) At August 1, 2011, ITAÚ UNIBANCO HOLDING acquired 50% plus 1 share of capital of MCC Securities Inc (Cayman Islands) for R$ 50,748, of which R$ 48,415 for the equity interest and R$ 2,333 for the exclusivity right to act on the sale of MCC Securities business. The transaction gave rise to a goodwill of R$ 52,169 and this interest was proportionally consolidated in the financial statements of ITAÚ UNIBANCO HOLDING.

 

 
 

 

III) Intangible assets

 

           CHANGES     
   Annual
depreciation/
amortization
rates (%) (2)		   Balance at
12/31/2010		   Acquisitions   Depreciation
and
amortization
expenses (3)		   Impairment (5)   Disposals   Exchange
variation		   Other   Balance at
12/31/2011		 
INTANGIBLE ASSETS (1)                                             
RIGHTS FOR ACQUISITION OF PAYROLL (4)        1,129,854    366,311    (602,502)   (24,113)   (112,181)   -    (5,921)   751,448 
Cost        2,414,697    366,311    -    (24,113)   (1,097,031)   -    (12,316)   1,647,548 
Accumulated amortization   until 9    (1,284,843)   -    (602,502)   -    984,850    -    6,395    (896,100)
OTHER INTANGIBLE ASSETS        1,804,003    1,589,576    (380,565)   (5,816)   (27,449)   27,797    50,818    3,058,364 
Association for the promotion and offer of financial products and services        1,115,272    303,526    (113,670)   (5,816)   (27,449)   839    3,480    1,276,182 
Cost        1,171,228    303,526    -    (5,816)   (93,672)   1,025    10,408    1,386,699 
Accumulated amortization   until 5    (55,956)   -    (113,670)   -    66,223    (186)   (6,928)   (110,517)
Expenditures on acquisition of software        532,147    981,414    (207,737)   -    -    10,171    22,639    1,338,634 
Cost        1,014,957    981,414    -    -    (115,904)   15,713    (24,561)   1,871,619 
Accumulated amortization   20    (482,810)   -    (207,737)   -    115,904    (5,542)   47,200    (532,985)
Other intangible assets        156,584    304,636    (59,158)   -    -    16,787    24,699    443,548 
Cost        270,793    304,636    -    -    (6,692)   25,038    24,693    618,468 
Accumulated amortization   10 to 20    (114,209)   -    (59,158)   -    6,692    (8,251)   6    (174,920)
TOTAL INTANGIBLE ASSETS        2,933,857    1,955,887    (983,067)   (29,929)   (139,630)   27,797    44,897    3,809,812 
Cost        4,871,675    1,955,887    -    (29,929)   (1,313,299)   41,776    (1,776)   5,524,334 
Accumulated amortization        (1,937,818)   -    (983,067)   -    1,173,669    (13,979)   46,673    (1,714,522)

 (1) There are no contractual commitments for purchase of new intangible assets;

(2) All intangible assets have defined useful lives, except for goodwill on acquisition;

(3) Amortization expenses of the rights for acquisition of payrolls and partnerships are disclosed in the expenses on financial operations.

(4) Represents the recording of amounts paid for acquisition of rights to provide services of payment of salaries, proceeds, retirement and pension benefits, and similar benefits;

(5) Pursuant to BACEN Resolution No. 3,566, of May 29, 2001 (Note 13i).

 

 
 

 

NOTE 16 – STOCKHOLDERS’ EQUITY

 

a)Shares

 

At the Extraordinary Stockholders Meeting held on April 25, 2011 homologated by the Brazilian Central Bank on August 22, 2011, the stockholders approved a 1-to-100 reverse stock split and simultaneously a 100-to-1 stock split. Said operation required cancellation of 75 common shares and 44 preferred shares, all of which are book-entry shares of Company’s own issue and existing in treasury, with no capital reduction.

 

Capital comprises 4,570,936,100 book-entry shares with no par value, of which 2,289,286,400 are common and 2,281,649,700 are preferred shares without voting rights, but with tag-along rights, in the event of the public offer of common shares, at a price equal to 80% of the amount paid per share with voting rights in the controlling stake, as well as a dividend at least equal to that of the common shares. Capital stock amounts to R$ 45,000,000 (R$ 45,000,000 at December 31, 2010), of which R$ 31,551,752 (R$ 31,546,933 at December 31, 2010) refers to stockholders domiciled in the country and R$ 13,448,248 (R$ 13,453,067 at December 31, 2010) refers to stockholders domiciled abroad.

 

The table below shows the change in shares of capital stock and treasury shares during the period:

 

   NUMBER     
   Common   Preferred   Total   Amount 
Residents in Brazil at 12/31/2010   2,286,135,621    918,287,035    3,204,422,656      
Residents abroad at 12/31/2010   3,150,854    1,363,362,709    1,366,513,563      
Shares of capital stock at 12/31/2010   2,289,286,475    2,281,649,744    4,570,936,219      
Cancellation of Shares – ESM of 04/25/2011 – Approved at 08/22/2011   (75)   (44)   (119)     
Shares of capital stock at 12/31/2011   2,289,286,400    2,281,649,700    4,570,936,100      
Residents in Brazil at 12/31/2011   2,283,888,835    921,023,218    3,204,912,053      
Residents abroad at 12/31/2011   5,397,565    1,360,626,482    1,366,024,047      
Treasury shares at December 31, 2010 (*)   2,202    26,566,015    26,568,217    (628,577)
Purchase of shares   -    40,970,900    40,970,900    (1,302,638)
Exercised options - Granting of stock options – Simple and Bonus options   -    (5,977,962)   (5,977,962)   117,034 
Disposals – Stock option plan   (27)   (4,264,938)   (4,264,965)   150,619 
(-) Cancellation of Shares – ESM of 04/25/2011   (75)   (44)   (119)   - 
Treasury shares at December 31, 2011 (*)   2,100    57,293,971    57,296,071    (1,663,562)
Outstanding shares at December 31, 2011   2,289,284,300    2,224,355,729    4,513,640,029      
Outstanding shares at December 31, 2010   2,289,284,273    2,255,083,729    4,544,368,002      

(*) Own shares, purchased based on authorization of the Board of Directors, to be held in Treasury for subsequent cancellation or replacement in the market.

 

We detail below the costs of shares purchased in the period, as well as the average cost of treasury shares and their market price at December 31, 2011:

 

Cost/Market value  Common   Preferred 
Minimum   -    26.20 
Weighted average   -    31.79 
Maximum   -    37.40 
Treasury shares          
Average cost   9.65    29.03 
Market value   27.01    33.99 

 

 
 

 

b)Dividends

 

Stockholders are entitled to a mandatory dividend of not less than 25% of annual net income, which is adjusted according to the rules set forth in Brazilian Corporate Law. Both types of shares participate equally, after common shares have received dividends equal to the annual minimum priority dividend of R$ 0.022 per share to be paid to preferred shares.

 

The calculation of the monthly advance of mandatory minimum dividend is based on the share position on the last day of the prior month, taking into consideration that the payment is made on the first business day of the subsequent month, in the amount of R$ 0.012 per share. The value per share will be maintained according to resolution adopted at the A/ESM held on April 24, 2009, so that total amounts monthly paid by the Company to stockholders will be increased by 10%, from October 1, 2009, date the bonus shares are included in the share position.

 

I - Calculation

 

Net income   11,890,196      
Adjustments:          
(-) Legal reserve   (594,510)     
Dividend calculation basis   11,295,686      
Mandatory minimum dividend   2,823,922      
Mandatory paid/provided for   4,393,807    38.9%

 

II - Payments/Provision for interest on capital and dividends

 

   Gross   WTF   Net 
Paid / Prepaid   1,820,516    (183,313)   1,637,203 
Dividends - 11 monthly installments of R$ 0,012 per share paid from February to December 2011   598,427    -    598,427 
Interest on capital - R$ 0,2706  per share, paid on August 22, 2011   1,222,089    (183,313)   1,038,776 
                
Declared until December 31, 2011 (Recorded in Other Liabilities – Social and Statutory)   1,386,584    (199,865)   1,186,719 
Dividends - 1 monthly installment of R$ 0,012 per share, paid on January 2, 2012   54,151    -    54,151 
Interest on capital - R$ 0,2880 per share, credited on December 29, 2011 to be paid until April 30, 2012   1,299,882    (194,982)   1,104,900 
Interest on capital - R$ 0,0072 per share to be paid until April 30, 2012   32,551    (4,883)   27,668 
                
Declared after December 31, 2011 (Recorded in Revenue Reserve - Unrealized profits) (*)   1,846,923    (277,038)   1,569,885 
Interest on capital - R$ 0,4092 per share to be paid until April 30, 2012   1,846,923    (277,038)   1,569,885 
                
Total from 01/01 to 12/31/2011 - R$ 0.9727 net per share   5,054,023    (660,216)   4,393,807 
Total from 01/01 to 12/31/2010- R$ 0,8607 net per share   4,482,550    (574,436)   3,908,114 

(*) In compliance with BACEN Circular Letter nº 3.516, of july 21, 2011.

 

 
 

 

c)Capital and revenue reserves

 

   12/31/2011   12/31/2010 
CAPITAL RESERVES   763,413    594,734 
Premium on subscription of shares   283,512    283,512 
Granted options recognized – Law No. 11,638   478,796    310,117 
Reserves from tax incentives and restatement of equity securities and other   1,105    1,105 
REVENUE RESERVES   34,422,444    25,661,505 
Legal   3,848,025    3,253,516 
Statutory:   28,727,496    22,407,989 
Dividends equalization (1)   8,576,671    6,718,349 
Working capital increase (2)   8,749,186    6,917,094 
Increase in capital of investees (3)   11,401,639    8,772,546 
Unrealized profits (4)   1,846,923    - 
(1)Reserve for Dividends Equalization – its purpose is to guarantee funds for the payment of advances of dividends, including interest on capital, to maintain the flow of the stockholders’ compensation;
(2)Reserve for Working Capital Increase – its purpose is to guarantee funds for the company’s operations;
(3)Reserve for Increase in Capital of Investees – its purpose is to guarantee the preferred subscription right in the capital increases of investees;
(4)Refers to Interest on Capital declared after December 31, 2011, in compliance with BACEN Circular Letter nº 3.516, of july 21, 2011.

 

d)Reconciliation of net income and stockholders’ equity (Note 2b)

 

   Net income   Stockholders’ equity 
   01/01 to
12/31/2011		   01/01 to
12/31/2010		   12/31/2011   12/31/2010 
ITAÚ UNIBANCO HOLDING   11,890,196    10,272,015    78,383,153    70,644,790 
Amortization of goodwill   2,779,263    2,999,772    (7,035,820)   (9,815,083)
Unrealized income (loss) and Other   (48,838)   51,176    -    48,838 
ITAÚ UNIBANCO HOLDING CONSOLIDATED   14,620,621    13,322,963    71,347,333    60,878,545 

 

 
 

 

e)Minority interest in subsidiaries

 

   Stockholders’ equity   Results 
   12/31/2011   12/31/2010   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Unibanco Participações Societárias S.A. (1)   -    1,190,343    (36,476)   (85,213)
Itau Bank, Ltd. (2)   740,703    657,794    -    - 
Redecard S.A.   793,779    700,064    (705,252)   (699,728)
Biu Participações S.A.   103,659    109,108    (34,510)   (25,236)
Itaú Gestão de Ativos S.A.   62,390    60,041    (3,034)   (6)
Biogeração de Energia S.A.   11,440    25,077    9,083    1,290 
Investimentos Bemge S.A.   18,738    17,485    (1,266)   (1,049)
Investment funds   397,679    741,455    (35,341)   (54,655)
Other   10,516    11,536    (6,020)   (1,326)
Total   2,138,904    3,512,903    (812,816)   (865,923)

(1)On July 28, 2011, Dibens Leasing S.A. Arrendamento Mercantil, subsidiary of ITAÚ UNIBANCO HOLDING, acquired minority interest in subsidiary Unibanco Participações Societárias for the amount of R$ 1,226,847.
(2)Represented by redeemable preferred shares issued on December 31, 2002 by Itau Bank Ltd., in the amount of US$ 393,072 thousand, with maturity on March 31, 2015 and semiannual dividends calculated based on LIBOR plus 1.25% p.a..

 

 
 

f)Stock Option Plan

 

I – Purpose and Guidelines of the Plan

 

The Group has a stock option plan for its executives. This program aims at involving the management members in the medium and long-term corporate development process, by granting simple stock options or partner options, personal, not pledgeable or transferable, which entitle to the subscription of one authorized capital share or, at the discretion of the management, one treasury share which has been acquired for replacement purposes.

 

Such options may only be granted in years in which there are sufficient profits to enable the distribution of mandatory dividends to stockholders and at a quantity that does not exceed the limit of 0.5% of the total shares held by the stockholders at the base date of the year-end balance sheet. The ITAÚ UNIBANCO HOLDING’s Personnel Committee is responsible for defining the total quantity, the beneficiaries, the type of option, the life of the option under each series, which may range from a minimum of 5 and a maximum of 10 years, and the vesting period for exercising the options and the period the acquired shares are unavailable due to the exercise of the options. The executive officers and Board of Directors members of ITAÚ UNIBANCO HOLDING and of its subsidiaries and employees may participate in this program, based on assessment of potential and performance.

 

Currently, ITAÚ UNIBANCO HOLDING settles the benefits under this PLAN only by delivering its own shares, which are held in treasury until the effective exercise of the options by the beneficiaries.

 

II - Characteristics of the Programs

 

II.I – Simple Options

 

Prior Programs

 

Before the merger, Itaú and Unibanco each had Stock Option Plans (Prior Programs). The eligible beneficiaries of the program were granted simple options, depending upon the individual employee performance. The exercise price is calculated based on the average prices of preferred shares at the BM&FBOVESPA trading sessions over the period of at least one (1) and at the most three (3) months prior to the option issue date; alternatively, subject to the positive or negative adjustment of up to 20%, and restated until the last business day of the month prior to the option exercise date based either on the IGP-M or IPCA, in its absence, based on the index determined by the Committee. Options are no longer granted under this model.

 

Post-Merger Program

 

The eligible beneficiaries of the program are granted simple options, dependent upon the individual employee performance. The exercise price is calculated based on the average prices of preferred shares at the BM&FBOVESPA in the last three months of the year prior to the grating date or alternatively, subject to the positive or negative adjustments of up to 20% in the period of at least one. The exercise price is adjusted based on the IGPM or, in its absence, based on the index determined by the committee.

 

The vesting period is from one (1) to seven (7) years, counted from the issue date.

 

II.II – Partners Plan

 

Executives selected to participate in the program may invest a percentage of their bonus to acquire shares or they have the right to receive shares (“Share-Based Instrument”). Title to the shares acquired, as well as the share-based instruments, should be held by the executives for a period of 3 to 5 years and they are subject to market fluctuation. At the time they acquire own shares and/or share-based instruments, Partner Options are granted in accordance with the classification of executives. Vesting period of Partner Options or share-based instruments is from 1 to 7 years. Share-based instruments and Partner options are converted into own shares of ITAÚ UNIBANCO HOLDING in the ratio of one share for each instrument after the respective vesting period, with no payment of amounts in legal tender during the exercise.

 

The acquisition price of own shares and Share-Based Instruments is established every six months and it is equivalent to the average preferred share quotation at the BM&FBOVESPA trading sessions in the 30 days prior to the determination of said price.

 

Title to the shares received after the vesting period of the Partner Options should be held, without any liens or encumbrances, for periods from 5 to 8 years, counted from the date of acquisition of own shares.

 

 
 

 

Summary of Changes in the Plan  
                                                                              
               Restated   Exercised options   Number of shares   
Granting  Vesting period   Exercise   exercise   Weighted average   Weighted average   Prior balance            Forfeited (*) /    To be exercised  
NO.  Date   until   until   price (R$ 1)   exercise price   market price   12/31/2010   Granted   Exercised   Cancelled   at 12/31/2011  
                                               
Simple Options                                                  
10th   2/16/2004    12/31/2008    12/31/2011    13.46    13.23    35.17    712,942    -    712,942    -   -  
27th   2/1/2005    5/5/2009    1/31/2011    16.52    16.42    39.50    12,650    -    12,650    -   -  
11th   2/21/2005    12/31/2009    12/31/2012    18.94    18.39    34.88    2,877,600    -    1,912,825    27,500   937,275  
11th   8/1/2005    12/31/2009    12/31/2012    18.94    18.39    34.88    27,500    -    27,500    -   -  
11th   8/6/2007    12/31/2009    12/31/2012    18.94    -    -    11,357    -    -    -   11,357  
27th   2/1/2005    2/1/2010    1/31/2011    16.52    16.42    39.50    16,389    -    16,389    -   -  
34th   3/21/2007    3/21/2010    3/20/2011    35.34    -    -    75,901    -    -    75,901   -  
35th   3/22/2007    3/22/2010    3/21/2011    35.31    -    -    29,518    -    -    29,518   -  
30th   7/4/2006    7/4/2010    7/3/2011    28.49    28.45    36.48    52,710    -    52,710    -   -  
29th   9/19/2005    9/19/2010    9/18/2011    21.77    21.30    38.45    12,650    -    12,650    -   -  
12th   2/21/2006    12/31/2010    12/31/2013    28.18    27.30    36.42    8,025,250    -    1,110,385    60,500   6,854,365  
12th   8/6/2007    12/31/2010    12/31/2013    28.18    -    -    15,867    -    -    -   15,867  
16th   8/10/2009    12/31/2010    12/31/2014    32.05    -    -    874,167    -    -    -   874,167  
34th   3/21/2007    3/21/2011    3/20/2012    36.85    -    -    75,901    -    -    -   75,901  
35th   3/22/2007    3/22/2011    3/21/2012    36.80    -    -    29,518    -    -    -   29,518  
36th   5/14/2008    5/14/2011    5/13/2012    45.79    -    -    25,301    -    -    -   25,301  
30th   7/4/2006    7/4/2011    7/3/2012    29.21    -    -    52,707    -    -    -   52,707  
33rd   8/30/2006    8/30/2011    8/29/2012    32.34    -    -    21,083    -    -    -   21,083  
13th   2/14/2007    12/31/2011    12/31/2014    35.89    34.82    36.93    8,546,975    -    507,375    306,625   7,732,975  
13th   8/6/2007    12/31/2011    12/31/2014    35.89    -    -    30,649    -    -    -   30,649  
13th   10/28/2009    12/31/2011    12/31/2014    35.89    -    -    45,954    -    -    -   45,954  
Total options to be exercised              21.84    35.62    21,572,589    -    4,365,426    500,044   16,707,119  
                                                         
34th   3/21/2007    3/21/2012    3/20/2013    36.85    -    -    75,901    -    -    -   75,901  
35th   3/22/2007    3/22/2012    3/21/2013    36.80    -    -    29,514    -    -    -   29,514  
36th   5/14/2008    5/14/2012    5/13/2013    45.79    -    -    25,300    -    -    -   25,300  
17th   9/23/2009    9/23/2012    12/31/2014    37.02    -    -    29,551    -    -    -   29,551  
14th   2/11/2008    12/31/2012    12/31/2015    41.37    -    -    10,846,487    -    -    1,580,421   9,266,066  
14th   5/5/2008    12/31/2012    12/31/2015    41.37    -    -    20,625    -    -    -   20,625  
14th   10/28/2009    12/31/2012    12/31/2015    41.37    -    -    45,954    -    -    -   45,954  
36th   5/14/2008    5/14/2013    5/13/2014    45.79    -    -    25,300    -    -    -   25,300  
15th   3/3/2009    12/31/2013    12/31/2016    27.06    26.97    33.88    15,067,330    -    804,770    147,620   14,114,940  
15th   10/28/2009    12/31/2013    12/31/2016    27.06    -    -    45,954    -    -    -   45,954  
18th   4/17/2010    12/31/2014    12/31/2017    43.95    -    -    6,126,609    -    -    74,386   6,052,223  
18th   5/11/2010    12/31/2014    12/31/2017    43.95    -    -    1,206,340    -    -    42,421   1,163,919  
37th   4/19/2011    12/31/2015    12/31/2018    42.93    -    -    -    9,863,110    -    93,678   9,769,432  
Total options outstanding              26.97    33.88    33,544,865    9,863,110    804,770    1,938,526   40,664,679  
Total simple options              22.64    35.35    55,117,454    9,863,110    5,170,196    2,438,570   57,371,798  
                                               
Partner Options                                                  
04th   3/3/2008    3/3/2011    -    -    -    37.22    416,487    -    376,581    -   39,906  
05th   9/3/2008    9/3/2011    -    -    -    28.83    490,624    -    431,185    12,729   46,710  
Total options to be exercised                   37.22    907,111    -    807,766    12,729   86,616  
06th   3/6/2009    3/6/2012    -    -    -    -    740,362    -    -    21,339   719,023  
07th   6/19/2009    3/6/2012    -    -    -    -    79,446    -    -    -   79,446  
01st   9/3/2007    9/3/2012    -    -    -    -    329,181    -    -    19,673   309,508  
03rd   2/29/2008    9/3/2012    -    -    -    -    33,474    -    -    -   33,474  
04th   3/3/2008    3/3/2013    -    -    -    -    415,930    -    -    27,498   388,432  
08th   8/17/2010    8/16/2013    -    -    -    -    376,916    -    -    37,284   339,632  
09th   8/30/2010    8/16/2013    -    -    -    -    359,991    -    -    30,280   329,711  
11th   9/30/2010    8/16/2013    -    -    -    -    17,717    -    -    -   17,717  
05th   9/3/2008    9/3/2013    -    -    -    -    490,126    -    -    40,684   449,442  
10th   9/30/2010    9/29/2013    -    -    -    -    1,940,987    -    -    78,578   1,862,409  
12th   2/28/2011    2/28/2014    -    -    -    -    -    1,585,541    -    26,957   1,558,584  
06th   3/6/2009    3/6/2014    -    -    -    -    739,608    -    -    35,004   704,604  
07th   6/19/2009    3/6/2014    -    -    -    -    79,445    -    -    -   79,445  
14th   11/4/2011    8/18/2014                        -    509    -    -   509  
13th   8/19/2011    8/19/2014    -    -    -    -    -    706,397    -    -   706,397  
08th   8/17/2010    8/16/2015    -    -    -    -    376,876    -    -    37,953   338,923  
09th   8/30/2010    8/16/2015    -    -    -    -    359,962    -    -    30,810   329,152  
11th   9/30/2010    8/16/2015    -    -    -    -    17,712    -    -    -   17,712  
10th   9/30/2010    9/29/2015    -    -    -    -    1,940,951    -    -    82,433   1,858,518  
12th   2/28/2011    2/28/2016    -    -    -    -    -    1,585,497    -    28,282   1,557,215  
13th   8/19/2011    8/19/2016    -    -    -    -    -    706,338    -    -   706,338  
14th   11/4/2011    8/18/2016    -    -    -    -    -    508    -    -   508  
Total options outstanding              -    -    8,298,684    4,584,790    -    496,775   12,386,699  
Total Partner Options              -    37.22    9,205,795    4,584,790    807,766    509,504   12,473,315  
TOTAL SIMPLE AND PARTNER OPTIONS         22.84    32.92    64,323,249    14,447,900    5,977,962    2,948,074   69,845,113  

 (*) Refers to the non-exercise due to the beneficiary’s option.

 

 
 

 

III - Fair Value and Economic Assumptions for Cost Recognition

 

ITAÚ UNIBANCO HOLDING recognizes, at the granting date, the fair value of options through the Binomial method for simple options and the Black & Scholes method for partner options. Economic assumptions used are as follows:

 

Exercise price: for the option exercise price, the exercise price previously agreed-upon at the option issue is adopted, adjusted by the IGP-M variation;

 

Price of the Underlying Asset: the share price of Itaú Unibanco Holding (ITUB4) used for calculation is the closing price at BOVESPA on the calculation base date;

 

Expected dividends: the average annual return rate for the last three years of the dividends paid, plus interest on capital of the ITUB4 share;

 

Risk-free interest rate: the applied risk-free rate is the IGP-M coupon rate at the expiration date of the option plan;

 

Expected volatility: calculated based on the standard deviation from the history of the last 84 monthly returns of closing prices of the ITUB4 share, released by BOVESPA, adjusted by the IGP-M variation.

  

Granting  Vesting
period		   Exercise   Price of
underlying		   Fair   Expected   Risk-free
   Expected 
No.  Date   until   period until   asset   value   dividends   interest rate   volatility 
Simple Options                                         
37th   4/19/2011    12/31/2015    12/31/2018    37.26    11.02    2.97%   5.80%   30.53%
                                         
Partner Options (*)                                        
12th   2/28/2011    2/28/2014    -    37.00    33.85    2.97%   -    - 
12th   2/28/2011    2/28/2016    -    37.00    31.83    2.97%   -    - 
13th   8/19/2011    8/19/2014    -    26.65    24.39    2.97%   -    - 
13th   8/19/2011    8/19/2016    -    26.65    22.98    2.97%   -    - 
14th   11/4/2011    8/18/2014    -    32.62    30.04    2.97%   -    - 
14th   11/4/2011    8/18/2016    -    32.62    28.30    2.97%   -    - 

 (*) The fair value of Partner option is measured based on the fair value of Itaú Unibanco share at the granting date.

 

IV - Accounting Effects Arising from Options

 

The exercise of stock options, pursuant to the Plan’s regulation, resulted in the sale of preferred shares held in treasury thus far. The accounting entries related to the plan are recorded during the vesting period, at the deferral of the fair value of options granted with effect on Income, and during the exercise of options, at the amount received from the option exercise price, reflected in Stockholders’ Equity.

 

The effect of Income for the period from January 1 to December 31, 2011 was R$ 162,663 (R$ 131,660 from January 1 to December 31, 2010), as contra-entry to Capital Reserve – Granted Options Recognized – Law No. 11,638 (Note 16 c).

 

In the Stockholders’ Equity, the effect was as follows:

 

Amount received for the sale of shares – exercised options   353,036 
(-) Cost of treasury shares sold   (267,653)
(+) Write-off of cost recognized of exercised options   (6,016)
Effect on sale (*)   79,367 

 (*) Recorded in revenue reserves.

 

 
 

 

NOTE 17 – RELATED PARTIES

 

a)Transactions between related parties are disclosed in compliance with CVM Resolution No. 642, of October 7, 2010, and CMN Resolution No. 3,750 of June 30, 2009. These transactions are carried out at amounts, terms and average rates in accordance with normal market practices during the period, as well as under reciprocal conditions.

 

Transactions between companies included in consolidation were eliminated from the consolidated financial statements and take into consideration the lack of risk.

 

The unconsolidated related parties are the following:

 

·Itaú Unibanco Participações S.A.(IUPAR) and ITAÚSA, parents company of ITAÚ UNIBANCO HOLDING.

 

·Its non-financial subsidiaries of ITAÚSA, especially: Itautec S.A., Duratex S.A., Elekeiroz S.A. and Itaúsa Empreendimentos S.A.;

 

·Fundação Itaubanco, FUNBEP – Fundo de Pensão Multipatrocinado, Caixa de Previdência dos Funcionários do BEG (PREBEG), Fundação Bemgeprev, Itaubank Sociedade de Previdência Privada, UBB – Prev Previdência Complementar, and Fundação Banorte Manuel Baptista da Silva de Seguridade Social, closed-end private pension entities that administer supplementary retirement plans sponsored by ITAÚ UNIBANCO HOLDING and/or its subsidiaries;
   
·Fundação Itaú Social, Instituto Itaú Cultural, Instituto Unibanco, Instituto Assistencial Pedro Di Perna, Instituto Unibanco de Cinema, and Associação Clube “A”, entities sponsored by ITAÚ UNIBANCO and subsidiaries to act in their respective areas of interest, as described in Notes 22e and 22j; and

 

·Investments in Porto Seguro Itaú Unibanco Participações S.A., SERASA S.A. and Banco BPI, S.A.

 

Additionally, there are operations with jointly controlled entities, particularly Banco Investcred Unibanco S.A., Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento, Luizacred S.A. Soc. Créd. Financiamento e Investimento, FAI Financeira Americanas Itaú S.A. Crédito, Financiamento Investimento, FIC Promotora de Vendas Ltda. and Ponto Frio Leasing S.A. Arrendamento Mercantil.

 

 
 

 

The transactions with these related parties are basically characterized by:

 

   ITAÚ UNIBANCO HOLDING   ITAÚ UNIBANCO HOLDING CONSOLIDATED 
   ASSETS/(LIABILITIES)   REVENUE/(EXPENSES)   ASSETS/(LIABILITIES)   REVENUE/(EXPENSES) 
   12/31/2011   12/31/2010   01/01 to
12/31/2011		   01/01 to
12/31/2010		   12/31/2011   12/31/2010   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Interbank investments   26,289,384    10,418,693    2,310,797    918,826    1,836,298    725,505    189,841    112,010 
Itaú Unibanco S.A.   26,289,384    10,418,693    2,310,797    918,826    -    -    -    - 
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento   -    -    -    -    618,853    426,710    56,483    35,089 
FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento   -    -    -    -    235,967    282,172    31,097    17,769 
Luizacred S.A. Sociedade de Crédito, Financiamento e Investimento   -    -    -    -    981,478    -    102,261    59,123 
Other   -    -    -    -    -    16,623    -    29 
Derivative financial instruments   -    -    (183)   (1,509)   -    -    -    - 
Itaú Unibanco S.A.   -    -    (183)   (1,509)   -    -    -    - 
Deposits   (4,832,444)   (3,344,008)   (445,936)   (269,784)   (76,573)   (92,623)   -    - 
Itaú Unibanco S.A.   (4,832,444)   (3,344,008)   (445,936)   (269,784)   -    -    -    - 
Duratex S.A.   -    -    -    -    (1,596)   (46,415)   -    - 
Elekeiroz S.A.   -    -    -    -    -    (30,621)   -    - 
Itautec S.A.   -    -    -    -    -    (8,364)   -    - 
Porto Seguro S.A.   -    -    -    -    -    (1,514)   -    - 
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento   -    -    -    -    (56,804)   (248)   -    - 
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento   -    -    -    -    (18,055)   (277)   -    - 
Ponto Frio Leasing S.A. Arrendamento Mercantil   -    -    -    -    -    (5,184)   -    - 
Banco Investcred Unibanco S.A.   -    -    -    -    (15)   -    -    - 
Other   -    -    -    -    (103)   -    -    - 
Repurchase agreements   -    -    -    -    (100,494)   (104,272)   (20,865)   (18,692)
Itaúsa Empreendimentos S.A.   -    -    -    -    -    (51,989)   -    - 
Duratex S.A.   -    -    -    -    -    (8,454)   (4,031)   (2,309)
Elekeiroz S.A.   -    -    -    -    -    -    (3,214)   (1,556)
Itautec S.A.   -    -    -    -    -    (17,789)   -    - 
FIC Promotora de Venda Ltda.   -    -    -    -    (6,078)   (6,216)   (782)   (442)
Facilita Promotora S.A.   -    -    -    -    (7,373)   -    (717)   - 
Olimpia Promoção e Serviços S.A.   -    -    -    -    (2,319)   (9,496)   (450)   - 
Banco Investcred Unibanco S.A.   -    -    -    -    (14,271)   (9,335)   (1,421)   (1,117)
Maxfácil Participações S.A   -    -    -    -    (63,753)   -    (6,662)   - 
Porto Seguro S.A.   -    -    -    -    -    -    (32)   (11,577)
Other   -    -    -    -    (6,700)   (993)   (3,556)   (1,691)
Amounts receivable from (payable to) related companies   (3,939)   (384)   -    -    (95,680)   (80,877)   -    - 
Itaú Unibanco S.A.   (3,557)   -    -    -    -    -    -    - 
Itaú Corretora de Valores S. A.   (382)   (384)   -    -    -    -    -    - 
Itaúsa Investimentos Itaú S.A.   -    -    -    -    82    -    -    - 
Porto Seguro S.A.   -    -    -    -    10,925    38,540    -    - 
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento   -    -    -    -    (4)   6,007    -    - 
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento   -    -    -    -    (1,098)   (1,372)   -    - 
Olimpia Promoção e Serviços S.A.   -    -    -    -    (173)   (130)   -    - 
Banco Investcred Unibanco S.A.   -    -    -    -    -    10    -    - 
Luizacred S.A. Sociedade de Crédito, Financiamento e Investimento   -    -    -    -    (520)   (25,229)   -    - 
Fundação Itaubanco   -    -    -    -    1,254    -    -    - 
FUNBEP - Fundo de Pensão Multipatrocinado   -    -    -    -    279    -    -    - 
Caixa de Prev.dos Func. do Banco Beg - PREBEG   -    -    -    -    (8,688)   -    -    - 
Fundação BEMGEPREV   -    -    -    -    (3,193)   (13,303)   -    - 
UBB Prev Previdência Complementar   -    -    -    -    (18,712)   (17,364)   -    - 
Fundação Banorte Manuel Baptista da Silva de Seguridade Social   -    -    -    -    (76,110)   (79,222)   -    - 
Other   -    -    -    -    278    11,186    -    - 
Banking services fees (expenses)   -    -    (4,824)   (4,520)   -    -    (15,673)   3,807 
Itaú Corretora de Valores S. A.   -    -    (4,782)   (4,520)   -    -    -    - 
Fundação Itaubanco   -    -    -    -    -    -    21,160    9,537 
FUNBEP - Fundo de Pensão Multipatrocinado   -    -    -    -    -    -    4,863    3,012 
UBB Prev Previdência Complementar   -    -    -    -    -    -    1,358    2,764 
Itaúsa Investimentos S.A.   -    -    -    -    -    -    1,141    1,324 
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento   -    -    -    -    -    -    (20,133)   1,939 
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento   -    -    -    -    -    -    (2,292)   - 
Porto Seguro S.A.   -    -    -    -    -    -    (25,889)   (18,404)
Other   -    -    (42)   -    -    -    4,119    3,635 
Rent revenues (expenses)   -    -    (226)   (410)   -    -    (37,422)   (28,773)
Itaúsa Investimentos S.A.   -    -    (16)   (29)   -    -    -    (1,353)
Itaú Seguros S.A.   -    -    (161)   -    -    -    -    - 
Fundação Itaubanco   -    -    -    -    -    -    (26,536)   (15,400)
FUNBEP - Fundo de Pensão Multipatrocinado   -    -    -    -    -    -    (9,566)   (7,563)
Other   -    -    (49)   (381)   -    -    (1,320)   (4,457)
Donation expenses   -    -    -    -    -    -    (57,110)   (44,673)
Instituto Itaú Cultural   -    -    -    -    -    -    (56,400)   (44,000)
Fundação Itaú Social   -    -    -    -    -    -    (280)   (273)
Associação Clube "A"   -    -    -    -    -    -    (430)   (400)
Data processing expenses   -    -    -    -    -    -    (314,651)   (296,053)
Itautec S.A.   -    -    -    -    -    -    (314,651)   (296,053)
Non-operating income   -    -    -    -    -    -    48,088    - 
Itaúsa Investimentos S.A.   -    -    -    -    -    -    48,088    - 

 

In addition to the aforementioned operations, ITAÚ UNIBANCO HOLDING and non-consolidated related parties, as an integral part of the Agreement for Apportionment of Common Costs of Itaú Unibanco, recorded in Other Administrative Expenses the amount of R$ 7,983 (R$ 16,645 from 01/01 to 12/31/2010) in view of the use of common structure.

 

 
 

 

In accordance with the rules in effect, the financial institutions cannot grant loans or advances to the following:

 

a)any individual or company that control the Institution or any entity under common control with the institution, or any officer, director, fiscal council member or direct relative of such individuals;

 

b)any entity controlled by the Institution; or

 

c)any entity of which the bank directly or indirectly holds at least 10% of capital stock.

 

Therefore, no loans or advances are made to any subsidiaries, executive officers, Board of Directors members or their relatives.

 

Itaú Unibanco Holding made regular donations to Fundação Itaú Social, a philanthropic foundation which objectives are: to create "Programa Itaú Social", aimed at coordinating activities that are of the community’s interest, support and develop social, scientific and cultural projects, mainly in the elementary education and health areas; support projects or initiatives in progress, maintained or sponsored by entities qualifying to work, according to "Programa Itaú Social". In addition, Itaú Unibanco is the founding partner and sponsor of Instituto Itaú Cultural - IIC, an entity which objective is to promote and preserve the Brazilian cultural heritage.

 

b)Compensation of the Management Key Personnel

 

The fees attributed in the period to ITAÚ UNIBANCO HOLDING management members are as follows:

 

   12/31/2011   12/31/2010 
Compensation   270,993    294,207 
Board of Directors   4,798    3,399 
Management members   266,195    290,808 
Profit sharing   191,923    261,282 
Board of Directors   1,000    2,500 
Management members   190,923    258,782 
Contributions to pension plans   5,018    8,092 
Board of Directors   163    589 
Management members   4,855    7,503 
Stock option plan – Management members   149,629    128,239 
Total   617,563    691,820 

 

Information related to the granting of stock option plan, benefits to employees and post-employment benefits are detailed in Notes 16f IV and 19, respectively.

 

 
 

 

NOTE 18 - MARKET VALUE

 

The financial statements are prepared in accordance with accounting principles which assume the normal continuity of the operations of ITAÚ UNIBANCO HOLDING and its subsidiaries.

 

The book value of each financial instrument, whether included or not in the balance sheet (comprises investments in affiliates and other investments), when compared to the value that might be obtained in an active market, or in the absence of such market, using the net present value of future cash flows adjusted based on the current market interest, is approximately equal to the market value, or does not have a market quotation available, except for the instruments in the table below:

 

           Unrealized income (loss) (1) 
   BOOK VALUE   MARKET   Results   Stockholders’ equity 
   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010 
Interbank deposits   27,820,434    14,834,851    27,848,688    14,842,100    28,254    7,249    28,254    7,249 
Securities and derivative financial instruments   187,880,424    186,562,415    188,477,270    187,166,832    1,326,216    1,070,847    596,846    604,417 
Adjustment of available-for-sale securities                       718,599    453,749    -    - 
Adjustment of held-to-maturity securities                       607,617    617,098    596,846    604,417 
Loan, lease and other credit operations   319,711,055    273,034,626    320,341,022    273,225,632    629,967    191,006    629,967    191,006 
Investments (2)                                        
BM&FBovespa   58,107    58,107    441,205    591,124    383,098    533,017    383,098    533,017 
BPI (3)   218,763    682,346    218,763    524,136    (413,087)   (382,138)   -    (158,210)
Cetip S.A.   291    34,682    12,235    520,740    11,944    486,058    11,944    486,058 
Porto Seguro Itaú Unibanco Participações S.A. (4)   1,155,677    1,079,773    2,093,631    2,781,678    937,954    1,701,905    937,954    1,701,905 
Serasa S.A.   271,636    254,379    1,252,447    869,057    980,811    614,678    980,811    614,678 
Parent company   179,701    168,285    1,160,512    782,963    980,811    614,678    980,811    614,678 
Minority stockholders (5)   91,935    86,094    91,935    86,094    -    -    -    - 
Fundings and borrowings (6)   219,234,287    159,586,365    219,425,572    159,737,232    (191,285)   (150,867)   (191,285)   (150,867)
Subordinated debt (Note 10f)   39,715,187    34,487,665    39,879,597    34,568,948    (164,410)   (81,283)   (164,410)   (81,283)
Treasury shares   1,663,562    628,577    1,947,479    1,057,130    -    -    283,917    428,553 
Total unrealized                       3,529,462    3,990,472    3,497,096    4,176,523 

 

(1) It does not consider the corresponding tax effects.

(2) Starting December 2011, Redecard is no longer disclosed since it is an investment in subsidiary;

(3) In unrealized result, considers adjustment to market value of available-for-sale securities.

(4) Parent company of Porto Seguro S.A.;

(5) The investment held by minority stockholders does not affect the result of ITAÚ UNIBANCO HOLDING;

(6) Funding is represented by interbank and time deposits, funds from acceptance and issuance of securities and borrowings;

 

 
 

 

To obtain the market values for these financial instruments, the following criteria were adopted:

 

·Interbank investments were determined based on their nominal amounts, monetarily restated to maturity dates and discounted to present value using future market interest rates and swap market rates for fixed-rate securities and using market interest rates for fixed-rate securities, achieved at the closing of BM&F at the balance sheet date, for floating-rate securities;

 

·Securities and derivative financial instruments, according to the rules established by Circulars No. 3,068 and 3,082 of November 8, 2001 and January 30, 2002, respectively, issued by the Central Bank of Brazil (BACEN), are recorded at their market value, except for those classified as Held-to-Maturity. Government securities allocated in this category have their market value calculated based on the rates obtained in the market, and validated through the comparison with information provided by the National Association of Financial Market Institutions (ANDIMA). Private securities included in this category have their market value calculated using a criterion similar to the one adopted for Investments in Interbank Deposits, as described above;

 

·Loans, based on the net present value of future cash flows, discounted at interest rates practiced in the market at the balance sheet date, also taking into account the effects of hedges (swap contracts);

 

·Investments - in companies BPI, BM&FBovespa, CETIP and Porto Seguro at the share value in stock exchanges and Serasa S.A. based on the historical average of Price/Income ratio of its parent company.
·Time and interbank deposits and funds from acceptance and issuance of securities and foreign borrowings through securities, when available, were calculated based on their present value determined by future cash flows discounted at market rates obtained at the closing of BM&F on the balance sheet date;

 

·Subordinated debt, based on the net present value of future fixed or floating cash flows in foreign currency, net of the interest rates practiced in the market on the balance sheet date and considering the credit risk of the issuer. The floating cash flows are estimated as from the interest curves of the indexation market places;

 

·Treasury shares are valued according to the average quotation available on the last trading day of the month or, if this is not available, according to the most recent quotation on prior trading days, published in the daily bulletin of each Stock Exchange.

 

 
 

 

NOTE 19 – BENEFITS TO EMPLOYEES

 

Pursuant to CVM Resolution No. 600, dated October 7, 2009, we present the policies adopted by ITAÚ UNIBANCO HOLDING and its subsidiaries regarding benefits to employees, as well as the accounting procedures adopted.

 

ITAÚ UNIBANCO HOLDING and some of its subsidiaries sponsor defined benefit and variable contribution plans, which basic purpose is granting benefits that, in general, provide a life annuity benefit, and may be converted into survivorship annuities, according to the plan's regulation. They also sponsor defined contribution plans, the benefit of which is calculated based on the accumulated balance at the eligibility date, according to the plan's regulation, which does not require actuarial calculation.

 

Employees hired until July 31, 2002, who come from Itaú, and until February 27, 2009, who come from Unibanco, are beneficiaries of the above-mentioned plans. As regards the employees hired after these dates, they have the option to voluntarily participate in a defined contribution plan (PGBL), managed by Itaú Vida e Previdência S.A.

 

a) Description of the Plans

 

The plans’ assets are invested in separate funds, with the exclusive purpose of providing benefits to eligible employees, and they are maintained independently from ITAÚ UNIBANCO HOLDING. These funds are maintained by closed-end private pension entities with independent legal structures, as detailed below:

 

Entity   Benefit plan
Fundação Itaubanco   Supplementary retirement plan – PAC (1)
    Franprev benefit plan - PBF (1)
    002 benefit plan - PB002 (1)
    Itaulam basic plan - PBI (1)
    Itaulam Supplementary Plan - PSI (2)
    Itaubanco CD Plan (3) (4)
     
Fundação Bemgeprev   Supplementary Retirement Plan – Flexible Premium Annuity (ACMV) (1)
Funbep Fundo de Pensão Multipatrocinado   Funbep I Benefit Plan (1)
    Funbep II Benefit Plan (2)
     
Caixa de Previdência dos Funcionários do Banco Beg - Prebeg   Prebeg Benefit Plan (1)
     
Itaú Fundo Multipatrocinado   Itaú Defined Benefit Plan (1)
    Itaú Defined Contribution Plan (2)
     
Múltipla - Multiempresas de Previdência Complementar   Redecard Basic Retirement Plan (1)
   

Redecard Supplementary Retirement Plan (2)

Redecard Supplementary Plan (3) (5)

     
Itaubank Sociedade de Previdência Privada   Itaubank Retirement Plan (3)
     
UBB-PREV - Previdência Complementar   Unibanco Pension Plan (3)
    Basic Plan (1)
    IJMS Plan (1)
     
Banorte Fundação Manoel Baptista da Silva de Seguridade Social   Benefit Plan II (1)

 

(1) Defined benefit plan;

(2) Variable contribution plan;

(3) Defined contribution plan;

(4) The Itaubanco Defined Contribution Plan was set up as a result of the partial spin-off of the Supplementary retirement plan - PAC, and is being offered to former participants of the latter, which are not receiving supplementary retirement by the PAC. The participants who have not joined the Itaubanco Defined Contribution Plan, as well as those contributing to the PAC, will remain in this latter, without any continuity, and will have their vested rights guaranteed. As set forth in the Itaubanco Defined Contribution Plan regulation, the transaction and novation period ended on May 8, 2010;

(5) Redecard Pension Plan was changed in January 2011 from Defined Benefit - BD to Defined Contribution - CD, with adhesion of 95% of employees. This plan enables the employee to contribute monthly with a defined percentage to be deducted from the monthly compensation and, additionally, the company contributes with 100% of the option chosen by the employees, limited to 9% of their income.

 

 
 

 

b) Defined benefit plan

 

I - Main assumptions used in actuarial valuation of Retirement Plans

 

    2011   2010  
Discount rate   9,72% p.a.   9.72% p.a.  
Expected return rate on assets   11.32 % p.a.   12.32% p.a.  
Mortality table (1)   AT-2000   AT-2000  
Turnover (2)   Itaú Exp. 2008/2010   Itaú Exp. 2003/2004  
Future salary growth   7.12 % p.a.   7.12% p.a.  
Growth of the pension fund and social security benefits   4.00 % p.a.   4.00% p.a.  
Inflation   4.00 % p.a.   4.00% p.a.  
Actuarial method (3)   Projected Unit Credit   Projected Unit Credit  

 

(1) The mortality tables adopted correspond to those disclosed by SOA – Society of Actuaries, the North-American Entity which corresponds to IBA – Brazilian Institute of Actuarial Science, which reflects a 10% increase in the probabilities of survival as compared to the respective basic tables;

 

The life expectancy in years by the AT-2000 mortality table for participants of 55 years of age is 27 and 31 years for men and women, respectively.

 

(2) The turnover assumption is based on the effective experience of ITAÚ UNIBANCO HOLDING, resulting in the average of 2.4% p.a. based on the 2008/2010 experience;

 

(3) Using the Projected Unit Credit, the mathematical reserve is determined by the current projected benefit amount multiplied by the ratio between the length of service in the company at the assessment date and the length of service that will be reached at the date when the benefit is granted. The cost is determined taking into account the current projected benefit amount distributed over the years that each participant is employed.

 

The basic difference between the assumptions above and those adopted upon determination of the actuarial liability of defined benefit plans, for purposes of recording in the balance sheet of the closed-end private pension entities that manage them, is the actuarial method. For this purpose, the Bank adopts the aggregate method, by which the mathematical reserve is defined based on the difference between the present value of the projected benefit and the present value of future contributions, subject to the methodology defined in the respective actuarial technical note.

 

II – Management of defined benefit plan assets

 

The purpose of the management of the funds from the closed-end private pension entities is the long-term balance between social security assets and liabilities by exceeding the actuarial goals.

 

As regards the assets guaranteeing mathematical reserves, management should ensure the payment capacity of benefits in the long-term by preventing the risk of mismatching assets and liabilities by pension plan.

 

 
 

 

At December 31, 2011 the allocation of plan assets and the allocation target for 2012, by type of asset, are as follows:

 

           % Allocation 
Types  At 12/31/2011   At 12/31/2010   12/31/2011   12/31/2010   2012 Target 
Fixed income securities   10,341,420    9,769,060    87.85%   87.47%   53% to 100% 
Variable income securities   1,051,130    992,733    8.93%   8.89%   0% to 25% 
Structured investments   13,511    10,570    0.11%   0.09%   0% to 10% 
Foreign investments   -    3,988    0.00%   0.04%   0% to 3% 
Real estate   344,012    368,515    2.92%   3.30%   0% to 6% 
Loans to participants   22,854    22,962    0.19%   0.21%   0% to 5% 
Total   11,772,927    11,167,828    100.00%   100.00%     

 

The defined benefit plan assets include shares of ITAÚ UNIBANCO HOLDING, its main parent company (ITAÚSA) and of subsidiaries of the latter, with a fair value of R$ 530,721 (R$ 542,233 at 12/31/2010), and real estate rented to Group companies with a fair value of R$ 298.169 (R$ 308,819 at 12/31/2010).

 

The expected income from defined benefit plan assets is based on projections of returns for each of the segments detailed above. For the fixed-income segment, the adopted interest rates were taken from long-term securities included in the portfolios, and the interest rates practiced in the market at the closing of the balance sheet. For the variable-income segment, conservative expectations of annual returns were adopted. For the real estate segment, the cash inflows of expected rental payments for the following 12 months were adopted. For all segments, the basis adopted was the portfolio positions at the balance sheet date.

 

III- Net amount recognized in the balance sheet

 

We present below the calculation of the net amount recognized in the balance sheet:

 

   12/31/2011   12/31/2010 
1 - Net assets of the plans   11,772,927    11,167,828 
2 - Actuarial liabilities   (10,413,448)   (9,815,180)
3- Surplus (1-2)   1,359,479    1,352,648 
4- Asset restriction (*)   (1,262,610)   (1,108,678)
5 - Net amount recognized in the balance sheet (3-4)   96,869    243,970 
Amount recognized in Assets   342,241    367,351 
Amount recognized in Liabilities   (245,372)   (123,381)

(*) Corresponds to the excess of present value of the available economic benefit, in conformity with item 58 of CVM Resolution No. 600.

 

In conformity with the exemption set forth in CVM Resolution No. 647, gains and losses accumulated to 01/01/2010 were recognized in Stockholders’ equity, net of tax effects and, taking into account the subsidiary company’s adjustments. The actuarial gains and losses for the period from 01/01 to 12/31/2011 were recognized in Results under “Personnel expenses”.

 

 
 

 

IV - Change in net assets, actuarial liabilities, and surplus

 

   12/31/2011   12/31/2010 
   Net assets   Actuarial
liabilities		   Surplus   Net assets   Actuarial
liabilities		   Surplus 
Present value – beginning of the period   11,167,828    (9,815,180)   1,352,648    14,757,268    (11,180,214)   3,577,054 
Effects of the partial spin-off of PAC (1);   -    -    -    (5,147,142)   2,709,982    (2,437,160)
Inclusion of Redecard Plan   60,817    (55,897)   4,920    -    -    - 
Inclusion of Itaú Defined Contribution Plan   11,748    (13,181)   (1,433)               
Effects of partial spin-off of Redecard (2)   (43,595)   42,357    (1,238)               
Expected return on assets (4)   1,341,662    -    1,341,662    1,334,336    -    1,334,336 
Cost of current service   -    (929,862)   (929,862)   -    (936,710)   (936,710)
Cost of interest   -    (91,529)   (91,529)   -    (84,043)   (84,043)
Benefits paid   (600,493)   600,493    -    (567,438)   567,438    - 
Contributions of sponsor   41,920    -    41,920    39,677    -    39,677 
Contributions of participants   9,300    -    9,300    40,910    -    40,910 
Actuarial gain/(loss) (3) (4)   (216,260)   (150,649)   (366,909)   710,217    (891,633)   (181,416)
Present value – end of the period   11,772,927    (10,413,448)   1,359,479    11,167,828    (9,815,180)   1,352,648 

(1) Corresponds to the effect of the partial spin-off of the PAC and creation of the Itaúbanco Defined Contribution Plan, which migration process resulted in the reduction and partial settlement of PAC payables. The reduction which implied a decrease in payables and thus in actuarial liabilities, made on December 31, 2009, is already adjusted in the opening balance (January 1, 2010). At March 31, 2010, the PAC participants who opted for the voluntary migration to Itaubanco CD Plan had all of their amounts payable settled by PAC through the initial contribution of the assets previously held by PAC for individuals accounts corresponding to the Itaubanco CD Plan. PAC is no longer responsible for any retirement benefit at the PAC level related to these participants. After the partial termination of PAC, assets were transferred from PAC to Itaúbanco CD Plan.

(2) During 2010, the Bank carried out the process of migrating participants of the Redecard Retirement Plan, structured as a defined benefit plan and subject to this disclosure of results, to the Redecard Pension Plan, structured as a defined contribution plan. For those participants migrating to the Redecard Pension Plan, the future benefits started to be accumulated under the defined contribution model and, therefore, there was no replacement by a benefit of a similar nature.

(3) Gains/losses recorded in Net Assets correspond to the income earned above/below the expected return rate of assets.

(4) The actual return on assets amounted to R$ 1,125,402 (R$ 2,044,553 at 12/31/2010).

 

The history of actuarial gains and losses is as follows:

 

   12/31/2011   12/31/2010 
Net assets of the plans   11,772,927    11,167,828 
Actuarial liabilities   (10,413,448)   (9,815,180)
Surplus   1,359,479    1,352,648 
Experience adjustments in net assets   (216,260)   710,217 
Experience adjustments in actuarial liabilities   (150,649)   (891,633)

 

V-Total revenue (expenses) recognized in income for the year

 

Total expenses recognized in defined benefit plans include components, as follows:

  

   12/31/2011   12/31/2010 
Cost of current service   (929,862)   (936,710)
Cost of interest   (91,529)   (84,043)
Expected return on the plan assets   1,341,662    1,334,336 
Effects of the partial spin-off of Redecard   (1,238)   - 
Effects of the partial spin-off of PAC   -    (2,437,160)
Effect on asset restriction   (153,931)   1,990,397 
Gain/(loss) for the year   (366,909)   (181,416)
Contributions of participants   9,300    40,910 
V- Total revenue (expenses) recognized in income for the year   (192,507)   (273,686)

 

During the period, contributions made totaled R$ 41,920 (R$ 39,677 at December 31, 2010). The contribution rate increases based on the beneficiary’s salary.

 

In 2012, the expected contribution to retirement plans sponsored by ITAÚ UNIBANCO HOLDING is R$ 38,870.

 

We present below the estimated benefit payments for the next 10 years:

 

  Period  Estimated
payment		 
2012   645,780 
2013   673,231 
2014   697,244 
2015   721,382 
2016   746,311 
2017 to 2021   4,118,739 

 

c)Defined contribution plans

 

The defined contribution plans have pension funds set up by the portion of sponsors’ contributions not included in the participant’s accounts balance and by the loss of eligibility to a plan benefit, as well as by resources from the migration from the defined benefit plans. The fund will be used for future contributions to the individual participants' accounts, according to the rules of the respective benefit plan regulation.

 

At December 31, 2011 the amount recognized in assets is R$ 1,443,186 (R$ 1,169,166 at 12/31/2010).

 

 
 

 

Total revenue recognized in defined contribution plans includes the following components:

 

   12/31/2011   12/31/2010 
Effect of the partial spin-off of PAC   -    1,476,743 
Contributions   (143,553)   (110,423)
Actuarial gain/(loss)   149,850    256,246 
Effect on asset restriction   267,722    (581,098)
Total revenue recognized in income for the year   274,019    1,041,468 

 

In conformity with the exemption set forth in CVM Resolution No. 647, gains and losses accumulated until 01/01/2010 were recognized in Stockholders’ equity, net of tax effects and, taking into account the subsidiary company’s adjustments. The actuarial gains and losses for the period from 01/01 to 12/31/2011 were recognized in Results under “Personnel expenses”.

 

In the period, contributions to the defined contribution plans, including PGBL, totaled R$ 192,631 (R$ 153,170 at 12/31/2010), of which R$ 143,553 (R$ 110,423 at 12/31/2010) arising from pension funds.

 

d)Other post-employment benefits

 

ITAÚ UNIBANCO HOLDING and its subsidiaries do not offer other post-employment benefits, except in those cases arising from maintenance obligations according to the acquisition agreements signed by Itaú Unibanco Holding, under the terms and conditions established, in which health plans are totally or partially sponsored for retired workers and beneficiaries.

 

I-Changes

 

Based on the report prepared by an independent actuary, the changes in obligations for these other projected benefits and the amounts recognized in the balance sheet, under liabilities, of Itaú Unibanco Holding are as follows:

 

   12/31/2011   12/31/2010 
At the beginning of the year   (105,335)   (100,280)
Cost of interest   (9,968)   (9,995)
Benefits paid   5,892    5,218 
Actuarial loss   (10,743)   (278)
At the end of the year   (120,154)   (105,335)

 

In conformity with the exemption set forth in CVM Resolution No. 647, gains and losses accumulated until 01/01/2010 were recognized in Stockholders’ equity, net of tax effects and, taking into account the subsidiary company’s adjustments. The actuarial gains and losses for the period from 01/01 to 12/31/2011 were recognized in Results under “Personnel expenses”.

 

We present below the estimated benefit payments for the next 10 years:

 

  Period  Estimated
payment		 
2012   6,366 
2013   6,852 
2014   7,362 
2015   7,854 
2016   8,363 
2017 to 2021   50,248 

 

II-Assumptions and sensitivities 1%

 

For calculation of benefits obligations projected beyond the assumptions used for the defined benefit plans (Note 19b l), the 8.16% p.a. increase in medical costs assumption is adopted.

 

Assumptions for rates related to medical assistance costs have a significant impact on the amounts recognized in income. A change of one percentage point in the medical assistance cost rates would have the effects as follows:

 

   1.0% increase   1.0% decrease 
Effects on service cost and cost of interest   1,609    (1,321)
Effects on present value of obligation   16,559    (13,563)

 

 
 

 

NOTE 20 – INFORMATION ON FOREIGN SUBSIDIARIES

 

   Foreign branches (1)   Itaú Argentina
Consolidated (2)		   Itaú Europa Consolidated
(3)		   Cayman Consolidated (4)   Chile Consolidated (5)   Uruguay Consolidated (6)   Banco Itaú Paraguay   Other foreign companies
(7)		   Foreign consolidated (8) 
   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010 
Assets                                                                                          
Current assets and long-term receivables                                                                                          
Cash and cash equivalents   1,742,219    1,854,460    162,197    107,681    399,289    1,028,679    3,732,507    2,162,500    892,932    409,999    828,153    380,289    369,102    170,737    1,472,131    1,305,758    4,595,382    4,407,432 
Interbank investments   16,006,563    8,601,130    249,457    183,488    2,690,641    3,135,597    6,357,842    4,835,807    56,573    299,580    816,640    544,708    32,851    57,919    252,388    21,512    17,684,723    10,375,327 
Securities   40,283,158    33,269,475    227,815    258,751    1,729,838    1,295,038    4,711,182    5,109,620    1,891,145    1,831,224    308,663    881,257    344,029    260,718    6,973    919    48,913,877    41,464,960 
Loan, lease and other credit operations   34,637,723    24,536,298    2,117,572    1,322,766    7,407,031    5,374,224    296,104    259,855    12,307,646    9,066,002    2,092,680    1,352,734    2,304,880    1,404,898    6,407    4,836    61,077,226    43,242,378 
Foreign exchange portfolio   21,503,413    21,612,033    20,355    55,379    2,220,248    1,186,232    554,360    561,799    306,398    193,915    21,401    4,909    127,977    53,017    -    -    24,097,405    23,252,906 
Other assets   1,129,576    1,252,526    530,249    319,870    159,266    186,947    767,173    2,255,453    923,661    300,364    720,298    385,144    513,215    312,377    137,672    132,754    4,822,472    5,086,166 
Permanent assets                                                                                          
Investments   21,984    27,338    2,102    2,158    111,023    336,799    46,317    38,784    2,925    1,111    751    470    880    748    116,467    355,447    256,132    722,658 
BPI (Note 15a II)   -    -    -    -    107,194    334,350    -    -    -    -         -    -    -    111,569    347,997    218,763    682,726 
Other investments   21,984    27,338    2,102    2,158    3,829    2,449    46,317    38,784    2,925    1,111    751    470    880    748    4,898    7,450    37,369    39,932 
Fixed and intangible assets   24,280    20,569    106,341    92,423    177,411    176,250    2,678    2,295    287,996    210,867    26,085    22,623    32,221    20,512    38,788    44,421    695,796    589,960 
Total   115,348,916    91,173,829    3,416,088    2,342,516    14,894,747    12,719,766    16,468,163    15,226,113    16,669,276    12,313,062    4,814,671    3,572,134    3,725,155    2,280,926    2,030,826    1,865,647    162,143,013    129,141,787 
                                                                                           
LIABILITIES                                                                                          
Current and long-term liabilities                                                                                          
Deposits   43,356,785    24,477,809    2,598,633    1,783,186    6,192,719    6,352,683    2,416,346    1,414,787    10,654,802    7,661,939    3,691,100    2,748,669    2,665,151    1,724,553    -    -    58,883,455    36,946,695 
Demand deposits   8,298,986    4,404,196    618,347    495,541    2,480,885    2,403,725    1,093,902    775,356    1,658,829    1,331,334    2,177,917    1,527,082    920,216    664,433    -    -    12,245,652    8,560,345 
Savings deposits   -    -    580,095    494,490    -    -    -    -    -    -    1,289,019    877,345    1,127,196    781,401    -    -    2,996,310    2,153,236 
Interbank deposits   1,573,226    3,077,211    64,523    10,452    1,503,552    2,568,377    -    416,242    -    1,242    7,532    9,483    -    -    -    -    2,520,833    1,540,906 
Time deposits   33,484,573    16,996,402    1,335,668    782,703    2,208,282    1,380,581    1,322,444    223,189    8,995,973    6,329,363    216,632    334,759    617,739    278,719    -    -    41,120,660    24,692,208 
Deposits received under securities repurchase agreements   6,538,738    14,752,992    70,772    99,183    -    -    1,844,753    1,785,560    105,704    157,091    -    -    -    2,354    -    -    7,404,766    15,585,589 
Funds from acceptance and issuance of securities   8,909,700    3,311,035    -    -    3,386,604    2,488,408    2,895,861    2,952,541    1,320,737    1,088,509    -    -    -    -    -    -    16,508,555    9,816,115 
Borrowings   14,343,973    9,763,083    96,051    32,929    561,044    625,577    39,590    89,037    1,304,344    860,070    29,854    32,698    322,203    112,454    31,058    27,866    16,697,060    11,517,597 
Derivative financial instruments   1,435,218    1,712,751    372    (3,644)   699,537    257,447    620,175    1,168,232    184,275    165,077    1,035    2,285    -    -    -    -    2,421,775    1,993,690 
Foreign exchange portfolio   21,492,533    21,623,597    20,361    55,636    2,223,737    1,199,411    547,446    550,829    305,630    193,752    21,395    4,931    131,866    51,028    -    -    24,086,221    23,264,806 
Other liabilities   6,035,232    5,814,763    318,394    191,592    478,248    379,689    864,520    912,178    836,897    770,331    689,943    484,904    148,739    71,940    127,189    147,168    9,378,919    8,662,496 
Deferred income   48,222    38,093    -    -    23,410    20,330    99    209    5,502    1,207    3,767    -    154    46    3,108    2,436    84,262    62,321 
Minority interest in subsidiaries   -    -    8,717    34,592    63    36    -    27    172    143    -    -    -    -    4    6    272    282 
Stockholders’ equity                                                                                          
Capital and reserves   11,163,788    8,422,399    276,795    147,742    1,433,568    1,299,281    7,177,436    6,428,298    1,802,538    1,246,464    316,031    244,535    310,426    224,439    2,052,613    1,660,946    24,489,444    19,670,311 
Net income for the period   2,024,727    1,257,307    25,993    1,300    (104,183)   96,904    61,937    (75,585)   148,675    168,479    61,546    54,112    146,616    94,112    (183,146)   27,225    2,188,284    1,621,885 
Total   115,348,916    91,173,829    3,416,088    2,342,516    14,894,747    12,719,766    16,468,163    15,226,113    16,669,276    12,313,062    4,814,671    3,572,134    3,725,155    2,280,926    2,030,826    1,865,647    162,143,013    129,141,787 
Statement of Income                                                                                          
Income from financial operations   2,630,283    1,955,113    349,548    236,224    264,674    240,506    353,217    147,512    920,740    759,034    178,202    145,236    294,625    176,410    13,202    (20,553)   4,878,691    3,594,253 
Expenses of financial operations   (810,930)   (661,375)   (105,767)   (67,639)   (106,974)   (135,523)   (197,766)   (195,588)   (476,266)   (259,519)   (12,577)   (10,245)   (61,451)   (31,253)   (3,417)   (4,994)   (1,661,723)   (1,301,950)
Result of loan losses   188,798    (70,516)   (18,063)   (11,034)   2,606    18,277    -    -    (57,178)   (114,306)   (25,351)   (16,780)   (31,214)   (4,588)   (3,333)   (2,962)   56,265    (201,909)
Gross income from financial operations   2,008,151    1,223,222    225,718    157,551    160,306    123,260    155,451    (48,076)   387,296    385,209    140,274    118,211    201,960    140,569    6,452    (28,509)   3,273,233    2,090,394 
Other operating revenues (expenses)   24,182    46,089    (223,809)   (166,013)   (224,648)   16,954    (92,243)   (26,674)   (217,758)   (175,141)   (45,046)   (42,644)   (39,458)   (35,497)   (166,456)   62,994    (972,266)   (339,804)
Operating income   2,032,333    1,269,311    1,909    (8,462)   (64,342)   140,214    63,208    (74,750)   169,538    210,068    95,228    75,567    162,502    105,072    (160,004)   34,485    2,300,967    1,750,590 
Non-operating income   (7,499)   (11,783)   40,345    8,277    1,360    (2,563)   297    266    3,124    (6,675)   100    (29)   (1,206)   (626)   1,705    6,275    35,438    (6,858)
Income before taxes on income and profit sharing   2,024,834    1,257,528    42,254    (185)   (62,982)   137,651    63,505    (74,484)   172,662    203,393    95,328    75,538    161,296    104,446    (158,299)   40,760    2,336,405    1,743,732 
Income tax   (108)   (221)   (7,943)   488    (34,276)   (36,203)   -    (61)   (23,947)   (34,894)   (33,782)   (21,426)   (14,680)   (10,334)   (24,849)   (13,538)   (139,584)   (116,240)
Statutory participation in income   -    -    -    -    (6,925)   (4,545)   (1,568)   (1,044)   (14)   -    -    -    -    -    -    -    (8,507)   (5,589)
Minority interest in subsidiaries   -    -    (8,318)   997    -    1    -    4    (26)   (20)   -    -    -    -    2    3    (30)   (18)
Net income (loss)   2,024,727    1,257,307    25,993    1,300    (104,183)   96,904    61,937    (75,585)   148,675    168,479    61,546    54,112    146,616    94,112    (183,146)   27,225    2,188,284    1,621,885 

(1)Itaú Unibanco S.A. - Grand Cayman, New York, Tokyo, and Nassau branches; Banco Itaú-BBA S.A - Nassau Branch; Itaú Unibanco Holding S.A - Grand Cayman branch and Unibanco Grand Cayman branch; only at 12/31/2010 Banco Itaú BBA S.A. Uruguay branch.
(2)Banco Itaú Argentina S.A, Itaú Asset Management S.A.Sociedad Gerente de Fondos Comunes de Inversión, Itrust Servicios Inmobiliarios S.A.C.I and Itaú Sociedad de Bolsa S.A.
(3)IPI - Itaúsa Portugal Investimentos, SGPS Lda. (49%), Itaúsa Europa - Investimentos, SGPS, Lda., Itaú Europa, SGPS, Lda., Itaúsa Portugal - SGPS, S.A., Banco Itau BBA International, S.A , Itau BBA International (Cayman) Ltd., Banco Itaú Europa Luxembourg S.A., BIE Cayman, Ltd., Banco Itaú Europa International, Itaú Bank & Trust Bahamas Ltd., Itaú Europa Securities Inc., BIE Directors Ltd, BIE Nominees, Lda, Federal Director International Services, S.A., Bay State Corporation Limited and Banco Itau Suisse S.A; only at 12/31/2010, BIEL Holdings AG, Fin Trade, BIEL Fund Management Company S.A., Itaú Europa Luxembourg Advisory Hold. Company S.A, Itaú Madeira Investimentos SGPS Ltda., Kennedy Director International Services S.A. and Cape Ann Corporation Limited.
(4)Itau Bank Ltd., ITB Holding Ltd., Jasper International Investment LLC, Unibanco Cayman Bank Ltd., Itaú Bank & Trust Cayman Ltd., Itau USA Asset Management, Uni-Investments Inter. Corp., Unipart Partic. Internac. Ltd., Rosefield Finance Ltd. and UBT Finance S.A.; only at 12/31/2010, BFB Overseas N.V, BFB Overseas Cayman, Ltd., UBB Delaware I LLC. and Unibanco Securities Inc.
(5)Itaú Chile Holdings, Inc., BICSA Holdings LTD., Banco Itaú Chile S.A., Itaú Chile Inversiones, Servicios Y Administración S.A., Itaú Chile Corredor de Bolsa Ltda., Itaú Chile Corredora de Seguros Ltda., Itaú Chile Administradora General de Fondos S.A., Itaú Chile Securitizadora S.A., Recuperadora de Créditos Ltda and Itaú Chile Compañia de Seguros de Vida S.A; only at 12/31/2011, MCC Asesorias Limitada (50%) and MCC Securites INC. (50%).
(6)ACO Ltda., Banco Itaú Uruguay S.A., OCA Casa Financiera S.A., OCA S.A, and Unión Capital AFAP S.A;
(7)Afinco Americas Madeira, SGPS, Soc. Unipessoal Ltda., Zux Cayman Company Ltd., Topaz Holding Ltd., United Corporate Services Inc (new company name of Itaú USA Inc), Itaú International Investment LLC, Albarus S.A., Banco Del Paraná S.A., Garnet Corporation, Itau Global Asset Management, Mundostar S.A., Karen International Ltd., Nevada Woods S.A., Itaú Asia Securities Ltd., Líbero Trading International Ltd., IPI - Itaúsa Portugal Investimentos, SGPS Lda. (51%), Itaú BBA USA Securities Inc., Itaú Middle East Limited (new company name of Itaú Middle East Securities Limited), Unipart B2B Investments, S.L., Tarjetas Unisoluciones S. A. de Capital Variable, Proserv - Promociones Y Servicios S.A. de C. V, Itau BBA UK Securities Limited, Itaú Japan Asset Management Ltd. Itaú (Beijing) Investment Consultancy Limited; only at 12/31/2011: Itaú UK Asset Management Limited, Itaú BBA SAS and Itaú Asia Asset Management Limited; only at 12/31/2010: Zux SGPS Lda., Agate SARL, Amethyst Holding Ltd., Spinel Corporation and Tanzanite Corporation.
(8)Foreign consolidated information presents balances net of eliminations from consolidation.

 

 
 

 

NOTE 21 – RISK MANAGEMENT

 

The purpose of risk identification is to map the risk events of internal and external nature that may affect the strategies of support and business units and the fulfillment of their objectives, with possibility of impact on income, capital and liquidity of the Bank.

 

Risk management is considered by Itaú Unibanco Holding an essential tool for optimizing the use of capital and selecting the best business opportunities, in order to obtain the best risk-return ratio.

 

At Itaú Unibanco Holding, Risk Management is the process in which:

 

·The existing and potential risks from the bank operations are identified and measured;
·Policies, procedures and methodologies for risk management and control consistent with the Board of Directors’ guidelines and the bank’s strategies are approved;
·The bank’s risk portfolio is managed considering the best risk-return ratio;

 

This process interweaves the whole institution, with full involvement of top management that, through committees, defines the global objectives that are measured as goals and limits to the risk management units. Control units, in turn, support the bank’s management by monitoring and analyzing risk.

 

Itaú Unibanco’s risk management organizational structure is in accordance with the Basel Accord’s recommendations. The control structure of Market, Credit, Liquidity, Operational and Underwriting risks is centralized at Itaú Unibanco Holding aiming at assuring that the conglomerate risks are being managed in accordance with established policies and procedures. The purpose of centralizing control is to provide top management with an overview of conglomerate’s risk exposure, so as to optimize and speed up corporate decision-making.

 

The purpose of that structure is to follow up the regulatory requirements issued by the conglomerate’s lead institution. Itaú Unibanco manages proprietary IT systems to fully meet the applicable rules on capital reserve in connection with the capital portions, pursuant to determinations and models issued by the Central Bank (BACEN). It also coordinates actions to check for adherence to qualitative and quantitative requirements established by the relevant authorities for compliance with the minimum mandatory capital requirement. Further information on risk management can be found on the Investor Relations website www.itau-unibanco.com.br/ri, in the section Corporate Government/Risk Management – Circular 3,477.

 

Aiming at complying with Resolution No. 3,988 of June 30, 2011 of the National Monetary Council (CMN), Itaú Unibanco is in the process of defining and implementing its capital management structure. The Board of Directors has recently approved the appointment of a director in charge and the definition of the required structure to meet the resolution requirements, applicable to the whole financial group and the other companies included in the economic-financial consolidated.

 

I – Market Risk

 

Market risk is the possibility of incurring losses arising from variations in market values of positions held by a financial institution, including the risks of transactions subject to the variations in foreign exchange and interest rates, and equities and commodity prices.

 

The market risk management is the process through which the institution plans, monitors and controls the risks of variations in financial instruments market values, aiming at optimizing the risk-return ratio, by using an appropriate structure of management limits, models and tools.

 

The scope of the market risk control carried out by Itaú Unibanco Holding is extended to all the financial instruments included in the portfolios of companies under its responsibility. In this sense, the Itaú Unibanco’s Market Risk Management Policy is in line with the principles of CMN Resolution No. 3,464 of June 26, 2007, issued by the National Monetary Council (CMN), being a set of principles that drive the institution’s strategy towards control and management of market risk of all business units and legal entities of the Itaú Unibanco Group.

 

The document that details the guidelines set out by this internal policy on market risk control can be read on the website www.itau-unibanco.com.br/ri, in the section Corporate Governance, Rules and Policies, Public Access Report – Market Risk.

 

 
 

 

The control of market risk is carried out by an area independent from the business ones, and is responsible for carrying out daily measurement, assessment and report activities by way of control units set in the legal entities of Itaú Unibanco group. The independent area also performs the monitoring, assessment and consolidated reporting of market risk information, including possible extrapolation of risk limits, reporting the event to the business unit in charge and monitoring the actions required to adjust the position and/or risk level. For this purpose, the bank relies on a structured communication and information process, aiming at providing feedback for the follow-up of the superior committees and compliance with the regulatory bodies in Brazil and abroad.

 

The market risk control and management process is submitted to periodic reviews, aimed at keeping it aligned with the best market practices and adhering to the continuous improvement processes at Itaú Unibanco Holding.

 

The process for managing market risks of Itaú Unibanco occurs within the governance and hierarchy of committees and limits approved specifically for this purpose, and that covers from the monitoring of aggregate indicators of risk, of granular limits, assuring effectiveness and coverage of control. These limits are dimensioned considering the projected results of the balance sheet, the level of equity and the profile of risk of each legal entity, which are defined in terms of risk measures used by management. Limits are monitored daily and excesses are reported and discussed in the corresponding committees.

 

The market risk analyses are conducted based on the following metrics:

 

·Statistical Value at Risk (VaR): Statistical measure that estimates the expected maximum potential economic loss in normal market conditions, considering a defined holding period and confidence level;
·Losses in Stress Scenarios: simulation technique to assess the behavior of assets and liabilities of a portfolio when several risk factors are taken to extreme market situations (based on prospective scenarios);
·Stop Loss Alert: effective losses added to the maximum potential loss in bullish and bearish scenarios;
·P&L To Be Realized (RaR): assessment of the difference between the appropriated interest amount and the market value on a certain date, in an usual scenario and stressed scenarios, reflecting accounting asymmetries and P&L expected to be realized. This is one of the risk measures used to managerially assess the risk of the banking portfolio.
·Earnings at Risk (EaR): measure that quantifies the impact in P& L in the balance sheet for adverse conditions of variation in interest rates;

 

In addition to the aforementioned risk measures, sensitivity and loss control measures are also analyzed. Among them, the following is included:

 

·Mismatching (gap) analysis: graphic representation by risk factor of cash flows expressed at market value, allocated at the maturity dates;
·Sensitivity (DV1): impact on the market value of cash flows, when submitted to an increase in 1 basis point per year in the future interest rate curve; Applied to risk factors;
·Sensitivity to Several Risk Factors (Greeks): partial derivatives of an option portfolio in relation to the price of the underlying asset, implied volatility, interest rate and time.
·Stop Loss: the maximum loss that a certain portfolio classified in the trading portfolio is authorized to reach.

 

The limits and exposure to market risks are relatively low as compared to the company’s stockholders’ equity.

 

In December 2011, Itaú Unibanco recorded a Total Global VaR of R$ 151 million (R$ 163 million in September 2011).

 

 
 

 

II – Credit Risk

 

Credit risk is the possibility of incurring losses in connection with the breach by the borrower or counterparty of the respective agreed-upon financial obligations, devaluation of loan agreement due to downgrading of the borrower’s risk rating, reduction in gains or compensation, advantages given upon renegotiation and recovery costs.

 

In line with the principles of CMN Resolution No. 3,721 of April 30, 2009, Itaú Unibanco has a structure for and a policy on credit risk management, approved by its Board of Directors, applicable to the companies and subsidiaries in Brazil and abroad.

 

The document that outlines the guidelines set out by this internal policy on credit risk control can be read on the website www.itau-unibanco.com.br/ri, in the section Corporate Governance, Rules and Policies, Public Access Report – Credit Risk.

 

The objective of Itaú Unibanco’s credit risk management is to maximize the risk and return ratio of its assets, maintaining the credit portfolio quality at levels appropriate to the market segments in which it is operating. The strategy is aimed at creating value to its stockholders so as to give rise to returns at levels higher than the minimum return value adjusted to the risk of each business.

 

Itaú Unibanco establishes its credit policy based on internal factors, such as the client rating criteria and the portfolio development analysis, the registered default levels, the incurred return rates, the portfolio quality and the allocated economic capital; and external factors, related to the economic environment in Brazil and abroad, including market share, interest rates, market default indicators, inflation and consumption increase/decrease.

 

Itaú Unibanco’s centralized process for making decisions and establishing a credit policy guarantees the synchrony of credit actions and optimization of business opportunities. In retail, decisions are made based on scoring models that are continuously followed up by an independent structure, evaluating the result of their application in groups to which credits were granted. In wholesale, the credit proposals are analyzed on a case by case basis, through an approval-level mechanism that ensures the detailed observation of transaction risk, as well as the necessary timing and flexibility of their approval.

 

To protect the institution against losses arising from loan operations, Itaú Unibanco considers all aspects that determine the client’s credit risk to define the provision level commensurate with the risk incurred in each operation. For each operation, the assessment and rating of the client or economic group, the operation rating, and the possible existence of past-due amounts are taken into account.

 

Itaú Unibanco recognizes a provision additional to that required by BACEN, aiming at ensuring a provision level compatible with the expected loss model adopted by the institution's credit risk management, based on internal models. This allowance is usually quantified in view of the past performance of loan portfolios, based on exposure, probabilities of default and expected recovery of transactions.

 

III – Operational Risk

 

The operational risk is the possibility of incurring losses arising from failure, deficiency or inadequacy of internal processes, personnel and systems, or external events. It includes the legal risk, associated with the inadequacy or deficiency in agreements signed by the institution, as well as sanctions for failing to meet legal provisions and compensation for damages to third parties arising from activities performed by the institution. That definition does not include the strategic risk and reputation risk.

 

The increasing sophistication of banking business environment and the development of technology make the risk profiles of organizations more complex, clearly outlining this risk class, which management is not a new practice, but now requires a specific structure, different from those traditionally adopted for credit and market risks. Therefore, operational risk management becomes important since, it assures the identification, assessment/measurement, response, monitoring and reporting of the exposure to the organization’s operational risk.

 

 
 

 

In line with the principles of CMN Resolution No. 3,380 of June 29, 2006, Itaú Unibanco Holding formulated a policy on operational risk management, approved by its Board of Directors, applicable to the companies and subsidiaries in Brazil and abroad.

 

The policy comprises a set of principles, procedures and tools to enable the company to make permanent adjustments to operational risk management, in view of the nature and complexity of products, services, activities, processes and systems.

 

The structure formalized in this policy establishes procedures for the identification, assessment, mitigation, monitoring and communications related to operational risks, as well as the roles and responsibilities of the bodies that participate in this structure. A summarized version of such policy is available on the website www.itau-unibanco.com.br/ri in the section Corporate Governance, Rules and Policies, Public Access Report – Operational Risk.

 

The BACEN’s legislation compelling financial institutions to allocate capital for operational risk came into effect as from July 1, 2008. Itaú Unibanco opted for the use of the Alternative Standardized Approach.

 

IV – Liquidity Risk

 

Liquidity risk is the occurrence of imbalances between tradable assets and falling due liabilities - mismatching between payments and receipts - which may affect the institution’s payment capacity, taking into consideration the different currencies and payment terms and their rights and obligations.

 

Management of liquidity risk seeks to adopt best practices to avoid having insufficient cash available and to avoid difficulties in meeting obligations due.

 

Itaú Unibanco has a structure dedicated to monitoring, controlling and analyzing liquidity risk, through models of variables projections that affect cash flows and the level of reserves in local and foreign currencies.

 

Additionally, the institution establishes guidelines and limits whose compliance is periodically analyzed in technical committees and whose purpose is providing safety margin in addition to the minimum projected needs. Liquidity management policies and associated limits are established based on prospective scenarios that are regularly reviewed and on top management definitions.

 

V - Underwriting Risk

 

Underwriting risk is the risk arising from an adverse economic situation, which is contrary to the insurance company’s expectations when it establishes its underwriting policy, and uncertainties existing in the estimate of reserves.

 

Analogous to Basel II, the International Association of Insurance Supervisors (IAIS) instructs that insurance companies should have a risk management system to supplement the system of minimum capital and solvency margin.

 

The centralized control of underwriting risk is conducted by the risk control area that is separate from the business units and internal audit department. That area’s role is to design internal models for measuring underwriting risk and create the conditions necessary to validate and control these models. Another role of the risk control area is to examine changes in policies and follow up the performance of insurance, pension plans and capitalization portfolios.

 

 
 

NOTE 22 – ADDITIONAL INFORMATION

 

a)Insurance policy - ITAÚ UNIBANCO HOLDING and its subsidiaries, despite the low risk exposure due to a physical non-concentration of their assets, have the policy to guarantee itsr valuables and assets at amounts considered sufficient to cover possible claims.

 

b)Foreign currency – the balances in Reais linked to the foreign currency were:

 

   12/31/2011   12/31/2010 
Permanent foreign investments   26,677,728    21,292,196 
Net amount of other assets and liabilities indexed to foreign currency, including derivatives   (42,093,627)   (36,878,785)
Net foreign exchange position   (15,415,899)   (15,586,589)

 

The net foreign exchange position, considering the tax effects on the net balance of other assets and liabilities indexed to foreign currency, reflects the low exposure to exchange variations.

 

c)Investment funds and managed portfolios - ITAÚ UNIBANCO HOLDING, through its subsidiaries, manages the following types of funds: privatization, fixed income, shares, open portfolio shares, investment clubs, customer portfolios and group portfolios, domestic and foreign, classified in memorandum accounts, distributed as follows:

 

   Amount   Amount (*)   Number of funds 
   12/31/2011   12/31/2010   12/31/2011   12/31/2010   12/31/2011   12/31/2010 
Investment funds   320,179,652    284,363,470    320,179,652    284,363,470    3,065    1,793 
Fixed income   305,242,003    252,737,578    305,242,003    252,737,578    2,415    1,495 
Shares   14,937,649    31,625,892    14,937,649    31,625,892    650    298 
Managed portfolios   161,077,902    146,745,380    83,726,157    79,454,761    15,225    16,804 
Customers   89,886,443    80,889,823    72,478,230    64,767,226    15,128    16,732 
Itaú Group   71,191,459    65,855,557    11,247,927    14,687,535    97    72 
TOTAL   481,257,554    431,108,850    403,905,809    363,818,231    18,290    18,597 
(*)It refers to the distribution after elimination of double-counting of managed portfolios in investment funds.

 

d) Funds of consortia

 

   12/31/2011   12/31/2010 
Monthly estimate of installments receivable from participants   77,097    52,465 
Group liabilities by installments   6,206,775    3,662,270 
Participants – assets to be delivered   5,830,775    3,427,044 
Funds available for participants   492,514    350,377 
(In units)          
Number of managed groups   755    679 
Number of current participants   204,668    162,841 
Number of assets to be delivered to participants   121,573    102,071 

 

 
 

 

e)Fundação Itaú Social - ITAÚ UNIBANCO HOLDING and its subsidiaries are the main sponsors of Fundação Itaú Social, the objectives of which are: 1) managing the “Itaú Social Program”, which aims at coordinating the organization’s role in projects of interest to the community by supporting or developing social, scientific and cultural projects, mainly in the elementary education and health areas; 2) supporting projects or initiatives in progress, supported or sponsored by entities qualified to work in the ”Programa Itaú Social” (Itaú Social Program); and 3) providing food and other similar benefits to the employees of ITAÚ UNIBANCO HOLDING and other companies of the group.

 

Donations made by the consolidated companies totaled R$ 280 (R$ 273 at December 31, 2010) in the period, and the Foundation’s social net assets totaled R$ 3,052,977 (R$ 3,080,923 at December 31, 2010). The income arising from its investments will be used to achieve the Foundation's social purposes.

 

f)Instituto Itaú Cultural – IIC - ITAÚ UNIBANCO HOLDING and its subsidiaries are supporters of Instituto Itaú Cultural - IIC, an entity formed to grant incentives, promote and preserve Brazil’s cultural heritage. During the period, the consolidated companies donated the amount of R$ 56,400 (R$ 44,000 from January 1 to December 31, 2010).

 

g)Instituto Unibanco - ITAÚ UNIBANCO HOLDING and its subsidiaries sponsor Instituto Unibanco, an entity whose objective is to support projects on social assistance, particularly education, culture, promotion of integration to labor market, and environmental protection, directly and/or supplementarily, through the civil society’s institutions.

 

h)  Instituto Unibanco de Cinema - ITAÚ UNIBANCO HOLDING and its subsidiaries sponsor Instituto Unibanco de Cinema, an entity whose objective is (i) the fostering of culture in general; and (ii) providing access of low-income population to cinematography, videography and similar productions, for which it shall maintain movie theaters owned or managed by itself, and theaters to screen films, videos, video-laser discs and other related activities, as well as to screen and divulge films of great importance, especially those produced in Brazil.

 

i)Associação Clube “A” - ITAÚ UNIBANCO HOLDING and is subsidiaries sponsor Associação Clube “A”, an entity whose objective is the provision of social services for the welfare of beneficiaries, in the way and conditions established by its Internal Rules, and according to the funds available. These services may include, among others, the promotion of cultural, educational, sports, entertainment and health care activities. During the period from January 1 to December 31, 2011, the consolidated companies made donations to Clube “A” in the amount of R$ 400 (R$ 1,707 from January 1 to December 31, 2010).

 

j)Instituto Assistencial Pedro di Perna - ITAÚ UNIBANCO HOLDING and its subsidiaries sponsor Instituto Assistencial Pedro di Perna, an entity whose objective is the provision of social services, stimulate sport activities, and promote recreation, aimed at the welfare of its members, in the way and conditions established by its Internal Rules, and according to the funds available.

 

k)Exclusions of nonrecurring effects net of tax effects – Holding and Holding Consolidated

 

   ITAÚ UNIBANCO HOLDING 
   01/01 to
12/31/2011		   01/01 to
12/31/2010		 
Additional allowance for loan losses (Note 8c)   -    1,037,919 
Program for Settlement or Installment Payment of Federal Taxes - Law No. 11,941/09 (Notes 12b and 14)   508,993    144,712 
Provision for contingencies – economic plans (Note 12)   (284,665)   (847,355)
Market value based on the share price – BPI (Note 15a II)   (244,697)   - 
Benefits to Employees (Note 19)   -    (34,961)
Total   (20,369)   300,315 

 

 
 

 

l)Reclassifications for comparison purposes – The Company carried out reclassifications in the balances of December 31, 2010, for financial statements comparison purposes, in view of the change in the percentage used for financial statements consolidation purposes (Note 2b) and regrouping of the following headings: In the Balance Sheet, the reclassification of the Reward Program from Other Liabilities - Credit Card Operations to Deferred Income, and the reclassification of Technical Provision for Insurance, Pension Plan and Capitalization to Other Receivables – Receivables from Insurance and Reinsurance Operations. In Statement of Income, the reclassification of Provision for Tax and Social Security from Other Operating Expenses to Other Operating Revenues, the reclassification of the Reward Program from Other Operating Expenses to Banking Service Fees, in compliance with CVM Resolution No. 597, of September 15, 2009 and the reclassification of Income from Credit Cards and Securities Brokerage from Banking Service Fees to Income from Bank Charges.

 

   Prior disclosure   Reclassification/
deconsolidation		   Adjusted balances 
CURRENT ASSETS AND LONG-TERM RECEIVABLES   744,600,668    (4,136,610)   740,464,058 
CASH AND CASH EQUIVALENTS   10,493,161    (396,621)   10,096,540 
INTERBANK INVESTMENTS   85,925,793    432,928    86,358,721 
Money market   68,181,744    (3,811)   68,177,933 
Interbank deposits   14,398,112    436,739    14,834,851 
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS   188,852,602    (2,290,187)   186,562,415 
Own portfolio   49,370,391    (725,806)   48,644,585 
Derivative financial instruments   8,313,742    (6,553)   8,307,189 
Assets guaranteeing technical provisions - PGBL/VGBL fund quotas   46,320,761    (270,013)   46,050,748 
Assets guaranteeing technical provisions – other securities   9,205,110    (1,287,815)   7,917,295 
INTERBANK ACCOUNTS   86,513,111    (2)   86,513,109 
Central Bank deposits   85,776,472    (2)   85,776,470 
INTERBRANCH ACCOUNTS   10,543    (112)   10,431 
LOAN, LEASE AND OTHER CREDIT OPERATIONS   274,809,552    (1,774,926)   273,034,626 
Operations with credit granting characteristics   297,101,886    (2,049,042)   295,052,844 
 (Allowance for loan losses)   (22,292,334)   274,116    (22,018,218)
OTHER RECEIVABLES   94,851,106    (1,289,545)   93,561,561 
Income receivable   1,031,793    60,426    1,092,219 
Receivables from insurance and reinsurance operations   3,660,803    (624,968)   3,035,835 
Sundry   47,425,483    (725,003)   46,700,480 
OTHER ASSETS   3,144,800    1,181,855    4,326,655 
Assets held for sale   181,707    (31,358)   150,349 
Prepaid expenses   2,607,913    1,213,213    3,821,126 
PERMANENT ASSETS   10,511,659    467,393    10,979,052 
INVESTMENTS   2,134,713    1,115,075    3,249,788 
Investments in affiliates   937,105    1,121,883    2,058,988 
Other investments   1,389,620    (10,550)   1,379,070 
 (Allowance for loan losses)   (192,012)   3,742    (188,270)
REAL ESTATE IN USE   5,020,757    (296,966)   4,723,791 
Real estate in use   4,577,762    (1,286,020)   3,291,742 
Other fixed assets   7,179,007    819,891    7,998,898 
 (Accumulated depreciation)   (6,736,012)   169,163    (6,566,849)
INTANGIBLE ASSETS   3,284,573    (350,716)   2,933,857 
Other intangible assets   2,839,135    (382,157)   2,456,978 
 (Accumulated amortization)   (1,969,259)   31,441    (1,937,818)
TOTAL ASSETS   755,112,327    (3,669,217)   751,443,110 
CURRENT AND LONG-TERM LIABILITIES   689,903,664    (3,617,867)   686,285,797 
DEPOSITS   202,738,135    (50,078)   202,688,057 
Demand deposits   25,531,744    5,390    25,537,134 
Interbank deposits   1,984,960    (55,543)   1,929,417 
Time deposits   116,416,300    75    116,416,375 
DEPOSITS RECEIVED UNDER SECURITIES REPURCHASE AGREEMENTS   199,640,802    15,551    199,656,353 
Own portfolio   164,880,825    15,551    164,896,376 
FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES   25,608,838    (17,119)   25,591,719 
Real estate, mortgage, credit and similar notes   14,294,810    (17,121)   14,277,689 
INTERBANK ACCOUNTS   799,030    (387,128)   411,902 
Correspondents   510,728    (387,128)   123,600 
INTERBRANCH ACCOUNTS   3,256,185    (15)   3,256,170 
Internal transfer of funds   35,001    (15)   34,986 
BORROWINGS AND ONLENDING   47,411,730    (73,766)   47,337,964 
Borrowings   15,722,620    (73,766)   15,648,854 
TECHNICAL PROVISION FOR INSURANCE, PENSION PLAN AND CAPITALIZATION   61,364,916    (814,149)   60,550,767 
OTHER LIABILITIES   143,379,193    (2,291,163)   141,088,030 
Collection and payment of taxes and contributions   695,045    (686)   694,359 
Social and statutory   4,507,448    (44,914)   4,462,534 
Tax and social security   23,130,156    (697,005)   22,433,151 
Credit card operations   38,120,842    (1,246,009)   36,874,833 
Sundry   17,961,530    (302,549)   17,658,981 
DEFERRED INCOME   598,894    166,971    765,865 
MINORITY INTEREST IN SUBSIDIARIES   3,731,224    (218,321)   3,512,903 
TOTAL LIABILITIES   755,112,327    (3,669,217)   751,443,110 

 

 
 

 

STATEMENT OF INCOME  Prior
disclosure		   Reclassification/
deconsolidation		   Adjusted
balances		 
INCOME FROM FINANCIAL OPERATIONS   80,325,961    (699,039)   79,626,922 
Loan, lease and other credit operations   51,747,503    (432,881)   51,314,622 
Securities and derivative financial instruments   18,772,105    (58,085)   18,714,020 
Financial income from insurance, pension plan and capitalization operations   4,720,741    (208,069)   4,512,672 
Foreign exchange operations   979,910    2    979,912 
Compulsory deposits   4,105,702    (6)   4,105,696 
EXPENSES OF FINANCIAL OPERATIONS   (35,066,002)   86,678    (34,979,324)
Money market   (30,083,417)   1,030    (30,082,387)
Financial expenses on technical provisions for pension plan and capitalization   (4,013,637)   85,490    (3,928,147)
Borrowings and onlending   (968,948)   158    (968,790)
INCOME FROM FINANCIAL OPERATIONS BEFORE LOAN LOSSES   45,259,959    (612,361)   44,647,598 
RESULT OF LOAN LOSSES   (10,087,727)   176,372    (9,911,355)
Expenses for allowance for loan losses   (14,363,636)   243,076    (14,120,560)
Income from recovery of credits written off as loss   4,275,909    (66,704)   4,209,205 
GROSS INCOME FROM FINANCIAL OPERATIONS   35,172,232    (435,989)   34,736,243 
OTHER OPERATING REVENUES (EXPENSES)   (14,726,901)   245,933    (14,480,968)
Banking service fees   14,252,929    (1,912,146)   12,340,783 
Asset management   2,526,235    (40,225)   2,486,010 
Current account services   605,330    (22,408)   582,922 
Credit cards   6,605,156    (1,321,100)   5,284,056 
Sureties and credits granted   1,462,078    (1,744)   1,460,334 
Receipt services   1,325,137    (612)   1,324,525 
Other   1,728,993    (526,057)   1,202,936 
Income from bank charges   3,209,658    1,550,213    4,759,871 
Result from insurance, pension plan and capitalization operations   2,658,435    (558,551)   2,099,884 
Personnel expenses   (12,822,261)   370,690    (12,451,571)
Other administrative expenses   (14,038,409)   440,515    (13,597,894)
Tax expenses   (4,295,742)   127,320    (4,168,422)
Equity in earnings of affiliates and other investments   224,216    198,877    423,093 
Other operating revenues   561,228    (32,595)   528,633 
Other operating expenses   (4,476,955)   61,610    (4,415,345)
OPERATING INCOME   20,445,331    (190,056)   20,255,275 
NON-OPERATING INCOME   79,825    769    80,594 
INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING   20,525,156    (189,287)   20,335,869 
INCOME TAX AND SOCIAL CONTRIBUTION   (6,017,002)   130,959    (5,886,043)
Due on operations for the period   (4,230,036)   102,379    (4,127,657)
Related to temporary differences   (1,786,966)   28,580    (1,758,386)
PROFIT SHARING   (261,282)   342    (260,940)
Management members - Statutory - Law No. 6,404 of 12/15/1976   (261,282)   342    (260,940)
MINORITY INTEREST IN SUBSIDIARIES   (923,909)   57,986    (865,923)
NET INCOME   13,322,963    -    13,322,963 

 

m)Transaction with Carrefour

 

On April 14, 2011, Itaú Unibanco Holding and Carrefour Comércio e Indústria Ltda. (“Carrefour Brazil”), entered into an Agreement for Purchase and Sale of Shares in order to purchase 49% of Banco CSF S.A. (“Banco Carrefour”) for R$ 725 million, corresponding to a multiple Price/Profit for 2010 of 11.6. The completion of the transaction depends on the approval from the Central Bank of Brazil.

 

 
 

 

Independent Auditor’s Report

 

To the Board of Directors and Stockholders Itaú Unibanco Holding S.A.

 

We have audited the accompanying financial statements of Itaú Unibanco Holding S.A. (the “Bank”) standing alone, which comprise the balance sheet as at December 31, 2011 and the statements of income, changes in equity and cash flows for the year and six-month period then ended, as well as the accompanying consolidated financial statements of Itaú Unibanco Holding S.A. and its subsidiaries (“Consolidated”), which comprise the consolidated balance sheet as at December 31, 2011 and the consolidated statements of income and cash flows for the year and six-month period then ended, and a summary of significant accounting policies and other explanatory information.

 

Management’s responsibility for the financial statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Independent Auditor’s responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements present fairly, in all material respects, the financial position of Itaú Unibanco Holding S.A. and of Itaú Unibanco Holding S.A. and its subsidiaries as at December 31, 2011, and the financial performance and cash flows, as well as the consolidated financial performance and cash flows, for the year and six-month period then ended, in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN).

 

 
 

 

Other matters

 

Statement of value added

 

We also have audited the Bank’s and the consolidated statements of value added for the year and six-month period ended December 31, 2011, the presentation of which is required by the Brazilian corporate legislation for listed companies. These statements were subject to the same audit procedures described above and, in our opinion, are fairly presented, in all material respects, in relation to the financial statements taken as a whole.

 

São Paulo, February 6, 2012

 

PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

 

Paulo Sergio Miron

Contador CRC 1SP173647/O-5

 

 
 

 

ITAÚ UNIBANCO HOLDING S.A.

  CNPJ. 60.872.504/0001-23 A Listed Company NIRE. 35300010230  

SUMMARY OF THE AUDIT COMMITTEE REPORT

 

According to its Charter (available on website www.itau-unibanco.com/ir), the Committee is responsible for the quality and integrity of the financial statements of the Itaú Unibanco Financial Conglomerate, for the compliance with legal and regulatory requirements, for the activities, independence and quality of the services rendered by the independent and the internal auditors, and for the quality and effectiveness of the internal controls and risk management systems of the Conglomerate. The assessments made by the Committee are based on information received from management, external auditors, internal auditors, those responsible for risk management and internal controls, and on its own analysis based on direct observation.

 

Committee Activities

 

The Committee met fifteen times in the period from August 2011 to February 2012, a total of 19 days. In addition, in a session on February 6th, the Committee analyzed the financial statements as of December 31, 2011 as well as examined and approved the Audit Committee Report and this Summary on the activities performed in the semester up to that baseline date.

 

Risk Management and Internal Controls

 

The Committee examined, during meetings in 2011 with Officers responsible for Risk Control and Finance, aspects related to risk management and control in the Conglomerate, with emphasis on credit, liquidity and market risks. Through meetings with the Officer in charge of the internal control and compliance, the Committee also monitored the implementation and application of the framework for operational risk management.

 

The Committee has also been monitoring the efforts of Itaú Unibanco to converge to Basel II recommendations in relation to the development of the Company’s internal risk management models, which should result in better controls in the integrated management of the businesses.

 

Based on the information brought to its attention, the Audit Committee considers the efforts that have been made to ensure the effectiveness of the existing internal controls and risk management systems to be positive. It also considers that the approach that the Organization has adopted to prepare itself for the use of internal models as required by Basel II is firmly established and properly focused.

 

Compliance with the Legislation, Regulatory Requirements and the Internal Policies and Procedures

 

The Audit Committee considers that the duties and responsibilities, as well as the procedures for assessing and monitoring legal risks are established and continue to be adopted in accordance with the corporate guidelines. Based on the information brought to its attention from the areas in charge, on the work carried out by the Internal Audit and on the reports prepared by the external auditors, the Audit Committee concludes that no deficiencies were identified in the compliance with the legislation, regulatory requirements and internal policies and procedures that might pose risks to the continuity of the Organization.

 

External Audit

 

The Committee has a regular channel of communication with the external auditors to extensively discuss the results of their work and relevant accounting aspects, thus enabling the Committee’s members to form a well-based opinion as to the integrity of the financial accounting statements and of the financial reports.

 

The Committee assesses as fully satisfactory the amount and the quality of the information provided by PricewaterhouseCoopers, which supports its opinion on the integrity of the financial statements. The Committee did not identify situations that could affect the objectivity and independence of the external auditors.

 

Internal Audit

 

The Audit Committee approves the annual working plan of the Internal Audit and the revised version of this plan for the second half of the year and, on a quarterly basis, monitors its compliance, making itself aware of work performed that was not planned and providing an opinion on the cancellation of works envisaged in the plan. The Committee evaluates positively the coverage and quality of the work performed by the internal auditors. The results presented during the Committee’s meetings did not bring to its attention the existence of residual risks that could affect the soundness and the continuity of the Organization.

 

 
 

 

Consolidated Financial Statements

 

The Committee analyzed the processes for preparing individual and consolidated balance sheets, notes to the financial statements and financial reports published together with the consolidated financial statements. It discussed this subject with PricewaterhouseCoopers and with Senior Management of the Conglomerate. An evaluation was also made of the relevant accounting practices used by the Itaú Unibanco Financial Conglomerate in the preparation of its financial statements. The Committee verified that they are in conformity with the generally accepted accounting principles applicable to institutions that have authorization to carry out operations from the Banco Central do Brasil or subject to regulation by the Superintendência de Seguros Privados.

 

Recommendations

 

Regular meetings were held with the Chairman of the Board of Directors and with the Chief Executive Officer of Itaú Unibanco. During those meetings, the Committee had the opportunity to present its opinions and points of view concerning different aspects of its activities.

 

Conclusion

 

This Audit Committee, with due consideration to its responsibilities and to the natural limitations due to the scope of its activities, recommends to the Board of Directors the approval of the consolidated financial statements of Itaú Unibanco Holding S.A., as of December 31, 2011.

 

São Paulo, February 6th, 2012.

 

The Audit Committee

 

Gustavo Jorge Laboissière Loyola – President

 

Alkimar Ribeiro Moura

 

Eduardo Augusto de Almeida Guimarães

 

Guy Almeida Andrade – Financial Expert

 

 
 

ITAÚ UNIBANCO HOLDING S.A.

 

CNPJ. 60.872.504/0001-23 Public company NIRE. 35300010230

  

OPINION OF THE FISCAL COUNCIL

 

The effective members of the Fiscal Council of ITAÚ UNIBANCO HOLDING S.A., by exercising the legal and statutory powers conferred to them, have reviewed the management report and the financial statements of the Company for the fiscal year ended December 31, 2011. Based on the analysis carried out and in view of the unqualified opinion of PricewaterhouseCoopers Auditores Independentes, they understand that these documents fairly reflect the Company’s financial and equity position and are eligible to the submitted to the appreciation and approval of the Stockholders.

 

São Paulo, February 6, 2012.

  

IRAN SIQUEIRA LIMA

Member

  

ALBERTO SOZIN FURUGUEM   ARTEMIO BERTHOLINI
Member   Member