20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)

OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-15276

ITAÚ UNIBANCO HOLDING S.A.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of incorporation)

Praça Alfredo Egydio de Souza Aranha, 100

04344-902 São Paulo, SP, Brazil

Alfredo Egydio Setubal (Investor Relations Officer)

e-mail: aes-drinvest@itau-unibanco.com.br

Telephone number: +55-11-5019-1549

________________________

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each share:	Name of each exchange on which registered:
Preferred Share, without par value	New York Stock Exchange*
American Depositary Shares (as evidenced by
American Depositary Receipts), each
representing 1(one) Share of Preferred Stock	New York Stock Exchange

*Not for trading purposes, but only in connection with the listing of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

_______________________________

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None.

_________________________

Securities for which there is a reporting obligation

pursuant to Section 15(d) of the Act:

None.

_________________________

The number of outstanding shares of each class of stock of ITAÚ UNIBANCO HOLDING S.A., as of December 31, 2012 was:

2,289,284,300 Common Shares, no par value per share

2,229,095,461 Preferred Shares, no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes        x        No        ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes¨        No        x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes        x        No        ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes        ¨        No        x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerx        Accelerated filer        ¨        Non-accelerated filer        ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

  U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board   x   Other ¨  

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17        ¨        Item 18        x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes        ¨        No        x

TABLE OF CONTENTS

		Page
	PART I
ITEM 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	2
ITEM 2	OFFER STATISTICS AND EXPECTED TIMETABLE	2
ITEM 3	KEY INFORMATION	3
3A.	Selected Financial Data	3
3B.	Capitalization and Indebtedness	8
3C.	Reasons for the Offer and Use of Proceeds	8
3D.	Risk Factors	9
ITEM 4	INFORMATION ON THE COMPANY	19
4A.	History and Development of the Company	19
4B.	Business Overview	21
4C.	Organizational Structure	113
4D.	Property, Plant and Equipment	114
ITEM 4A	UNRESOLVED STAFF COMMENTS	114
ITEM 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	115
5A.	Operating Results	115
5B.	Liquidity and Capital Resources	153
5C.	Research and Development, Patents and Licenses, Etc.	162
5D.	Trend Information	162
5E.	Off-Balance Sheet Arrangements	162
5F.	Tabular Disclosure of Contractual Obligations	163
ITEM 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	164
6A.	Directors and Senior Management	164
6B.	Compensation	169
6C.	Board Practices	170
6D.	Employees	176
6E.	Share Ownership	177
ITEM 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	179
7A.	Major Shareholders	179
7B.	Related Party Transactions	180
7C.	Interests of Experts and Counsel	182
ITEM 8	FINANCIAL INFORMATION	183
8A.	Consolidated Financial Statements and Other Financial Information	183
8B.	Significant Changes	187
ITEM 9	THE OFFER AND LISTING	188
9A.	Offer and Listing Details	188
9B.	Plan of Distribution	190
9C.	Markets	191
9D.	Selling Shareholders	196
9E.	Dilution	196
9F.	Expenses of the Issue	196
ITEM 10	ADDITIONAL INFORMATION	197
10A.	Share Capital	197

10B.	Memorandum and Articles of Association	197
10C.	Material Contracts	206
10D.	Exchange Controls	206
10E.	Taxation	207
10F.	Dividends and Paying Agents	214
10G.	Statement by Experts	214
10H.	Documents on Display	214
10I.	Subsidiary Information	214
ITEM 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	215
ITEM 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	226
12A.	Debt Securities	226
12B.	Warrants and Rights	226
12C.	Other Securities	226
12D.	American Depositary Shares	226
	PART II
ITEM 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	227
ITEM 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	227
ITEM 15	CONTROLS AND PROCEDURES	228
ITEM 16	[RESERVED]	229
16A.	Audit Committee Financial Expert	229
16B.	Code of Ethics	229
16C.	Principal Accountant Fees and Services	229
16D.	Exemptions from the Listing Standards for Audit Committees	230
16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	231
16F.	Change in Registrant’s Certifying Accountant	231
16G.	Corporate Governance	231
16H.	Mine Safety Disclosure	234
	PART III
ITEM 17	FINANCIAL STATEMENTS	235
ITEM 18	FINANCIAL STATEMENTS	235
itEM 19	EXHIBITS	236

INTRODUCTION

All references in this annual report to (1) “Itaú Unibanco Holding,” “Itaú Holding,” “we,” “us,” or “our,” are to Itaú Unibanco Holding S.A. (formerly Banco Itaú Holding Financeira S.A.) and its consolidated subsidiaries, except where otherwise specified or the context otherwise requires; (2) “Itaú Unibanco,” is to Itaú Unibanco S.A. (formerly Banco Itaú S.A.) and “Itaú BBA” is to Banco Itaú BBA S.A., in each case, together with its consolidated subsidiaries, except where otherwise specified or the context otherwise requires; (3) the “Itaú Financial Group” are to Itaú Holding and all of its subsidiaries before the Association; (4) the “Unibanco Financial Group” are to Unibanco Holdings and all of its subsidiaries before the Association; (5) “Itaú Unibanco Group” is to Itaú Unibanco Holding together with its subsidiaries and affiliates; (6) the “Brazilian government” is to the federal government of the Federative Republic of Brazil; (7) “preferred shares” and “common shares” are to our authorized and outstanding shares of preferred stock and common stock, designated as ações preferenciais and ações ordinárias, respectively, each without par value; (8) “ADSs” are to our American Depositary Shares (one ADS represents one preferred share); (9) the “real,” “reais” or “R$” are to Brazilian reais, the official currency of Brazil, and (10) “US$,” “dollars” or “U.S. dollars” are to United States dollars.

As of December 31, 2012 and April 19, 2013, the selling rate for purchasing U.S. dollars was R$ 2.0435 to US$1.00 and R$ 2.0089 to US$1.00, respectively.

We have prepared our consolidated financial statements included in this annual report under Item 18, in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010. We prepared our consolidated financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") until December 31, 2010. Our consolidated financial statements included in our annual report on Form 20-F for fiscal 2010 was the last report with U.S. GAAP financial statements. We adopted IFRS in 2011, with first adoption date on January 1, 2010, and subsequent reports have included IFRS financial statements. All 2012, 2011 and 2010 financial data included in this report, unless stated otherwise, have been prepared in accordance with IFRS as issued by the IASB.

We use accounting practices adopted in Brazil applicable to the institutions authorized to operate by the Central Bank for our reports to Brazilian shareholders, in filings with the Brazilian Securities Commission (Comissão de Valores Mobiliários or “CVM”), for the determination of dividend payments, and for the determination of tax liability.

Our fiscal year ends on December 31, and references in this annual report to any specific fiscal year are to the twelve-month period ended December 31 of such year.

Certain industry data presented in this annual report have been derived from the following sources: the Central Bank System (Sistema do Banco Central or “SISBACEN”), a database of information provided by financial institutions to the Central Bank; the Brazilian association of leasing companies (Associação Brasileira de Empresas de Leasing or “ABEL”); the Brazilian government development bank (Banco Nacional de Desenvolvimento Econômico e Social or “BNDES”); the Brazilian financial and capital markets association (Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais or “ANBIMA”); the National Monetary Council (Conselho Monetário Nacional or “CMN”), and the insurance industry regulator (Superintendência de Seguros Privados or “SUSEP”).

You should assume that the information appearing in this annual report is accurate only as of the date to which it refers or as of the date of this annual report, as the case may be. Our business, financial condition, results of operations and prospects may have changed since that date.

1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains statements that are or may constitute forward-looking statements, including but not limited to statements in “Item 3D. Risk Factors,” “Item 4B. Business Overview” and “Item 5. Operating and Financial Review and Prospects.” We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions including, among other risks:

· General economic, political and business conditions in Brazil and changes in inflation, interest rates, exchange rates and the performance of financial markets;

· Disruptions and volatility in the global financial markets;

· Difficulties in integrating acquired or merged businesses;

· Government regulations and tax laws and changes therein;

· Competition and industry consolidation;

· Increases in reserve and compulsory deposit requirements;

· Changes in our loan, securities and derivatives portfolios;

· Our exposure to Brazilian federal government debt;

· Incorrect pricing expectations and inadequate reserves;

· Effectiveness of our risk management policies;

· Failure in, or breach of, our operational or security systems or infrastructure;

· Losses associated with counterparty exposures;

· The ability of our controlling shareholder to direct our business;

· Regulation of our business on a consolidated basis; and

· Other risk factors as set forth under “Item 3D. Risk Factors”.

The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in such forward-looking statements.

ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

2

ITEM 3 KEY INFORMATION

3A. Selected Financial Data

You should read the following selected financial data in conjunction with the “Introduction” and “Item 5. Operating and Financial Review and Prospects” included in this annual report. The information below is qualified in its entirety by reference to our consolidated financial statements included in Item 18 in this annual report.

We maintain our books and records in reais, the official currency of Brazil, and prepare our financial statements for statutory and regulatory purposes in accordance with accounting practices adopted in Brazil and applicable to institutions authorized to operate by the Central Bank (“Brazilian GAAP”). Accounting principles and standards generally applicable under Brazilian GAAP include those established by Brazilian Corporate Law (Law No. 6,404, as amended, including Law No. 11,638), by the accounting pronouncements committee (Comitê de Pronunciamentos Contábeis or ”CPC”), which began issuing standards in 2007, and by the federal accounting council (Conselho Federal de Contabilidade or “CFC”), while interpretative guidance was issued before the CPC became active by the Brazilian professional body of independent accountants (Instituto dos Auditores Independentes do Brasil or “IBRACON”). In the case of companies subject to regulation by the Central Bank, such as Itaú Unibanco Holding, the effectiveness of accounting pronouncements issued by accounting standard setters, such as the CPC, depends on approval of the pronouncement by the National Monetary Council (Conselho Monetário Nacional or “CMN”), and the Central Bank which also establishes the effective date of the pronouncements. In addition, the CVM and other regulatory entities, such as SUSEP and the Central Bank, provide additional industry-specific guidelines. See “Item 9C. Markets” for additional information.

Notwithstanding the above, we have derived the data we present in the tables below from our audited consolidated financial statements as of and for the years presented, which have been prepared in accordance with IFRS as issued by IASB. You should read all of the data in the tables below together with the consolidated financial statements and notes included in “Item 18. Financial Statements” and the information we provide in “Item 5. Operating and Financial Review and Prospects.” Except where we have indicated otherwise, we have prepared all of the consolidated financial information in this document in accordance with IFRS as issued by IASB. We prepared our consolidated financial statements in accordance with U.S. GAAP until December 31, 2010. Our consolidated financial statements included in our annual report on Form 20-F for fiscal 2010 was the last report with U.S. GAAP financial statements. We adopted IFRS in 2011, with first adoption date on January 1, 2010, and subsequent reports have included IFRS financial statements. All 2012, 2011 and 2010 consolidated financial data included in this report have been prepared in accordance with IFRS as issued by the IASB. Our group division and segment data are derived from our management reporting systems and are not based on, or prepared in accordance with, IFRS. For a discussion of the major differences between our management reporting systems and our consolidated financial statements under IFRS, see “Item 5A. Operating Results – Results of Our Operating Segments” and note 34 to our consolidated financial statements.

The consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010 included in this annual report have been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report included elsewhere in this annual report.

3

IFRS Selected Financial Data

This information is qualified in its entirety by reference to the consolidated financial statements included in "Item 18 - Financial Statements".

	For the Year Ended December 31,
Statement of Income	2012			2011			2010
	(in millions of R$)
Banking product		81,172			74,276			69,415
Losses on loans and claims		(21,354	)		(16,072	)		(12,938	)
Operating margin		59,818			58,204			56,477
General and administrative expenses		(38,080	)		(35,674	)		(34,632	)
Tax expenses		(4,497	)		(4,166	)		(4,164	)
Share of profit or (loss) of unconsolidated companies		175			(113	)		349
Current income tax and social contribution		(7,716	)		(6,956	)		(4,042	)
Deferred income tax and social contribution		3,491			3,315			(1,494	)
Net income		13,191			14,610			12,494
Net income attributable to non-controlling interests		(557	)		(773	)		(786	)
Net income attributable to owners of the parent company		12,634			13,837			11,708

Earnings and Dividend per Share Information
	For the Year Ended December 31,
	2012		2011		2010
	(in R$, except number of shares)
Basic earnings per share (1):
Common		2.80		3.06		2.58
Preferred		2.80		3.06		2.58
Diluted earnings per share (1):
Common		2.75		3.05		2.57
Preferred		2.75		3.05		2.57
Dividends and interest on stockholders’ equity per share (2):
Common		1.00		0.97		0.86
Preferred		1.00		0.97		0.86
Weighted average number of shares outstanding - basic
Common		2,289,284,300		2,289,284,275		2,289,284,273
Preferred		2,228,675,507		2,240,026,557		2,246,784,818
Weighted average number of shares outstanding - diluted
Common		2,289,284,300		2,289,284,275		2,289,284,273
Preferred		2,239,708,939		2,251,061,836		2,260,240,831

⁽¹⁾ Earnings per share have been computed following the “two class method” set forth by IAS 33 Earnings Per Share. See “Item 10B. Memorandum and Articles of Association” for a description of our two classes of stock. See note 28 to our consolidated financial statements for a detailed calculation of earnings per share.

⁽²⁾ Under Brazilian Corporate Law, we are allowed to pay interest on stockholders’ equity as an alternative to paying dividends to our shareholders. See "Item 8A. Consolidated Financial Statements and Other Financial Information - Dividend Policy and Dividends" and “Item 10E. Taxation – Interest on Stockholders’ Equity” and note 21b to our consolidated financial statements for a description of interest on stockholders’ equity.

	For the Year Ended December 31,
	2012		2011		2010
	(in US$)
Dividends and interest on stockholders’ equity per share (1)(2):
Common		0.49		0.52		0.52
Preferred		0.49		0.52		0.52

⁽¹⁾ Under Brazilian Corporate Law, we are allowed to pay interest on stockholders’ equity as an alternative to paying dividends to our stockholders. See "Item 8A. Consolidated Financial Statements and Other Financial Information - Dividend Policy and Dividends" and "Item 10E. Taxation - Brazilian Tax Considerations - Interest on Stockholders Equity" for a description of interest on stockholders’ equity.

⁽²⁾ Translated into US$ from reais at the selling rate established by the Central Bank at the end of the year in which dividends or interest on stockholders’ equity were paid or declared, as the case may be.

4

Balance Sheet Data

	As of December, 31
Assets	2012			2011			2010
	(in millions of R$)
Cash and deposits on demand		13,967			10,668			10,172
Central Bank compulsory deposits		63,701			98,053			85,776
Interbank deposits		23,826			27,821			14,835
Securities purchased under agreements to resell		162,737			92,248			88,682
Financial assets held for trading		145,516			121,889			115,497
Financial assets designated at fair value through profit or loss		220			186			306
Derivatives		11,597			8,754			7,777
Available-for-sale financial assets		90,869			47,510			44,539
Held-to-maturity financial assets		3,202			3,105			3,170
Loan operations and lease operations portfolio, net		341,271			322,391			274,843
Loan operations and lease operations portfolio		366,984			346,264			294,837
(-) Allowance for loan and lease losses		(25,713	)		(23,873	)		(19,994	)
Other financial assets		44,492			40,254			40,945
Investments in unconsolidated companies		3,005			2,544			2,948
Fixed assets, net		5,628			5,358			4,801
Intangible assets, net		4,671			3,825			2,934
Tax assets		32,412			26,088			24,142
Assets held for sale		117			85			78
Other assets		9,923			7,357			5,637
Total assets		957,154			818,136			727,082
Average interest-earning assets (*)		784,686			721,686			585,125
Average non-interest-earning assets (*)		70,758			69,134			65,044
Average total assets (*)		855,444			790,820			650,169

(*) The average balances are calculated based on a monthly basis. See “Item 4B. Business Overview – Selected Statistical Information – Average Balance Sheet and Interest Rate Data” for more detailed information on our average assets, liabilities and stockholders’ equity for the years ended December 31, 2012, 2011 and 2010.

5

	As of December, 31
Liabilities	2012			2011			2010
	(in millions of R$)
Deposits		243,200			242,636			202,688
Securities sold under repurchase agreements		267,405			185,413			199,657
Financial liabilities held for trading		642			2,815			1,335
Derivatives		11,069			6,747			5,671
Interbank market debt		97,073			90,498			62,599
Institutional market debt		72,028			54,807			44,513
Other financial liabilities		50,255			44,119			41,012
Reserves for insurance and private pension		90,318			70,904			56,864
Liabilities for capitalization plans		2,892			2,838			2,603
Provisions		19,209			15,990			14,457
Tax liabilities		7,109			7,408			12,110
Other liabilities		19,956			18,625			16,021
Total liabilities		881,156			742,800			659,530
Stockholders’ equity:
Capital		45,000			45,000			45,000
Treasury shares		(1,523	)		(1,663	)		(628	)
Additional paid-in capital		888			738			490
Appropriated reserves		22,423			24,279			16,904
Unappropriated reserves		7,379			5,561			3,615
Cumulative other comprehensive income		1,735			26			494
Total stockholders’ equity attributed to the owners of the the parent company		75,902			73,941			65,875
Non-controlling interests		96			1,395			1,677
Total Stockholders' equity		75,998			75,336			67,552
Total liabilities and stockholders’ equity		957,154			818,136			727,082
Average interest-bearing liabilities (*)		648,682			572,622			464,214
Average non-interest-bearing liabilities (*)		130,637			150,813			128,220
Total average stockholders’ equity (*)		76,125			67,385			57,736
Total average liabilities and stockholders’ equity (*)		855,444			790,820			650,169

(*) The average balances are calculated based on a monthly basis. See “Item 4B. Business Overview – Selected Statistical Information – Average Balance Sheet and Interest Rate Data” for more detailed information on our average assets, liabilities and stockholders’ equity for the years ended December 31, 2012, 2011 and 2010.

6

Selected Consolidated Ratios (%)
	For the Year Ended December 31,
	2012		2011		2010
Profitability and performance
Net interest margin (1)		6.2		5.8		7.0
Return on average assets (2)		1.5		1.7		1.8
Return on average equity (3)		16.6		20.5		20.3

	As of the Year Ended December 31,
	2012		2011		2010
Liquidity
Loans and leases as a percentage of total deposits (4)		150.9		142.7		145.5
Capital
Total stockholders' equity as a percentage of total assets (5)		7.9		9.0		9.1

⁽¹⁾ Net interest income divided by average interest-earning assets. The average balances are calculated based on a monthly basis. See “Item 4B. Business Overview - Selected Statistical Information – Average Balance Sheets and Interest Rate Data” for more detailed information on our average assets, liabilities and stockholders' equity for the years ended December 31, 2012, 2011 and 2010.

⁽²⁾ Net income attributable to owners of the parent company divided by average total assets. The average balances are calculated based on a monthly basis. See “Item 4B. Business Overview - Selected Statistical

Information – Average Balance Sheet and Interest Rate Data” for more detailed information on our average assets, liabilities and stockholders' equity for the years ended December 31, 2012, 2011 and 2010.

⁽³⁾ Net income attributable to owners of the parent company divided by average stockholders' equity. The average balances are calculated based on a monthly basis. See “Item 4B. Business Overview - Selected Statistical Information – Average Balance Sheet and Interest Rate Data” for more detailed information on our average assets, liabilities and stockholders' equity for the years ended December 31, 2012, 2011 and 2010.

⁽⁴⁾ Loans and leases operations as of year-end divided by total deposits as of year-end.

⁽⁵⁾ Total stockholders' equity as of year-end divided by total assets as of year-end.

7

EXCHANGE RATES

Currently, the Brazilian foreign exchange system allows the purchase and sale of foreign currency and the performance of international transfers in reais by any individual or legal entity, subject to certain regulatory procedures.

The Brazilian government may impose temporary restrictions on the conversion of Brazilian currency into foreign currencies and on the remittance to foreign investors of proceeds from their investments in Brazil. Brazilian law allows the government to impose these restrictions whenever there is a serious imbalance in Brazil’s balance of payments or there are reasons to foresee a serious imbalance. We cannot predict whether the Brazilian government will impose remittance restrictions in the future. The real may depreciate or appreciate substantially against the U.S. dollar in the future. See “Item 3D. Risk Factors — Risks Relating to Brazil — Exchange rate instability may have a material adverse effect on the Brazilian economy and our business, financial condition and results of operations.”

As of April 19, 2013, the U.S. dollar-real exchange rate (PTAX) was R$2.0089 to U$1.00.

Exchange Rates

The following table sets forth information on the selling rate for U.S. dollars as reported by the Central Bank for the periods and dates indicated.

	Exchange Rate of Brazilian Currency per US$ 1.00
Year	Low		High		Average (1)		Year-End
2008		1.5593		2.5004		1.8335		2.3370
2009		1.7024		2.4218		1.9905		1.7412
2010		1.6554		1.8811		1.7589		1.6662
2011		1.5345		1.9016		1.6709		1.8758
2012		1.7024		2.1121		1.9588		2.0435
2013 (through April 19, 2013)		1.9528		2.0471		1.9921		2.0089

Source: Central Bank

(1) Represents the average of the exchange rates on the last day of each month during the relevant period.

	Exchange Rate of Brazilian Currency per US$ 1.00
Month	Low		High		Average (1)		End
September 2012		2.0139		2.0392		2.0281		2.0306
October 2012		2.0224		2.0382		2.0298		2.0313
November 2012		2.0312		2.1074		2.0678		2.1074
December 2012		2.0435		2.1121		2.0778		2.0435
January 2013		1.9883		2.0471		2.0311		1.9883
February 2013		1.9570		1.9893		1.9733		1.9754
March 2013		1.9528		2.0185		1.9828		2.0138
April 2013 (through April 19, 2013)		1.9736		2.0239		1.9986		2.0089

Source: Central Bank

(1) Represents the average of the closing exchange rates of each day the relevant period.

3B. Capitalization and Indebtedness

Not applicable.

3C. Reasons for the Offer and Use of Proceeds

Not applicable.

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3D. Risk Factors

The following section does not describe all the risks of an investment in our preferred shares and ADSs. These are the risks we consider material as of the date of this annual report. There may be additional risks that we currently consider immaterial or of which we are currently unaware, and any of these risks could have similar effects to those set forth below.

Therefore, you should carefully read this annual report in its entirety. You should consider, among other things, the risk factors with respect to Itaú Unibanco Holding, to Brazilian financial institutions and to Brazil not normally associated with investments in securities of United States, European and other similar issuers, including those risk factors set out below. Our business, results of operations, financial condition or prospects could be negatively affected if any of such risks occurs, and as a result, the trading price of our preferred shares and ADSs could decline and you could lose all or part of your investment.

Risks Relating to Brazil

The Brazilian government has exercised, and continues to exercise, influence over the Brazilian economy. This influence, as well as Brazilian political and economic conditions, could have a material adverse effect on our business, financial condition and results of operations and, as a consequence, on the market price of our preferred shares and ADSs.

The Brazilian government from time to time intervenes in the Brazilian economy and makes changes in policies and regulations. The Brazilian government’s actions have involved, in the past, among other measures, changes in interest rates, changes in tax policies, price controls, capital control limits and restrictions on selected imports and, prior to the current floating exchange regime, currency devaluations. Our business, financial condition, and results of operations may be materially and adversely affected by changes in policies or regulations involving or affecting certain factors, such as:

• Interest rates;

• Reserve requirements;

• Capital requirements;

• Liquidity of capital, financial and credit markets;

• General economic growth, inflation and currency fluctuations;

• Tax and regulatory policies;

• Restrictions on remittances abroad and other exchange controls;

• Increases in unemployment rates, decreases in wage and income levels and other factors that influence our customers’ ability to meet their obligations with us; and

• Other political, diplomatic, social and economic developments within and outside Brazil that affect the country.

As a bank in Brazil, the vast majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our business, results of operations and financial condition are significantly affected by inflation, interest rate fluctuations and related government monetary policies, all of which may have a material adverse effect on the growth of the Brazilian economy and on us, including our loan portfolio, our cost of funding and our income from credit operations.

In addition, changes in administration may result in changes in government policy that may affect us. Uncertainty over whether the Brazilian government in the future will implement changes in policies or regulations affecting these and other factors in the future may contribute to heightened volatility in the Brazilian securities markets and in the securities of Brazilian issuers, which in turn may have a material adverse effect on us and, as a consequence, on the market price of our preferred shares and ADSs.

Inflation and fluctuation in interest rates could have a material adverse effect on our business, financial condition and results of operations.

Inflation and interest rate volatility have in the past caused material adverse effects in the Brazilian economy. While the Brazilian government has been able to keep inflation close to target levels since the introduction of inflation targets in 1999, we cannot assure you that it will continue to be able to do so. Inflation, especially sudden increases in inflation, usually causes the loss of purchasing power. Also prolonged periods of high inflation provoke distortions in the allocation of resources. From 2006 to 2012, the average annual inflation was 5.2%. Expected inflation for 2013, as surveyed by the Central Bank, is 5.5%.

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Measures to combat historically high rates of inflation have included tight monetary policies with high interest rates, resulting in restrictions on credit and short-term liquidity. Between 2006 and 2012, the base interest rate established by the Central Bank, which is the benchmark interest rate payable to holders of securities issued by the Brazilian government and traded through the Special Clearing and Settlement System (Sistema Especial de Liquidação e Custódia or “SELIC”), varied between 17.65% per year and 7.14% per year. Public expectations regarding possible future governmental actions in the economy, government intervention in the foreign exchange market and the effects of the downturn in the global financial markets have caused and may continue to cause interest rates to fluctuate. In addition, if Brazil experiences fluctuations in rates of inflation in the future, our costs and net margins may be materially and adversely affected, and government measures to combat inflation may include tightening monetary policy with high interest rates which may harm our business. Increases in the SELIC rate could materially and adversely affect us by reducing the demand for credit, increasing our cost of funds and increasing the risk of customer default. Conversely, decreases in the SELIC rate could also materially and adversely affect us by decreasing revenues on interest-earning assets and lowering our margins.

Exchange rate instability may have a material adverse effect on the Brazilian economy and our business, financial condition and results of operations.

The Brazilian currency fluctuates in relation to the U.S. dollar and other foreign currencies. The Brazilian government has in the past implemented various economic plans and utilized a number of exchange rate regimes, including sudden devaluations, periodic mini-devaluations in which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, and dual exchange rates coupled with exchange controls. Since 1999, Brazil has adopted a floating exchange rate system with interventions by the Central Bank in buying or selling foreign currency. From time to time, the exchange rate between the real and the U.S. dollar and other currencies has fluctuated significantly. For example, the real depreciated 15.7%, 34.3%, 24.2% and 11.2% against the U.S. dollar in 2001, 2002, 2008 and 2011, respectively, and appreciated 22.3%, 8.8%, 13.4%, 9.5%, 20.7%, 34.2% and 4.5% against the U.S. dollar in 2003, 2004, 2005, 2006, 2007, 2009 and 2010, respectively. In 2012, the real depreciated 8.2% against the U.S. dollar from an exchange rate of R$1.87 per US$1.00 as of December 31, 2011 to an exchange rate of R$2.04 per US$1.00 as of December 31, 2012. The average exchange rate in 2012 was R$1.96 per US$1.00 compared to an average exchange rate of R$1.67 per US$1.00 in 2011. Recent Brazilian government interventions to maintain a stable foreign exchange rate might not have the desired effect and could lead to increased exchange rate volatility, potentially affecting our results.

Some of our assets and liabilities are denominated in, or indexed to, foreign currencies, especially the U.S. dollar. As of December 31, 2012, 25.1% of our total liabilities and 22.9% of our total assets were denominated in, or indexed to, a foreign currency. Although as of December 31, 2012, our material foreign investments were economically hedged in order to mitigate effects arising out of foreign exchange volatility, including the potential tax impact of such investments, there can be no assurance that such hedging strategies will remain in place or will offset such effects. Therefore, a depreciation of the real could have several adverse effects on us, including (i) losses on our liabilities denominated in or indexed to foreign currencies; (ii) impairments to our ability to pay dollar-denominated or dollar-indexed liabilities by making it more costly for us to obtain the foreign currency required to pay such obligations; (iii) impairments to the ability of our borrowers to repay dollar-denominated or dollar-indexed liabilities to us and (iv) negatively affect the market price of our securities portfolio. Conversely, an appreciation of the Brazilian currency could cause us to incur losses on our assets denominated in or indexed to foreign currencies. Therefore, depending on the circumstances, either a depreciation or appreciation of the real could have a material adverse effect on our business, financial condition and results of operations and, as a consequence, on the market price of our preferred shares and ADSs.

Infrastructure and work force deficiencies in Brazil may impact economic growth and have a material adverse effect on our business.

Our performance is dependent on the overall health of the Brazilian economy. While Brazil has experienced economic growth in recent years, the rate of growth has decreased in 2011 and 2012. Continued growth could be limited by inadequate infrastructure, including potential energy shortages and a deficient transportation sector, and a lack of qualified work force, which could contribute to low levels of productivity and efficiency. Depending on intensity and duration, these factors could lead to employment volatility and generally lower income and consumption levels, which could limit our growth, result in increased default rates and ultimately have a material adverse effect on our business.

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Developments and the perception of risk of other countries may adversely affect the Brazilian economy and the market price of Brazilian securities.

Economic and market conditions in other countries, including the United States, the European Union and emerging market countries, may affect to varying degrees the market value of securities of Brazilian issuers. Although economic conditions in these countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these other countries may have a material adverse effect on the market value of securities of Brazilian issuers, the availability of credit in Brazil and the amount of foreign investment in Brazil. Crises in the European Union, the United States and emerging market countries, particularly Latin American countries, may diminish investor interest in securities of Brazilian issuers, including Itaú Unibanco Holding. This could materially and adversely affect the market price of our securities, and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all.

Banks located in countries considered to be emerging markets may be particularly susceptible to disruptions and reductions in the availability of credit or increases in financing costs, which could have a material adverse impact on our financial condition. In addition, the availability of credit to entities that operate within emerging markets is significantly influenced by levels of investor confidence in such markets as a whole and any factor that impacts market confidence (for example, a decrease in credit ratings or state or central bank intervention in one market) could materially and adversely affect the price or availability of funding for entities within any of these markets.

Risks Relating to Our Business and the Banking Industry

We are exposed to effects of the disruptions and volatility in the global financial markets and the economies in those countries where we do business, especially Brazil.

Beginning in late 2007, major financial institutions, including some of the largest global commercial and investment banks and insurance companies, experienced significant difficulties, especially lack of liquidity and depreciation of financial assets. More recently, fiscal problems in Europe, such as high debt levels, impaired growth and the risk of a sovereign default, particularly in Greece, Spain, Italy, Ireland and Portugal, increased volatility in already relatively fragile global financial markets. At the same time, the United States has been facing fiscal difficulties, which led to the downgrade of the U.S. long-term sovereign credit rating by Standard & Poor’s on August 6, 2011. See “Item 5A. Operating Results — Effects of the Global Financial Markets on our Financial Condition and Results of Operations.” These difficulties constricted the ability of a number of major global financial institutions to engage in further lending activity and caused losses. In addition, downgrades of sovereign credit ratings and defaults by, and doubts about the solvency of, certain financial institutions and the financial services industry generally led to market-wide liquidity problems and could lead to losses or defaults by, and bankruptcies of, other institutions.

We are exposed to the disruptions and volatility in the global financial markets because of their effects on the financial and economic environment in the countries in which we operate, especially Brazil, such as a slowdown in the economy, an increase in the unemployment rate, a decrease in the purchasing power of consumers and the lack of credit availability. We lend primarily to Brazilian borrowers and these effects could materially and adversely affect our customers and increase our non-performing loans and, as a result, increase the risk associated with our lending activity and require us to make corresponding revisions to our risk management and loan loss reserve models. For example, in 2009, we experienced an increase in our non-performing loans past due more than 90 days from 3.6% of total loans in December 31, 2008 to 5.6% December 31, 2009. As of December 31, 2012, our non-performing loans past due more than 90 days represented 4.8% of our total loan portfolio.

The global financial downturn has had significant consequences for Brazil and the other countries in which we operate, including stock, interest and credit market volatility, a general economic slowdown, and volatile exchange rates that may, directly or indirectly, materially and adversely affect the market price of Brazilian securities and have a material adverse effect on our business, financial condition and results of operations. In addition, institutional failures and disruption of the financial market in Brazil and the other countries in which we operate could restrict our access to the public equity and debt markets.

Continued or worsening disruption or volatility in the global financial markets could lead to further increase in negative effects on the financial and economic environment in Brazil and the other countries in which we operate, which could have a material adverse effect on us.

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A failure in, or breach of, our operational or security systems could temporarily interrupt our businesses, increasing our costs and causing losses.

Although we have high profile information security controls, continuing investments in infrastructure, and operations and crisis management in place, our business, financial, accounting, data processing systems or other operating systems and facilities may stop operating properly for a limited period of time or become temporarily disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control, such as: electrical or telecommunications outages; breakdowns, systems failures or other events affecting third parties with which we do business or that facilitate our business activities, including exchanges, clearing houses, financial intermediaries or vendors that provide services; events arising from local or larger-scale political or social matters and cyber attacks.

Temporary interruptions or failures in the physical infrastructure or operating systems that support our businesses and customers, cyber attacks, or any unauthorized disclosures of personal information in our possession, could result in customer attrition, lawsuits, regulatory fines, penalties or intervention, reimbursement or other compensation costs.

Changes in applicable law and regulation may have a material adverse effect on our business.

Brazilian banks, including us, are subject to extensive and continuous regulatory review by the Brazilian government, principally by the Central Bank. We have no control over applicable law and government regulations, which govern all aspects of our operations, including regulations that impose:

• Minimum capital requirements;

• Reserve and compulsory deposit requirements;

• Restrictions on credit card activities;

• Minimum levels for federal housing and rural sector lending;

• Funding restrictions;

• Lending limits, earmarked lending and other credit restrictions;

• Limitations or restrictions on our capacity to deduct amounts directly from salaries with respect to payroll-deduction loans;

• Limits on investments in fixed assets;

• Corporate governance requirements;

• Limitations on charging of commissions and fees by financial institutions for services to retail clients and the amount of interest financial institutions can charge;

• Accounting and statistical requirements; and

• Other requirements or limitations in the context of the global financial crisis.

The regulatory structure governing Brazilian financial institutions, including banks, broker-dealers and leasing companies and Brazilian insurance companies is continuously evolving. Disruptions and volatility in the global financial markets resulting in liquidity problems at major international financial institutions could lead the Brazilian government to change laws and regulations applicable to Brazilian financial institutions based on such international developments.

In response to the global financial crisis which began in late 2007, national and intergovernmental regulatory entities, such as the Basel Committee on Banking Supervision, proposed reforms to prevent the recurrence of a similar crisis, including the Basel III framework, that creates new higher minimum regulatory capital requirements. In February 2011, the Central Bank issued preliminary guidance and an estimated timeline for implementation of the Basel III framework in Brazil. See “Item 4B. Business Overview — Regulation and Supervision — Regulation by the Central Bank — Capital Adequacy and Leverage/Regulatory Capital Requirements.” In addition, on March 1, 2013 and March 4, 2013, the Central Bank issued initial rules to implement the Basel III framework in Brazil. See “Item 4B. Business Overview — Regulation and Supervision — Regulation by the Central Bank — Capital Adequacy and Leverage/Regulatory Capital Requirements — Implementation of Basel III in Brazil.” Based on our current regulatory capital ratios, as well as conservative assumptions on expected returns and asset growth, we do not anticipate that additional regulatory capital will be required to support our operations in the near future. However, depending on the effects of the rules that complete the implementation of the Basel III framework on Brazilian banks and particularly on our operations, we may need to reassess our ongoing funding strategy for regulatory capital. See “Item 4B. Business Overview — Regulation and Supervision — Regulation by the Central Bank — Capital Adequacy and Leverage/Regulatory Capital Requirements — Implementation of Basel III in Brazil — Expected Future Rules.”

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Moreover, there are several proposed bills under consideration in the Brazilian congress that, if signed into law as currently drafted, could adversely affect us. For example, a proposed law to benefit insolvent individual borrowers would allow courts to change the terms and conditions of credit agreements in certain situations. In addition, another proposed bill to amend the rules of civil procedures could have the effect of making recovery more difficult and appealing unfavorable judicial decisions in higher courts more burdensome.

We also have operations in countries outside of Brazil, including Argentina, Chile, Colombia, Paraguay, Portugal, United Kingdom, Uruguay and the United States. Changes in the laws or regulations applicable to our business in the countries in which we operate or adoption of new laws, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States, and the related rulemaking, may have a material adverse effect on our business, financial condition and results of operations.

The amendment of existing laws and regulations or the adoption of new laws and regulations could have a material adverse effect on our business, financial condition and results of operations, including our ability to provide loans, make investments or render certain financial services. See “Item 4B. Business Overview — Regulation and Supervision.”

Tax reforms may have a material adverse impact on our results of operations.

To maintain its fiscal policies, the Brazilian government regularly enacts reforms to tax and other assessment regimes. These reforms include the enactment of new taxes, changes in the bases of calculation or rates of assessments, including rates applicable solely to the banking industry, and occasionally the enactment of temporary taxes for designated governmental purposes. For example, in July 2011, the Brazilian government introduced a tax on securities transactions at the rate of 1.0% on the notional adjusted value of financial derivatives. See “Item 4B. Business Overview — Regulation and Supervision — Taxation — Tax on Financial Transactions.” The effects of these changes and any other changes that could result from the enactment of additional taxation cannot be quantified. These changes, however, may reduce our volume of operations, increase our costs or limit our profitability.

Future changes in tax policy that may affect financial operations include the creation of new taxes. Until 2007, certain financial transactions were subject to the provisional contribution on financial transactions (Contribuição Provisória sobre a Movimentação ou Transmissão de Valores e de Créditos e Direitos de Natureza Financeira or “CPMF”). However, much uncertainty exists as to whether the CPMF, or similar taxes, will be re-introduced in the future. Also, the Brazilian Congress may discuss broad tax reforms in Brazil to improve the efficiency of allocation of economic resources, as proposed by the executive branch of the Brazilian federal government. Furthermore, extensive tax reforms have been discussed over the last few years. We cannot predict if such tax reforms will be implemented in the future. The effects of these changes, if enacted, and any other changes that could result from the enactment of additional tax reforms, cannot be quantified.

Increases in reserve and compulsory deposit requirements may have a material adverse effect on our business, financial condition and results of operations.

The Central Bank has periodically changed the level of reserves and compulsory deposits that financial institutions in Brazil are required to maintain with the Central Bank. The Central Bank may increase the reserve and compulsory deposits requirements in the future or impose new requirements.

Increases in reserve and compulsory deposit requirements reduce our liquidity to make loans and other investments and, as a result, may have a material adverse effect on our business, financial condition and results of operations.

The compulsory deposits generally do not yield the same return as other investments and deposits because a portion of compulsory deposits:

• Do not bear interest;

• Must be held in Brazilian federal government securities; and

• Must be used to finance government programs, including a federal housing program and rural sector subsidies.

For more detailed information on compulsory deposits and capital requirements, see “Item 4B. Business Overview — Regulation and Supervision.”

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As of December 31, 2012, we had R$57,253 million in interest-bearing compulsory deposits and R$6,448 million in non-interest-bearing compulsory deposits. For more detailed information on compulsory deposits, see “Item 4B. Business Overview — Selected Statistical Information — Central Bank Compulsory Deposits.”

The increasingly competitive environment and consolidations in the Brazilian banking industry may have a material adverse effect on us.

The markets for financial and banking services in Brazil are highly competitive. We face significant competition from other large Brazilian and international banks, including Brazilian public banks. Competition has increased as a result of recent consolidations among financial institutions in Brazil and as a result of new regulations by CMN that facilitate the customer’s ability to switch business between banks. See “Item 4B. Business Overview — Regulation and Supervision — Antitrust Regulation.” The increased competition may materially and adversely affect us by, among other things, limiting our ability to retain our existing consumer base, increase our customer base and to expand our operations, reducing our profit margins on banking and other services and products we offer, and to the extent it limits investment opportunities.

Changes in the profile of our business and economic conditions may have a material adverse effect on our loan portfolio.

As of December 31, 2012, our loan and financing portfolio was R$366,984 million, compared to R$346,264 million as of December 31, 2011. Our allowance for loan losses was R$25,713 million, representing 7.0% of our total loan portfolio, as of December 31, 2012, compared to R$23,873 million, representing 6.9% of our total loan portfolio, as of December 31, 2011. The quality of our loan portfolio is subject to changes in the profile of our business resulting from organic growth and our merger and acquisition activity and is dependent on domestic and, to a lesser extent, international economic conditions. For example, during 2012 Brazilian banks experienced an increase in non-performing loans in the consumer credit business, particularly in the automobile sector. Adverse changes affecting any of the sectors to which we have significant lending exposure, political events within and external to Brazil and the variability of economic activity may have a material adverse impact on our business, financial condition and our results of operations. Furthermore, our historic loan loss experience may not be indicative of our future loan losses.

In addition, our strategy includes efforts to significantly expand our loan portfolio as well as increase the number of clients, particularly individuals and small and middle-market companies, that we serve. Certain financial products we offer to individuals and other clients are generally characterized by higher margins, but also higher risks of default. A future increase in our loan portfolio, as well as a shift to higher margins and higher risk products, could result in increased default rates, which could have a material adverse effect on our business, financial condition and results of operations.

The value of our securities and derivatives positions are subject to market fluctuations due to changes in Brazilian or international economic conditions and may produce material losses.

As of December 31, 2012, investment securities represented R$239,807 million, or 25.1% of our assets, and derivative financial instruments, which are used to hedge against risks represented R$11,597 million, or 1.2% of our assets, and realized and unrealized gains and losses have had and will continue to have a significant impact on our results of operations. These gains and losses, which we record when investments in securities are sold or are marked to market (in the case of trading securities) or when our derivative financial instruments are marked to market, may fluctuate considerably from period to period and are impacted by domestic and international economic conditions. If, for example, we have entered into derivatives transactions to protect against decreases in the value of the real or in interest rates and the real increases in value or interest rates increase, we may incur financial losses. We cannot predict the amount of realized or unrealized gains or losses for any future period, and variations from period to period have no practical analytical value in helping us to make such a prediction. Such losses could materially and adversely affect our results of operations and financial condition. Gains or losses on our investment portfolio may not continue to contribute to net income at levels consistent with recent periods or at all, and we may not successfully realize the appreciation or depreciation now existing in our consolidated investment portfolio or any portion thereof.

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Exposure to Brazilian federal government debt could have a material adverse effect on us.

Like many other Brazilian banks, we invest in debt securities of the Brazilian government. As of December 31, 2012, approximately 16.6% of our total assets, and 63.4% of our securities portfolio, was comprised of debt securities issued by the Brazilian government. Any failure by the Brazilian government to make timely payments under the terms of these securities, or a significant decrease in their market value, will have a material adverse effect on us.

If our pricing expectations are incorrect or our reserves for future policyholder benefits and claims are inadequate, the profitability of our insurance and pension products or our results of operations and financial condition may be materially and adversely affected.

Our insurance and pension plan business sets prices and establishes reserves for many of our insurance and pension products based upon actuarial or statistical estimates. The pricing of our insurance and pension products and the insurance and pension plans reserves carried to pay future policyholder benefits and claims are each based on models that include many assumptions and projections which are inherently uncertain and involve the exercise of significant judgment, including as to the levels of and timing of receipt or payment of premiums, contributions, benefits, claims, expenses, interest credits, investment results, interest rates, retirement, mortality, morbidity and persistency. Although we frequently review the pricing of our insurance and pensions products and the adequacy of our insurance and pension plans reserves, we cannot determine with precision the ultimate amounts that we will pay for, or the timing of payment of, actual benefits, claims and expenses or whether the assets supporting our policy liabilities, together with future premiums and contributions will be sufficient for payment of benefits and claims. Significant deviations in actual experience from our pricing assumptions could have a material adverse effect on the profitability of our insurance and pension plans products. In addition, if we conclude that our reserves, together with future premiums, are insufficient to cover future policy benefits and claims, we would be required to increase our reserves and incur income statement charges for the period in which the determination is made, which may have a material adverse effect on our business, financial condition and results of operations.

Our market, credit and operational risk management policies, procedures and methods may not be fully effective in mitigating our exposure to unidentified or unanticipated risks and our losses may exceed our allowance for loan losses.

Our market, credit and operational risk management policies, procedures and methods, including our statistical modeling tools, such as value at risk (VaR), stress test and sensitivity analyses, may not be fully effective in mitigating our risk exposure in all economic market environments or against all types of risk, including risks that we fail to identify or anticipate. Some of our qualitative tools and metrics for managing risk are based upon our use of observed historical market behavior. In addition, due to limitations in the availability of information in Brazil, in assessing customers’ creditworthiness we rely largely on the credit information available from our own databases, certain publicly available consumer credit information and other sources. We apply statistical and other tools to these observations to quantify our risk exposures. These qualitative tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors we did not anticipate or correctly evaluate in our statistical models. This would limit our ability to manage our risks. Our losses thus could be significantly greater than the historical measures indicate. In addition, our quantified modeling does not take all risks into account. Our more qualitative approach to managing those risks could prove insufficient, exposing us to material unanticipated losses. If existing or potential customers believe our risk management is inadequate, they could take their business elsewhere. This could harm our reputation as well as our revenues and profits.

Our results of operations and financial condition depend on our ability to evaluate losses associated with risks we are exposed to and our ability to build these risks into our pricing policies. We estimate our allowance for loan losses according to the principles within IFRS. The calculation also involves significant judgment on the part of our management. Those judgments may prove to be incorrect or change in the future depending on information as it becomes available. This could adversely affect our operating income and, consequently, our financial condition and results of operations.

In addition, our businesses depend on the ability to process a large number of transactions securely, efficiently and accurately. Losses can result from inadequate personnel, inadequate or failed internal control processes and systems, information systems failures or breaches or from external events that interrupt normal business operations. We also face the risk that the design of our controls and procedures for mitigating operational risk proves to be inadequate or is circumvented.

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We may incur losses associated with counterparty exposures.

We face the possibility that a counterparty will be unable to honor its contractual obligations. These counterparties may default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. Counterparty risk may arise, for example, from entering into reinsurance agreements or loan facilities or other credit agreements under which counterparties have obligations to make payments to us; executing currency or other trades that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries. In addition, we routinely transact with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. We may incur in losses if a counterparty does not honor its contractual obligations.

Our controlling shareholder has the ability to direct our business.

As of March 31, 2013, IUPAR, our controlling shareholder, directly owned 51.0% of our common stock and 25.5% of our total capital stock. See “Item 7A. Major Shareholders.” As a result, IUPAR has the power to control us, including the power to elect and remove our directors and officers and determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations and the timing and payment of dividends. In addition, IUPAR is jointly controlled by Itaúsa, which is controlled by the Egydio de Souza Aranha family, and the former controlling shareholders of Unibanco, the Moreira Salles family. The interests of IUPAR, Itaúsa and the Egydio de Souza Aranha and Moreira Salles families may be different from your interests as a holder of our preferred shares and ADSs.

Investors in our securities do not have the same protections as if the majority of the members of our board of directors were independent.

As described in “Item 7A. Major Shareholders”, IUPAR is our controlling shareholder and, as a result, has the power to control us, including the power to elect and remove our directors and officers. Our current board of directors is comprised of 12 members; only four of those directors are independent in accordance with our corporate governance policy. As a foreign private issuer, we are subject to corporate governance standards, such as the New York Stock Exchange listed company rules, that differ from those applicable to U.S. domestic issuers, including with respect to director independence requirements. See “Item 16G. Corporate Governance.” A significant number of our directors participate in decision-making on matters in which they have greater interests than would an independent director. As a result, the interests of these directors may not be, at all times, the same as those of our securityholders. In addition, several of our directors are affiliated with IUPAR and circumstances may arise in which the interests of IUPAR and its affiliates conflict with the interests of our other stockholders. Where these and other conflicting interests exist, our securityholders will be dependent on our directors exercising, in a manner fair to all of our securityholders, their fiduciary duties as a member of our board of directors.

We are subject to regulation on a consolidated basis and may be subject to liquidation or intervention on a consolidated basis.

The Central Bank treats us and our subsidiaries and affiliates as a single financial institution for regulatory purposes. While our consolidated capital base provides financial strength and flexibility to our subsidiaries and affiliates, their activities could indirectly put our capital base at risk. In particular, any investigation of, or intervention by the Central Bank in, the affairs of any of our subsidiaries and affiliates could have a material adverse impact on our other subsidiaries and affiliates and ultimately on us.

Integration of acquired or merged businesses involves certain risks that may have a material adverse effect on us.

We have engaged in a number of mergers and acquisitions in the past and may make further acquisitions in the future as part of our growth strategy in the Brazilian financial services industry. We believe that these transactions will contribute to our continued growth and competitiveness in the Brazilian banking sector.

Any acquisition and merger of institutions and assets and the integration of such institutions and assets involves certain risks including the risk that:

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• Integrating new networks, information systems, personnel, financial and accounting systems, risk and other management systems, financial planning and reporting, products and customer bases into our existing business may run into difficulties, cause us to incur unexpected costs and operating expenses and place additional demands on management time;

• We may incur unexpected liabilities or contingencies relating to the acquired businesses;

• Antitrust and other regulatory authorities may impose restrictions or limitations on the terms of the acquisition or merger, require disposition of certain assets or businesses or withhold their approval of such transaction; and

• The expected operation and financial synergies and other benefits from such mergers or acquisitions may not be fully achieved.

If we fail to achieve the business growth opportunities, cost savings and other benefits we anticipate from mergers and acquisition transactions, or incur greater integration costs than we have estimated, our business, financial condition and results of operations may be materially and adversely affected.

Risks Relating to the Preferred Shares and the ADSs

The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the preferred shares underlying the ADSs at the price and time you desire.

Investing in securities that trade in emerging markets often involves greater risk than investing in securities of issuers in the United States or in other countries, and these investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States or in other countries. There is also significantly greater concentration in the Brazilian securities market than in major securities markets such as the United States or in other countries. The ten largest companies in terms of market capitalization represented 52.4% of the aggregate market capitalization of BM&FBOVESPA S.A. (Bolsa de Valores, Mercadorias e Futuros, or “BM&FBOVESPA”), as of December 31, 2012. Therefore, although you are entitled to withdraw our shares underlying the ADSs from the depositary bank at any time, your ability to sell the preferred shares underlying the ADSs at the price and at time they desire may be limited.

The preferred shares and ADSs generally do not have voting rights.

According to our bylaws, holders of preferred shares, and therefore of the ADSs, are not entitled to vote at meetings of our shareholders, except in limited circumstances. See “Item 10B. Memorandum and Articles of Association.” In the limited circumstances where the preferred shareholders are able to vote, holders may exercise voting rights with respect to the preferred shares represented by ADSs only in accordance with the provisions of the deposit agreement relating to the ADSs.

Despite there being no provisions under Brazilian law or under our bylaws that limit ADS holders' ability to exercise their voting rights through the depositary bank with respect to the underlying preferred shares (in the limited circumstances in which the preferred shareholders are able to vote), there are practical limits to the ability of ADS holders to exercise their voting rights due to extra procedural steps involved in communicating with such holders.

According to the provisions of the deposit agreement, we will provide notice to the depositary bank, which will, in its turn, and to the extent practicable, mail such notice to holders and instructions on how the ADS holders can participate in the shareholders meeting. To exercise their voting rights, ADS holders must instruct the depositary bank on how to vote the shares represented by their ADSs. Because of this extra procedural step involving the depositary bank, the process for exercising voting rights is longer for ADS holders.

Holders of ADSs may be unable to exercise preemptive rights with respect to our preferred shares.

We may not be able to offer our preferred shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our preferred shares in connection with any issuance of our preferred shares unless a registration statement under the Securities Act is effective with respect to the preferred shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available. However, as we are not obligated to file a registration statement relating to preemptive rights with respect to our preferred shares, we cannot assure you that we will file any such registration statement. If a registration statement is not filed and an exemption from registration does not exist, The Bank of New York Mellon, as depositary, will attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of the sale. However, these preemptive rights will expire if the depositary does not sell them in a timely manner, and U.S. holders of ADSs will not realize any value from the granting of the preemptive rights. For more information on the exercise of your preemptive rights, see “Item 10B. Memorandum and Articles of Association — Preemptive Rights on Increase in Preferred Share Capital.”

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If you surrender your ADSs and withdraw preferred shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.

As a holder of ADSs, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our preferred shares underlying the ADSs in Brazil, which permits the depositary to convert dividends and other distributions with respect to the preferred shares underlying the ADSs into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw preferred shares, you may be entitled to continue to rely on the custodian´s electronic certificate of foreign capital registration for five business days from the date of withdrawal. Thereafter, upon the disposition of or distributions relating to the preferred shares, you will not be able to remit abroad non-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration, the Electronic Declaratory Registration of Foreign Direct Investment (RDE-IED), or you qualify under Brazilian foreign investment regulations that entitle foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining a separate electronic certificate of foreign capital registration, the Electronic Declaratory Registration of Portfolio (RDE – Portfolio), in accordance with CMN Resolution No. 2,689, of January 26, 2000. If you do not fulfill the requirements to obtain a RDE – Portfolio, you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our preferred shares. If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our preferred shares or the return of your capital in a timely manner. Moreover, should you surrender your ADSs and withdraw preferred shares, applicable regulations require you to enter into corresponding exchange transactions and pay taxes on these exchange transactions. Finally, the custodian´s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.

Holders of our preferred shares and ADSs may not receive any dividends.

According to our bylaws, we are obligated to pay our shareholders at least 25.0% of our annual adjusted net income, which may differ significantly from our net income calculated under IFRS. This adjusted net income may be capitalized, used to absorb losses or otherwise retained as allowed by Brazilian Corporate Law. Brazilian Corporate Law allows us to suspend the mandatory distribution of dividends to all shares in any particular year if our board of directors informs our shareholders that such distribution would be incompatible with our financial condition. In addition, due to the implementation of Basel III rules, Brazilian law currently establishes that if financial institutions are not in compliance with the CMN requirements, they must significantly reduce the amount of dividends to be distributed or even not distribute any dividends. See “Item 8A. Consolidated Financial Statements and Other Financial Information – Dividend Policy and Dividends” and “Item 10B. Memorandum and Article of Association – Calculation of Distributable Amount.”

As a holder of ADSs, you have shareholder rights that differ from those of shareholders of companies organized under the laws of the United States or other jurisdictions.

Our corporate affairs are governed by the Brazilian Corporate Law and our bylaws, which may differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States or in other jurisdictions outside Brazil. Under Brazilian Corporate Law, the holders of ADSs and the holders of the preferred shares may have different rights with respect to protection of their interests, including measures related to actions taken by our board of directors or the holders of our common shares, which may differ from the laws of other jurisdictions outside Brazil.

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ITEM 4 INFORMATION ON THE COMPANY

4A. History and Development of the Company

General

Our legal and commercial name is Itaú Unibanco Holding S.A. We were incorporated on September 9, 1943. We are organized as a publicly held corporation for an unlimited period of time under the laws of Brazil. Our head offices are located at Praça Alfredo Egydio de Souza Aranha, 100, 04344-902, São Paulo, SP, Brazil and our telephone number is +55-11-5019-1267.

Investor information can be found on our website at www.itau-unibanco.com/ir. Information contained on our website is not incorporated by reference in, and shall not be considered a part of, this annual report. Our agent for service of process in the United States is the general manager of our New York branch, which is located at 767 Fifth Avenue, 50th floor, New York, NY 10153.

History

We trace our origins to 1944, when members of the Egydio de Souza Aranha family founded Banco Federal de Crédito S.A. in São Paulo. Since 1973 we have operated through Banco Itaú S.A., now Itaú Unibanco. Unibanco was founded by the Moreira Salles family in 1924, making it Brazil’s oldest non-state owned bank at the time of the Association.

On November 3, 2008, we announced the combination of the operations of Itaú Holding (currently Itaú Unibanco Holding) and Unibanco Holdings S.A., including its subsidiary Unibanco and Unibanco’s subsidiaries. The result of this Association was the creation of Itaú Unibanco Holding. Since the final approval of the Association by the Central Bank on February 18, 2009 and by CADE on August 18, 2010, we have fully integrated the operations of the two banks.

As of December 31, 2012, we were the largest bank in Brazil based on market capitalization according to Bloomberg.

Statistical Disclosure by Bank Holding Companies

See “Item 4B. Business Overview — Selected Statistical Information” for additional information relating to our business.

Divestitures

Orbitall

On December 22, 2011, Banco Itaucard S.A. (“Banco Itaucard”), Banco Itauleasing S.A., Itaú Unibanco and Intrag-Part. Administração e Participações Ltda. entered into a share purchase agreement with TI Brasil Participações Ltda., by means of which they undertook to (i) spin-off Itaú Unibanco Serviços e Processamento de Informações Comerciais Ltda. (formerly known as Orbitall Serviços e Processamento de Informações Comerciais Ltda.) (“Old Orbitall”) so that all of its assets, liabilities, staff and necessary resources to carry out the third party credit card processing business of Old Orbitall would be merged into Orbitall Serviços e Processamento de Meios de Pagamento Ltda. (“Orbitall”) and (ii) sell 100.0% of the shares of Orbitall. The transaction closed on March 31, 2012.

Serasa

On October 22, 2012, Itaú Unibanco Holding, through BIU Participações S.A., entered into a stock purchase agreement with Experian Brasil Ltda., under which it undertook to sell its equity stake, corresponding to 601,403 common shares, in Serasa S.A., a credit bureau, for approximately R$1,700 million. This transaction closed on November 23, 2012.

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BPI

On April 20, 2012 Itaú Unibanco Holding entered into an agreement through its subsidiary IPI - Itaúsa Portugal Investimentos, SGPS, Lda. (“IPI”), to sell its stake of 18.87% in Banco BPI, S.A. By means of this transaction, Caixabank, S.A. (“La Caixa”), a Spanish bank, acquired such stake for approximately €93 million. The Portuguese Central Bank approved the transaction on April 30 and its closing occurred on May 3, 2012.  This transaction had a positive impact of R$124 million on our consolidated stockholders’ equity due to the adjustment in other comprehensive income in connection with the sale and a negative non-recurring effect of R$186 million on our net income, due to the difference between the consideration received and the carrying amount of our equity investment and the adjustment in other comprehensive income.

Capital Expenditures

On January 27, 2012, we announced the construction of a new technology center, representing a total investment of approximately R$800 million for the first phase of the project (building). See “Item 4B. Business Overview Technology”. In September 2012, we announced an investment of R$10,413 million in technology, innovation and services to be made in the period from 2012 to 2015.

See “Item 5B. Liquidity and Capital Resources – Capital – Capital Expenditures” for a discussion of our capital expenditures for the last three fiscal years.

Acquisitions

Banco Carrefour

On April 14, 2011 Itaú Unibanco entered into a share purchase and sale agreement governing the indirect acquisition by Itaú Unibanco of 49.0% of Banco CSF S.A. (“Banco CSF”) for the amount of R$725 million. Banco CSF is the entity responsible for the offering and distribution, on an exclusive basis, of financial, insurance and pension products and services through the distribution channels of Carrefour Comércio e Indústria Ltda., which operates under the “Carrefour” brand in Brazil. As of April 14, 2011, the “Carrefour” brand included 163 hypermarkets and supermarkets and related e-commerce channels, and had 7.7 million accounts and a credit portfolio (gross book value) of R$2,254 million as of December 31, 2010. This transaction was approved by the Central Bank in April 2012 and closed on May 31, 2012.

BMG Association

On July 9, 2012, Itaú Unibanco entered into an association agreement with Banco BMG S.A. (“Banco BMG”), a privately-held Brazilian bank, forming a joint venture for the distribution of payroll loans in Brazil (the “BMG Association”). The BMG Association is structured as a new financial institution, Banco Itaú BMG Consignado S.A. (the “JV”), controlled by Itaú Unibanco, who holds, indirectly, 70.0% of the shares issued by the JV. BMG holds the remaining 30.0% stake in the JV. The initial stockholders’ equity of the JV was approximately R$1 billion. Itaú Unibanco has the right to nominate the majority of the board of directors of the JV and the majority of the officers of the JV, including the Chief Executive Officer. Banco BMG has the right to appoint the officers responsible for the commercial, back-office and collection divisions of the JV, subject to Itaú Unibanco’s approval.

Banco BMG shares its distribution channels operated through banking agents (correspondentes bancários) with the JV, which has the right to grant 70.0% of the payroll loans generated by such distribution channels. The remaining 30.0% of such loans may be granted directly by Banco BMG.

The payroll loans granted to Itaú Unibanco’s clients through Itaú Unibanco’s branches and other exclusive Itaú Unibanco channels remain separate from the operations of the JV. Itaú Unibanco also provides funding for Banco BMG’s payroll loan transactions of up to R$300 million per month, for a five-year term, through the acquisitions of payroll credit portfolios. Itaú Unibanco and its affiliates also have the right to offer their products and services to the JV’s customers.

Following approval of this transaction by CADE, definitive agreements governing the BMG Association were executed on December 13, 2012, and included an investment agreement governing each party’s rights and obligations under the JV, and an agreement for the provision of funding through assignment of credit rights governing Itaú Unibanco’s provision of funds to Banco BMG. The transaction closed on January 7, 2013 and it was approved and ratified by the Central Bank in April, 2013.

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Redecard

On February 7, 2012, Itaú Unibanco Holding announced its intention to acquire, directly or through its affiliates, all outstanding shares of Redecard S.A. (“Redecard”), through a public tender offer (the “Tender Offer”) aimed at cancelling Redecard’s authorization as a publicly-held company registered with the CVM. The Tender Offer targeted the acquisition of common shares of Redecard corresponding to approximately 50.0% of its share capital. On April 12, 2012, Itaú Unibanco Holding confirmed that the price to be paid in cash would be R$35.00 per share (“Tender Offer Price”). The Tender Offer was successfully completed on September 24, 2012. As a result of the auction, Itaú Unibanco Holding acquired, through its affiliate Banestado Participações, Administração e Serviços Ltda., 298,989,137 common shares of Redecard, representing 44.4% of Redecard’s share capital, bringing the total amounts of common shares owned by us to 94.4% of Redecard’s share capital. On October 18, 2012, Redecard’s registration as a publicly held company was cancelled. As of December 31, 2012, Itaú Unibanco Holding held, through its affiliates, 100.0% of Redecard’s shares, as a result of subsequent purchases. The shares were purchased at the Tender Offer Price for a total amount of R$11,752 million (including the Tender Offer) and the difference between the value paid and the value corresponding to the minority interest was recognized under appropriated reserves in the amount of R$11,151 million as of December 31, 2012, which net of taxes totaled R$7,360 million. See note 3(c) to our annual consolidated financial statements.

Unibanco Participações Societárias

On July 29, 2011, we acquired, through a wholly-owned subsidiary, all remaining interests not previously owned in Unibanco Participações Societárias, an indirect investment subsidiary of Itaú Unibanco Holding, for approximately R$1.2 billion in cash.

HSBC Portfolio in Chile

On October 24, 2011, we completed the acquisition of HSBC’s high net worth portfolio in Chile, which included, among others, 4 branches and the consumer credit and mortgage portfolios, strengthening our position in the Chilean market, with a network of 88 branches in Chile.

MCC Securities

On August 1, 2011, Itaú Unibanco, through its subsidiaries, entered into certain agreements with Munita, Cruzat & Claro (“MCC”) and acquired 50.0% plus one share issued by MCC Securities Inc. (Cayman Islands), forming a joint venture with MCC targeting Chilean high net worth clients.

4B. Business Overview

Itaú Unibanco Holding ranked among the twenty largest banks in the world in 2012 and was the largest bank in Brazil, each ranking based on market capitalization according to Bloomberg as of December 31, 2012. Our principal operations are: (i) commercial banking (including insurance, pension plan and capitalization products, credit cards, asset management and a variety of credit products and services for individuals, small and middle-market companies); (ii) corporate and investment banking (Itaú BBA); (iii) consumer credit (financial products and services to our non-accountholders); and (iv) operations with the market and corporation (referred to as corporate and treasury in note 34 to our consolidated financial statements).

We have an extensive network with 4,121 branches, 906 customer site branches (“CSBs”) and 27,960 ATMs in Brazil and abroad, as of December 31, 2012, which includes 998 branches and 245 CSBs of Unibanco that were redesigned and integrated as Itaú Unibanco customer service locations in 2010.

We were elected or ranked:

· “The Best Private Banking Overall Services” in Brazil, according to the 2012 Annual Private Banking and Wealth Management Survey, coordinated by Euromoney magazine;

· The largest mutual fund manager among private banks in Brazil based on our assets under management, according to ANBIMA;

· The largest manager of private bank client assets, according to ANBIMA; and

· The top provider of securities services in Brazil by ANBIMA.

In addition, we received the following awards and recognition in 2012:

· Ranked first among the Latin American financial institutions in Top 1000 World Banks 2012 from The Banker magazine — Financial Times.

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· The World’s Most Sustainable Bank in the 2012 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;

· Private Banker International Awards 2012 — Outstanding Private Banking in Latin America. Hosted by British magazine “Private Banker International”; and

· “Most Innovative Investment Bank in Latin America” to Itaú BBA from The Banker magazine — Financial Times.

· Ranked first in six out of eight awards granted by Institutional Investor Magazine: Best Investor Relations voted on by sell-side and buy-side analysts; Best CEO voted on by sell-side and buy-side analysts; Best CFO voted on by buy-side analysts and Best Investor Relations Professional voted on by buy-side analysts.

Our Ownership Structure

We are a financial holding company controlled by IUPAR, a holding company jointly controlled by (i) Itaúsa, which is a holding company controlled by members of the Egydio de Souza Aranha family; and (ii) E. Johnston, which is a holding company controlled by the former controlling shareholders of Unibanco, the Moreira Salles family. Itaúsa also directly owned 38.7% of the shares of our common stock as of March 31, 2013. See “Item 7A. Major Shareholders”.

The following chart is a simplified overview of the direct and indirect ownership structure of the Itaú Unibanco Group as of March 31, 2013:

(1) Excluding controlling shareholder and treasury shares.

Ownership percentages above refer to the total of direct and indirect ownership. All of the above companies were organized and have their operations in Brazil, except Banco Itaú Argentina S.A. (“Banco Itaú Argentina”), Itau BBA International Limited (“Itau BBA International”), Banco Itaú Chile S.A. (“Banco Itaú Chile”), Banco Itaú Paraguay S.A (“Banco Itaú Paraguay”) and Banco Itaú Uruguay S.A. (“Banco Itaú Uruguay”). For further information with respect to our significant subsidiaries, see note 2.4(a) to our consolidated financial statements.

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Competitive Strengths

We believe the following strengths provide us with significant competitive advantages and distinguish us from our competitors.

Premier banking brand in Brazil.

Our brands are very strong and very well recognized in Brazil. They represent quality and reliability and, with our large portfolio of products, help us to maintain a low customer turnover rate, especially among customers in the high income segment.

Large branch network in geographic areas with high economic activities.

We have an extensive network with 4,121 branches, 906 CSBs and 27,960 ATMs in Brazil and abroad, as of December 31, 2012. Our Brazilian branch network, while national in scope, is strategically concentrated in Southeast Brazil, the country’s wealthiest region. Our branch network in other countries of the Southern Cone (Argentina, Chile, Paraguay, and Uruguay) is also positioned in regions with high levels of economic activity. A branch network in wealthier and key economic areas gives us a strong presence and a competitive advantage to offer our services to a broad range of customers and profit from selective market opportunities. Our exclusive ATM network allows us to offer a wide range of products and services to our customers which we see as one of our competitive strengths.

Diverse line of products and services.

We are a multi-service bank offering a diverse line of products and services that are designed to address the needs of various types of clients, including corporate clients, small and medium-sized enterprises, retail customers, high-income individuals, private bank clients, non-accountholders and credit card users. We believe that this model creates opportunities to improve our relationships with clients and thereby increase our market share. We expect to sustain our leading presence by capturing a solid and growing pipeline of transactions across a number of business segments.

Technology and electronic distribution channels as drivers for sales.

Our intensive use of technology and electronic distribution channels, which has contributed significantly to an increase in sales of products and services, is one of our most important competitive advantages. In 2012, we spent approximately R$5,215 million on information technology, of which approximately R$1,853 million was for the purchase of hardware and software and approximately R$3,362 million for the cost of information technology (“IT”) infrastructure, operation and maintenance. We have sophisticated technology that supports other remote banking access (call centers, Internet banking, etc.) and offers customers the ability to verify their statements and perform their transactions. Our sales teams can access client credit scores directly through mobile phones and credit proposals can be sent over the Internet by any broker registered in our systems.

Risk-based pricing model as a tool to manage risk while exploring opportunities.

Our risk-based pricing model is an important competitive advantage as it gives us a more precise dimension of the risk equation versus return in various scenarios. This is an essential tool to explore commercial opportunities and simultaneously manage risks. Depending on the product, each contract is individually priced using risk adjusted return on capital models that give us a better assessment of the market.

Business Strategy

Our board of directors is responsible for defining the guidelines of our strategy and that of our subsidiaries. Strategic decisions by our board of directors are supported by the strategy committee of the board, which provides data and information about strategic business issues. See “Item 6C. Board Practices – Committees of the Board of Directors – Strategy Committee”. The strategy committee’s activities and responsibilities range from evaluating investment opportunities and budget guidelines to providing advice and support to the chief executive officer for the monitoring of our consolidated strategy. The strategy committee is supported by the economic scenarios sub-committee which provides macroeconomic data in order to support discussions on strategies, investments and budgets.

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Expand our operations in Brazil and abroad.

We intend to expand our operations in Brazil and abroad. In 2012, we carried out a series of transactions aimed at expanding our operations in Brazil. We acquired the remaining shares of Redecard S.A. in a tender offer, resulting in our ownership of 100.0% of Redecard’s capital stock, formed Banco Itaú BMG Consignado S.A., a new financial institution in partnership with Banco BMG S.A. and controlled by us, and acquired shares representing 49.0% of the capital stock of Banco CSF S.A. Also in 2012, we were authorized by the Colombian regulatory authorities to structure our wholesale and investment banking operations in Colombia through Itaú BBA SA Colombia — Corporación Financiera (“Itaú BBA Colombia”). Itaú BBA’s target market in Colombia is composed of institutional investors and large Brazilian companies operating in Colombia as well as Colombian companies operating in Brazil. The products portfolio in Colombia is expected to include loan operations, foreign trade financing, foreign exchange and derivatives, and investment bank activities, such as advising on mergers and acquisitions and access to capital markets. In addition, in order to consolidate and expand operations in Europe, we recently transferred the central administration and registered offices of Banco Itaú BBA International from Lisbon to London by means of a cross-border merger by absorption. See “Item 4B. Business Overview — International Operations — Itau BBA International.” We expect these transactions, which added to the significant steps taken in 2011, to expand our wholesale and investment bank operations abroad, our offering of products and services and our distribution channels. In Chile, we entered into an agreement with Munita, Cruzat & Claro, one of the leaders in third party wealth management services in Chile. Also in 2011, we acquired HSBC Bank’s high net worth portfolio in Chile, strengthening our position in the Chilean market, with a network of 88 branches in that country. In addition, Itaú Unibanco Holding started operations in Switzerland through a subsidiary of Banco Itaú BBA International located in Zurich, to provide services to private clients, both Brazilian and Latin American, who seek global investment opportunities.

Continue to improve efficiency.

After the completion of the integration of Itaú and Unibanco branches in 2010, we created the “Efficiency Project”, which implements, on an ongoing basis, close budget management and monitoring of costs and revenues, the establishment of targets for each business unit and the promotion of a strong culture of operational efficiency. In 2011, we fully integrated all systems that still had Unibanco’s legacy information on operations entered into prior to the integration of the branch network. This was the last remaining step to the integration of Banco Itaú Holding and Unibanco.

Grow our loan portfolio with the maintenance of asset quality.

The growth of our loan portfolio and the maintenance of asset quality are central issues to our strategy. We are constantly seeking to improve our models for risk management and our economic forecasts and scenario modeling. We intend to increase the average volume of loan operations to maintain and even grow our market share, depending on the product, market and customer type, including through the development of new products for specific client demographics.

Implement an advanced and fully integrated risk management approach should position us for sustainable growth and enhanced profitability.

Our main strategic goals in risk management include: (i) the incorporation of best practice recommendations and the implementation of the advanced approaches under Basel II and Basel III, which should enhance profitability from more precise risk-based pricing and risk-adjusted performance measurement frameworks, which are important sources of competitive advantage; and (ii) developing and implementing a fully integrated risk management approach, through the integration of processes and systems to provide a comprehensive picture of risk exposures across risk types and from multiple viewpoints, as well as through the development of stress testing and risk appetite standards.

Develop strong relationships with our customers based on customer segmentation.

We will continue to work on our customer segmentation strategy in order to identify our customers’ needs and enhance our relationship with our customer base, as well as to increase market penetration. A customer segment is a distinguishable part of our customer base that is subject to a specific set of needs that we focus on meeting. We believe that our customer segmentation tools and strategy provide us an important competitive advantage developed over the course of more than 25 years. We aim to fulfill customers’ financial needs through a wide product portfolio, including cross-selling of banking and insurance products and sales through a variety of channels. It is also extremely important to deliver best-in-class customer service, in order to maintain and increase client satisfaction and increase portfolio profitability.

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Operations

The table below presents revenues for our segments for each of the years ended December 31, 2012, 2011 and 2010. As disclosed in note 34 to the consolidated financial statements we have four operational and reporting segments: Commercial Banking, Itaú BBA, Consumer Credit and Activities with the Market and Corporation.

(in millions of R$, except percentages)
	Year Ended December 31,									Variation
	2012			2011			2010			2012-2011			%			2011-2010			%
Commercial Banking		45,059			42,499			36,314			2,560			6.0	%		6,185			17.0	%
Interest margin (1)		32,770			31,584			27,068			1,186			3.8	%		4,516			16.7	%
Banking service fees		12,289			10,915			9,246			1,374			12.6	%		1,669			18.1	%
Itaú BBA		7,595			7,019			6,533			576			8.2	%		486			7.4	%
Interest margin (1)		5,334			4,896			4,601			438			8.9	%		295			6.4	%
Banking service fees		2,261			2,123			1,932			138			6.5	%		191			9.9	%
Consumer Credit		14,200			14,075			14,809			125			0.9	%		(734	)		(5.0	)%
Interest margin (1)		8,310			8,356			9,044			(46	)		(0.6	)%		(688	)		(7.6	)%
Banking service fees		5,890			5,719			5,765			171			3.0	%		(46	)		(0.8	)%
Activities with the Market and Corporation (2)		5,804			5,110			3,538			694			13.6	%		1,572			44.4	%
Interest margin (1)		5,555			4,801			3,356			754			15.7	%		1,445			43.1	%
Banking service fees		249			309			182			(60	)		(19.4	)%		127			69.8	%
IFRS Adjustments and consolidation elimination		124			(930	)		1,888			1,054			(113.3	)%		(2,818	)		(149.3	)%
Interest margin (1)		1,869			(1,274	)		1,921			3,143			(246.7	)%		(3,195	)		(166.3	)%
Banking service fees		(1,745	)		344			(33	)		(2,089	)		607.3	%		377			(1142.4	)%
Total		72,782			67,773			63,082			5,009			7.4	%		4,691			7.4	%
Interest margin (1)		53,838			48,363			45,990			5,475			11.3	%		2,373			5.2	%
Banking service fees		18,944			19,410			17,092			(466	)		(2.4	)%		2,318			13.6	%

⁽¹⁾ Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

⁽²⁾ Activities with the Market and Corporation includes the results related to the trading activities in our proprietary portfolio, trading related to managing currency, interest rate and other market risk factors, asset and liability management and arbitrage opportunities in domestic and foreign markets. It also includes the results associated with financial income from the investment of our excess capital.

We mainly carry out our business activities in Brazil. We do not break down our revenues by geographic market within Brazil. Our revenues consisting of interest income, banking service fees and income from insurance, private pension and capitalization operations after claim and selling expenses are divided between revenues earned in Brazil and abroad. The information in the table below presents revenues for each of the years ended December 31, 2012, 2011 and 2010 and is presented after elimination upon consolidation.

(in millions of R$, except percentages)
	Year Ended December 31,						Variation
	2012		2011		2010		2012-2011			%			2011-2010		%
Interest Income (1)		101,905		103,962		82,830		(2,057	)		(2.0	)%		21,132		25.5	%
Brazil		95,063		99,083		79,236		(4,020	)		(4.1	)%		19,848		25.0	%
Abroad		6,842		4,879		3,594		1,964			40.3	%		1,284		35.7	%
Banking service fees		18,944		19,410		17,092		(466	)		(2.4	)%		2,318		13.6	%
Brazil		17,918		18,506		16,196		(588	)		(3.2	)%		2,310		14.3	%
Abroad		1,026		904		896		122			13.5	%		8		0.9	%
Income from insurance, private pension and capitalization operations after claim and selling expenses		2,820		2,566		2,007		254			9.9	%		559		27.9	%
Brazil		2,792		2,535		1,991		256			10.1	%		545		27.4	%
Abroad		28		31		16		(2	)		(7.5	)%		14		86.7	%

⁽¹⁾ Includes interest and similar income, dividend income, net gain (loss) from investment securities and derivatives, foreign exchange results and exchange variation on transactions.

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The table below presents revenues abroad by operational segment for each of the years ended December 31, 2012, 2011 and 2010:

(in millions of R$, except percentages)
	Year Ended December 31,						Variation
	2012 (5)		2011 (5)		2010 (5)		2012-2011			%			2011-2010			%
Commercial Banking		3,806		3,081		2,467		725			23.5	%		614			24.9	%
Argentina (1)		425		244		169		181			74.3	%		75			44.2	%
Chile (2)		629		444		500		185			41.5	%		(56	)		(11.1	)%
Uruguay (3)		227		166		135		61			37.1	%		31			22.7	%
Other companies abroad (4)		2,525		2,227		1,663		298			13.4	%		564			33.9	%
Itaú BBA		832		968		656		(136	)		(14.0	)%		312			47.5	%
Other companies abroad (4)		832		968		656		(136	)		(14.0	)%		312			47.5	%
Consumer Credit		127		103		105		24			23.1	%		(2	)		(1.7	)%
Argentina (1)		22		20		22		2			9.1	%		(2	)		(8.4	)%
Uruguay (3)		24		17		18		7			37.3	%		(1	)		(2.9	)%
Chile (2)		81		66		65		15			23.6	%		1			0.8	%
IFRS adjustments		3,131		1,662		1,278		1,469			88.4	%		384			30.1	%

⁽¹⁾ Includes Banco Itaú Argentina S.A, Itaú Asset Management S.A., Sociedad Gerente de Fondos Comunes de Inversión, Itrust Servicios Inmobiliarios S.A.C.I (formerly known as Itrust Servicios Financieros S.A) and Itaú Sociedad de Bolsa S.A.

⁽²⁾ Includes 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.

⁽³⁾ Includes ACO Ltda., Banco Itaú Uruguay S.A., OCA Casa Financiera S.A., OCA S.A, and Unión Capital AFAP S.A.

⁽⁴⁾ Itaú Unibanco S.A. - Grand Cayman, New York and Tokyo; Itaú Unibanco Holding S.A. - Grand Cayman Branch; Banco Itaú-BBA S.A. - Nassau Branch, only for the year ended December 31, 2011; Unibanco Grand Cayman Branch and Itaú Unibanco S.A. - Nassau Branch; IPI - Itaúsa Portugal Investimentos, SGPS Lda. (49.0%); Itaúsa Europa - Investimentos, SGPS, Lda.; Itaú Europa, SGPS, Lda.; Itaúsa Portugal - SGPS, S.A.; Banco Itaú 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.; Itaú Bahamas Directors Ltd (formerly known as Federal Director International Services, S.A.), Itaú Bahamas Nominees Ltd. (new company name of Bay State Corporation Limited) and Banco Itau Suisse S.A (only for the year ended December 31, 2011); BIE Directors Ltd and BIE Nominees Lda (only for the year ended December 31, 2012); Itau BBA International Limited; Itau Bank Ltd.; ITB Holding Ltd.; Jasper International Investiment LLC; Itaú Bank & Trust Cayman Ltd.; Uni-Investments Inter. Corp.; Rosefield Finance Ltd. (50.0%); UBT Finance S.A.; Itaú Cayman Directors Ltd. and Itaú Cayman Nominees Ltd. (only for the year ended December 31, 2011); Itau USA Asset Management; Unibanco Cayman Bank Ltd. and Unipart Partic. Internac. Ltd; Afinco Americas Madeira, SGPS, Soc. Unipessoal Ltda.; Topaz Holding Ltd.; 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. (51.0%); Itaú BBA USA Securities Inc.; Itaú Middle East Limited; Unipart B2B Investments, S.L.; Itau BBA UK Securities Limited; Itaú Japan Asset Management Ltd.; Itaú (Beijing) Investment Consultancy Limited; Itaú UK Asset Management Limited and Itaú Asia Asset Management Limited (only for the year ended December 31, 2011); Zux Cayman Company Ltd (only for the year ended December 31, 2011), Itaú USA Asset Management; Banco Itau Paraguay; Tarjetas Unisoluciones S. A. de Capital Variable, Proserv - Promociones Y Servicios S.A. de C. V .; MCC Asesorias Limitada (50.0%); MCC Securites INC. (50.0%) (only for the year ended December 31,2011); EF Securities S.A.; MCC Corredora de Bolsa (50.05%); Itaú BBA Colômbia; Itaú BBA SAS.

(5) Activities with the Market and Corporation has no operations outside Brazil.

Our Business

Overview

We provide a broad range of banking services to a diverse customer base of individuals and corporate customers. We provide these services on an integrated basis through the following operational segments:

· Commercial banking,

· Itaú BBA (corporate and investment banking),

· Consumer credit, and

· Activities with the market and corporation

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The commercial banking business segment offers a wide range of banking services to a diversified base of individuals and companies. Services offered by the commercial banking segment include insurance, pension plan and capitalization products, credit cards, asset management, credit products and customized products and solutions specifically developed to meet customers’ demands. Our marketing strategies are adjusted for each customer profile and implemented through the most suitable distribution channels. We aim to increase the number of products used by our customers, thus diversifying our revenue sources. This segment is an important funding source for our operations and generates significant financial income and banking fees. The commercial banking segment is comprised of the following specialized areas and products:

· Retail banking (individuals);

· Public sector banking;

· Personnalité (banking for high-income individuals);

· Private banking (banking and financial consulting for wealthy individuals);

· Very small business banking;

· Small business banking;

· Middle-market banking (to transition to Itaú BBA in 2013);

· Credit cards;

· Real estate financing;

· Asset management;

· Corporate social responsibility fund;

· Securities services for third parties;

· Brokerage; and

· Insurance, private retirement and capitalization products.

Itaú BBA is responsible for our corporate and investment banking activities. Itaú BBA’s management model is based on building close relationships with its customers by obtaining an in-depth understanding of their needs and offering them customized solutions. Corporate activities include providing banking services to large corporations and investment banking activities include offering funding resources to the corporate segment, including through fixed and variable income instruments. On February 21, 2013, we announced certain changes to our management, which includes our middle-market banking business becoming part of the Itaú BBA operational segment. The segment information included in “Item 5A. Operating Results” and in our financial statements is based on the organizational structure in place as of December 31, 2012 and, therefore, the previously mentioned change has not been reflected in such information.

Through the consumer credit business segment, we implement our strategy of expanding our offering of financial products and services beyond our current accountholders. As such, this division oversees the financing of vehicles outside our branch network, credit cards to individuals who are not accountholders, and lending to lower income consumers.

The activities with the market and corporation segment manages interest income associated with Itaú Unibanco Holding capital surplus, subordinated debt surplus and the net balance of tax credits and debits, as well as net interest income from the trading of financial assets through proprietary positions (desks), management of currency interest rate gaps and other risk factors, arbitrage opportunities in the foreign and domestic markets, and mark-to-market of financial assets. This segment also includes the effect of non-recurring items that are not considered in the managerial statement of income.

Itaú Unibanco Holding also has a broad range of overseas operations and has built its international presence based on strategically positioned units in the Americas, Europe and Asia. This creates significant synergies in foreign trade finance, the placement of Eurobonds, offering more sophisticated financial transactions, and private banking operations. These operations are presented in the commercial banking and in the Itaú BBA segments.

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Commercial Banking

Overview of Accountholder Products and Services

We have a large and diverse portfolio of products to address our customers’ needs. The main available products to our accountholders are:

· Credit: personal loans, overdraft protection, payroll loans, vehicles, credit cards, mortgage and agricultural loans, working capital, trade note discount and export;

· Investments: pension plans, mutual funds, time deposits, demand deposit accounts, savings accounts and capitalization plans; and

· Services: insurance (life, home, credit/cash cards, vehicles, loan protection, among others), exchange, brokerage and others.

Retail Banking

Our core business is retail banking, which serves individuals with a monthly income below R$10,000. On December 31, 2012, we had over 17.9 million customers and 4,488 branches and CSBs. Our retail banking operations are present in all Brazilian states and in cities that together represented more than 85.0% of Brazil’s individual domestic consumption as of December 31, 2012.

We classify our retail clients in accordance with their income and profile:

· Itaú retail customers, who earn less than R$4,000 or R$5,000 per month, depending upon the region; and

· Itaú Uniclass customers, who earn more than R$4,000 or R$5,000 per month, depending upon the region;

· Specialized account managers provide services to Itaú Uniclass customers who also have access to certain customized products.

For the year ended December 31, 2012, credit products represented 66.3% of our consolidated revenue from retail banking, while investments represented 17.2% and services and other fee-based products represented 16.4%.

Our strategy is to offer high quality and differentiated banking products to our retail banking customers. As part of this strategy, Itaú Unibanco now serves two retail segments: (i) Itaú Uniclass serves customers with differentiated needs and who require a more diversified service with separate areas within branches; and (ii) Itaú retail serves all other customers. This diversified relationship concept is interwoven by “Itaú 30 horas,” a convenience service that enables users to carry out banking transactions in ATMs, telephones, mobiles, on the internet and at the branches.

Public Sector

Our public sector business operates in all areas of the public sector, including the federal, state and municipal governments (in the executive, legislative and judicial branches). As of December 31, 2012, we had 3,833 public sector customers. To service these customers, we use platforms that are separate from the retail banking branches, with teams of specially trained managers who offer customized solutions in tax collection, foreign exchange services, administration of public agency assets, payments to suppliers, payroll for civil and military servants and retirement. Based on these platforms, we have a significant amount of business with public sector clients, particularly in those Brazilian states where we acquired previously state-owned financial institutions.

Itaú Personnalité

Itaú Unibanco began providing customized services to higher-income individuals in 1996 with the creation of Itaú Personnalité. Itaú Personnalité serves individuals who earn more than R$10,000 per month or have investments in excess of R$100,000.

Itaú Personnalité’s focus is delivering (i) financial advisory services by its managers, who understand the specific needs of our higher-income customers; (ii) a large portfolio of exclusive products and services (iii) special benefits based on the type and length of relationship with the customer, including discounts on various products and services. Itaú Personnalité services its clients through a dedicated network comprised of 240 branches, located in the main Brazilian cities. Itaú Personnalité customers also have access to Itaú Unibanco network of branches and ATMs throughout the country, as well as internet and telephone banking.

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Itaú Private Bank

Itaú Private Bank is a leading Brazilian bank in the global private banking industry, providing wealth management services to Latin American high net worth individuals. Approximately 600 employees focus on offering financial consulting services to clients with at least US$1.5 million in assets to invest in Brazil or US$1 million to invest in our branches in Switzerland or the United States. In addition, we provide our customers with a full range of banking products and services. As of December 31, 2012, our private banking activity had assets under management equivalent to US$89,182 million. Fees earned from our private banking customers are, in most cases, a function of assets under management.

Wealth management services are provided by teams of experienced relationship managers based in Brazil, the United States, Chile, Switzerland, Uruguay and Paraguay, and supported by investment specialists who recommend the most appropriate solutions for each individual risk profile. We serve our customers’ needs for offshore wealth management solutions in major jurisdictions through independent institutions: in the United States through Banco Itaú Europa International and Itaú Europa Securities, in Switzerland through Banco Itaú Suisse, in Luxembourg through Banco Itaú Europa Luxemburgo, in the Bahamas through Itaú Bank & Trust Bahamas and in the Cayman Islands through Itaú Bank & Trust Cayman. As part of our strategy, Itaú Unibanco Holding decided in September 2011 to reorganize its operations in Europe, and the private banking operations of Banco Itaú Europa Luxembourg are expected to be gradually transferred to Banco Itaú Suisse.

On August 21, 2011, Itaú Private Bank International entered into a joint venture with MCC to develop the Chilean private banking market. With over 29 years of experience, MCC is a leading wealth management services provider in Chile acknowledged for its expertise in global fixed income. The new institution retained the name of Munita, Cruzat & Claro.

Itaú Private Bank has received the following awards, among others, in recent years:

· “Best Private Bank in Latin America 2010, 2011 & 2012” and “Best Private Bank in Brazil 2012” from PWM / The Banker magazine;

· “Outstanding Private Bank — Latin America 2009, 2010, 2011 & 2012” from Private Banker International; and

· “Best Private Banking Services Overall in Brazil 2008, 2009, 2010, 2011 & 2012”, “Best Private Bank for Ultra High Net Worth Individuals in Uruguay 2012”, “Best Private Bank in Peru 2011” and “Best Private Bank in Chile 2010” from Euromoney.

Very Small Business Banking

Our very small business banking office managers are trained to offer customized solutions and provide detailed advice on all products and services to very small companies. Our strategy is to capture the market opportunity by meeting the needs of these companies and their owners, particularly with respect to the management of cash flow, credit facilities, investment needs and services.

As of December 31, 2012, we had 259 very small business banking offices located throughout Brazil and approximately 2,800 managers working for over 1.4 million small business customers. In 2012 we focused on clients with good credit quality, seeking to decrease credit losses. In 2013, we plan to expand our current revenue target from clients with annual revenues up to R$500,000 to clients with annual revenues up to R$1 million.

Loans to very small businesses totaled R$5,438 million as of December 31, 2012.

Small Business Banking

We have structured our relationships with small business customers through the use of specialized offices since 2001. As of December 31, 2012, we had 377 offices located nationwide in Brazil, approximately 2,600 managers and provided services to approximately 500,000 companies with annual revenues from R$500,000 to R$6 million.

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All our managers are certified by ANBIMA, and throughout the year they receive training to offer the best solutions for each customer profile. Our customers rely on our ability to provide products, terms and rates customized to their needs.

Loans to small businesses totaled R$14,267 million as of December 31, 2012.

Middle-Market Banking

As of December 31, 2012, we had approximately 119,000 middle-market corporate customers that represented a broad range of Brazilian companies. Our middle-market customers are generally companies with annual revenues from R$6 million to R$150 million. As of December 31, 2012, we had approximately 1,600 managers focused on middle-market customers, working at 245 specialized offices located at key branches.

We offer a full range of financial products and services to middle-market customers, including deposit accounts, investment options, insurance, private retirement plans and credit products. Credit products include investment capital loans, working capital loans, inventory financing, trade financing, foreign currency services, equipment leasing services, letters of credit and guarantees. We also carry out financial transactions on behalf of middle-market customers, including interbank transactions, open market transactions and futures, swaps, hedging and arbitrage transactions. We also offer our middle-market customers collection services and electronic payment services. We are able to provide these services for virtually any kind of payment, including Internet office banking. We charge collection fees and fees for making payments, such as payroll, on behalf of our customers.

Loans to middle-market businesses totaled R$48,308 million as of December 31, 2012.

Credit Cards and Commercial Agreements

We are the leading company in the Brazilian credit card market, based on transaction volume as of December 31, 2012. Our subsidiaries, Banco Itaucard and Hipercard Banco Múltiplo S.A. (“Hipercard”), offer a wide range of products to 33.3 million credit card accounts as of December 31, 2012, including Itaú Unibanco’s current accountholders and non-accountholders and also to clients from business partnerships and joint ventures. In the year ended December 31, 2012, the volume of credit cards transactions was R$174,529 million, a 13.2% increase from the prior year.

We have developed a strong presence in the consumer finance sector through our strategic alliances and commercial agreements with leading retailers in Brazil. Since 2001, when we established the first partnership, these alliances have been supporting our credit card and consumer finance business through several products, such as co-branded credit cards, private label cards, personal loans and insurance.

In August 2012, we launched a new credit card, Itaucard 2.0, a new product in the Brazilian market with an interest rate structure more similar to international markets, including lower rates which accrue from the date of purchase instead of the invoice due date and with a maximum monthly limit of 5.99%. New customers receive the new card, and existing customers can also receive Itaucard 2.0 with the option of going back to their previous credit card. In addition, monthly credit card interest rates for accountholders and non-accountholders are less than 10.0%.

Our main challenges in the credit card business are to continually improve our portfolio profitability and manage the quality of our assets. To this end, our credit card division focuses on the development of new products, assessment of our partnerships, control of the credit quality of our portfolio and on a more efficient cost management.

Real Estate Financing

As of December 31, 2012, we had approximately R$26,135 million in outstanding real estate loans, already considering the sale of R$389 million of our mortgage portfolio for the Fundo de Garantia por Tempo de Serviço (“FGTS”), the Brazilian social security fund.

Given our expectation of growth over the next several years in the mortgage market in Brazil, we are investing in the operational platform in order to reduce costs and improve quality for our customers. We are also developing our distribution channels for mortgage loans by focusing on our branch network and developing our relationships with real estate brokers. We have partnerships with two of the largest real estate brokers in Brazil: LPS Brasil Consultoria de Imóveis S.A. and Coelho da Fonseca Empreendimentos Imobiliários Ltda. These two long-term partnerships provide us with exclusive real estate financing origination at a large number of locations throughout Brazil.

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According to Brazilian regulations, financial institutions are required to allocate at least 65.0% of their savings accounts balances to fund mortgage financing, of which 80.0% must be used to finance properties with values lower than R$500,000 and must have annual interest rates lower than 12.0%.

Payroll Loans

A payroll loan is a credit transaction with fixed installments directly discounted from the customer’s payroll. Through the BMG Association, which was established in July 2012 and which has been operational since December 2012, we aim at achieving a leading position in the offering, distribution and sale of payroll loans in Brazil, in line with our strategy of expanding our activities in businesses with historically lower spreads and losses. The BMG Association was structured as a new business, with Itaú Unibanco holding 70.0% of the capital stock of the BMG Association and Banco BMG holding the remaining 30.0%. Payroll loans granted to Itaú Unibanco’s customers through Itaú Unibanco’s branches and other exclusive Itaú Unibanco channels will remain separate from the operations of the JV. See “Item 4B. — Business Overview — Acquisitions — BMG Association.”

Our payroll loan portfolio, including the portfolio acquired from Banco BMG, reached R$12,929 million as of December 31, 2012.

Itaú Asset Management

According to ANBIMA, as of December 31, 2012, we were Brazil’s largest fund manager among private banks, with R$329,700 million in total net assets under management and a 14.6% of market-share. As of that date, we had approximately 2.0 million customers, including retail, corporate, Brazilian and foreign institutional investors and private banking clients.

As of December 31, 2012, we provided portfolio management services to approximately 600 mutual funds and 890 tailor-made mutual funds. Our investment management team is specialized in asset classes and consisted of 119 professionals as of December 31, 2012, making it one of the largest teams conducting Latin American research and portfolio management, based in São Paulo, Santiago, Buenos Aires and New York.

In October 2012, Fitch Ratings, one of the largest international rating agencies in Brazil, maintained its M1 (bra) credit rating, the highest rating granted to asset managers, of our asset management business unit. We have been rated M1 since 2003.

Corporate Social Responsibility

The Itaú Social Excellence Fund (Fundo Itaú Excelência Social or “FIES”), launched in 2004, is a socially responsible investment fund. It invests in the shares of companies with superior corporate social responsibility practices with the goal of achieving higher long-term returns than those offered by the main Brazilian financial market indices. In addition to analyzing the risks and returns of companies, fund managers take into account three fundamental criteria relating to companies: corporate social activities; environmental protection aspects; and good corporate governance practices.

In addition, every year the fund manager donates 50.0% of FIES’s accumulated asset management fees to social projects in the following categories: environmental education; employment education; and childhood education. The projects are selected by the FIES Advisory Board, which is comprised of market leaders and sustainability specialists. Since its launch in 2004, FIES donated approximately R$20 million to social projects from 116 NGOs, which have supported approximately 22,000 children and approximately 2,000 educators.

As of December 31, 2012, FIES had net assets of R$274 million while the donations to social projects totaled more than R$2.4 million. Fifteen projects were selected to receive up to R$120,000 each. Unicef Brazil received an amount of R$240,000 and R$600,000 was spent on analyzing and visiting applicants’ projects, training, monitoring and providing technical support for the selected projects. The selected organizations also have access to an online platform in which they can interact with other peer organizations and technical partners.

Securities Services

Itaú Securities Services is composed of four main business lines: local and international custody, fiduciary services, and corporate solutions. Pension funds, insurance companies, asset managers, international institutional investors and equity and debt issuers are our primary customers, representing approximately 1,600 customers in 21 countries. On December 31, 2012, Itau Securities Services reached R$3,159,472 million of assets covered by its services.

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The local custody and fiduciary services business provide services such as custody, fund accounting, administration, supervision and contracting of service for local investment funds and other funds. As of December 31, 2012, Itaú had R$725,268 million of assets under custody, representing an increase of 22.7% compared to December 31, 2011.

The international custody services business provides custody and depository services for international institutional customers and depository receipt programs. As of December 31, 2012, we had R$214,445 million of assets under custody, representing a decrease of 7.4% compared to December 31, 2011.

Our corporate solutions services consist of acting as transfer agent and shareholder servicer for Brazilian companies issuing equity, debentures and promissory notes. We are currently the registrar agent to 229 companies listed on BM&FBovespa (the Brazilian securities, commodities and futures exchange), which represents 62.9% of the listed companies on that exchange. Moreover, as of December 31, 2012, we were the transfer agent to 307 debentures offerings in the Brazilian market, representing 47.4% of the debentures market in Brazil. We also provide collateral agent services for corporate clients.

In 2012, Itau Securities Services received industry awards voted on by customers as the Best Brazilian Custodian for domestic customers (5th consecutive year), international customers (4th consecutive year) and was recognized as Top Rated service provider in the region Americas and Caribbean (2nd consecutive year) according to Global Custodian Magazine. Also in 2012, we were recognized by Global Finance as Best Custodian in Brazil for international customers. The management and business governance model was awarded the Gold Medal by the Management Excellence Institute of São Paulo.

Brokerage

Itaú Corretora de Valores S.A. has been providing brokerage services in BM&FBovespa since 1965. The brokerage services are also provided to international customers via our broker-dealers in New York, Hong Kong and Dubai.

In 2012, Itaú Corretora was ranked fifth on the BM&FBovespa equity trading volume, among all brokers, and fourth in number of commodities and derivatives contracts.

Insurance, Private Retirement and Capitalization Products

Insurance

As of December 31, 2012, according to SUSEP, we were one of the leading providers of insurance in Brazil based on aggregate insurance premiums, including our indirect 30.0% share in Porto Seguro and excluding health insurance and VGBL (private retirement plan providing annuity benefits). For regulatory purposes VGBL is considered life insurance. For the year ended December 31, 2012, our insurance premiums totaled approximately R$9,246 million (including R$2,518 million from our 30.0% share in Porto Seguro).

Our main lines of insurance are (i) life and casualty (excluding VGBL; see “— Private Retirement Plans”); (ii) extended warranties and (iii) property, which accounted for 31.4%, 14.8% and 16.7% of insurance premiums, respectively, for the year ended December 31, 2012. Our policies are sold through our banking operations, independent local brokers, multinational brokers and other channels. We reinsure a portion of the risks we underwrite, particularly large marine property and casualty risks that exceed the retention limits we have established within regulatory limits.

Risks that exceed the retention limit must be ceded to licensed Brazilian reinsurers in accordance with Supplementary Law No. 126, published on January 15, 2007, and the SUSEP regulations, published on December 17, 2007.

Our strategy to increase our level of penetration in the Brazilian insurance market varies by market. In the high risk market, we intend to grow our market share through independent local brokers and multinational brokerage firms. For individuals and small and medium company markets, we focus on operations within our banking customer base to increase customer penetration. We are working on improving customer penetration in property and casualty insurance for small and medium companies. Our customer relationship management has implemented several advances and the development of specific products for different segments allows more efficient use of each marketing channel (our branches, telemarketing, Internet, ATMs and bank teller terminals).

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Porto Seguro

Itaú Unibanco Holding and Porto Seguro operate under an agreement that provides for the offering and distribution, on an exclusive basis, of homeowner and automobile insurance products of Porto Seguro to customers of Itaú Unibanco Holding in Brazil and Uruguay (the “Porto Seguro Alliance”). Itaú Unibanco Holding indirectly owns 30.0% of Porto Seguro’s capital stock. Itaú Unibanco Holding is entitled to nominate two members of the board of directors of each of Porto Seguro and its parent company, Porto Seguro Itaú Unibanco Participações S.A.

XL

In May, 2010, Itaú Seguros acquired XL Swiss Holding Ltd.’s participation in Itaú XL Seguros Corporativos S.A. (“Itaú XL”) from XL Capital Ltd. (“XL Capital”), such that Itaú XL was wholly owned by us and was subsequently merged with and into Itaú Seguros. In November 2010, SUSEP approved the change of Itaú XL’s corporate name to Itaú Unibanco Seguros Corporativos S.A. At the time, a separate arrangement was entered into by which Itaú Seguros provided insurance to XL Capital’s clients in Brazil and XL Capital’s Global Program clients with operations in Brazil. In March 2012, this agreement expired in accordance with its terms.

Private Retirement Plans

As of December 31, 2012, balances under private retirement plans (including VGBL but excluding our 30.0% interest in Porto Seguro) totaled R$80,990 million, an increase of 28.0% compared to December 31, 2011. As of December 31, 2012, we had R$82,604 million in assets related to our private retirement liabilities (including VGBL but excluding our 30.0% interest in Porto Seguro). As of December 31, 2012, we were the second largest private retirement plan manager in Brazil based on total liabilities according to SUSEP.

Capitalization Products

Capitalization products are savings account products that generally require a customer to deposit a fixed sum with us to be returned at the end of an agreed upon term, with accrued interest. In return, the customer is automatically entered into periodic drawings for the opportunity to win a significant cash prize. As of December 31, 2012, we had 11.8 million in capitalization products outstanding, representing R$2,892 million in liabilities with assets that function as guarantees of R$2,998 million. We distribute these products through our retail network, electronic channels and ATMs. These products are sold by our subsidiary, Cia. Itaú de Capitalização S.A. During 2012, R$2,028 million of capitalization products were sold and we distributed over R$ 36.6 million in cash prizes to 4,177 customers.

Itaú BBA

Itaú BBA is responsible for our corporate and investment banking activities. As of December 31, 2012, Itaú BBA offered a complete portfolio of products and services to approximately 2,600 companies and conglomerates in Brazil through a team of highly qualified professionals. Itaú BBA’s activities range from typical operations of a commercial bank to capital markets operations and advisory services for mergers and acquisitions. These activities are fully integrated, which enables Itaú BBA to achieve a performance tailored to its clients’ needs.

As of December 31, 2012, our corporate loan portfolio reached R$158,534 million. Foreign currency loans were the main contributors to the growth of our corporate loan portfolio in 2012. On a consolidated basis, we had total outstanding foreign-currency loans of R$43,481 million as of December 31, 2012, an increase of R$8,101 million compared to December 31, 2011.

In investment banking, the fixed income department acted as bookrunner or manager in the issuance of debentures, promissory notes and securitization transactions that totaled R$23,519 million in the year ended December 31, 2012. According to ANBIMA, Itaú BBA was the leader in distribution of fixed income in 2012 with a 29.5% market share. In the international debt markets, Itaú BBA acted as joint bookrunner of offerings with a total volume of US$19,108 million in the year ended December 31, 2012, reaching first place in number of offerings in BondRadar’s ranking of Brazilian companies issuances in real and dollars.

In addition, Itaú BBA advised 70 merger and acquisition transactions with an aggregate deal volume of US$17,213 million in 2012, and was the leader in terms of number of transactions according to Thomson Reuters.

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During 2012, Itaú Corretora acted as a broker-dealer for transactions totaling R$199.1 billion of shares listed on the BM&FBovespa for individual, institutional, foreign and company customers. During 2012, Itaú Corretora was in fifth place in the ranking of brokerages, with a 5.6% market share. In the futures market, Itaú Corretora was in fourth place in the ranking of brokerages, with a market share of 9.3%, according to BM&FBovespa.

In 2012, Itaú BBA maintained its leadership in CETIP, a Brazilian clearing house for custody and financial settlement of securities, in terms of volume in derivative transactions with companies, mainly in transactions hedging exposures to foreign currencies, interest rates and commodities. The volume of contracted transactions in the year ended December 31, 2012 was 36.7% higher than in the year ended December 31, 2011.

Aiming to expand activities to other Latin American countries, Itaú BBA began operations in Colombia in 2012, with a capital of US$200 million. We believe Colombia is a country that offers favorable growth opportunities and a stable economic scenario. We intend to gradually develop a range of products and services similar to that of Itaú BBA in Brazil.

We focus on assessment practices and mitigation of environmental risks seeking to ensure the sustainability of the cash flows of our customers and manage our credit risk. These practices have been disseminated to other market participants through programs and partnerships with customers and international organizations such as the outreach program for Latin America.

Coordinated by Itaú BBA, the outreach program has the support of the International Finance Corporation, the Inter-American Development Bank and the United Nations Environment Programme Finance Initiative and is a forum for dissemination of good practices in environmental risk analysis in project financing among major players in the financial market in Latin America, where Itaú BBA has operating units. Itaú BBA is also involved in the public review of the new version of the Equator Principles in Brazil, which is also under public review in London, Vienna and Toronto, in which banks, consultants, law firms and NGOs participated. Due to the impact of these initiatives and our leadership role, we were invited also to participate in forums and discussions in Turkey, China and Germany where we discussed our risk management practices in response to environmental macroeconomic and financial challenges expected in the coming years.

In 2012, Itaú BBA was recognized as the “Most Innovative Investment Bank in Latin America” for the third time, an award granted by the UK magazine, The Banker — Financial Times Group. For the fifth consecutive year, Itaú BBA was chosen by Euromoney as the “Best Bank for Cash Management in Brazil” and is among the top three in the category “Best Regional Cash Management Latam.” To define the best in the segment, the magazine assesses the quality of service, technical support, knowledge in the field, commitment and innovation, according to the perception of the client companies. For the fourth consecutive year, Itaú BBA was recognized as the” Best Trade Finance Bank in Brazil” by Global Finance, which elects banks offering better products and conditions for financing foreign trade. Itaú BBA also received awards for “Deal of the Year” for two project finance transactions in Latin America in oil &gas and public-private partnerships, “Best Investment Bank in Latin America” and “Best Emerging Market Banks in Latin America” from Global Finance. Itaú BBA’s was also recognized for its equity offerings and mergers and acquisitions deals as “Best Equity House of the Year” and “Deals of the Year 2011” Latin Finance and “Deal of the Year” by Euromoney.

Consumer Credit

Vehicle Financing

As of December 31, 2012, our loan portfolio of vehicle financing, leasing, consortium and lending through the National Industrial Finance Authority (Financiamento de Máquinas e Equipamentos or “FINAME”) consisted of approximately 3.6 million contracts, of which approximately 68% were non–account holder customers. This loan portfolio reached R$56,094 million as of December 31, 2012, representing a market share in Brazil of approximately 26.9%, from R$64,871 million in 2011.

The vehicle financing sector in Brazil is dominated by banks and finance companies that are affiliated with vehicle manufacturers. According to ABEL, the Brazilian association of leasing companies, we were the largest leasing company in Brazil in terms of the present value of these operations as of December 31, 2012.

We finance vehicles through 12,847 dealers as of December 31, 2012. Sales are made through computer terminals installed in the dealerships that are connected to our computer network through the Internet. Each vehicle financing application is reviewed based on credit scoring and dealer scoring systems. Applications with high credit scores are subject to electronic validation according to our credit policy and by credit bureaus and, upon verification, are automatically approved. Approximately 93.4% of our credit approvals in 2012 were automatically approved because our scoring models permit pre-approvals for our customers, which provide us with a very efficient tool and high credit approval performance.

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Due to an increase in our non-performing loan ratio with respect to vehicle loans in 2012, which followed the general trends observed in the Brazilian financial market, we adopted stricter requirements for granting loans, including term reduction and an increased down payment policy, in addition to classifying customers into groups based on their level of indebtedness.

The truck financing division reached R$3,338 million in loans as of December 31, 2012, from R$4,268 million as of December 31, 2011. Loans relating to motorcycles reached R$808 million and the division of light vehicles reached R$17,951 million as of December 31, 2012, from R$1,475 million and R$25,456 million, respectively, as of December 31, 2011.

Itaú Unibanco Acquiring Business (Redecard & Hipercard)

Redecard is one of the two largest multi-brand acquirers of credit, debit and benefit card transactions in Brazil. Its activities include merchant acquiring, capturing, transmission, processing and settlement of credit and debit card transactions, prepayment of receivables to merchants; (resulting from sales made with credit cards), rental of point-of-sale (“POS”) terminals, check verification through POS terminals, and the capture and transmission of transactions using coupons, private-label cards and loyalty programs. Once we held 50.0% plus one share of Redecard’s capital stock starting on March 30, 2009, Redecard became a subsidiary of Itaú Unibanco and its results were presented on a consolidated basis in our financial statements. As part of a public tender offer aimed at cancelling Redecard’s authorization as a publicly-held company registered with the CVM, which was completed on September 24, 2012, and as a result of the auction, we acquired additional shares of Redecard representing 44.4% of Redecard’s share capital. On October 18, 2012, Redecard’s registration as a publicly held company was cancelled. As of December 31, 2012, we held, through affiliates, 100.0% of Redecard’s shares, as a result of subsequent purchases. See “— Acquisitions — Redecard.”

In May 2010, Hipercard, also a subsidiary of Itaú Unibanco, entered into an agreement with Redecard, pursuant to which, beginning in the second quarter of 2010, Redecard started acquiring Hipercard transactions and Hipercard had access to Redecard’s nationwide infrastructure and network, which improved the efficiency and speed of Hipercard’s merchant affiliations.

In 2012, Redecard and Hipercard’s acquiring service revenue totaled R$3,830 million, representing an increase of 11.8% from 2011 due to the capture of R$277,618 million in transactions with credit cards and debit cards, an increase of 10.1% from 2011. The number of transactions captured and processed reached 3,307 million, representing an increase of 8.7% from 2011. In December 2012, we had 1.4 million installed POS terminals throughout Brazil.

The following table sets forth the financial volume of transactions in millions of reais and the quantity of transactions of credit and debit cards processed by Itaú Unibanco in 2012 and 2011:

	Financial Volume				Transactions
	2012		2011		2012		2011
	(In millions of R$)				(In millions)
Credit cards		183,451		172,927		1,670		1,608
Debit cards		94,167		79,207		1,636		1,433
Total		277,618		252,134		3,307		3,042

International Operations

The following information refers to our main operations in Latin America (Argentina, Chile, Uruguay, Paraguay and Colombia). We are also present in the Mexican credit card market, through Itaucard México, and in Peru, with an Itaú BBA representative office.

Banco Itaú Argentina

We started our operations in Argentina in 1979, focusing on large companies with business ties with Brazil. In 1994, we initiated our retail operations in Buenos Aires. In 1998, we increased our presence by buying Buen Ayre Bank, subsequently renamed Itaú Argentina.

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As of December 31, 2012, Banco Itaú Argentina had approximately 346,300 customers. Compared with 2011, this represents a 23.1% increase in the number of customers. As of December 31, 2012, Banco Itaú Argentina had assets of R$4,146 million, loan and leasing operations of R$2,971 million, deposits totaling R$3,102 million and stockholders’ equity of R$483 million. As of the same date, Banco Itaú Argentina had 75 branches, 194 ATMs, and 20 CSBs.

Banco Itaú Argentina offers products and services in corporate banking, small- and medium-sized enterprises (“SMEs”) and retail banking. Our corporate banking business focuses on large and institutional clients, providing lending, structured finance, investment and cash management services. Our SMEs business provides credit for working capital and investments in production capacity increases. Our retail banking business focuses on middle and upper-income customers and services offerings include current and saving accounts, personal loans and credit cards.

Banco Itaú Chile

Banco Itaú Chile started its official activities on February 26, 2007, when BAC transferred the operations of BankBoston Chile and BankBoston Uruguay to us. In 2011 we acquired the high net worth portfolio of HSBC Bank and, in 2012, we completed the acquisition of 50.0% of MCC, a leader in wealth management in Chile. In order to continue to grow in the retail segment, we plan to open new branches in 2013 and 2014.

As of December 31, 2012, our consolidated Chilean operations had R$23,555 million in assets, R$18,213 million in loans and leases, R$14,522 million in deposits and R$2,802 million in stockholders’ equity. According to the Chilean banking and financial institutions regulator (Superintendencia de Bancos e Instituciones Financieras —SBIF), as of that same date, Banco Itaú Chile ranked eighth in the Chilean loans and leases market with a 4.21% market share and ranked fifth in number of demand deposit accounts in the private sector.

Banco Itaú Chile offers several products such as factoring, leasing, corporate finance, mutual funds, insurance brokerage and trading, which are offered through different entities and different lines of business. The retail segment focuses on the upper-income segment that, as of December 31, 2012, accounted for 60.0% of Banco Itaú Chile’s total revenues. As of December 31, 2012, Banco Itaú Chile had 70 ATMs and 91 branches. Banco Itaú Chile’s commercial banking segment offers a wide range of products to improve customer experience by building a competitive advantage based on service quality, products and processes for targeted customers (companies with annual revenues of between US$2 million and US$100 million). Banco Itaú Chile’s global corporate banking segment offers local and international corporate finance capabilities such as syndications and private placements. It also provides trade financing and global treasury services complementing Banco Itaú Chile’s marketing strategy. Treasury products such as foreign exchange and derivatives are a key part of this strategy.

Banco Itaú Uruguay

Our banking operations in Uruguay include Banco Itaú Uruguay, the largest credit card issuer in Uruguay, OCA S.A. (“OCA”), and the pension fund management company Unión Capital AFAP S.A. (“Unión Capital”), making us one of the leading financial operations in Uruguay. Our strategy in Uruguay is to serve a broad range of customers through customized banking solutions. As of December 31, 2012, our operations in Uruguay had R$6,463 million in assets, R$2,919 million in loans and leases, R$4,930 million in deposits and R$610 million in stockholders’ equity.

Banco Itaú Uruguay ranked second in terms of asset volume among non-state owned banks in Uruguay, as of December 31, 2012, according to the Uruguayan Central Bank (Banco Central del Uruguay) (“BCU”).

The retail banking business is focused on individuals and small business customers, with more than 240,500 customers as of December 31, 2012. The core branch network is located in the metropolitan area of Montevideo with 17 branches. In addition, Banco Itaú Uruguay has branches in Tacuarembó, Salto, Paysandú, Mercedes and Punta del Este. Banco Itaú Uruguay has a leading position in the debit card segment of non-state owned banks in Uruguay with 17.8% market share as of December 31, 2012, according to BANRED (a network of ATMs in Uruguay), and a leading role as a credit card issuer (mainly Visa), with a 30.9% market share as of December 31, 2012 based on the aggregate amount of credit card purchases in Uruguay according to Visanet Compañía Uruguaya de Medios de Procesamiento S.A. Retail products and services focus on the middle and upper-income segments, and also include current and savings accounts, payroll payment, self-service areas and ATMs in all branches, and phone and Internet banking. The wholesale banking division is focused on multinational companies, financial institutions, large and medium-sized corporations and the public sector. It provides lending, cash management, treasury, trade and investment services. Additionally, the private banking business unit provides a full portfolio of local and international financial market products.

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OCA is the main credit card issuer in Uruguay, with a 39.7% market share based on the aggregate amount of credit card purchases in Uruguay as of December 31, 2012, and an approximately 50.0% market share in terms of number of transactions processed. OCA performs the three main credit card operations: customer acquisition, issuance of cards and transaction processing. The main products offered by OCA are credit cards and consumer loans and it had approximately 436,800 customers, and a network of 36 points of service, as of December 31, 2012.

Unión Capital is a pension fund management company which has been operating in Uruguay since 1996, when the current Uruguayan pension system was created. As of December 31, 2012, it had approximately 246,000 customers, managed US$1,673 million in pension funds, with a market share of 16.4%, according to the BCU.

Banco Itaú Paraguay

Banco Itaú Paraguay S.A. (“Banco Itaú Paraguay”), formerly known as Interbanco, was set up in Paraguay in 1978 and has become one of the largest banks in the Paraguayan financial market. In 1995, Interbanco was acquired by Unibanco, and the “Itaú” brand has been present in the country since July 12, 2010. As of December 31, 2012, Banco Itaú Paraguay had 36 branches, approximately 338,700 customers and 246 ATMs.

Banco Itaú Paraguay’s products and services operate under the following structure: corporate banking (small and medium-sized businesses, agribusiness, large companies, institutional clients) and consumer banking (individuals and payroll customers). Its main sources of income are consumer banking products, primarily credit cards. The retail segment also focuses on the payroll customers. Under corporate banking, Banco Itaú Paraguay has a well-established presence in the agribusiness segment, which has experienced attractive credit performance. Banco Itaú Paraguay has been the most profitable bank in Paraguay for the past eight years. As of December 31, 2012, Banco Itaú Paraguay had R$4,889 million in total assets, including R$3,052 million in loans and leases, R$3,648 million in deposits and R$710 million in stockholders’ equity.

Banco Itaú Paraguay is also recognized by launching innovative products and services. It provides its customers several products and services, such as International Debit Card Cirrus Maestro and the Internet Banking Service Interhome Banking and also offers banking customer information through mobile phones with the Click Banking service.

Itaú BBA Colombia

In April 2012, we obtained permission from Colombian regulatory authorities to structure our wholesale and investment bank operation through Itaú BBA SA Colombia — Corporación Financiera, which was incorporated in June 2012 with an initial share capital of approximately US$100 million. Our operating license was issued by the Superintendencia Financiera de Colombia (Financial Superintendence of Colombia) in October 2012, after an additional capitalization of approximately US$100 million. We expect to gradually grow our Colombian operations throughout 2013.

Itaú BBA’s target market in Colombia is composed of institutional investors and large Brazilian companies operating in Colombia as well as Colombian companies operating in Brazil. The products portfolio is expected to include loan operations, foreign trade financing, foreign exchange and derivatives, and investment bank activities, such as advising on mergers and acquisitions and access to capital markets.

Itau BBA International

In order to consolidate and expand our operations in Europe, we decided to transfer the central administration and registered offices of Itau BBA International, then Banco Itaú BBA International, S.A., a Portuguese credit institution authorized and regulated by the Central Bank of Portugal (“Banco Itaú BBA International”), from Lisbon to London by means of a cross-border merger (the “Merger”) of Banco Itaú BBA International into Itau BBA International Limited (“Itau BBA International”), an English credit institution authorized and regulated by the United Kingdom Financial Services Authority. On January 10, 2013, the Companies Court of the High Court of Justice, Chancery Division, issued an order for the completion of the Merger. The Merger had effect on February 1, 2013, on which date the assets and liabilities of Banco Itaú BBA International were transferred by operation of law to Itau BBA International and Banco Itaú BBA International ceased to exist as a separate legal entity. These initiatives are aimed at enabling Itau BBA International to improve its performance and sources of funding, expand its customer base, strengthen its position as an international platform for the group, achieve greater diversification of risk and increase profitability indicators.

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Itau BBA International focuses mainly on two lines of business:

· Corporate & Investment Banking — This segment supports the financial needs of companies with international presence and operations and is an important player in the segment of international financial operation associated with trading finance and investment relations between Latin America and Europe. The various services provided include the origination of structured financing and risk hedge operations, including exchange rate and interest rate derivatives, particularly involving European parent corporations of companies in Latin America, the financing of exports among Itaú Unibanco’s best corporate clients and European companies, advisory and financing services to European companies investing in Latin America, and also to Latin American companies undergoing internationalization processes. This segment includes also all the activities conducted by Itaú Unibanco Group in the financial, capital and derivative markets, both to meet the needs for financing other activities of Itaú Unibanco Group and to develop financial intermediation activities and management of its assets. These activities involve funding and applications in interbank markets, the issue of debt securities and structured funding products, intermediation (creation and distribution) of debt securities for clients, particularly large companies and groups, clients of Itaú Unibanco Group, investment and trading securities, derivatives and structured products, with institutional investors and corporate clients.

· Private Banking — The international Private Banking business is conducted by Banco Itaú Europa Luxembourg S.A., Banco Itaú Europa International, Itaú Bank & Trust Bahamas Ltd. and Banco Itaú Suisse S.A. This segment offers financial and asset management services for customers with high purchasing power by providing a diversified and specialized basis of investment funds, trading and managing on their account securities and other financial instruments, as well as by managing trusts and investment companies on behalf of customers. As part of our strategy, we are scaling down our Luxembourg activities and the private bank operations currently performed in Luxembourg will gradually be transferred to Switzerland.

As of December 31, 2012, Banco Itaú BBA International had R$13,348 million in assets, R$7,934 million in loans and leases, R$5,908 million in deposits and R$1,586 million in stockholders’ equity.

The private banking business provides financial and asset management services to our Latin American customers, putting at their disposal a diversified and specialized range of investment funds, dealing in and managing securities and other financial instruments, trusts and investment companies on behalf of customers. Assets under management of the private banking business amounted to R$30,802 million as of December 31, 2012.

All of our transactions with Itau BBA International (successor of Banco Itaú BBA International) and its subsidiaries are on an arm’s-length basis.

Other International Operations

Our other international operations have the following objectives:

· Support our customers in cross-border financial transactions and services: The international units of Itaú Unibanco Holding are active in providing our customers with a variety of financial products such as trade financing, loans from multilateral credit agencies, off-shore loans, international cash management services, foreign exchange, letters of credit, guarantees required in international bidding processes, derivatives for hedging or proprietary trading purposes, structured transactions, and international capital markets offerings. These services are mainly offered through our branches in Nassau, New York, Cayman Islands, and Uruguay, as well as through Banco Itaú Argentina, Banco Itaú Chile and Itaú BBA Colombia.

· Manage proprietary portfolios and raise funds through the issuance of securities in the international market: Fund raising through the issuance of securities, certificates of deposit, commercial paper and trade notes can be executed by Itaú Unibanco’s branches located in the Cayman Islands, Bahamas and New York, as well as through Itaú Bank Ltd. (“Itaú Bank”), a banking subsidiary incorporated in the Cayman Islands.

The proprietary portfolios are mainly held by Itaú Bank and Itaú Unibanco Cayman Islands branch. These offices also enhance our ability to manage our international liquidity.

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Through our international operations, we establish and monitor trade-related lines of credit from foreign banks and maintain correspondent banking relationships with money centers and regional banks throughout the world and oversee our other foreign currency-raising activities.

· Participate in the international capital markets as dealers: Itaú BBA has equity and fixed income sales and trading teams in São Paulo, New York, London, Hong Kong and Tokyo. Besides having one of the largest sales and trading teams in Latin America, we have the largest research analyst team in Latin America and provide extensive coverage of over 200 listed companies in Brazil, Mexico, Chile, Colombia, Peru, Panama and Argentina. Our international fixed income and equity teams are active in trading and offering Brazilian and Latin American securities to institutional investors.

· In addition, we are also present and servicing our clients in Asia, especially in China, through Itaú BBA’s representative office in Shanghai.

Trade Financing

Our trade financing business consists of the management of financial products for export and import, foreign loans, guarantees, remittance and international exchange. Our export financing to larger corporate customers is generally unsecured, but some transactions require complex guarantees, particularly those originally structured to be syndicated.

Marketing and Distribution Channels

We provide integrated financial services and products to our customers through a variety of marketing and distribution channels. Our distribution network consists principally of branches, ATMs and CSBs, which are banking service centers located on corporate customers’ premises.

The following table provides information relating to our branch network, CSBs and ATMs as of December 31, 2012 in Brazil and abroad:

	Branches		CSBs		ATMs
Itaú Unibanco		3,615		873		26,909
Itaú Personnalité		240		3		500
Itaú BBA		9		—		—
Total in Brazil		3,864		876		27,409
Itaú Unibanco abroad (excluding Latin America)		4		—		—
Argentina		75		20		194
Chile		91		—		70
Uruguay		59		1		41
Paraguay		27		9		246
Total		4,120		906		27,960

The following table provides information relating to the geographic distribution of our distribution network throughout Brazil as of December 31, 2012:

Region	Branches		CSBs		ATMs
South		637		120		3,790
Southeast		2,534		607		19,132
Center-west		294		63		1,741
Northeast		304		49		2,113
North		95		37		633
Total in Brazil		3,864		876		27,409

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Branches

As of December 31, 2012, we had a network of 3,864 full service branches throughout Brazil. As of December 31, 2012, 79.0% of our branches were located in the States of São Paulo, Rio de Janeiro and Minas Gerais in the Southeast region, Paraná in the South, and Goiás in the Center-west. The branch network serves as a distribution network for all of the products and services we offer to our customers, such as credit cards, insurance plans and private retirement plans.

Customer Site Branches

As of December 31, 2012, we operated 876 CSBs throughout Brazil. The range of services provided at the CSBs may be the same as those provided at a full service branch, or more limited according to the size of a particular corporate customer and its needs. CSBs represent a low-cost alternative to opening full service branches. In addition, we believe CSBs provide us with an opportunity to target new retail customers while servicing corporate customers and personnel.

ATMs

As of December 31, 2012, we operated 27,409 ATMs throughout Brazil. Our customers may conduct almost all account related operations through ATMs. ATMs are low cost alternatives to employee-based services and give us points of service at costs significantly lower than branches. We also have arrangements with other network operators such as the brands “Cirrus” and “Maestro” to allow our clients to use simplified services through their networks.

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Risk Management

Itaú Unibanco Holding regards risk management as an essential instrument to optimize the use of its resources and to select the best business opportunities in order to maximize value creation to its shareholders. The purpose of our risk management policy is to identify the internal and external risk events that may affect the strategies of our business and support units, as well as the achievement of their goals, with potential impacts on Itaú Unibanco Holding’s results, capital, liquidity and reputation.

The credit, market, liquidity, operational and insurance risk control is performed in a centralized manner by an independent risk control unit, in order to ensure that the risks faced by Itaú Unibanco Holding are managed in accordance with our policies and procedures. This independent unit is also responsible for centralizing Itaú Unibanco Holding’s capital management. This centralized control aims to provide our board and the senior management with a global view of Itaú Unibanco Holding’s exposure to risks as well as a prospective view of our capital adequacy, so as to optimize corporate decisions.

Our risk management procedures permeate the entire institution, aligned with the guidelines of our board and senior management, which, through Superior Committees described below, determine our overall risk management objectives, expressed as targets and limits for each of our business units. The control units, in turn, support Itaú Unibanco Holding’s management by means of monitoring procedures and risk analysis.

The Capital and Risk Management Committee (“CGRC”) advises our board on Itaú Unibanco Holding’s risks and capital management. The CGRC submits reports and recommendations for the analysis of the board of directors with respect to: (i) supervision of Itaú Unibanco Holding’s risk management and control activities, for the purpose of ensuring their adequacy to the risk levels assumed and to the complexity of operations, as well as complying with regulatory requirements; (ii) review and approval of capital management policies and strategies that establish mechanisms and procedures aimed at maintaining capital compatible with the risks incurred by the institution; (iii) determination of the minimum return on the capital of Itaú Unibanco Holding’s as a whole and of its business lines, as well as performance monitoring; (iv) supervision of incentive structures, including compensation, aimed at ensuring their alignment with risk control and value creation objectives; and (v) promotion of the improvement of Itaú Unibanco Holding’s risk culture. See “Item 6C. Board Practices — Statutory Bodies.”

The Audit Committee is responsible for overseeing the quality and integrity of our internal controls and risk management systems, among other functions. See “Item 6C. Board Practices — Statutory Bodies — Audit Committee.”

The Superior Risk Policies Committee (“CSRisc”) is our superior risk and capital management body at the executive level, responsible for (i) establishing guidelines consistent with our risk management policies; (ii) approving management-level risk policies with high impact on capital positions; (iii) defining decision authority levels for the lower level committees; (iv) setting limits combined by type of risk; (v) ensuring consistency of risk and capital management across the Itaú Unibanco Group; (vi) monitoring the process for implementing risk and capital management tools; and (vii) approving risk assessment and capital calculation methodologies.

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In addition to the Superior Risk Policies Committee (CSRisc), senior management oversight of risk management is performed through five committees: the Superior Institutional Treasury Committee (“CSTI”), the Superior Institutional Treasury and Liquidity Committee (“CSTIL”), the Superior Credit Committee (“CSC”), the Superior Audit and Operational Risk Management Committee (“CSAGRO”) and the Superior Risk Institutional Policies Committee (“CSNIR”).

The Superior Institutional Treasury Committee (CSTI) and the Superior Institutional Treasury and Liquidity Committee (CSTIL) are responsible for assessing and establishing strategies for market and liquidity risks. CSTI establishes the exposure limits for market risk and the maximum loss limits of positions based on the limits determined by CSRisc. The limits are monitored on a daily basis and excesses are reported to the appropriate level. CSTIL establishes liquidity limits based on the limits determined by CSRisc, and monitors current and future levels of liquidity in order to manage cash flows.

The Superior Credit Committee (CSC) is responsible for managing large corporate credit risks, including establishing corporate credit policies, coordinating internal rules on credit limits for financing and guarantees and determining the authority levels to approve credit transactions.

The Superior Audit and Operational Risk Management Committee (CSAGRO) is responsible for operational risks and internal controls, including: managing risks associated with our processes and businesses; setting up guidelines for internal audits and management of operational risks and analyzing the results from our internal controls and compliance system.

The Superior Risk Institutional Policies Committee (CSNIR) is responsible for validating and approving our institutional policies of market, liquidity, credit, operational and insurance risks control and of capital management.

In addition to the risk management committees, the Superior Product Committee (CSP) approves products, operations, services and processes in Itaú Unibanco Holding, ensuring the adherence to the customer and unit needs, and is responsible for assessing potential risks for Itaú Unibanco Holding and its public relations and the Superior Foreign Units Committee (CSEXT) supervises businesses abroad and is the highest level of authority for approving initiatives, transactions, services and processes in markets where Itaú Unibanco Holding operates outside Brazil.

As part of our risk control tools, Itaú Unibanco Holding manages proprietary IT systems to comply with Central Bank’s capital reserve regulations and models. These models are based on the following elements:

· Economic, financial and statistical analyses, which enable the evaluation of the effects of adverse events on liquidity, credit and market positions;

· Market risk metrics such as Value-at-Risk (VaR), losses in stress scenarios, stop loss alerts and concentration;

· Credit risks rating tools, which assign ratings to clients based on statistical models of application and behavior scoring for retail portfolios and proprietary rating models for corporate customers. We also use credit portfolio management models to quantify and allocate economic capital, which is the capital that Itaú Unibanco Holding estimates that is sufficient to cover risks incurred;

· Operational risks, many of which have been evaluated through the use of internal databases and statistical models that monitor the frequency and the severity of internal loss events to quantify the risks and allocate economic capital. Itaú Unibanco Holding is in the process of extending statistical and scenario-based approaches to cover all material operational risks; and

· Simulations of alternatives for protection due to liquidity losses and contingency plans for crisis situations in different scenarios.

Itaú Unibanco Holding has processes to calculate the regulatory capital, in accordance with CMN Resolution No. 3,490. The regulatory capital to cover risks takes into consideration the sum of the following portions:

· PEPR: the regulatory capital portion required to cover credit risk and other asset exposures not included in the other portions;

· PCAM: the regulatory capital portion required to cover market risk exposure related to gold and fluctuation of foreign currencies;

· PJUR: the regulatory capital portion required to cover market risk exposure in the trading book related to interest rate fluctuation;

· PCOM: the regulatory capital portion required to cover market risk exposure related to commodity price fluctuation;

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· PACS: the regulatory capital portion required to cover market risk exposure in the trading book related to equity price fluctuation; and

· POPR: the regulatory capital portion required to cover operational risk exposure.

Complementing the risk management process, we have concluded the implementation of the capital management structure, in compliance with CMN Resolution No. 3,988, of June 30, 2011.

The capital management process supports Itaú Unibanco Holding by means of an ongoing process involving:

· Monitoring our capital needs under normal and stress scenarios, considering the regulatory requirements and our board’s guidelines;

· Planning of targets and capital needs taking into consideration Itaú Unibanco Holding’s strategic objectives; and

· Adoption of a prospective posture in relation to capital management.

Since the publication of Basel III, Itaú Unibanco Holding has implemented internal processes to evaluate the impact of the changes, and recently published concepts under Basel III have been incorporated in our prospective analyses of capital and liquidity as part of the process to conform our business to the new regulation. See “Item 4B. Business Overview — Regulation and Supervision — Capital Adequacy and Leverage/Regulatory Capital Requirements — Implementation of Basel III in Brazil.”

Market Risk Management

Market risk is the possibility of losses resulting from fluctuations in the market values of positions held by a financial institution, most typically caused by variations in foreign exchange rates, interest rates, price indexes, equity and commodity prices, along with various indexes on these risk factors.

Our market risk control framework covers all financial instruments held in all portfolios of the companies under our control. In this respect, Itaú Unibanco Holding’s institutional policies and general market risk management framework is in line with the principles of CMN Resolution No. 3,464 and subsequent amendments. These principles guide the institution’s approach to market risk control and management across all business units and legal entities of the Itaú Unibanco Group.

At Itaú Unibanco Holding, market risk management is the process by which management monitors and controls risk of variations in the value of financial instruments, while aiming to optimize the risk-return ratio through an adequate structure of limits, effective risk management models and related management tools. The internal VaR model used by Itaú Unibanco Holding considers a one-day holding period and a 99.0% confidence level. Volatilities and correlations are estimated based on a “volatility weighting” methodology that confers higher weight to the most recent information.

Market risk control is managed by a group that is independent from our “risk origination” business units, and is responsible for performing the daily activities of risk measurement, evaluation, analysis and reporting to responsible individuals and units, according to established governance requirements, and monitoring the necessary actions to readjust the position and/or level of risk. For this purpose, there is a structured process of communication and information flow, which aims at providing information to the Superior Committees and ensuring compliance with the requirements of Brazilian and relevant foreign regulatory agencies.

Itaú Unibanco Holding’s market risk management framework is subject to the governance and hierarchy of its committees, with specific limits and established authorities. These range from aggregated risk indicators at the portfolio level, to more granular limits at the individual desk level. They help ensure the effectiveness and coverage of control, limits are calibrated based on projections of future balance sheets, stockholders’ equity available to support trading activities, and the risk profile of each organizational entity (defined in terms of risk measurement as used within the risk management process). Limits are monitored on a daily basis, with compliance reported to and discussed at the relevant board and management committees.

The structure of limits and alerts follows our board guidelines. These are approved by the Superior Risk Policies Committee (CSRisc), after endorsement by the Superior Institutional Treasury Committee (CSTI). The limits are reviewed at least annually.

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Liquidity Risk Management

Liquidity risk is defined as the occurrence of imbalances between assets and liabilities, or a mismatch between payments and receipts, that may affect an institution’s payment capabilities, taking into consideration the different currencies and settlement terms of its rights and obligations. Liquidity risk management aims to use best practices so as to avoid cash shortages and difficulties making payments.

Liquidity risk management is overseen by the Superior Institutional Treasury and Liquidity Committee (CSTIL), which analyses current and expected levels of liquidity and establishes limits related to liquidity, including the maximum levels of liquidity mismatch based on maturities and currencies and minimum levels of reserves in domestic and foreign currencies. It also establishes policies for raising and investing funds in the national and international markets and strategies for funding our portfolios. This committee reports to the Superior Risk Policies Committee (CSRisc) and oversees the Institutional Treasury Management Committee, which is responsible for setting limits regarding liquidity risk and developing criteria and models for liquidity risk assessment. In addition, the Cash Committee is responsible for implementing and controlling the established strategies for liquidity risk control.

We have a structure dedicated to improving monitoring and analysis of liquidity risk by applying statistical models and economic and financial forecasts of the variables that impact cash flows and the level of reserves in local and foreign currency.

In addition, we have established guidelines and limits, which compliance is periodically reviewed by technical committees to ensure an additional safety margin with respect to the minimum liquidity requirements based on our models. Our liquidity management policies and related limits are established based on prospective scenarios that are periodically reviewed in light of cash requirements due to atypical market conditions or arising from strategic decisions.

Pursuant to the requirements of CMN Resolution No. 2,804, of December 21, 2000 and Central Bank Circular No. 3,393, of July 3, 2008, we deliver our Liquidity Risk Statements (DRL) to the Central Bank monthly and the following items are regularly prepared and submitted to senior management for monitoring and support:

· Different scenarios for liquidity projections;

· Contingency plans for critical situations;

· Reports and charts to enable monitoring risk positions;

· Evaluation of funding costs and alternatives for funding sources; and

· Tracking and control of funding sources by counterparty type, maturity and other aspects.

Credit Risk Management

Credit risk is defined as the possibility of losses associated with: (i) the failure by the borrower or counterparty to fulfill its respective financial obligations under agreed upon terms; (ii) the depreciation of the borrower’s credit-worthiness arising from a rating downgrade; (iii) the partial payment of any amounts owed to the lender; (iv) conferring an undue benefit to a counterparty upon renegotiation of an agreement or (v) collection costs arising from enforcing an agreement or guarantee.

In line with the principles of CMN Resolution No. 3,721, of April 30, 2008, our credit risk management structure and institutional guidelines are approved by our board and are applicable to companies and subsidiaries in Brazil and abroad. Our credit risk management structure is designed to create value for our shareholders through the analysis of risk-adjusted returns, focusing on maintaining the quality of loan portfolios at appropriate levels for each market segment in which we operate.

In order to calculate credit risk we consider the client’s or counterparty’s probability of default (PD), the estimated value of the exposure at default (EAD) and loss given default (LGD), as well as single-creditor and industry-level credit concentration. The assessment and monitoring of these risk components is a part of our process for granting credit, managing portfolios and defining limits contributing to a diversified borrower distribution.

Our credit policy is developed on the basis of internal factors, such as borrower rating criteria, performance and evolution of portfolio, default levels, return rates, and the allocated economic capital, as well as external factors related to the economic environment, interest rates, market default indicators, inflation and changes in consumption levels.

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The governance of our credit risk management is conducted through executive committees and the Superior Credit Committee (CSC). The executive committees evaluate competitive market conditions, define our credit limits, review control practices and approve policies and actions within their respective authorities. Our credit risk management structure also encompasses a communication and reporting process, including the disclosure of institutional guidelines on credit risk management. The highest authority for credit lending approval is the Superior Credit Committee (CSC), and its main responsibilities include: (i) analyzing and deciding on credit proposals that are beyond the authority of the credit commissions and committees of the business units and the intermediate authority level; and (ii) analyzing and deciding on credit policies or changes in maximum credit authority levels of the related business units and the intermediate authority commission. The description of the credit risk management structure is contained in a publicly available report, approved by our board of directors.

Our credit risk control is carried out by our independent risk control unit, segregated from the business units and the internal audit unit, as required by current regulation. With respect to the credit risk control processes, this independent risk control unit has the following responsibilities, among others:

· Preparation of institutional guidelines for credit risk control;

· Model development governance;

· Validation of credit risk models;

· Evaluation of credit policies;

· Monitoring allowance for loan losses;

· Evaluation and approval of new products;

· Assessment of the portfolio’s risk and return parameters;

· Consolidated portfolio monitoring;

· Calculation and monitoring of our regulatory capital.

Our independent risk control unit evaluates the impact of creating or modifying our credit policies or products, before their implementation, in order to identify and quantify uncertainties inherent in each business unit. This evaluation process seeks to enable us to identify potential risks in order to ensure that credit decisions make sense from an economic and risk perspective.

The credit rating for our wholesale transactions is based on information such as economic and financial conditions of the potential borrower, its cash-generating capabilities, the company group to which it belongs, and the current and prospective situation of the industry in which it operates. The credit proposals are analyzed on a case-by-case basis, as part of our approval structure.

With respect to our retail transactions (individuals, small and medium businesses), the process of measuring and managing credit risk is done through quantitative rating models, referred to as credit scoring models. These models are divided into two types: application and behavior scores. The application score is used in the beginning of a customer’s relationship with us, while the behavior score model is used in managing the risk of customers who already have a relationship with us. The purpose of these models is to predict the default risk of the borrowers, based on the characteristics and credit behavior history of Itaú Unibanco Holding’s customers. The models also incorporate credit exposure information of the customers with other banks (e.g., information from Central Bank’s database). The borrowers classification is updated on a monthly basis and is used for the automated establishment of credit limits, renewals of operations, definition of pre-approved product offers and maximum number of installments allowed within credit operations. Specific cases may be analyzed on an individual basis.

We seek to strictly control our credit exposure to clients and counterparties, taking action to remediate occasional situations in which our actual exposure exceeds the desired one. In these cases, a series of contractual provisions may be enforced, such as the right to demand early payment or requirement of additional collateral.

Mitigating Instruments

As part of our framework for credit risk control, we have an institutional guideline that sets out the general rules and responsibilities related to the use of guarantees. Additionally each business unit formalizes the use of guarantees in their credit policies.

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We use guarantees in order to increase our collection capacity in operations with credit risk. These guarantees may be personal guarantees, secured guarantees, legal structures with mitigating power and netting agreements, as permitted by applicable rules and regulations. Our policy is that any guarantees that impacts mitigation, allocation and provision of capital must be legally valid, enforceable and periodically reassessed.

We also use credit derivatives, such as single name credit default swaps, to mitigate the credit risk of our securities portfolio. We price these instruments based on models that use the fair market value inputs, such as credit spreads, recovery rates, correlations and interest rates.

Operational Risk Management

Operational risk is defined as the possibility of losses resulting from failure, deficiency or inadequacy of internal processes, people and systems or from external events. It includes legal risk, coupled with inadequacy or deficiency of contracts, as well as the penalties due to non-compliance with laws and punitive damages to third parties arising from the activities undertaken by an institution.

The sophistication of the banking businesses and the evolution of technologies have increased the complexity of our risk profiles and affected our operational risk management. As a result, we have established a specific structure for the operational risk distinct from the one traditionally applied to market and credit risks. The CSAGRO oversees operational risk management and establishes guidance for internal auditing. The committee analyses audit reports, establishes operational risk management guidelines and models and monitors internal controls, operational risks and legal compliance. Decisions regarding capital measurement models and risk control policies are made by the CSRisc.

In line with the principles established by the CMN, we established an operational risk management policy, which was approved by our audit committee and ratified by the board of directors. The operational risk management policy is applicable to Itaú Unibanco Holding. This policy is comprised of a set of principles, procedures and guidelines for the management of products, processes and systems’ risks, taking into consideration their nature and complexity. The operational risk management policy defines procedures for identifying, assessing, measuring, responding to, monitoring and reporting with respect to operational risk, as well as the roles and responsibilities of participant in the process.

Since July 1, 2008, the Central Bank has required financial institutions to allocate capital for operational risk, based on Basel II operational risk capital requirements guidelines. Itaú Unibanco Holding has adopted the Alternative Standardized Approach (“ASA”). See “Item 5B. — Liquidity and Capital Resources — Capital.”

Insurance Underwriting and Portfolio Risk Management

Insurance underwriting and portfolio risk is the risk from an adverse economic scenario that contradicts the assumptions used in our underwriting policy and in estimating its reserves. This risk is managed by the same bodies that oversee operational risk as described above. Management of our insurance operations establishes our underwriting policies relating to retentions, protections, reinsurance programs and pricing, depending on the type of business. This approach is designed to maintain high quality underwriting, pricing discipline and reduce volatility in the results. The actuarial department analyses the adherence of the probability tables used in the pricing models to the experience of our portfolio. In the retail market, the prices of our insurance products are established according to proprietary scoring and rating systems based on data we gathered and analyzed over many years, which underwriters use to assess and evaluate risks prior to quotation. This information provides specialized knowledge relating to industry segments and helps analyze risk based on account characteristics and pricing parameters. In the group life market, the prices of our insurance products are established according to rating systems based on an international actuarial table of mortality and the historical experience of our policies, the age of the group, the industry segments, the percentage of females and males and experience of each group and the financial health of the client. Property insurance underwriting is monitored through risk factors and pricing is based on exposure based on economic segment analysis, activity and level of severity risk, customer and similar companies experiences, financial health and customized management instruments. Our strategy for reinsurance underwriting is to work with a limited number of reinsurers in order to have a high pre-negotiated retention limit, which decreases our risk exposure. In addition, the underwriters analyze all of our accounts on an annual basis to manage risk associated with our insurance portfolio. In addition we apply risk-adjusted return on capital model to the corporate segment to allocate enough capital to ensure business sustainability. The risk adjustment return on capital model allows us to quantify the exposure to risk based on statistical criteria.

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Funding

Main Sources

'Our principal source of funding is deposits. Deposits include non-interest bearing demand deposits, interest bearing savings account deposits, time deposits certificates sold to customers and interbank deposits from financial institutions. As of December 31, 2012, total deposits amounted to approximately R$243,200 million, representing 35.7% of total funding. As of December 31, 2011, total deposits amounted to approximately R$242,636 millions, representing 42.3% of our total funding. Our time deposits represent one of our major sources of funding which, as of December 31, 2012 and 2011 accounted for 17.2% and 25.2% of total funding, respectively.

'The following table sets forth a breakdown of our sources of funding as of December 31, 2012, 2011 and 2010:

	2012				2011				2010
	millions of R$		% of total funding		millions of R$		% of total funding		millions of R$		% of total funding
Deposits		243,200		35.7		242,636		42.3		202,688		39.9
Demand deposits		34,641		5.1		28,932		5.0		25,537		5.0
Investment deposits		-		-		-		-		-		-
Savings deposits		83,451		12.3		67,170		11.7		57,899		11.4
Time deposits		117,232		17.2		144,469		25.2		116,416		22.9
Interbank deposits		7,601		1.1		2,065		0.4		1,930		0.4
Other deposits		275		-		-		-		906		0.2
Securities sold under repurchase agreements		267,405		39.3		185,413		32.3		199,657		39.2
Interbank market debt		97,073		14.5		90,498		15.6		62,599		12.1
Mortgage notes		227		-		244		-		302		0.1
Real estate credit bills		13,296		2.0		15,751		2.7		8,736		1.7
Agribusiness credit bills		5,321		0.8		3,284		0.6		2,774		0.5
Financial credit bills		18,695		2.8		14,308		2.5		2,466		0.5
Import and export Financing		23,053		3.4		21,452		3.7		15,455		3.0
Onlending-domestic		36,048		5.4		35,459		6.1		31,689		6.1
Other		433		0.1		-		-		1,177		0.2
Institutional market debt		72,028		10.5		54,807		9.6		44,513		8.8
Debentures		1,569		0.2		1,039		0.2		1,384		0.3
Subordinated debt		55,179		8.1		39,715		6.9		34,487		6.8
Foreign borrowings through securities		15,280		2.2		14,053		2.5		8,642		1.7
Total		679,706		100.0		573,354		99.8		509,457		100.0

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The following tables set forth a breakdown of deposits by maturity, as of December 31, 2012, 2011 and 2010:

(in millions of R$)
	2012
	0-30 days		31-180 days		181-365 days		Over 365 days		Total
Non-interest bearing deposits		34,916		-		-		-		34,916
Demand deposits		34,641		-		-		-		34,641
Other deposits		275		-		-		-		275
Interest bearing deposits		98,462		24,412		17,868		67,542		208,284
Savings deposits		83,451		-		-		-		83,451
Time deposits		12,369		20,861		16,667		67,335		117,232
Interbanks Deposits		2,642		3,551		1,201		207		7,601
Total		133,378		24,412		17,868		67,542		243,200

(in millions of R$)
	2011
	0-30 days		31-180 days		181-365 days		Over 365 days		Total
Non-interest bearing deposits		28,932		-		-		-		28,932
Demand deposits		28,932		-		-		-		28,932
Other deposits		-		-		-		-		-
Interest bearing deposits		98,754		19,849		11,920		83,181		213,704
Savings deposits		67,170		-		-		-		67,170
Time deposits		30,918		19,167		11,475		82,909		144,469
Interbanks Deposits		666		682		445		272		2,065
Total		127,686		19,849		11,920		83,181		242,636

(in millions of R$)
	2010
	0-30 days		31-180 days		181-365 days		Over 365 days		Total
Non-interest bearing deposits		25,537		-		-		-		25,537
Demand deposits		25,349		-		-		-		25,349
Other deposits		188		-		-		-		188
Interest bearing deposits		74,486		17,550		21,981		63,134		177,151
Savings deposits		57,899		-		-		-		57,899
Investment deposits		906		-		-		-		906
Time deposits		15,332		16,714		21,476		62,894		116,416
Interbanks Deposits		349		836		505		240		1,930
Total		100,023		17,550		21,981		63,134		202,688

The following table sets forth the mix of the individual and corporate time deposits divided among our retail, Itaú Personnalité, middle market and corporate markets (each expressed as a percentage of total time deposits) as of December 31, 2012, 2011 and 2010:

	2012			2011			2010
Retail		20.5	%		19.0	%		15.0	%
Itaú Personnalité		16.2	%		18.2	%		27.7	%
Middle market		37.7	%		40.7	%		43.3	%
Corporate		25.6	%		22.1	%		14.0	%
Total		100.0	%		100.0	%		100.0	%

Other Sources

We also act as a financial agent in borrowing funds from BNDES and FINAME, and lending such funds at a spread determined by the Brazilian government to targeted sectors of the economy. These borrowings are primarily in the form of credit lines that are directed by government agencies to specific sectors targeted for economic development through private banks. As of December 31, 2012, we participated as on-lender in BNDES and FINAME financed transactions valued at approximately R$36,048 million. See “— Itaú BBA.”

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We obtain U.S. dollar-denominated lines of credit from our affiliates, including IU Holding Grand Cayman Branch, Banco Itaú Chile and Itaú BBA Nassau Branch to provide trade finance funding for Brazilian companies. As of December 31, 2012, our total import and export funding was approximately R$23,053 million.

In addition, we obtain foreign currency funds from the issuance of securities in the international capital markets, either by borrowing privately or by issuing debt securities generally to on-lend these funds in Brazil to Brazilian companies and financial institutions. These on-lending transactions are usually denominated in reais and are indexed to the U.S. dollar. As of December 31, 2012, we had approximately R$15,280 million outstanding of structured and financial transactions. Our international operations including the IU Holding Grand Cayman-Branch, Itau BBA International, Banco Itaú Chile, Itaú Unibanco´s Grand Cayman and Itaú BBA’s Nassau Branch, represent further funding vehicles for us, being responsible for issuing securities and establishing programs for the issuance of several financial instruments. See “— International Operations — Other International Operations.”

We also generate additional funds for our operations through the resale to our customers of securities issued by us and previously held in treasury. Our customers have the right to sell these securities back to us at their option before the maturity date. We pay interest on these securities funds at variable rates based on the Interbank Deposit Certificate. As of December 31, 2012, total funding under this financial product amounted to R$267,405 million.

Technology

We are committed to offering the most advanced technology for the convenience of our customers. Therefore, we continuously invest in the development and improvement of our systems.

In 2012, our IT budget consisted of approximately R$3,400 million in expenditures, including application development, and R$1,900 million in investments, with 6,869 employees.

During 2012 for improving, growing and modernizing our IT operations, necessary to meet our expected growth, was rebuilt the command center for IT operations in the Itaú Unibanco Technology Center building, in the city of São Paulo. This will control all IT resources of the bank, until the full conclusion of the new Data Center in Mogi Mirim, São Paulo. It will promote synergy between traditional processes such as operations with datacenter monitoring services, facilities monitoring, telemetry and governance. This integration is expected to improve our IT operation’s management. 

On January 27, 2012, we announced the construction of a new technology center in which we will concentrate our data processing and storage equipment and is intended to become our main technology hub (the “Data Center”). The Data Center will be set up on a 815,000-square-meter site in the city of Mogi Mirim, São Paulo representing an investment of approximately R$800 million for the first phase of the project (building). The project is scheduled to be completed in 2015 and will feature approximately 60,000 square meters of floor area and employ close to 400 direct employees on-site.

We have workplace contingency and disaster recovery processes for our main businesses. The back-up site is located in Campinas, São Paulo. Both our primary and secondary data centers have dedicated uninterruptible power systems and generators that are designed to start automatically whenever a power outage occurs.

Competition

General

The last several years have been characterized by increased competition and consolidation in the financial services industry in Brazil.

Retail Banking

As of December 31, 2012, there were 136 multiple-service banks, 22 commercial banks, and numerous savings and loan, brokerage, leasing and other financial institutions in Brazil.

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We, together with Banco Bradesco S.A. (“Bradesco”), Banco Santander (Brasil) S.A. (“Banco Santander”) and HSBC Bank Brasil S.A. (“HSBC”), are the leaders in the non-state-owned multiple-services banking sector. As of September 30, 2012, these banks accounted for 40.7% of the Brazilian banking sector’s total assets. We also face competition from state-owned banks, which has increased recently. As of September 30, 2012, Banco do Brasil S.A. (“Banco do Brasil”), Caixa Econômica Federal (“CEF”), and BNDES, ranked first, fourth and fifth in the banking sector, respectively, accounting for 42.9% of the banking system’s total assets.

The table below sets forth the total assets of the top 14 banks in Brazil, ranked according to their share of the Brazilian banking sector’s total assets:

	As of September 30, 2012(*)
	In billions of R$		% of Total Assets
Banco do Brasil(**)		1,046.5		19.0
Itaú Unibanco Holding		901.4		16.4
Bradesco		741.6		13.5
CEF		673.5		12.2
BNDES		642.3		11.7
Banco Santander		453.1		8.2
HSBC		143.1		2.6
Banco Votorantim		114.1		2.1
Safra		92.6		1.7
BTG Pactual		85.6		1.6
Citibank		63.4		1.2
Banrisul		44.9		0.8
Credit Suisse		35.9		0.7
Deutsche		33.1		0.6
Others		434.1		7.9
Total		5,505.1		100.0

(*) Based on banking services, excluding insurance and pension funds.

(**)Includes the consolidation of 50.0% of Banco Votorantim S.A. based on Banco do Brasil ownership of a 50.0% interest in Banco Votorantim S.A..

Source: Central Bank, 50 Largest Banks and the Consolidated Financial System (September 2012).

Itaú Unibanco Holding has a leading position in many areas in the domestic financial market. We achieved a market share of 14.5% based on total loans as of November 2012, positioning us at third place in the Brazilian market. Not considering the public banks, we had a leading position based on total loans with 27.0% of the Brazilian market share as of November 2012.

We also have a highly qualified team of employees. We intensified our presence in the Southern Cone (Argentina, Chile, Paraguay and Uruguay) to strengthen our operations in Latin America. Our long-term strategy is to move gradually to a global position, but our strategy gives priority to the consolidation of our presence in the domestic and regional markets.

Credit Cards

The Brazilian credit card market is highly competitive, growing at a compound annual growth rate of over 21.4% over the last three years, as of June 30, 2012, according to the Brazilian Association of Credit Card Companies and Services (Associação Brasileira das Empresas de Cartões de Crédito e Serviços). Itaú Unibanco’s major competitors are Bradesco, Banco do Brasil and Banco Santander. Credit card companies, are restructuring their offerings to adjust to lower levels of interest rates and adapting relationship pricing policies (interest rates, cardholder fees and merchant fees) in order to strengthen their position in the market.

Asset Management Competition in Brazil

While the Brazilian asset management industry has grown in recent years by focusing on various client segments, activity is still dominated by commercial banks. According to ANBIMA, the asset management industry reached total assets of R$2,261 billion in the end of 2012, with competition focused on large and well-established retail banks. With respect to institutional clients, new foreign players are now present in Brazil, while niche players are present in the private banking business

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Insurance

The Brazilian insurance market is highly competitive. Our primary competitors in this sector, excluding health insurance, are related to large commercial banks, such as Bradesco, Banco do Brasil, CEF and Banco Santander. As of December 31, 2012, this industry consisted of approximately 117 insurance companies of various sizes, including 28 conglomerates and 36 independent companies. The Porto Seguro Alliance resulted in gains in scale and efficiency. Giving effect to our 30.0% ownership interest in Porto Seguro, we had 13.2% of the Brazilian market share based on insurance premiums for the year ended December 31, 2012.

Private Retirement Plans and Capitalization Products

Our primary competitors in private retirement plans and capitalization products are controlled by large commercial banks, such as Bradesco, Banco do Brasil, Banco Santander and CEF, which, like us, take advantage of their branch network to gain access to the retail market.

Corporate and Investment Banking

In the wholesale credit market, Itaú BBA contends for the top spot against Banco do Brasil (including its 50.0% stake in Banco Votorantim) based on aggregate loan volume, where it is currently followed by Bradesco and Banco Santander.

Itaú BBA also has a prominent position in the derivatives market, particularly in structured derivatives. In this market, its main competitors are the international banks, namely Banco Citibank, Credit Suisse Hedging Griffo, HSBC, Banco JP Morgan S.A., Banco Morgan Stanley and Banco Santander.

Itaú BBA also has a leading position in the Treasury Services market, where its main challengers are Banco do Brasil, Banco Santander and Bradesco. In 2012, Itaú BBA was chosen by Euromoney as the “Best Bank for Cash Management in Brazil” and is among the top three in the category “Best Regional Cash Management Latam.”

In investment banking, Itaú BBA’s main competitors include Banco Santander, Credit Suisse Hedging Griffo, Bank of America Merrill Lynch, Banco Morgan Stanley, Banco JP Morgan, Bradesco and Banco BTG Pactual. In 2012, Itaú BBA ranked in a top-one or two position in each of equity capital markets, debt capital markets and mergers and acquisitions.

Real Estate Financing

The main player in the Brazilian real estate market is CEF, a government owned bank. CEF is focused on real estate financing and, with its aggressive pricing strategy, is the leader in this market. This position is reinforced with the “Minha Casa, Minha Vida” federal program, which is responsible for the construction and financing of one million low income homes and for which CEF is the main operator. There are also two important private bank competitors: Banco Santander and Bradesco. Banco do Brasil, another government owned bank, is also becoming an important player in this market.

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REGULATION AND SUPERVISION

The basic institutional framework of the Brazilian financial system was established in 1964 through Law No. 4,595 of December 31, 1964 (the “Banking Reform Law”). The Banking Reform Law regulates the national financial system, composed of the CMN, the Central Bank, Banco do Brasil, the BNDES, and many financial institutions from the public and private sectors. This legislation created the CMN, as the regulatory agency responsible for establishing currency and credit policies, promoting economic and social development, as well as for the operation of the financial system. This law confers on the CMN powers to set the loan and capital limits, approve monetary budgets, establish exchange and interest rate policies, oversee activities related to stock markets, regulate the organization and operation of financial institutions in the public and private sectors, give authority to the Central Bank over issuing banknotes and setting reserve requirement levels, and setting out general guidelines related to the banking and financial markets.

Principal Regulatory Agencies

The CMN

The CMN, the highest authority responsible for monetary and financial policies in Brazil, is responsible for the overall supervision of Brazilian monetary, credit, budgetary, fiscal and public debt policies. The CMN is chaired by the minister of finance and includes the minister of planning budget and management and the president of the Central Bank. The CMN is authorized to regulate the credit operations which Brazilian financial institutions are engaged in, to regulate the Brazilian currency, to supervise Brazil’s reserves of gold and foreign exchange, to determine Brazilian saving and investment policies and to regulate the Brazilian capital markets. In this regard, the CMN also oversees the activities of the Central Bank and the CVM.

The Central Bank

The Central Bank is responsible for implementing the policies established by the CMN, related to monetary policy and exchange control matters, regulating public and private sector Brazilian financial institutions, monitoring and registration of foreign investment in Brazil and overseeing the Brazilian financial markets. The president of the Central Bank is appointed by the president of Brazil subject to ratification by the Brazilian senate, to perform his duties for an indefinite term. Since January 2011, the president of the Central Bank has been Mr. Alexandre Antônio Tombini.

The CVM

The CVM is the federal agency responsible for regulating the Brazilian securities and derivative markets in accordance with the general regulatory framework enacted by the CVM in accordance with CMN guidelines. The CVM also regulates capital market participants, such as companies whose securities are traded on the Brazilian securities markets, investment funds, investors, financial intermediaries and others such as securities custodians, asset managers, independent auditors, securities analysts and consultants.

SUSEP

The SUSEP, a body subject to the Ministry of Finance, established by Decree Law No. 73, enacted on November, 21, 1966, is responsible for the supervision and control of insurance, open private pension plans, capitalization and reinsurance businesses in Brazil.

CNSP

The National Private Insurance Council (Conselho Nacional de Seguros Privados or “CNSP”), also established by Decree Law No. 73, regulates (together with SUSEP) insurance, open private pension plans, capitalization and reinsurance businesses in Brazil. The CNSP is chaired by the minister of finance or his representative and includes the superintendent of private insurance and representatives of the Ministry of Justice, the Ministry of Social Welfare, the Central Bank and the CVM.

Principal Limitations and Restrictions on Financial Institutions

Under Brazilian banking laws and regulations, financial institutions may not:

· Operate in Brazil without the prior approval of the Central Bank and carry out transactions that fail to comply with principles of selectivity of transactions, adequate guarantees, liquidity and risk diversification;

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· Invest in the equity of another company unless the investment receives the prior approval of the Central Bank, based upon certain standards established by the CMN. Those investments may, however, be made through the investment banking business unit of a multiple-service bank or through an investment bank;

· Own real estate unless the institution occupies that property. When real estate is transferred to a financial institution in satisfaction of a debt, the property must be sold within one year, except if otherwise authorized by the Central Bank; and

· Lend more than 25.0% of their capital calculated in accordance with CMN Resolution No. 3,444 as the basis for their regulatory capital to any single person or group.

Principal Financial Institutions

Public Sector

The federal and state governments of Brazil control several commercial banks and financial institutions devoted to fostering economic development, primarily with respect to the agricultural and industrial sectors. State development banks act as independent regional development agencies in addition to performing commercial banking activities. In the last decade, several public sector multiple-service banks have been privatized and acquired by Brazilian and foreign financial groups. Government-controlled banks include:

· Banco do Brasil, which is a federal government-controlled bank. Banco do Brasil provides a full range of banking products to the public and private sectors;

· BNDES, which is the federal government-controlled development bank primarily engaged in the provision of medium- and long-term finance to the Brazilian private sector, including to industrial companies, either directly or indirectly through other public and private sector financial institutions;

· CEF, which is a federal government-controlled multiple-service bank and the principal agent of the national housing finance system. CEF is involved principally in deposit-taking, savings accounts and the provision of financing for housing and urban infrastructure; and

· Other federal public sector development and multiple-service banks, including those controlled by the various state governments.

Private Sector

The private financial sector includes commercial banks, investment, finance and credit companies, investment banks, multiple-service banks, securities dealers, stock brokerage firms, credit co-operatives, leasing companies, insurance companies and others. In Brazil, the largest participants in the financial markets are financial conglomerates involved in commercial banking, investment banking, financing, leasing, securities dealing, brokerage and insurance.

In addition, the private financial sector includes consumer credit companies (financeiras), securities dealerships (distribuidoras de títulos e valores mobiliários), stock brokerage companies (corretoras de valores), leasing companies (sociedades de arrendamento mercantil), savings and credit associations (associações de poupança e empréstimo) and real estate credit companies (sociedades de crédito imobiliário).

Regulation by the Central Bank

Overview

The Central Bank implements the currency and credit policies established by the CMN, and controls and supervises all public- and private-sector financial institutions. Any amendment to a financial institution’s bylaws, any increase in its capital or any establishment or transfer of its principal place of business or any branch (whether in Brazil or abroad), any merger, acquisition, corporate reorganization or change of control, and the election of directors, officers or audit committee members of financial institutions must be approved by the Central Bank.

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Central Bank approval is necessary to enable a financial institution to merge with, or acquire, another financial institution or for any corporate reorganization or change of control of financial institutions. On August 2, 2012, the Central Bank enacted Resolution No. 4,122, which revoked and substituted, with certain amendments, Resolutions 3,040 and 3,041, both dated November 28, 2002.  In general terms, Resolution No. 4,122 created additional tools for the Central Bank, allowing it to perform a more complete and qualitative review of the authorization processes submitted for analysis of organization, operation, corporate reorganizations and changes of control of financial institutions, and the cancellation of such authorizations, as well as for the election process of directors, officers and audit committee members. Additionally, on March 29, 2012, the Central Bank enacted Resolution No. 4,062, which amends Resolution No. 2,723, dated as of May 31, 2000 and sets forth that any direct or indirect equity interest by financial institutions in any company located in Brazil or abroad, or the increase thereof, must be previously authorized by the Central Bank, other than (i) equity interests typically held in the investment portfolios of investment banks, development banks,  development agencies (agências de fomento) and multiservice banks with investment or development portfolios and (ii) temporary equity interests not registered as permanent assets of the financial institution. The Central Bank will only authorize such equity interest in companies whose corporate purpose is complementary or subsidiary to the activities carried out by the investing financial institution. 

See also “— Antitrust Regulation.” The Central Bank also determines minimum capital requirements, permanent asset limits, lending limits and mandatory reserve requirements. No financial institution may operate in Brazil without the prior approval of the Central Bank.

The Central Bank monitors compliance with accounting and statistical requirements. Financial institutions must submit annual and semi-annual audited financial statements, quarterly financial statements, subject to a limited review, as well as monthly unaudited financial statements, prepared in accordance with the Central Bank rules, all of which must be filed with the Central Bank. Publicly held financial institutions must also submit annual and quarterly financial statements to the CVM, which are subject to a limited review. In addition, financial institutions are required to disclose to the Central Bank all credit transactions, foreign exchange transactions, export and import transactions and any other related economic activity. This disclosure is usually made on a daily basis by computer and through periodic reports and statements. A financial institution and the corporate entities or individuals which control such financial institution have a duty to make available for inspection by the Central Bank its corporate records and any other document which the Central Bank may require in order to carry out its activities.

Capital Adequacy and Leverage/Regulatory Capital Requirements

Existing Requirements

Since January 1995, Brazilian financial institutions have been required to comply with Basel I on risk-based capital adequacy, modified as described below.

In general, Basel I and Basel II require banks to maintain a ratio of capital to assets and certain off-balance sheet items, determined on a risk-weighted basis, of at least 8.0%. At least half of the required capital must consist of Tier 1 Capital, and the balance must consist of Tier 2 Capital. Tier 1 Capital includes equity capital (i.e., common shares and non-cumulative permanent preferred shares), share premium, retained earnings and certain disclosed reserves less goodwill. Tier 2 Capital, or supplementary capital, includes “hidden” reserves, asset revaluation reserves, general loan loss reserves, subordinated debt and other quasi-equity capital instruments (such as cumulative preferred shares, long-term preferred shares and mandatory convertible debt instruments). There are also limitations on the maximum amount of certain Tier 2 Capital items. To assess the capital adequacy of banks under the risk-based capital adequacy guidelines, a bank’s capital is evaluated on the basis of the aggregate amount of its assets and off-balance sheet exposures, such as financial guarantees, letters of credit and foreign currency and interest rate contracts, which are weighted according to their categories of risk.

Brazilian legislation closely tracks the provisions of Basel II standardized or basic approaches for credit, market and operational risks. Among the key differences between Brazilian legislation and Basel II are:

· The minimum ratio of capital to assets determined on a risk-weighted basis is 11.0%;

· The risk-weighting assigned to certain assets and off-balance sheet exposures differs slightly from those set forth in Basel II, including a risk weighting of 300.0% on deferred tax assets other than temporary differences, and certain types of lending to individuals;

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· The ratio of capital to assets of 11.0% mentioned above must be calculated according to two different methods: by consolidating only our financial subsidiaries and on a fully consolidated basis since July 2000, i.e., including all financial and non-financial subsidiaries. In making these consolidations, Brazilian financial institutions are required to take into account all investments made in Brazil or abroad in which the financial institution holds, directly and indirectly, individually or together with another partner, including through voting agreements: (i) partner rights that ensure a majority in adopting corporate resolutions of the invested entity; (ii) power to elect or dismiss the majority of the management of the invested entity; (iii) operational control of the invested company characterized by common management; and (iv) effective corporate control of the invested entity characterized by the total equity interest held by its management, controlling individuals or entities, related entities and the equity interest held, directly or indirectly, through investment funds. Upon preparation of the consolidated financial statements, the financial institutions that are related by actual operational control or by operation in the market under the same trade name or trademark must also be considered for consolidation purposes;

· Since July 1, 2008, the Central Bank has required financial institutions to set aside a portion of their equity to cover operational risk based on Basel II’s guidelines on operational risk capital requirements. Itaú Unibanco Holding has opted for the ASA, which requires a financial institution to set aside 12.0% to 18.0% of its financial intermediation average gross income or a percentage of its average volume of loans, depending on the line of business, according to regulatory classification, to cover operational risks; and

· Undisclosed or “hidden” reserves are not included within the definition of Tier 2 Capital under Brazilian law and regulation.

For limited purposes, the Central Bank establishes the criteria for the determination of regulatory capital for Brazilian financial institutions. In accordance with those criteria established by CMN Resolution No. 3,444, the capital of the banks is divided into Tier 1 Capital and Tier 2 Capital.

Tier 1 Capital is represented by stockholders’ equity plus balance of credit income account and blocked deposits account in order to mitigate the capital deficiency, excluding the balance of debt income account, revaluation reserves, contingency reserves, special profit reserves related to mandatory dividends not yet distributed, preferred cumulative stock, preferred redeemable stock, non-realized earnings related to available-per-sale securities market value adjustments and certain tax credits in accordance with Resolution No. 3,059, as amended, established by CMN.

Tier 2 Capital is represented by revaluation reserves, contingency reserves, special profit reserves related to mandatory dividends not yet distributed, preferred cumulative stock, preferred redeemable stock, subordinated debt and hybrid instruments and non-realized earnings related to available-for-sale securities market value adjustments. As mentioned above, Tier 2 Capital must not exceed Tier 1 Capital. In addition, preferred redeemable stock with original maturity of less than 10 years plus the amount of subordinated debt is limited to 50.0% of the amount of Tier 1 Capital.

Regulatory capital is represented by the sum of Tier 1 Capital and Tier 2 Capital and, together with the deductions described in note 33 to our consolidated financial statements, is taken into consideration for the purposes of defining the operational limits of financial institutions.

On March 4, 2013, the Central Bank enacted Circular No. 3,648, which establishes the minimum requirements for the use of internal credit risk classification systems in the calculation of the required regulatory capital, as set forth in Resolution No. 3,490.

Basel III Framework

On December 16, 2010, the Basel Committee issued its new Basel III framework, which was revised and republished on June 1, 2011. The Basel III framework includes higher minimum capital requirements and new conservation and countercyclical buffers, revised risk-based capital measures, and the introduction of a new leverage ratio and two liquidity standards. The new rules will be phased in gradually and, as with other Basel directives, these will not be self-effectuating. Rather, each country must adopt them by legislation or regulation to be imposed upon that country’s home banks.

The Basel III framework will require banks to maintain: (i) a minimum common equity capital ratio of 4.5%; (ii) a minimum Tier 1 Capital ratio of 6.0% and (iii) a minimum total capital ratio of 8.0%. In addition to the minimum capital requirements, Basel III will require a “capital conservation buffer” of 2.5% and each national regulator is given discretion to institute a “countercyclical buffer” if it perceives a greater system-wide risk to the banking system as the result of a build-up of excess credit growth in its jurisdiction. The Basel Committee proposed to phase in the three basic minimum requirements first, beginning on January 1, 2013, with a longer period for banks to comply with the capital conservation buffer, the “countercyclical buffer” and other requirements, beginning on January 1, 2016.

Basel III also introduces a new leverage ratio. A supervisory monitoring period began on January 1, 2011 and a parallel semi-annual testing run period of a minimum Tier 1 Capital leverage ratio of 3.0% began on January 1, 2013 and will run until January 1, 2017. Basel III will require banks to disclose their leverage ratio and its components beginning January 1, 2015.

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In addition, Basel III aims to improve risk coverage by reforming the treatment of counterparty credit risk (“CCR”). Going forward, affected banks generally will, among other things, be required to determine their capital requirement for CCR using stressed inputs and be subject to a capital charge for potential mark-to-market losses associated with counterparties’ deteriorating credit-worthiness.

In relation to liquidity, Basel III implements a liquidity coverage ratio (“LCR”) and a net stable funding ratio (“NSFR”). The LCR will require affected banks to maintain sufficient high-quality liquid assets to cover the net cash outflows that could be encountered under a potential liquidity disruption scenario over a thirty-day period. The NFSR establishes a minimum amount of stable sources of funding a bank will be required to maintain based on the liquidity profiles of the bank’s assets, as well as the potential for contingent liquidity needs arising from off-balance sheet commitments over a one-year period. Basel III provides for an observation period which began in 2011. On January 7, 2013, the Basel Committee issued a revised version of the LCR requirements. This revised version includes, among other changes, an expansion in the definition of high-quality liquid assets and a revised timetable for the phase-in of the LCR. According to this new timetable, the LCR, including any revisions, will be introduced as a minimum requirement on January 1, 2015. The LCR will begin at 60.0% on January 1, 2015 and will rise in increments of 10 percentage points per year to reach 100.0% on January 1, 2019. The NSFR, including any revisions, will be introduced as minimum standard in 2018.

In addition, on January 13, 2011, the Basel Committee expanded on the Basel III capital rules with additional requirements, also referred to generally as the “January 13 Annex”, applicable to non-common Tier 1 Capital or Tier 2 Capital instruments issued by internationally active banks. These requirements are in addition to the criteria detailed in the Basel III capital rules outlined above. To be included in additional Tier 1 Capital or Tier 2 Capital, the January 13 Annex requires an instrument issued by an internationally active bank to have a provision that requires such instruments, at the option of the relevant authority, to either be written off or converted to common equity upon a “trigger event.” A “trigger event” is the earlier of: (i) a decision that a write-off, without which the bank would become non-viable, is necessary, as determined by the relevant authority; and (ii) the decision to make a public sector injection of capital, or equivalent support, without which the bank would have become non-viable, as determined by the relevant authority. The additional requirements apply to all instruments issued after January 1, 2013, depending on the implementation of the framework by each country; otherwise, qualifying instruments which do not comply with the new Basel III requirements and are issued prior to that date will be phased out over a ten-year period, beginning on January 1, 2013.

On November 4, 2011, the Basel Committee published the final document addressing the assessment methodology for determining the systemically important financial institutions (“G-SIFIs”) and the amount of additional regulatory capital requirements that G-SIFIs should meet and the arrangements by which such additional requirements will be phased in. The assessment methodology is based on an indicator-based measurement approach. The selected indicators reflect a G-SIFI’s (i) size; (ii) interconnectedness; (iii) lack of readily available substitute or financial institution infrastructure for the services they provide; (iv) global, or cross-jurisdictional, activity; and (v) complexity, each of them receiving an equal weight of 20.0% in the assessment. The magnitude of additional loss absorbency requirements for G-SIFIs proposed by the Basel Committee ranges from 1.0% to 2.5% of risk-weighted assets to be met with Common Equity Tier 1 only, as defined in the Basel III framework. The additional loss absorbency requirement for G-SIFIs will be phased-in in parallel with the “capital conservation” and “countercyclical” buffers between January 1, 2016 and year end 2018, becoming fully effective on January 1, 2019. The Issuer has not been classified as a G-SIFI by the Basel Committee.

On October 11, 2012, the Basel Committee issued a framework for dealing with domestic systemically important banks (“D-SIBs”), which entails a set of principles national regulators could adopt when determining the assessment methodology and the higher loss absorbency requirement for D-SIBs. The D-SIB framework supplements the G-SIFI framework by focusing on the impact that the distress or failure of systemically important banks would have on the domestic economy of each country. The Central Bank has not yet issued any proposed regulation or official guidance on the assessment methodology or the higher loss absorbency requirement for D-SIBs in Brazil.

No official revision of the phase-in arrangements for the Basel III framework has been made by the Basel Committee (except for the LCR), which phase-in should have begun on January 1, 2013.

Implementation of Basel III in Brazil

On February 28, 2013, the Brazilian government enacted Provisional Measure No. 608 to address certain legislative changes required to enable the implementation of the Basel III framework in Brazil, including modifications to Law No. 12,249, which regulates the issuance of financial bills and modifications to the treatment of tax credits for regulatory capital purposes.

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Pursuant to Provisional Measure No. 608, new rules were also issued to adapt financial bills to the Basel III framework, as well as to provide for the possibility of Central Bank limiting payment of dividends and interest on capital by financial institutions if they disregard the capital requirements defined by the CMN. The new rules include the following main features with respect to financial bills: 

· Possibility of issuance of financial bills convertible into equity. The conversion may not be requested by the investor or the issuer (financial institution), and is subject to the rules indicated below. The issuance of financial bills convertible into equity is subject to the preemptive right of shareholders, except in case of public offerings and other exceptions established in the regulations;

· In case the financial bills are part of the regulatory capital of the financial institution, suspension of payment of interest in case of non-compliance with capital requirement rules. In addition, in accordance with Basel III rules, and in order to preserve the regular functioning of the financial system, the Central Bank may determine the conversion of financial bills into equity or extinction of the debt (write-off), and these decisions shall not be considered an event of default and shall not accelerate other debts of the financial institution; and

· Financial bills may include, as early maturity events, an event of default on the payment of the remuneration of the bill or the dissolution of the financial institution.

On March 1, 2013, the CMN issued four resolutions (one of which, CMN Resolution No. 4,194, does not apply to our business), which were followed by several circulars enacted by the Central Bank on March 4, 2013, all of which detail the implementation of the Basel III framework.

CMN Resolution No. 4,192, CMN Resolution No. 4,193 and CMN Resolution No. 4,195 regulate, among others, the calculation of capital requirements (Common Equity Tier 1 Capital, Tier 1 and total capital requirements), eligibility of instruments to qualify as Tier 1 or Tier 2 Capital, calculation methodology for regulatory capital, the introduction of capital buffers, the definition of “consolidated enterprise level” (conglomerado prudencial) and phase-in and phase-out arrangements.

According to CMN Resolution No. 4,192 and CMN Resolution No. 4,193, Brazilian banks’ minimum total capital ratio is calculated as the sum of three components:

· Regulatory capital (patrimônio de referência);

· A capital conservation buffer (to enhance the loss absorption ability of financial institutions); and

· A countercyclical capital buffer (to address the risk of the build-up of excess credit growth).

Brazilian banks’ regulatory capital continues to comprise two tiers, Tier 1 Capital and Tier 2 Capital, and qualification of financial instruments as Tier 1 Capital or Tier 2 Capital is based on the ability of such instruments to absorb losses at a viable financial institution. Tier 1 Capital is further divided into two portions: Common Equity Tier 1 Capital (common equity capital and profit reserves, or Capital Principal) and Additional Tier 1 Capital (hybrid debt and equity instruments authorized by the Central Bank, or Capital Complementar). Existing hybrid instruments and subordinated debt already approved by the Central Bank as Additional Tier 1 Capital or Tier 2 Capital may continue to qualify as Additional Tier 1 Capital or Tier 2 Capital, as the case may be, provided that such instruments comply with CMN Resolution No. 4,192’s requirements and a new authorization from the Central Bank is obtained. All instruments that do not comply with these requirements will be phased-out as eligible capital instruments by deducting 10.0% of their book value per year from the amount that qualifies as Additional Tier 1 Capital or Tier 2 Capital. The first deduction is due on October 1, 2013, and subsequent deductions will take place annually starting January 1, 2014 until January 1, 2022.

According to CMN Resolution No. 4,192, in order to qualify as Additional Tier 1 or Tier 2 Capital, an instrument issued by a Brazilian bank must, among other things, have a provision that requires such instrument to be automatically written-off or converted to equity upon a “trigger event.” A “trigger event” is the earlier of: (i) Common Equity Tier 1 Capital being less than 5.125% of risk-weighted assets for Tier 1 instruments and 4.5% for Tier 2 instruments, calculated in accordance with the requirements of CMN Resolution No. 4,193; (ii) the decision, as established in a firm irrevocable written agreement, to make a public sector injection of capital, as determined by applicable legislation; (iii) the Central Bank declares the beginning of a special administration regime (Regime de Administração Especial Temporária or “RAET”) or intervention in the issuing financial institution; or (iv) a decision that a write-off or conversion, without which the bank would become non-viable and in order to mitigate relevant risks to the Brazilian financial system, is necessary, as determined by the Central Bank, in accordance with guidance criteria to be established by the CMN (the “regulatory discretionary trigger event”). The additional requirements apply to all instruments issued after October 1, 2013.

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Resolution No. 4,193 also establishes capital conservation and countercyclical buffers for Brazilian financial institutions, determining their minimum percentages and which sanctions and limitations will apply in case of non-compliance with such additional requirements. Such limitations include: (i) partial or full inability to pay executives and members of the board their share of variable compensation; (ii) partial or full inability to distribute dividends and interest on equity to shareholders; and (iii) full inability to repurchase their own shares and effect reductions in their share capital. Under CMN Resolution No. 4,193, capital requirements will be increased in 2019 to a maximum of 13.0% of risk-weighted assets, of which 2.5% will only be required as a countercyclical measure, with phase-in of such modifications beginning on October 1, 2013. The composition of a financial institution’s risk-weighted assets is also described in Resolution No. 4,193 and the risk categories are detailed and regulated by the Central Bank Circulars enacted on March 4, 2013. For further details on the detailed calculation of risk-weighted assets, please see “Item 5B. Liquidity and Capital Resources.”

The following table presents the schedule for implementation by the Central Bank of the principal changes related to capital adequacy and leverage requirements under Basel III according to CMN Resolution No. 4,193.

	From October 1,			From January 1,
	2013			2014			2015			2016			2017			2018			2019
Common equity tier 1		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%
Tier 1 capital		5.5	%		5.5	%		6.0	%		6.0	%		6.0	%		6.0	%		6.0	%
Regulatory capital		11.0	%		11.0	%		11.0	%		9.875	%		9.25	%		8.625	%		8.00	%
Capital conservation buffer		-			-			-			0.625	%		1.25	%		1.875	%		2.5	%
Countercyclical capital buffer		-			-			-			Up to 0.625	%		Up to 1.25	%		Up to 1.875	%		Up to 2.5	%

CMN Resolution No. 4,195 defines the entities that compose the “consolidated enterprise level” (conglomerado prudencial) of a Brazilian financial institution, and establishes the requirement that a financial institution prepare and file with the Central Bank monthly consolidated financial statements of the consolidated enterprise level, as defined therein. Such financial statements must also be subject to audit by external auditors on a semi-annual basis. According to CMN Resolution No. 4,192, capital requirements will, as of January 1, 2014, be applied at the consolidated enterprise level (conglomerado prudencial), as determined by CMN Resolution No. 4,195.

Also as part of the implementation of the Basel III framework, on June 30, 2011 the CMN enacted Resolution No. 3,988, which sets forth that Brazilian financial institutions shall implement a structure of capital management compatible with the nature of their transactions, the complexity of the products and services they offer, as well as with the extent of their exposure to risks. Capital management is defined as a process that includes: (i) monitoring and controlling the financial institution’s capital; (ii) assessing capital needs in light of the risks to which the financial institution is subject; and (iii) setting goals and conducting goal and capital planning in order to anticipate capital needs due to changes in market conditions. Financial institutions shall provide to the general public a report describing the structure of their capital management at least on an annual basis.

Until the resolutions issued on March 1, 2013 and the circulars issued on March 4, 2013 come into effect (on July 1, 2013, in the case of CMN Resolution No. 4,195, and on October 1, 2013, in the case of the other resolutions and circulars), the existing capital rules described above under “— Capital Adequacy and Leverage/Regulatory Capital Requirements” continue to be in force.

Further Details on Provisional Measure No. 608´s effects

Pursuant to CMN Resolution No. 4,192, Common Equity Tier 1 Capital is reduced by tax credits due to temporary differences, among other items. These tax credits, which are tax credits for accounting purposes, depend on future profits to be realized and may, in the future, reduce taxation levied on profits. Allowances for loan and lease losses represent one of the most significant of such temporary differences.

In order to reduce the negative impact of such reductions to Common Equity Tier 1 Capital, Provisional Measure No. 608 allows financial institutions to replace such temporary differences related to allowances for loan and lease losses with a presumed credit, cashable against the national treasury. Temporary differences related to allowances for loan and lease losses are also automatically replaced with a presumed credit when a financial institution undergoes liquidation or bankruptcy. As a result, financial institutions should be able to reduce their tax credits due to temporary differences which depend of future profits for their realization (accounting tax credits) and, consequently, negative impacts on Common Equity Tier 1 Capital. The presumed credit created by Provisional Measure No. 608, on the other hand, does not reduce the regulatory capital as it is not an accounting tax credit that depends on future profits. The use of presumed credits is expected to be further regulated by the Brazilian Revenue Office and the Central Bank during 2013.

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Implementation of Basel III in Brazil — Expected Future Rules

A maximum leverage ratio of 3.0% is expected to apply to Brazilian banks beginning January 2018, with certain disclosure requirements applicable from January 1, 2015. A LCR to address short-term liquidity risk and a NSFR to address long-term liquidity risk are expected to apply to Brazilian banks beginning January 1, 2015 and 2018, respectively, with certain calculation and monitoring requirements applicable beginning January 15, 2012. None of CMN Resolution No. 4,192, CMN Resolution No. 4,193, CMN Resolution No. 4,195 and the Circulars enacted by the Central Bank on March 4, 2013 address liquidity ratio requirements and the Central Bank has not yet officially announced its position on liquidity regulation, including whether the implementation of the LCR in Brazil would follow the modified phase-in arrangements set by the Basel Committee in January 2013.

The Central Bank and the CMN are also expected to enact regulation in the near future on (i) the assessment methodology or the higher loss absorbency requirement for D-SIBs in Brazil and (ii) the criteria to be used by the Central Bank as guidance in considering the use of its authority under CMN Resolution No. 4,192 to declare a regulatory discretionary trigger event.

Reserve Requirements

The Central Bank currently imposes several reserve requirements on Brazilian financial institutions and such reserve amounts must be deposited with the Central Bank. Reserve requirements are a mechanism to control the liquidity of the Brazilian financial system. These reserve requirements are applied to a wide range of banking activities and transactions, such as demand deposits, savings deposits and time deposits.

Reserve requirements, certain deductibility criteria and mandatory application of moneys in certain financing transactions applicable to demand deposits are currently regulated by CMN Resolution No. 4,096, of June 28, 2012, Circular No. 3,632, dated February 21, 2013, as amended, by Circular 3,573, of January 23, 2012, as amended, and by Circular No. 3,622, enacted on December 27, 2012. Resolution 4,096 establishes the minimum mandatory investment criteria for a percentage of a financial institution’s demand deposit outstanding balance. Circular 3,632 consolidated and redefined demand deposit reserve requirements applicable to commercial banks, multiservice banks and investment banks. Circular 3,573 allows for certain additional deductibility criteria. Circular 3,622 sets forth additional rules in respect of compliance with the requirements over demand deposits. Key features of Resolution 4,096, Circular 3,632, Circular 3,573 and Circular 3,622 include the definition of:

· The percentage of demand deposit requirements that may be deducted in connection with rural credit financing with agricultural and cattle funding contracted in certain predefined periods (which is currently limited to 5.0% of the total requirement and limited to loans contracted in the period from January 1, 2012 to September 30, 2012);

· The minimum requirement for financial institutions to invest a predetermined percentage of their total demand requirements in rural credit transactions (which is currently established at 34.0% of the total demand reserve requirements (Valor Sujeito a Recolhimento);

· The percentage of the deposit requirement set forth in Circular No. 3,622 that may be deducted from the amount corresponding to the updated outstanding balance of the loans granted as of December 21, 2012 and which are in accordance with certain criteria established for the sub-programs of Resolution No. 4170, dated December 20, 2012 (which is currently limited to 20% and only applies to financial institutions which, in September 2012, had Tier 1 Regulatory Capital above R$6 billion).

Pursuant to Circular 3,632, as a general rule, banks are currently required to deposit 45.0% of the sum of the arithmetic average balance of demand deposits, third-party funds in transit, collection of taxes and similar items, banker’s checks, debt assumption agreements related to transactions carried out in Brazil, obligations for the rendering of services of payment, and proceeds from the realization of guarantees in excess of R$44 million. However, up until the calculation and compliance periods beginning (i) on June 2, 2014 and June 18, 2014, respectively, for institutions classified by the Brazilian Central Bank as Group A institutions for purposes of demand deposits, and (ii) on June 9, 2014 and June 25, 2014, respectively, for institutions classified by the Brazilian Central Bank as Group B institutions for purposes of demand deposits, the applicable rate shall be 44%. The calculation is made over a two-week period, beginning on Monday of the first week and ending on Friday of the following week. At the end of each day, the balance of the bank’s accounts must be equivalent to at least 80.0% of the required deposit for the respective period. The arithmetic average of the balance of such account of the institution during the period of required deposit should correspond to 100% of the required deposit calculated for the respective period.

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Reserve requirements and mandatory application of moneys in certain financing transactions applicable to savings deposits are currently regulated by CMN Resolution No. 3,932, of December 16, 2010 and/or Circular No. 3,093, dated March 1, 2002, as amended. Resolution 3,932 establishes the minimum mandatory investment criteria for a percentage of a financial institution’s savings deposit outstanding balance. Circular 3,093 consolidated and redefined savings reserve requirements applicable to commercial banks, multiservice banks with a real estate portfolio, real estate credit companies (sociedades de crédito imobiliário) and savings banks. Key features of Resolution 3,932 and Circular 3,093 include the definition of:

· The rate and the basis for calculation of the total savings deposit reserve requirements (Valor Sujeito a Recolhimento), which is currently 20.0% of the arithmetic average of the outstanding amounts of savings deposits defined therein over a predetermined period;

· The mandatory application by financial institutions receiving savings deposit of a predefined percentage of their savings deposits in real estate financing (which is currently established at 65.0% of the total savings deposits balance); and

· The interest rate applicable to reserve requirements paid by the Central Bank over a predetermined percentage of the total savings deposits reserve requirements (currently, 100.0% of the savings deposits reserve requirements are eligible to earn interest, as set forth by Circular 3,093).

Additionally, Law No. 8,177, of March 1, 1991, which established rules for return on savings accounts, was amended by Provisional Measure No. 567, dated May 3, 2012 (converted into Law No. 12,703 on August 8, 2012). Provisional Measure No. 567 created new rules regarding return on deposits in savings account, setting forth that it will be 70.0% of the monthly equivalent of the annual SELIC rate plus the variation of the reference rate (Taxa Referencial or “TR”) whenever the SELIC rate equals or is lower than 8.5% per year. In case the SELIC rate is greater than 8.5% per year, return on deposits in savings accounts will be fixed at 0.5% per month plus the variation of the reference rate. Also in this respect, on May 30, 2012, the Central Bank enacted Circular No. 3,595, which set out the formula used to calculate return on deposits in savings accounts.

Reserve requirements and deductibility criteria applicable to time deposits are currently regulated by Circular No. 3,569, dated December 22, 2011, as amended. Circular 3,569 consolidated and redefined term deposit reserve requirements applicable to commercial banks, multiservice banks, development banks, investment banks, foreign exchange banks, savings banks and credit, financing and investment companies. Key features of Circular 3,569 include the definition of:

· The rate and the basis for the calculation of the total time deposit reserve requirements (Valor Sujeito a Recolhimento), which is currently 20.0% of the average outstanding amounts of certain time deposits defined therein over a predetermined period, as well as the predefined authorized deductions (which varies considering the consolidated Tier I Capital of each institution in question);

· The percentage of term deposit reserves eligible to earn interest as overnight deposits with the Central Bank (which is currently limited to 50.0% of the total requirements);

· The percentage of term deposit requirements that may be deducted in connection with the acquisition of financial bills, credit portfolios and certain other assets issued or originated by eligible financial institutions (which is currently limited to 50.0% of the total requirements);

· Certain other assets originated by the financial institution itself that may be deducted from the reserve requirements (which currently includes, for instance, certain credit facilities for the financing and leasing of motorcycles); and

· Criteria for a financial institution to be deemed an “eligible financial institution” for the purposes of item (ii), above (which currently comprises several combined criteria such as, but not limited to, having a consolidated Tier 1 Capital of less than R$3.5 billion and a time deposit to total liabilities ratio of at least 20.0%).

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Pursuant to Circular 3,655, dated March 27, 2013, the Central Bank stipulated an additional reserve requirement on deposits raised by full service banks, investment banks, commercial banks, development banks, finance, credit and investment companies, real estate credit companies and savings and loan associations. These institutions are required to deposit on a weekly basis the total sum of the following amounts: (i) 11.0% of the arithmetic average of funds from time deposits subject to the reserve requirement; (ii) 10.0% of the arithmetic average of funds from savings accounts subject to the reserve requirement; and (iii) 0% of the arithmetic average of funds from demand deposits subject to the reserve requirement. These amounts must be discounted from: (i) R$3 billion for financial institutions with consolidated Tier 1 Capital under R$2 billion; (ii) R$2 billion for financial institutions with consolidated Tier 1 Capital between R$2 billion and R$5 billion; (iii) R$1 billion for financial institutions with consolidated Tier 1 Capital between R$5 billion and R$15 billion, and (iv) zero for financial institutions with regulatory capital higher than R$15 billion. At the close of each day, the balance of such account should be equivalent to 100.0% of the additional reserve requirement.

All these regulations are frequently amended by the Central Bank in accordance with the economic scenario and response to changing views of Brazilian monetary policy. As of December 31, 2012, we had required reserves funded in cash of R$63,701 million compared to R$98,053 million as of December 31, 2011, of which R$57,253 million and R$92,323 million, respectively, earn interest.

Foreign Currency Exposure

The total exposure in gold, foreign currency and other assets and liabilities indexed or linked to the foreign exchange rate variation undertaken by financial institutions (including their offshore branches), and their direct and indirect subsidiaries, on a consolidated basis, may not exceed 30.0% of their regulatory capital, in accordance with CMN Resolution No. 3,488, of August 29, 2007.

Liquidity and Fixed Assets Investment Regime

In accordance with CMN Resolution No. 2,669, of November 25, 1999, the Central Bank prohibits Brazilian financial institutions, including us, from holding, on a consolidated basis, permanent assets in excess of 50.0% of their adjusted regulatory capital. Permanent assets include investments in unconsolidated subsidiaries as well as real estate, equipment and intangible assets.

Lending Limits

In accordance with the CMN Resolution No. 2,844, of June 29, 2001, a financial institution, on a consolidated basis, may not extend loans or advances, grant guarantees, enter into credit derivative transactions, underwrite or hold in its investment portfolio securities of any customer or group of affiliated customers that, in the aggregate, exceed 25.0% of the financial institution’s regulatory capital.

Treatment of Past Due Debts

In accordance with CMN Resolution No 2,682, Brazilian financial institutions are required to classify their credit transactions (including leasing transactions and other transactions characterized as credit advances) at different levels and make provisions according to the level attributed to each such transaction. The classification is based on the financial condition of the customer, the terms and conditions of the transaction and the period of time during which the transaction is past due, if any. For purposes of Central Bank requirements and under Brazilian GAAP, transactions are classified as level AA, A, B, C, D, E, F, G or H, with AA being the highest classification. Credit classifications must be reviewed on a monthly basis and, apart from additional provisions required by the Central Bank which are deemed necessary by management of those financial institutions, each level has a specific allowance percentage that is applied to it and which we use to calculate our allowance for loan losses, as specified with more detail in the table below:

Classification(1)	AA			A			B			C			D			E			F			G			H
Allowance %		0	%		0.5	%		1	%		3	%		10	%		30	%		50	%		70	%		100	%
Past due (in days)		-			-			15 to 30			31 to 60			61 to 90			91 to 120			121 to 150			151 to 180			Over 180

⁽¹⁾ Our credit classification also takes into account the customer´s credit profile, which may negatively impact the past due classification.

Under IFRS, allowance for loan losses is based on our internally developed incurred loss models, which calculate the allowance by multiplying the probability of default by the client or counterparty (PD) by the potential for recovery on defaulted credits (LGD) for each transaction, as described in note 2.4(g) VIII to our consolidated financial statements. The risk levels strong, satisfactory, higher risk, and impairment are determined based on the probability of default, following an internal scaling, as set out in note 36 to our consolidated financial statements.

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Provision for Loan Losses for Income Tax Deduction Purposes

Brazilian financial institutions are allowed to deduct loan losses as expenses for purposes of determining their taxable income. The period during which these deductions may be made depends on the amounts, maturities and types involved in the transaction, in accordance with article 9 of Law No. 9,430 of December 27, 1996.

Foreign Currency Loans

Financial institutions in Brazil are permitted to borrow foreign-currency denominated funds in the international markets (either through direct loans or through the issuance of debt securities) for any purpose including on-lending those funds in Brazil to Brazilian corporations and financial institutions without the prior written consent of the Central Bank, in accordance with CMN Resolution No. 3,844, of March 24, 2010. The Central Bank may establish limits on the term, interest rate and general conditions of such international loan transactions (including the issuance of bonds and notes by financial institutions). Currently, there are no limits imposed on such transactions, but the inflow of funds to, deriving from or for, loans, including the issuance of notes in the international market, whose average minimum payment term is no longer than 360 days is subject to the IOF/FX tax, at a rate of 6.0%. However, if the average minimum term of the loan is longer than 360 days, the IOF/FX tax is reduced to zero. Moreover, if a loan transaction with a minimum term longer than 360 days is settled partially or completely before completion of the 360 days term, the IOF/FX tax would be 6.0%, plus interest and penalty.

Cross-border loans between individual or legal entities (including banks) resident or domiciled in Brazil and individual or legal entities resident or domiciled abroad are no longer subject to the prior approval of the Central Bank, but are subject to the prior registration with the Central Bank.

Financial institutions may also grant loans in foreign currency, or indexed to the fluctuation of a foreign currency, to their clients’ trade-related activities, such as by granting advances on foreign exchange contracts (Adiantamento sobre Contrato de Câmbio), advances on delivered commercial papers (Adiantamento sobre Cambiais Entregues) or export or import prepayment agreements (Pré-Pagamento de Exportação e Financiamento à Importação), all in accordance with Brazilian regulations on foreign exchange markets and international capital flows. On December 4, 2012, for instance, the Central Bank issued Circular No. 3,617, which amended Brazilian regulations on foreign exchange markets and international capital flows and lessened some previously established limitations imposed on export financings by, among other changes, extending the maximum term for export financings from 360 to 1,800 days.

The Central Bank and the Brazilian government frequently change rules and regulations applicable to foreign currency loans in accordance with the economic scenario and the Brazilian monetary policy.

Foreign Currency Position

Transactions involving the sale and purchase of foreign currency in Brazil may only be conducted by institutions authorized to do so by the Central Bank. The Central Bank imposes limits on the foreign exchange sale and purchase positions of institutions authorized to operate in the foreign exchange markets. These limits vary according to the type of financial institution conducting foreign exchange transactions, the foreign exchange sale positions held by those institutions, as well as the stockholders’ equity of the relevant institution. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. In accordance with the Central Bank Circular No. 3,401, of August 15, 2008, other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits in respect to foreign exchange long positions.

According to Central Bank Circular No. 3,548, of July 8, 2011, as amended, there is a cash reserve requirement for financial institutions with foreign exchange operations corresponding to 60.0% of the average amount of the last five days foreign exchange short position in excess of US$3 billion.

In accordance with CMN Resolution No. 4,033, of November 30, 2011, banks with regulatory capital exceeding R$5 billion may lend funds raised through external funding activities to (i) Brazilian companies; (ii) their offshore subsidiaries and (iii) foreign companies, provided that the majority of such foreign company’s voting stock belongs to a shareholder that is, directly or indirectly, an individual or legal entity resident or domiciled in Brazil. Resolution No. 4,033 also allows banks to acquire, in the primary market, bonds issued or guaranteed by the above mentioned companies.

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Transactions with Affiliates

Under Brazilian Corporate Law, as well as Central Bank and CVM rules, we are required to identify in our financial statements all related party transactions, according to the materiality criteria established by accounting rules. On December 2012, we adopted a Related Party Transactions Policy so as to ensure we are aligned with best practices in corporate governance. See “Item 7B. Related Party Transactions.”

Law No. 7,492, enacted on June 16, 1986, which sets forth crimes against the Brazilian financial system, defines as a criminal offense the extension of credit by a financial institution to any of its controlling shareholders, directors or officers and certain family members of such individuals and any entity controlled directly or indirectly by such financial institution or which is under common control with such financial institution. Violations of Law No. 7,492 are punishable by two to six years of imprisonment and a fine. On June 30, 1993, the CMN issued Resolution No. 1,996, which requires any such transaction to be reported to the prosecutor’s office.

Brazilian banking laws and regulations also impose prohibitions on the extension of credit or guarantee to any company which holds more than 10.0% of the financial institution’s capital and to any company in which they hold more than 10.0% of the capital. This limitation is also applicable in respect to directors and officers of the financial institution and certain family members of these individuals, as well to those companies in which such persons hold more than 10.0% of the capital.

Establishment of Offices and Investments Abroad

For a Brazilian financial institution to establish foreign offices or directly or indirectly maintain equity interests in financial institutions outside Brazil, it must obtain the prior approval of the Central Bank, which will depend on the applicant Brazilian bank being able to meet certain criteria, including:

· The Brazilian financial institution must have been in operation for at least six years;

· The Brazilian financial institution’s paid-in capital and stockholders’ equity must meet the minimum levels established by Central Bank regulations for the relevant financial institution plus an amount equal to 300.0% of the minimum paid-in capital and stockholders’ equity required by Central Bank regulations for commercial banks;

· The Central Bank must be assured of access to information, data and documents regarding the transactions and accounting records of the branch for its global and consolidated supervision; and

· The Brazilian financial institution must present to the Central Bank a study on the economic and financial viability of the subsidiary, branch or investment and the expected return on investment.

Within 180 days of Central Bank approval, the Brazilian financial institution must submit a request to open the branch to the competent foreign authorities and begin operations within one year, as of the date of approval by such local authority. Failure to fulfill these conditions may result in cancellation of the authorization.

Compensation of Directors and Officers of Financial Institutions

On November 25, 2010, the CMN issued Resolution No. 3,921, which established new rules related to the compensation of directors and officers of financial institutions. The compensation of directors and officers may be fixed or variable. Variable compensation may be based on specific criteria set forth in CMN Resolution No. 3,921 and is required to be compatible with the financial institution’s risk management policies. At least 50.0% of variable compensation must be paid in shares or share-based instruments and at least 40.0% of variable compensation must be deferred as payment for at least three years and is subject to clawbacks, based on the result of the institution and business unit during the period of deferral. These new rules took effect on January 1, 2012 and are applicable to compensation of directors and officers based on the services rendered during the year of 2012. In addition, financial institutions that are publicly-held companies or required by the Central Bank to establish an audit committee must also establish a compensation committee prior to the first shareholders’ meeting of 2012. Such committee must follow the requirements set out in Resolution No. 3,921.

On October 22, 2012, our board of directors approved a compensation policy (as amended on February 28, 2013), proposed by the compensation committee for the members of the management of Itaú Unibanco Holding and its controlled companies, in compliance with the guidelines established by CMN Resolution No 3,921 stated above.

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Other

On July 28, 2011 the CMN enacted Resolution No. 3,998, supplemented by Central Bank Circular No. 3,553, both effective as of August 22, 2011, which requires that financial institutions in Brazil register assignments of the following types of credit transactions: (i) payroll loans and (ii) vehicle leases. Under Resolution No. 3,998, financial institutions must appoint an officer responsible for registration procedures and specified controls related to these credit transactions and the assignment thereof. The information required to be disclosed upon registration of these credit transactions and their assignment includes: (i) name of the assignor and assignee; (ii) name of the financial institution that granted the underlying credit; (iii) certain information with respect to the credit transaction being assigned (e.g., identity of the debtor, specified dates, any guarantees, amounts payable, installments, etc.) and (iv) details of the credit assignment transaction (e.g., amounts assigned, portion of the credit transaction subject to the assignment, specified dates, any guarantees involved). Such registration must be made before a clearing house duly authorized to act as such by the Central Bank.

On June 13, 2012, the Central Bank approved a public hearing for the proposal of two new resolutions regarding (i) the social and environmental responsibility policy of financial institutions and other institutions authorized to operate by the Central Bank; and (ii) the preparation and disclosure of a social and environmental responsibility report. The proposed resolutions, if approved, may require the consideration of social and environmental issues in the management and business strategies of financial institutions, with the objective of improving the existing regulation and promoting the efficiency of the Brazilian financial system by means of sustainable development. The public comment period ended on September 11, 2012. The Central Bank has not yet enacted the final versions of these resolutions, but is expected to do so in the near future.

Law No. 12,414, dated June 9, 2011, as regulated by Decree No. 7,829, dated October 17, 2012, established rules for the organization and consultation of databases compiling credit history information of individuals and legal entities. On December 20, 2012, the Central Bank enacted Resolution No. 4,172, which regulates the provision of credit history information by financial institutions to such databases and the disclosure of such information, which are subject to the express request or authorization by the client. Financial institutions and other institutions which are subject to the Central Bank’s regulation must carry out the necessary operational adjustments no later than August 1, 2013 to comply with Resolution No. 4,172.

Bank Insolvency

Insolvency Regime

Financial institution insolvency is largely a matter handled by the Central Bank. The Central Bank will commence and oversee all administrative proceedings, whether for, or in avoidance of, liquidation.

The insolvency of financial institutions remains governed by specific regimes set forth in Law No. 6,024, enacted on March 13, 1974 and Presidential Decree No. 2,321, of February 25, 1987 (intervention, extrajudicial liquidation and temporary special administration regime, each of which is discussed in further detail below), and is also subject to Law No. 11,101, enacted on February 9, 2005, as amended (the “Brazilian Insolvency Law”), to the extent applicable, on an ancillary basis.

Intervention

The Central Bank may intervene in the operations of a bank in the following circumstances:

· If there is a material risk for creditors, resulting from mismanagement;

· If the bank repeatedly fails to remedy material violation of the Brazilian banking laws or regulations after notice of the Central Bank; or

· If intervention is an alternative to liquidation.

Beginning with the date it is ordered, by the Central Bank, an intervention suspends claims related to payable obligations of the financial institutions, prevents early termination or maturity of obligations of the financial institution, and freezes pre-existing deposits.

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The intervention may cease:

· At the discretion of the Central Bank if the controlling shareholders or interested third parties take over the administration of the financial institution under intervention after having provided the guarantees required by the Central Bank;

· When the situation of the financial institution is regularized as determined by the Central Bank; or

· When extrajudicial liquidation or bankruptcy of the entity is ordered by the Central Bank or by the relevant courts, respectively.

Extrajudicial Liquidation

An extrajudicial liquidation of any financial institution (with the exception of public financial institutions controlled by the Brazilian government) may be carried out by the Central Bank if it can be established that:

· Debts of the financial institution are not being paid when due;

· The financial institution is deemed insolvent;

· The financial institution has incurred losses that could abnormally increase the exposure of the unsecured creditors;

· Management of the relevant financial institution has materially violated Brazilian banking laws or regulations; or

· Upon cancellation of its operating authorization, a financial institution’s ordinary liquidation proceedings are not carried out within 90 days or are carried out with delay representing a risk to its creditors, at the Central Bank’s discretion.

Liquidation proceedings may otherwise be requested, on reasonable grounds, by the financial institution’s officers or by the intervener appointed by the Central Bank in the intervention proceeding.

Extrajudicial liquidation (i) suspends actions or foreclosures related to the financial institution, during which time no other action or foreclosure may be commenced; (ii) accelerates the term of its obligations; and (iii) interrupts the statute of limitations with regard to the obligations of the financial institution. In addition, interest ceases accruing on the obligations of the financial institution until all its obligations to third parties are duly paid.

Extrajudicial liquidation proceedings may cease:

· At the discretion of the Central Bank if the controlling shareholder or interested third parties take over the administration of the financial institution after having provided the guarantees required by the Central Bank;

· When the liquidator’s final accounts are rendered and approved, and subsequently filed with the competent public registry;

· When converted to an ordinary liquidation; or

· When the financial institution is declared bankrupt.

Temporary Special Administration Regime

In addition to the aforesaid procedures, the Central Bank may also establish the RAET, which is a less severe form of Central Bank intervention in private and non-federal public financial institutions and which allows institutions to continue to operate normally. The RAET may be imposed by the Central Bank in the following circumstances:

· The financial institution continually participates in transactions contrary to economic and financial policies established by federal law;

· The financial institution fails to comply with the compulsory reserves rules;

· The financial institution has operations or circumstances which call for an intervention;

· Illegal or management misconduct exists; or

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· The institution faces a shortage of assets.

The main purpose of the RAET is to assist with the recovery of the financial condition of the institution under special administration. Although the RAET does not affect the day-to-day business operations, liabilities or rights of the financial institution, which continue to operate in its ordinary course, the Central Bank has the authority to order corporate reorganizations of the financial institution and its subsidiaries, including changing the corporate type, merger or other types of business consolidations, spin-off or change of control of the financial institution under such regime.

Deposit Insurance

In the event of intervention, extrajudicial liquidation or liquidation of a financial institution in a bankruptcy proceeding, the Fundo Garantidor de Crédito (“FGC”), a deposit insurance system, guarantees a maximum amount of R$70,000 of certain deposits and credit instruments held by an individual, a company or another legal entity with a financial institution (or financial institutions of the same financial group). The FGC is funded principally by mandatory contributions from all Brazilian financial institutions that handle customer deposits, currently at 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations per month, and certain special contributions, in accordance with CMN Resolution No. 4,087, as amended. Additionally, deposits and any funds raised outside of Brazil are not guaranteed by the FGC, in accordance with CMN Resolution No. 4,087, of May 24, 2012.

In addition, CMN Resolution No. 4,115, of July 26, 2012, authorizes financial institutions to raise funds by means of time deposits guaranteed by the FGC up to a certain amount provided that such deposits (i) have a minimum term of twelve months and a maximum term of thirty-six months; (ii) are not callable before their term; (iii) are backed by a secured interest over assets; and (iv) are limited to an amount assessed considering bank’s Tier 1 reference net worth and bank’s time deposits, whichever is higher, per deposit of the same bank, limited to R$5 billion.

Repayment of Creditors in Liquidation

In the event of extrajudicial liquidation of a financial institution or liquidation of a financial institution in a bankruptcy proceeding, employees’ wages and related labor claims up to a certain amount, secured credits and indemnities and tax claims enjoy the highest priority of any claims against the bankruptcy estate. The payment of unsecured credit, including regular retail customer deposits not payable under the FGC, is subject to the prior payment of all secured credits and other credits to which specific laws may grant special privileges. In addition, upon payment of the deposits guaranteed by the FGC, the FGC becomes an unsecured creditor of the bankruptcy estate and ranks pari passu with other unsecured creditors.

Brazilian Payment and Settlement System

The rules for the settlement of payments in Brazil are based on the guidelines adopted by the Bank of International Settlements. The Brazilian Payment and Settlement System began operating in April 2002. The Central Bank and the CVM have the power to regulate and supervise this system. Pursuant to these rules, all clearing houses are required to adopt procedures designed to reduce the possibility of systemic crises and to reduce the risks previously borne by the Central Bank. The most important principles of the Brazilian payment and settlement system are:

· The existence of two main payment and settlement systems: real time gross settlements, using the reserves deposited with the Central Bank; and deferred net settlements, through the clearing houses;

· The clearing houses, with some exceptions, are liable for the payment orders they accept; and

· Bankruptcy laws do not affect the payment orders made through the credits of clearing houses, nor the collateral granted to secure those orders. However, clearing houses have ordinary credits against any participant under bankruptcy laws.

Foreign Banks and Foreign Investments

Foreign Banks

The establishment in Brazil of new branches by foreign financial institutions (financial institutions which operate and have a head office offshore), as well as the acquisition of equity interests by foreign financial institutions in Brazilian financial institutions, is prohibited, except when duly authorized by the Brazilian government and by the Central Bank, in accordance with international treaties, the policy of reciprocity and the interest of the Brazilian government. Once authorized to operate in Brazil, a foreign financial institution is subject to the same rules, regulations and requirements that are applicable to any other Brazilian financial institution.

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Foreign Investments in Brazilian Financial Institutions

Foreign investment in Brazilian financial institutions by individuals or companies is permitted only if specific authorization is granted by the Brazilian government and by the Central Bank, in accordance with international treaties, the policy of reciprocity and the interest of the Brazilian government. Once authorization is granted, Brazilian law sets forth the following rules concerning foreign investment in Brazil and the remittance of capital outside of Brazil:

· Foreign and Brazilian investors must be treated equally, unless legislation states otherwise;

· Any foreign entity that directly owns shares of Brazilian companies must be registered with the corporate taxpayer registry (Cadastro Nacional de Pessoa Jurídica);

· Foreign direct investments, repatriations and profit remittances must be registered electronically with the Central Bank;

· The Central Bank may require that Brazilian companies provide information regarding the foreign equity interests in those Brazilian companies, and any other information in connection with the relevant foreign investment in Brazil; and

· Brazilian companies must provide in their financial statements relevant foreign investments, obligations and credits.

On December 9, 1996, a presidential decree authorized the acquisition by non-Brazilians of non-voting shares issued by Brazilian financial institutions as well as the offering abroad of depositary receipts representing those shares. Also, since December 1996 the CMN has specifically authorized the global offering of depositary receipts representing non-voting shares of Brazilian financial institutions. Therefore, in these specific cases, authorization from the Brazilian government is not necessary. For cases involving the acquisition of shares issued by Brazilian financial institutions, foreign investors must also comply with the registration requirements with the corporate taxpayer registry and with the Central Bank, as described above.

On March 15, 2013, a presidential decree authorized an increase in the limit of foreign ownership of Itaú Unibanco Holding´s common shares, from 7.18% to 30%. We do not expect this to affect our corporate and control structures.

Internal Compliance Procedures

All financial institutions must have in place internal policies and procedures to control their activities, their financial, operational and management information systems, and their compliance with all regulations applicable to them.

Audit Committee

For information regarding our audit committee and our audit committee financial experts, see “Item 6C. Board Practices — Statutory Bodies — Audit Committee” and “Item 16D. Exemptions from the Listing Standards for Audit Committees.”

Regulation of Independent Auditors

CMN Resolution No. 3,198, of May 27, 2004, as amended, establishes the rules governing external audit services provided to financial institutions.

In accordance with CMN Resolution No. 3,198, financial statements and financial information of financial institutions must be audited by independent auditors who are (i) registered with the CVM; (ii) certified as banking experts by the CFC and IBRACON; and (iii) meet independence requirements.

In order to maintain their banking certification, the responsible partner and the audit team members with management duties must (i) perform independent audit in financial institutions and attend a continuing professional education program; or (ii) pass a new exam organized by the CFC and the IBRACON within a period not to exceed three years of the last approval.

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At least every five consecutive fiscal years, the responsible partner and the audit team members with management duties must rotate. Such former auditors may only be re-engaged after three fiscal years have passed since their prior engagement.

CMN Resolution No. 3,198 also prohibits the engagement and maintenance of independent auditors by financial institutions in the event that: (i) any of the circumstances of impediment or incompatibility for the provision of audit services provided for in the rules and regulations of the CVM, CFC or IBRACON arise; (ii) any ownership shares of capital or any financial operation, asset or liability in the audited financial institution held by the audit firm or members of the audit team involved in the audit work of the financial institution exists; and (iii) the payment of fees representing at least 25.0% or more of the total annual fees of the independent auditor. Additionally, the audited institution is prohibited from hiring partners and audit team members in management positions that were involved in the audit work for the financial institution for the past 12 months.

In connection with the audit work for the financial institution, in addition to the audit report, the independent auditor must prepare the following reports:

· An assessment of the internal control and risk management procedures of the financial institution, including the electronic data processing system, showing any deficiencies found; and

· A description of any non-compliance with legal and regulatory provisions that have, or may have, a significant impact on the audited financial statements or operations of the audited financial institution.

These reports, as well as working papers, mail, service agreements and other documents related to the audit work must be made available to the Central Bank for at least five years.

Under Brazilian law, our financial statements must be prepared in accordance with Brazilian GAAP. Financial institutions must have their financial statements audited every six months. Quarterly financial statements filed with the CVM must be reviewed by a financial institution’s independent auditors. CVM Rule No. 381 requires public companies, including financial institutions, to disclose information relating to other services rendered by independent auditors, other than the audit of financial statements if these other services represents 5.0% or more of the fees paid to the independent accounting firm. The information to be disclosed in this circumstance involves type of service, amount paid, and percentage it represents of the fees paid for the audit of financial statements.

Regulation of Presentation of Financial Statements

CMN Resolution No. 2,723, of May 31, 2000, as amended, establishes certain rules on consolidation of financial statements by financial institutions. According to this Resolution, financial institutions, except for credit unions, are required to prepare their financial statements on a consolidated basis, including investments in companies in which they hold, directly or indirectly, solely or jointly; (i) the right to nominate or designate a majority of the company’s board of directors; (ii) the right to appoint or dismiss the majority of the officers and directors of the company; or (iii) operational or corporate control. Such resolution is applied by the Central Bank to us on a group-wide basis.

Rules Governing the Collection of Bank and Credit Card Fees

The collection of bank fees and commissions is extensively regulated by the CMN and by the Central Bank. CMN Resolution No. 3,919, effective as of March 1, 2011, amended the existing rules seeking standardization of the collection of bank fees and the cost of credit transactions for individuals. According to these rules, bank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services. Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying ten checks per month to accountholders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through branch counters or ATM terminals; (vi) inquiries over the internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch counter, through ATM terminals or over the internet; (viii) clearance of checks; and (ix) supplying, by February 28th of each year, a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts. Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and, therefore, are exempt from the payment of fees. CMN Resolution No. 3,919 prohibits banks from collecting fees for supplying essential services in connection with deposit and savings accounts where clients agree to access and use their accounts by electronic means only. In the case of these exclusively electronic deposit and savings accounts, banks are only authorized to collect fees for supplying essential services when the client voluntarily elects to obtain personal service at the banks’ branches or client service locations.

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Priority services are the ones rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards and records and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in Appendix I. CMN Resolution No. 3,919 also states that commercial banks must offer to their individual clients a “standardized package” of priority services, whose content is defined by Appendix II to such resolution. Banking clients must have the option to acquire individual services, instead of adhering to the package.

The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and on-lending of funds from the real estate financial system, for example) are still governed by the specific provisions found in the laws and regulations relating to such services.

The regulation authorizes financial institutions to collect fees for the performance of specific or differentiated services, provided that the account holder or user shall be informed of the conditions for use and payment or the fee and charging method are defined in the contract. Some of the specific or differentiated services are (i) approval of signatures; (ii) management of investment funds; (iii) rental of safe deposit boxes; (iv) courier services; (v) custody and brokerage services; (vi) endorsement of clients debts (aval/guarantee); (vii) pledge of credit instruments; and (viii) foreign currency exchange, among others.

Other changes included in CMN Resolution No. 3,919 are: (i) prohibition from charging fees for amending adhesion contracts, except in the cases of asset replacement in leasing transactions and early liquidation or amortization, cancelation or termination of agreements; (ii) prohibition from including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) subscription to service packages must be through a separate contract; (iv) information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) registration fees cannot be cumulatively charged; (vii) overdraft fees can be charged, at most, once for the last 30 days.

CMN Resolution No. 3,919 also established new rules applicable to credit card, including types of fees that can be charged for services rendered by financial institutions, information to be disclosed in credit card invoices and agreement and creation of two types of credit cards: (i) a basic credit cards with certain basic services, which was classified as a priority service; and (ii) a differentiated credit card, with rewards and other benefits to the consumer, which was classified as a differentiated service. In addition, Central Bank Circular No. 3,512, of November 25, 2010, as amended, established a minimum amount that credit card holders must pay monthly on outstanding credit card balances: 15.0%.

In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account thus forbidding overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days notice must precede any increase or creation of fees, while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (whereas reductions can take place at any time). With respect to credit cards, a minimum of 45 days notice is required for any increase or creation of fees, and such fees can only be increased after 365 days from the date of last increase. The period of 365 days is also applicable to changes in rewards or benefits program rules.

Finally, CMN Resolution No. 3,919 also established that, as of March 2012, financial institutions must supply, by February 28th of each year, a consolidated statement describing, on a month-by-month basis, the fees, interest, late fees, fines, and other expenses charged over the preceding year with respect to any credit and leasing transactions.

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Regulation of Internet and Electronic Commerce

Although Brazil does not have a comprehensive legislation regulating electronic commerce, since 2001 the legal validity of electronic documents in Brazil is ruled by Provisional Measure No. 2,200, which establishes a government controlled digital certification system, aimed at guaranteeing the authenticity, integrity and legal validity of electronic documents and ensuring the security of electronic transactions. However, there are currently several bills relating to internet and electronic commerce regulation in the Brazilian Congress. The proposed legislation, if enacted, will reinforce the legal effect, validity and enforceability of information in the form of electronic messages, allowing parties to enter into an agreement, make an offer and accept one through electronic messages.

Considering the increasing use of electronic channels in the Brazilian banking sector, the CMN enacted Resolution No. 2,817 on February 22, 2001, as amended by CMN Resolution No. 2,953, of April, 25, 2002, allowing Brazilian residents to open deposit bank accounts by electronic means, which includes the internet, ATM machines, telephone and other communication channels. This regulation sets forth specific rules on the opening and use of bank accounts via electronic means, including: (i) requirements contained in CMN Resolution No. 2,025, of November 24, 1993, for verification of the identity of the customer; and (ii) transfers of amounts are allowed only between accounts of the same accountholders or in the event of liquidation of investment products and funds, to an account of the same accountholders of the investment products/funds.

On March 26, 2009, the CMN enacted Resolution No. 3,694 requiring that all financial institutions offering products and services to their clients through electronic means must guarantee security, secrecy and reliability in all electronic transactions and disclose, in clear and precise terms, the risks and responsibilities involving the product or service acquired through such channel.

In addition, the Central Bank also permits, under CMN Resolution No. 3,919, the opening of deposit bank and savings accounts, accessed and used exclusively through electronic means. See “— Rules Governing the Collection of Bank and Credit Card Fees” above.

On November 30, 2012, in order to address cybersecurity crimes, the Brazilian government enacted Law No. 12,737, which added the crime of computer hacking to the Brazilian Penal Code, describing the conduct of invading another person’s computing device, connected or not to a network, in violation of security mechanisms and to obtain, tamper or destroy data or information without express or implied consent of the device’s owner, or install anything to gain an unfair advantage.

Anti-Money Laundering Regulations

The Brazilian anti-money laundering law (Law No. 9,613, enacted on March 3, 1998, as amended by Law No. 12,683, enacted on July 9, 2012, the “AML Law”), establishes as a crime to hide or disguise the nature, origin, location, disposal, movement or ownership of goods, rights or finances coming, directly or indirectly, from criminal acts, subject to imprisonment from three to ten years and a financial penalty.

The AML Law also created the Council of Control of Financial Activities (Conselho de Controle de Atividades Financeiras or “COAF”), which is the Brazilian financial intelligence unit that operates under the Ministry of Finance. COAF has a central role in the Brazilian system of fighting against money laundering and terrorism financing, and the legal responsibility to coordinate mechanisms for international cooperation and information exchange.

According to the AML Law and complementary regulations enacted by the Central Bank, including rules applicable to procedures that must be adopted by financial institutions in the prevention and combat of money laundering and terrorism financing, as a response to the recommendations of the Financial Action Task Force (“FATF”), financial institutions must have internal policies and internal controls procedures in order to:

· Identify and know their customers, which includes determining whether the customer is a Politically-Exposed Person (“PEP”), as well as identifying the beneficial owners in the related transaction, if any. These records must be kept up to date;

· Verify the compatibility between funds movement and a client’s economical and financial capability;

· Verify the source of funds;

· Prepare an analysis of new products and services with respect to anti-money laundering issues;

· Maintain records of all financial services or transactions held on behalf of, or for, a customer. The record system must allow the identification of: (i) any transaction or series of transactions involving amounts that exceed R$10,000 and belong to the same customer, conglomerate or group, in one calendar month; and (ii) operations that reveal a pattern of activity that suggests a scheme to avoid identification;

· Pay special attention to (i) unusual transactions, or proposed transactions, related to the parties involved, amounts, forms of execution and the instruments used, or that have no apparent economic or legal basis; (ii) transactions or proposed transactions involving PEPs, persons from Brazil and countries with which Brazil has a high number of financial and commercial transactions or countries bordering Brazil or with ethnic, linguistic or political ties to Brazil; (iii) evidence of fraud in customer or transaction identification; (iv) customers or transactions involving unidentifiable beneficial owners; (v) operations originated from or destined to countries that do not fully comply the Financial Action Task Force Recommendations; and (vi) situations where it is not possible to keep a customer’s identification records up to date. Financial institutions must have enhanced monitoring programs, check if a certain customer or transaction must be reported to COAF and evaluate if they want to begin or maintain a relationship with a customer;

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· Inform COAF within one business day from any transaction that is considered suspect by the financial institution, including all cash transactions equal to or above R$100,000, without informing the involved person or any third party;

· Keep the records referred to above for at least five years or ten years, depending on the nature of information, even after ending a customer relationship or closing a transaction;

· Define criteria for employee hiring and maintain an employee anti-money laundering training;

· Establish that anti-money laundering procedures must be complied with by branches and subsidiaries of Brazilian financial institutions located abroad;

· Establish that the institutions authorized to operate in the Brazilian foreign exchange market with financial institutions located abroad must verify whether the foreign financial institution is physically located in the jurisdiction where it has been organized and licensed, and is object of effective supervision;

· Monitor transactions and situations which could be considered suspicious for money laundering purposes, aiming to enable the financial institution to properly report the suspicious activity to the COAF;

· Report to COAF the occurrence of transactions as required under applicable regulations, and also whenever such transactions are not verified;

· Require clients to inform the financial institution, at least one business day in advance, their intention to withdraw amounts equal to or exceeding R$ 100,000, and

· Ensure that policies, procedures and internal controls are commensurate with their size and volume of operations.

Non-compliance with any of the obligations indicated above subjects the financial institution and its managers to the following penalties: (i) formal notice, (ii) fines (from 1.0% to 200.0% of the amount of the transaction, 200.0% of the profit generated thereby, or a fine of up to R$20,000,000), (iii) rendering its managers temporarily ineligible, for up to ten years, for the exercise of any functions in financial institutions and (iv) the revocation of the financial institution’s license to operate.

Politically-Exposed Persons

PEPs are public agents who occupy or have occupied a relevant public function (for example heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials and current or past senior managers in international organizations of any nature), over the past five years, in Brazil or other countries, territories and foreign jurisdictions. It also includes their family members and close associates. Financial institutions must develop and implement internal procedures to identify PEPs and obtain special approval of a more senior staff member than otherwise would be authorized to approve relationships, such as directors, prior to establishing any relationship with those individuals. They must also adopt reinforced and continuous surveillance actions with regard to transactions with PEPs and report all the suspicious transactions to COAF.

Banking Secrecy

Financial institutions must maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about clients, services or operations of Brazilian financial institutions or credit card companies may be disclosed to third parties are the following: (i) the disclosure of information with the express consent of the interested parties; (ii) the exchange of information between financial institutions for record purposes; (iii) the provision to credit reference agencies of information based on data from the records of subscribers of checks drawn on accounts without sufficient funds and defaulting debtors; (iv) the provision by financial institutions and credit card companies to competent authorities of information relating to the occurrence of, or suspicions as to a criminal or other unlawful act; (v) as otherwise expressly allowed by Supplementary Law No. 105, of January 10, 2001; and (vi) the disclosure of information in compliance with a judicial order. Supplementary Law No. 105 also allows the Central Bank or the CVM to exchange information with foreign governmental authorities pursuant to an existing treaty.

Finally, a breach of bank confidentiality may be ordered by judicial authority when necessary to investigate any torts or crimes. With the exception of instances permitted by Supplementary Law No. 105 and other instances permitted by judicial order, a breach of bank confidentiality is a crime punished by one to four years of confinement, and fine.

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The Consumer Defense Code and Banking Client Protection Regulation

On September 11, 1990, the Brazilian Consumer Defense Code (Código de Defesa do Consumidor, or the “CDC”), was enacted to establish rules for consumers’ protection and governs the relationship between product and service providers and consumers. After a long controversy over the extent to which CDC applies to financial services, the Brazilian Supreme Court decided in a final judgment that the CDC also applies to transactions between financial institutions and their clients. Based on this decision, CMN and the Central Bank focused their regulation and supervisory role to issues that are specific to financial services, which includes: (i) ombudsman services organized as a free communication channel between customers and financial institutions under the supervision of an ombudsman officer (CMN Resolution No. 3,849); (ii) early liquidation of loans (CMN Resolution No. 3,516); (iii) standards for disclosure and transparency requirements for consumer credit products and financial services, such as the total cost of credit transactions (CMN Resolution No. 3,517); (iv) liability prevention and control in financial transactions (CMN Resolution No. 3,694); (v) collection of bank fees and commissions (CMN Resolution No 3,919).

Besides the banking client protection regulation enforced by CMN and the Central Bank, the basic consumer rights guaranteed by the CDC regarding the relationship between financial institutions and their clients include: (i) the imposition of a reverse burden of proof in court; (ii) financial institutions must ensure that customers are fully aware of all contractual clauses, including responsibilities and penalties applicable to both parties, in order to protect against abusive practices; (iii) financial institutions are prohibited from releasing misleading or abusive publicity or information about their contracts or services; (iv) financial institutions are liable for any damages caused to their customers by misrepresentations in their publicity or information provided; and (v) interest charges in connection with personal credit and consumer directed credit transactions must be proportionally reduced in case of early payment of debts.

With respect to consumer’s rights, Decree No. 6,523, of July 31, 2008, directed the CDC to establish general rules on Customer Service Assistance (Serviço de Atendimento ao Consumidor), by phone for information, clarification of doubts, complaints, and agreements regarding suspension or cancellation, and Law No. 11,785, enacted on September 22, 2008, amended CDC’s Article 54 to define that in adhesions agreements, the font size may not be smaller than a size 12.

Antitrust Regulation

A new Brazilian Antitrust law (Law No. 12,529) was enacted on November 30, 2011 and became effective with respect to transactions consummated as of May 30, 2012. According to the new regime, transactions resulting in economic concentration must be previously submitted to CADE for approval if any of the parties had, in the last fiscal year, gross revenues of R$750 million or more and the other party had gross revenues of R$75 million or more in the same period. The closing of a transaction before its approval by CADE subjects the parties to fines ranging from R$60,000 to R$60 million and the relevant agreement may be deemed void.

Financial conglomerates submit merger and acquisitions transactions in various industries, including the insurance and pension plan industries, to CADE’s approval. In addition, merger and acquisition transactions in the banking industry must be submitted to the Central Bank for antitrust review, as confirmed by Circular No. 3,590 issued by the Central Bank on April 26, 2012, which sets forth that the Central Bank will examine certain corporate reorganizations and other acts involving two or more financial institutions considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Central Bank may establish certain restrictions and require that the financial institutions execute an agreement in market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act will be set forth.

Since 2010, a dispute has been under review in the Federal Supreme Court as to the exclusive authority of the Central Bank to review and approve merger and acquisition transactions involving financial institutions.

Asset Management Regulation

Asset management is regulated by the CMN and the CVM. CMN and CVM regulations stipulate that institutions must segregate their asset management activities from their other activities.

Certain investment funds within the asset management industry, such as private equity investment funds are also regulated by ANBIMA, which enacts additional rules and policies, especially with respect to the offering, marketing and advertising of financial products and services.

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Investment funds are subject to the regulation and supervision of the CVM and are managed by companies authorized by the CVM to manage investment fund portfolios. Investment funds may invest in instruments available in the financial and capital markets, including fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.

According to CVM Instruction No. 409, of August 18, 2004, as amended, investment funds may be classified as (i) short term funds; (ii) referenced funds; (iii) fixed income funds; (iv) stocks funds; (v) exchange funds; (vi) external debt funds; and (vii) multi-market funds.

Investment funds are subject to certain restrictions with respect to the composition of their portfolios and the classification of their investors, including, among other things, restrictions on the types of securities, financial assets and operations, limits per issuer and limits by type of financial assets. Such restrictions are set forth in CVM regulations.

In addition, the CVM regulations establish criteria for the registration and accounting evaluation of titles, securities, financial instruments and derivatives held by investment funds. Pursuant to such regulations, fund managers must mark their securities to market; hence, the fund’s portfolio assets must be accounted for at their fair market value, instead of their expected yield to maturity.

The CVM has also enacted rules to regulate private equity funds, credit rights investment funds, real estate investment funds and other specified investment funds. The rules of CVM Instruction No. 409 are applicable to each and every investment fund registered with the CVM to the extent they are not contrary to specific rules applicable to such funds.

Leasing Regulations

The basic legal framework governing leasing transactions is established by Law No. 6,099, of September 12, 1974, as amended, Ordinance No. 564, of November 3, 1978 of the Ministry of Finance and the regulations issued thereunder by the CMN from time to time, in particular CMN Resolution No. 2,309, of August 28, 1996.

Law No. 6,099, as amended, sets forth the general guidelines for the tax treatment of leasing transactions and provides that all leasing transactions are subject to the control and supervision of the Central Bank according to standards established by the National Monetary Council. CMN Resolution No. 2,309 provides the types of leasing, the legal requirements of a leasing contract and other relevant guidelines applicable to the product. The Ministry of Finance’s Ordinance No. 564 establishes the loss/profit recognition, for purposes of taxation of leasing transactions, and, in particular, establishes that the guaranteed residual amount of a leasing transaction is the value contractually guaranteed by the leaseholder as a minimum that will be received by the lessor after the sale of the leasehold item to a third-party, if the purchase option is not exercised. Furthermore, the laws and regulations applicable to financial institutions, such as those related to reporting requirements, capital adequacy and leverage, assets composition limits and treatment of doubtful loans, are generally also applicable to leasing companies.

Taxation

We describe below the main corporate taxes that may impact financial transactions entered into by companies of the Itaú Unibanco Group, as well as a description of the main taxes on financial transactions.

Overview

The table below summarizes the main taxes imposed on our activities.

Tax	Rate	Calculation of Taxable Profit
IRPJ	15.0% plus 10.0%	Net income with adjustments (exclusions, additions, and deductions)
CSLL	15.0% or 9.0%	Net income with adjustments (exclusions, additions, and deductions)
COFINS	4.0%	Gross revenue minus specific deductions
PIS	0.65%	Gross revenue minus specific deductions
ISS	2.0% to 5.0%	Service value

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Corporate Income Tax and Social Contribution on Profits

Currently, Brazilian companies are subject to the corporate income tax (Imposto de Renda da Pessoa Juridica or “IRPJ”) and the social contribution on profits (Contribuição Social Sobre o Lucro Liquido or “CSLL”).

According to the tax regime adopted by each company, the IRPJ and CSLL may be imposed on an adjusted tax basis (taxable income regime), which is subject to adjustments (deductions, additions and exclusions) upon the ascertainment of the tax due at the end of the fiscal year (e.g., operating costs, expenses, provisions and equity accounting).

The IRPJ is imposed at a rate of 15.0% and a surtax of 10.0% is applicable when the total amount of profit exceeds R$20,000 per month or R$240,000 per year (imposing a total rate of 25.0% on the amount of profit exceeding R$20,000 per month).

The CSLL is generally imposed at a rate of 9.0%. Law No. 11,727, of June 23, 2008, established that as of May 1, 2008, the CSLL rate on income of financial, insurance and similar companies increased to 15.0%. The following companies are considered financial, insurance and similar companies for this purpose: private insurance and capitalization companies, banks of any type, securities underwriters, foreign exchange and securities brokerages, credit, financing and investment companies, real estate loan companies, credit card management companies, leasing companies, credit cooperatives and savings and loan associations. The increased CSLL rate is applicable to us and many of our subsidiaries and affiliates. Brazilian financial institutions, including us, are disputing the constitutionality of a higher CSLL tax rate that applies only to financial, insurance and similar companies. The amounts in dispute are accounted for as a tax liability provision in our balance sheet.

Brazilian companies can offset the historical nominal amount of tax losses against results of subsequent years at any time (i.e., with no limitations with respect to time periods), provided that such offsetting does not exceed 30.0% of the annual taxable income of such future year.

Companies pay the IRPJ and CSLL taxes based on their worldwide income rather than on income solely from Brazilian operations. Therefore, profits, capital gains and other income obtained abroad by Brazilian entities will be computed in the determination of their net income. In addition, profits, capital gains and other income from foreign branches or income from subsidiaries or foreign corporations controlled by a Brazilian entity will also be computed in the calculation of such entity’s profits, in proportion to its participation in such foreign companies’ capital. The Brazilian company is allowed to deduct income tax paid abroad, up to the amount of Brazilian income taxes imposed on such income.

Taxation of Profit Distribution

Dividends paid by a Brazilian company, including stock dividends and other dividends paid to an investor domiciled either in Brazil or abroad, are currently not subject to withholding income tax (Imposto de Renda Retido na Fonte or “IRRF”) in Brazil to the extent that these amounts are related to profits generated on or after January 1, 1996. Dividends paid from profits generated before January 1, 1996 may be subject to IRRF at varying rates, according to the tax legislation applicable to each corresponding year.

Law No. 9,249, of December 26, 1995, as amended, allows a Brazilian corporation to make, instead of dividend distributions, distributions that are treated as interest on net equity (juros sobre o capital próprio) and that constitute deductible expenses for purposes of calculating the IRPJ and CSLL. These distributions may be paid in cash. For tax purposes, this interest is limited to the daily average of the Brazilian long-term interest rate (Taxa de Juros a Longo Prazo or “TJLP” ), as determined by the Central Bank, over the taxable year, and the amount of payments and deduction may not exceed the greater of (i) 50.0% of net income (after the deduction of CSLL, but before taking into account the amount of such interest on net equity and the provision for IRPJ) for the period in respect of which the payment is made; and (ii) 50.0% of the sum of retained profits and profit reserves.

Any payment of interest on net equity is subject to withholding income tax at the rate of 15.0%, or 25.0% in the case of a shareholder who is resident or domiciled in a tax haven jurisdiction (see “Item 10E. Taxation —Brazilian Tax Considerations”). These payments may be qualified, at their net value, as part of any mandatory dividend.

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Taxes on Revenue – Contribution on Social Integration Program and Social Security Financing Contribution

In addition to IRPJ and CSLL, Brazilian companies are subject to the following taxes on revenues: contribution on social integration program (Contribuição Para o Programa da Integração Social or “PIS”) and social security financing contribution (Contribuição Social Para o Financiamento da Seguridade Social or “COFINS”).

According to Law 9,718, of November 27, 1998, as amended, financial institutions must pay contribution to PIS at a rate of 0.65% and COFINS at a rate of 4.0%. In general, PIS and COFINS are charged on companies’ gross revenues, with some exemptions. In the case of financial institutions, certain additional deductions are provided by law so that the taxation basis is similar to the gross profit margin. Certain of our financial subsidiaries are currently claiming that the PIS and COFINS should be levied only on their revenue from the sale of goods and services, and not on revenues from financial and other activities. The amounts in dispute are accounted for as a tax liability provision on our balance sheet.

Most of the non-financial companies that calculate IRPJ and CSLL based on the taxable income regime are required to calculate PIS and COFINS contributions according to the non-cumulative regime. Under this regime, PIS is imposed at a rate of 1.65% and COFINS is imposed at a rate of 7.6%. The calculation basis of these contributions is the gross revenue earned by the company; however, the taxpayer can offset credits arising from the application of the same rates on the value paid on the purchase of certain inputs used in the production process of the company. Currently, under such non-cumulative regime, financial income (except, for example, for income from interest on net equity) of non-financial companies is not subject to PIS and COFINS.

Service Tax

The tax on services (Imposto Sobre Serviços de Qualquer Natureza or “ISS”) is generally imposed on the price of value of services rendered (e.g., bank services) and charged by the municipality where our branch or office that renders the service is located. The tax rates vary from 2.0% up to the maximum rate of 5.0%, depending on the municipality.

Tax on Financial Transactions

The tax on financial transactions (Imposto Sobre Operações de Crédito, Câmbio e Seguro, e Sobre Operações Relativas a Títulos e Valores Mobiliários or “IOF”) is imposed on foreign exchange, insurance, credit, securities and derivatives transactions. The IOF rate may be changed by a decree from the executive branch (which is generally effective as of its publication date) rather than a law.

The IOF on foreign exchange transactions (“IOF/FX”) tax is imposed on several foreign exchange transactions. Its applicable rates may be increased up to 25.0%. The IOF/FX tax rates imposed on foreign exchange transactions recently have been modified and are currently imposed at a rate of 0.38%, with the following main important exceptions:

· The IOF/FX tax is imposed at a rate of 6.0% on the inflow of funds to Brazil deriving from, or for, loans, including the issuance of notes in the international market, whose average minimum payment term is no longer than 360 days (if the average minimum term of the loan is longer than 360 days, and for foreign financing the IOF/FX rate is 0.0%);

· The IOF/FX is imposed at a rate of 6.0% on the inflow of funds into Brazil in connection with settlement of foreign exchange transactions by foreign investors, including simultaneous foreign exchange transactions, with the purpose of investing in the Brazilian financial and capital markets, except, for example, for the transactions set out below;

· The IOF/FX is imposed at a rate of 0.0% on the inflow of funds into Brazil in connection with the settlement of foreign exchange transactions by foreign investors that involve variable-income investments on stock exchanges or on futures and commodities exchanges, in compliance with the regulations issued by the CMN, except for derivative transactions giving rise to predetermined income;

· The IOF/FX is imposed at a rate of 0.0% on the inflow of funds into Brazil from December 1, 2011 in connection with the settlement of foreign exchange transactions by foreign investors for the purchase of shares as a result of public offerings registered or exempt from registration with the CVM or for the subscription of shares, provided that in each case the issuer is a publicly-held company whose shares are admitted to trade in a stock exchange;

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· The IOF/FX tax is imposed at a rate of 0.0% on the inflow of funds into Brazil in connection with the settlement of foreign exchange transactions carried out on or after December 1, 2011 by a foreign investor, including simultaneous foreign exchange transactions, to purchase units in private equity funds (Fundo de Investimento em Participações or “FIP”) and emerging companies funds (Fundo de Investimento em Empresas Emergentes or “FIEE”), as well as units in investment funds that invest in units of FIPs and FIEEs that are established in accordance with regulation issued by CVM;

· The IOF/FX is imposed at a rate of 0.0% on the outflow of funds from Brazil in connection with the settlement of foreign exchange transactions for the purpose of repatriating funds of foreign investors out of the Brazilian financial and capital markets, with some exceptions;

· The IOF/FX tax is imposed at a rate of 0.0% on the outflow of funds from Brazil in connection with foreign exchange transactions for the remittance of interest on net equity and dividends earned by foreign investors;

· The IOF/FX tax is imposed at a rate of 0.0% on the inflow of funds into Brazil from December 1, 2011, deriving from the cancelling of depositary receipts to invest in shares tradable in a stock exchange;

· The IOF/FX tax is imposed at a rate of 6.38% on foreign exchange transactions in accordance with obligations of credit card management companies or commercial or multiple banks, as credit card issuers, and deriving from the purchase of goods and services made abroad by their credit card users;

· The IOF/FX tax is imposed at a rate of 0.0% on the inflow of funds into Brazil in connection with the acquisition of publicly-traded bonds and securities acquired on or after January 1, 2011, provided some conditions are met; and

· The IOF/FX tax is imposed at a rate of 0.0% on the inflow of funds into Brazil in connection with the acquisition of Brazilian Depositary Receipts and on the acquisition of units of real estate investment funds (Fundo de Investimento Imobiliário or “FII”) acquired on or after January 31, 2013, in compliance with the regulations issued by the CMN.

Depending upon the type of inflow of foreign funds into Brazil, the IOF/FX may be levied on the outflow and inflow of funds. It may also be levied when the type of investment is changed. In many cases, the outflow and inflow of funds will require simultaneous foreign exchange transactions.

The IOF tax is also imposed on insurance transactions upon the receipt of a premium (“IOF/Insurance”). In insurance transactions, the IOF/Insurance tax will be imposed at a highest rate of 25.0%. Currently, the rates imposed vary from 0.0% to 7.38% according to the type of insurance purchased.

The IOF tax is also imposed on credit transactions, including financing, discounts and factoring (“IOF/Credit”). Currently, in most credit transactions, individuals and companies pay IOF/Credit at a rate of 0.0041% per day, until the total amount of IOF/Credit due reaches a limit of 1.5% in a period of 365 days. An additional IOF/Credit tax at a rate of 0.38% is also imposed on any credit transaction.

The IOF tax is also imposed on the acquisition, assignment, redemption, renegotiation or payment for settlement of securities, even though these transactions are carried out on stock, commodities and futures exchanges (“IOF/Securities”). The rate of the IOF/Securities with respect to many securities transactions is currently 0.0%, although certain transactions may be subject to specified rates. The President has the legal authority to increase the rate to a maximum of 1.5% of the amount of the taxed transaction per day for the period during which the investor holds the securities, up to the amount equal to the gain on the transaction. Currently, there is a short-term IOF/Securities tax on fixed income and investments in fund quotas with a holding period of less than 30 days. If the investor sells, redeems, assigns, resells or renews fixed income and investments in fund quotas within 30 days of the original investment, IOF/Securities is levied at a rate of 1.0% per day, with certain maximum limits based on a regressive percentage of the total fixed income gain for a security reaching zero and for a maturity equal to or higher than 30 days. Finally, the IOF/Securities tax is levied at a rate of 1.5% on the assignment of shares traded in the Brazilian stock market in order to permit the issuance of depositary receipts to be negotiated overseas.

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On July 27, 2011, the Brazilian government enacted Decree No. 7,536, which introduced a tax on securities transactions (“IOF/Securities-Derivatives”) at the rate of 1.0% on the notional adjusted value of financial derivatives, the value of which is affected by exchange rates and which results in an increase in the net sold exposure of the holder. On the same date, the Brazilian government enacted Provisional Measure No. 539, which sets forth that institutions authorized to register derivative contracts will be responsible for charging and collecting the IOF/Securities-Derivatives amounts due.

According to Decree No. 7,563, enacted on September 15, 2011, the IOF/Securities-Derivatives taxpayer is the holder of the derivative contract, but the entities or institutions authorized to register the derivative contracts are responsible for the calculation and collection of this tax. In the event it is not possible for them to calculate and collect the IOF/Securities-Derivatives due by the taxpayer, such entities and institutions must provide the necessary information for the calculation of the tax base, through intermediaries and authorized participants, by the tenth business day of the month following the occurrence of a taxable event to: (i) the taxpayer resident or domiciled in Brazil; (ii) the legal representative of the taxpayer resident or domiciled abroad; and (iii) the manager of funds and investment clubs. On November 3, 2011, the Brazilian Revenue Office enacted Normative Ruling No. 1,207, which further regulated the terms, conditions and tax base of the IOF/Securities-Derivatives.

On December 8, 2011, Provisional Measure No. 539 was converted into Law No. 12,543, which further provides that legal entities that carry out export transactions may deduct from their IOF due the amount of IOF/Securities-Derivatives assessed on derivatives hedge transactions or, in the event such discount is not possible, such entities may require a refund or offset against other federal taxes and certain social contributions. Law No. 12,543 also grandfathered the IOF/Securities-Derivatives assessment on taxable events between July 27 and September 15, 2011. On December 27, 2011, the Ministry of Finance enacted Ruling No. 560, which postponed to January 31, 2012 the collection of the IOF/Securities-Derivatives assessed from September 16 to December 31, 2011. Under Brazilian law, the Brazilian government is authorized to increase the IOF/Securities-Derivatives rate up to 25.0% of the notional adjusted value at any time. IOF/Securities-Derivatives may be subject to further regulation and the related rules may be changed.

On March 15, 2012, Decree 7,699 reduced to 0.0% IOF/Securities-Derivatives on (i) derivatives transactions for hedging purposes, related to export contracts celebrated by individuals or companies who are resident or domiciled in Brazil; and (ii) all other financial derivatives transaction which do not result in an increase in the net sold exposure of the holder.

The table below summarizes IOF tax, which is imposed on financial transactions (such as foreign exchange, insurance transactions, credit or those transactions related to securities), as explained above. For a more detailed analysis, investors should consult their tax advisers.

Transaction Type	Rate (general rule subject to change by executive decree)
International Loans	IOF/FX:  6.0% (average minimum payment term is no longer than 360 days)
Foreign Investments in Brazilian Financial and Capital Markets	IOF/FX:  6.0% (general rule for inflow of funds)
	IOF/FX:  0.0% (general rule for variable income investments; purchase of shares outside of the stock exchange as a result of public offerings; investments in FIPs and FIEEs and units of investment funds that invest in units of such funds; and acquisition of infrastructure debentures, real estate receivables certificates and BDRs).
	IOF/FX:  0.0% (specific rule for certain fixed income investment; acquisition of publicly-traded bonds and securities acquired on or after January 1, 2011, provided some conditions are met.
	IOF/FX:  0.0% (general rule for outflow of resources, including repatriation of funds and remittance of interest on net equity and dividends.)
Credit Card	IOF/FX:  6.38%
Insurance Transactions	IOF/Insurance:  0.0% to 7.38%

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Transaction Type	Rate (general rule subject to change by executive decree)
Loans and Credits	IOF/Credit:  0.0041% (individuals and companies) per day, until it reaches the limit of 1.5% up to a limit of 365 days, plus 0.38%
Securities	IOF/Securities:  0.0% to 1.0% (general rule)
	IOF/Securities:  1.5% (assignment of shares in order to permit issuances of depository receipts)
Securities-Derivatives	IOF/Securities-Derivatives:  1.0%
	IOF/Securities-Derivatives: 0.0% (derivatives transactions for hedging purposes, related to export contracts; and all other financial derivatives transaction which do not result in an increase in the net sold exposure of the holder)

Income Taxes Imposed on Financial Investments

Foreign investors that receive payments derived from Brazilian sources, or gains related to Brazilian assets, will be subject to the Brazilian income tax. Under Brazilian law, income tax on capital gains and income from financial transactions carried out in the Brazilian financial and capital market vary depending on the domicile or residence of the investor, the type of registration of the investment held by the investor with the Central Bank and the manner in which the transaction is carried out.

For foreign investors who invested in the Brazilian financial and capital markets, in accordance with CMN Resolution No. 2,689, of January 26, 2000, and are not located in a jurisdiction considered a “tax haven jurisdiction” (see “Item 10E. Taxation — Brazilian Tax Considerations”), the income tax is imposed, in general, pursuant to a special regime, as follows:

· Capital gains from the sale of stock on Brazilian stock exchanges or income derived from derivatives traded on the Brazilian stock and future exchanges are exempted, except if related to combined transactions in derivatives with a predetermined income;

· Income tax will be imposed at a rate of 10.0% on income from stock funds, swaps and other transactions on futures market not carried out through a Brazilian stock exchange; and

· Income tax will be imposed at a rate of 15.0% on income from all other fixed income investments made through a Brazilian stock exchange or over-the-counter market and on gains earned therefrom.

Foreign investors that invested in the Brazilian financial and capital markets, in accordance with CMN Resolution No. 2,689, and are located in a tax haven jurisdiction are subject to income tax, in general, pursuant to rules applicable to Brazilian individuals, as follows:

· On income from financial transactions (variable income) at a rate of 15.0%;

· On income from fixed income, including public bonds, at rates varying from 22.5% to 15.0% (the rates vary according to the transaction type and terms); and

· Income from other long and short-term investment funds at rates varying from 22.5% to 15.0%, according to the investment period.

The table below is a summary of the income taxation relating to the foreign investment in the Brazilian financial and capital market located in a non-tax haven jurisdiction and a tax haven jurisdiction. It does not purport to be a complete analysis of all tax considerations relating to investments in Brazil. For a more detail analysis the prospective investors should consult their tax advisers.

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Rate for   

Transaction Type (Under CMN Resolution No. 2,689)	Foreign investor located in a non-tax haven jurisdiction	Foreign investor located in a tax haven jurisdiction
Capital gains from stock and derivatives and other variable income securities traded on the stock and futures exchange	0.0%	15.0%
Swap transactions	10.0%	22.5% to 15.0%
Other over-the-counter derivatives	10.0%	15.0%
Fixed income securities, including structured fixed income combinations (rates may vary according to the transaction type and term)	15.0%	22.5% to 15.0%
Income from public bonds (provided certain requirements are observed)	0.0%	22.5% to 15.0%
Short-term fixed income investment funds	15.0%	22.5% to 20.0%
Long-term fixed income investment funds	15.0%	22.5% to 15.0%
Income from stock funds	10.0%	15.0%

Finally, Provisional Measure No. 517, of December 31, 2010, converted into Law 12,431, of June 24, 2011, as amended by Law 12,715, of September 17, 2012, provides that income from publicly-traded bonds and securities acquired as of January 1, 2011, of non-resident investors that are not resident or domiciled in tax haven jurisdictions are subject to the withholding income tax at a 0.0% rate. To be eligible for this benefit, the following requirements must be met: (i) the bonds and securities must have been issued by private non-financial entities in accordance with the rules set forth by the CMN; (ii) the bonds must have weighted average maturity greater than four years; (iii) the issuer or one of its related parties may not repurchase and settle such bonds or securities in advance through pre-payment or redemption, unless in accordance with the rules set forth by the CMN, within the first two years after issuance; (iv) the remuneration must be linked to predetermined rates and related to certain inflation indices; (v) the buyer has no agreement or commitment to resell; (vi) income payments, if any, must take place no more frequently than once per 180 day period; (vii) there must be evidence that the bonds or securities are registered in a system duly authorized by the Central Bank or the CVM; and (viii) the issuer must demonstrate the commitment to allocate the proceeds from the issuance on the future payment or reimbursement of expenses or debts related to the investment projects, including R&D.

Presumed Credits Ascertained by Financial Institutions

On February 28, 2013, the Brazilian government enacted Provisional Measure No. 608, which entitles financial institutions to benefit from a presumed credit (crédito presumido) based on tax credits due to temporary differences on allowance for loan and lease losses which may, in the future, reduce taxation levied on profits. These presumed credits, which are tax credits for accounting purposes, may be used as of January 1, 2014 and are cashable against the national treasury, through reimbursement requests either in cash or Brazilian federal government bonds, after the deduction of any debts the financial institution may have with the national treasury.

Each calendar year, presumed credits may be ascertained by financial institutions and certain other institutions duly authorized by the Central Bank which have cumulatively ascertained  credits due to temporary differences on allowances for loan and lease losses and accumulated tax losses in the previous tax year, such presumed credits being limited to the lesser of such amounts.

As further discussed in “—Regulation by the Central Bank —Capital Adequacy and Leverage/Regulatory Capital Requirements—Further Details on Provisional Measure No. 608´s Effects” above, presumed credits do not reduce Common Equity Tier 1 Capital, as would be the case for accounting tax credits which depend on future profits for their realization.

The use of presumed credits is expected to be further regulated by the Brazilian Revenue Office and the Central Bank during 2013.

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Insurance Regulation

The Brazilian insurance system is governed by three regulatory agencies: the CNSP, SUSEP and the ANS. With governmental approval, an insurance company may offer all types of insurance with the exception of workers’ compensation insurance, which is provided exclusively by the National Institute of Medical Assistance and Social Welfare (Instituto Nacional de Seguridade Social or “INSS”). Insurance companies may sell policies directly or through qualified brokers. In accordance with Brazilian insurance legislation, health insurance coverage can only be offered by insurers whose corporate purpose is limited to the sale of health insurance products and which are subject to the rules of the ANS, the regulatory agency responsible for regulating and overseeing the private health insurance sector.

Insurance companies must set aside reserves to be invested in specific types of securities. As a result, insurance companies are among the main investors in the Brazilian financial market and are subject to the rules of the CMN regarding the investment of technical reserves.

Insurance companies are exempt from ordinary bankruptcy procedures and instead are subject to a special procedure administered by SUSEP or by the ANS, the insurance sector regulators. However, if this special procedure is determined by SUSEP or by the ANS, and the assets of the insurance company are not sufficient to guarantee at least half of the unsecured credits or procedures relating to acts that may be considered bankruptcy-related crimes, the insurance company will be subject to ordinary bankruptcy procedures. Dissolutions may be either voluntary or compulsory. The Minister of Finance is responsible for the institution of compulsory dissolutions of insurance companies under SUSEP’s regulation and ANS is responsible for the dissolution of health insurance companies.

There is currently no restriction on foreign investments in insurance companies regulated by CNSP, SUSEP and ANS.

According to Brazilian law, insurance companies must buy reinsurance to the extent their liabilities exceed their technical limits under SUSEP rules. For several years, reinsurance activities in Brazil were carried out on a monopoly basis by the Brazilian Reinsurance Institute (IRB – Brasil Resseguros S.A. or “IRB”). On January 16, 2007, Supplementary Law No. 126 came into force, providing for the opening of the Brazilian reinsurance market to other reinsurance companies. This supplementary law specifically established new policies related to reinsurance, retrocession and its intermediation, coinsurance operations, contracting insurance products abroad and insurance sector foreign currency operations.

The main changes introduced by Supplementary Law No. 126 are summarized below. Three types of reinsurers are established by such law:

· Local reinsurer: a reinsurer with its head office in Brazil, incorporated as a corporation (sociedade por ações) and having as its exclusive purpose the performance of reinsurance and retrocession transactions;

· Admitted reinsurer: a reinsurer not headquartered in Brazil, registered with the SUSEP to carry out reinsurance and retrocession transactions, with a representative office in Brazil, which complies with the requirements of Supplementary Law No. 126 and the applicable rules regarding reinsurance and retrocession activities; and

· Eventual reinsurer: a reinsurer not headquartered in Brazil, registered with SUSEP to carry out reinsurance and retrocession transactions, without a representative office in Brazil, which complies with the requirements of Supplementary Law No. 126 and the applicable rules regarding reinsurance and retrocession activities.

An eventual reinsurer cannot be headquartered in a country considered as a tax-haven jurisdiction, as defined in Supplementary Law No. 126.

An admitted or eventual reinsurer must comply with the following requirements:

· To be duly incorporated, according to the laws of their countries of origin, in order to underwrite local and international reinsurance in the fields that they intend to operate in Brazil and present evidence that they have carried out their operations in their respective countries of origin for at least five years;

· To have economic and financial capacity equal to or higher than the minimum established by the CNSP;

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· To have a rating issued by rating agencies recognized by SUSEP equal to or higher than the minimum established by the CNSP;

· To have a duly appointed attorney-in-fact domiciled in Brazil with full administrative and judicial powers; and

· To comply with additional requirements established by the CNSP and SUSEP.

In addition to the requirements mentioned above, an admitted reinsurer must keep a foreign currency account with SUSEP and periodically submit their financial statements to SUSEP, pursuant to the rules enacted by CNSP.

Entering into reinsurance and retrocession contracts in Brazil or abroad must occur either through direct negotiation between the involved parties or an authorized broker. Foreign reinsurance brokers may be authorized to operate in Brazil, according to the law and additional requirements established by SUSEP and the CNSP.

Reinsurance operations relating to survival life insurance and private pension plans may only be offered by local reinsurers.

With due observance of the rules enacted by the CNSP, insurance companies, when transferring their risks in reinsurance, have to transfer to local reinsurers 40.0% of said risks. In addition, risk assignment between insurers and reinsurers belonging to the same economic group is currently limited to 20.0% of the premiums pertaining to a given insurance coverage.

The technical reserves of local reinsurers and funds deposited in Brazil for purposes of guaranteeing admitted reinsurers’ local activities will be managed according to the rules of the CMN. The IRB continues to be authorized to carry out reinsurance and retrocession activities in Brazil as a local reinsurer.

SELECTED STATISTICAL INFORMATION

The following information is included for analytical purposes and should be read in connection with our IFRS consolidated financial statements in Item 18 as well as with “Item 5. Operating and Financial Review and Prospects.” Information is presented as of and for the years ended December 31, 2012, 2011 and 2010.

The data included in this section are presented in accordance with IFRS, unless otherwise indicated.

Average Balance Sheet and Interest Rate Data

The following table presents the average balances of our interest-earning assets and interest-bearing liabilities, other assets and liabilities accounts, the related interest income and expense amounts and the average real yield/rate for each period. We calculated the average balances using monthly book balances for the years ended December 31, 2012, 2011 and 2010 as we believe such balances are representative of our operations and it would be too costly to produce average balances using daily book balances in IFRS. The majority of our business is composed of retail banking operations, which have grown organically and without significant fluctuations over short periods of time during 2012, 2011 and 2010. Non-accrual loans and leases are disclosed as a non-interest earning asset in the table below.

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									(in millions of R$, except percentages)
	2012								2011								2010
Assets	Average balance			Interest		Average yield/rate (%)			Average balance			Interest		Average yield/rate (%)			Average balance			Interest		Average yield/rate (%)
Interest-earning assets (*)		784,686			96,364		12.3	%		721,686			97,352		13.5	%		585,125			77,818		13.3	%
Interbank deposits		24,873			1,042		4.2	%		17,015			890		5.2	%		15,147			824		5.4	%
Securities purchased under agreements to resell		122,546			10,096		8.2	%		87,538			9,961		11.4	%		116,326			9,940		8.5	%
Central Bank compulsory deposits		70,416			5,334		7.6	%		88,926			9,182		10.3	%		45,524			4,025		8.8	%
Financial assets held for trading		126,160			13,324		10.6	%		121,431			14,676		12.1	%		73,047			8,028		11.0	%
Available-for-sale financial assets		62,527			3,771		6.0	%		43,036			2,888		6.7	%		40,159			2,997		7.5	%
Held-to-maturity financial assets		3,094			471		15.2	%		3,101			360		11.6	%		2,842			456		16.0	%
Loan operations and lease operations (accrual)		335,127			61,139		18.2	%		302,125			58,492		19.4	%		252,070			50,693		20.1	%
Other Financial Assets		39,943			1,187		3.0	%		58,514			903		1.5	%		40,009			855		2.1	%
Non-interest-earning assets		70,758								69,134								65,045
Cash and deposits on demand		12,814								14,205								12,717
Central Bank compulsory deposits		4,141								4,664								4,139
Derivatives		9,502								9,734								7,489
Non-accrual loans		20,055								17,528								14,816
Allowance for loan and lease losses		(24,962	)							(22,976	)							(21,889	)
Fixed assets, net		5,360								4,932								4,340
Investments in unconsolidated companies		3,032								2,268								2,539
Intangible assets, net		4,343								3,224								3,240
Other assets		36,474								35,555								37,653
Total assets		855,444								790,820								650,169

(*) For the net yield on total average interest-earning assets, see "Net Interest Margin and Spread".

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															(in millions of R$, except percentages)
	2012							2011							2010
Liabilities	Average balance		Interest		Average yield/rate (%)			Average balance		Interest		Average yield/rate (%)			Average balance		Interest		Average yield/rate (%)
Interest-bearing liabilities		648,682		48,067		7.4	%		572,622		55,599		9.7	%		464,214		36,840		7.9	%
Interest-bearing deposits:		206,652		10,544		5.1	%		186,429		12,186		6.5	%		164,210		10,591		6.4	%
Savings deposits		73,404		4,069		5.5	%		61,143		3,992		6.5	%		52,457		3,127		6.0	%
Interbank Deposits		8,661		286		3.3	%		2,376		169		7.1	%		1,703		145		8.5	%
Time deposits		124,587		6,188		5.0	%		122,910		8,025		6.5	%		110,050		7,319		6.7	%
Securities sold under repurchase agreements		204,358		17,539		8.6	%		194,949		22,133		11.4	%		156,347		15,774		10.1	%
Interbank market debt and Institutional market debt:		154,852		13,471		8.7	%		125,007		16,041		12.8	%		89,231		6,437		7.2	%
Interbank market debt		94,555		5,747		6.1	%		77,189		5,536		7.2	%		50,782		2,100		4.1	%
Institutional market debt		60,297		7,724		12.8	%		47,818		10,505		22.0	%		38,449		4,337		11.3	%
Reserves for insurance and private pension and Liabilities for capitalization plans		82,820		6,513		7.9	%		66,237		5,239		7.9	%		54,426		4,038		7.4	%
Non-interest bearing liabilities		130,637							150,813							128,220
Non-interest bearing deposits		30,324							26,072							25,817
Derivatives		8,251							7,193							6,724
Other non-interest-bearing liabilities		92,062							117,547							95,679
Stockholders’ equity		76,125							67,385							57,736
Total liabilities and stockholders’ equity		855,444							790,820							650,169

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Changes in Interest Income and Expenses – Volume and Rate Analysis

The following table sets forth the allocation of the changes in our interest income and expense in terms of average volume and changes in the average yields/rates for the year ended December 31, 2012 compared to 2011 and December 31, 2011 compared to 2010. Volume balance and rate variations have been calculated based on variations of average balances over the period and changes in average interest yield/rates on interest-earning assets and interest-bearing liabilities from one period to the other. Volume change has been computed as the change in the average interest-earning assets or interest-bearing liabilities from one period to the other multiplied by the average yield/rate in the earlier period. Yield/rate change has been computed as the change in the yield/rate in the period multiplied by the average interest-earning assets or interest-bearing liabilities in the earlier period. We allocated the net change from the combined effects of volume and yield/rate proportionately to volume change and yield/rate change, in absolute terms, without considering positive and negative effects.

										(in millions of R$)
	Increase/(decrease) due to changes in:									Increase/(decrease) due to changes in:
	2012/2011									2011/2010
	Volume			Yield/rate			Net change			Volume			Yield/rate			Net change
Interest-earning assets:		6,217			(7,205	)		(988	)		20,239			(705	)		19,534
Interbank deposits		267			(115	)		152			96			(30	)		66
Securities purchased under agreements to resell		437			(301	)		135			(60	)		81			20
Central Bank compulsory deposits		(1,688	)		(2,160	)		(3,848	)		4,385			772			5,157
Financial assets held for trading		604			(1,956	)		(1,352	)		5,778			870			6,648
Available-for-sale financial assets		1,137			(254	)		883			268			(377	)		(109	)
Held-to-maturity financial assets		(1	)		112			111			47			(143	)		(96	)
Loan and lease operations (accrual)		5,609			(2,961	)		2,647			9,604			(1,805	)		7,799
Other Financial Assets		(148	)		433			284			120			(72	)		48
Interest-bearing liabilities:		8,318			(15,850	)		(7,532	)		9,252			9,507			18,760
Interest-bearing deposits:		571			(2,213	)		(1,642	)		1,427			168			1,595
Saving deposits		313			(236	)		78			549			315			865
Interbank deposits		147			(30	)		117			41			(17	)		24
Time deposits		111			(1,948	)		(1,837	)		837			(131	)		706
Securities sold under repurchase agreements		1,133			(5,727	)		(4,594	)		4,218			2,141			6,359
Interbank market debt and Institutional market debt		5,311			(7,881	)		(2,570	)		2,686			6,918			9,604
Interbank market debt		656			(445	)		211			1,425			2,011			3,435
Institutional market debt		4,655			(7,436	)		(2,781	)		1,261			4,907			6,168
Reserves for insurance and private pension and Liabilities for capitalization		1,304			(30	)		1,274			921			281			1,202

Net Interest Margin and Spread

The following table sets forth our average interest-earning assets, total average interest-bearing liabilities, net interest income and the comparative net interest margin and net interest spread for the years ended December 31, 2012, 2011 and 2010.

	(in millions of R$, except percentages)
	2012			2011			2010
Total average interest-earning assets		784,686			721,686			585,125
Total average interest-bearing liabilities		648,682			572,622			464,214
Net interest income (1)		48,297			41,753			40,977
Average yield on average interest-earning assets(2)		12.3	%		13.5	%		13.3	%
Average rate on average interest-bearing liabilities(3)		7.4	%		9.7	%		7.9	%
Net interest spread(4)		4.9	%		3.8	%		5.4	%
Net interest margin(5)		6.2	%		5.8	%		7.0	%

⁽¹⁾ Is the sum of total interest income less total interest expense.

⁽²⁾ Total interest income, dividend income, net gain (loss) from financial assets and liabilities, foreign exchange results and exchange variation on transactions divided by total average interest-earning assets.

⁽³⁾ Total interest expense divided by total average interest-bearing liabilities.

⁽⁴⁾ Difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.

⁽⁵⁾ Net interest income divided by total average interest-earning assets.

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Return on Equity and Assets

The following table sets forth certain data with respect to return on equity and assets for the years ended December 31, 2012, 2011, and 2010:

	(in millions of R$, except percentages)
	2012			2011			2010
Net income attributable to owners of the parent company		12,634			13,837			11,708
Average total assets		855,444			790,820			650,169
Average stockholders' equity		76,125			67,385			57,736
Net income as a percentage of average total assets (1)		1.5	%		1.7	%		1.8	%
Net income as a percentage of average stockholder's equity (1)		16.6	%		20.5	%		20.3	%
Average stockholder's equity as a percentage of average total assets		8.9	%		8.5	%		8.9	%
Dividend payout ratio per share (2)		33.2	%		31.9	%		33.5	%

⁽¹⁾ Attributable to owners of the parent company.

⁽²⁾ Dividend and interest on stockholders’ equity per share divided by basic earnings per share. Please see “Item 3A. Selected Financial Data – IFRS Selected Financial Data – Earnings and Dividend Per Share” for additional information on the computation of both dividend and interest on shareholders’ equity and basic earnings per share.

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Securities Portfolio

General

The following table sets forth our portfolio of financial assets held for trading, derivatives, available-for-sale financial assets and held-to-maturity financial assets, as of December 31, 2012, 2011 and 2010. The amounts exclude our investments in securities of unconsolidated companies. For more information on our investments in unconsolidated companies see note 13 to our consolidated financial statements. Financial assets held for trading assets, financial assets designated at fair value through profit or loss, derivatives and available-for-sale financial assets are stated at fair value and held-to-maturity financial assets are stated at amortized cost.

										(in millions of R$, except percentages)
	2012			% of total			2011			% of total			2010			% of total
Financial assets held for trading		145,516			100	%		121,889			100	%		115,497			100	%
Investment funds		1,468			1.0	%		1,339			1.1	%		1,748			1.5	%
Government securities - domestic		112,492			77.3	%		94,824			77.8	%		87,365			75.8	%
Brazilian government securities		111,206			76.4	%		93,914			77.0	%		86,699			75.1	%
Brazilian external debt bonds		1,286			0.9	%		910			0.8	%		666			0.7	%
Government securities - abroad		872			0.6	%		802			0.6	%		9,353			8.0	%
Argentina		106			0.1	%		225			0.2	%		293			0.3	%
United States		345			0.2	%		292			0.2	%		8,714			7.5	%
Mexico		225			0.2	%		205			0.2	%		29			0.0	%
Russia		-			0.0	%		-			0.0	%		45			0.0	%
Chile		108			0.1	%		50			0.0	%		248			0.2	%
Colombia		34			0.0	%		-			0.0	%		-			0.0	%
Uruguay		33			0.0	%		27			0.0	%		24			0.0	%
Other		21			0.0	%		3			0.0	%		-			0.0	%
Corporate securities		30,684			21.1	%		24,924			20.5	%		17,031			14.7	%
Shares		2,815			1.9	%		2,297			1.9	%		3,248			2.8	%
Securitized real estate loans		21			0.0	%		24			0.0	%		596			0.5	%
Bank deposit certificates		2,933			2.0	%		7,820			6.4	%		8,932			7.7	%
Debentures		4,636			3.2	%		3,526			2.9	%		2,800			2.4	%
Eurobonds and other		1,612			1.1	%		1,431			1.2	%		1,452			1.3	%
Financial credit bills		18,441			12.7	%		8,973			7.4	%		-			0.0	%
Other		226			0.2	%		853			0.7	%		3			0.0	%
Financial assets held for trading as a percentage of total assets		15.20	%					14.90	%					15.89	%
Financial assets designated at fair value through profit or loss - Government securities - domestic - Brazilian external debt bonds		220			100	%		186			100	%		306			100	%
Government securities - domestic		220			100.0	%		186			100.0	%		306			100.0	%
Derivatives		11,597			100	%		8,754			100	%		7,777			100	%
Derivatives as a percentage of total assets		1.21	%					1.07	%					1.07	%
Available-for-sale financial assets		90,869			100	%		47,618			100	%		44,539			100	%
Investment funds		255			0.3	%		806			1.7	%		770			1.7	%
Government securities - domestic		43,527			47.9	%		18,330			38.6	%		14,799			33.3	%
Brazilian government securities		25,462			28.0	%		12,424			26.2	%		10,079			22.7	%
Brazilian external debt bonds		18,065			19.9	%		5,906			12.4	%		4,720			10.6	%
Government securities - abroad		7,137			7.9	%		4,317			9.1	%		4,559			10.3	%
United States		375			0.4	%		-			0.0	%		679			1.5	%
Mexico		-			0.0	%		11			0.0	%		-			0.0	%
Denmark		2,554			2.8	%		1,949			4.1	%		2,016			4.5	%
Spain		-			0.0	%		418			0.9	%		734			1.7	%
Korea		1,662			1.8	%		295			0.6	%		236			0.5	%
Chile		1,534			1.7	%		995			2.1	%		453			1.0	%
Paraguay		491			0.5	%		344			0.7	%		256			0.6	%
Uruguay		294			0.3	%		268			0.6	%		185			0.4	%
United Kingdon		83			0.1	%		-			0.0	%		-			0.0	%
Belgium		71			0.1	%		-			0.0	%		-			0.0	%
France		57			0.1	%		37			0.1	%		-			0.0	%
Other		16			0.0	%		-			0.0	%		-			0.0	%
Corporate securities		39,950			44.0	%		24,165			50.6	%		24,411			54.8	%
Shares		3,812			4.2	%		3,978			8.4	%		5,124			11.5	%
Securitized real estate loans		8,568			9.4	%		8,014			16.8	%		6,975			15.7	%
Bank deposit certificates		391			0.4	%		274			0.6	%		559			1.3	%
Debentures		13,964			15.4	%		7,236			15.2	%		6,634			14.9	%
Eurobonds and others		5,596			6.2	%		3,638			7.7	%		3,843			8.6	%
Financial credit bills		5,720			6.3	%		-			0.0	%		-			0.0	%
Rural Product Note		778			0.9	%		108			0.1	%		-			0.0	%
Promissory notes		777			0.9	%		646			1.4	%		1,265			2.8	%
Other		344			0.4	%		271			0.4	%		11			0.0	%
Available-for-sale financial assets as a percentage of total assets		9.49	%					5.81	%					6.13	%
Held-to-maturity financial assets		3,202			100	%		3,105			100	%		3,170			100	%
Government securities - domestic		3,131			97.8	%		3,008			96.9	%		2,990			94.3	%
Brazilian government securities		3,013			94.1	%		2,812			90.6	%		2,764			87.2	%
Brazilian external debt bonds		118			3.7	%		196			6.3	%		226			7.1	%
Government securities – abroad		20			0.6	%		-			0.0	%		16			0.5	%
Uruguay		20			0.6	%		-			0.0	%		16			0.5	%
Corporate securities		51			1.6	%		97			3.1	%		164			5.2	%
Debentures		-			0.0	%		30			1.0	%		30			0.9	%
Eurobonds and others		51			1.6	%		65			2.0	%		130			4.2	%
Securitized real estate loans		-			0.0	%		2			0.1	%		4			0.1	%
Held-to-maturity financial assets, as a percentage of total assets		0.33	%					0.38	%					0.44	%

86

As of December 31, 2012, we held securities issued by the Brazilian federal government classified above as “Brazilian federal government securities” with an aggregate book value and an aggregate market value of R$159,150 million, which amount represented 209.4%, of our consolidated stockholders’ equity as of that date. As of December 31, 2012, we did not hold securities of any other issuer which in the aggregate represented more than 10.0% of our consolidated stockholders’ equity.

As of December 31, 2011, we held securities issued by the Brazilian federal government classified above as “Brazilian federal government securities” with an aggregate book value and an aggregate market value of R$116,348 million, which amount represented 154.4%, of our consolidated stockholders’ equity as of that date. As of December 31, 2011, we did not hold securities of any other issuer which in the aggregate represented more than 10.0% of our consolidated stockholders’ equity.

As of December 31, 2010, we held securities issued by the Brazilian federal government classified above as “Brazilian federal government securities” and securities issued by the U.S. federal government classified above as “Government debt securities abroad — United States” with an aggregate book value and an aggregate market value of R$88,214 million and R$9,393 million, respectively, which amounts represented 98.3% and 10.5%, respectively, of our consolidated stockholders’ equity as of that date. As of December 31, 2010, we did not hold securities of any other issuer which in the aggregate represented more than 10.0% of our consolidated stockholders’ equity.

87

The following table sets forth our portfolio of financial assets held for trading, financial assets designated at fair value through profit or loss, derivatives, available-for-sale financial assets and held-to-maturity financial assets at its amortized cost and its fair value as of December 31, 2012.

	(in millions of R$)
	Amortized Cost		Fair Value
Financial assets held for trading		145,144		145,516
Investment funds		1,422		1,468
Government securities - domestic		112,249		112,492
Brazilian government securities		110,999		111,206
Brazilian external debt bonds		1,250		1,286
Government securities - abroad		860		872
Argentina		105		106
United States		335		345
Mexico		224		225
Chile		108		108
Colombia		34		34
Uruguay		33		33
Other		21		21
Corporate securities		30,613		30,684
Shares		2,777		2,815
Securitized real estate loans		21		21
Bank deposit certificates		2,933		2,933
Debentures		4,629		4,636
Eurobonds and other		1,587		1,612
Financial credit bills		18,440		18,441
Other		226		226
Financial assets designated at fair value through profit or loss - Government securities - domestic - Brazilian external debt bonds		216		220
Derivatives		9,492		11,597
Available-for-sale financial assets		87,575		90,869
Investment funds		250		255
Government securities - domestic		41,923		43,527
Brazilian government securities		24,706		25,462
Brazilian external debt bonds		17,217		18,065
Government securities - abroad		7,174		7,137
United States		375		375
Denmark		2,554		2,554
Korea		1,662		1,662
Chile		1,538		1,534
Paraguay		528		491
Uruguay		292		294
United Kingdon		83		83
Belgium		70		71
France		56		57
Other		16		16
Corporate securities		38,228		39,950
Shares		3,350		3,812
Securitized real estate loans		7,916		8,568
Bank deposit certificates		391		391
Debentures		13,656		13,964
Financial credit bills		5,720		5,720
Eurobonds and others		5,311		5,596
Promissory notes		777		777
Rural Product Note		770		778
Other		337		344
Held-to-maturity financial assets		3,202		4,507
Government securities - domestic		3,131		4,434
Brazilian government securities		3,013		4,310
Brazilian external debt bonds		118		124
Government securities – abroad		20		20
Uruguay		20		20
Corporate securities		51		53
Debentures		-		-
Eurobonds and others		51		53
Securitized real estate loans		-		-

88

Maturity Distribution

The following table sets forth the maturity distribution and average yields as of December 31, 2012 for our financial assets held for trading, financial assets designated at fair value through profit or loss, derivatives, available-for-sale financial assets and held-to-maturity financial assets.

	(in millions of R$, except percentages)
	Maturity
	No stated maturity					Due in 1 year or less						Due after 1 year to 5 years					Due after 5 years to 10 years					Due after 10 years					Total
	R$		Average yield %			R$			Average yield %			R$		Average yield %			R$		Average yield %			R$		Average yield %			R$		Average yield %
Financial assets held for trading, at fair value		4,283					28,050						85,582					17,934					9,667					145,516
Investment funds (1)		1,468		0.0	%		-			0.0	%		-		0.0	%		-		0.0	%		-		0.0	%		1,468		0.0	%
Government securities - domestic		-					18,570						72,426					12,189					9,307					112,492
Brazilian government securities		-		0.0	%		18,760			1.8	%		71,887		2.2	%		12,094		2.2	%		8,465		4.5	%		111,206		2.3	%
Brazilian external debt bonds		-		0.0	%		(190	)		-0.5	%		539		0.4	%		95		0.4	%		842		5.5	%		1,286		3.9	%
Government securities - abroad		-					205						345					216					105					871
Argentina		-		0.0	%		69			7.8	%		4		16.7	%		32		16.7	%		1		18.3	%		106		10.9	%
United States		-		0.0	%		2			2.4	%		310		2.4	%		10		2.4	%		22		1.6	%		344		2.3	%
Mexico		-		0.0	%		-			0.0	%		9		5.7	%		156		5.7	%		60		5.0	%		225		5.5	%
Chile		-		0.0	%		106			5.8	%		-		0.0	%		1		0.0	%		2		4.7	%		109		5.7	%
Colombia		-		0.0	%		-			0.0	%		17		7.4	%		17		7.4	%		-		0.0	%		34		7.4	%
Uruguay		-		0.0	%		28			8.7	%		5		2.9	%		-		2.9	%		-		0.0	%		33		7.8	%
Other		-		0.0	%		-			0.0	%		-		0.0	%		-		0.0	%		20		8.4	%		20		8.4	%
Corporate securities		2,815					9,275						12,811					5,529					255					30,685
Shares		2,815		0.0	%		-			0.0	%		-		0.0	%		-		0.0	%		-		0.0	%		2,815		0.0	%
Securitized real estate loans		-		0.0	%		1			0.0	%		21		9.0	%		-		0.0	%		-		0.0	%		22		8.6	%
Bank deposit certificates		-		0.0	%		914			0.0	%		2,018		0.0	%		-		0.0	%		1		0.0	%		2,933		0.0	%
Debentures		-		0.0	%		522			0.0	%		2,798		0.2	%		1,161		0.2	%		155		0.1	%		4,636		0.2	%
Eurobonds and other		-		0.0	%		228			7.0	%		972		7.3	%		353		7.2	%		59		6.7	%		1,612		7.2	%
Financial credit bills		-		0.0	%		7,404			0.0	%		7,002		0.0	%		4,015		0.0	%		20		0.0	%		18,441		0.0	%
Other		-		0.0	%		206			0.0	%		-		0.0	%		-		0.0	%		20		0.0	%		226		0.0	%
Financial assets designated at fair value through profit or loss - Government securities - domestic - Brazilian external debt bonds		-		0.00	%		220			0.00	%		-		0.00	%		-		0.00	%		-		0.00	%		220		0.0	%
Derivatives		-		0.00	%		6,914			0.00	%		3,749		0.00	%		816		0.00	%		118		0.00	%		11,597		0.0	%
Available-for-sale financial assets, at fair value		4,061					22,455						29,470					20,479					14,404					90,869
Investment funds (1)		251		0.0	%		-			0.0	%		4		0.0	%		-		0.0	%		-		0.0	%		255		0.0	%
Government securities - domestic		-					10,784						11,910					9,041					11,792					43,527
Brazilian government securities		-		0.0	%		10,773			0.8	%		9,531		5.6	%		1,243		4.8	%		3,915		3.5	%		25,462		3.2	%
Brazilian external debt bonds		-		0.0	%		11			8.2	%		2,379		6.2	%		7,798		6.3	%		7,877		8.3	%		18,065		7.2	%
Government securities - abroad		-					6,544						467					126					-					7,137
Denmark		-		0.0	%		2,554			5.9	%		-		0.0	%		-		0.0	%		-		0.0	%		2,554		5.9	%
Korea		-		0.0	%		1,662			0.0	%		-		0.0	%		-		0.0	%		-		0.0	%		1,662		0.0	%
Chile		-		0.0	%		1,469			4.7	%		63		3.2	%		1		3.4	%		-		0.0	%		1,533		4.6	%
Paraguay		-		0.0	%		382			5.9	%		109		9.0	%		-		0.0	%		-		0.0	%		491		6.6	%
United States				0.0	%		262			0.0	%		41		0.6	%		71		1.2	%		-					374		0.3	%
Uruguay		-		0.0	%		173			0.0	%		100		0.0	%		22		0.1	%		-		0.0	%		295		0.0	%
United Kingdon		-		0.0	%		-			0.0	%		83		1.0	%		-		0.0	%							83		1.0	%
Belgium		-		0.0	%		28			4.3	%		11		2.8	%		32		4.0	%							71		3.9	%
France		-		0.0	%		14			2.0	%		44		2.7	%		-		0.0	%							58		2.5	%
Other		-		0.0	%		-			0.0	%		16		0.0	%		-		0.0	%		-		0.0	%		16		0.0	%
Corporate securities		3,810					5,127						17,089					11,312					2,612					39,950
Shares		3,810		0.0	%		-			0.0	%		-		0.0	%		-		0.0	%		-		0.0	%		3,810		0.0	%
Securitized real estate loans		-		0.0	%		791			2.8	%		2,722		1.0	%		2,924		4.9	%		2,131		6.0	%		8,568		3.7	%
Bank deposit certificates		-		0.0	%		384			1.8	%		-		0.0	%		7		12.3	%		-		0.0	%		391		2.0	%
Debentures		-		0.0	%		1,588			0.8	%		5,756		2.1	%		6,247		1.5	%		373		7.4	%		13,964		1.8	%
Eurobonds and others		-		0.0	%		1,184			2.5	%		2,268		4.4	%		2,070		5.7	%		75		6.0	%		5,597		4.5	%
Financial credit bills		-		0.0	%		-			0.0	%		5,720		0.2	%		-		0.0	%		-		0.0	%		5,720		0.2	%
Promissory notes		-		0.0	%		777			1.0	%		-		0.0	%		-		0.0	%		-		0.0	%		777		1.0	%
Other		-		0.0	%		403			9.9	%		623		6.9	%		64		10.2	%		33		0.0	%		1,123		8.0	%
Held-to-maturity financial assets, at amortized cost		-					188						147					1,087					1,780					3,202
Government securities - domestic		-					137						135					1,087					1,772					3,131
Brazilian government securities		-		0.0	%		19			6.0	%		135		0.0	%		1,087		0.0	%		1,772		0.0	%		3,013		0.0	%
Brazilian external debt bonds		-		0.0	%		118			10.2	%		-		0.0	%		-		0.0	%		-		0.0	%		118		10.2	%
Government securities - abroad		-					-						12					-					8					20
Uruguay		-		0.0	%		-			0.0	%		12		7.5	%		-		0.0	%		8		7.9	%		20		7.7	%
Corporate securities		-					51						-					-					-					51
Eurobonds and others		-		0.0	%		51			8.8	%		-		0.0	%		-		0.0	%		-		0.0	%		51		8.8	%

(1) Average yields are not shown for these securities, as such yields are not meaningful because future yields are not quantifiable. These securities have been excluded from the calculation of the total yield.

89

The following table sets forth our securities and derivative portfolio by currency as of December 31, 2012, 2011 and 2010.

									(in millions of R$)
	Fair Value								Amortized cost
	Financial assets held for trading		Financial assets designated at fair value		Derivatives		Available-for-sale financial assets		Held-to-maturity financial assets		Total
As of December 31, 2012		145,516		220		11,597		90,869		3,202		251,404
Denominated in Brazilian currency		122,970		-		11,563		66,484		3,043		204,060
Denominated in Brazilian currency and indexed by foreign currency (1)		21,959		-		-		14,610		159		36,728
Denominated in foreign currency (1)		587		220		34		9,775		-		10,616
As of December 31, 2011		121,889		186		8,754		47,510		3,105		181,444
Denominated in Brazilian currency		108,755		-		8,655		37,670		2,823		157,903
Denominated in Brazilian currency and indexed by foreign currency (1)		12,602		-		-		5,690		282		18,574
Denominated in foreign currency (1)		532		186		99		4,150		-		4,967
As of December 31, 2010		115,497		306		7,777		44,539		3,170		171,289
Denominated in Brazilian currency		95,805		-		7,777		33,428		2,834		139,844
Denominated in Brazilian currency and indexed by foreign currency (1)		8,879		-		-		5,073		313		14,265
Denominated in foreign currency (1)		10,813		306		-		6,038		23		17,180

⁽¹⁾ Predominantly U.S. dollar.

Central Bank Compulsory Deposits

We are required to either maintain certain deposits with the Central Bank or to purchase and hold federal government securities as compulsory deposits. The following table shows the amounts of these deposits as of December 31, 2012, 2011 and 2010:

						(in millions of R$, except percentages)
	2012					2011					2010
	R$		% of total compulsory deposits			R$		% of total compulsory deposits			R$		% of total compulsory deposits
Non-interest bearing deposits (1)		6,448		10.1	%		5,730		5.8	%		4,742		5.5	%
Interest-bearing deposits (2)		57,253		89.9	%		92,323		94.2	%		81,034		94.5	%
Total		63,701		100.0	%		98,053		100.0	%		85,776		100.0	%

⁽¹⁾ Mainly related to demand deposits.

⁽²⁾ Mainly related to time and savings deposits.

90

Loan and Lease Operations

The following table presents our loan and lease portfolio by category of transaction. Substantially all of our loans are to borrowers domiciled in Brazil and are denominated in reais. Additionally, the majority of our loan portfolio is indexed to Brazilian base interest rates or to the U.S. dollar.

(in millions of R$)
Loan and Lease Operations, by type (1)	2012				2011				2010
	Loan		Allowance		Loan		Allowance		Loan		Allowance
Individuals		150,300		14,779		149,277		13,679		126,517		10,717
Credit card		40,531		2,863		38,961		3,825		33,041		3,306
Personal loans		40,076		7,643		36,403		5,393		25,258		3,590
Vehicles		51,646		4,227		60,463		4,415		60,151		3,709
Mortgage loans		18,047		46		13,450		46		8,067		112
Corporate		104,350		1,427		92,079		708		74,853		973
Small and Medium Businesses		85,185		9,091		85,649		9,197		79,950		8,041
Foreign Loans Latin America		27,149		416		19,259		289		13,517		263
Total loans and advances to clients		366,984		25,713		346,264		23,873		294,837		19,994

⁽¹⁾We consider all loans and leases more than 60 days overdue as non-accrual loans and we discontinue accruing financial income related to them. The contractual amount of non-accrual loans was R$20,791 million, R$20,439 million and R$14,736 million as of December 31, 2012, 2011 and 2010, respectively. Non-accrual loans are presented in the table above in the appropriate category of loan and lease. The interest income foregone on our non-accrual loans net of allowance for loan losses for 2012, 2011 and 2010 was R$1,776 million, R$1,818 million and R$1,469 million, respectively.

- The Individuals portfolio consists primarily of vehicle financing to individuals, credit card, personal loans (including mainly consumer finance and overdrafts) and residential mortgage loans.

- The Corporate portfolio consists primarily of loans made to large corporate clients.

- The Small and Medium Businesses portfolio consists primarily of loans to small and medium-sized companies.

- The Foreign Loans Latin America portfolio consists primarily of loans granted by our operations in Argentina, Chile, Paraguay and Uruguay, primarily to individuals.

With respect to loans which are not considered either impaired or non-accrual and that have not been renegotiated, as of December 31, 2012, we are not aware of any information about borrowers’ credit problems that could cause us to have serious doubts as to the ability of such borrowers to pay us.

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The following table presents our loan and lease portfolio by category of transaction, presented in accordance with U.S. GAAP. The vast majority of our loans are to borrowers domiciled in Brazil and are denominated in reais. Additionally, the majority of our loan portfolio is indexed to Brazilian base interest rates or to the U.S. dollar.

	(in millions of R$)
	U.S. GAAP
	2009			2008
Type of loans and leases (1)
Commercial:
Industrial and others		104,505			64,952
Import financing		1,895			3,643
Export financing		6,823			9,746
Real estate loans (primarily residential housing loans)		10,939			6,469
Lease financing (primarily vehicle financing)		47,230			41,663
Public sector (domestic)		1,611			759
Individuals:
Overdraft		4,119			3,544
Consumer finance operations		32,701			20,272
Credit card		30,781			14,288
Agricultural		5,132			4,364
Allowance for loan and lease losses		(19,968	)		(12,202	)
Loans, net of allowance for loan and lease losses		225,768			157,498

⁽¹⁾ The contractual amount of non-accrual loans was R$15,499 million and R$7,579 million as of December 31, 2009 and 2008, respectively. The interest income foregone on our non-accrual loans for 2009 and 2008 was R$1,564 million and R$1,265 million, respectively.

- The Commercial portfolio consists primarily of short-term loans as well as medium-term loans and financing for large, medium, and small companies. We also act as a financial agent for the Brazilian government through BNDES and its affiliates for the onlending of money to target groups of private sector borrowers. Our trade financing activities focus on export, pre-export and import financing.

- The Real estate portfolio consists primarily of loans for the construction, refurbishment, extension and acquisition of homes. We fund real estate loans primarily from Central Bank mandated portions of our savings account deposits. We extended real estate loans principally to retail bank customers to finance home acquisitions. Maturity is generally limited to 15 years.

- The Lease financing portfolio consists primarily of automobiles leased to individuals and machinery and equipment leased to corporate and middle market borrowers. We are a major participant in the Brazilian leasing market through our subsidiary, Itauleasing.

- The Public sector portfolio consists primarily of loans to federal government, state and municipal entities.

- The Individuals portfolio consists primarily of providing individual customers with three main credit products: overdraft accounts, consumer finance operations and credit card. In addition, we are one of the largest issuers of credit cards in Brazil under the Itaucard brand.

- The Agricultural portfolio consists primarily of obtaning funding for our Agricultural loans from Central Bank mandated portions of our deposit base. We extend agricultural loans principally to agro-industrial borrowers.

Loan Approval Process

Our management seeks to optimize the relationship between risk and return of assets, maintaining the quality of credit financial instruments at an acceptable level in the market segments in which we operate. Both our accepted risk levels and return objectives are set for each of our credit areas, and interest rates applicable to each transaction are defined through models of risk-adjusted pricing.

Our credit policies are defined and reviewed considering internal and external factors. Internal factors include the criteria for classification of customers; analysis of portfolio evolution, observed delinquency levels, observed rates of return, portfolio quality and allocation of economic capital. External factors are related to the economic environment in Brazil and abroad, and factors such as market share, interest rates, and indicators of market default, inflation and increase (or decrease) in consumer spending.

Our decision-making process and our process for setting credit policy is structured to ensure alignment of credit approvals with the optimization of business opportunities, and this process is managed by our credit committees. For retail credit transactions, decisions regarding granting and management of credit portfolio are made based on credit score models that are continuously monitored by us. For Corporate credit transactions, our various committees are subordinated to the Superior Credit Committee responsible for managing credit risk and the various authority levels within our risk management structure ensure detailed monitoring of the risk of credit transactions as well as the necessary timing and flexibility in our approval processes. For a discussion of our credit committee structure, see “Item 4B. Business Overview — Credit Risk Management”.

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I. Individuals

Credit Cards

Granting of credit cards is based mainly on each customer’s level of income and score models. Through these models, we define which customers will receive credit offers and the conditions under which they receive offers. We also look to each customer’s monthly income to establish monthly credit limits.

Personal Loans

Granting of credit to our account holder customers is based mainly on their level of income (whether self-reported or estimated according to internal methodologies) and our customer internal credit score determined based on statistical models of behavior and credit score. Through these models and the observation of several financial indicators, we define which customers will receive credit offers and in what amount. According to their credit score, we define the maximum number of installments, interest rates (which are fixed) and the maximum percentage of the monthly installment with respect to monthly income. Based on these limits, customers choose the amount and terms that best meet their needs. We do not require collateral from the majority of our customers. We require the following documents during the credit granting process: personal identification, tax identification number, proof of income and proof of residential address.

Vehicles

Our vehicle financing applications are originated in multi-brand car dealers or official brand car dealers and subject to “filters” to reject those from customers with serious indications of credit default or indications of fraud. Subsequently, a score is calculated internally for the loan requested, which takes into consideration the internal credit score of the customer and the terms of the proposed transaction. Applications with scores below an established cutoff level are automatically rejected. Applications with high credit scores and for which personal information is validated by our credit bureaus are automatically approved. The process of consulting with credit bureau is similar to the process described under “Real Estate” above. Applications that are not automatically approved also go through individual reviews by our credit approval desk. The maximum maturity is determined based on the age of the vehicle. Our credit policy also defines maximum ratio of lease payments to income and maximum LTV ratio, which may not exceed 100% at the date credit is granted.

Interest rates are generally fixed. Interest rates vary from customer to customer depending on factors such as the department through which the loan is made, maturity and the age of the vehicle acquired and a spread which is defined for each individual contract based on our RAROC (Risk Adjusted Return on Capital) analysis.

Mortgage loans

The mortgage application is originated by Internet, telephone, real estate brokers or by our branch network. A client score is calculated internally based on credit score models. Applications with score below an established cutoff level are automatically rejected (such as applications rejected due to serious indications of credit default and/or score may be exceptionally approved by the appropriate credit committee). Applications with high credit scores and for which no significant negative information is provided by credit bureaus are automatically approved. A request of information made to credit bureaus has the purpose of verifying whether the applicant’s history shows anything that we would consider an impediment to grant loans (applicants with assets blocked in court, applicants who provided invalid tax identification number), or that would effectively restrict the granting of a loan (e.g., customers who have entered into debt restructuring or renegotiation or have issued checks with insufficient funds) or other information (e.g., customers under other types of judicial debt restructuring). In Brazil, credit bureaus do not provide score information or general credit history but rather only information with respect to default and other negative events. If, as result of information provided by a credit bureau, we identify an impediment or suspect fraud exists (e.g., cases where the telephone number provided by the applicant matches the number of another existing client in our files or if last name provided by the applicant does not match the last name provided by the credit bureau), the proposals are individually reviewed by one of our credit approval desks. If there is additional relevant positive information (such as acceptable evidence of current funds or income or there is evidence that any negative information obtained results from isolated events), the application may be approved by the one of our credit desks or by our Real Estate Credit Committee, even if the credit score is below the cutoff threshold we have established. The volume and the observed levels of default associated with credit approved in this manner are monitored so we can control the quality of our lending practices. Our credit policy also defines maximum maturity, maximum ratio of mortgage installment to income and maximum loan-to-value (“LTV”) ratio, which may not exceed 85% at the date the loan is granted. Interest rates are established based on the “TR” rate (a Brazilian interest rate that represents the interest rate of saving deposits) plus a fixed spread defined for each individual contract based on our RAROC (Risk Adjusted Return on Capital) analysis.

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II. Corporate

In the corporate segment, credit committees periodically evaluate customer data, analyzing several material aspects for determining credit ratings and credit limits to be applied to each customer. In addition, all corporate customers shall be subject to KYC (know-your-customer) procedures.

Our various credit committees are subordinated to the Superior Credit Committee responsible for managing credit risk and the various authority levels within our risk management structure ensure detailed monitoring of the risk of credit transactions as well as the necessary timing and flexibility in our approval processes.

Much of the credit for companies requires guarantees. Transactions to finance the production of goods usually require machinery and equipment as collateral. Financing for working capital might be guaranteed by trade receivables, check receivables or credit card receivables or is guaranteed by the company's partners or shareholders and/or by third parties. Investment transactions, on the other hand, typically require insurance or mortgage liens but may also include liens on acceptable investments, fund shares, debt securities and other instruments.

III. Small and medium businesses

We grant credit to companies on the condition that they open a current account with us, a process which includes review of company documents and implementation of KYC procedures. For each client, we determine a maximum credit amount to be granted. This limit is determined based on our internal customer classification (based on credit score and history) and the level of average monthly earnings of the company. Billing information may be provided by the company or estimated by us based on internal methods. Our internal customer classification determines a maximum level of indebtedness, maximum credit to be granted, interest rates (substantially fixed rates), maximum ratio of the monthly installment to the company’s profits and the amount and type of guarantees required. Similar to the corporate segment, the majority of the portfolio is guaranteed by receivables within the retail sector and by goods in the case of financing.

IV. Foreign Loans Latin America

Granting of credit in our subsidiaries in Latin America follows the same corporate governance and the policies established by Itaú Unibanco Holding. All subsidiaries are subject to a centralized management that monitors the performance of our portfolio, establishes the rules for granting of credit and is responsible for the corporate governance related to granting of credit within Itaú Unibanco Holding.

The Individuals and Corporate units within our Foreign Loans Latin America segment follow similar procedures as the Individuals and Corporate segments discussed above. For the Individuals unit, granting of credit is based on mainly on each customer’s level of income and score models. For the Corporate unit, granting of credit is based on an evaluation of customer data and KYC procedures. Credit analysis is made after analysis of such information and credit limits are approved according to the guidelines established by the risk management structure. Such guidelines depend upon the size and the needs of each of the subsidiaries, but are subordinate to the guidelines established by the credit committees within Itaú Unibanco Holding.

Indexing

Most of our portfolio is denominated in reais. However, a portion of our portfolio is indexed to foreign currencies, primarily the U.S. dollar. The foreign currency portion of our portfolio consists of loans and financing for foreign trade and onlending operations. Our loans indexed to foreign currencies or denominated in U.S. dollars represented 23.9%, 22.1% and 19.7% of our loan portfolio as of December 31, 2012, 2011 and 2010, respectively.

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Loans and Leases – Maturity and Interest Rates

The following tables present an analysis of the distribution of our loan and lease portfolio as of December 31, 2012 by maturity according to the type of loan and lease, as well as the classification of the portfolio between variable and fixed rates for each range of maturity. The values are segmented by overdue and non-overdue loans and are considered contractual values.

Non-Overdue

											(in millions of R$)
Type of loan and lease	Due in 30 days or less		Due in 31- 90 days		Due in 91- 180 days		Due in 181- 360 days		Due in one year to five years		Due after five years		Total Non- Overdue Loans
Individuals
Credit card		15,791		11,861		6,340		3,032		95		-		37,119
Personal loan		7,647		2,687		3,275		5,702		17,908		270		37,489
Vehicles		2,350		3,524		4,962		9,510		29,530		5		49,881
Mortgage loans		203		233		419		722		4,118		12,293		17,988
Corporate		7,545		13,323		14,716		16,494		41,745		9,663		103,486
Small and Medium Businesses		14,305		14,383		10,163		14,100		27,987		323		81,261
Foreign Loans Latin America		4,569		3,153		2,832		2,083		5,509		8,380		26,526
Total (1)		52,410		49,164		42,707		51,643		126,892		30,934		353,750

⁽¹⁾ Non-accrual loans of R$20,791 million are presented in the table above in the appropriate category. Non-accrual loans include in the case of loans payable in installments both current and past due installments.

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Overdue (2)
															(in millions of R$)
Type of loan and lease	01-30 days		31-60 days		61-90 days		91-180 days		181-360 days		One year or more		Total gross loans		Allowance for loan losses			Total net
Individuals
Credit card		634		231		261		848		1,430		8		40,531		(2,863	)		37,668
Personal loan		535		293		274		653		827		5		40,076		(7,643	)		32,433
Vehicles		597		280		171		319		340		58		51,646		(4,227	)		47,419
Mortgage loans		25		13		5		8		7		1		18,047		(46	)		18,001
Corporate		476		203		7		84		94		-		104,350		(1,427	)		102,923
Small and Medium Businesses		801		448		406		1,026		1,223		20		85,185		(9,091	)		76,094
Foreign Loans Latin America		457		64		21		31		46		4		27,149		(416	)		26,733
Total (1)		3,525		1,532		1,145		2,969		3,967		96		366,984		(25,713	)		341,271

⁽¹⁾ Non-accrual loans of R$20,791 million are presented in the table above in the appropriate category. Non-accrual loans include, in the case of loans payable in installments, both current and past due installments.

⁽²⁾ Defined as loans and leases contractually past due as to payment of interest or principal.

Non-Overdue
											(in millions of R$)
	Due in 30 days or less		Due in 31-90 days		Due in 91- 180 days		Due in 181- 360 days		Due in one year to five years		Due after five years		Total Non- Overdue Loans
Interest rate of loans to customers by maturity:
Variable rates		10,007		16,207		12,713		16,379		48,581		29,569		133,456
Fixed rates		42,403		32,957		29,994		35,264		78,311		1,365		220,294
Total (1)		52,410		49,164		42,707		51,643		126,892		30,934		353,750

⁽¹⁾ Non-accrual loans of R$20,791 million are presented in the table above in the appropriate category. Non-accrual loans include, in the case of loans payable in installments, both current and past due installments.

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Overdue (2)
											(in millions of R$)
	01-30 days		31-60 days		61-90 days		91-180 days		181-360 days		One year or more		Total gross loans
Interest rate of loans to customers by maturity:
Variable rates		714		263		39		119		153		7		134,751
Fixed rates		2,811		1,269		1,106		2,850		3,814		89		232,233
Total (1)		3,525		1,532		1,145		2,969		3,967		96		366,984

⁽¹⁾ Non-accrual loans of R$20,791 million are presented in the table above in the appropriate category. Non-accrual loans include, in the case of loans payable in installments, both current and past due installments.

⁽²⁾ Defined as loans and leases contractually past due as to payment of interest or principal.

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Cross-Border Outstanding

Loans outstanding to foreign borrowers exceeded 1% of total assets in the case of foreign borrowers from our subsidiaries and branches in Argentina, Chile, Paraguay, Uruguay and Europe. Total amount outstanding to such borrowers consisting of loans and leases, deposits in banks and securities, as of December 31, 2012 was R$50,300 million. The amounts have been translated into reais from their original amounts in foreign currencies (Argentine pesos, Chilean pesos, Paraguayan guaranis, U.S. dollars, euros, Swiss francs and Uruguayan pesos, as appropriate) using the exchange rate at each date.

Total cross-border outstanding amounts to countries listed above, as of December 31, 2012, 2011 and 2010 consisted of:

	(in millions of R$, except percentages)
	2012		%		2011		%		2010		%
Cash and deposits on demand		2,617		5.2		2,753		7.0		2,097		6.9
Interbank deposits		4,540		9.0		3,719		9.4		4,112		13.6
Securities purchased under agreements to resell		21		0.0		127		0.3		109		0.4
Central Bank compulsory deposits		2,528		5.0		2,111		5.3		906		3.0
Financial assets held for trading		1,142		2.3		1,127		2.8		1,536		5.1
Derivatives		972		1.9		1,067		2.7		377		1.2
Available-for-sale financial assets		3,878		7.7		2,309		5.8		2,615		8.6
Loan and lease operations		34,602		68.8		26,383		66.6		18,552		61.2
Total outstanding		50,300		100.0		39,596		100.0		30,304		100.0

Loans and Leases by Economic Activity

The following table presents the composition of our loan portfolio, including non-accrual loans, by economic activity of the borrower at each of the dates indicated.

	(in millions of R$, except percentages)
	2012					2011					2010
Economic Activities	Loan portfolio		% of Loan portfolio			Loan portfolio		% of Loan portfolio			Loan portfolio		% of Loan portfolio
Public sector		877		0.2	%		1,990		0.6	%		1,138		0.4	%
Industry and commerce		107,405		29.3	%		99,859		28.8	%		84,997		28.8	%
Services		77,922		21.2	%		70,642		20.4	%		60,295		20.5	%
Primary sector		16,649		4.5	%		16,109		4.7	%		13,933		4.7	%
Individuals		161,937		44.2	%		156,167		45.1	%		132,289		44.9	%
Other sectors		2,194		0.6	%		1,497		0.4	%		2,185		0.7	%
TOTAL		366,984		100.0	%		346,264		100.0	%		294,837		100.0	%

As of December 31, 2012, there was no concentration of loans and leases exceeding 10% of total loans and leases not otherwise disclosed on a category of loans and losses.

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Rating of the Loan and Lease Portfolio

We present below the classification of our loan and lease portfolio based on probability of default. For corporate clients, the classification is based on information such as the economic and financial condition of the client, its ability to generate cash, the economic group to which it belongs, current economic and financial conditions and prospects for the market in which it operates, the collateral offered and the ultimate purpose of the loans granted. For the remaining clients, the classification is based on statistical models of credit and behavior scoring, as required by Basel II. In certain exceptional circumstances, classification may be based on individualized analyses which are submitted to the appropriate credit committees. The ratings are grouped in four categories: strong, satisfactory, higher risk and impairment.

	(in millions of R$, except percentages)
	12/31/2012
Internal Rating	Loans neither overdue nor impaired			Loans overdue not impaired			Loans impaired			Total loans
Strong		249,282			5,438			-			254,720
Satisfactory		61,075			9,436			-			70,511
Higher Risk		14,190			8,052			-			22,242
Impairment		-			-			19,511			19,511
Total		324,547			22,926			19,511			366,984
%		88.5	%		6.2	%		5.3	%		100.0	%

	12/31/2011
Internal Rating	Loans neither overdue nor impaired			Loans overdue not impaired			Loans impaired			Total loans
Strong		221,315			5,800			-			227,115
Satisfactory		63,763			10,956			-			74,719
Higher Risk		16,910			9,135			-			26,045
Impairment		-			-			18,385			18,385
Total		301,988			25,891			18,385			346,264
%		87.3	%		7.3	%		5.4	%		100.0	%

	12/31/2010
Internal Rating	Loans neither overdue nor impaired			Loans overdue not impaired			Loans impaired			Total loans
Strong		195,988			4,346			-			200,334
Satisfactory		52,561			8,053			-			60,614
Higher Risk		13,663			6,348			-			20,011
Impairment		-			-			13,878			13,878
Total		262,212			18,747			13,878			294,837
%		88.9	%		6.4	%		4.7	%		100	%

Non-Accrual Loans and Leases

We consider all loans and leases more than 60 days overdue as non-accrual loans and we discontinue accruing financial income related to them the contractual amount of such loans and leases. In 2012, we did not have any individually material non-accrual loans or leases.

Charge-offs

Loans and leases are charged off against the allowance when the loan is not collected or is considered permanently impaired. We normally charge off loans when they become 360 days past due as to principal or interest payments, except for loans with original maturity in excess of 36 months that we charge off when they are overdue 540 days. However, charge-offs may be recognized earlier than 360 days if we conclude that the loan is not recoverable.

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Loans and Leases Quality Information

The table below presents our non-accrual loans together with certain asset quality ratios for the years ended December 31, 2012, 2011 and 2010.

	(in millions of R$, except percentages)
	2012			2011			2010
Non-accrual loans		20,791			20,439			14,736
Allowance for loan losses		25,713			23,873			19,994
Total loans and leases		366,984			346,264			294,837
Non-accrual loans as a percentage of total loans		5.7	%		5.9	%		5.0	%
Allowance for loan losses as a percentage of total loans		7.0	%		6.9	%		6.8	%
Allowance for loan losses as a percentage of non-accrual loans		123.7	%		116.8	%		135.7	%

The table below presents, calculated in accordance with U.S. GAAP, our non-accrual loans together with certain asset quality ratio for the years ended December 31, 2009 and 2008.

(in millions of R$, except percentages)
	U.S. GAAP
	2009			2008
Non-accrual loans and foreclosed assets		15,717			7,760
Non-accrual loans		15,499			7,579
Foreclosed assets, net of reserves		218			181
Allowance for loan losses		19,968			12,202
Total loans and leases		245,736			169,700
Non-accrual loans as a percentage of total loans		6.3	%		4.5	%
Non-accrual loans and foreclosed assets as a percentage of total loans		6.4	%		4.6	%
Allowance for loan losses as a percentage of total loans		8.1	%		7.2	%
Allowance for loan losses as a percentage of non-accrual loans		128.8	%		161.0	%
Allowance for loan losses as a percentage of non-accrual loans and foreclosed assets		127.0	%		157.2	%

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Loan Loss Experience

The table below sets forth the allowance for loan and lease losses for the years ended December 31, 2012, 2011 and 2010.

	(in millions of R$, except percentages)
	2012			2011			2010
Balance at the beginning of period		23,873			19,994			20,245
Charge-offs		(22,142	)		(16,159	)		(15,798	)
Individuals
Credit card		(5,335	)		(3,558	)		(2,731	)
Personal loans		(5,134	)		(2,959	)		(3,908	)
Vehicles		(2,696	)		(2,041	)		(2,377	)
Mortgage loans		(34	)		(73	)		(75	)
Corporate		(314	)		(294	)		(466	)
Small and Medium Businesses		(8,407	)		(7,001	)		(5,793	)
Foreign Loans Latin America		(222	)		(233	)		(448	)
Increase Provision for loan losses		23,982			20,038			15,547
Balance at the end of period		25,713			23,873			19,994
Recoveries from Loans Writen Off		4,664			5,477			4,195
Individuals
Credit card		515			616			470
Personal loans		592			586			275
Vehicles		656			956			856
Mortgage loans		147			184			174
Corporate		1,326			1,475			1,090
Small and Medium Businesses		1,083			1,355			1,138
Foreign Loans Latin America		345			305			192
Net charge-offs		(17,478	)		(10,682	)		(11,603	)
Ratio of charge-offs during the period to average loans outstanding during the period		6.2	%		5.1	%		5.9	%
Ratio of net charge-offs during the period to average loans outstanding during the period		4.9	%		3.3	%		4.3	%
Ratio of allowance for loan losses to total loans and leases		7.0	%		6.9	%		6.8	%

The table below sets forth our provision for loan and lease losses, charge-offs and recoveries included in our result of operations for the years ended December 31, 2012, 2011 and 2010.

	(in millions of R$, except percentages)
	2012			2011			2010			2012/2011			2011/2010
Provision for loan and lease losses		(23,982	)		(20,038	)		(15,547	)		19.7	%		28.9	%
Loan charge-offs		(22,142	)		(16,159	)		(15,798	)		37.0	%		2.3	%
Loan recoveries		4,664			5,477			4,195			(14.8	)%		30.6	%
Net charge-offs		(17,478	)		(10,682	)		(11,603	)		63.6	%		(7.9	)%

Itaú Unibanco Holding periodically assesses whether there is any objective evidence that a receivable or group of receivables is impaired. A receivable or group of receivables is impaired and there is a need for recognizing an impairment loss if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows that can be reliably estimated.

The allowance for loan and lease losses is recognized as probable losses inherent in the portfolio at the balance sheet date. The determination of the level of the allowance rests upon various judgments and assumptions, including current economic conditions, loan portfolio composition, prior loan and lease loss experience and evaluation of credit risk related to individual loans. Our process for determining the allowance for loan and lease losses includes management's judgment and the use of estimates. The adequacy of the allowance is regularly analyzed by management.

The criteria adopted by Itaú Unibanco Holding for determining whether there is objective evidence of impairment include the following:

• default in principal or interest payment;

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• financial difficulties of the debtor and other objective evidence that results in the deterioration of the financial position of the debtor (for example, debt-to-equity ratio, percentage of net sales or other indicators obtained through processes adopted to monitor credit, particularly for retail portfolios);

• breach of loan clauses or terms;

• entering into bankruptcy; and

• loss of competitive position of the debtor.

The estimated period between the loss event and its identification is defined by management for each identified portfolio of similar receivables. The periods adopted by management are of twelve months and considering that the observed period for homogenous receivables portfolios vary, depending upon the specific portfolio, between nine and twelve months, management chose to use twelve-month period as being the most representative, while those observed for portfolios of loans individually evaluated for impairment do not exceed 12 months, considering the review cycle for each credit.

Assessment

Itaú Unibanco Holding first assesses whether objective evidence of impairment exists for receivables that are individually significant, and individually or collectively for receivables that are not individually significant.

To determine the amount of the allowance for individually significant receivables with objective evidence of impairment, we use methodologies that consider both the quality of the client and the nature of the transaction, including its collateral, to estimate the cash flows expected from these loans.

If no objective evidence of impairment exists for an individually assessed receivable, whether significant or not, the asset is included in a group of receivables with similar credit risk characteristics and such group is collectively assessed for impairment. Receivables that are individually assessed for impairment and for which an impairment loss is recognized are not included in the collective assessment. The amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.

For collectively assessed loans, the calculation of the present value of the estimated future cash flows for which there is collateral reflects the historical performance of the foreclosure and recovery of fair value, considering the cash flows that may arise from foreclosure less costs for obtaining and selling that collateral.

For the purpose of a collective evaluation of impairment, receivables are grouped on the basis of similar credit risk characteristics. The characteristics are relevant to the estimation of future cash flows for such receivables by being indicative of the debtors’ ability to pay all amounts due, according to the contractual terms of the receivables being evaluated. Future cash flows in a group of receivables that are collectively evaluated for purposes of identifying the need for recognizing impairment are estimated on the basis of the contractual cash flows of the group of receivables and the historical loss experience for receivables with similar credit risk characteristics. The historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

For individually significant receivables with no objective evidence of impairment, Itaú Unibanco Holding classifies these loans into certain rating categories based on several qualitative and quantitative factors applied through internally developed models. Considering the size and the different risk characteristics of each contract, the rating category determined according to internal models may be reviewed and modified by our Corporate Credit Committee, the members of which are executives and experts in corporate credit risk. Itaú Unibanco Holding estimates inherent losses for each rating category considering an internally developed approach for low-default portfolios, that uses our historical experience for building internal models, that are used both to estimate the probability of default (“PD”) and to estimate the loss given default (“LGD”).

To determine the amount of the allowance for individually non-significant items, loans are segregated into classes considering the underlying risks and characteristics of each group. The allowance for loan and lease losses is determined for each of those classes through a process that considers historical delinquency and loan loss experience over the most recent years.

102

During the year ended in December 31, 2012, we charged off credits in the total amount of R$22,142 million and as of December 31, 2012 our ratio of allowances for loan and lease losses to total loans and leases was 7.0%. The increase in the volume of loans charged off is a consequence of the increase in delinquencies in 2011 and early 2012, coupled with the increase in the volume of our portfolio of credit card, personal loans and small and medium businesses. As of December 31, 2012, our ratio of allowances for loan and lease losses to total loans and leases was the same as in the previous year.

During the year ended December 31, 2011, we charged off loans and leases in the total amount of R$16,159 million and as of December 31, 2011 our ratio of allowances for loan and lease losses to total loans and leases was 6.9%. Our ratio of allowances for loan and lease losses to total loans and leases increased by 0.1 percentage points compared to the previous year, as we continue to provide for loans and leases in 2011 as a result of increased delinquency in 2009 and 2010, combined with the strong growth of our loan and lease portfolio in 2011.

During the year ended December 31, 2010, we charged off loans and leases in the total amount of R$15,798 million and as of December 31, 2010 our ratio of allowances for loan and lease losses to total loans and leases was 6.8%. The increase in the volume of loans and leases written off in 2010 was a result of increased delinquency in 2009 combined with the strong growth of our loan and lease portfolio.

103

The table below sets forth allowance for loan and lease losses, calculated in accordance with U.S. GAAP, for the years ended December 31, 2009 and 2008.

(in millions of R$, except percentages)
	U.S. GAAP
	2009			2008
Balance at the beginning of period		12,202			7,473
Charge-offs		(9,490	)		(5,904	)
Commercial
Industrial and others		(3,883	)		(2,069	)
Import financing		(53	)		(7	)
Export financing		-			-
Real estate loans (primarily residential housing loans)		(72	)		(78	)
Lease financing (primarily vehicle financing)		(1,465	)		(453	)
Public sector (domestic)		-			-
Individuals
Overdraft		(903	)		(587	)
Consumer finance operations		(1,606	)		(1,218	)
Credit card		(1,508	)		(1,482	)
Agricultural		(1	)		(10	)
Recoveries		1,884			1,272
Commercial
Industrial and others		255			254
Import financing		-			-
Export financing		-			-
Real estate loans (primarily residential housing loans)		207			166
Lease financing (primarily vehicle financing)		119			174
Public sector (domestic)		-			-
Individuals
Overdraft		398			232
Consumer finance operations		769			401
Credit card		136			45
Agricultural		-			-
Net charge-offs		(7,606	)		(4,632	)
Provision for loan losses		15,372			9,361
Balance at the end of period		19,968			12,202
Ratio of charge-offs during the period to average loans outstanding during the period		4.3	%		4.2	%
Ratio of net charge-offs during the period to average loans outstanding during the period		3.4	%		3.3	%
Ratio of allowance for loan losses to total loans and leases		8.1	%		7.2	%

The table below sets forth our provision for loan and lease losses, charge-offs and recoveries included in our result of operations, calculated in accordance with U.S. GAAP, for the years ended December 31, 2009 and 2008.

	(in millions of R$, except percentages)
	2009			2008			2009/2008
Provision for loan and lease losses		(15,372	)		(9,361	)		64.2	%
Loan charge-offs		(9,490	)		(5,904	)		60.7	%
Loan recoveries		1,884			1,272			48.1	%
Net charge-offs		(7,606	)		(4,632	)		64.2	%

104

During the year ended December 31, 2009, under U.S. GAAP, we charged off loans and leases in the total amount of R$9,490 million and as of December 31, 2009 our ratio of allowance for loan and lease losses to total loans and leases was 8.1%. The increase in losses reflects the adverse economic environment and occurred in accordance with our forecasted scenario. Recent data indicate that leading indicators for default rates, such as first payment default rates, improved and we believe that this is a result of increased selectivity in our origination, our ongoing development of risk analysis procedures and an overall improvement in macroeconomic conditions in Brazil.

During the year ended December 31, 2008, under U.S. GAAP, we charged off loans and leases in the total amount of R$5,904 million and as of December 31, 2008 our ratio of allowance for loan and lease losses to total loans and leases was 7.2%. The relatively small increase in our charged-off loans and leases in 2008, in an environment where our portfolio has been growing significantly, was due to the improved performance of our portfolio and collection activities during that year, mainly in the first nine months of the year. During the fourth quarter, with the worsening of the global economic crisis, we increased the balance of allowance for loans and lease losses to adapt to the new economic scenario of increased credit risk in our loan and lease portfolio. As a consequence, our ratio of allowance for loan and lease losses to total loans and leases was 7.2% as of December 31, 2008, compared to 6.4% as of December 31, 2007.

105

Allocation of the Allowance for Loans and Lease Losses

The table below presents a breakdown, by each segment and class, as defined under our portfolio segmentation, of the allowance for loan and lease losses, the allowance as a percentage of total loan and lease losses for the relevant segment or class and the percentage of total loans and leases in each segment and class of total loans and leases as of December 31, 2012, 2011 and 2010.

(in millions of R$, except percentages)
	2012								2011								2010
	Allocated allowance		Allocated allowance as a % of total loans and leases			Loans category as a % of total loans(1)			Allocated allowance		Allocated allowance as a % of total loans and leases			Loans category as a % of total loans(1)			Allocated allowance		Allocated allowance as a % of total loans and leases			Loans category as a % of total loans(1)
Individuals		14,779		9.8	%		57.5	%		13,679		9.2	%		57.3	%		10,717		8.5	%		53.6	%
Credit Card		2,863		7.1	%		11.1	%		3,825		9.8	%		16.0	%		3,306		10.0	%		16.5	%
Personal Loans		7,643		19.1	%		29.7	%		5,393		14.8	%		22.6	%		3,590		14.2	%		18.0	%
Vehicles		4,227		8.2	%		16.4	%		4,415		7.3	%		18.5	%		3,709		6.2	%		18.6	%
Mortgage Loans		46		0.3	%		0.2	%		46		0.3	%		0.2	%		112		1.4	%		0.6	%
Corporate		1,427		1.4	%		5.5	%		708		0.8	%		3.0	%		973		1.3	%		4.9	%
Small and Medium Businesses		9,091		10.7	%		35.4	%		9,197		10.7	%		38.5	%		8,041		10.1	%		40.2	%
Foreign Loans Latin America		416		1.5	%		1.6	%		289		1.5	%		1.2	%		263		1.9	%		1.3	%
Total		25,713		7.0	%		100.0	%		23,873		6.9	%		100.0	%		19,994		6.8	%		100.0	%

⁽¹⁾ Excludes non-accrual loans.

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The following table sets forth, calculated in accordance with U.S. GAAP, our allocation of the allowance for loan and lease losses by type of loan as of December 31, 2009 and 2008. The allocated amount of the allowance is expressed as a percentage of the related loan and lease amount with the corresponding percentage of the loan and lease category to total loans and leases.

(in millions of R$, except percentages)
	U.S. GAAP
	2009								2008
	Allocated allowance		Allocated allowance as a % of total loans and leases			Loans category as a % of total loans (1)			Allocated allowance		Allocated allowance as a % of total loans and leases			Loans category as a % of total loans (1)
Type of loan
Commercial
Industrial and other		3,334		1.4	%		42.4	%		2,399		1.4	%		38.4	%
Import financing		11		0.0	%		0.8	%		10		0.0	%		2.1	%
Export financing		127		0.1	%		2.8	%		135		0.1	%		5.7	%
Real estate loans (primarily residential housing loans)		209		0.1	%		4.5	%		171		0.1	%		3.8	%
Lease financing (primarily vehicle financing)		2,521		1.0	%		19.2	%		1,454		0.9	%		24.6	%
Public sector (domestic)		-		0.0	%		0.7	%		2		0.0	%		0.4	%
Individuals:
Overdraft		1,319		0.5	%		1.7	%		2,290		1.3	%		2.1	%
Consumer finance operations		6,382		2.6	%		13.3	%		4,042		2.4	%		11.9	%
Credit Card		5,309		2.2	%		12.5	%		1,564		0.9	%		8.4	%
Agricultural		756		0.3	%		2.1	%		135		0.1	%		2.6	%
Total		19,968		8.1	%		100.0	%		12,202		7.2	%		100.0	%

(1) Excludes non-accrual loans.

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Renegotiated Loans
	(In millions of R$, except percentages)
	Year Ended December 31,
	2012			2011
Renegotiated loans (1)		14,519			11,844
Allowance for loan and lease losses		6,767			5,355
Allowance for loan and lease losses/renegotiated loans		46.6	%		45.2	%

⁽¹⁾ Includes debt consolidation, deferment or any other arrangement that modifies the periods or conditions, of operations originally overdue.

We include under renegotiated loans both loans which the original terms of the contractual arrangement have been amended (agreements) and new loan transactions originated to settle contracts or transactions with the same customer (restructured loans), that were originally overdue. Amendments and restructured loans typically reflect changes in contract terms, rates or payment conditions.

After the amendment or restructuring, the loan which was previously overdue is no longer considered past due. The fact that a loan or lease transaction has been renegotiated is also considered in determining its specific allowance for loan and lease losses after renegotiation. The past performance and payment history of both the client and the transaction, including the redefault probability of renegotiated transactions, are considered by our risk models to determine the probability of default . This probability of default is always higher than the one attributed to similar transactions that have never been renegotiated. Another factor that is considered in determining the appropriate level of the allowance for loan and lease losses is any additional collateral provided by the debtor. The resulting provision levels are compatible with the risk profile of each transaction.

Our renegotiated loan portfolio increased to 3.96% of our total loan portfolio as of December 31, 2012, compared to 3.42% as of December 31, 2011. At the end of 2012, the ratio of the allowance for loan and lease losses to the renegotiated portfolio was 46.6% compared to 45.2% at December 31, 2011. This ratio increased in 2012 mainly because of an increase in the redefaulted renegotiated loans to total renegotiated loans ratio, from 29.8% as of December 31, 2011 compared to 35.4% as of December 31, 2012.

During 2012, the Brazilian economy experienced an increase in delinquency levels for individuals, mainly in vehicles and in personal loan portfolios. As one of the largest banks in Brazil, this increase also affected our loan portfolio. In order to increase the recovery of loan operations that are past due, including loans that have been written off as losses, and to reduce losses, we increased our collection and recovery initiatives. We require, however, that at least one installment be paid in order to consider the renegotiation to be valid and treated as a renegotiated agreement.

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The total amount of each type of renegotiated loan is shown in the tables below as of December 31, 2012 and 2011.

As of December 31, 2012
Type of Loan	Total Renegotiated Loans		Total Allowance for Loan Losses		Allowance for Loan Losses /Renegotiated Loans			Total Redefaulted Renegotiated Loans (*)		% Redefaulted Renegotiated Loans
Restructured Loans		11,343		5,287		46.6	%		4,012		35.4	%
Agreements		3,176		1,480		46.6	%		1,722		54.2	%
Total		14,519		6,767		46.6	%		5,734		39.5	%

(*) Our redefaulted renegotiated loans are renegotiated operations 60 days or more overdue.

As of December 31, 2011
Type of Loan	Total Renegotiated Loans		Total Allowance for Loan Losses		Allowance for Loan Losses /Renegotiated Loans			Total Redefaulted Renegotiated Loans (*)		% Redefaulted Renegotiated Loans
Restructured Loans		8,652		3,732		43.1	%		2,574		29.8	%
Agreements		3,192		1,623		50.8	%		1,791		56.1	%
Total		11,844		5,355		45.2	%		4,365		36.9	%

(*) Our redefaulted renegotiated loans are renegotiated operations 60 days or more overdue.

109

The following tables provide an additional breakdown of renegotiated loans by portfolios of segments and classes, based on type of modification, as of December 31, 2012 and 2011:

As of December 31, 2012
Renegotiated loan and lease operations	Payment extension (1)		Multiple concessions (2)		Multiple modifications (3)		Total
	( In millions of R$ )
Individuals		2,095		1,743		4,625		8,463
Credit card		-		460		-		460
Personal loans		14		1,283		4,625		5,922
Vehicles		2,025		-		-		2,025
Mortgage loans		56		-		-		56
Corporate		-		-		495		495
Small and medium businesses		136		5,137		259		5,532
Foreign loans - Latin America		-		29		-		29
Total renegotiated loan and lease operations		2,231		6,909		5,379		14,519

⁽¹⁾ Represents loan and lease transactions subject to an amendment of contractual terms relating exclusively to payment due dates.

⁽²⁾ Represents multiple loan and lease transactions which have been restructured, i.e., all such outstanding transactions are terminated and a single new transaction consolidating the terminated loan and lease transactions is entered into.

⁽³⁾ Represents individual loan and lease transactions entered into with a customer that are renegotiated for an amendment of the original contractual terms, which may include amendment of interest  rates, discounts of outstanding amounts due and payment extensions.

As of December 31, 2011
Renegotiated loan and lease operations	Payment extension (1)		Multiple concessions (2)		Multiple modifications (3)		Total
	( In millions of R$ )
Individuals		1,655		1,732		2,406		5,793
Credit card		-		260		-		260
Personal loans		85		1,472		2,406		3,963
Vehicles		1,518		-		-		1,518
Mortgage loans		52		-		-		52
Corporate		-		-		54		54
Small and medium businesses		135		5,566		291		5,992
Foreign loans - Latin America		-		5		-		5
Total renegotiated loan and lease operations		1,790		7,303		2,751		11,844

⁽¹⁾ Represents loan and lease transactions subject to an amendment of contractual terms relating exclusively to payment due dates.

⁽²⁾ Represents multiple loan and lease transactions which have been restructured, i.e., all such outstanding transactions are terminated and a single new transaction consolidating the terminated loan and lease transactions is entered into.

⁽³⁾ Represents individual loan and lease transactions entered into with a customer that are renegotiated for an amendment of the original contractual terms, which may include amendment of interest  rates, discounts of outstanding amounts due and payment extensions.

110

The following tables provide show an additional breakdown of renegotiated loans by portfolios of segments and classes, based on  their classification, as of December 31, 2012 and 2011:

As of December 31, 2012
Renegotiated loan and lease operations	Impaired performing		Nonimpaired performing		Impaired nonperforming		Nonimpaired nonperforming		Total
	( In million of R$ )
Individuals		-		3,995		2,966		1,502		8,463
Credit card		-		460		-		-		460
Personal loans		-		3,142		1,654		1,126		5,922
Vehicles		-		379		1,284		362		2,025
Mortgage loans		-		14		28		14		56
Corporate		87		247		161		-		495
Small and medium businesses		-		1,792		2,659		1,081		5,532
Foreign loans - Latin America		-		15		4		10		29
Total renegotiated loan and lease operations		87		6,049		5,790		2,593		14,519

As of December 31, 2011
Renegotiated loan and lease operations	Impaired performing		Nonimpaired performing		Impaired nonperforming		Nonimpaired nonperforming		Total
	( In million of R$ )
Individuals		-		2,678		2,026		1,089		5,793
Credit card		-		260		-		-		260
Personal loans		-		2,203		961		799		3,963
Vehicles		-		205		1,035		278		1,518
Mortgage loans		-		10		30		12		52
Corporate		5		35		14		-		54
Small and medium businesses		-		2,342		2,319		1,331		5,992
Foreign loans - Latin America		-		1		4		-		5
Total renegotiated loan and lease operations		5		5,056		4,363		2,420		11,844

The table below additionally presents changes in our impaired loan and lease portfolio, including changes from the renegotiated transactions in our impaired operations, for the years ended  December 31, 2012 and 2011:      

Impaired loans	2012			2011
	( In million of R$ )
Balance at the beginning of the period		18,385			13,774
(+) Loan operations added		11,441			12,150
(+) Loan operations added due to redefault		6,873			5,304
(-) Loans removed due to write-off		(12,867	)		(6,774	)
(-) Loans removed due to renegotiation (including amendments)		(622	)		(518	)
(-) Loans removed due to total or partial pay-off		(3,699	)		(5,551	)
Balance at the end of the period		19,511			18,385

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Average Deposit Balances and Interest Rates

The table below sets forth the average balances of deposits together with the average interest rates for each period presented.

(in millions of R$, except percentages)
	2012					2011					2010
	Average balance		Average rate			Average balance		Average rate			Average balance		Average rate
Non-interest bearing deposits		30,324					26,072					25,817
Interbank deposits		30,084					25,752					24,719
Other deposits		240					321					1,098
Interest-bearing deposits		206,652		5.1	%		186,429		6.5	%		164,210		6.4	%
Deposits from banks		8,661		3.3	%		2,376		7.1	%		1,703		8.5	%
Savings deposits		73,404		5.5	%		61,143		6.5	%		52,457		6.0	%
Time deposits		124,587		5.0	%		122,910		6.5	%		110,050		6.7	%
Total		236,976					212,502					190,027

Maturity of Deposits

The following tables set forth a breakdown of deposits by maturity, as of December 31, 2012:

(in millions of R$)
	2012
	0-30 days		31-180 days		181-365 days		Over 365 days		Total
Non-interest bearing deposits		34,916		-		-		-		34,916
Demand deposits		34,641		-		-		-		34,641
Other deposits		275		-		-		-		275
Interest bearing deposits		98,462		24,412		17,868		67,542		208,284
Savings deposits		83,451		-		-		-		83,451
Time deposits		12,369		20,861		16,667		67,335		117,232
Interbanks Deposits		2,642		3,551		1,201		207		7,601
Total		133,378		24,412		17,868		67,542		243,200

The table below sets forth the maturity of outstanding time deposits with balances in excess of US$100,000 (or its equivalent) issued by us as of December 31, 2012.

	(in millions of R$)
Maturity within three months		26,164
Maturity after three months to six months		7,065
Maturity after six months to twelve months		16,667
Maturity after twelve months		67,335
Total time deposits in excess of US$100,000		117,231

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Short-Term Borrowings

Short-term borrowings are included in our balance sheet under the line items "Securities sold under repurchase agreements", "Interbank market debt" and "Institutional market debt". The principal category of our short-term borrowings is securities held under repurchase agreements. The average monthly balance outstanding during 2012, 2011 and 2010 for other categories of short-term borrowings was less than 30% of our stockholders’ equity at the end of each fiscal year.

The table below presents a summary of securities sold under repurchase agreements for the periods indicated.

(in millions of R$, except percentages)
	2012			2011			2010
Securities sold under repurchase agreements
Amount outstanding (as of December 31)		267,405			185,413			199,657
Maximum amount outstanding during the period		267,405			206,753			199,657
Weighted average interest rate at period-end		8.97	%		9.75	%		7.93	%
Average amount outstanding during period		204,358			196,400			163,901
Weighted average interest rate		9.36	%		10.36	%		7.82	%

Capital

Specific regulatory capital requirements are discussed in “Item 4B. Business Overview — Regulation and Supervision — Regulatory Capital Requirements.” Additional information on capital requirements is discussed in note 33 to our consolidated financial statements.

Minimum Capital Requirements

The following table sets forth our capital positions of total risk-weighted assets, as well as our minimum capital requirements under Central Bank rules, in each case as of December 31, 2012, 2011 and 2010, in each case on a fully consolidated basis, including our financial and non-financial subsidiaries.

(in millions of R$, except percentages)
	2012			2011			2010
Tier 1 Capital		72,007			71,601			62,240
Tier 2 Capital		37,833			21,565			18,652
Tier 1 plus Tier 2 Capital		109,840			93,166			80,892
Adjustments		(420	)		(55	)		(173	)
Our regulatory capital (1)		109,421			93,111			80,719
Minimum regulatory capital required (2)		72,036			62,556			57,525
Excess over minimum regulatory capital required		37,385			30,555			23,194
Total risk-weighted assets		654,872			568,693			522,952
Our regulatory capital to risk-weighted assets ratio		16.7	%		16.4	%		15.4	%

⁽¹⁾ Based on Central Bank requirements (see note 33 to our consolidated financial statements).

⁽²⁾ The minimum requirement in Brazil was 11% as of December 31, 2012, 2011 and 2010.

4C. Organizational Structure

We are a financial holding company controlled by IUPAR, a holding company jointly controlled by Itaúsa and E. Johnston, which is a holding company controlled by the former controlling shareholders of Unibanco, the Moreira Salles family. See “Item 4B. Business Overview – Our Ownership Structure” and “Item 7A. Major Shareholders.” Our list of significant subsidiaries as of December 31, 2012 is included as Exhibit 8.1 to this annual report. This list contains information relating to our significant subsidiaries in accordance with our consolidated financial statements.

113

4D. Property, Plant and Equipment

We own our principal executive offices located in São Paulo, Brazil and a number of other administrative buildings. Our offices and the main activities conducted in each of them are:

· Centro Empresarial Itaú Unibanco, located at Praça Alfredo Egydio de Souza Aranha, 100, São Paulo — head office, commercial department, back-offices and main administrative departments;

· Centro Administrativo Tatuapé, located at Rua Santa Virgínia/Rua Santa Catarina, 299, São Paulo — administrative center;

· Centro Tecnológico, located at Avenida do Estado, 5,533, São Paulo — data processing center;

· Our leased office, located at Avenida Brigadeiro Faria Lima, 3.400, 3rd through 12th floor, São Paulo; at Avenida Nações Unidas, 7,815, Tower I — 3rd through 13th floor, Tower II — 5th floor, São Paulo and at Avenida Brigadeiro Faria Lima, 3,311, 1st through 3rd floor, 13th and 14th floor — wholesale and investment bank activities;

· Centro Administrativo Raposo, located at Rua João Moreira Sales, 130 — Jardim Monte Alegre — São Paulo – administrative center and data processing center;

· Centro Administrativo Pinheiros, located at Av.Eusébio Matoso, 891 — Pinheiros — São Paulo — administrative center;

· Edifício Boa Vista, located at Rua Boa Vista, 162 — São Paulo — administrative center; and

· CA Patriarca, located at Praça do Patriarca, 30 / Rua Direita, 250 — São Paulo — administrative center.

We also lease a portion of our administrative offices and the majority of our branches at competitive market prices from third parties and under renewable leases with terms ending from the first half of 2013 (which are in the process of being renewed under similar terms) to the fourth quarter of 2032. As of December 31, 2012, we owned 31.4% of our administrative offices and branches (including electronic service points, banking sites and parking lots) and leased the remaining 68.6%.

In addition, on January 27, 2012, we announced the construction of a new technology center. See “ 4B. Business Overview — Technology.”

ITEM 4A UNRESOLVED STAFF COMMENTS

None.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5A. Operating Results

The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes and other financial information included elsewhere in this annual report, and in conjunction with the information included under “Item 3A. Selected Financial Data” and “Item 4B. Business Overview – Selected Statistical Information”. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these discussed in forward-looking statements as a result of various factors, including those set in forth in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 3D. Risk Factors”.

Effects of the Global Financial Markets on our Financial Condition and Results of Operations

The global financial markets crisis has significantly affected the world economy since the last quarter of 2008.  The crisis led to (i) recessions and increasing unemployment in the world’s leading economies; (ii) a reduction in investments on a global scale; (iii) a decrease in commodities prices; (iv) a sharp decline in credit availability and liquidity and (iv) a general reduction in the levels of transactions in the capital markets worldwide.

Global financial markets risks increased in the first half of 2012, primarily due to worsening fiscal problems in Europe.  Fear of a sovereign debt crisis spread to large European countries, such as Italy and Spain.  A significant portion of these countries’ debt is held by financial institutions, and their economic situation may impact the results of banks and investment funds.  Markets fear sovereign or bank defaults and the lack of political coordination in Europe.

Increased financial market risks in the euro zone have declined since August 2012, when the European Central Bank first outlined a framework for intervention in the sovereign-debt markets.  The European Central Bank will purchase bonds from sovereigns that first agree to receive direct assistance from the bailout funds (the European Financial Stability Facility and European Financial Stabilization Mechanism). The new framework has two major advantages.  First, there are no quantitative limits on purchases.  Second, the European Central Bank will accept the same (pari passu) treatment as private or other creditors with respect to bonds purchased under the new program.

Although we believe risks have diminished, a financial deterioration of any of these countries may impair growth of economies worldwide and, indirectly, Brazil’s economy. Although we have international operations and investments in certain European countries affected by the fiscal crisis, our exposure to the sovereign bonds of Greece, Ireland, Italy, Portugal and Spain (“GIIPS”), as well as to financial institutions and other corporations and small businesses and individuals domiciled in those countries is not significant when compared to our total assets or stockholders’ equity.  We were also indirectly exposed to the GIIPS countries through Banco BPI S.A. (“Banco BPI”), a Portuguese bank which was our equity investee. However, on April 20, 2012, Itaú Unibanco Holding sold its investment of 18.9% in Banco BPI to Caixa Bank, S.A. (“La Caixa Group”) and received approximately €93 million in cash. This transaction had a positive impact on our stockholders’ equity of approximately R$124 million due to the adjustment in other comprehensive income in connection with the sale and had a negative non-recurring effect of R$186 million on our net income due to the difference between the consideration received and the carrying amount of our equity investment and the adjustment in other comprehensive income.

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Our gross exposure as of December 31, 2012 to the sovereign bonds of the GIIPS countries as well as to financial institutions and other corporations and small businesses and individuals domiciled in those countries, is set forth in the table below, in millions of reais:

(R$ in million)
As of December 31, 2012
	Segment	Credit		Co-obligation		Sovereign		Bond		Derivative		Total Exposure
Italy	Corporate		-		-		-		-		-		-
	Financial		-		7		-		-		-		7
Portugal	Corporate		929		4		-		-		3		936
	Financial		-		-		-		10		-		10
Spain	Corporate		621		12		-		-		1		634
	Financial		-		101		-		-		8		108
Total			1,551		123		-		10		11		1,694

The gross exposure presented above as of December 31, 2012 amounted R$1,694 million, with co-obligations in the amount of R$123 million, primarily related to our exposure to corporate credits. The disclosure above has been measured at our estimated realizable value which is updated depending on its nature (such as pledged amounts in current accounts used to collect customer receivables, financial investments, real estate, machinery and equipment or others), except for guarantees provided by third parties where the amount corresponds to the outstanding debt. Our derivatives related to GIIPS countries as of December 31, 2012 amounted R$11 million.

In the U.S., the main risk to a relatively stable outlook for 2013 seems to be the increasing fiscal drag caused by higher tax rates.  The US economy grew 2.2% in 2012, compared to 1.8% in 2011.  Private investment recovered in 2012, especially in the housing market, which was offset by a decrease in public spending.  We expect modest U.S. growth in 2013, as the increasing private demand is expected to be partially offset by continued restrictive adjustments to its fiscal policy.

Emerging markets, including Brazil and China, display tentative signs of recovery, but risks remain.  In China, a rise in real estate prices and increased inflation could trigger a new round of tightening measures.  In Brazil, domestic demand has been sustained by an active labor market.  Should increased growth not materialize, unemployment may rise and jeopardize the recovery of the economy in emerging markets.  Although moderate growth is expected in 2013, emerging markets are likely to perform better than the developed world.  The Brazilian economy is expected to grow around 3.0% in 2013.

Our results of operations since the last quarter of 2008 have been partially negatively affected by the global financial markets crisis.  Fiscal problems in advanced economies, sluggishness in the developed world and inflation and other issues in developing economies may have an impact on future growth in Brazil and, therefore, on our results of operations.

Brazilian Economic, Political and Social Conditions

As a Brazilian bank with most of our operations in Brazil, we are significantly affected by economic, political and social conditions in Brazil. In recent years, we have benefited from Brazil’s generally stable economic environment, with average annual gross domestic product (“GDP”) growth of approximately 4.3% from 2004 to 2011. Weak domestic economic activity has allowed the Central Bank to ease the benchmark interest rate payable to holders of securities issued by the Brazilian government and traded through the SELIC from 12.5% in August 2011 to a low of 7.25% in October 2012. As a proportion of GDP, bank lending expanded to 53.5% in December 2012 from 49.0% in December 2011. In addition, the Brazilian government reduced the manufactured products tax (Imposto sobre Produtos Industrializados or “IPI”) for vehicles, “white-line” goods, furnishings and other related products, in order to stimulate domestic activity. Further tax reductions are expected to take place in 2013 in an attempt to stimulate the Brazilian economy.

There are still concerns about the acceleration of inflation in Brazil. Consumer price inflation did not reach the Central Bank’s target in 2012, reflecting not only rising commodity prices during 2012 but also an active labor market and inflationary inertia. The Consumer Price Index (Índice de Preços ao Consumidor Amplo or “IPCA”) decreased to 5.8% in 2012, compared to 6.5% in 2011. However, if inflation rises, disposable income of families may decrease in real terms and could eventually lead to higher delinquency rates in the Brazilian banking system.

After growing 7.5% in 2010, Brazilian GDP growth decreased to 2.7% in 2011, as a result of global deceleration, macroprudential measures taken in late 2010 by the Brazilian government and fiscal and monetary tightening. In 2012, growth of the Brazilian economy decelerated further, as a result of higher domestic and international uncertainty, and has grown only by 0.9%. We expect GDP growth around 3.0% in 2013.

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The Brazilian credit market showed moderate growth in 2012 and 2011 compared to 2010, impacted by the effects of lower growth and higher delinquency rates in 2011 and 2012. In 2012 total new consumer loans in Brazil increased by 2.1% in real terms, after growing 4.4% in 2011 and 15.4% in 2010. Similarly, total new corporate loans in Brazil increased by 1.6% in real terms, after growing by 1.4% in 2011 and 2.5% in 2010. In addition, throughout 2012 we have experienced some deterioration in non-performing loans, particularly vehicle and personal loans and account overdraft services. In the last two quarters, non-performing loans over 90 days past due stabilized and non-performing loans from 15 to 90 days past due decreased slightly to 3.9% from 4.3%. See “— Results of Operations for Year Ended December 31, 2012 compared to Year Ended December 31, 2011 — Highlights.”

The current account deficit reached 2.4% of GDP as of December 31, 2012, from 2.1% as of December 31, 2011. Brazil’s external solvency improved considerably, with US$379 billion in international reserves as of December 31, 2012 and US$317 billion in external debt as of December 31, 2012. Brazil’s external liabilities excluding foreign direct investments (mainly foreign portfolio investments) increased to US$841 billion as of December 31, 2012, from US$791 billion as of December 31, 2011. The Central Bank has not been active in the foreign exchange spot market since May 2012, but has been active in the derivatives market (swaps), both as a purchaser and seller. Balance of payments results could increase exchange-rate volatility, potentially affecting our results. See “— Certain Effects of Foreign Exchange Rates on Our Net Interest Margin.”

We are also exposed to tax-policy and regulatory changes, which are sometimes adopted on short notice. For example, the IOF/FX was modified in 2010 and is currently levied at a rate of 0.38%, with certain exceptions to this general rule. In 2012, the Brazilian government made additional changes to the IOF/FX. The 6% tax on external debt with average maturity of less than two years was extended to instruments whose maturity is less than five years and later reduced to apply to maturities of one year or less. Moreover, tax-free exports funding was restricted in March 2012 and then eased in December 2012 and the 60.0% reserve requirement on foreign currency spot short positions, imposed in 2011 for positions exceeding US$1 billion, was also eased at the end of 2012 to apply only to spot short positions exceeding US$3 billion. See “ Item 4B. Business Overview — Regulation and Supervision — Taxation — Tax on Financial Transactions.”

Altogether, those measures contributed to the depreciation of the real and, subsequently, reduction of currency volatility, when compared to the U.S. dollar. The exchange rate was R$2.05 to US$1.00 as of December 31, 2012, compared to R$1.87 to US$1.00 as of December 30, 2011.

The savings account rule for new deposits was also amended in May 2012. The current rule ties the interest rate of savings accounts to the benchmark SELIC rate, yielding 70.0% of the SELIC, if the SELIC is at or below 8.5%. If the SELIC is above 8.5%, the rule in place prior to May 2012 applies: 0.5% per month plus the TR reference rate.

On April 30, 2008, Standard & Poor’s Rating Services upgraded the long-term rating of Brazil’s sovereign foreign currency debt to BBB- from BB+, upgrading Brazil’s rating to investment grade. On November 17, 2011, S&P further upgraded Brazil to BBB. On May 29, 2008, Fitch Ratings followed suit and upgraded Brazil to investment grade, raising its rating to BBB- from BB+, and on April 4, 2011, to BBB. On September 22, 2009, Moody’s Investors Service Inc. “Moody’s”) raised Brazil’s sovereign rating to Baa3 from Ba1, and on June 20, 2011 updated it to Baa2. These upgrades have contributed to further increase the inflow of foreign capital.

On June 27, 2012, Moody’s concluded their previously announced review for downgrade of Brazilian financial institutions as part of their ongoing global review of banks whose standalone assessments are higher than the rate of the country in which they are domiciled. Itaú Unibanco Holding’s issuer rating was downgraded to Baa1 from A2, which is one notch above the level of the Brazil sovereign debt rating, and carries a positive outlook. The downgrade reflected Moody’s assessment of the correlation between sovereign and financial institution credit risk globally, in order to determine to which degree the affected Brazilian entities’ stand-alone credit profiles are correlated with sovereign risk. For Itaú Unibanco Holding, the downgrade did not reflect a credit profile deterioration.

On February 28, 2013, Moody’s announced the downgrade of the ratings of subordinated debt issued by certain Brazilian banks, including Itaú Unibanco Holding. This downgrade reflected Moody´s global revision of its approach to “notching” and is in line with the “Moody´s Guidelines for Rating Bank Hybrid Securities and Subordinated Debt”. For Itaú Unibanco Holding, the downgrade did not reflect a credit profile deterioration. There has been no material impact in funding related to this rating action.

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The table below shows the real GDP growth, the inflation rate, exchange rate variation and the interest rates in Brazil as of and for the years ended December 31, 2012, 2011, 2010, 2009 and 2008:

				As of and for the year ended December 31
	2012			2011			2010		2009			2008
Real GDP growth % (1)		0.9			2.7			7.5		(0.3	)		5.2
Inflation rate % (2)		8.1			5.0			11.3		(1.4	)		9.1
Inflation rate % (3)		5.8			6.5			5.9		4.3			5.9
Exchange rate variation %(R$ /US$)(4)		(8.6	)		(11.2	)		4.5		34.2			(24.2	)
TR – a reference interest rate %(5)		0.0			1.1			0.7		0.2			2.3
CDI (interbank interest rate) %(5)		6.9			10.9			10.6		8.6			13.5
SELIC – overnight interest rate %(5)		7.2			10.9			10.7		8.7			13.7
CDS 5 year (6)		108.3			160.8			111.0		123.0			298.5

⁽¹⁾ Source: Instituto Brasileiro de Geografia e Estatística (“IBGE”)

⁽²⁾ Source: General Price Index – Internal Availability (Índice Geral de Preços – Disponibilidade Interna or “IGP-DI”), as published by the Fundação Getulio Vargas.

⁽³⁾ Source: IPCA, as published by IBGE.

⁽⁴⁾ Source: Central Bank (period end, negative numbers mean depreciation of the Brazilian real).

⁽⁵⁾ Source: Central Bank (period end).

⁽⁶⁾ Source: Bloomberg (period end). Credit default swap (CDS) is a measure of country risk (basis point).

Certain Effects of Foreign Exchange Rates on Our Net Interest Margin

The variation of the real can affect our net interest margin (includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions). A certain amount of our financial assets and liabilities are denominated in or indexed to foreign currencies, primarily the U.S. dollar. When the real depreciates, we incur losses on our liabilities denominated in or indexed to foreign currencies, such as our U.S. dollar-denominated long-term debt and short-term borrowings, because the cost in reais of the related interest expense increases. At the same time, we realize gains on monetary assets denominated in or indexed to foreign currencies, such as our dollar-indexed trading securities and loans, due to increased interest income from such assets measured in reais. When the real appreciates, the effects are the opposite of those described above. Consequently, the management of the gap in foreign currencies can have material effects on our net income. Our foreign currency gap management also takes into account the tax effects of such positions. As the profits from exchange rate variation on investments abroad are not taxable, we aim to maintain sufficient hedges (a liability position in foreign exchange derivatives) to reduce the potential effects from our total foreign-exchange exposure, net of tax effects.

Unless otherwise indicated, the discussion in this “Item 5. Operating Results and Financial Review and Prospects” relates to our annual average interest rates and yields. Interest rates cited are measured in reais and include the effect of the variation of the real against foreign currencies.

Seasonality

Generally our retail banking and our credit card businesses have some seasonality, with increased levels of retail and credit card transactions during the Christmas season and a subsequent decrease of these levels at the beginning of the year. We also have some seasonality in our banking service fees related to collection services at the beginning of the year, which is when taxes and other fiscal contributions are generally paid.

Discussion of Critical Accounting Policies

General

The preparation of the consolidated financial statements included in this annual report involves certain assumptions that are derived from historical experience and various other factors that we deem reasonable and relevant. While we review these estimates and assumptions in the ordinary course of business, the portrayal of our financial condition and results of operations often requires our management to make judgments regarding the effects on our financial condition and results of operations on matters that are inherently uncertain. The following discussion describes those areas that require the most judgment or involve a higher degree of complexity in the application of the accounting policies that currently affect our financial condition and results of operations. Actual results may differ from those estimated under different variables, assumptions or conditions. Note 2 to our consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements.

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Use of Estimates and Assumptions

The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue, expenses, gains and losses during the reporting period, because actual results may differ from those determined in accordance with such estimates and assumptions.

All estimates and assumptions made by management are in accordance with IFRS and represent the current best estimates made in conformity with the applicable rule standards. Estimates and judgments are evaluated on an ongoing basis, considering past experience and other factors.

Allowance for Loan Losses

The allowance for loan losses represents our estimate of the probable losses inherent to our loan and lease portfolio at the end of each reporting period. The methodology for determining the allowance for loan and lease losses is further described in “Item 4B. Business Overview — Selected Statistical Information — Loan and Lease Operations Approval Process - Loan Loss Experience.” In order to determine the amount of the allowance for loan losses, a portfolio is classified into two categories with respect to which specific methodologies are used to estimate inherent losses. Loans reviewed on an individual basis (which corresponds to our corporate portfolio) are individually reviewed for impairment. For those considered to be impaired, we determine the allowance amount based on expected cash flows. For those that are not impaired, loans are classified by ratings based on risk factors and inherent losses for each rating are estimated based on our historical experience. This involves judgments in identifying the risk factors and assigning a rating. Loans reviewed on a portfolio basis (which includes individuals, small and medium business and foreign loans Latin America portfolios) are further segregated into classes, when appropriate, based on the underlying risks and characteristics, and the allowance for loan losses is determined by category based on historical experience. This also involves judgments and assumptions. Many factors affect the estimate for the range of losses in each of the categories for which we estimate the allowance on a portfolio basis, such as the methodology used to measure historical delinquency and the historical period to be used. Additionally, factors affecting the specific amount of allowance to be recorded are subjective, and include economic and political conditions, credit quality trends, the volume and growth observed in each sub-category and specific economic conditions affecting a sub-category. Our total allowance for loan losses as of December 31, 2012, 2011 and 2010 was R$25,713 million, R$23,873 million and R$19,994 million, respectively, and we recognized a provision for loan losses in our statement of income of R$23,982 million, R$20,038 million and R$15,547 million for the years ended December 31, 2012, 2011 and 2010.

Fair Value of Financial Instruments

Financial instruments recorded at fair value on our balance sheet include mainly securities classified as trading and available-for-sale, and other trading assets including derivatives. Securities classified as held-to- maturity are recorded at amortized historical cost on our balance sheet, and their corresponding fair values are shown in the notes to our consolidated financial statements. Total financial instruments recorded at fair value as of December 31, 2012, 2011 and 2010 are assets amounting to R$248,202 million, R$178,339 million and R$168,119 million, respectively, of which R$11,597 million R$8,754 million and R$7,777 million, respectively, were derivatives, and liabilities in the amount of R$11,711 million, R$9,562 million and R$7,006 million, respectively, of which R$11,069 million R$6,747 million and R$5,671 million, respectively, were derivatives. We determine the fair values of our financial instruments based on IAS 39, which defines fair value as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. According to IFRS 7, there are different levels of inputs that may be used to measure the fair value of financial instruments and we prioritize the use of available inputs in a higher level before using inputs in a level that is lower in the hierarchy. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); Level 3 inputs are inputs for the asset or liability that are not based on observable market data (unobservable inputs). For instruments classified in Levels 1 and 2, where inputs are principally based on observable market data, there is less judgment applied in arriving at a fair value measurement. For instruments classified within Level 3, judgments are more significant. In arriving at an estimate of fair value for an instrument within Level 3, management first determines the appropriate model to use. Second, due to the lack of observability of significant inputs, management assesses all relevant empirical data in deriving valuation inputs, including but not limited to yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. Additionally, with respect to non-exchange traded products, management judgment must be applied to assess the appropriate level of valuation adjustments to reflect counterparty credit quality, our own creditworthiness, and constraints on liquidity and unobservable parameters, where relevant. While we believe our valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Trading and available-for-sale securities classified as Level 3 as of December 31, 2012, 2011 and 2010 amounted to R$2,509 million, R$1,886 million and R$1,806 million, respectively, and net derivatives as of such date amounted to R$144 million, R$205 million and R$150 million, respectively. For additional information see note 31 to our consolidated financial statements. Judgments are also required to determine whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any impairment evidence exists for available-for-sale or held-to-maturity financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, is recognized in the statement of income. Factors that are used by management in determining whether there is objective evidence that a financial asset is impaired includes mainly the observed period of the loss, the degree of the loss, whether we will be required to sell the security before recovery and the expectation as of the date of analysis as to the potential for realization of the security.

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Other significant accounting policies are described in note 2 of our consolidated financial statements.

Significant Changes in Accounting Rules

See note 2.2 to our consolidated financial statements for information about significant changes in accounting rules.

Results of Operations for Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Highlights

For the year ended December 31, 2012, our net income attributable to owners of the parent company was R$12,634 million and our total stockholders’ equity was R$75,902 million.

As of December 31, 2012, total loan operations and lease operations was R$366,984 million, a 6.0% increase compared to December 31, 2011. Our total loan and lease operations grew at a slower pace in 2012 compared to 2011. Loans to individuals increased by 0.7%, while loans to companies increased by 6.6% compared to December 31, 2011. During 2012, we increased the volume of credit card lending, personal loans, mortgage loans and loans to medium companies, with mortgage loans and payroll loans increasing at a higher rate than other segments, but decreased the volume of loans to individuals for vehicles and to small companies. As of December 31, 2012, the loan portfolio of our operations in Latin America increased 41.0% compared to December 31, 2011. This increase reflects the growth of our operations outside Brazil and the depreciation of the real against the currencies of these countries and the U.S. dollar in the year ended December 31, 2012.

Loans to individuals totaled R$150,300 million in 2012, an increase of R$1,023 million, or 0.7% compared to 2011. This increase is primarily a result of mortgage loans increasing 34.2%, totaling R$18,047 million in 2012 compared to 2011, as a result of a favorable Brazilian economic environment for that particular line of credit. Personal loans increased 10.1% in 2012, totaling R$40,076 million, primarily due to an increase in the volume of payroll loans of 15.1%, mainly due to payroll loans acquired, as we focused increasingly on less risky portfolios. Credit card increased 4.0%, totaling R$40,531 million in 2012, due to the growing popularity of this product. Vehicle financing decreased 14.6% in 2012 compared to 2011, totaling R$51,646 million, as a result of our stricter requirements for granting loans during this period, which have led to increased down payment requirements and shorter financing terms.

Loans to companies totaled R$189,535 million in 2012, an increase of R$11,807 million, or 6.6%, compared to 2011. Loans to small and medium businesses decreased R$464 million, or 0.5% in 2012 compared to 2011, totaling R$85,185 million. Loans to corporate customers increased R$12,271 million, or 13.3%, in 2012 compared to 2011, totaling R$104,350 million, in particular in export/import financing, payroll loans acquired from other financial institutions and working capital facilities. In 2012, we continued to focus our underwriting initiatives on medium and large companies, which typically have lower delinquency rates, and which grew consistent with the banking industry as a whole. In addition, the depreciation of the real against other currencies, especially the U.S. dollar, also contributed to the growth of our medium to large companies portfolio since certain loans to these customers are denominated, or originated in, such currencies.

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Losses on loans and claims are the sum of expenses for allowance for loan and lease losses, recovery of loans written off as losses and expenses for claims. In 2012, our losses on loans and claims increased from R$16,072 million in 2011 to R$21,354 in 2012 a R$5,282 million increase, or 32.9%, mainly due to an increase of expenses for allowance for loan and lease losses and in a lesser extent by a decrease in the recovery in loans written off as losses and by an increase of expenses for claims. The increase in expenses for allowance for loan and lease losses is primarily due to an increase in non-performing loans to individuals, especially in vehicle loans and personal loans, which follows the general trends observed in the Brazilian financial market.

As of December 31, 2012, the ratio of 90-day non-performing loans as a percentage of our total loan portfolio decreased to 4.8%, compared to 4.9% as of December 31, 2011. This decrease in the non-performing loan ratio, impacted our 90-day coverage ratio, that increased from 142% in 2011 to 146% in 2012. When the non-performing loan ratio decreases, an increase in the coverage ratio is expected. The provisions for allowance for loan and lease losses are reversed only when there is a strong indication of the recovery of overdue loans, increasing the coverage ratio.

Impaired loans (see note 36.6 of our consolidated financial statements) increased from R$18,385 million in 2011 to R$19,511 million in 2012, mainly due to growth of impaired personal loans and vehicle loans.

Loan operations under renegotiation, including extended, modified and deferred repayments, increased to 5.3%, of our total portfolio as of December 31, 2012, compared to 4.2% as of December 31, 2011, mainly due to the increased amount of renegotiation of collateralized loans (mainly vehicles). See “Item 4B. Business Overview – Selected Statistical Information – Loan and Lease Operations – Renegotiated Loans.”

Results of Operations

The following table shows the main components of our net income for 2012 and 2011.

	(in millions of R$, except percentages)
	Year Ended December 31,						Variation
	2012			2011			2012-2011			%
Banking product		81,172			74,276			6,896			9.3	%
Interest and similar income		96,364			97,352			(988	)		(1.0	)%
Interest and similar expense		(48,067	)		(55,599	)		7,532			(13.5	)%
Dividend income		323			361			(38	)		(10.5	)%
Net gain (loss) from investment securities and derivatives		1,463			1,251			212			16.9	%
Foreign exchange results and exchange variation on transactions		3,755			4,998			(1,243	)		(24.9	)%
Banking service fees		18,944			19,410			(466	)		(2.4	)%
Income from insurance, private pension and capitalization operations before claim and selling expenses		6,108			5,345			763			14.3	%
Other income		2,282			1,158			1,124			97.1	%
Losses on loans and claims		(21,354	)		(16,072	)		(5,282	)		32.9	%
Expenses for allowance for loan and lease losses		(23,982	)		(20,038	)		(3,944	)		19.7	%
Recovery of loans written off as loss		4,663			5,477			(814	)		(14.9	)%
Expenses for claims		(3,320	)		(2,446	)		(874	)		35.7	%
Recovery of claims under reinsurance		1,285			935			350			37.4	%
Operating margin		59,818			58,204			1,614			2.8	%
Other operating income (expenses)		(42,402	)		(39,953	)		(2,449	)		6.1	%
General and administrative expenses		(38,080	)		(35,674	)		(2,406	)		6.7	%
Tax expenses		(4,497	)		(4,166	)		(331	)		7.9	%
Share of profit or (loss) of unconsolidated companies		175			(113	)		288			n.m.
Income before income tax and social contribution		17,416			18,251			(835	)		(4.6	)%
Current income tax and social contribution		(7,716	)		(6,956	)		(760	)		10.9	%
Deferred income tax and social contribution		3,491			3,315			176			5.3	%
Net income		13,191			14,610			(1,419	)		(9.7	)%
Net income attributable to non-controlling interests		557			773			(216	)		(27.9	)%
Net income attributable to owners of the parent company		12,634			13,837			(1,203	)		(8.7	)%

Our results of operations for the year ended December 31, 2012, when compared to the year ended December 31, 2011, reflected a significant impact from lower CDI rates and in a lesser extent from exchange rate variations. In 2012, we observed a decrease in the CDI rate to 8.4% from 11.6% which caused impacts on costs and on revenues of many our assets and liabilities. The exchange rate between the U.S. dollar and the real changed significantly. During the year ended December 31, 2012, the real depreciated 8.9% against the U.S. dollar, while in 2011 the real depreciated 12.6% against the U.S. dollar.

In order to improve liquidity in the Brazilian market the Central Bank of Brazil decreased the reserve and compulsory deposit requirement in 2012. This decrease was primarily due to a change in criteria for returns on compulsory deposits enacted by Circulars No. 3,569 and 3,576 that allowed part of the funds to be used in vehicle loan operations instead of compulsory deposits. The balance of interest-bearing compulsory deposits from the Central Bank of Brazil decreased 38.0%, from R$92,323 million as of December 31, 2011 to R$57,253 million as of December 31, 2012.

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Banking Product

Banking product is a subtotal of the following line items: interest and similar income, interest and similar expense, dividend income, net gain (loss) from financial assets and liabilities, foreign exchange results and exchange variation on transactions, banking service fees, income from insurance, private pension and capitalization operations before claim and selling expenses and other income.

Interest and similar Income

The following table shows the main components of our interest income for 2012 and 2011.

	(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2012		2011		2012-2011			%
Interest and similar income
Interest on loan and lease operations		61,139		58,492		2,647			4.5	%
Interest on Interbank deposits		1,042		890		152			17.1	%
Interest on Central Bank compulsory deposits		5,334		9,182		(3,848	)		(41.9	)%
Interest on securities purchased under agreements to resell		10,096		9,961		135			1.4	%
Interest on financial assets held for trading		13,324		14,676		(1,352	)		(9.2	)%
Interest on available-for-sale financial assets		3,771		2,888		883			30.6	%
Interest on held-to-maturity financial assets		471		360		111			30.9	%
Interest on other financial assets		1,187		903		284			31.4	%
Total Interest and similar income		96,364		97,352		(988	)		(1.0	)%

Interest and similar income is a subtotal of the following line items: interest on loan and lease operations, interest on interbank deposits, interest on Central Bank compulsory deposits, interest on securities purchased under agreements to resell, interest on financial assets held for trading, interest on available-for-sale financial assets, interest on held-to-maturity financial assets and interest on other financial assets.

The R$988 million, or 1.0%, decrease in interest income in 2012 is primarily due to the decrease in interest on Central Bank compulsory deposits and in interest on financial assets held for trading, partially offset, primarily, by an increase in the income of loan and lease operations and in interest on available-for-sale financial assets.

Interest on Loan and Lease Operations

The table below shows the volume of loan and lease operations, with loans classified by type of creditor (individuals and companies) and further broken down by type of product for individuals and by size of customer for companies. In addition, the table presents the balance of loan operations from our subsidiaries in Latin America outside of Brazil (Argentina, Chile, Uruguay and Paraguay).

	(in millions of R$, except percentages)
	As of December 31,
	2012				2011				Variation (%)
Loans to individuals		150,300	41.0	%		149,277	43.1	%		1,023		0.7	%
Credit card		40,531	11.0	%		38,961	11.3	%		1,570		4.0	%
Personal loan		40,076	10.9	%		36,403	10.5	%		3,673		10.1	%
Vehicles		51,646	14.1	%		60,463	17.5	%		(8,817	)	(14.6	)%
Mortgage Loans		18,047	4.9	%		13,450	3.9	%		4,597		34.2	%
Loans to companies		189,535	51.6	%		177,728	51.3	%		11,807		6.6	%
Small and Medium Businesses		85,185	23.2	%		85,649	24.7	%		(464	)	(0.5	)%
Corporate		104,350	28.4	%		92,079	26.6	%		12,271		13.3	%
Foreign loans Latin America		27,149	7.4	%		19,259	5.6	%		7,890		41.0	%
Total loan operations and lease operations		366,984	100.0	%		346,264	100.0	%		20,720		6.0	%

Mortgage loans and rural loans portfolios are presented within loans to individuals, loans to companies or foreign loans Latin Amercia, as appropriate, according to the type of client. As of December 31, 2012, the total mortgage loan portfolio totalled R$31,344 million and the total rural loan portfolio totalled R$6,616 million, compared to R$23,339 million and R$5,939 million, respectively, as of December 31, 2011.

Interest on loan and lease operations totaled R$61,139 million in 2012, an increase of R$2,647 million, or 4.5% compared to 2011. This increase was due primarily to an increase in the average volume of loans and lease transactions.

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As of December 31, 2012, total loan and lease operations was R$366,984 million, a 6.0% increase compared to December 31, 2011. Loans to individuals increased by 0.7%, while loans to companies increased by 6.6% compared to December 31, 2011. During 2012, we increased the volume of credit card lending, personal loans, mortgage loans and loans to medium companies, with mortgage loans and payroll loans increasing at a higher rate than other segments, but decreased the volume of loans to individuals for vehicles and to small companies. We highlight that mortgage loans and rural loans portfolios are presented within loans to individuals or loans to companies, as appropriate, according to the type of client.

Loans to individuals totaled R$150,300 million in 2012, an increase of R$1,023 million, or 0.7% compared to 2011. This increase is primarily a result of mortgage loans increasing 34.2%, totaling R$18,047 million in 2012 compared to 2011, as a result of a favorable Brazilian economic environment for that particular line of credit. Personal loans increased 10.1% in 2012, totaling R$40,076 million, primarily due to an increase in the volume of payroll loans of 15.1%, mainly due to payroll loans acquired, as we focused increasingly on less risky portfolios. Credit card increased 4.0%, totaling R$40,531 million in 2012, due to the growing popularity of this product. Vehicle financing decreased 14.6% in 2012 compared to 2011, totaling R$51,646 million, as a result of our stricter requirements for granting loans during this period, which have led to increased down payment requirements and shorter financing terms.

Loans to companies totaled R$189,535 million in 2012, an increase of R$11,807 million, or 6.6%, compared to 2011. Loans to small and medium businesses decreased R$464 million, or 0.5% in 2012 compared to 2011, totaling R$85,185 million. Loans to corporate customers increased R$12,271 million, or 13.3%, in 2012 compared to 2011, totaling R$104,350 million, in particular in export/import financing, payroll loans acquired from other financial institutions and working capital facilities. In 2012, we continued to focus our underwriting initiatives on medium and large companies, which typically have lower delinquency rates, and which grew consistent with the banking industry as a whole. In addition, the depreciation of the real against other currencies, especially the U.S. dollar, also contributed to the growth of our medium to large companies portfolio since certain loans to these customers are denominated, or originated in, such currencies.

The balance of our foreign loans from our operations in Latin America outside Brazil (Argentina, Chile, Uruguay and Paraguay) totaled R$27,149 million as of December 31, 2012, an increase of 41.0% compared to December 31, 2011, mostly as a result of the growth of operations in South American countries where we operate, excluding Brazil, and by the depreciation of the real against several foreign currencies, particularly the U.S. dollar.

Interest on Interbank Deposits

Interest on interbank deposits, totaled R$1,042 million in 2012, an increase of R$152 million, or 17.1%, compared to 2011. This increase was mainly due to the increase on the average balance of these deposits, which are managed by our treasury department, that resulted in an increase in income of R$267 million, partially offset by the decrease in the average yield/rate, mainly due to lower CDI rates, that resulted in a decrease in income of R$115 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

Interest on Central Bank Compulsory Deposits

Interest on Central Bank compulsory deposits totaled R$5,334 million in 2012, a decrease of R$3,848 million, in 2012 compared to 2011. This decrease was primarily due to a change in criteria for returns on compulsory deposits enacted by Circulars No. 3,569 and 3,576 that allowed part of the funds to be used in vehicle loan operations instead of compulsory deposits. The balance of interest-bearing compulsory deposits from the Central Bank decreased 38.0%, from R$92,323 million as of December 31, 2011 to R$57,253 million as of December 31, 2012. The decrease in the average balance of Central Bank compulsory deposits resulted in a decrease in income of R$1,688 million in 2012 compared to 2011. Furthermore, the decrease of the average SELIC rate from 11.8% during the year ended December 31, 2011 to 8.6% during the year ended December 31, 2012 contributed to this decrease in income from compulsory deposits. This decrease in the average yield/rate of Central Bank compulsory deposits resulted in a decrease in income of R$2,160 million in 2012 compared to 2011. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

Interest on Securities Purchased under Agreements to Resell

Interest on securities purchased under agreements to resell totaled R$10,096 million in 2012, an increase of R$135 million, or 1.4% in 2012 compared to 2011. This increase was mainly due to higher average balance of securities purchased under agreements to resell that resulted in an increase in income of R$437 million, partially offset by a lower yield/rate of securities purchased under agreements to resell that resulted in a decrease in income of R$301 million in 2012 compared to 2011. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

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Interest on Financial Assets Held for Trading

Interest on financial assets held for trading, which is managed by our treasury department, totaled R$13,324 million in 2012, a decrease of R$1,352 million, or 9.2%, compared to 2011. This decrease was mainly due to a decrease in the average yield/rate of financial assets held for trading that resulted in an increase income of R$1,956 million, partially offset by an increase in the average balance of interest on financial assets held for trading that resulted in a decrease in income of R$604 million in 2012 compared to 2011. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

Interest on Available – for – Sale Financial Assets

Interest on available-for-sale financial assets totaled R$3,771 million in 2012, an increase of R$883 million, or 30.6%, compared to 2011. This increase was mainly due to an increase in the average balance of available-for-sale financial assets that resulted in an increase in income of R$1,137 million, partially offset by the decrease in average yield/rate of available-for-sale financial assets that resulted in a decrease in income of R$254 million in 2012 compared to 2011. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

Interest on Held-to-Maturity Financial Assets

Interest on held-to-maturity financial assets totaled R$471 million in 2012, an increase of R$111 million, or 30.9%, compared to 2011. This increase was mainly due to an increase in the average yield/rate of held-to-maturity financial assets that resulted in an increase in income of R$112 million, partially offset by a decrease in the average balance of held-to-maturity financial assets that resulted in a decrease in income of R$1 million in 2012 compared to 2011. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

Interest on Other Financial Assets

Interest on other financial assets totaled R$1,187 million, an increase of R$284 million, or 31.4%, compared to 2011. This increase was mainly due to an increase in the average yield/rate of financial assets held for trading that resulted in an increase in income of R$433 million, partially offset by a decrease in the average balance of interest on financial assets held for trading that resulted in a decrease in income of R$148 million in 2012 compared to 2011. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.”

Interest and similar Expense

The following table shows the main components of our interest expense in 2012 and 2011.

	(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2012		2011		2012-2011			%
Interest and similar expense
Interest on deposits		10,544		12,186		(1,642	)		(13.5	)%
Interest on securities sold under repurchase agreements		17,539		22,133		(4,594	)		(20.8	)%
Interbank market debt		5,747		5,536		211			3.8	%
Institutional market debt		7,724		10,505		(2,781	)		(26.5	)%
Financial expense from reserves for insurance and private pension		6,513		5,239		1,274			24.3	%
Total interest expense		48,067		55,599		(7,532	)		(13.5	)%

Total interest expense was R$48,067 million in 2012, a decrease of R$7,532 million, or 13.5%, compared to 2011, mainly due to decreases in interest expense from interest on securities sold under repurchase agreements and from interest on deposits, primarily due to lower CDI in 2012. The depreciation of the real against the dollar also contributed to this decrease.

Interest on Deposits

Interest on deposits was R$10,544 million in 2012, a decrease of R$1,642 million, or 13.5% in comparison to 2011. The decrease in the average yield/rate resulted in a decrease in expenses of R$2,213 million, partially offset by an increase in the average balance of deposits that resulted in an increase in expenses of R$571 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

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Interest on Securities Sold Under Repurchase Agreements

Interest on securities sold under repurchase agreements was R$17,539 million in 2012 a decrease of R$4,594 million, or 20.8%, compared to 2011. The decrease in the average yield/rate resulted in a decrease in expenses of R$5,727 million, partially offset by an increase in the average balance of securities sold under repurchase agreements that resulted in an increase in expenses of R$1,133 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

Interbank Market Debt

Interest expense on interbank market debt totaled R$5,747 million in 2012, an increase of R$211 million, or 3.8%, compared to 2011. This increase was due to an increase in the average balance of interbank market debt, that resulted in an increase in expenses of R$656 million, partially offset by a decrease on the average yield/rate that decreased expenses by R$445 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.

Institutional Market Debt

Interest expense on institutional market debt totaled R$7,724 million in 2012, a decrease of R$2,781 million, or 26.5% compared to 2011. This decrease was primarily due to a decrease in the average yield/rate that resulted in a decrease in expenses of R$7,436 million, partially offset by an increase on the average balance of institutional market debt that increased expenses by R$4,655 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

Financial Expense from Reserves for Insurance and Private Pension

Financial expense from reserves for insurance and private pension plans totaled R$6,513 million in 2012, an increase of R$1,274 million, or 24.3%, compared to 2011. This increase was primarily due to an increase in the average balance of reserves for insurance and private pension and liabilities for capitalization plans of R$1,304 million, partially offset by a decrease of R$30 million due to a decrease of the average yield/rate. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

Other interest income and Foreign Exchange Results

The following table shows the main components of our other interest income and foreign exchange results in 2012 and 2011.

	(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2012		2011		2012-2011			%
Other interest income
Dividend income		323		361		(38	)		(10.5	)%
Net gain (loss) from investment securities and derivatives		1,463		1,251		212			16.9	%
Foreign exchange results and exchange variation on transactions		3,755		4,998		(1,243	)		(24.9	)%
Total other interest income and foreign exchange results		5,541		6,610		(1,069	)		(16.2	)%

In 2012, our other interest income and foreign exchange results totaled R$5,541 million, a decrease of R$1,069 million, or 16.2%, in 2012 compared to 2011. This decrease was primarily due to the decrease of R$1,243 million in foreign exchange results and exchange variation on transactions, partially offset by an increase of R$212 million in net gain (loss) from investment securities and derivatives.

Dividend Income

Dividend income totaled R$323 million in 2012, a decrease of R$38 million compared to 2011, due to lower income from dividends of other companies.

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Net gain (loss) from investment securities and derivatives totaled a gain of R$1,463 million in 2012 compared to a gain of R$1,251 million in 2011, mainly to our risk management strategy and administration of gaps, particularly those associated with derivative instruments used to hedge our investments abroad.

Foreign Exchange Results and Exchange Variation on Transactions

Foreign exchange results and exchange variation on transactions totaled R$3,755 million a decrease of R$1,243 million, or 24.9% compared to 2011, due mainly to the effect from derivative financial instruments used to hedge the impact of exchange rate variation on our investments in subsidiaries abroad.

Non-Interest Income

The following table shows the main components of our non-interest income in 2012 and 2011.

	(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2012		2011		2012-2011			%
Non-interest income
Banking service fees		18,944		19,410		(466	)		(2.4	)%
Income from insurance, private pension and capitalization operations before claim and selling expenses		6,108		5,345		763			14.3	%
Other income		2,282		1,158		1,124			97.0	%
Total non-interest income		27,334		25,913		1,421			5.5	%

In 2012, our non-interest income totaled R$27,334 million, an increase of R$1,421 million, or 5.5%, in 2012 compared to 2011. This increase was primarily due an increase of R$1,124 million in other non-interest income, partially offset by a decrease in banking service fees of R$466 million.

Banking Service Fees

Banking service fees totaled R$18,944 million in 2012, a decrease of R$466 million, or 2.4%, compared to 2011. This decrease was mainly due to certain income from fund management that was no longer included in banking service fees and was instead included in interest and similar income in 2012 and to decreases in the real interest rate principally for checking accounts, in line with pricing changes by our competitors, partially offset by an increase in our volume of transactions with customers. See note 24 to our consolidated financial statements for more details.

Income from Insurance, Private Pension and Capitalization Operations Before Claim and Selling Expenses

Income from insurance, private pension and capitalization operations before claim and selling expenses totaled R$6,108 million in 2012, an increase of R$763 million, or 14.3%, compared to 2011. This increase was mainly due to an increase in the volume of pension plan, life insurance and extended guarantee insurance products, due in part to a favorable economic environment for pension plan in Brazil.

Other Income

Other income totaled R$2,282 million in 2012, an increase of R$1,124 million, or 97.0%, compared to 2011. This increase was mainly due to the sale of our 16.14% interest in Serasa S.A. to Experian Brasil Ltda. that generated a gain of R$1,468 million.

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Losses on Loans and Claims

The following table shows the principal components of our losses on loans and claims for 2012 and 2011.

(in million of R$, except percentages)
	Year Ended December 31,						Variation
	2012			2011			2012-2011			%
Losses on loans and claims		(21,354	)		(16,072	)		(5,282	)		24.7	%
Expenses for allowance for loan and lease losses		(23,982	)		(20,038	)		(3,944	)		16.4	%
Recovery of loans written off as losses		4,663			5,477			(814	)		(17.5	)%
Expenses for claims		(3,320	)		(2,446	)		(874	)		26.3	%
Recovery of claims under reinsurance		1,285			935			350			27.2	%

Losses on loans and claims include expenses for allowance for loan and lease losses, recovery of loans written off as losses, expenses for claims and recovery of claims under reinsurance. In 2012, our losses on loans and claims increased from R$16,072 million in 2011 to R$21,354 in 2012 a R$5,282 million increase, or 32.9%, mainly due to an increase of expenses for allowance for loan and lease losses and to a lesser extent a decrease in the recovery in loans written off as losses and an increase of expenses for claims.

Expenses for Allowance for Loan and Lease Losses

Expenses for allowance for loan and lease losses totaled R$23,982 million in 2012, an increase of R$3,944 million, or 19.7%, in comparison to 2011, due to a decrease in the asset quality of our vehicle and personal loan portfolios in comparison to the previous year, which resulted in an increase in default levels in our vehicle and personal loan portfolios.

Itaú Unibanco Holding uses statistical models to calculate the allowance for loan and lease losses in the homogeneous loan portfolio (reviewed for impairment on a portfolio basis). Itaú Unibanco Holding periodically carries out procedures to improve these estimates by aligning the necessary provisions to the levels of losses observed by the historical behavior (as described in Note 2.4g VIII to our consolidated financial statements). This alignment aims at ensuring that the allowance for loan and lease losses reflects the current economic condition, the composition of the loan portfolios, the quality of guarantees and the profile of our clients.

In 2012, as a result of the market trends we observed, mainly in relation to an increase in delinquency rates of personal loans and small and medium companies, we analyzed the assumptions we were using in our statistical models. As a result of this analysis, we implemented improvements in the risk models of Probability Default (PD) and Loss Given Default (LGD) to provision more conservatively. Such improvements included the update of the observed period of historical losses to more recent loan vintages (improving the adherence to the actual loan loss experience) and the inclusion of new variables in the risk models (improving the credit assessment capability). These improvements of model assumptions gave rise to a growth in the level of provisions in the amount of R$1,492 million, mainly in the small and medium companies’ portfolio and in the personal loans portfolio. See notes 2.4g.VIII, 12 b. and 36 to our consolidated financial statements for more details.

The observed market trends in delinquency further triggered us to improve our credit granting process. Below we have highlighted some actions taken by us to reduce our credit risk and future loan loss experience.

a) For vehicle loans we reduced terms and required higher down payments. As a consequence, our average loan term decreased from 53 months in 2010 to 44 months in 2012, consistent with our more conservative policies. In the second half of 2012, all of our vehicle loan origination required such higher down payments;

b) The ratings categories that allow pre-approved loans for companies and individuals were also reviewed. This revision resulted in a more restrictive policy for loans with no guarantees;

c) Our business strategy was to increase loan portfolios of less risky portfolios such as factoring of receivables and payroll loans.

Recovery of Loans Written off as Losses

Recovery of loans written off as losses decreased from R$5,477 million in 2011 to R$4,663 million in 2012, a decrease of R$814 million, or 14.9%, primarily due to discounts granted in the renegotiation of credit that had already been written off as losses no longer being deducted from interest and similar income in 2012, but deducted from income from the recovery of loans written off as losses. In 2011, these discounts amounted to R$609 million. Disregarding this effect, the recovery of loans written off as losses would have decreased by 3.7%, or R$205 million.

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Expenses for Claims

Expenses for claims increased from R$2,446 million in 2011 to R$3,320 million in 2012, an increase of R$874 million, or 26.3%, mainly due to increases in claims in life insurance and corporate risks insurance portfolios.

Recovery of Claims under Reinsurance

Recovery of claims under reinsurance increased from R$935 million in 2011 to R$1,285 million in 2012, an increase of R$350 million, or 27.2%, mainly due to an increase in the recovery of claims from corporate insurance risks, that have reinsurance.

Operating Margin

Operating margin is the sum of banking product and losses on loans and claims. The operating margin increased R$1,614 million, or 2.8%, amounting to R$59,818 million in 2012, due to the 9.3% growth in the banking product, partially offset by the 32.9% increase in losses on loans and claims.

Non-Interest Expenses

The following table shows the main components of our non-interest expense in 2012 and 2011.

	(in millions of R$, except percentages)
	Year Ended December 31,						Variation
	2012			2011			2012-2011			%
	(in millions of R$)
General and administrative expenses		(38,080	)		(35,674	)		(2,407	)		6.7	%
Salaries and employee benefits		(14,332	)		(13,373	)		(959	)		7.2	%
Administrative expenses		(12,665	)		(12,490	)		(175	)		1.4	%
Amortization of intangible assets		(844	)		(984	)		139			(14.2	)%
Insurance selling expenses		(1,253	)		(1,268	)		16			(1.2	)%
Depreciation		(1,346	)		(1,184	)		(162	)		13.7	%
Other non-interest expense		(7,640	)		(6,375	)		(1,265	)		19.8	%
Tax expenses		(4,497	)		(4,166	)		(331	)		7.9	%
Share of profit or (loss) of unconsolidated companies		175			(113	)		288			n.m.
Total non-interest expense		(42,402	)		(39,953	)		(2,449	)		6.1	%

Non-interest expense totaled R$42,402 million in 2012, an increase of R$2,449 million, or 6.1%, compared to 2011. This increase was mainly due to general and administrative expenses, partially offset by the increase in share of profit or (loss) of unconsolidated companies.

General and Administrative Expenses

General and administrative expenses is composed of salaries and employee benefits, administrative expenses, amortization of intangible assets, insurance selling expenses, depreciation and other non-interest expenses.

Salaries and Employee Benefits

Salaries and employee benefits totaled R$14,332 million in 2012, an increase of 7.2% compared with 2011. This increase was mainly a result of the increase in expenses related to employee terminations and labor claims in connection with the restructuring process of our consumer credit business unit. This increase was also due to the collective bargaining agreements reached in September 2011, which increased both compensation and benefits by 9.0% for all employees, and in September 2012, which further increased compensation by 7.5% and benefits by 8.5%. The number of employees decreased 7.2% from December 31, 2011 to a total of 96,977 employees as of December 31, 2012, mainly due to restructuring initiatives in our consumer credit business unit which were intended to integrate systems and processes into a single platform in order to capture synergies across our consumer operations and in connection with a strategic review of certain businesses (as part of this review, certain positions within our consumer credit business were transferred to our retail partners) and, to a lesser extent, due to the sale of Orbitall, which reduced the number of our employees by 1,231.

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Administrative Expenses

Administrative expenses totaled R$12,665 million in 2012, an increase of R$175 million, or 1.4%, compared to 2011. This increase in administrative expenses was mainly due to inflation affecting most contracts and costs such as utilities and to the organic growth of our operations. We also recorded increased expenses related to higher operating activity, especially those related to data processing and communication, services from third-parties, including marketing, advisory and consulting services, and financial system services.

Amortization of Intangible Assets

Amortization of intangible assets totaled R$844 million in 2012, a decrease of R$139 million, or 14.2%, compared to 2011, primarily, due to lower amortization of acquisition of rights to payroll loans in 2012. See note 16 to our consolidated financial statements.

Insurance Selling Expenses

Insurance selling expenses totaled R$1,253 million in 2012, a decrease of R$16 million, or 1.2%, compared to 2011, primarily, due to lower expenses for life insurance products.

Depreciation

Depreciation totaled R$1,346 million in 2012, an increase of R$162 million, or 13.7%, compared to 2011. This increase was primarily due to an increase of 5.0% in the balance of our fixed assets.

Other Non-Interest Expense

Other non-interest expenses totaled R$7,640 million in 2012, an increase of R$1,265 million, or 19.8%, compared to 2011. This increase was mainly due to an increase in expenses related to credit cards and to a review of civil lawsuits for provisioning that increased provisions for contingencies related to lawsuits primarily in connection with economic plans and other civil lawsuits (see note 32 to our consolidated financial statements).

Tax Expenses

Tax expenses amounted to R$4,497 million in 2012 an increase of R$330 million, or 7.9%, from R$4,166 million in 2011. This increase in tax expenses was mainly due to increased operational activity.

Share of Profit or (Loss) of Unconsolidated Companies

Share of profit or (loss) of unconsolidated companies increased from a R$113 million loss in 2011 to a R$175 million gain in 2012. This R$288 million increase, or 254.9%, was mainly due to the impairment to our investment in Banco BPI recognized in 2011 and on April 20, 2012 we sold our investment in Banco BPI to La Caixa Group.

Current Income Tax and Social Contribution and Deferred Income Tax and Social Contribution

Certain amounts of income and expenses are recognized in our statement of income but do not affect our taxable basis and, conversely certain amounts are taxable income or deductible expenses in determining our taxes on income but do not affect our statement of income.  Those items are known as permanent differences. Our total income tax and social contribution includes current income tax and social contribution and deferred income tax and social contribution.  The first is the tax expense under the Brazilian tax laws for the period.  The second is the tax expense resulting from the permanent differences.

Income tax expense and social contribution for the year resulted in a tax expense of R$4,225 million in 2012 compared to R$3,641 million in the prior year, a 16.0% increase. Deferred income tax and social contribution totaled positive R$3,491 million, an increase of R$176 million compared to 2011. Current income tax and social contribution totaled R$7,716 million in 2012, an increase of R$760 million, or 10.9% compared to 2011. The main reason for this increase was the foreign exchange variation as described below, which was partially offset by decreased income from banking activities.

For Brazilian tax purposes, exchange rate gains and losses on our investments in subsidiaries abroad are not taxable, if they represent a gain, or are not deductible, if they represent a loss, and they constitute a permanent difference. From an economic perspective we hedge our investments in subsidiaries outside Brazil by using foreign-currency denominated liabilities or derivative instruments. The gains or losses on derivative instruments and the exchange rate gains and losses on foreign-currency denominated liabilities are taxable or deductible for purposes of Brazilian taxes. During the year ended December 31, 2012, depreciation of the real against the foreign currencies in which our subsidiaries operate generated gains that were not recognized for tax purposes. The depreciation of the real generated taxable losses on derivatives instruments used as economic hedges and taxable exchange rate gains on liabilities used as economic hedges.

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Results of our Operating Segments

The following discussion should be read in conjunction with our consolidated financial statements, especially note 34 regarding segment information included elsewhere in this annual report as well as the information included under “Item 3A. Selected Financial Data” and “Item 4B. Business Overview - Selected Statistical Information”.

Overview

We provide a wide range of financial products and services to a diverse customer base of individuals and corporate customers.

Below we describe our four operational and reporting segments: Commercial Bank, Itaú BBA, Consumer Credit, and Activities with the Market and Corporation:

Commercial Bank

Our commercial bank segment provides a broad range of banking services to a diversified client base of individuals and companies, among which are the following: retail clients (individuals and very small companies), high net worth clients, private banking clients, and small and medium-sized companies. The products and services provided by our commercial bank segment include insurance, private pension and capitalization plans, credit cards, asset management and loans, among others. The segment is an important source of funding for our operations and provides significant interest and banking services income.

Itaú BBA

Itaú BBA is the segment responsible for banking operations for large companies and investment banking services. The investment banking activities comprise lending to corporate borrowers through fixed and variable income instruments. In addition, this segment performs activities related to mergers and acquisitions.

Consumer Credit

Our consumer credit segment is responsible for the development of the strategy of increasing the range of financial products and services beyond the universe of clients who are accountholders. Thus, the consumer credit segment comprises vehicle financing services provided by units other than the branch network, credit cards to clients who are not accountholders, and credit to low income individuals.

Activities with the Market and Corporation

Our activities with the market and corporation segment manages the interest income associated with our capital surplus, subordinated debt surplus and the net balance of tax credits and debits, as well as the net interest income from the trading of financial assets through proprietary positions (desks), management of currency interest rate gaps, and other risk factors, arbitrage opportunities in the foreign and domestic markets, and mark-to-market of financial assets. In this segment, we also present the effect of non-recurring items that are not considered in the managerial statement of income.

Basis of Presentation of Segment Information

We prepare segment information based on reports used by senior management to assess the performance of our business and to make decisions regarding the allocation of funds for investment and other purposes. Our senior management uses a variety of information for such purposes, including financial information that is prepared based on accounting practices adopted in Brazil. Our segment information is not prepared in accordance with IFRS.

The segment information has been prepared following accounting practices adopted in Brazil modified for the adjustments described below. Financial segment information differs from accounting practices adopted in Brazil because: (i) it includes recognition of the impact related to allocated capital using a proprietary model; and (ii) it presents net interest income using certain management criteria. For more information our segment financial information, see note 34 to our consolidated financial statements.

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Capital Allocation to each Segment

The book value of each of stockholders' equity and subordinated debt was replaced by funding at estimated market price, and interest income and expense were allocated to the segments, based on Tier I Capital, following a proprietary model, with surplus capital and subordinated debt being allocated to the activities with the market and corporation segment. The tax effects of payments of interest on capital by each segment have been reversed and reallocated to the segments in amounts proportional to the amount of the Tier I Capital. Share of income of unconsolidated companies which is not related to segment and non-controlling interest were allocated to the activities with the market and corporation segment.

Net Interest Income

We manage the foreign exchange risk of subsidiaries outside Brazil in order to economically hedge against impacts on our results arising from variation in exchange rates. In order to achieve this objective, we use derivative instruments to hedge against foreign currency risk. Hedge accounting is not applied for those derivatives; instead, they are recorded at fair value, with gains and losses included in income.

Our hedging strategy considers all tax effects, including those not related to taxes or to the non-deductibility of the exchange variation on the investments abroad as well as gains and losses on derivative financial instruments used. When the parity of the real against foreign currencies is considerable, there is a significant impact on interest income and expense.

As a result of the above, we have adopted a managerial statement of income to report segment information. The managerial statement of income is prepared by making reclassifications in the financial statements in accordance with the accounting practices adopted in Brazil. Tax effects of the hedge of these investments abroad, which are presented in tax expenses (PIS and COFINS) and income tax and social contribution expense, have been reclassified for our segment information.

Additionally, the managerial interest margin for banking product includes, for each operation, allocation of its opportunity cost.

For a better analysis we present below a summary of the results from our operating segments. The adjustments column shows the effects of the differences between the accounting principles followed for the presentation of segment information, which are substantially in line with the accounting practices adopted in Brazil, except as described above, and the policies used in the preparation of these consolidated financial statements according to IFRS.

	For the year ended December 31, 2012 (In millions of reais, except per share information)
Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			ACTIVITIES WITH THE MARKET AND CORPORATION			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		51,551			7,491			14,211			5,808			78,978			2,194			81,172
Losses on loans and claims		(15,292	)		(795	)		(5,179	)		251			(21,015	)		(339	)		(21,354	)
Operating margin		36,259			6,696			9,032			6,059			57,963			1,855			59,818
Other operating income (expenses)		(27,030	)		(3,301	)		(7,476	)		(281	)		(38,041	)		(4,361	)		(42,402	)
Income before income tax and social contribution		9,229			3,395			1,556			5,778			19,922			(2,506	)		17,416
Income tax and social contribution		(2,981	)		(1,066	)		(311	)		(968	)		(5,326	)		1,101			(4,225	)
Non-controlling interest in subsidiaries		-			-			-			(589	)		(553	)		(4	)		(557	)
Net income attributable to owners of the parent company		6,248			2,329			1,245			4,221			14,043			(1,409	)		12,634

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	For the year ended December 31, 2011 (In millions of reais, except per share information)
Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			ACTIVITIES WITH THE MARKET AND CORPORATION			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		48,236			6,897			14,102			5,109			74,257			19			74,276
Losses on loans and claims		(11,011	)		(134	)		(4,270	)		(521	)		(15,936	)		(136	)		(16,072	)
Operating margin		37,225			6,763			9,832			4,588			58,321			(117	)		58,204
Other operating income (expenses)		(25,829	)		(2,911	)		(7,911	)		(390	)		(37,025	)		(2,928	)		(39,953	)
Income before income tax and social contribution		11,396			3,852			1,921			4,198			21,296			(3,045	)		18,251
Income tax and social contribution		(3,833	)		(1,287	)		(477	)		(244	)		(5,841	)		2,200			(3,641	)
Non-controlling interest in subsidiaries		-			-			-			(885	)		(814	)		41			(773	)
Net income attributable to owners of the parent company		7,563			2,565			1,444			3,069			14,641			(804	)		13,837

Results of Operations for Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

The result per segment is disclosed based on managerial criteria. Such information excludes certain results which are considered not related to our core business by our management. We highlight that in note 34 to our consolidated financial statements, we have disclosed the main IFRS adjustments into the business operating segments’ consolidated managerial data to obtain the IFRS consolidated financial statements in more detail.

Commercial Bank

The main products and services we provide to our accountholders are:

· Credit: personal loans, overdraft protection, payroll loans, vehicles, credit cards, mortgage and agricultural loans, working capital, trade note discount and export;

· Investments: pension plans, mutual funds, time deposits, demand deposit accounts, savings accounts and capitalization plans; and

· Services: insurance (life, home, credit/cash cards, vehicles, loan protection, among others), exchange, brokerage and others.

The table below shows our banking product for the commercial bank segment for the years ended December 31, 2012 and 2011:

	For the Year Ended December 31,
	2012		2011		2012-2011			%
	(in millions of R$)				Variation
Banking product		51,551		48,236		3,315			6.9	%
Interest margin (1)		32,770		31,584		1,186			3.8	%
Banking service fees		12,289		10,915		1,374			12.6	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		6,030		5,229		801			15.3	%
Other income		462		508		(46	)		(9.1	)%

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

For the year ended December 31, 2012, our banking product for the commercial bank segment increased by 6.9%, from R$48,236 million in the year ended December 31, 2011 to R$51,551 million for the same period in 2012, an increase of R$3,315 million. This increase was mainly due to the 12.6% growth in banking service fees related to the increase in our customer base and to an increase in the volume of services, the 3.8% growth in interest margin, related to the 12.8% growth in the loan portfolio, and to a lesser extent the 15.3% growth in income from insurance, private pension and capitalization operations before claim and selling expenses , partially offset by the decrease of 9.1% in other income. The increase in banking service fees was partially offset by recent reductions in some of our banking service fees, in line with pricing changes by our competitors.

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The table below shows an increase of 38.9% in our losses on loans and claims for the commercial bank segment for the year ended December 31, 2012, compared to the same period of 2011, mainly due to the 19.7% increase in expenses for allowance for loan and lease losses.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Banking product		51,551			48,236			3,315			6.9	%
Losses on loans and claims		(15,292	)		(11,011	)		(4,281	)		38.9	%
Expenses for allowance for loan and lease losses		(16,577	)		(13,845	)		(2,732	)		19.7	%
Recovery of loans written-off as losses		3,320			4,346			(1,026	)		(23.6	)%
Expenses for claims/Recovery of claims under reinsurance		(2,035	)		(1,512	)		(523	)		34.6	%
Operating margin		36,259			37,225			(966	)		(2.6	)%

Our expenses for allowance for loan and lease losses increased by 19.7%, from R$13,845 million in the year ended December 31, 2011 to R$16,577 million in the same period of 2012. The increase of R$2,732 million in expenses for allowance for loan and lease losses was mainly due to the increase in delinquency levels observed in our portfolios of personal loans and to the growth in our loan portfolio.

The decrease of R$1,026 million in recovery of loans written-off as losses was mainly due to discounts granted in the renegotiation of credit that had already been written off as losses no longer being deducted from the interest and similar income in 2012, but deducted from the income from the recovery of loan operations written off as losses.

The table below shows an increase of 4.6% in our other operating income (expenses) for the commercial bank segment for the year ended December 31, 2012, compared to the same period of 2011, primarily due to the increase of 5.2% in non-interest expenses.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Operating margin		36,259			37,225			(966	)		(2.6	)%
Other operating income (expenses)		(27,030	)		(25,829	)		(1,201	)		4.6	%
Non-interest expenses (1)		(24,539	)		(23,315	)		(1,224	)		5.2	%
Tax expenses for ISS, PIS and COFINS and other		(2,704	)		(2,596	)		(108	)		4.2	%
Share of profit or (loss) of unconsolidated companies, net		108			(43	)		151			n.m.
Other		105			125			(20	)		(16.0	)%
Income before income tax and social contribution		9,229			11,396			(2,167	)		(19.0	)%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

Non-interest expenses totaled R$24,539 million in 2012, an increase of R$1,224 million, or 5.2%, compared to 2011.This increase was driven by the higher volume of transactions, as a result of a growth in our banking operations. This increase was also driven by an increase in personnel expenses, which were affected by the increases in compensation and benefits of 9.0% in September, 2011, that affected all of 2012, and of 7.5% (compensation) and 8.5% (benefits) in September, 2012, due to the collective bargaining agreements reached in each year, was partially offset by a reduction in the number of employees in the segment during the year. Finally, this increase was also driven by an increase in provisions due to changes in criteria for the model for provisioning (see note 32 to our consolidated financial statements), as well as increased selling expenses for credit cards due to the growth in customer base and volume of transactions (see note 26 to our consolidated financial statements).

Our tax expense for ISS, PIS and COFINS and other taxes increased 4.2% compared to year ended December 31, 2011. This increase reflects the increase in revenues and in our operational activities throughout the year. See “— Net interest income” above.

Our share of profit or (loss) of unconsolidated companies, net of commercial bank activities increased by R$151 million for the year ended December 31, 2012 compared to the same period of 2011, mainly due to the impairment to our investment in Banco BPI recognized in 2011 and in April 20, 2012 we sold the Banco BPI to La Caixa Group.

The table shows a 22.2% decrease in income tax expense and social contribution for the year ended December 31, 2012. The main reason for this was the decrease in income before income tax and social contribution as explained above.

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The table below also shows a decrease of R$1,315 million in our net income for the commercial bank segment for the year ended December 31, 2012, compared to the same period of 2011.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Income before income tax and social contribution		9,229			11,396			(2,167	)		(19.0	)%
Income tax and social contribution		(2,981	)		(3,833	)		852			(22.2	)%
Non-controlling interest in subsidiaries		-			-			-			-
Net income attributable to owners of the parent company		6,248			7,563			(1,315	)		(17.4	)%

Itaú BBA

For our corporate and investment bank segment (Itaú BBA), the banking product for 2012 compared to 2011, is shown in the table below:

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Banking product		7,491			6,897			594			8.6	%
Interest margin (1)		5,334			4,896			438			8.9	%
Banking service fees		2,261			2,123			138			6.5	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		38			-			38			-
Other income		(142	)		(122	)		(20	)		16.4	%

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

For the year ended December 31, 2012, our banking product for Itaú BBA increased by 8.6%, from R$6,897 million in the year ended December 31, 2011 to R$7,491 million for the same period in 2012, an increase of R$594 million.  This increase was mainly due to an increase in interest margin due to an increase in the large companies’ credit portfolio by 13.8% and an increase in income from dividends. This increase in banking product was also due to an increase in banking service fees due to an increase in revenues from investment banking transactions and fees from credit transactions. The increase in banking product was partially offset by a decrease in other income of R$20 million.

The table below shows a significant increase in our losses on loans and claims from Itaú BBA for the year ended December 31, 2012, compared to the same period of 2011, primarily due to an increase in expenses for allowance for loan and lease losses.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Banking product		7,491			6,897			594			8.6	%
Losses on loans and claims		(795	)		(134	)		(661	)		493.3	%
Expenses for allowance for loan and lease losses		(871	)		(266	)		(605	)		227.4	%
Recovery of loans written-off as losses		76			132			(56	)		(42.4	)%
Expenses for claims/Recovery of claims under reinsurance		-			-			-			-
Operating margin		6,696			6,763			(67	)		(1.0	)%

We had a loss of R$795 million for loans and claims for the year ended December 31, 2012 compared to a loss of R$134 million for the year ended December 31, 2011. This increase is mainly due to an increase in expenses for allowance for loan and lease losses related to the recognition of provisions for some economic groups as a result of the revision of ratings and the growth in our loan portfolio. However, there was no increase in overdue balances of the corporate portfolio and 92.1% of our corporate portfolio has an “AA”, “A” or “B” rating in accordance with the criteria set forth in CMN Resolution No. 2,682.

The table below shows an increase of 13.4% in other operating income (expenses) for the Itaú BBA segment in the year ended December 31, 2012, compared to the same period of 2011, mainly due to a 11.0% increase in non-interest expenses.

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	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Operating margin		6,696			6,763			(67	)		(1.0	)%
Other operating income (expenses)		(3,301	)		(2,911	)		(390	)		13.4	%
Non-interest expenses (1)		(2,891	)		(2,605	)		(286	)		11.0	%
Tax expenses for ISS, PIS and COFINS and other		(410	)		(341	)		(69	)		20.2	%
Share of profit or (loss) of unconsolidated companies, net		5			6			(1	)		(16.7	)%
Other		(5	)		29			(34	)		n.m.
Income before income tax and social contribution		3,395			3,852			(457	)		(11.9	)%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

Non-interest expenses totaled R$2,891 million in 2012, an increase of R$286 million, or 11.0%, compared to 2011. This increase is due mainly to increases in compensation and benefits of 9.0% in September 2011, that affected all of 2012, and of 7.5% (compensation) and 8.5% (benefits) in September 2012, due to the collective bargaining agreements reached in each year, and an increase of 14% in the number of employees.

Tax expense for ISS, PIS and COFINS and other taxes resulted in R$410 million in 2012 compared to R$341 million in the prior year, a 20.2% increase, mainly due to a growth in the operating activities.

The table shows a 11.9% decrease in income before tax and social contribution for Itaú BBA for the period ended December 31, 2012 compared to the same period of 2011 from R$3,852 million for 2011 to R$3,395 million for 2012. Income tax and social contribution for the year totaled R$1,066 million in 2012 compared to R$1,287 million in the prior year, a 17.2% decrease, mainly due to the lower income before income tax and social contribution.

The table below also shows a decrease of 9.2% in net income for Itaú BBA segment for the year ended December 31, 2012 compared to the same period of 2011.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Income before income tax and social contribution		3,395			3,852			(457	)		(11.9	)%
Income tax and social contribution		(1,066	)		(1,287	)		221			(17.2	)%
Non-controlling interest in subsidiaries		-			-			-			-
Net income attributable to owners of the parent company		2,329			2,565			(236	)		(9.2	)%

Consumer Credit

We offer credit cards to non-account holders both through direct sales and through our partnerships, in the form of joint ventures and operating agreements with major retailers present in the Brazilian market. We also offer vehicle financing to non-account holders, through partnerships with both new and used car retailers in Brazil.

The banking product for the consumer credit operating segment is show in the table below.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Banking product		14,211			14,102			109			0.8	%
Interest margin (1)		8,310			8,356			(46	)		(0.6	)%
Banking service fees		5,890			5,719			171			3.0	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		(7	)		(13	)		6			(46.2	)%
Other income		18			40			(22	)		(55.0	)%

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

For the year ended December 31, 2012, our banking product for consumer credit increased 0.8% compared with 2011, from R$14,102 million in the year ended December 31, 2011 to R$14,211 million in the year ended December 31, 2012, an increase of R$109 million. In 2012, the results of the banking product remain in line with 2011, as the increase in interest income and fees from credit cards was offset by a decrease in interest income and fees from our vehicle portfolio.

135

Our losses on loans and claims for the consumer credit segment increased 21.3% in the year ended December 31, 2012 compared to the same period of 2011, from R$4,270 million in 2011 to R$5,179 million in 2012, primarily due to a 16.0% increase in expenses for allowance for loan and lease losses, as shown in the table below.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Banking product		14,211			14,102			109			0.8	%
Losses on loans and claims		(5,179	)		(4,270	)		(909	)		21.3	%
Expenses for allowance for loan and lease losses		(6,111	)		(5,270	)		(841	)		16.0	%
Recovery of loans written-off as losses		932			1,000			(68	)		(6.8	)%
Expenses for claims/Recovery of claims under reinsurance		-			-			-			-
Operating margin		9,032			9,832			(800	)		(8.1	)%

Our expenses for allowance for loan and lease losses increased by 16.0%, from R$5,270 million in the year ended December 31, 2011 to R$6,111 million in the same period of 2012. This increase is due to an increase in the delinquency levels of Brazilian consumers and in the vehicle loans portfolio.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Operating margin		9,032			9,832			(800	)		(8.1	)%
Other operating income (expenses)		(7,476	)		(7,911	)		435			(5.5	)%
Non-interest expenses (1)		(6,551	)		(6,948	)		397			(5.7	)%
Tax expenses for ISS, PIS and COFINS and other		(968	)		(953	)		(15	)		1.6	%
Share of profit or (loss) of unconsolidated companies, net		58			-			58			n.m.
Other		(15	)		(10	)		(5	)		50.0	%
Income before income tax and social contribution		1,556			1,921			(365	)		(19.0	)%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

Non-interest expenses totaled R$6,551 million in 2012, a decrease of R$397 million, or 5.7%, compared to 2011, mainly due the restructuring of the consumer credit business unit, implemented in 2012 in which we revised agreements and partnerships, halting those with underperformance histories, and reduced the number of employees some of which were transferred to our retail partners. Some of the benefits of the unit restructuring was offset by increases in compensation and benefits of 9.0% in September 2011, that affected all of 2012, and of 7.5% (compensation) and 8.5%(benefits) in September 2012, due to the collective bargaining agreements reached in each year.

Tax expenses for ISS, PIS and COFINS and other taxes remained in line with 2011. See —Net interest income above.

Our income before income tax and social contribution for the consumer credit segment decreased 19.0% in the year ended December 31, 2012 compared to the same period of 2011, from R$1,921 million in 2011 to R$1,556 million in 2012, as shown in the table below. The table below also shows a 34.8% decrease in income tax and social contribution for the year that totaled R$311 million in 2012 compared to R$477 million in the prior year, primarily due to lower income before income tax and social contribution.

The table below also shows a 13.8% decrease in net income for the consumer credit segment for the year ended December 31, 2012, compared to the same period of 2011.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Income before income tax and social contribution		1,556			1,921			(365	)		(19.0	)%
Income tax and social contribution		(311	)		(477	)		166			(34.8	)%
Non-controlling interest in subsidiaries		-			-			-			-
Net income attributable to owners of the parent company		1,245			1,444			(199	)		(13.8	)%

136

Activities with the Market and Corporation

The activities with the market and corporation segment presents the result from excess capital, excess subordinated debt and the net balance of tax assets and liabilities. It also shows the financial margin on market transactions, costs of treasury operations, equity in the earnings of companies that are not linked to any segments, as well those adjustments relating to minority shareholdings in subsidiaries and our interest in Porto Seguro.

The banking product for the activities with the market and corporation business operational segment shown in the table below increased by 13.7%, from R$5,109 million in the year ended December 31, 2011 to R$5,808 million in the same period in 2012, an increase of R$699 million, mainly due to an increase in the interest margin.

	For the Year Ended December 31,
	2012		2011			2012-2011			%
	(in millions of R$)					Variation
Banking product		5,808		5,109			699			13.7	%
Interest margin (1)		5,555		4,801			754			15.7	%
Banking service fees		249		309			(60	)		(19.4	)%
Income from insurance, private pension and capitalization operations before claim and selling expenses		4		(1	)		5			n.m.
Other income		-		-			-			-

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

The interest margin within this segment primarily consists of revenues by treasury transactions and surplus capital. During the year ended December 31, 2012, the interest margin totaled R$5,555 million and increased by 15.7% compared to the same period of 2011. This increase is primarily due to higher gains from investing capital surplus in 2012 compared to 2011. Gains in treasury transactions in 2012 remained in line with 2011.

Banking service fees decreased 19.4% while income from insurance, private pension and capitalization operations before claim and selling expenses increased R$5 million. These changes were due to differences in revenues and expenses allocation to other operating segments in 2012 compared to 2011.

Losses on loans and claims decreased from a loss of R$521 million in 2011 to a gain of R$251 million in 2012, as shown in the table below, mainly due to the decrease in expenses for allowance for loan and losses.

	For the Year Ended December 31,
	2012			2011			2012-2011		%
	(in millions of R$)						Variation
Banking product		5,808			5,109			699		13.7	%
Losses on loans and claims		251			(521	)		772		n.m.
Expenses for allowance for loan and lease losses		(85	)		(531	)		446		(84.0	)%
Recovery of loans written-off as losses		336			10			326		3260.0	%
Expenses for claims/Recovery of claims under reinsurance		-			-			-		-
Operating margin		6,059			4,588			1,471		32.1	%

The expenses for allowance for loans and lease losses decreased from R$531 million in 2011 to R$85 million in 2012. These changes were due to differences in revenues and expenses allocation to other operating segments in 2012 compared to 2011.

Other operating income (expenses) decreased from R$390 million in 2011 to R$281 million in 2012, as shown in the table below, mainly due to the 52.0% decrease in non-interest expenses.

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	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Operating margin		6,059			4,588			1,471			32.1	%
Other operating income (expenses)		(281	)		(390	)		109			(27.9	)%
Non-interest expenses (1)		(449	)		(935	)		486			(52.0	)%
Tax expenses for ISS, PIS and COFINS and other		(148	)		51			(199	)		n.m.
Share of profit or (loss) of unconsolidated companies, net		316			447			(131	)		(29.3	)%
Other		-			47			(47	)		n.m.
Income before income tax and social contribution		5,778			4,198			1,580			37.6	%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

Non-interest expenses decreased R$486 million in the year ended December 31, 2012 compared to the year ended December, 31, 2011, mainly due to lower expenses in benefits related to employment in 2012 compared to 2011.

Tax expenses for ISS, PIS and COFINS and other increased R$199 million in the year ended December 31, 2012 compared to the year ended December, 31, 2011, mainly due to differences in revenues and expenses allocation to other operating segments in 2012 compared to 2011.

Share of profit or (loss) of unconsolidated companies, net decreased R$131 million, from R$447 million in 2011 to R$316 million in 2012, a decrease of 29.3%, due to sale of BPI and of Serasa shares.

The table below shows an increase of R$724 million in income tax and social contribution for 2012 from 2011, due to higher income before income tax and social contribution as explained above and a decrease of R$296 million in non-controlling interest in subsidiaries from R$885 million in 2011 to R$589 million in 2012, mainly due to the acquisition of the remaining minority shares of Redecard.

Net income for the activities with the market and corporation segment increased from R$3,069 million in 2011 to R$4,221 million in 2012, as shown in the table below.

	For the Year Ended December 31,
	2012			2011			2012-2011			%
	(in millions of R$)						Variation
Income before income tax and social contribution		5,778			4,198			1,580			37.6	%
Income tax and social contribution		(968	)		(244	)		(724	)		296.7	%
Non-controlling interest in subsidiaries		(589	)		(885	)		296			(33.4	)%
Net income attributable to owners of the parent company		4,221			3,069			1,152			37.5	%

Results of Operations for Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Highlights

For the year ended December 31, 2011, our net income attributable to owners of the parent company was R$13,837 million and our total stockholders’ equity was R$73,941 million.

As of December 31, 2011, total loan operations and lease operations was R$346,264 million, a 17.4% increase compared to December 31, 2010. Loans to individuals increased by 18.0%, while loans to companies increased by 14.8% compared to December 31, 2010. During 2011, we maintained our strategy of increasing the volume of credit card lending, personal loans, mortgage loans and loans to middle market companies, with personal loans increasing at a higher rate than other segments. We highlight that mortgage loans and rural loans portfolios (which are regulatory required loans) are presented within loans to individuals or loans to companies, as appropriate, according to the type of client.

Loans to individuals totaled R$148,277 million in 2011, an increase of R$22,760 million, or 18.0%, compared to 2010. This increase is primarily a result of a 44.1% growth in personal loans, totaling R$36,403 million, as a consequence of the increase in credit limits as well as additional product offerings to our customer base. Mortgage loans in 2011 compared to 2010 increased 66.7%, totaling R$13,450 million, as a result of the favorable Brazilian mortgage market, which presented the highest growth in 2011. Vehicle financing increased 0.5% in 2011 compared to 2010, totaling R$60,463 million, due to a) the low overall growth in this market in Brazil, related to the macroprudential measures taken by the government at the end of 2010 (i.e., increase in capital requirements for such transactions, considering the percentage of down-payment and the tenure of the contracts, as established by Circular 3,515/Central Bank of December 3, 2010), b) higher non-performing loan (NPL) levels and c) tightening of our underwriting standards.

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Loans to companies totaled R$177,728 million in 2011, an increase of R$22,925 million, or 14.8%, compared to 2010. Loans to small and medium companies increased R$5,699 million, or 7.1% in 2011 compared to 2010, totaling R$85,649 million and loans to corporate customers increased R$17,226 million, or 23.0%, in 2011 compared to 2010, totaling R$92,079 million. In 2011, we focused our underwriting initiatives on medium and large companies, which typically have lower delinquency rates, and grew consistent with the banking industry as a whole. In addition, the depreciation of the real against other currencies, especially the U.S. dollar, also contributed to the growth of our medium to large companies portfolio since certain of our loans are denominated, or originated in, such currencies.

Due to the higher non-performing loan (NPL) levels observed in our small businesses portfolio (mainly in the first half of 2011) and in our vehicle financing portfolio (especially in the second half of 2011), we tightened our underwriting standards and required either more collateral or higher down payments, and reduced the maturity of loans within these portfolios. These changes, combined with the slowing growth of the Brazilian market, resulted in a slight reduction of our small companies loan portfolio and in the overall stability in the vehicle financing portfolio.

Losses on loans and claims represent the total of expenses for allowance for loan and lease losses, recovery of loans written off as losses and expenses for claims. In 2011, our losses on loans and claims increased from R$12,938 million in 2010 to R$16,072 million in 2011 a R$3,134 million increase, or 24.2%, mainly due to an increase of expenses for allowance for loan and lease losses and to a lesser extent to an increase of expenses for claims, partially offset by an increase of the recovery in loans written off as losses.

During 2011, delinquency levels increased both in our portfolio and in the Brazilian financial system. This increase led to higher incurred losses, especially in the small companies and vehicle financing portfolios, and to an increase in expenses for allowance for loan and lease losses from 2010 to 2011. For more details on how we calculate allowance for loan losses, see note 36.4 of our consolidated financial statements.

As of December 31, 2011, the ratio of 90-day non-performing loans as a percentage of our total loan portfolio increased to 4.9%, compared to 4.2% as of December 31, 2010, in line with the Brazilian banking industry average (based on Brazilian Central Bank data), due to higher non-performing loan (NPL) levels in the small companies portfolio, especially in the first half of 2011, and higher NPL levels in the vehicle financing portfolio in the second half of 2011. Due to an increase in non-performing loans, the 90-day coverage ratio reduced from 161% in 2010 to 142% in 2011. The decrease in the coverage ratio reflects the mechanics of our provisioning model. When there is evidence of impairment, the incurred loss model increases  provision, increasing the coverage ratio. However, the related transactions are not necessarily overdue for more than 90days, and are therefore not yet considered non-performing. When the loan transaction becomes overdue by more than 90 days and nonperforming balances actually increase, most of the provisions have already been made and the coverage ratio decreases. In addition, impaired loans (as reflected in note 36.6 of our consolidated financial statements) increased from R$13,878 million in 2010 to R$18,385 million in 2011, due to growth of loans to individuals and small and medium companies.

Credits under renegotiation, including extended, modified and deferred repayments, increased to 4.2% of our total portfolio, mainly due to the increased amount of renegotiation of collateralized loans (mainly vehicle loans) as of December 31, 2011, compared to 3.1% as of December 31, 2010.

Efficiency Project

During 2011, after the completion of the integration of Itaú and Unibanco branches in 2010, we implemented the “Efficiency Project”, which aims a close budget management and matricial monitoring of costs and revenues, the establishment of targets for each business unit and the promotion of a strong culture of operational efficiency.

During 2010 our main challenge was the completion of the integration of Unibanco branches and CSBs throughout Brazil. With the completion of the integration, we were able to improve our processes and, accordingly, expand the volume of services and increase our customer base, while maintaining service quality. We highlight the improvement of asset quality as the principal change in our financial condition for the year ended December 31, 2010. Our operations were positively affected by a decrease in nonperforming loans, mainly due to an improvement in the quality of our portfolio with individuals and companies, and an improvement in our recovery of loans previously written off as losses. Reduced delinquency levels are associated with the improving Brazilian economy.

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Results of Operations

The following table shows the main components of our net income for 2011 and 2010.

(in millions of R$, except percentages)
	Year Ended December 31,						Variation
	2011			2010			2011-2010			%
Banking product		74,276			69,415			4,861			7.0	%
Interest and similar income		97,352			77,818			19,534			25.1	%
Interest and similar expense		(55,599	)		(36,840	)		(18,759	)		50.9	%
Dividend income		361			326			35			10.7	%
Net gain (loss) from investment securities and derivatives		1,251			2,862			(1,611	)		(56.3	)%
Foreign exchange results and exchange variation on transactions		4,998			1,824			3,174			174.0	%
Banking service fees		19,410			17,092			2,318			13.6	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		5,345			4,923			422			8.6	%
Other income		1,158			1,410			(252	)		(17.9	)%
Losses on loans and claims		(16,072	)		(12,938	)		(3,134	)		24.2	%
Expenses for allowance for loan and lease losses		(20,038	)		(15,547	)		(4,491	)		28.9	%
Recovery of loans written off as loss		5,477			4,195			1,282			30.6	%
Expenses for claims		(1,511	)		(1,586	)		75			(4.7	)%
Operating margin		58,204			56,477			1,727			3.1	%
Other operating income (expenses)		(39,953	)		(38,447	)		(1,506	)		3.9	%
General and administrative expenses		(35,674	)		(34,632	)		(1,042	)		3.0	%
Tax expenses		(4,166	)		(4,164	)		(2	)		0.0	%
Share of profit or (loss) of unconsolidated companies		(113	)		349			(462	)		n.m.
Income before income tax and social contribution		18,251			18,030			221			1.2	%
Current income tax and social contribution		(6,956	)		(4,042	)		(2,914	)		72.1	%
Deferred income tax and social contribution		3,315			(1,494	)		4,809			n.m.
Net income		14,610			12,494			2,116			16.9	%
Net income attributable to non-controlling interests		773			786			(13	)		(1.7	)%
Net income attributable to owners of the parent company		13,837			11,708			2,129			18.2	%

Interest and similar Income

The following table shows the main components of our interest income for 2011 and 2010.

(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2011		2010		2011-2010			%
Interest and similar income
Interest on loan and lease operations		58,492		50,693		7,799			15.4	%
Interest on Interbank deposits		890		824		66			8.1	%
Interest on Central Bank compulsory deposits		9,182		4,025		5,157			128.1	%
Interest on securities purchased under agreements to resell		9,961		9,940		21			0.2	%
Interest on financial assets held for trading		14,676		8,028		6,648			82.8	%
Interest on available-for-sale financial assets		2,888		2,997		(109	)		(3.6	)%
Interest on held-to-maturity financial assets		360		456		(96	)		(21.0	)%
Interest on other financial assets		903		855		48			5.7	%
Total Interest and similar income		97,352		77,818		19,534			25.1	%

Banking Product

Banking product is a subtotal of individual line items, such as interest and similar income, interest and similar expense, dividend income, net gain (loss) from investment securities and derivatives, foreign exchange results and exchange variation on transactions, banking service fees, income from insurance, private pension and capitalization operations before claim and selling expenses and other income.

Interest and Similar Income

The R$19,534 million or 25.1% increase in interest income in 2011 is primarily due to an increase in the balance of loan and lease operations, financial assets held for trading and securities and in a lesser extent to Central Bank compulsory deposits.

Interest and similar income is a subtotal of individual line items, such as interest on loan and lease operations, interest on interbank deposits, interest on Central Bank compulsory deposits, interest on securities purchased under agreements to resell, interest on financial assets held for trading, interest on available-for-sale financial assets, interest on held-to-maturity financial assets and interest on other financial assets.

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Interest on Loan and Lease Operations

The table below shows the performance of loan operations and lease operations, with loans classified by type of creditor (individuals and companies) and further broken down by type of product for individuals and by size of customer for companies. In addition, the table presents the balance of credit operations from our subsidiaries in Latin America outside of Brazil (Argentina, Chile, Uruguay and Paraguay).

(in millions of R$, except percentages)
	As of December 31,
	2011				2010				Variation (%)
Loans to individuals		149,277	43.1	%		126,517	42.9	%		22,760	18.0	%
Credit card		38,961	11.3	%		33,041	11.2	%		5,920	17.9	%
Personal loan		36,403	10.5	%		25,258	8.6	%		11,145	44.1	%
Vehicles		60,463	17.5	%		60,151	20.4	%		312	0.5	%
Mortgage Loans		13,450	3.9	%		8,067	2.7	%		5,383	66.7	%
Loans to companies		177,728	51.3	%		154,803	52.5	%		22,925	14.8	%
Small and Medium Businesses		85,649	24.7	%		79,950	27.1	%		5,699	7.1	%
Corporate		92,079	26.6	%		74,853	25.4	%		17,226	23.0	%
Foreign loans Latin America		19,259	5.6	%		13,517	4.6	%		5,742	42.5	%
Total loan operations and lease operations		346,264	100.0	%		294,837	100.0	%		51,427	17.4	%

Our results of operations for the year ended December 31, 2011, when compared to the year ended December 31, 2010, reflected a significant impact from exchange rate variations. The exchange rate between the U.S. dollar and the real changed significantly. During the year ended December 31, 2011, the real depreciated 12.6% against the U.S. dollar, while in 2010 the real appreciated 4.3% against the U.S. dollar.

In 2011, we observed an increase in the CDI rate to 11.6% from 9.8% which caused impacts on costs as revenues of many our assets and liabilities.

Interest on loan and lease operations totaled R$58,492 million in 2011, an increase of R$7,799 million, or 15.4% compared to 2010. This increase was due primarily to an increase in the average volume of loans and lease transactions.

As of December 31, 2011, total loan operations and lease operations was R$346,264 million, a 17.4% increase compared to December 31, 2010. Loans to individuals increased by 18.0%, while loans to companies increased by 14.8% compared to December 31, 2010. During 2011, we maintained our strategy of increasing the volume of credit card lending, personal loans, mortgage loans and loans to medium businesses, with personal loans increasing at a higher rate than other segments. We highlight that mortgage loans and rural loans portfolios (which are regulatory required loans) are presented within loans to individuals or loans to companies, as appropriate, according to the type of client.

Loans to individuals totaled R$149,277 million in 2011, an increase of R$22,760 million, or 18.0% compared to 2010. This increase is primarily a result of a 44.1% growth in personal loans, totaling R$36,403 million, primarily due to the conclusion of systems integration at the end of 2010, which allowed a better use of Unibanco account holder data during 2011. Mortgage loans in 2011 compared to 2010 increased 66.7%, totaling R$13,450 million, as a result of a favorable Brazilian economic environment. Credit card increased 17.9%, totaling R$38,961 million in 2011, due to the consistently growing popularity of this product due to its practicality and safety. Credit card lending is an increasingly important tool that we use to acquire new customers, in particular low-income individuals. Vehicle financing increased 0.5% in 2011 compared to 2010, totaling R$60,463 million, due to the low overall growth in this market in Brazil, mainly due to macro prudential measures taken by the government at the end of 2010.

Loans to companies totaled R$177,728 million in 2011, an increase of R$22,925 million, or 14.8%, compared to 2010. Loans to small and medium businesses increased R$5,699 million, or 7.1% in 2011 compared to 2010, totaling R$85,649 million. Loans to corporate increased R$17,226 million, or 23.0%, in 2011 compared to 2010, totaling R$92,079 million, due to our strategy of growth in medium and large companies in 2011.

The balance of our foreign loans from our operations in Latin America outside Brazil (Argentina, Chile, Uruguay and Paraguay) totaled R$19,259 million as of December 31, 2011, an increase of 42.5% compared to December 31, 2010, primarily driven by the growth of operations abroad and the fluctuation of the real against several of these currencies.

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Interest on Interbank Deposits

Interest on interbank deposits totaled R$890 million in 2011, an increase of R$66 million, or 8.1%, compared to 2010. This increase was due primarily to the increase on the average balance of these deposits, which is managed by our treasury department.

Interest on Central Bank Compulsory Deposits

Interest on Central Bank compulsory deposits totaled R$9,182 million in 2011, an increase of R$5,157 million, in 2011 compared to 2010. This increase was mainly due to increases in the average balance of levels of compulsory deposits required by the Central Bank compared to 2010. In December 2010, the Central Bank increased compulsory deposit requirements in order to restore the levels of compulsory deposits held by the banks before the international financial crisis of 2008, when the Central Bank decreased required amounts of compulsory deposits, and also to help control inflation and credit growth in Brazil.

Interest on Securities Purchased under Agreements to Resell

Interest on securities purchased under agreements to resell totaled R$9,961 million in 2011, an increase of R$21 million, or 0.2% in 2011 compared to 2010. This increase was mainly due to higher yield/rate of interest on securities purchased under agreements to resell in 2011 compared to 2010.

Interest on Financial Assets Held for Trading

Interest on financial assets held for trading totaled R$14,676 million in 2011, an increase of R$6,648 million, or 82.8%, compared to 2010. This increase was mainly due to an increase in the average balance and in the average yield/rate of financial assets held for trading in 2011 compared to 2010, which is managed by our treasury department.

Interest on Available for Sale Financial Assets

Interest on available-for-sale financial assets totaled R$2,888 million in 2011, a decrease of R$109 million, or 3.6%, compared to 2010. This decrease was mainly due to the decrease of average yield/rate of available-for-sale financial assets, partially offset by an increase in the average balance of available-for-sale financial assets in 2011 compared to 2010.

Interest on Held-to-Maturity Financial Assets

Interest on held-to-maturity financial assets totaled R$360 million in 2011, a decrease of R$96 million, or 21.0%, compared to 2010. This decrease was mainly due to a decrease in the average yield/rate of held-to-maturity financial assets, partially offset by an increase in the average balance of held-to-maturity financial assets in 2011 compared to 2010.

Interest on Other Financial Assets

Interest on other financial assets totaled R$903 million, an increase of R$48 million, or 5.7%, compared to 2010. This increase was mainly due to an increase in other operational income.

Interest and similar Expense

The following table shows the main components of our interest expense in 2011 and 2010.

(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2011		2010		2011-2010		%
Interest and similar expense
Interest on deposits		12,186		10,591		1,595		15.1	%
Interest on securities sold under repurchase agreements		22,133		15,774		6,359		40.3	%
Interbank market debt		5,536		2,100		3,436		163.6	%
Institutional market debt		10,505		4,337		6,168		142.2	%
Financial expense from reserves for insurance and private pension		5,239		4,038		1,201		29.8	%
Total interest expense		55,599		36,840		18,759		50.9	%

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Total interest expense was R$55,599 million in 2011, an increase of R$18,759 million, or 50.9%, compared to 2010, mainly due to increases in interest expense from interest on securities sold under repurchase agreements and from institutional market debt.

Interest on Deposits

Interest on deposits was R$12,186 million in 2011, an increase of R$1,595 million, or 15.1% in comparison to 2010. An increase in the average balance of deposits resulted in an increase in expenses of R$1,427 million and by an increase in the average yield/rate resulted in an increase in expenses of R$168 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

Interest on Securities Sold Under Repurchase Agreements

Interest on securities sold under repurchase agreements was R$22,133 million in 2011 an increase of R$6,359 million, or 40.3%, compared to 2010. An increase in the average balance resulted in an increase in expenses of R$4,218 million in 2011 and an increase in the average yield/rate resulted in an increase in expenses of R$2,141 million related to our strategy of liquidity management.

Interbank Market Debt

Interest expense on interbank market debt totaled R$5,536 million in 2011, an increase of R$3,435 million, or 163.6%, compared to 2010. This increase was due to an increase in the average balance of interbank market debt, that resulted in an increase in expenses of R$1,425 million, and to an increase on the average yield/rate that increased the expenses by R$2,011 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data.

Institutional Market Debt

Interest expense on institutional market debt totaled R$10,505 million in 2011, with an increase of R$6,168 million, or 142.2% compared to 2010. This increase was primarily due to an increase in the average yield/rate that resulted in an increase in expenses of R$4,907 million and by an increase on the average balance of institutional market debt that increased expenses by R$1,261 million. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

Financial Expense from Reserves for Insurance and Private Pension

Financial expense from reserves for insurance and private pension plans totaled R$5,239 million in 2011, an increase of R$1,201 million, or 29.8%, compared to 2010. This increase was primarily due to an increase in the average balance of reserves for insurance and private pension and liabilities for capitalization plans of R$921 million, and by an increase of R$281 million due to an increase on the average yield/rate. See “Item 4B. Business Overview — Selected Statistical Information — Average Balance Sheet and Interest Rate Data."

Other interest income and Foreign Exchange Results

The following table shows the main components of our other interest and foreign exchange results income in 2011 and 2010.

(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2011		2010		2011-2010			%
Other interest income
Dividend income		361		326		35			10.7	%
Net gain (loss) from investment securities and derivatives		1,251		2,862		(1,611	)		(56.3	)%
Foreign exchange results and exchange variation on transactions		4,998		1,824		3,174			174.0	%
Total other interest income and foreign exchange results		6,610		5,012		1,598			31.9	%

In 2011, our other interest income and foreign exchange results totaled R$6,610 million, an increase of R$1,598 million, or 31.9%, in 2011 compared to 2010. This increase was primarily due to the increase of R$3,174 million in foreign exchange results and exchange variation on transactions, partially offset by a decrease of R$1,611 million in net gain (loss) from investment securities and derivatives related mainly to our risk management strategy and administration of gaps, particularly those associated with derivative instruments used to hedge our investments abroad.

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Dividend Income

Dividend income totaled R$361 million on 2011, an increase of R$35 million compared to 2010, due to higher income from dividends of other companies.

Net Gain (Loss) from Investment Securities and Derivatives

Net gain (loss) from investment securities and derivatives totaled a gain of R$1,251 million in 2011 compared to gains of R$2,862 million in 2010, mainly to our risk management strategy and administration of gaps, particularly those associated with derivative instruments used to hedge our investments abroad.

Foreign Exchange Results and Exchange Variation on Transactions

Foreign exchange results and exchange variation on transactions totaled R$4,998 million an increase of R$3,174 million, or 174.0% compared to 2010, due mainly to the effect of the depreciation of the real against the dollar in our investments in subsidiaries abroad.

Non-Interest Income

The following table shows the main components of our non-interest income in 2011 and 2010.

(in millions of R$, except percentages)
	Year Ended December 31,				Variation
	2011		2010		2011-2010			%
Non-interest income
Banking service fees		19,410		17,092		2,318			13.6	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		5,345		4,923		422			8.6	%
Other income		1,158		1,410		(252	)		(17.9	)%
Total non-interest income		25,913		23,425		2,488			10.6	%

In 2011, our non-interest income totaled R$25,913 million, an increase of R$2,488 million, or 10.6%, in 2011 compared to 2010. This increase was primarily due an increase of R$2,318 million in banking service fees, partially offset by a decrease of R$252 million in other non-interest income.

Banking Service Fees

Banking service fees totaled R$19,410 million in 2011, an increase of R$2,318 million, or 13.6%, compared to 2010. This increase was mainly due to increased revenues from credit card fees, which increased by 16.2% from R$6,408 million in 2010 to R$7,446 million in 2011, primarily due to higher annual fees, and higher interchange revenues arising from the increased volume of transactions due to year-end sales and growth in the number of credit card transactions. See note 24 of our consolidated financial statements for more details.

Income from Insurance, Private Pension and Capitalization Operations Before Claim and Selling Expenses

Income from insurance, private pension and capitalization operations before claim and selling expenses totaled R$5,345 million in 2011, an increase of R$422 million, or 8.6%, compared to 2010. This increase was mainly due to an increase in insurance and private pension premiums and to a lesser extent to an increase on revenue from capitalization plans, partially offset by an increase in reserves for insurance and private pension.

Other Income

Other income totaled R$1,158 million in 2011, a decrease of R$252 million, or 17.9%, compared to 2010. This decrease was mainly due to a reversal of operational provisions in 2010.

Losses on Loans and Claims

Losses on loans and claims are the sum of expenses for allowance for loan and lease losses, recovery of loans written off as losses and expenses for claims. In 2011, our losses on loans and claims increased from R$12,938 million in 2010 to R$16,072 in 2011 a R$3,134 million increase, or 24.2%, mainly due to an increase of expenses for allowance for loan and lease losses and to a lesser extent to an increase of expenses for claims, partially offset by an increase in the recovery in loans written off as losses.

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Expenses for Allowance for Loan and Lease Losses

Expenses for allowance for loan and lease losses totaled R$20,038 million in 2011, an increase of R$4,491 million, or 28.9%, in comparison to 2010. See note 12.b of our consolidated financial statements for more details.

During 2011, the asset quality of our loan portfolio decreased in comparison to the previous year. In 2011, the adverse effects of the international economic and financial crisis spread among industries and resulted in increased risk related to certain credit portfolios. Levels of non-performing loans increased for individuals and companies generally, reflecting these adverse market conditions.

Recovery of Loans Written off as Losses

Recovery of loans written off as losses increased from R$4,195 million in 2010 to R$5,477 million in 2011, an increase of R$1,282 million, or 30.6%, mainly due to an increase in collection efforts.

Expenses for Claims

Expenses for claims decreased from R$1,586 million in 2010 to R$1,511 million in 2011, a reduction of R$75 million, or 4.7%, mainly due to decreases in claims in the life and personal accidents portfolios.

Operating Margin

Operating margin is the sum of banking product and losses on loans and claims. The operating margin increased R$1,727 million, or 3.1%, amounting R$58,204 million in 2011, due to the 7.0% growth in the banking product, partially offset by the 24.2% increase in the losses on loans and claims.

Non-Interest Expenses

The following table shows the main components of our non-interest expense in 2011 and 2010.

(in millions of R$, except percentages)
	Year Ended December 31,						Variation
	2011			2010			2011-2010			%
	(in millions of R$)
General and administrative expenses		(35,674	)		(34,632	)		(1,042	)		3.0	%
Salaries and employee benefits		(13,373	)		(13,007	)		(366	)		2.8	%
Administrative expenses		(12,490	)		(12,350	)		(139	)		1.1	%
Amortization of intangible assets		(984	)		(978	)		(6	)		0.6	%
Insurance selling expenses		(1,268	)		(1,330	)		61			(4.6	)%
Depreciation		(1,184	)		(1,165	)		(19	)		1.6	%
Other non-interest expense		(6,375	)		(5,801	)		(574	)		9.9	%
Tax expenses		(4,166	)		(4,164	)		(3	)		0.1	%
Share of profit or (loss) of unconsolidated companies		(113	)		349			(462	)		n.m.
Total non-interest expense		(39,953	)		(38,447	)		(1,506	)		3.9	%

Non-interest expense totaled R$39,953 million in 2011, an increase of R$1,506 million, or 3.9%, compared to 2010. This increase was mainly due to general and administrative expenses and the increase in share of comprehensive income of unconsolidated companies.

General and Administrative Expenses

General and administrative expenses is composed by salaries and employee benefits, administrative expenses, amortization of intangible assets, insurance selling expenses, depreciation and other non-interest expenses.

Salaries and Employee Benefits

Salaries and employee benefits totaled R$13,373 million in 2011, an increase of 2.8% compared with 2010, partially offset by the 3.2% decrease in number of employees in 2011. This increase was lower than the 9.0% on the labor agreement. See note 26 to our consolidated financial statements.

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Administrative Expenses

Administrative expenses totaled R$12,490 million in 2011, an increase of R$139 million, or 1.1%, compared to 2010. This increase was driven by the higher volume of overall customer transactions, partially offset by a reduction of expenses related to the migration of Unibanco branches and CSBs to the Itaú layout and platform.

Amortization of Intangible Assets

Amortization of intangible assets totaled R$984 million in 2011, an increase of R$6 million, or 0.6%, compared to 2010, due to amortization of intangible assets in line with 2010. See note 16 to our consolidated financial statements.

Insurance Selling Expenses

Insurance selling expenses totaled R$1,268 million in 2011, a decrease of R$61 million, or 4.6%, compared to 2010. This decrease was mainly due to improvements in our insurance selling process.

Depreciation

Depreciation totaled R$1,184 million in 2011, an increase of R$19 million, or 1.6%, compared to 2010. This increase was due to an increase in the balance sheet amount of our fixed assets.

Other Non-Interest Expense

Other non-interest expenses totaled R$6,375 million in 2011, an increase of R$574 million, or 9.9%, compared to 2010. This increase was mainly related to an increase in provisions for civil lawsuits (see note 32 to our consolidated financial statements), as well as increased selling expenses for credit cards due to the growth in client base and volume of transactions (see note 26 to our consolidated financial statements).

Tax Expenses

Tax expenses amounted to R$4,166 million in 2011 an increase of R$ 2 million, or 0.1%, from R$4,164 million in 2010, remaining practically stable. PIS, COFINS expenses increased in 2011, but were offset by the decrease in ISS and other tax expenses.

Share of Profit or (Loss) of Unconsolidated Companies

Share of profit or (loss) of unconsolidated companies decreased from a R$349 million gain in 2010 to a R$113 million loss in 2011 a R$ 462 million decrease, or 132.4%, mainly due to a lower result from Banco Português de Investimento, which had a R$75 million profit in 2010 and had a R$343 million loss in 2011. The investment held in the Banco Português de Investimento was adjusted to recognize its market value based on the share price on the respective closing dates.

Current Income Tax and Social Contribution and Deferred Income Tax and Social Contribution

Certain amounts of income and expenses are recognized in our statement of income but do not affect our taxable basis and, conversely certain amounts are taxable income or deductible expenses in determining our taxes on income but do not affect our statement of income. Those items are known as permanent differences, which it segregates our total income tax and social contribution in two different lines: current income tax and social contribution and deferred income tax and social contribution. The first is the tax expense demanded by the Brazilian tax laws in the period. The second is a result from the permanent differences.

Income tax expense and social contribution for the year resulted in a tax expense of R$3,641 million in 2011 compared to R$5,536 million in the prior year, a 34.2% decrease. Deferred income tax and social contribution totaled positive R$3,315 million, a decrease of R$4,809 million compared to 2010. Current income tax and social contribution totaled R$6,956 million in 2011, an increase of R$2,914 million, or 72.1% compared to 2010. The main reason for this decrease was the effect of, decreased exchange rate losses on our investments in subsidiaries abroad and related increased gains on the derivative instruments used to hedge our investments in subsidiaries abroad as described below, which was partially offset by increased income in the banking activities.

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For Brazilian tax purposes, exchange rate gains and losses on our investments in subsidiaries abroad are not taxable, if they represent a gain, or are not deductible, if they represent a loss, they constitute a permanent difference. From an economic perspective we hedge our investments in subsidiaries outside Brazil by using foreign-currency denominated liabilities or derivative instruments. The gains or losses on derivative instruments and the exchange rate gains and losses on foreign-currency denominated liabilities are taxable or deductible for purposes of Brazilian taxes.

Results of our Operating Segments

The following discussion should be read in conjunction with our consolidated financial statements, especially note 34 regarding segment information included elsewhere in this annual report as well as the information included under “Item 3A. Selected Financial Data” and “Item 4B. Business Overview - Selected Statistical Information”.

For a better analysis we present below a summary of the results from our operating segments.

	From January 1 to December 31, 2011 (In millions of reais, except per share information)
Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			ACTIVITIES WITH THE MARKET AND CORPORATION			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		48,236			6,897			14,102			5,109			74,257			19			74,276
Losses on loans and claims		(11,011	)		(134	)		(4,270	)		(521	)		(15,936	)		(136	)		(16,072	)
Operating margin		37,225			6,763			9,832			4,588			58,321			(117	)		58,204
Other operating income (expenses)		(25,829	)		(2,911	)		(7,911	)		(390	)		(37,025	)		(2,928	)		(39,953	)
Income before income tax and social contribution		11,396			3,852			1,921			4,198			21,296			(3,045	)		18,251
Income tax and social contribution		(3,833	)		(1,287	)		(477	)		(244	)		(5,841	)		2,200			(3,641	)
Non-controlling interest in subsidiaries		-			-			-			(885	)		(814	)		41			(773	)
Net income attributable to owners of the parent company		7,563			2,565			1,444			3,069			14,641			(804	)		13,837

	From January 1 to December 31, 2010 (In millions of reais, except per share information)
Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			ACTIVITIES WITH THE MARKET AND CORPORATION			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		41,238			6,400			15,148			3,657			66,390			3,025			69,415
Losses on loans and claims		(9,523	)		186			(3,754	)		(2	)		(13,093	)		155			(12,938	)
Operating margin		31,715			6,586			11,394			3,655			53,297			3,180			56,477
Other operating income (expenses)		(22,927	)		(2,721	)		(7,826	)		(860	)		(34,327	)		(4,120	)		(38,447	)
Income before income tax and social contribution		8,788			3,865			3,568			2,795			18,970			(940	)		18,030
Income tax and social contribution		(2,509	)		(1,023	)		(1,054	)		(495	)		(5,081	)		(455	)		(5,536	)
Non-controlling interest in subsidiaries		2			-			-			(914	)		(866	)		80			(786	)
Net income attributable to owners of the parent company		6,281			2,842			2,514			1,386			13,023			(1,315	)		11,708

Results of Operations for Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

The result per segment is disclosed based on managerial criteria. Such information excludes certain results which are considered not related to our core business by our management. We highlight that in note 34 of our consolidated financial statements, we have disclosed the main IFRS adjustments into the business operating segments’ consolidated managerial data to obtain the IFRS consolidated financial statements.

Commercial Bank

We have a large and diverse portfolio of products to address our customers’ needs. The main products and services we provide to our accountholders are:

· Credit: personal loans, overdraft protection, payroll loans, vehicles, credit cards, mortgage and agricultural loans, working capital, trade note discount and export;

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· Investments: pension plans, mutual funds, time deposits, demand deposit accounts, savings accounts and capitalization plans; and

· Services: insurance (life, home, credit/cash cards, vehicles, loan protection, among others), exchange, brokerage and others.

The table below shows our banking product in the commercial bank segment for 2011 and 2010:

	For the Year Ended December 31,
	2011		2010		2011-2010		%
	(in millions of R$)				Variation
Banking product		48,236		41,238		6,998		17.0	%
Interest margin (1)		31,584		27,068		4,516		16.7	%
Banking service fees		10,915		9,246		1,669		18.1	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		5,229		4,469		760		17.0	%
Other income		508		455		53		11.6	%

⁽¹⁾ Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

For the year ended December 31, 2011, our consolidated banking product from the commercial bank segment increased by 17.0%, from R$41,238 million in the year ended December 31, 2010 to R$48,236 million for the same period in 2011, an increase of R$6,998 million. This increase was mainly due to the 16.7% growth in interest margin, related to a 20.4% growth in the loan portfolio as well as a 18.1% growth in banking service fees related to the increase in our customer base and to an increase in the volume of services, and to a lesser extent to income from insurance, private pension and capitalization operations before claim and selling expenses that increased by 17.0% and to other income that increased by 11.6%.

The table below shows an increase of 15.6% on our losses on loans and claims in the commercial bank segment for the year ended December 31, 2011, compared to the same period of 2010.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Banking product		48,236			41,238			6,998			17.0	%
Losses on loans and claims		(11,011	)		(9,523	)		(1,488	)		15.6	%
Expenses for allowance for loan and lease losses		(13,845	)		(10,808	)		(3,037	)		28.1	%
Recovery of loans written-off as losses		4,346			2,893			1,453			50.2	%
Expenses for claims		(1,512	)		(1,608	)		96			(6.0	)%
Operating margin		37,225			31,715			5,510			17.4	%

Our expenses for allowance for loan and lease losses increased by 28.1%, from R$10,808 million in the year ended December 31, 2010 to R$13,845 million in the same period of 2011. We highlight the increase in the delinquency levels and reduction in the asset quality as the principal change in our commercial bank segment for the year ended December 31, 2011. This increase was partially offset by the increase in the recovery of loans written-off as losses due to a higher effort in collection services and lower expenses for claims.

The table below shows an increase of 12.7% on our other operating income (expenses) from the commercial bank segment for the year ended December 31, 2011, compared to the same period of 2010.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Operating margin		37,225			31,715			5,510			17.4	%
Other operating income (expenses)		(25,829	)		(22,927	)		(2,902	)		12.7	%
Non-interest expenses (1)		(23,315	)		(20,827	)		(2,488	)		11.9	%
Tax expenses for ISS, PIS and COFINS and other		(2,596	)		(2,139	)		(457	)		21.4	%
Share of profit or (loss) of unconsolidated companies, net		(43	)		19			(62	)		n.m.
Other		125			20			105			525.0	%
Income before income tax and social contribution		11,396			8,788			2,608			29.7	%

⁽¹⁾ Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

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Upon the completion of the integration of Unibanco's branches and other customer sites throughout Brazil in the end of 2010. During 2011 we were able to improve our processes and expand accordingly the volume of services and increase our customer base, while maintaining service quality. Non-interest expenses totaled R$23,315 million in 2011, an increase of R$2,488 million, or 11.9%, compared to 2010.This increase was driven by the higher volume of overall customer transactions, an increase in provisions for civil lawsuits (see note 32 of our consolidated financial statements), as well as increased selling expenses for credit cards due to the growth in client base and volume of transactions (see note 26 to our consolidated financial statements) and to the 9.0% salaries increase on the labor agreement, partially offset by a reduction of expenses related to the migration of Unibanco branches and CSBs to the Itaú layout and platform and to improvements in our insurance selling process.

Our tax expense for ISS, PIS and COFINS and other taxes increased 21.4% compared to year ended December 31, 2010. This increase reflects the increase in revenues and in our operational activities throughout the year. See “—Net interest income above”.

Our share of profit or (loss) of unconsolidated companies, net from commercial bank activities decreased by R$62 million for the year ended December 31, 2011 compared to the same period of 2010, mainly due to an impairment of the investment held in the Banco Português de Investimento to recognize its market value based on the share price on the respective closing dates.

The net income from commercial bank activities totaled R$7,563 million in 2011, an increase of R$1,282 million compared to 2010.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Income before income tax and social contribution		11,396			8,788			2,608			29.7	%
Income tax and social contribution		(3,833	)		(2,509	)		(1,324	)		52.8	%
Non-controlling interest in subsidiaries		-			2			(2	)		n.m.
Net income attributable to owners of the parent company		7,563			6,281			1,282			20.4	%

Income tax expense and social contribution for the year resulted in a tax expense of R$3,833 million in 2011 compared to R$2,509 million in the prior year, a 52.8% increase. The main reasons for this was the increase in income before income tax and social contribution and the adjustment in tax rate as explained above.

Itaú BBA

For our corporate and investment bank activities (Itaú BBA), the banking product for 2011 compared to 2010, is shown in the table below:

	For the Year Ended December 31,
	2011			2010			2011-2010		%
	(in millions of R$)						Variation
Banking product		6,897			6,400			497		7.8	%
Interest margin (1)		4,896			4,601			295		6.4	%
Banking service fees		2,123			1,932			191		9.9	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		-			-			-		-
Other income		(122	)		(133	)		11		(8.3	)%

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

For the year ended December 31, 2011, our consolidated banking product from Itaú BBA increased by 7.8%, from R$6,400 million in the year ended December 31, 2010 to R$6,897 million for the same period in 2011, an increase of R$497 million. This increase was mainly due to an increase in interest margin and in banking service fees due to an increase in the large companies’ segment credit portfolio by 21.7%, and an increase in revenues from investment bank transactions and credit fees and by an increase in other income of R$11 million.

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Our losses on loans and claims from Itaú BBA are shown in the table below:

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Banking product		6,897			6,400			497			7.8	%
Losses on loans and claims		(134	)		186			(320	)		n.m.
Expenses for allowance for loan and lease losses		(266	)		(182	)		(84	)		46.2	%
Recovery of loans written-off as losses		132			368			(236	)		(64.1	)%
Expenses for claims		-			-			-			-
Operating margin		6,763			6,586			177			2.7	%

We had a loss of R$134 million on loans and claims for the year ended December 31, 2011 compared to a gain on losses on loans and claims of R$186 million for the year ended December 31, 2010. In both 2011 and 2010 we reversed provisions for allowance for loans losses, with significantly increased reversals in 2010. The strong quality level of the credit portfolio is to be highlighted, with 95,3% of the credits as described as “AA”, “A” an “B” risk ratings, in accordance with criteria set forth in the Brazilian Monetary Council Resolution 2,682.

Our other operating income (expenses) in the Itaú BBA segment in the table below shows an increase of 7.0% for the year ended December 31, 2011, compared to the same period of 2010.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Operating margin		6,763			6,586			177			2.7	%
Other operating income (expenses)		(2,911	)		(2,721	)		(190	)		7.0	%
Non-interest expenses (1)		(2,605	)		(2,379	)		(226	)		9.5	%
Tax expenses for ISS, PIS and COFINS and other		(341	)		(387	)		46			(11.9	)%
Share of profit or (loss) of unconsolidated companies, net		6			(6	)		12			n.m.
Other		29			51			(22	)		(43.1	)%
Income before income tax and social contribution		3,852			3,865			(13	)		(0.3	)%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

Non-interest expenses totaled R$2,605 million in 2011, an increase of R$226 million, or 9.5%, compared to 2010. The rise in non-interest expense is primarily attributable to the 9.0% salaries increase on the labor agreement.

Tax expense for ISS, PIS and COFINS and other taxes resulted in R$341 million in 2011 compared to R$387 million in the prior year, an 11.9% decrease.

Net income from Itaú BBA activities decreased by 9.7% for the year ended December 31, 2011 compared to the same period of 2010, as showed in the table below.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Income before income tax and social contribution		3,852			3,865			(13	)		(0.3	)%
Income tax and social contribution		(1,287	)		(1,023	)		(264	)		25.8	%
Non-controlling interest in subsidiaries		-			-			-			-
Net income attributable to owners of the parent company		2,565			2,842			(277	)		(9.7	)%

Income before tax and social contribution from Itaú BBA decreased 0.3% for the period ended December 31, 2011 compared to the same period of 2010, from R$3,865 million in 2010 to R$3,852 million in 2011. Income before tax and social contribution for the year totaled R$1,287 million in 2011 compared to R$1,023 million in the prior year, a 25.8% increase due to the adjustment in tax rate as explained above.

Consumer Credit

We offer credit cards to non-account holders both through direct sales and through our partnerships, in the form of joint ventures and operating agreements with major retailers present in the Brazilian market. We also offer vehicle financing to non-account holders, through a wide chain of partnerships with both new and used car retailers in Brazil.

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The banking product from consumer credit business operating segment is show in the table below.

	For the Year Ended December 31,
	2011			2010		2011-2010			%
	(in millions of R$)					Variation
Banking product		14,102			15,148		(1,046	)		(6.9	)%
Interest margin (1)		8,356			9,044		(688	)		(7.6	)%
Banking service fees		5,719			5,765		(46	)		(0.8	)%
Income from insurance, private pension and capitalization operations before claim and selling expenses		(13	)		254		(267	)		n.m.
Other income		40			85		(45	)		(52.9	)%

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

For the year ended December 31, 2011, our interest margin from consumer credit decreased by 7.6%, from R$9,044 million in the year ended December 31, 2010 to R$8,356 million for the same period in 2011, a decrease of R$ 688 million. Banking service fees remained in line with 2010. The income from insurance, private pension and capitalization operations before claim and selling expenses decreased R$ 267 million in the year ended December 31, 2011 compared to the year ended December, 31, 2010. This decrease is due to the small growth in the vehicles loan portfolio during 2011, as a result of an increase in the capital requirements established by Central Bank for this market.

Our losses on loans and claims from consumer credit segment increased 13.7% in the year ended December 31, 2011 compared to the same period of 2010, from R$3,754 million in 2010 to R$4,270 million in 2011, as shown in the table below.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Banking product		14,102			15,148			(1,046	)		(6.9	)%
Losses on loans and claims		(4,270	)		(3,754	)		(516	)		13.7	%
Expenses for allowance for loan and lease losses		(5,270	)		(4,702	)		(568	)		12.1	%
Recovery of loans written-off as losses		1,000			948			52			5.5	%
Expenses for claims		-			-			-			-
Operating margin		9,832			11,394			(1,562	)		(13.7	)%

Our expenses for allowance for loan and lease losses increased by 12.1%, from R$4,702 million in the year ended December 31, 2010 to R$5,270 million in the same period of 2011. This increase is due to an increase in the delinquency levels of Brazilian consumers generally and the growth in the credit portfolio in 2011.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Operating margin		9,832			11,394			(1,562	)		(13.7	)%
Other operating income (expenses)		(7,911	)		(7,826	)		(85	)		1.1	%
Non-interest expenses (1)		(6,948	)		(6,857	)		(91	)		1.3	%
Tax expenses for ISS, PIS and COFINS and other		(953	)		(969	)		16			(1.7	)%
Share of profit or (loss) of unconsolidated companies, net		-			-			-			-
Other		(10	)		-			(10	)		n.m.
Income before income tax and social contribution		1,921			3,568			(1,647	)		(46.2	)%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

Non-interest expenses totaled R$6,948 million in 2011, an increase of R$91 million, or 1.3%, compared to 2010, remaining in line with 2010, mainly due to the 9.0% salaries increase on the labor agreement, offset by the restructuring of the consumer credit area.

Tax expenses for ISS, PIS and COFINS and other taxes remained in line with 2010. See “—Net interest income” above.

Our income before tax and social contribution on net income in the consumer credit segment decreased 46.2% in the year ended December 31, 2011 compared to the same period of 2010, from R$3,568 million in 2010 to R$1,921 million in 2011, as shown in the table below.

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	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Income before income tax and social contribution		1,921			3,568			(1,647	)		(46.2	)%
Income tax and social contribution		(477	)		(1,054	)		577			(54.7	)%
Non-controlling interest in subsidiaries		-			-			-			-
Net income attributable to owners of the parent company		1,444			2,514			(1,070	)		(42.6	)%

Income tax and social contribution for the year totaled R$477 million in 2011 compared to R$1,054 million in the prior year, a 54.7% decrease, primarily due to lower income before income tax and social contribution, partially offset by the adjustment in tax rate as explained above.

Activities with the Market and Corporation

The activities with the market and corporation segment presents the result from excess capital, excess subordinated debt and the net balance of tax assets and liabilities. It also shows the financial margin on market transactions, costs of treasury operations, equity in the earnings of companies that are not linked to any segments, as well those adjustments relating to minority shareholdings in subsidiaries and our interest in Porto Seguro.

The banking product from activities with the market and corporation business operational segment is shown in the table below and increased by 39.7%, from R$3,657 million in the year ended December 31, 2010 to R$5,109 million in the same period in 2011, an increase of R$1,452 million, mainly due to an increase in the interest margin.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Banking product		5,109			3,657			1,452			39.7	%
Interest margin (1)		4,801			3,356			1,445			43.1	%
Banking service fees		309			182			127			69.8	%
Income from insurance, private pension and capitalization operations before claim and selling expenses		(1	)		(12	)		11			(91.7	)%
Other income		-			131			(131	)		n.m.

(1) Includes net interest and similar income and expenses, dividend income, net gain (loss) from investment securities and derivatives and foreign exchange results and exchange variation on transactions.

The interest margin within this segment primarily consists of revenues by treasury transactions and excess capital. During the year ended December 31, 2011, the interest margin totaled R$4,801 million and increased by 43.1% compared to the same period of 2010. This increase is primarily due to higher investing capital excess gains in 2011 compared to 2010, partially offset by lower gains in treasury operations.

Banking service fees increased 69.8% while income from insurance, private pension and capitalization operations before claim and selling expenses decreased 91.7% and other income in 2011 decreased 100%. These changes were due to differences in revenues and expenses allocation to other operating segments in 2011 compared to 2010.

Losses on loans and claims increased from R$2 million in 2010 to R$521 million in 2011, as shown in the table below.

	For the Year Ended December 31,
	2011			2010			2011-2010			%
	(in millions of R$)						Variation
Banking product		5,109			3,657			1,452			39.7	%
Losses on loans and claims		(521	)		(2	)		(519	)		-
Expenses for allowance for loan and lease losses		(531	)		(2	)		(529	)		-
Recovery of loans written-off as losses		10			-			10			-
Expenses for claims		-			-			-			-
Operating margin		4,588			3,655			933			25.5	%

The expenses for allowance for loans losses increased from R$2 million in 2010 to R$531 million in 2011, due to an increase in provisions we made in 2011 in connection with our activities with the market and corporation segment in excess of Central Bank requirements as a result of our model for allowance for loan losses which includes the expected loss.

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Other operating income (expenses) decreased from R$860 million in 2010 to R$390 million in 2011, as shown in the table below:

	For the Year Ended December 31,
	2011			2010			2011-2010		%
	(in millions of R$)						Variation
Operating margin		4,588			3,655			933		25.5	%
Other operating income (expenses)		(390	)		(860	)		470		(54.7	)%
Non-interest expenses (1)		(935	)		(1,005	)		70		(7.0	)%
Tax expenses for ISS, PIS and COFINS and other		51			(274	)		325		n.m.
Share of profit or (loss) of unconsolidated companies, net		447			409			38		9.3	%
Other		47			10			37		370.0	%
Income before income tax and social contribution		4,198			2,795			1,403		50.2	%

(1) Refers to general and administrative expenses including salaries and employee benefits, depreciation expenses and amortization.

The Tax expenses for ISS, PIS and COFINS and other decreased R$ 325 million in the year ended December 31, 2011 compared to the year ended December, 31, 2010, mainly due to the increase in the PIS and COFINS taxable base with respect to the payment of interest on own capital between the different group companies.

Non-interest expenses decreased R$70 million in the year ended December 31, 2011 compared to the year ended December, 31, 2010.

Share of profit or (loss) of unconsolidated companies, net remained in line with 2010, due to the results of Porto Seguro.

Net income in the activities with the market and corporation segment increased from R$1,386 million in 2010 to R$3,069 million in 2011, as shown in the table below.

	For the Year Ended December 31,
	2011			2010			2011-2010		%
	(in millions of R$)						Variation
Income before income tax and social contribution		4,198			2,795			1,403		50.2	%
Income tax and social contribution		(244	)		(495	)		251		(50.7	)%
Non-controlling interest in subsidiaries		(885	)		(914	)		29		(3.2	)%
Net income attributable to owners of the parent company		3,069			1,386			1,683		121.4	%

Income tax and social contribution decreased R$251 million in 2011 from 2010, due to the adjustment in tax rate as explained above.

Non-controlling interest in subsidiaries in 2011 stood in line with 2010.

5B. Liquidity and Capital Resources

Our Superior Institutional Treasury and Liquidity Committee (CSTIL) determines our policy regarding asset and liability management. See “Item 4B. Business Overview — Risk Management.” Our policy is to maintain a close match of our maturity, interest rate and currency exposures. In establishing our policies and limits, the Superior Institutional Treasury and Liquidity Committee (CSTIL) considers our exposure limits for each market segment and product, and the volatility and correlation across different markets and products. The institutional treasury unit of Itau Unibanco Holding has ultimate responsibility for our liquidity, within the parameters set forth by the CSTIL, including for all business units outside Brazil.

We have invested in improving our liquidity risk management. We keep available at all times a portfolio of bonds and securities with high liquidity (an “operational reserve”), which represents our main source of liquidity. Our operational reserve, which is the total amount of assets that can be immediately turned into cash based on local market practices and legal regulations, generally includes: cash and deposits on demand, funded positions of securities purchased under agreements to resell and unencumbered government securities.

We maintain separate liquidity pools at our Brazilian operations and at each of our subsidiaries in Latin America and Europe. Our Brazilian operations include the financial institutions in Brazil (the most important ones in terms of size being Itaú Unibanco Holding, Itaú Unibanco and Itaú BBA) and the entities used by the Brazilian operations for funding and serving their clients abroad (the most important ones in terms of size being Itaú Unibanco Holding S.A., Cayman Branch, Itaú Unibanco S.A., Cayman Branch, Itaú BBA S.A., Nassau Branch and Itaú Bank, a Cayman Islands indirect subsidiary of Itaú Unibanco Holding).

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Each subsidiary in Latin America (e.g., in Chile, Argentina, Uruguay and Paraguay) and in Europe has its own treasury function with significant autonomy to manage liquidity according to local needs and regulations, while remaining in compliance with the liquidity limits established by Itaú Unibanco Holding senior management. In general there are no liquidity transfers between subsidiaries or between the head office and a subsidiary, except under very specific circumstances, like targeted capital increases.

There are no liquidity pool minima established by Brazilian regulators, nor by regulators in the countries where the above mentioned foreign entities operate.

The following table presents our operational reserve as of December 31, 2012 and 2011, as well as the yearly average.

	As of December 31,				2012 Average
	2012		2011		Balance
	(In millions of R$)
Cash and deposits on demand		13,967		10,668		12,809
Funded positions of securities purchased under agreements to resell		22,896		25,438		40,188
Unencumbered government securities		83,980		44,741		48,995
Operational reserve		120,843		80,847		101,991

Management controls our liquidity reserves by projecting the resources that will be available for investment by our treasury department. The technique we employ involves the statistical projection of scenarios for our assets and liabilities, considering the liquidity profiles of our counterparties.

Short-term minimum liquidity limits are defined according to guidelines set by the Superior Institutional Treasury and Liquidity Committee (CSTIL). These limits aim to ensure sufficient liquidity, including upon the occurrence of unforeseen market events. These limits are revised periodically based on the projection of cash needs in atypical market situations (i.e., stress scenarios).

Management of liquidity makes it possible for us to simultaneously meet our operating requirements, protect our capital and exploit market opportunities. Our strategy is to maintain adequate liquidity to meet our present and future financial obligations and to capitalize on business opportunities as they arise. See “Item 4B. Business Overview — Risk Management — Liquidity Risk Management.”

Due to our stable sources of funding, which include a large deposit base, the large number of correspondent banks with which we have long-standing relationships as well as facilities in place pursuant to which we can access further funding, we have not historically experienced liquidity problems, despite the recent disruptions in the international financial markets. See “Item 3D. Risk Factors — Risks Relating to Our Business and the Banking Industry — We are exposed to effects of the disruptions and volatility in the global financial markets and the economies in those countries where we do business, especially Brazil.”

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Under Brazilian law, cash dividends may only be paid if the subsidiary paying such dividends has reported a profit in its financial statements.  In addition, subsidiaries that are financial institutions are prohibited from making loans to Itaú Unibanco Holding but are allowed to make deposits in Itaú Unibanco Holding, which are represented by CDIs — certificados de depósitos interfinanceiros. These restrictions have not had and are not expected to have a material impact on our ability to meet our cash obligations.

The following table sets forth our average liabilities for 2012, 2011 and 2010.

(in millions of R$, except percentages)
	For the Year Ended December 31,
	2012					2011					2010
	Average balance		% of total			Average balance		% of total			Average balance		% of total
Interest-bearing liabilities		648,682		83.2	%		572,622		79.2	%		464,214		78.4	%
Interest-bearing deposits		206,652		26.5	%		186,429		25.8	%		164,210		27.7	%
Savings deposits		73,404		9.4	%		61,143		8.5	%		52,457		8.9	%
Interbank Deposits		8,661		1.1	%		2,376		0.3	%		1,703		0.3	%
Time deposits		124,587		16.0	%		122,910		17.0	%		110,050		18.6	%
Securities sold under repurchase agreements		204,358		26.2	%		194,949		26.9	%		156,347		26.4	%
Interbank market debt and Institutional market debt		154,852		19.9	%		125,007		17.3	%		89,231		15.1	%
Interbank market debt		94,555		12.1	%		77,189		10.7	%		50,782		8.6	%
Institutional market debt		60,297		7.7	%		47,818		6.6	%		38,449		6.5	%
Reserves for insurance private pension and liabilities for capitalization plans		82,820		10.6	%		66,237		9.2	%		54,426		9.2	%
Non-interest-bearing liabilities		130,638		16.8	%		150,813		20.8	%		128,220		21.6	%
Non-interest bearing deposits		30,324		3.9	%		26,072		3.6	%		25,817		4.4	%
Derivatives		8,251		1.1	%		7,193		1.0	%		6,724		1.1	%
Other non-interest bearing liabilities		92,062		11.8	%		117,547		16.2	%		95,679		16.2	%
Total liabilities		779,319		100.0	%		723,435		100.0	%		592,434		100.0	%

Our principal sources of funding are interest-bearing deposits, securities sold under repurchase agreements, interbank market debt and institutional market debt. For a more detailed description of our sources of funding see “Item 4B — Business Overview — Funding” and notes 17 and 19 to our consolidated financial statements.

Our current funding strategy is to continue to use all our funding sources in accordance with their cost and availability and our general asset and liability management strategy. We consider our current level of liquidity to be adequate. The international financial turmoil magnified the importance of issues associated with funding and the liquidity of financial institutions around the world. In order to finance our operations, we intensified the use of liquidity provided by savings and interbank deposits, interbank market debt and institutional market debt during 2012. In 2011, we intensified the use of liquidity provided by securities sold under repurchase agreements, interbank market debt and institutional market debt. The balance of time deposits decreased its share on the total funding in 2012 because we utilized less expensive funding sources, such as Brazilian debentures subject to repurchase which are reported under “securities sold under repurchase agreements” and are offered not only to institutional clients but also to private banking, corporate banking and retail clients. This funding strategy is designed to provide better profitability through higher spreads on our savings deposits and higher fees earned on market funds.

Our ability to obtain funding depends on numerous factors, including our credit ratings, general economic conditions, investors’ perception of emerging markets in general and of Brazil (in particular, prevailing economic and political conditions in Brazil and government regulations in relation to foreign exchange funding).

Some of our long-term debt provides for acceleration of the outstanding principal balance upon the occurrence of specified events, which are events ordinarily found in long-term financing agreements. As of December 31, 2012, none of these events, including any events of default or failure to satisfy financial covenants had occurred and we have no reason to believe that it is reasonably likely that any of these events will occur in 2013.

On June 27, 2012, Moody’s announced the downgrade of Brazilian financial institutions as part of their ongoing global review of banks whose standalone assessments are higher than the rate of the country in which they are domiciled. Itaú Unibanco Holding’s issuer rating was downgraded to Baa1 with positive outlook from A2. This change did not reflect a credit profile deterioration and there was no liquidity impact as a result of this downgrade.

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Share Repurchases

On October 31, 2011, our board of directors renewed the annual authorization for open market purchases at market prices of up to 9,000,000 of our common shares and 56,700,000 of our preferred shares. These purchases were authorized to be carried out from November 4, 2011 to November 5, 2012. From January to October 2012, we acquired 4,300,000 of our preferred shares at an average price of R$28.45 per share. On October 22, 2012, our board of directors again renewed the authorization for open market purchases at market prices, increasing the amounts to up to 13,700,000 common shares and 86,300,000 preferred shares, for the period from November 5, 2012 to November 4, 2013.

Changes in Cash Flows

The following table sets forth the main variations in our cash flows during the years ended December 31, 2012, 2011 and 2010.

(in millions of R$)
	For the Year Ended December 31,
	2012			2011			2010
Net cash provided by (used in) operating activities		48,635			(7,440	)		(30,872	)
Net cash used in investing activities		(37,583	)		(1,311	)		(2,117	)
Net cash (used in) provided by financing activities		(4,913	)		(921	)		6,575
Net increase (decrease) in cash and cash equivalents		6,139			(9,672	)		(26,414	)

Operating Activities

Our cash flows from operating activities resulted in cash inflows of R$48,635 million in 2012, cash outflows of R$7,440 million in 2011 and cash outflows of R$30,872 million in 2010. In 2012, the changes in cash flows from operating activities resulted primarily from an increase in deposits received under securities repurchase agreements and a decrease in compulsory deposits with the Central Bank. This was partially offset by increases in securities purchased under agreements to resell, loan operations and financial assets held for trading and other assets. In 2011, the changes in cash flows from operating activities resulted mainly from increases in loan operations and securities purchased under agreements to resell, partially offset by an increase in deposits. In 2010, the changes in cash flows from operating activities resulted mainly from increases in compulsory deposits with the Central Bank and loan operations. These were partially offset by an increase in deposits received under securities repurchase agreements.

Investing Activities

Our cash flows from investing activities generated cash outflows of R$37,583 million in 2012, cash outflows of R$1,311 million in 2011 and cash outflows of R$2,117 million in 2010. In 2012, 2011 and 2010, the increase in purchase of available-for-sale assets was the main cause for the outflows in our cash flow from investing activities compensated by cash received from sale of available-for-sale assets.

Financing Activities

Our cash flows from financing activities generated cash outflows of R$4,913 million in 2012, cash outflows of R$921 million in 2011 and cash inflows of R$6,575 million in 2010. In 2012, the changes in cash flows from financing activities were primarily a result of a decrease in redemptions in institutional markets and the acquisition of the remaining minority interest in Redecard, partially offset by an increase in funding from institutional markets. In 2011, the changes in cash flows from financing activities were primarily a result of a decrease in redemptions in institutional markets and dividends and interest on capital paid, partially offset by an increase in funding from institutional markets. In 2010, the changes in cash flows from financing activities were primarily a result of an increase in funding from institutional markets.

We paid dividends and interest on capital in the amount of R$5,206 million, R$4,588 million and R$4,315 million in 2012, 2011 and 2010, respectively. In 2012 we purchased an amount of R$122 million treasury shares, which generated a cash outflow of the same amount.

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Capital

We are required to comply with Brazilian capital adequacy regulations under Central Bank rules, which require banks to have total capital equal to or greater than 11.0% of risk-weighted assets, in lieu of the 8.0% minimum capital requirement of the original Basel Accord, Basel I and Basel II. In addition, the Central Bank issued on March 1, 2013 the final rules for the implementation of the Basel III framework in Brazil. Since the publication of Basel III, Itaú Unibanco Holding has implemented internal processes to evaluate the impact of the changes resulting from Basel III on our capital ratios and operations, and the concepts under Basel III have been incorporated in our prospective analyses of capital and liquidity as part of the process to conform our business to the new regulation. We currently do not foresee any changes in our capital management due to the new developments of Basel III requirements which, in Brazil, have not yet been completely defined. For more information, see “Item 4B. Business Overview – Regulation and Supervision— Capital Adequacy and Leverage/Regulatory Capital Requirements — Implementation of Basel III in Brazil.”

On March 1, 2013, the Central Bank also published new capital requirements for credit risk, changing some exposure rules and risk weight assets (RWA) to align them with the Basel III framework. The changes will be effective partially in March 2013 and totally in October 2013. Changes are mainly due to alignment with Basel III, with emphasis on the inclusion of capital requirements for central counterparty and credit valuation adjustment for OTC derivatives and changes in the securitization framework, as well as adjustments to local regulations to increase the threshold for considering SMEs as retail customers and creating the concept of large companies, with a reduction in the risk weights for these companies.

As required by Central Bank rules, we currently measure our capital compliance according to two different methods: (i) by consolidating only our financial subsidiaries; and (ii) on a fully consolidated basis, including all of our financial and non-financial subsidiaries. We believe we have a solid capital base as measured by both methods. As of December 31, 2012, 2011 and 2010, our solvency ratio measured on a fully consolidated basis was 16.7%, 16.4% and 15.4%, respectively. The variation in our solvency ratio was the result of several factors, including: (i) the impact of net income less payment of dividends and interest on stockholders’ equity for each period and (ii) the issuance of subordinated debt, which was partially offset by (iii) changes in ownership interest in Redecard; (iv) an increase in our total risk-weighted assets, mainly due to the organic growth of lending transactions; and (v) the changes in the weight applied to lending to individuals.

The following table sets forth our capital positions of total risk-weighted assets, as well as our minimum capital requirements under Central Bank rules, in each case as of December 31, 2012, 2011 and 2010, in each case on a fully consolidated basis, including our financial and non-financial subsidiaries.

	As of December  31,
	2012			2011			2010
	(In millions of R$, except percentages)
Tier 1 Capital		72,007			71,601			6,224
Tier 2 Capital		37,833			21,565			18,652
Tier 1 plus Tier 2 Capital		109,840			93,166			80,892
Adjustments		(420	)		(55	)		(173	)
Our Regulatory Capital		109,421			93,111			80,719
Minimum regulatory capital required		72,036			62,556			57,525
Excess over minimum regulatory capital required		37,385			30,555			23,194
Total risk-weighted assets		654,872			568,693			522,952
Our regulatory capital to risk-weighted assets ratio		16.7	%		16.4	%		15.4	%

CMN Resolution No. 3,490, of August 29, 2007, which sets out the criteria currently applicable to our computation of our minimum regulatory capital required, has been in effect since July 1, 2008. For calculation of our risk portions, we follow the procedures of the following Central Bank circulars and circular letters:

· Circular No. 3,360, of September 12, 2007 for credit risk;

· Circulars No. 3,361, 3,362, 3,363, 3,364, 3,366 and 3,368, of September 12, 2007, 3,388, of June 4, 2008, and 3,389, of June 25, 2008 and Circular Letters No. 3,309 and 3,310, of April 15, 2008 for market risk;

· Circular No. 3,383 and Circular Letters No. 3,315 and 3,316, of April 30, 2008 for operational risk. For calculation of our operational risk portion, we opted for the use of the standardized alternative approach; and

· Circular No. 3,563, of November 11, 2011, which amended Circular No. 3,360, of September 12, 2007, establishing certain measures to ease the capital requirements relating to certain retail transactions given the current economic scenario.

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Circular No. 3,568, of December 21, 2011, amends 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 of regulatory capital related to market risk. The new calculation method will be adopted gradually from January 1, 2012, and will be fully effective on December 31, 2013. If these new rules had already been in effect on December 31, 2012, our solvency ratio would have been reduced by approximately 0.1%.

Funds obtained through the issue of subordinated debt securities are considered Tier 2 Capital for purposes of capital to risk-weighted assets ratio are set form below as of December 31, 2012.

Name of Security / Currency	Principal Amount (Original Currency)		Issue		Maturity			Return %	Account Balance (in milions of R$)
Subordinated CDB -R$
		1,558		2008		2013	(1)	100% of CDI + 0,5% to 0,6%		2,597
		48						106% to 107% of CDI		79
		40		2003		2013	(1)	102% of CDI		121
		1,865		2007		2014		100% of CDI + 0,35% to 0,6%		3,329
		33						IGPM + 7,22%		68
		1,000		2008		2014		112% of CDI		1,554
		400		2008		2015		119,8% of CDI		657
		50		2010		2015		113% of CDI		69
		466		2006		2016		100% of CDI + 0,7% (2)		892
		2,665		2010		2016		110% to 114% of CDI		3,654
		122						IPCA + 7,21%		173
		367		2010		2017		IPCA + 7,33%		524
		8,614								13,717
Subordinated financial bills - R$
		365		2010		2016		100% of CDI + 1,35% to 1,36%		375
		1,874						112% to 112,5% of CDI		1,924
		30						IPCA + 7%		39
		206		2010		2017		IPCA + 6,95% to 7,2%		244
		3,224		2011		2017		108% to 112% of CDI		3,309
		352						IPCA + 6,15% to 7,8%		408
		138						IGPM + 6,55% to 7,6%		163
		3,650						100% of CDI + 1,29% to 1,52%		3,716
		42		2011		2018		IGPM + 7%		50
		30						IPCA + 7,53% to 7,7%		34
		2		2011		2019		109% to 109,7% of CDI		2
		500		2012		2017		100% of CDI + 1,12%		503
		6		2011		2021		109,25% to 110,50% of CDI		7
		461		2012		2018		IPCA + 4,40% to 6,58%		508
		2,597						100% of CDI + 1,05% to 1,32%		2,640
		5,761						108% to 113% of CDI		5,902
		112						9,95 to 11,95%		118
		12		2012		2019		11,96%		13
		100						IPCA + 4,70% to 6,30%		108
		1						110% of CDI		1
		20		2012		2020		IPCA + 6,00% to 6,17%		22
		1						111% of CDI		1
		1,317		2012		2022		IPCA + 5,4% to 5,83%		1,375
		20						IGPM + 4,63%		20
		20,821								21,482
Subordinated euronotes - US$
		990		2010		2020		6.2%		2,043
		1,000		2010		2021		5.75%		2,095
		730		2011		2021		5,75% to 6,2%		1,493
		550		2012		2021		6.2%		1,140
		2,600		2012		2022		5,50% to 5,65%		5,354
		1,851		2012		2023		5.13%		3,810
		7,721								15,935
TOTAL										51,134

(1) Subordinated CDBs in the principal amount of $2,415.4 million have matured as of March 28, 2013.

(2) Subordinated CDBs may be redeemed on any date from November 2011 until maturity.

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Interest Rate Sensitivity

Management of interest rate sensitivity is a key component of our asset and liability policy. Interest rate sensitivity is the relationship between market interest rates and net interest income resulting from the maturity or re-pricing characteristics of interest-earning assets and interest-bearing liabilities. The pricing structure is matched when an equal amount of these assets or liabilities matures or re-prices. Any mismatch of interest-earning assets and interest-bearing liabilities is known as a gap position. A negative gap denotes liability sensitivity and normally means that a decline in interest rates would have a positive effect on net interest income, while a positive gap denotes asset sensitivity and normally means that an increase in interest rates would have a positive effect on net interest income. These relationships are as of one particular date only, and significant swings can occur daily as a result of both market forces and management decisions. Our interest rate sensitivity strategy takes into account rates of return, the underlying degree of risk, and liquidity requirements, including minimum regulatory cash reserves, mandatory liquidity ratios, withdrawal and maturity of deposits, capital costs and additional demand for funds.

Our Superior Institutional Treasury and Liquidity Committee (CSTIL) analyzes the statement of income and risk information on a monthly basis and establishes limits for market risk exposure, interest rate positions and foreign currency positions. For more detailed information on the monitoring of our positions, see “Item 4B — Business Overview — Risk Management — Market Risk Management.”

The following table sets forth our interest-earning assets and interest-bearing liabilities based on our contractual cash flows as of December 31, 2012 and therefore does not reflect interest rate gap positions that may exist at other times. In addition, variations in interest rate sensitivity may exist within the re-pricing periods presented due to differing re-pricing dates within the period. Variations may also arise among the different currencies in which interest rate positions are held.

(in millions of R$, except percentages)
	Up to 30 days			31-180 days			181-365 days			1-5 years			Over 5 years			Total
Total interest-earning assets		255,232			191,194			78,496			246,502			97,228			868,652
Central Bank compulsory deposits		63,701			-			-			-			-			63,701
Interbank deposits		15,321			3,274			4,835			395			1			23,826
Securities purchased under agreements to ressel		87,829			71,539			3,190			179			-			162,737
Financial assets held for trading		17,163			7,251			7,920			85,581			27,601			145,516
Financial assets designated at fair value through profit or loss		220			-			-			-			-			220
Derivatives		1,943			3,581			1,390			3,742			941			11,597
Available-for-sale financial assets		13,120			7,914			5,481			29,470			34,884			90,869
Held-to-maturity financial assets		-			118			70			147			2,867			3,202
Loan operations and lease operations		55,935			97,517			55,610			126,988			30,934			366,984
Total interest-bearing liabilities		233,991			78,742			59,229			210,743			76,688			659,393
Savings deposits		83,451			-			-			-			-			83,451
Time deposits		12,369			20,861			16,667			62,226			5,109			117,232
Interbank deposits		2,643			3,550			1,201			207			-			7,601
Securities sold under repurchase agreements		123,001			17,838			16,281			82,424			27,861			267,405
Financial liabilities held for trading		6			22			51			522			41			642
Derivatives		1,724			2,582			1,211			4,500			1,052			11,069
Interbank maket debt		5,606			26,871			21,065			38,802			4,729			97,073
Institucional market debt		2,299			7,018			2,753			22,062			37,896			72,028
Liabilities for capitalization plans		2,892			-			-			-			-			2,892
Asset/liability gap		21,241			112,452			19,267			35,759			20,540			209,259
Cumulative gap		21,241			133,693			152,960			188,719			209,259
Ratio of cumulative gap to total interest-earning assets		2.4	%		15.4	%		17.6	%		21.7	%		24.1	%

159

Exchange Rate Sensitivity

The greater part of our operations is denominated in, or indexed to, reais. We also have assets and liabilities denominated in foreign currency, mainly in U.S. dollars, as well as assets and liabilities, which, although denominated in reais, are dollar-indexed and therefore expose us to exchange rate risks. The Central Bank regulates our maximum open, short and long foreign currency positions. As of December 31, 2012, our net foreign currency position, including investments abroad was a liability totaling R$6,817 million. See note 36 of our consolidated financial statements. The gap management policy adopted by our Superior Institutional Treasury and Liquidity Committee takes into consideration the tax effects on this position. Since the profits from exchange rate variation on investments abroad are not taxed, we have set up a hedge (a liability in foreign exchange derivatives) of a sufficient amount, so that our total foreign exchange exposure, net of the tax effects, is consistent with our strategy of low exposure to risk.

Our foreign currency position is composed on the liability side of the issuance of securities in the international capital markets, credit from foreign banks to finance trade operations and dollar-linked onlending from government financial institutions. The proceeds of these operations are mainly applied to dollar-linked lending operations and securities purchases.

The following table sets forth assets and liabilities classified by currency including those denominated in Brazilian reais and those denominated in or indexed to foreign currencies as of December 31, 2012. This table may not reflect currency gap positions at other times. Variations may also arise among the different currencies that are held.

(in millions of R$, except percentages)
	As of December 31, 2012
	Brazilian currency			Denominated in foreign currency (1)			Indexed to foreign currency (1)			Total			Percentage of amounts denominated in and indexed to foreign currency of total
Assets:		737,872			27,031			192,251			957,154			22.9	%
Cash and deposits on demand		5,257			1,649			7,061			13,967			62.4	%
Central Bank compulsory deposits		61,172			-			2,529			63,701			4.0	%
Interbank deposits		9,254			113			14,459			23,826			61.2	%
Securities purchased under agreements to resell		162,235			-			502			162,737			0.3	%
Financial assets held for trading		139,699			142			5,675			145,516			4.0	%
Financial assets designated at fair value through profit or loss		4			-			216			220			98.2	%
Derivatives		7,615			-			3,982			11,597			34.3	%
Available-for-sale financial assets		36,214			24			54,631			90,869			60.1	%
Held-to-maturity financial assets		2,656			19			527			3,202			17.1	%
Loan operations and lease operations		284,040			13,217			69,727			366,984			22.6	%
Allowance for loan losses		(24,499	)		-			(1,214	)		(25,713	)		4.7	%
Other financial assets		792			11,490			32,210			44,492			98.2	%
Investments in unconsolidated companies		3,005			-			-			3,005			0.0	%
Fixed assets, net		5,232			-			396			5,628			7.0	%
Intangibles assets, net		4,338			-			333			4,671			7.1	%
Tax assets		31,916			-			496			32,412			1.5	%
Assets held for sale		102			-			15			117			12.8	%
Other assets		8,840			377			706			9,923			10.9	%
Percentage of total assets		77.1	%		2.8	%		20.1	%		100.0	%
Liabilities and Stockholders’ Equity:		714,747			50,154			192,253			957,154			25.3	%
Deposits		181,404			275			61,521			243,200			25.4	%
Securities sold under repurchase agreements		249,627			-			17,778			267,405			6.6	%
Financial liabilities held for trading		(78	)		-			720			642			112.1	%
Derivatives		7,616			-			3,453			11,069			31.2	%
Interbank market debt		67,100			7,771			22,202			97,073			30.9	%
Institutional market debt		14,131			27,827			30,070			72,028			80.4	%
Other financial liabilities		8,643			9,555			32,057			50,255			82.8	%
Reserves for insurance and private pension		88,365			1,916			37			90,318			2.2	%
Liabilities for capitalization plans		2,892			-			-			2,892			0.0	%
Provisions		19,186			-			23			19,209			0.1	%
Tax liabilities		6,221			-			888			7,109			12.5	%
Other liabilities		14,909			2,810			2,237			19,956			25.3	%
Non-controlling interests		96			-			-			96			0.0	%
Stockholders’ equity		54,635			-			21,267			75,902			28.0	%
Percentage of total liabilities and stockholders’ equity		74.7	%		5.2	%		20.1	%		100.0	%

⁽¹⁾ Predominantly U.S. dollar.

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For purposes of analysing our exposure to changes in foreign currency, the table below present the composition of the notional amount of our derivative instruments as of December 31, 2012, classified in reais and foreign currency, which also include the instruments linked to foreign currency. For the fair value of the derivatives financial instruments we refer to note 7 and note 30 of our consolidated financial statements.

(in millions of R$)
	Notional amounts
	Brazilian Currency			Denominated in or linked to Foreign Currency			Total
Derivative financial instruments
Swap contracts
Buy (Sale) commitments, net		2,527			(2,527	)		-
Forward contracts
Buy (Sale) commitments, net		(3,747	)		(1,839	)		(5,586	)
Future contracts
Buy (Sale) commitments, net		206,131			(43,835	)		162,296
Option contracts
Buy (Sale) commitments, net		174,563			6,363			180,926
Others
Buy (Sale) commitments, net		4,107			853			4,960

Capital Expenditures

In 2012, we made capital expenditures related to the Redecard Tender Offer and the construction of a new technology center, as well as other investment in technology. The Redecard Tender Offer was successfully completed on September 24, 2012 and Redecard’s registration as a publicly held company was cancelled on October 18, 2012. As of December 31, 2012, Itaú Unibanco Holding held, through its affiliates, 100.0% of Redecard’s shares, as a result of subsequent purchases. The shares were purchased at the Tender Offer Price for a total amount of R$11,752 million (including the Tender Offer) and the difference between the value paid and the value corresponding to the minority interest was recognized under appropriated reserves in the amount of R$11,151 million as of December 31, 2012, which net of taxes totaled R$7,360 million. See note 3(c) to our consolidated financial statements.

In September 2012, we announced the investment of R$10,413 million in technology, innovation and services to be made in the period from 2012 to 2015, of which:

· R$2,749 million is expected to be used for data processing systems;

· R$753 million is expected to be used for the acquisition of software;

· R$4,638 million is expected to be used for system development; and

· R$2,273 million is expected to be used for our Data Center in Mogi Mirim, which is under construction and expected to have capacity to support the expansion of our operations in the long-term.

In accordance with our practice during recent years, our capital expenditures in 2012 were funded by our internal resources. We cannot assure, however, that the capital expenditures will be made and, if made, that those expenditures will be made in the amounts currently expected.

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The table below sets forth our capital expenditures for the years ended December 31, 2012, 2011 and 2010.

(in millions of R$)
	For the Year Ended December 31,
	2012		2011		2010
FIXED ASSETS		1,914		1,903		1,924
Land and buildings		278		248		208
Leasehold improvements		226		229		225
Furniture and data processing equipment		1,349		1,341		1,374
Other		61		85		117
INTANGIBLE ASSETS		1,738		1,972		582
Acquisition of rights to credit payroll		320		366		182
Partnership for the promotion and offer of financial products and services		12		318		195
Software developed or obtained for internal use		1,295		981		205
Other intangible		111		307		-
Total		3,652		3,875		2,506

5C. Research and Development, Patents and Licenses, Etc.

Not applicable.

5D. Trend Information

We expect that several factors will affect our future results of operations, liquidity and capital resources, including:

· the Brazilian economic environment (see “Item 5. Operating and Financial Review and Prospects — Operating Results — Brazilian Economic, Political and Social Conditions”),

· legal and regulatory developments (see “Item 5. Operating and Financial Review and Prospects — Operating Results — Brazilian Economic, Political and Social Conditions”),

· the effects of any continued international financial turmoil, including on our required liquidity and capital (see “Item 5. Operating and Financial Review and Prospects — Operating Results — Effects of the Global Financial Markets on our Financial Condition and Results of Operations”),

· the effects of inflation on our results of operations (see “Item 5. Operating and Financial Review and Prospects — Operating Results — Brazilian Economic, Political and Social Conditions”),

· the effects of fluctuations in the value of the real and interest rates on our net interest margin (see “Item 5. Operating and Financial Review and Prospects — Operating Results — Certain Effects of Foreign Exchange Rates on our Net Interest Margin), and

· any acquisitions we make in the future.

As part of our strategy, we continue to review opportunities to grow, both in Brazil and internationally.In addition, you should read “Item 3D. Risk Factors” for a discussion of the risks we face in our business operations, which could affect our business, results of operations or financial condition.

5E. Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, other than the guarantees we granted that are described in note 36 of our consolidated financial statements and derivative financial instruments discussed above under “Item 5B. Liquidity and Capital Resources –- Exchange Rate Sensitivity.”

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5F.Tabular Disclosure of Contractual Obligations

The table below summarizes the maturity profile of our consolidated long-term debt, operating leases and other contractual commitments as of December 31, 2012:

(in millions of R$)
	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interbank market debt (1)		106,704		53,837		36,408		8,920		7,539
Institutional market debt (1)		93,947		15,022		16,994		24,158		37,772
Operating and capital (finance) lease obligations (1)		4,608		1,122		2,101		883		502
Guarantees and stand by letters of credit		60,310		14,797		5,013		2,690		37,810
Pension Obligation		245		17		15		14		199
Health Benefits		120		6		14		16		84
Total		265,934		84,801		60,545		36,682		83,906

(1) Includes total estimated interest payments (including for derivatives). These estimated interest payments were calculated substantially based on the interbank forward rates at the specific periods.

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ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6A. DIRECTORS AND SENIOR MANAGEMENT

We are managed by our Conselho de Administração, or board of directors, and our Diretoria, or board of officers.

Pursuant to our bylaws, our board of directors must be composed of a minimum of ten and a maximum of fourteen directors elected by our shareholders at the annual shareholders’ meeting. Our board of directors meets regularly eight times a year and extraordinarily any time it deems necessary.

Our board of officers must be composed of a minimum of five and a maximum of twenty members. Our board of officers is elected by our board of directors.

All of our directors and officers are elected for a term of one year and can be reelected. Set forth below are the names, positions and dates of birth of the members of our board of directors and board of officers as of the date hereof. The members of our board of directors were reelected on April 19, 2013 at our annual shareholders’ meeting and the members of our board of officers were reelected on April 25, 2013 at a meeting of our board of directors. The reelection of the members of our board of directors and our board of officers is pending approval by the Central Bank.

Pursuant to Brazilian law, the election of each member of our board of directors and our board of officers must be approved by the Central Bank. Also under Brazilian law, an acting director or officer retains his or her position until he or she is reelected or a successor is elected.

As determined pursuant to our corporate governance policy, we have four directors who are considered independent. See “Item 16G. — Corporate Governance — Principal Differences between Brazilian and U.S. Corporate Governance Practices — Majority of Independent Directors.”

The business address for correspondence with each of our directors and officers is Praça Alfredo Egydio de Souza Aranha, 100, 04344-902, São Paulo, SP, Brazil.

Directors:

Name	Position	Date of Birth
Pedro Moreira Salles	Chairman	10/20/1959
Alfredo Egydio Arruda Villela Filho	Vice Chairman	11/18/1969
Roberto Egydio Setubal	Vice Chairman	10/13/1954
Alfredo Egydio Setubal	Director	09/01/1958
Candido Botelho Bracher	Director	12/05/1958
Demosthenes Madureira Pinho Neto	Director	01/28/1960
Gustavo Jorge Laboissiere Loyola(1)	Director	12/19/1952
Henri Penchas	Director	02/03/1946
Israel Vainboim(1)	Director	06/01/1944
Nildemar Secches(1)	Director	11/24/1948
Pedro Luiz Bodin de Moraes(1)	Director	07/13/1956
Ricardo Villela Marino	Director	01/28/1974

(1) Independent director.

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Officers:

Name	Position	Date of Birth
Roberto Egydio Setubal	President and Chief Executive	10/13/1954
Alfredo Egydio Setubal	Executive Vice President	09/01/1958
Candido Botelho Bracher	Executive Vice President	12/05/1958
Caio Ibrahim David	Executive Officer	01/20/1968
Claudia Politanski	Executive Officer	08/31/1970
Eduardo Mazzilli de Vassimon	Executive Officer	10/07/1958
Ricardo Baldin	Executive Officer	07/14/1954
Alexsandro Broedel Lopes	Officer	05/10/1974
Ana Tereza de Lima e Silva Prandini	Officer	06/05/1978
Eduardo Hiroyuk Miyaki	Officer	06/11/1972
Emerson Macedo Bortoloto	Officer	07/25/1977
Robert George Stribling	Officer	12/27/1953
Rogério Paulo Calderón Peres	Officer	02/02/1962
Rodrigo Luis Rosa Couto	Officer	08/08/1975

Set forth below are the summary biographical descriptions of our directors and officers. As described, some of the members of our board of directors and board of officers also perform senior management functions at our subsidiaries and at Itaúsa and its subsidiaries.

Mr. Pedro Moreira Salles has been chairman of our board of directors since February 2009 (with investiture, i.e., the date on which he assumed such role after approval of his election by the Central Bank on February 19, 2009) and was our executive vice president from November 2008 to August 2009. He worked at Unibanco since 1989, where he served as vice chairman of the board of directors from 1991 to 1997, chairman of the board of directors from 1997 to 2004, and again as vice chairman of the board of directors from 2004 until November 2008. At Unibanco, he also held the post of chief executive officer from April 2004 to November 2008. At Unibanco Holdings he served as vice chairman of the board of directors and chief executive officer. He served as chairman of the boards of directors of Unibanco Seguros and Banco Fininvest S.A. and vice chairman of the board of AIU Seguros S.A. He is currently a member of the board of IBMEC and was previously a member of the board of Instituto Empreender Endeavor Brasil, as well as the president of the board of PlaNet Finance Brasil. Mr. Pedro Moreira Salles has a bachelor’s degree, magna cum laude, in Economics and History from the University of California, Los Angeles. He also attended the international relations masters program at Yale University and the OPM - Owners/President Management Program at Harvard University.

Mr. Alfredo Egydio Arruda Villela Filho has been vice chairman of our board of directors since November 2002 (with investiture on March 10, 2003). He has served as a member of the board of directors of Itaúsa since 1995, serving as vice chairman since May 2011, and CEO since September 2008. He is the vice chairman of the board of directors of Itautec S.A. and Duratex S.A. He was also member of the board of directors of Elekeiroz S.A. from April 2004 to April 2010. Mr. Villela Filho has a bachelor’s degree in Mechanical Engineering from the Mauá Engineering School of the Instituto Mauá de Tecnologia (IMT) and a post-graduate degree in Business Administration from Fundação Getúlio Vargas (FGV).

Mr. Roberto Egydio Setubal has been vice chairman of our board of directors since March 2003 (with investiture on March 10, 2003). He has served as a director since April 1995 and president and chief executive officer since April 1994. He served as our general manager from 1990 to 1994. He has served as executive vice president of Itaúsa since May 1994 and chairman of the board of directors of Itaú BBA since February 2003. Mr. Roberto Setubal was the president of the Brazilian Federation of Banks (Federação Brasileira de Bancos — FEBRABAN) and of the National Federation of Banks (Federação Nacional de Bancos or “FENABAN”), from April 1997 to March 2001. He was a member of the board of directors of Petróleo Brasileiro S.A. — PETROBRAS from March 2002 to January 2003. He is currently a vice chairman of the Institute of International Finance and member of the International Monetary Conference and serves on the international advisory committee of the Federal Reserve Bank of New York and the international advisory committee of New York Stock Exchange. Mr. Roberto Setubal has a bachelor’s degree in Production Engineering from Escola Politécnica of the Universidade de São Paulo (USP) and a master of science degree in Engineering from Stanford University.

165

Mr. Alfredo Egydio Setubal has been a member of our board of directors since April 2007 (with investiture on June 29, 2007) and has served as executive vice president since April 29, 1996 (with investiture on July 3, 1996). He has served as our investor relations officer since 1995. He is currently responsible for our wealth management and capital markets services divisions, with primary responsibility for communications with capital markets, for increasing the transparency of financial and strategic information through improvements in the quality, relevance, timeliness, reliability and comparability of information and for managing relations with the CVM, the Central Bank and other official capital markets authorities. He served as our executive officer between 1993 and 1996 and managing officer between 1988 and 1993. He has been a member of the board of directors of Itaúsa since September 2008. He was a member of ANBIMA from 1994 to August 2003 and its president from August 2003 to August 2008. He has been a member of the board of directors of the Securities Dealers’ Association (Associação das Empresas Distribuidoras de Valores — ADEVAL), since 1993, of BM&FBovespa (formerly BOVESPA) since 1996, of the Brazilian Association of Listed Companies (Associação Brasileira das Companhias Abertas — ABRASCA), since 1999. He was a member of the board of directors of the Brazilian Settlement and Custody Company (Companhia Brasileira de Liquidação e Custódia — CBLC), from 1998 to 2003. He was president of the board of directors of the Brazilian Institute of Investor Relations (Instituto Brasileiro de Relações com Investidores, — IBRI), from 2000 to 2003 and a member since 2004. He has served as the finance officer of the Museum of Modern Art of São Paulo — MAM since 1992. Mr. Alfredo Setubal has a bachelor’s and a post-graduate degree in Business Management from Fundação Getúlio Vargas (FGV).

Mr. Candido Botelho Bracher has been a member of our board of directors since November 2008 (with investiture on February 19, 2009) and the executive vice president of our board of officers since May 2, 2005 (with investiture on August 1, 2005). He is currently responsible for our corporate treasury division. He has been a member of the board of directors of Itaú BBA since February 2003, CEO since April 2005, and is responsible for the commercial, capital markets and human resources divisions and was vice president of the board of officers from February 2003 to April 2005. He served as an officer at Banco BBA Creditanstalt S.A. from 1988 to 2003. He is a member of the board of directors of Pão de Açúcar S.A. and of BM&FBovespa. Mr. Bracher has a degree in Business Administration from the Fundação Getúlio Vargas (FGV).

Mr. Demosthenes Madureira de Pinho Neto has been a member of our board of directors since April 2012 (with investiture on May 31, 2012). He was executive director of Itaú Unibanco from December 2008 to April 2011. He was also executive vice-president of Itaú BBA from November 2008 to April 2009, vice-chairman of Unibanco from July 2005 to April 2011 and executive director of Unibanco Asset Management from August 2002 to July 2005. Mr. Pinho Neto was president of the National Association of Investment Banks (Associaçāo Nacional dos Bancos de Investimento — ANBID) from 2000 to 2003, chief executive officer of Dresdner Asset Management from 1999 to 2002 and director of the Central Bank from 1997 to 1999. He has bachelor’s and master’s degrees in Economics from PUC-RJ and a PhD in Economics from University of California Berkeley.

Mr. Gustavo Jorge Laboissiere Loyola has been a member of our board of directors since April 2006 (with investiture on July 31, 2006). He has also been a member of our audit committee since May 2007, and since September 2008 he has served as its president. He was president of our fiscal council from March 2003 to April 2006. He has been a partner and an officer of Gustavo Loyola Consultoria S/C since February 1998 and a member of the board of directors of Caramuru Alimentos S.A. and Mabel Alimentos S.A., since April 2008 and August 2006, respectively. He was the governor of the Central Bank from November 1992 to March 1993 and from June 1995 to August 1997, as well as the deputy governor for the Financial System Regulation and Organization from March 1990 to November 1992. He was a partner and an officer of MCM Consultores Associados Ltda. from August 1993 to May 1995, assistant officer of Banco de Investimento Planibanc S.A. from February to October 1989 and operating officer of Planibanc Corretora de Valores S.A. from November 1987 to January 1989. Mr. Loyola has a bachelor’s degree in Economics from Universidade de Brasília and a master’s degree and Ph.D. in Economics from the Fundação Getúlio Vargas (FGV).

Mr. Henri Penchas has been a member of our board of directors since November 2002 (with investiture on March 10, 2003) and served as senior vice president from April 1997 to April 2008, executive vice president from 1993 to 1997 and executive officer from 1988 to 1993. He was an executive officer of Itaúsa from December 1984 to April 2008, has been its investor relations officer since 1995 and its executive vice president since April 2009. He has also been the chief executive officer of Duratex S.A. since April 2009. Mr. Penchas was the vice president of the board of directors of Itaú BBA from February 2003 to April 2008. Mr. Penchas has a bachelor’s degree in Mechanical Engineering from the Universidade Mackenzie and a post-graduate degree in finance from the Fundação Getúlio Vargas (FGV).

Mr. Israel Vainboim has been a member of our board of directors since November 2008 (with investiture on February 19, 2009). He was elected to the board of directors of Unibanco in 1988 and to the board of directors of Unibanco Holdings in 1994. He was chairman of Unibanco from 1988 to 1992. He has served as executive chairman of Unibanco Holdings since 1992. He joined Unibanco in 1969. He has served on the board of directors of Souza Cruz S.A., Iochpe Maxion S.A., E-Bit Tecnologia em Marketing S.A., Vinhedo Investimentos Ltda., Casa da Cultura de Israel, Museu de Arte Moderna de São Paulo — MAM and Hospital Israelita Albert Einstein. Mr. Vainboim has a bachelor’s degree in Mechanical Engineering from the Universidade Federal do Rio de Janeiro (UFRJ), and a master’s degree in Business Administration, or MBA, from Stanford University.

166

Mr. Nildemar Secches has been a member of our board of directors since April 2012 (with investiture on May 31, 2012). Mr. Secches has been chairman of the board of directors of BRF-Brasil Foods since April, 2007. He has also been a member of the board of directors of Weg S.A. since 2004, Ultrapar Participações S.A. since 2002 and Iochpe-Maxion since 2004. He was a director of BNDES from 1987 to 1990, corporate director general for the Iochpe-Maxion Group from 1990 to 1994 and President of the Brazilian Association of Chicken Exporters (Associacāo Brasileira dos Exportadores de Frango — ABEF) from 2001 to 2003. He graduated with a degree in Mechanical Engineering from the Universidade de São Paulo (USP), earned a post-graduate degree in Finance from the Pontifícia Universidade Católica do Rio de Janeiro (PUC-RJ) and completed a Ph.D. in Economics at the Universidade Estadual de Campinas (Unicamp).

Mr. Pedro Luiz Bodin de Moraes has been a member of our board of directors since November 2008 (with investiture on February 19, 2009). He was a partner in Itaú Holding and a member of the board of directors of Unibanco, from April 2003 to November 2008. He was an officer and partner at Banco Icatu S.A. from 1993 to 2002. He served as deputy governor for monetary policy at the Central Bank from 1991 to 1992 and officer of BNDES from 1990 to 1991. Mr. Bodin de Moraes has a bachelor’s and master’s degree in economics from the Pontifícia Universidade Católica do Rio de Janeiro (PUC-RJ) and a Ph.D. in economics from Massachusetts Institute of Technology (MIT).

Mr. Ricardo Villela Marino has been a member of our board of directors since April 2008 (with investiture on June 2, 2008) and has served as executive vice president of Itaú Unibanco since September 2009 (with investiture on February 2, 2010). He is currently responsible for our human resources and international division. He served as our senior managing officer from May 2005 to August 2006, managing officer from April 2004 to April 2005, head of the derivatives dealing desk (heading the team responsible for the structuring and sale of derivative products to middle market companies, institutional investors and private individuals) from 2003 to 2004 and head of business intelligence (responsible for the implementation of new technologies and methodologies which have helped us become a leader in the credit card industry in Brazil) from 2002 to 2003. He has served as chairman of Federación Latino Americana de Bancos — FELABAN from November 2008 to November 2010. He was a manager of the emerging markets’ equities portfolio covering Argentina, Chile, Peru, Colombia and South Africa and of the relations with governments, banks and manager of companies in each of these countries at Goldman Sachs Asset Management in London. Mr. Villela Marino has a degree in Business Administration from MIT Sloan School of Management, Cambridge, a master’s degree in Business Administration with specialization in Financial Administration and bachelor’s degree in Mechanical Engineering from the Escola Politécnica of the Universidade de São Paulo (USP).

Mr. Caio Ibrahim David has been a member of our board of officers since May 2010 (with investiture on December 3, 2010). He joined the group in 1987 as a trainee, with expertise as a controller and in risk management. He was an executive officer of Itaú BBA from April 2008 to July 2010. He has been an executive officer of Itauseg Participações S.A. and member of the board of directors of Dibens Leasing S.A. - Arrendamento Mercantil, both since April 2010. He has been alternate member of the board of directors of Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento since April 2010. Additionally, he worked at Bankers Trust in New York as an associate in the area of Global Risk Management in 1998. He has bachelor’s degree in Engineering from the Universidade Mackenzie (1986-1990), post-graduate degree in Economics and Finance (1992-1993) from the Universidade de São Paulo (USP) and master in Controllership also from the Universidade de São Paulo (USP) (1994-1997) and an MBA from the New York University (1997-1999) with major in finance, accounting and international business.

Ms. Claudia Politanski has been a member of our board of officers since November 2008 (with investiture on November 27, 2008) and is currently responsible for our legal division and serves as general legal counsel. She joined Unibanco in 1991 and was elected executive officer of Unibanco in 2007. Ms. Politanski has a law degree from the Universidade de São Paulo (USP). She also holds a master’s degree in law, or LL.M., from the University of Virginia and an MBA from the Fundação Dom Cabral, Minas Gerais.

Mr. Eduardo Mazzilli de Vassimon has been a member of our board of officers since January 2013 (with investiture on March 1, 2013), and is responsible for our risk control division. He has been a member of the board of directors of Itaú BBA since April 2003, where he served as vice president from April 2003 to December 2008, and was responsible for the following areas: international, financial institutions, products, customer dealing desk and treasury. Mr. Vassimon served as general manager of Itaú Unibanco from 1980 to 1990. He also served as assistant foreign exchange director from 1990 to 1991 and as international unit director from 1992 to 2003 at Banco BBA Creditanstalt S.A. Mr. Vassimon has a degree in Economics from Universidade de São Paulo (USP), and a degree in Business Administration from Fundação Getúlio Vargas. He also holds masters degrees from Fundação Getúlio Vargas and École dês Hautes Études Commerciales — France.

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Mr. Ricardo Baldin has been a member of our board of officers since April 2009 (with investiture on September 1, 2009) and is currently responsible for our internal audit division. In 1977 he joined PricewaterhouseCoopers as a trainee and was a partner there for eighteen years. As an independent auditor, he was the leading partner in the area of financial institutions. He was also the partner responsible for PricewaterhouseCoopers’ financial institutions group in South America, where he was responsible for coordinating various projects in the region, including the evaluation of the Ecuadorian financial system. He was an officer of the National Association of Financial, Administrative and Accounting Executives and was also responsible for the financial institutions group at IBRACON for several years. Mr. Baldin has a bachelor’s degree in accounting science from the Universidade do Vale do Rio dos Sinos, Rio Grande do Sul, and university extension courses in Management and Finance from the Fundação Dom Cabral and the Fundação Getúlio Vargas (FGV).

Mr. Alexsandro Broedel Lopes has been a member of our board of officers since May 2012 (with investiture on August 1, 2012). He is an Accounting and Finance Professor at Universidade de São Paulo (USP) and has been a Professor and Researcher at the London School of Economics, Manchester Business School, Arizona State University and Fundação Getúlio Vargas. He was a commissioner at the CVM from 2010 to 2011. Mr. Lopes is a member of the audit committee of BM&FBovespa and a member of the Advisory Council and Education Advisory Group of IFRS Foundation. He is also the author of various books and articles regarding finance, tax and accounting. Mr. Lopes graduated with a degree and doctorate in accounting from Universidade de São Paulo and holds a PhD in accounting sciences from Manchester Business School.

Ms. Ana Tereza de Lima e Silva Prandini has been a member of our board of officers since April 2012 (with investiture on June 1, 2012). She is also a member of the board of officers of Dibens Leasing S.A. — Arrendamento Mercantil. She occupied various management positions in credit risk and risk control units within Itaú Unibanco Holding between 2008 and 2012. Ms. Prandini was a manager at the banking book and treasury groups of Banco Citibank S.A. from 2006 to 2008, a risk control supervisor and analyst at treasury with Banco Itaú S.A. from 2001 to 2005 and worked as a trainee and as a civil engineer at Figueiredo Ferraz Engenharia de Projetos from 2000 to 2001. She graduated with a degree in civil engineering from Universidade Estadual de Campinas (Unicamp) and has an MBA in market finance from Instituto Brasileiro de Mercado de Capitais — IBMEC (Sāo Paulo).

Mr. Eduardo Hiroyuki Miyaki has been a member of our board of officers since April 2011 (with investiture on August 1, 2011). He has been an officer of Itaú Unibanco since June 2010. He was the manager and compliance officer of the Money Laundering Prevention program of the Itaú Unibanco Group from 1996 to 2003 and, from 2003 until 2004, he was the manager responsible for its internal audit department for our treasury and asset management units. Mr. Miyaki was also the manager of our internal audit of treasury, capital markets, insurance and securities units from 2005 to 2010, when he became a managing director of Itaú Unibanco. He holds a degree in Civil Engineering from the Universidade de São Paulo (USP), a postgraduate degree in sanitation from Federal University of Gunma Province in Japan and a post-graduate degree in Business Administration from the Fundação Getúlio Vargas (FGV). Mr. Miyaki also holds an MBA in International Finance and Business from the Leonard Stern School of Business of New York University.

Mr. Emerson Macedo Bortoloto has been a member of our board of officers since September 2011 (with investiture on November 1, 2011). He joined us in July 2003, holding positions in the Internal Audit group. Since November 2008, he has been responsible for the evaluation of processes related to Market, Credit and Operational Risks in addition to Auditing Projects and Continuous Auditing. Previously, Mr. Bortoloto held positions in the Itaú Unibanco group in Coordination and Management, where he was responsible for auditing the processes of Information Technology and Analysis and Concession of Retail Credit. He also worked at Ernst & Young Auditores Independentes from May 2001 to June 2003, as well as at Banco Bandeirantes S.A. between 1992 and 2001, where he was responsible for conducting IT and operational processes audits. He holds a degree in Data Processing Technology from the Faculdades Integradas Tibiriçá and a postgraduate degree in Auditing and Consultancy in Information Security from FASP — Faculdades Associadas de São Paulo. In 2004, he was awarded a CISA certification issued by ISACA. Mr. Bortoloto holds an MBA in Internal Auditing from Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiros — FIPECAFI.

Mr. Robert George Stribling has been a member of our board of officers since July 2012 (with investiture on November 11, 2012). Mr. Stribling was Group Chief Risk Officer at Suncorp Group Ltd. from 2010 to 2012. Before that, he worked at National Australia Bank as Country Manager in China from 2007 to 2008 and Chief Risk Officer in Australia from 2005 to 2007. He also worked at ANZ Banking Group from 2001 to 2005 as Chief Operating Officer and Head of Market Risk. He graduated with a bachelor of science in Human Relations & Organizational Behavior from the University of San Francisco and has a post-graduate degree in banking.

Mr. Rogério Paulo Calderón Peres has been a member of our board of officers since April 2011 (with investiture on August 1, 2011). He has been an officer of Itaú Unibanco since April 2009 and member of the Disclosure and Trading Committee of Itaú Unibanco Holding since June 2009. Mr. Calderón was an executive officer of Unibanco from 2007 to April 2009 and of Grupo Bunge from 2003 to 2006. Mr. Calderón was a member of the board of directors of Fertilizantes Fosfatados S.A. — Fosfertil, Ultrafertil S.A. and Fertifos S.A., an officer of Bunge Brasil S.A. and Fertifos S.A. and member of the audit committee of Fundação Bunge, Bungeprev — Fundo Múltiplo de Previdência Privada and Fosfertil from 2003 to 2006. From 1981 to 2003 he was a partner at PricewaterhouseCoopers’s audit, tax and consulting divisions. Mr. Calderón holds a degree in Business Administration from the Fundação Getúlio Vargas (FGV), a degree in Accounting from Fundação Paulo Eiró and has completed a postgraduate course from the E-Business Education Series from Darden Graduate School of Business Administration of University of Virginia. He also attended courses at the Summer Executive Business School at the University of Western Ontario Canada, the Center for Executive Development Faculty of Princeton University, Management of Continuing Education and Training Professionals in Arundel, England, and Executive Business Development at Fundação Getúlio Vargas (FGV).

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Mr. Rodrigo Luis Rosa Couto has been a member of our board of officers since December 2011 (with investiture on January 10, 2012). He joined us in 2008, holding a position in the corporate risk management sector. Previously, Mr. Couto worked at McKinsey & Company as an Associate from September 2005 to February 2008, as well as at the Central Bank from 1998 to 2003. He holds a degree in Business from Universidade Federal do Rio Grande do Sul (UFRGS) and an MBA in Finance from the Wharton School, University of Pennsylvania.

Four of our directors, Alfredo Egydio Arruda Villela Filho, Alfredo Egydio Setubal, Ricardo Villela Marino and Roberto Egydio Setubal, are members of the Egydio de Souza Aranha family and one of our directors, Pedro Moreira Salles, is a member of the Moreira Salles family.

There are no pending legal proceedings in which any of our directors, nominees for director, or officers is a party adverse to us. We have no knowledge of any arrangement or understanding with major shareholders, customers, suppliers or any other person pursuant to which any person was selected as a director or executive officer, except the shareholders’ agreement between Itaúsa and E. Johnston to govern their relationship regarding IUPAR, Itaú Unibanco Holding and its subsidiaries. See “Item 7A. Major Shareholders — Shareholders’ Agreement”.

On March 15, 2013, Marcos de Barros Lisboa, our executive officer responsible for operational risk and efficiency divisions, resigned.

On April 19, 2013, our shareholders approved an increase to the mandatory retirement age for the position of Chief Executive Officer of Itaú Unibanco Holding from 60 to 62 years old. This increase is subject to Central Bank approval. Roberto Egydio Setubal is expected to remain as Chief Executive Officer of Itaú Unibanco Holding and Itaú Unibanco until he reaches the age of 60, after which he is expected to hold only the position of Chief Executive Officer of Itaú Unibanco Holding for the following two years.

6B. Compensation

For the year ended on December 31, 2012, the aggregate compensation accrued by us for all members of the board of directors and the board of officers of the Itaú Unibanco Group for services rendered during that year in all capacities was approximately R$575 million. This figure includes salaries in the amount of approximately R$244 million, a profit-sharing plan in the amount of approximately R$160 million and contributions to employer-sponsored pension plans in the amount of approximately R$8 million. Except for the highest and lowest compensation received by a director and an officer, without identification of the individual recipients, we are not required under Brazilian law to, and we do not, disclose the compensation of our directors, officers and members of our administrative, supervisory or management bodies on an individual basis. Finally, during 2012, the members of our fiscal council and the alternate members received monthly compensation of R$12,000 and R$5,000 respectively.

On April 20, 2012, our shareholders approved (i) compensation for members of our board of directors in an annual aggregate amount of R$13 million, (ii) compensation for members of our board of officers in an annual aggregate amount of R$125 million, and (iii) monthly individual compensation of R$12,000 and R$5,000 for members and alternate members of our fiscal council, respectively.

Our officers and members of our board of directors receive additional benefits generally provided to our employees, such as medical and dental assistance, which benefits totaled approximately R$4.1 million for the year ended December 31, 2012.

For fiscal year 2013, our shareholders approved, on April 19, 2013, (i) compensation for members of our board of directors in an annual aggregate amount of R$15.5 million, (ii) compensation for members of our board of officers in an annual aggregate amount of R$125 million, and (iii) monthly individual compensation of R$15,000 and R$6,000 for members and alternate members of our fiscal council, respectively.

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Regarding the disclosure of the highest and lowest compensation received by the members of our management (which includes directors and officers), on March 2, 2010, the Brazilian Institute of Financial Executives of Rio de Janeiro (Instituto Brasileiro de Executivos de Finanças — IBEF Rio de Janeiro) filed, on behalf of their affiliated members, an ordinary proceeding requesting an injunction, in which the legality of this disclosure requirement is being challenged on the grounds that it would cause great discomfort to the executives and would violate their individual rights and guarantees. We do not intend to make this disclosure until the matter is finally determined, especially in light of our view that our executives’ rights to judicial review would otherwise be curtailed.

We have established a profit sharing plan for our management and the plan and its rules have been approved by our board of directors. Under the terms of such plan, each beneficiary of the plan is assigned annually a base amount for computation of payments under the profit sharing plan. The final amount of the payment to an individual is based on the consolidated results of the Itaú Unibanco Group, the results of the business unit to which the individual belongs and the individual’s performance. This individual amount is determined by multiplying the base amount by an index applicable to all participants, which depends on our level of return on stockholders’ equity.

On October 22, 2012, our board of directors approved a compensation policy (amended on February 28, 2013) proposed by the compensation committee for the members of the management of Itaú Unibanco Holding and its controlled companies, in compliance with the guidelines established by CMN Resolution No 3,921. This measure established new rules related to compensation of management of financial institutions, establishing that variable compensation should be consistent with the institution’s risk management policies, of which at least 50.0% of the compensation must be paid in shares or share-based instruments and at least 40.0% must be deferred as payment for at least three years, and that the deferred payment is subject to clawbacks, based on the results of the institution or the business unit during the period of deferral. These new rules have been in force since January 1, 2012 and are applicable to compensation of directors and officers based on the services rendered during 2012.

In order to comply with the new rules mentioned above, on September 6, 2011, Itaú Unibanco Holding was authorized by the CVM to transfer, on a private basis, treasury shares to its executives and the executives of its controlled companies. Itaú Unibanco Holding was also authorized by its shareholders to use Itaú Unibanco Holding’s preferred shares held in treasury to compensate executives of Itaú Unibanco Holding and its controlled companies.

Our directors have not entered into any service contract with us or any of our subsidiaries providing for benefits upon termination of employment.

6C. Board Practices

For information concerning the election of our directors and officers and their respective term of office see “Item 6A. Directors and Senior Management.”

For information concerning the powers of the board of directors and the board of officers, see “Item 10B. Memorandum and Articles of Association”.

Statutory Bodies

Fiscal Council

According to Brazilian Corporate Law, the adoption of a fiscal council is voluntary and it may be on a permanent or temporary basis. Our fiscal council has been established annually since 2000, even though our bylaws granted temporary status to our fiscal council. The fiscal council is an independent body elected by shareholders annually to supervise the activities of management and independent auditors. The responsibilities of the fiscal council are established by the Brazilian Corporate Law and encompass the oversight of management’s compliance with the laws and bylaws, the issuance of a report included in the annual and quarterly reports and certain matters submitted for shareholders’ approval and calling of shareholders’ meetings and the reporting of specific adverse matters arising at those meetings. Our fiscal council is composed of the following individuals, each of whom serves for a term of one year and was reelected on April 19, 2013 at the annual shareholders’ meeting:

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Name	Position	Date of Birth
Iran Siqueira Lima(1)	President	05/21/1944
Alberto Sozin Furuguem(1)	Member and Alternate President	02/09/1943
Luiz Alberto de Castro Falleiros(2)	Member	02/13/1957
Ernesto Rubens Gelbcke(2)	Alternate	12/01/1943
José Caruso Cruz Henriques(1)	Alternate	12/31/1947
João Costa(1)	Alternate	08/10/1950

(1) Members appointed by the controlling block of shareholders.

(2) Members appointed by the holders of preferred shares.

The reelection of the members of our fiscal council is pending approval by the Central Bank.

Audit Committee

In accordance with CMN regulations, all financial institutions that (i) have regulatory capital equal to or in excess of R$1 billion; (ii) manage third-party funds of at least R$1 billion; or (iii) hold deposits and manage third-party funds in an aggregate amount of at least R$5 billion, are required to have an in-house audit committee. Audit committees are required to be created under an express provision in the bylaws of the respective financial institution and are required to be composed of at least three members, one of which must be a financial expert, who should rotate every five years. The members of the audit committee will only be allowed to be part of the committee again after three years following the maximum five-year office term.

Audit committee members of publicly held financial institutions may not (i) be or have been in the previous twelve months: (a) an officer of the institution or its affiliates; (b) an employee of the institution or its affiliates; (c) an officer, manager, supervisor, technician, or any other member of the team involved in auditing activities at the institution; or (d) a member of the institution’s fiscal council or that of its affiliates; and (ii) be a spouse or relative (first or second-degree relative) of the persons described in items (i)(a) or (i)(c).

Audit committee members of publicly held financial institutions are also prohibited from receiving any compensation from the institution or its affiliates other than as a member of the audit committee. In the event an audit committee member of the institution is also a member of the board of directors of the institution or its affiliates, such member must opt for compensation related to only one of the positions.

Our audit committee reports to the board of directors and its principal functions are to oversee:

· The quality and integrity of the financial statements of Itaú Unibanco Holding;

· The compliance with legal and regulatory requirements;

· The performance, independence and quality of the services rendered by the independent auditors of Itaú Unibanco Holding;

· The performance, independence and quality of the work performed by the internal auditors of Itaú Unibanco Holding;

· The quality and the effectiveness of the internal controls and risk management systems of Itaú Unibanco Holding;

· Recommendations for improvement or change of policies and procedures; and

· Recommendations for hiring and replacement of independent auditors to the board of directors.

According to Central Bank regulations, the audit committee is required to be a statutory body, created by a shareholders’ resolution, which is separate from the board of directors. Notwithstanding the requirement of separate corporate bodies, the members of the audit committee may be members of the board of directors, provided that they meet certain independence requirements. In addition, under Brazilian law, the hiring of the independent auditor is a function reserved exclusively for the board of directors of a company. However, Brazilian regulation permits the creation of a single committee for an entire group of companies.

Independent auditors and the audit committee must immediately notify the Central Bank of the existence or evidence of error or fraud within a maximum period of three business days from the respective identification of the same, including:

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· Non-compliance with legal and regulatory norms that place the continuity of the audited entity at risk;

· Fraud of any amount perpetrated by the administration of said institution;

· Relevant fraud perpetrated by entity employees or third parties; and

· Errors that result in significant mistakes in the accounting records of the entity.

Our audit committee is comprised of the following individuals, each of whom serves for a one year term and was reelected by our board of directors on April 25, 2013. The reelection of the members of our audit committee is pending approval by the Central Bank.

Name	Position
Gustavo Jorge Laboissiere Loyola	President
Alkimar Ribeiro Moura	Member
Eduardo Augusto de Almeida Guimarães	Member
Guy Almeida Andrade	Member and Financial Expert
Luiz Alberto Fiore	Member
Geraldo Travaglia Filho	Member

Our board of directors has determined that one of the members of our audit committee, Mr. Guy Almeida Andrade, is an audit committee financial expert and meets the requirements set forth by the SEC and the NYSE. Our audit committee financial expert, along with the other members of our audit committee, are independent pursuant to CMN Resolution No. 3,198, of May 27, 2004, which requires that such members not be, or have been in the last year, an officer or employee of the company or its affiliates or an employee with managerial responsibilities in the internal audit division of the company. Other members of our audit committee are experts in accounting practices adopted in Brazil and we believe the skills, experience and education of our audit committee members qualify them to carry out all of their duties as members of the audit committee, including overseeing the preparation of our IFRS financial statements. In addition, our audit committee has the ability to retain independent auditors, financial advisers or other consultants, advisers and experts whenever it deems appropriate.

See above for the biography of Gustavo Jorge Laboissiere Loyola. Set forth below are brief biographical descriptions of Messrs. Alkimar Ribeiro Moura, Eduardo Augusto de Almeida Guimarães, Guy Almeida Andrade and Luiz Alberto Fiore.

Mr. Alkimar Ribeiro Moura has been a member of our audit committee since May 2010. He was an independent member on the Supervisory Board of BM&FBovespa Supervisão de Mercados (BSM) from October 2007 to September 2010. Previously, he was a member of the board of Banco Nossa Caixa S.A. from May 2006 to February 2007 and of Cia. Brasil de Seguros from May 2001 to February 2003. He was a member of the board of Banco Bandeirantes S.A. from May 1999 to December 2000, and chief executive officer of the Banco do Brasil Banco de Investimentos (BBBI), and executive vice-president for Finance and Capital Markets of the Banco do Brasil S.A., from April 2001 to January 2003. In the Central Bank, he was deputy governor for financial system regulations and organization, from February 1996 to September 1997, deputy governor for monetary policy from March 1994 to February 1996, and deputy governor for public debt and open market operations from January 1987 to January 1988. Mr. Moura has a degree in economics from the Universidade Federal de Minas Gerais, a master’s degree from University of California, Berkeley, USA in 1966, and a Ph.D. in economics from Stanford University.

Mr. Eduardo Augusto de Almeida Guimarães has been a member of our audit committee since December 2008. He was a member of the audit committee of Unibanco from April 2004 to December 2008. He previously held the positions of president of the IBGE from 1990 to 1992, National Treasury Secretary at the Ministry of Finance from 1996 to 1999, CEO of the Banco do Estado de Sāo Paulo — BANESPA from 1999 to 2000, and CEO of Banco do Brasil from 2001 to 2003. He has been a member of the boards of directors of various companies such as Banco do Brasil, CEF, BNDES Participações S.A. and Banco Nossa Caixa S.A. He has also undertaken various academic functions, such as professor and dean of the Economics Institute of the Universidade Federal of Rio de Janeiro, lecturer in the Economics Departments of both the Pontifícia Universidade Católica of Rio de Janeiro (PUC-RJ), and the Universidade Federal Fluminense. Mr. Guimarães has a degree in civil engineering, a degree in economics, a master’s degree in production engineering from the Universidade Federal do Rio de Janeiro, and a Ph.D. in economics from the University of London.

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Mr. Guy Almeida Andrade has been a member of our audit committee since December 2008. He was a member of the audit committee of Unibanco from April 2004 to December 2008. He began his career in 1974 at Magalhães Andrade S/S Auditores Independentes, where he became a partner in 1982, a position he currently holds. In 1984, he joined an intern program at Dunwoody & Co., Toronto, Canada. In 1983 he was admitted to the Chamber of Independent Auditors of IBRACON. Currently, Mr. Andrade is member of board of directors of IBRACON. From 2002 to 2004, he was president of the National Executive Board of IBRACON. In 2000, he was elected as a member of the board of directors of the International Federation of Accountants — IFAC, headquartered in New York, a position he held until November 2006. Mr. Andrade was the chairman of IFAC’s audit committee, from 2003 to 2006. He was also a member of IFAC’s nominating committee, from 2007 to 2010. Mr. Guy Almeida Andrade has a bachelor’s degree in accounting from the Universidade de São Paulo, and a bachelor’s degree in business administration from Universidade Mackenzie.

Mr. Luiz Alberto Fiore has been a member of our audit committee since February 2012. He began his career in 1971 at PricewaterhouseCoopers. In 1973, he joined Deloitte Touche Tohmatsu, where he became a partner in the External Audit and Corporate Finance areas in 1985 and member of the Executive Committee and of the board of directors of Deloitte do Brasil in 1987. In 1998, he became a representative for Latin America of the International Board of Deloitte Corporate Finance, continuing at Deloitte until 2010. Mr. Luiz Alberto Fiore has a bachelor’s degree in Business Management from Universidade Católica (ESAN-PUC) and a bachelor’s degree in Accounting Sciences from Universidade Mackenzie.

Mr. Geraldo Travaglia Filho has been a member of our audit committee since January 2013. He served as executive officer of Itaú Unibanco Holding from November 2008 to April 2009 and as secretary to the board of directors from December 2010 to August 2011. He also served as executive officer of Redecard from May 2009 to April 2010, of Itaú BBA from November 2008 to January 2010 and of Itaú Unibanco from November 2008 to April 2009. Mr. Travaglia Filho has a bachelor’s degree in Business Management from Universidade de São Paulo (USP) and a specialization in Bank Management from Wharton School, University of Pennsylvania.

Committees of the Board of Directors

The information provided below relates to the members of the strategy, risks and capital management, appointment and corporate governance, personnel and compensation committees reelected on April 25, 2013.

The board of directors generally appoints members to each committee from the members of our board of directors, however, key employees of Itaú Unibanco Holding and specialists in each specific committee area may be invited to be members of a committee. Members are appointed on an annual basis.

Strategy Committee

Our strategy committee is responsible for corporate strategy, investments and budget.

With respect to corporate strategy, the committee: (i) supports the board of directors in its discussions with the board of officers regarding the strategic guidelines with respect to business matters; (ii) issues opinions and recommendations on the strategic guidelines and provides input for the board of directors’ discussions and decisions; and (iii) takes the initiative in the discussion of key matters and those of a high impact nature.

Regarding investments, the committee: (i) reviews investment opportunities presented by the board of officers which have a relevant impact on the business; and (ii) issues opinions and recommendations on investment opportunities presented, providing input and support to the discussions and decisions of the board of directors.

As to the budget, the committee: (i) proposes budgetary guidelines; (ii) conducts a thorough discussion with the board of officers in order to establish budgetary guidelines; (iii) conducts discussions with the board of officers and makes a recommendation on the budget for the current year to the board of directors; and (iv) advises and supports the CEO in monitoring corporate strategy in relation to the budget.

Further, the strategy committee also establishes an economic scenarios sub-committee, made up of key employees of Itaú Unibanco Holding and its controlled companies that have recognized expertise in macro economy. Such sub-committee supplies macroeconomic input to the strategy committee to provide support for its considerations in defining strategy, investments and budgets.

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The following members of our board of directors were appointed to our strategy committee: Pedro Moreira Salles (president), Roberto Egydio Setubal, Ricardo Villela Marino, Henri Penchas, Israel Vainboim and Nildemar Secches.

Capital and Risk Management Committee

Our capital and risk management committee is responsible for supporting the board of directors in the performance of its functions related to Itaú Unibanco’s risk and capital management, submitting reports and recommendations for the analysis of the board of directors with respect to: (i) supervision of Itaú Unibanco’s risk management and control activities, for the purpose of ensuring their adequacy to the risk levels assumed and to the complexity of operations, as well as complying with regulatory requirements; (ii) review and approve capital management policies and strategies that establish mechanisms and procedures aimed at maintaining capital compatible with the risks incurred by the institution; (iii) determination of the minimum return expected on the capital of Itaú Unibanco as a whole and of its business lines, as well as performance monitoring; (iv) supervision of incentive structures, including compensation, aimed at ensuring their alignment with risk control and value creation objectives; and (v) promotion of the improvement of Itaú Unibanco’s risk culture.

The following members of our board of directors were appointed to our capital and risk management committee: Pedro Luiz Bodin de Moraes (president), Roberto Egydio Setubal, Gustavo Jorge Laboissière Loyola, Demosthenes Madureira de Pinho Neto and Candido Botelho Bracher.

Appointment and Corporate Governance Committee

Our appointment and corporate governance committee is responsible for certain corporate governance matters, such as the selection, appointment and assessment of members of our board of directors and CEO.

In connection with corporate governance matters, the committee: (i) proposes the division among the directors of the fixed aggregate compensation established by the annual shareholders meeting; (ii) recommends changes in the composition of the board of directors and its committees; and (iii) recommends changes to the structure of committees, including the creation and dissolution of committees. Certain functions that used to be responsibility of the appointment and corporate governance committee were transferred to the related parties committee. See “— Related Parties Committee.”

In connection with selection and appointment of members of the board of directors and the CEO, the committee: (i) identifies, analyses and proposes candidates for the board of directors to be presented at the annual shareholders meeting, and determines, if elected, whether the candidate will be deemed an internal (also an officer of the company), external (not an officer of the company) or independent (not elected by the controlling shareholder, among other independence requirements) director; (ii) periodically reviews criteria for defining independent, external and internal directors pursuant to best practice governance principles and applicable regulations, recommends to the board of directors any modifications that may be necessary and re-evaluates the standing of each director in the light of any new independence criteria that may be established; (iii) assesses the functioning of the board of directors; (iv) discusses and makes recommendations on the succession of the chairman of the board of directors; (v) discusses and makes recommendations on the succession of the CEO; and (vi) assists in the identification of directors qualified to fill vacancies on the board committees, including the appointment and corporate governance committee, and is specifically required to provide an opinion with respect to the independence and financial specialization of members of the audit committee.

With respect to the assessment of members of the board of directors and the CEO, the committee: (i) recommends processes for evaluating the board of directors, individual directors, the chairman of the board, the committees and the CEO; and (ii) provides support with respect to evaluation methodology and to the board of directors, individual directors, chairman of the board, committees and CEO.

The following members of our board of directors were appointed to our appointment and corporate governance committee: Pedro Moreira Salles (president), Alfredo Egydio Arruda Villela Filho, Alfredo Egydio Setubal, Henri Penchas, Israel Vainboim and Demosthenes Madureira de Pinho Neto.

Personnel Committee

Since 2009, the personnel committee has been in charge of establishing compensation principles and practices, as well as stock options and overseeing recruiting, training and retaining talented employees. In view of the creation of the compensation committee by our board of directors at a meeting held on February 17, 2011, in response to CMN Resolution No. 3,921, some of the responsibilities of the personnel committee regarding the establishment of the main compensation policies and principles of the Itaú Unibanco Group were transferred to the compensation committee.

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Our personnel committee is responsible for the principal guidelines with respect to the policies relating to personnel, being responsible for the following functions:

With respect to guidelines for employee recruiting and retention: (i) discuss strategies for domestic and international recruiting and mobility of executives; (ii) discuss, monitor and advise the board of officers with respect to the career of the key employees in the Itaú Unibanco Group; (iii) monitor the performance of the key executives of the Itaú Unibanco Group and the results of the trainees program; (iv) monitor the employee appraisal system; (v) provide support in the establishment of executive monitoring and mentoring guidelines; (vi) suggest employee compensation policies to the compensation committee, including various forms of fixed and variable compensation; (vii) advise on the necessary skills and profile for the Itaú Unibanco Group to reach its medium and long-term goals; and (viii) monitor the tendencies in employee hiring among companies in the same sector.

With respect to guidelines for training: (i) discuss the culture, suitability of profile and the needs for training; (ii) monitor the policy for courses and processes for improving skills; and (iii) provide support for the decision-making regarding continued education programs.

Finally, with respect to the stock options plan: (i) oversee our stock options plan and (ii) approve option grants under our stock option plan.

The following members of our board of directors were appointed to our personnel committee: Pedro Moreira Salles (president), Roberto Egydio Setubal, Ricardo Villela Marino and Candido Botelho Bracher.

Compensation Committee

On February 17, 2011, our board of directors created the compensation committee. We are required under Resolution No. 3,921, to establish a compensation committee under the requirements set out in Resolution No. 3,921. Our compensation committee is responsible for all matters regarding compensation of the members of the management and employees of Itaú Unibanco Group as described below.

The Committee is responsible for the following functions: (i) propose to the board of directors the compensation policy for Itaú Unibanco Holding’s management, including the various forms of fixed and variable compensation in addition to special benefits and policies for recruitment and termination; (ii) discuss, examine and supervise the implementation and operation of existing compensation models for Itaú Unibanco and for Itaú BBA (including the treasury unit), and discuss general principles of compensation policy for their employees and recommend any adjustments and improvements to the board of directors; (iii) supervise the implementation and operation of the compensation policy for Itaú Unibanco Holding’s management; (iv) review the compensation policy for Itaú Unibanco Holding’s management on an annual basis, recommending any adjustments or improvements to the board of directors; (v) propose to the board of directors the aggregate compensation for management to be submitted at the annual shareholders meeting; (vi) evaluate and approve the compensation package for the CEO, as well as approve the individual amount of his compensation, including fixed and variable salaries and benefits; (vii) evaluate and approve compensation packages proposed by the CEO for the executive vice presidents of Itaú Unibanco and for the CEO and for the executive vice presidents of Itaú BBA, including fixed and variable compensation components, benefits and long-term incentive compensation, and evaluate the compensation packages of the remaining members of management of the Itaú Unibanco Group; (vii) evaluate future internal and external scenarios and their possible impacts on the compensation policy; (viii) compare the compensation policy of similar companies in order to identify significant discrepancies and propose any necessary adjustments; (ix) ensure that the compensation policy is compatible with the risk management policy, targets and the current and expected financial situation of the Itaú Unibanco Holding and with CMN Resolution No 3,921; and (x) prepare the “Compensation Committee Report” on an annual basis.

See “Item 4B. Business Overview — Regulation and Supervision — Compensation of Directors and Officers of Financial Institutions.”

The following members were appointed to our compensation committee: Pedro Moreira Salles (president), Alfredo Egydio Arruda Villela Filho, Henri Penchas, Israel Vainboim, Pedro Luiz Bodin de Moraes and José Castro Araújo Rudge.

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Related Parties Committee

We created a related parties committee, entirely composed of independent members, to analyze the transactions between related parties in certain circumstances and in accordance with our related party transactions policy (“Related Party Transactions Policy”), to ensure their treatment at arm’s length and transparency and our alignment with best practices in corporate governance.

The following members were elected to our related parties committee: Pedro Luiz Bodin de Moraes, Nildemar Secches and Gustavo Jorge Laboissiere Loyola.

Committees of the Board of Officers

Disclosure and Trading Committee

Our disclosure and trading committee’s main responsibility is to manage our trading and disclosure policies. It covers a range of internal actions in order to improve the flow of information and oversee the ethical conduct of the management and employees in order to: (i) ensure the transparency, quality, equality and accuracy of the information rendered to shareholders, investors, press, government authorities and other capital market entities; (ii) address and implement the criteria established by us so that Itaú Unibanco Holding’s management, shareholders, controllers and employees, as well as third parties that have a relationship with us, may comply with ethical and legal standards in the trading of our securities; (iii) evaluate the guidelines and procedures under our trading policy and guidelines for disclosure of an act or material fact and for maintaining confidentiality of certain information established by our disclosure policy, as well as the prior analysis of the content of announcements to the press; (iv) monitor and regulate compliance by management and other employees of Itaú Unibanco Holding to our policies; and (v) investigate cases of breach of our policies, notifying any infractions to the board of directors.

Our disclosure and trading committee is comprised of our principal investor relations officer and from two to ten persons elected annually among the members of our board of directors, board of officers or controlled companies and specialists in capital markets.

6D. Employees

General

The following table sets forth the number of our employees as of December 31, 2012, 2011 and 2010:

	December 31,
	2012		2011		2010
Employees (on a consolidated basis)		96,977		104,542		108,040
Brazil		90,323		98,258		102,316
Abroad		6,654		6,284		5,724
Argentina		1,651		1,566		1,514
Chile		2,451		2,334		2,043
Uruguay		1,162		1,099		1,071
Paraguay		701		650		517
Europe		261		213		212
Others		428		422		367

Employees from each of our operations segments as of December 31, 2012, 2011 and 2010 are presented in the following table:

	December 31,
	2012		2011		2010
Commercial Banking		91,304		95,534		93,430
Itaú BBA		2,848		3,024		2,387
Consumer Credit		2,781		5,941		12,133
Corporate and Treasury		44		43		90
Total		96,977		104,542		108,040

The number of our employees had reduction by 7.2% from December 31, 2011 to December 31, 2012.

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Since 1986, the banking sector in Brazil has been the target of strikes organized by labor unions, usually during wage negotiations in the third quarter of each year. During a strike, part of the normal activities of our branches suffers from temporary disruptions. During the wage negotiations of 2012, our branches suffered a 9-day strike which resulted in an average closure of 30.0% of our branches during the strike. Despite disruptions to our operations in retail banking and, to a lesser extent, our corporate banking operations, we have not historically suffered significant losses due to strikes.

The FENABAN represents banking institutions as employers and negotiates with the two organizations representing the workers, the National Federation of Financial Industry Workers (Confederação Nacional dos Trabalhadores do Ramo Financeiro or “CONTRAF”), and the National Federation of Credit Industry Workers (Confederação Nacional dos Trabalhadores nas Empresas de Crédito or “CONTEC”). They conduct annual wage negotiations to update salaries, overtime pay levels of banks and other benefits. The negotiation takes place in September of each year. We traditionally set the salary structure of our employees above these levels.

We strive to maintain good relationships with our employees and with the unions that represent them.

Itaú Unibanco Holding, through sponsored enterprises, offers its employees nineteen pension plans administered by six entities, eighteen of which are closed pension funds and one is an open pension fund. The purpose of the plans is to provide a supplement to the Brazilian federal pension benefits. Twelve plans are defined benefit plans, in which the calculation of the retirement benefit is determined by a set formula. Three are defined contribution plans, in which contribution amounts are fixed and the value of the benefit is proportional to the return on investment over time and four are variable contribution plans in which the contribution amounts vary by participant and the amount of the benefit also depends on investment returns over time. New employees can participate in a defined contribution plan managed by Itaú S.A. Life and Pensions.

Our pension plans are managed in accordance with our corporate governance principles designed to ensure that participants receive retirement benefits through the management plan. As required by Brazilian regulatory agencies, actuarial valuations are made by the actuary responsible for each plan every year. During 2012, we made contributions to pension plans at the levels required by actuarial standards. We made contributions to our pension plans of approximately R$42.3 million in 2012.

Training and Development

Personnel development is one of our core values, and we make an effort to train high performance teams engaged and motivated by sustainable development. The Itaú Unibanco Business School, provides continuing education in three areas: business management (knowledge of different business areas), leadership (knowledge management for the development of leaders) and business skills (general knowledge management applications and preparation programs for certification).

6E. Share Ownership

Except for the stock indirectly owned by our controlling shareholders (owned through their participation in IUPAR and Itaúsa), the members of our board of directors and our board of officers, on an individual basis and as a group, beneficially own less than 1.0% of the shares of our common stock and less than 1.0% of the shares of our preferred stock.

Stock Option Plan

We have been issuing stock options as a long-term incentive since 1995, which we believe reinforces the commitment of the members of the management (including directors and officers) and senior employees of Itaú Unibanco Holding and its controlled companies to our medium and long-term development. We believe that this will allow them to benefit from additional value that their work created for Itaú Unibanco Group and our stock option plan is designed to attract and retain the services of highly qualified management and employees.

Our stock option plan is governed by the personnel committee, whose members are appointed by our board of directors. The personnel committee designates the beneficiaries to whom stock options are granted under our stock option plan. Our board of directors has the power to modify the decisions taken by the personnel committee in their first meeting after the date the options are granted. If not modified, the option grants are confirmed. The personnel committee may only grant options if our profits are sufficient to permit the distribution of the mandatory dividend in accordance with Brazilian Corporate Law and the amount of options granted in any given year may not exceed 0.5% of our total shares at the end of the relevant fiscal year. If in a specific fiscal year, the amount of stock options granted during such year is below the 0.5% maximum limit of the total number of shares, the difference may be added to options granted in any one of seven subsequent fiscal years.

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The options have an exercise period of between five and ten years from the date of their issuance and they may only be exercised after a vesting period determined by the personnel committee, that varies from one to seven years from the date of issuance of the options.

The exercise price of an option is determined by the personnel committee when the option is granted and can be restated up to the month prior to the exercise of the option. To determine the exercise price, the personnel committee considers the average prices of our preferred shares at BM&FBovespa during the last three months prior to the issuance of the option and an adjustment of up to 20.0% more or less than the average price is permitted.

In addition, we have a mechanism for granting options to beneficiaries who are considered to have outstanding performance and potential, measured through the use of performance and leadership evaluation tools, which we refer to as partner options. The personnel committee may grant options for which the strike price is paid through the obligation of the beneficiary to invest up to 20.0% of the portion of the person’s bonus that is tied to profits and results in shares of Itaú Unibanco Holding. The beneficiaries to whom these options are granted must keep ownership of the shares unaltered and with no encumbrances of any nature from the date the option is granted until the exercise of the option. This mechanism was expanded at the general extraordinary meeting held on April 26, 2010 in order to (i) permit a portion or the full net amount of the bonus to be invested in shares; and (ii) allow the personnel committee to impose additional conditions on the exercise of the options.

The general extraordinary meeting of shareholders held on April 26, 2010, established that the shares which the beneficiaries receive through the exercise of options may be subject to additional restrictions in accordance with resolutions adopted by the personnel committee such as minimum holding periods.

On April 25, 2011, our shareholders approved modifications to our stock option plan in order to (i) adjust the rule for termination of the beneficiary holding options; (ii) adjust the term for defining the price of simple options; and (iii) expressly provide that the beneficiaries, upon investing their bonuses in the stock option program and thereby receiving bonus options, may acquire stock directly from our treasury.

On April 19, 2013, our shareholders approved modifications to our stock option plan in order to (i) improve clarity and objectivity; (ii) establish new mechanisms for granting options to the beneficiaries who reside outside of Brazil; (iii) consolidate rules governing termination of options in the event of an option-holder’s death; and (iv) amend the rule on a holder’s right to retain options in the event of retirement.

Finally, our shareholders approved the assumption, by the Company, of the rights and obligations set forth in currently effective agreements entered into with beneficiaries of Redecard S.A.’s stock option plan, including responsibilities for the granting of options under such plan.

See note 22 of our consolidated financial statements, for additional information on our stock option plan and the issuance of options.

As of December 31, 2012, we had 73,514,461 options to be exercised by our directors, officers and employees, comprising 633 beneficiaries of simple options (including Itaú Unibanco Holding and the original Unibanco and Unibanco Holdings stock option plans) and 220 beneficiaries of partner options (including Itaú Unibanco Holding and Unibanco and Unibanco Holdings original stock option plans).

In 2012, 13,745,475 options were granted under our stock option plan. The granting dates were January 13, February 24, April 27 and June 14, 2012.

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ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7A. Major Shareholders

In accordance with our bylaws, our capital stock is divided into two classes of shares: common shares (ações ordinárias) and preferred shares (ações preferenciais). Each common share entitles its holder to one vote at meetings of our shareholders, and there are no differences in the voting rights conferred by each of our common shares. Our preferred shares are non-voting.

The following table sets forth certain information as of March 31, 2013, with respect to any person known to us to be the beneficial owner of more than 5.0% of our outstanding common or preferred shares:

	Common Shares					Preferred Shares					Total
	Total Number of Shares		% of Total			Total Number of Shares		% of Total			Total Number of Shares		% of Total
IUPAR – Itaú Unibanco Participacões S.A.		1,167,536,100		51.00	%		–		0.00	%		1,167,536,100		25.54	%
Itaúsa – Investimentos Itaú S.A.		885,142,900		38.66	%		77,100		0.00	%		885,220,000		19.37	%
Blackrock (1)		0		0.00	%		159,335,737		6.98	%		159,335,737		3.49	%
Others		236,605,300		10.34	%		2,069,903,034		90.73	%		2,306,508,334		50.46	%
Subtotal		2,289,284,300		100.00	%		2,229,315,871		97.71	%		4,518,600,171		98.86	%
Treasury stock(2)		2,100		0.00	%		47,818,173		2.10	%		47,820,273		1.05	%
Total		2,289,286,400		100.00	%		2,281,649,700		100.00	%		4,570,936,100		100.00	%

(1) Share ownership information provided by shareholder.

(2) Does not include Itaú Unibanco shares held by Itaubanco defined contribution plan in excess of the individual accounts of participants in the amount of 1,500,000 common shares.

On April 19, 2013, our shareholders approved an increase in our capital stock of R$15.0 billion, from R$45.0 billion to R$60.0 billion, through the capitalization of certain statutory revenue reserves, subject to approval by the Central Bank. This capital increase will be effected by the issuance of 457,093,610 new book entry shares with no par value, 228,928,640 of which will be common shares and 228,164,970 of which will be preferred shares. Such shares will be granted to shareholders in the form of bonus shares, free of charge, in the proportion of one new share for every ten shares of the same class held. Shares held as treasury stock will be entitled to receive bonus shares in the same proportion. There has been no change to our dividend policy as a consequence of this capital increase.

Itaú Unibanco Holding is a financial holding company controlled by IUPAR, a holding company jointly controlled by (i) Itaúsa, a holding company controlled by members of the Egydio de Souza Aranha family; and (ii) E. Johnston, a holding company controlled by the former controlling shareholders of Unibanco, the Moreira Salles family. Itaúsa also directly owned 38.7% of the shares of our common stock as of March 31, 2013. Four of our directors, Alfredo Egydio Arruda Villela Filho, Alfredo Egydio Setubal, Ricardo Villela Marino and Roberto Egydio Setubal, are members of the Egydio de Souza Aranha family and one of our directors, Pedro Moreira Salles, is a member of the Moreira Salles family.

In accordance with Article 12 of CVM Rule No.358, BlackRock, Inc. informed us on March 30, 2011 that it owned preferred shares representing approximately 7% of the issued preferred shares of Itaú Unibanco Holding for investment purposes only.

The table below contains information regarding our shares and American Depository Shares (“ADS”) according to our internal share record as of March 31, 2013:

	Number
	of Shares
Common shares		2,289,286,400
Preferred shares		2,281,649,700
Preferred shares represented by ADS		845,319,248
Total		5,416,255,348

Shareholders’ Agreement

Itaúsa and E. Johnston

Itaúsa, a holding company controlled by the Egydio de Souza Aranha family, and E. Johnston, a holding company controlled by the Moreira Salles family, have a shareholders’ agreement that governs their relationship regarding IUPAR, Itaú Unibanco Holding and its subsidiaries. Its main provisions are described below.

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Corporate Governance

The board of directors of IUPAR is composed of four members: two appointed by Itaúsa and two by E. Johnston, and its board of officers is composed of four officers: two appointed by Itaúsa and two by E. Johnston. The board of directors of Itaú Unibanco Holding is composed of up to fourteen members, out of which six are jointly appointed by Itaúsa and E. Johnston.

Lock-up Period, Right of First Refusal and Tag-Along Rights

The shares issued by IUPAR may not be transferred by its shareholders to third parties until November 3, 2018. After this period, in case one of the parties decides to transfer shares of IUPAR, the other party may choose to (i) exercise its right of first refusal to acquire the shares; (ii) exercise its tag-along right, in the exact same terms and conditions; or (iii) waive both its rights of first refusal and tag-along. Itaúsa may freely transfer the shares issued by Itaú Unibanco Holding that are directly owned by it. In case the parties decide to jointly transfer the totality of their shares issued by IUPAR, Itaúsa may exercise its tag-along right in order to include all or part of the shares issued by Itaú Unibanco Holding that are directly owned by Itaúsa.

Term

The shareholders’ agreement is in effect for a period of twenty years from January 27, 2009, and may be automatically renewed for successive periods of ten years, unless otherwise terminated upon one year’s prior written notice by any of the shareholders.

7B. Related Party Transactions

Transactions between related parties are carried out at amounts, terms and average rates in accordance with normal market practices during the period, as well as under reciprocal conditions. See note 35 to our consolidated financial statements.

The granting of credit to our officers, directors or affiliates is subject to restrictions under Brazilian law. Under Brazilian law, financial institutions may not grant loans, advances or guarantees to:

· any individual, or the immediate family members of such individual, or entity that controls the financial institution or any entity under common control with the financial institution;

· any officer, director or member of the fiscal council of the financial institution, or the immediate family members of such individual, or entity in which such individual directly or indirectly holds more than 10.0% of the capital stock;

· any entity controlled by the financial institution; or

· any entity in which the financial institution directly or indirectly holds more than 10.0% of the capital stock or which directly or indirectly holds more than 10.0% of the financial institution’s capital stock.

As of the date hereof, we believe that we are in compliance with the restrictions under Brazilian law. Brazilian law does not limit our ability to enter into transactions in the interbank market with our affiliates that are financial institutions. See “Item 4B. Business Overview – Regulation and Supervision.”

On October 22, 2012, our board of directors approved a Related Party Transactions Policy. The definition of related party is provided in our Related Party Transactions Policy, and includes controlling shareholders of, and entities controlled by or under common control with, Itaú Unibanco Holding, as well as directors and officers of these entities, certain family members of such individuals and any entities controlled directly or indirectly by them. Our Related Party Transactions Policy provides that any transaction involving related parties must be carried out at arm’s length, comply with all practices put in place by Itaú Unibanco Holdings’ management (such as the guidelines provided in our Code of Ethics), be executed in writing, and be clearly disclosed in Itaú Unibanco Holding’s financial statements according to the materiality criteria provided by accounting standards.

Any related party transaction or series of transactions within a one-year period that exceeds R$1 million, defined as a “Significant Amount” (except those exclusively involving entities wholly owned, directly or indirectly, by Itaú Unibanco Holding), is analyzed by our ethics and ombudsman department and submitted to our board of directors on a quarterly basis. Any related party transaction or series of transactions within a one-year period that exceeds 0.1% of our total assets and liabilities, defined as a “Relevant Amount” (except those exclusively involving entities wholly owned, directly or indirectly, by Itaú Unibanco Holding), must be approved in advance by an ad hoc committee formed by two independent members of our board of directors and one member of our audit committee, and subsequently submitted to approval by our board of directors.

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Transactions between companies included in the consolidation were eliminated in the consolidated financial statements and take into consideration the absence of risk. See note 2.4a to our consolidated financial statements.

Unconsolidated related parties are the following:

· IUPAR and Itaúsa, parent companies of Itaú Unibanco Holding.

· 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 our 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 Holding and subsidiaries to act in their respective areas of interest.

· Investments in unconsolidated companies – Porto Seguro Itaú Unibanco Participações S.A., BSF Holding S.A. and SERASA S.A.. See note 13 to our consolidated financial statements.

Additionally, there are transactions with entities under joint control, particularly Banco Investcred Unibanco S.A., Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento, Luizacred S.A. Soc. Créd. Financiamento Investimento, FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento, FIC Promotora de Vendas Ltda. and Ponto Frio Leasing S.A. Arrendamento Mercantil. See note 3(b) to our consolidated financial statements.

The transactions with these related parties are mainly as follows:

· interbank deposits, which are investments in other financial institutions;

· deposits, which are funds received as deposits from other entities;

· securities sold under repurchase agreements, which are funds received from security repurchase agreements for financial treasury bills, national treasury bills, national treasury notes, government securities abroad, Eurobonds, bank deposit certificates, debentures, swaps forwards, options and future contracts;

· amounts receivable from (payable to) related parties, which arise from custody fees and risk management fees;

· banking service fees (expenses), which arise from affiliate portfolio management fees, custody fees, risk management fees and social security and investment management fees;

· rental revenues (expenses), which consist of rent for space used by not-for profit entities sponsored by us;

· donation expenses, which consist of donations for investment in projects of not-for profit entities sponsored by us; and

· data processing expenses, which consist of expenses for processing services, including expert technical assistance and maintenance of equipment, provided by Itautec.

For more details on transactions with related parties see note 35 to our consolidated financial statements.

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In addition, Itaú Unibanco Holding has made regular donations to Fundação Itaú Social, a charitable foundation whose objectives are:

· to create the “Programa Itaú Social,” aimed at coordinating activities of interest to the community, supporting and developing social, scientific and cultural projects, mainly in the areas of education and health;

· to support ongoing projects or initiatives, sustained or sponsored by entities qualified under the “Programa Itaú Social,” and

· to act as a supplier of ancillary services to companies of the group.

Itaú Unibanco Holding is the founding partner and sponsor of the Instituto Itaú Cultural – IIC, an entity whose purpose is the promotion and preservation of the Brazilian cultural heritage.

The donations to Instituto Itaú Cultural and services rendered by other entities such as:

· Fundação Itaubanco, Funbep — Fundo de Pensão Multipatrocinado, Fundação Bemgeprev, UBB PREV — Previdência Complementar, and Fundação Manoel Baptista da Silva de Seguridade Social, closed-end private pension entities, that administer supplementary retirement plans sponsored by Itaú Unibanco Holding and its subsidiaries; and

· Instituto Itaú Cultural, Instituto Unibanco de Cinema and Associação Clube “A,” not-for-profit entities sponsored by Itaú Unibanco Holding and its subsidiaries.

In addition to the aforementioned transactions, Itaú Unibanco and non-consolidated entities are parties to an agreement for apportionment of common costs, pursuant to which such subsidiaries pay Itaú Unibanco for certain shared structures provided by Itaú Unibanco. In connection with such agreement, the non-consolidated entities paid Itaú Unibanco R$8.0 million, R$8.0 million and R$16.6 million in 2012, 2011 and 2010, respectively.

7C. Interests of Experts and Counsel

Not applicable.

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ITEM 8 FINANCIAL INFORMATION

8A. Consolidated Financial Statements and Other Financial Information

The information included in “Item 18. Financial Statements” of this annual report is referred to and incorporated by reference into this Item 8A.

Litigation

Overview

We are party to numerous lawsuits and administrative proceedings that arise during the normal course of our business. We are routinely involved in consumer complaints filed with SUSEP and the Central Bank, which do not constitute administrative proceedings. We are not defendants in any material administrative proceeding with the CVM, SUSEP, the Central Bank or any municipalities.

Our financial statements only include reserves for probable losses that can be reasonably estimated and expenses that we may incur in connection with pending litigation or administrative proceedings, or as otherwise required by Brazilian law. As of December 31, 2012, our provisions for such contingencies were R$19,209 million, of which R$10,433 million are related to tax contingencies, R$4,852 million are related to labor contingencies, R$3,732 million are related to civil contingencies and R$192 million to other contingencies. See note 32 to our consolidated financial statements. Our management believes that our provisions, including interest, for legal proceedings in which we are defendants are sufficient to cover probable losses that can be reasonably estimated in the event of unfavorable court decisions. It is currently not possible to estimate the amount of all potential costs that we may incur or penalties that may be imposed on us other than those amounts for which we have reserves. We believe that any potential liabilities related to these lawsuits and administrative proceedings will not have a material adverse effect on our financial condition or results. There are no material proceedings in which any of our directors, any member of our senior management or any of our affiliates is either a party adverse to us or to our subsidiaries or has a material interest adverse to us or our subsidiaries.

Civil Litigation

Litigation Arising from Government Monetary Stabilization Plans

From 1986 to 1994, the Brazilian federal government implemented several consecutive monetary stabilization plans to combat hyper-inflation. In order to implement these plans, the Brazilian federal government enacted several laws based on its power to regulate the monetary and financial systems as granted by the Brazilian federal constitution.

Holders of savings accounts during the periods when the monetary stabilization plans were implemented have challenged the constitutionality of the laws that implemented those plans, claiming from the banks where they held their savings accounts additional amounts of interest based on the inflation rates applied to savings accounts under the monetary stabilization plans.

We are defendants in numerous standardized lawsuits filed by individuals in respect of the monetary stabilization plans. We record provisions for such claims upon receipt of summons to present a defense.

In addition, we are defendants in class actions, similar to the lawsuits by individuals, filed by either (i) consumer protection associations or (ii) public attorneys’ office (Ministério Público) on behalf of holders of savings accounts. Holders of savings accounts may collect any amount due based on such a decision. We record provisions when individual plaintiffs apply to enforce such decisions, using the same criteria used to determine provisions for individual lawsuits.

The Federal Supreme Court (Supremo Tribunal Federal) has issued some decisions in favor of the holders of savings accounts, but has not issued a final ruling with respect to the constitutionality of the monetary stabilization plans as applicable to savings accounts. In relation to a similar dispute with respect to the constitutionality of monetary stabilization plans as applicable to time deposits and other private agreements the Federal Supreme Court has decided that the laws were in accordance with the federal constitution. Due to this contradiction, the Confederação Nacional do Sistema Financeiro (“Consif”), an association of Brazilian financial institutions, filed a special proceeding with the Federal Supreme Court (Arguição de Descumprimento de Preceito Fundamental nº 165), in which the Central Bank has filed an amicus brief, arguing that holders of savings accounts did not incur actual damages and that the monetary stabilization plans as applicable to savings accounts were in accordance with the federal constitution.

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Other Civil Litigation

In addition to litigation arising from government monetary stabilization plans, we are defendants in numerous civil lawsuits arising from the normal course of our business. We are not able to currently predict the total amounts involved in these claims, due to the nature of the matters disputed. However, we believe that any potential liabilities related to these lawsuits will not have a material adverse effect on our financial condition or results.

As of December 31, 2012, our total amount of provisions related to civil litigation, including the monetary stabilization plans, was R$3,732 million.

Tax Litigation

We have certain tax disputes that arise from our ordinary business activities, mainly relating to the constitutionality or legality of certain taxes imposed on us. Contingent liabilities arising from tax disputes are computed according to the principal amount of taxes in dispute, subject to tax assessment notices, plus interest and, if applicable, penalties and other administrative charges.

A provision for such contingent liability is established if it involves a legal tax obligation, regardless of the probability of winning or losing the dispute. A legal tax obligation exists if the gain or loss of the related litigation depends directly on the determination that a currently enforceable law is or not unconstitutional. In any other situation, a provision is recognized if a loss is probable (prevailing in the litigation is less likely than a loss).

As of December, 31, 2012, our total amount of provisions related to taxes was R$10,433 million. See note 32 to our consolidated financial statements, for details regarding the changes in the provisions and respective escrow deposits for tax and social security lawsuits.

The main types of tax disputes for which we have recognized provisions are as follows (the terms “PIS”, “COFINS”, “CSLL”, “IRPJ” and “ISS” are described in “Item 4B. Business Overview — Regulation and Supervision — Taxation”):

· PIS and COFINS: we claim those taxes should be levied on the revenue arising from sales of goods and services, instead of the total gross revenue.

· CSLL: we claim that this tax should be levied at the regular rate of 9.0%, instead of the increased CSLL rate for financial and insurance companies of 15.0%, which we believe unconstitutional.

· IRPJ and CSLL: we claim that these taxes should be applied on profits earned abroad and argue the non-applicability of Normative Instruction of Federal Revenue Services (SRF) No. 213-02 to the extent it exceeds the legal text.

· PIS: we claim that the effectiveness of Constitutional Amendments No. 10 and 17 should not apply retroactively to tax periods prior to its effectiveness, during which the tax provisions of preceding Supplementary Law No. 07 should apply.

No provision is recognized in relation to tax litigation where prevailing is more likely than losing. The total actual estimated risk in such litigation is R$8,395 million, which reflects the amount under dispute where a loss is possible. The main types of such tax disputes are detailed below:

· INSS: we defend and claim that non-wage benefits, such as profit sharing, transportation voucher and one-time bonuses, are not subject to social security taxes.

· IRPJ, CSLL, PIS and COFINS: we claim certain tax credits that we have offset against other tax liabilities, which have not been recognized by tax authorities.

· IRPJ, CSLL: we defend the deductibility of interest on capital declared to shareholders based on the TJLP levied on the shareholders interest on capital for the year and for prior years.

· IRPJ, CSLL: we defend that losses and discounts on receipt of credits are necessary operating expenses and therefore losses are deductible from loan operations and discounts are deductible upon their renegotiation and recovery.

· ISS: we defend that certain banking transactions do not generate service fees or income, but rather only interest and commissions, and that certain revenues are not listed under the law and are therefore not subject to the ISS tax.

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· IRPJ, CSLL: we defend the deductibility of the amortization of goodwill generated by virtue of certain mergers and acquisitions.

· IRPJ, CSLL: we defend the application of the standard Brazilian tax (taxable income) and the unavailability of profits with the mere transfer of capital invested between the Itaú Unibanco Holding subsidiaries.

In addition, we participated in the Program for Cash or Installment Payment of Federal Taxes established by Law No. 11,941, enacted on May 27, 2009, which allowed litigating taxpayers who agreed to discontinue the litigation to pay only the principal amount under dispute without penalties and interest applicable to such amounts. Under this program, we paid part of the disputed amounts in our litigation regarding PIS and COFINS based on total gross revenue as set forth by paragraph 1 of Article 3 of Law No. 9,718, enacted on November 27, 1998, and recognized them under Legal Tax Liability.

A portion of the payments will be paid in installments and are pending the consolidation of related debt by the tax authorities. They are no longer considered to be a provision for a contingency and, therefore, such amounts have been transferred to tax and social securities contributions liability.

Labor Litigation

Labor unions and former employees file lawsuits against us seeking compensation for alleged violations of their labor contract or related statutory rights. As of December 31, 2012, there were approximately 50,500 labor claims filed against us. Individual labor lawsuits against us are primarily related to overtime pay and salary parity. Collective labor lawsuits against us are primarily related to maintenance of healthcare plans, security rules, strikes and salary differences resulting from monetary stabilization plans implemented by the Brazilian federal government. We are also defendants in labor lawsuits filed by the Brazilian Public Labor Prosecutor Office related to union classification, outsourcing, occupational disease, health and safety, determination of working days, and compliance with minimum share of disabled personnel. For the fiscal year ended December 31, 2012, we paid approximately R$916 million in settlements with former employees and judgments imposed by the labor courts.

Dividend Policy and Dividends

General

Brazilian Corporate Law generally requires that the bylaws of each Brazilian corporation specify a minimum percentage of the distributable profit of the corporation (adjusted net profit, as defined in Article 202 of Brazilian Corporate Law), comprising normal dividends and interest on stockholders’ equity, that must be distributed to the shareholders as described below. Under our bylaws, we are required to distribute to our shareholders each fiscal year an amount equal to not less than 25.0% of our adjusted net profit. This is referred to as the mandatory dividend. Under Brazilian Corporate Law, the mandatory dividend may be paid in the form of normal dividends or in the form of interest on stockholders’ equity. Our board of directors may also declare the payment of interim dividends from retained earnings and profit reserves. Any payment of interim dividends or payment of interest on stockholders’ equity will be netted against the amount of the mandatory dividend for that fiscal year. In addition, under our bylaws, each preferred share is entitled to a priority minimum annual dividend of R$0.022, which amount is reduced from the mandatory dividend payable.

The principal difference between dividends and interest on stockholders’ equity is their tax treatment. For tax purposes, interest on stockholders’ equity is limited to the daily average of the TJLP as determined by the Central Bank, over the taxable year, and cannot exceed the greater of (i) 50.0% of adjusted net profit for the period in respect of which the payment is made (after the deduction of CSLL, but before taking into account the amount of such interest on stockholders’ equity and the provision for IRPJ, as described in “Item 4B. Business Overview — Regulation and Supervision — Taxation”); and (ii) 50.0% of the sum of retained earnings and profit reserves. Any payment of interest on stockholders’ equity to holders of preferred shares, whether Brazilian residents or not, including holders of ADSs, is subject to Brazilian withholding tax at the rate of 15.0%, or 25.0% if the shareholder is a resident or domiciled in a tax haven jurisdiction or a privileged tax regime, pursuant to Normative Ruling No. 1,037 of June 4, 2010, as amended. The amount paid to shareholders as interest on stockholders’ equity, net of any withholding tax, may be included as part of the mandatory dividend. In such cases, we are required to distribute to shareholders an amount sufficient to ensure that the net amount received by shareholders, after the payment by us of applicable withholding taxes in respect of the distribution of interest on stockholders’ equity, is at least equal to the mandatory dividend. See “Item 4B. Business Overview — Regulation and Supervision — Taxation —Corporate Income Tax and Social Contribution on Profits”.

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Under Brazilian Corporate Law, a company is allowed to suspend payment of the mandatory dividend in respect of common shares and preferred shares if management reports to shareholders at a meeting that the distribution would be incompatible with the financial circumstances of the company and the shareholders ratify this decision at a meeting. In this case, the fiscal council must prepare and issue an opinion about the report of management and management must provide an explanation to the CVM within five days of the shareholders’ meeting, justifying the decision. The distributable amount that was not distributed will be recorded as a special reserve and, if not absorbed by losses in subsequent fiscal years, should be paid as dividends as soon as the company’s financial situation permits.

On February 28, 2013, the Brazilian government enacted Provisional Measure No. 608, which establishes that the payment of dividends and interest on stockholders’ equity by financial institutions to their shareholders is subject to the compliance with regulation issued by the CMN. The measure is part of recent developments to implement Basel III liquidity requirements. On March 1, 2013, CMN issued Resolution No 4,193, which provides that non-payment of dividends may occur if financial institutions fail to comply with the additional capital requirements, which will be required beginning on January 1, 2016 and gradually increased until 2019. For more information, see “Item 4B. Business Overview — Regulation and Supervision — Capital Adequacy and Leverage/Regulatory Capital Requirements — Implementation of Basel III in Brazil”.

Such restriction on the payment of dividends will apply progressively, according to the extent of the non-compliance with additional capital requirements. In case the additional capital provided by a financial institution is less than 25.0% of that established by the CMN for that year, no dividends or interest on stockholders’ equity may be distributed. If the additional capital is greater than 25.0% and less than 50.0% of that required, 80.0% of the intended dividends and interest on stockholders’ equity may not be distributed. If the additional capital is greater than 50.0% and less than 75.0% of that required, 60.0% of the intended dividends and interest on stockholders’ equity may not be distributed. If the additional capital is greater than 75.0% and less than 100.0% of that required, 40.0% of the intended dividends and interest on stockholders’ equity may not be distributed.

Payment of Dividends

We are required to hold an annual shareholders’ meeting by no later than April 30 of each year at which the annual dividend may be declared or ratified. Additionally, interim dividends may be declared by our board of directors. According to Brazilian Corporate Law, the payment of dividends must occur prior to the end of the fiscal year in which the dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends in respect of its shares, after which we have no liability for that payment. Shareholders who do not reside in Brazil must generally register with the Central Bank to have dividends and interest on stockholders’ equity, sales proceeds or other amounts with respect to their shares eligible to be remitted in foreign currency outside of Brazil.

The preferred shares underlying the ADSs are held in Brazil by the custodian (as agent for the depositary), which is the registered owner on the records of the registrar of our preferred shares. The registrar is The Bank of New York Mellon. Payments of cash dividends and cash distributions, if any, on preferred shares underlying the ADSs will be made in Brazilian currency to the custodian or to the depositary, which will then convert or cause to be converted as promptly as practicable those proceeds into U.S. dollars. The custodian or the depositary will deliver the converted proceeds to the holders of our ADSs, in proportion to the number of ADSs representing the preferred shares held by holders; provided, however, that in the event that we, the custodian or the depositary are required to withhold from cash dividend or other cash distribution an amount of taxes or other governmental charges, the amount distributed to the holder of the ADSs shall be reduced accordingly.

Dividend Policy

We currently pay dividends and interest on stockholders’ equity equal to the mandatory dividend, subject to any determination by our board of directors that such distribution would be inadvisable in view of our financial condition and provided that our board of directors determines to pay solely the minimum, non-cumulative preferred dividend in respect of the preferred shares. We currently intend to pay a fixed amount of dividends monthly, which is equal to R$0.015 per share. At the end of a fiscal year, we intend to pay any difference between this monthly dividend and our minimum annual dividend of R$0.022 per share.

The record date in Brazil for the monthly payment is the last business day of the preceding month and in the United States the record date is three business days after the Brazilian record date. The payment of the dividend is the first business day of the following month.

On February 9, 2011, our disclosure and trading committee approved a formal policy regarding dividends and interest on stockholders’ equity, as described above.

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History of Dividend Payments

The following table sets forth the dividends and interest on stockholders’ equity paid to or declared for holders of our common shares and preferred shares since 2010.

	Dividend
	Amount		Per Share
Year	(In millions of R$)		(R$)
2012		5,177		1.145
2011		5,054		1.12
2010		4,484		0.99

On February 4, 2013, our board of directors declared interest on equity in the amount of R$0.3824 per share (or R$0.3250 per share, net of taxes) and authorized payment of interest on equity declared on November 29, 2012 in the amount of R$0.3120 per share (or R$0.2652, net of taxes). All such amounts were paid on March 14, 2013. The ex-dividend date is March 14, 2013 and December 21, 2012, respectively.

8B. Significant Changes

We are not aware of any significant changes bearing on the financial condition since the date of the consolidated financial statements included in this annual report.

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ITEM 9 THE OFFER AND LISTING

9A. Offer and Listing Details

Our preferred shares trade on the NYSE, under the symbol “ITUB” in the form of ADSs. We listed our ADSs on the NYSE and became a U.S. registered company on February 21, 2002 and have since that time complied with NYSE requirements, as well as with those of the SEC, which include disclosure of financial statements in IFRS since 2011, and compliance with U.S. legislative requirements, including the 2002 Sarbanes-Oxley Act. Each ADS represents one preferred share. The ADSs are evidenced by American Depository Receipts (“ADRs”), issued by The Bank of New York Mellon, as depositary, under a Deposit Agreement, dated as of May 31, 2001, as amended and restated as of February 20, 2002 and as of March 30, 2009, effective as of April 3, 2009, among us, the depositary and the owners and beneficial owners of ADSs from time to time.

We are a publicly held company with shares traded on the market since our founding in 1943. In 1944 we registered with the BM&FBOVESPA, which is the principal trading market for our preferred shares and common shares. Our shares trade on the BM&FBOVESPA under the symbol “ITUB4” for the preferred shares without par value and “ITUB3” for the common shares without par value.

As of December 31, 2012, there were an aggregate of 2,281,649,700 preferred shares issued, including 52,554,239 held as treasury shares, and 2,289,286,400 common shares issued, including 2,100 held as treasury shares. As of December 31, 2012, 8,886,344 common shares and 1,397,000,259 preferred shares were held by non-Brazilian investors (calculated based on the investors’ addresses indicated in our records related to the shares that are in our custody), representing 0.39% and 61.2%, respectively, of the total of each class outstanding.

We have registered one class of ADSs under a registration statement on Form F-6 pursuant to the Securities Act. As a result of a stock split effected on October 3, 2005, one ADS came to represent one preferred share without par value. As of December 31, 2012, there were approximately 856.5 million ADSs outstanding, representing approximately 37.5% of the preferred shares. All of the ADSs were registered in the name of The Depository Trust Company and The Bank of New York Mellon. As of December 31, 2012, there were 82 registered holders of ADSs.

We also trade our preferred shares in the form of Argentine Certificates of Deposits (Certificados de Depósitos Argentinos or “CEDEARs”), on the Argentine Stock Exchange (Bolsa de Comércio de Buenos Aires or “BCBA”). Currently, one CEDEAR represents one preferred share without par value. As of December 31, 2012, there were approximately 5,141,300 CEDEARs outstanding.

On April 19, 2013, our shareholders approved an increase in our capital stock of R$15.0 billion, from R$45.0 billion to R$60.0 billion, through the capitalization of certain statutory revenue reserves, subject to approval by the Central Bank. This capital increase would be effected by the issuance of 457,093,610 new book entry shares with no par value, 228,928,640 of which will be common shares and 228,164,970 of which will be preferred shares, granted to shareholders in the form of bonus shares, free of charge, in the proportion of one new share for every ten shares of the same class held. Shares held as treasury stock will be entitled to receive bonus shares in the same proportion. Determination of the record date for shareholders entitled to receive bonus shares will be made following approval of the issuance by the Central Bank.

The following tables set forth, for the periods indicated, the reported high and low sales prices for our preferred shares on the BM&FBOVESPA, in reais and U.S. dollars at the selling rate for the sale of U.S. dollars at the last day of each respective period. See “Item 3A. Selected Financial Data — Exchange Rates” for information with respect to exchange rates applicable during the periods set forth below. All information takes into account retroactively the effect of certain bonus shares. See “Item 3A. Selected Financial Data — IFRS Selected Financial Data.”

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	R$ per				US$ per
	Preferred Share				Preferred Share
Calendar Period	High		Low		High		Low
2008		38.09		15.37		23.07		6.65
2009		40.63		18.47		23.44		7.63
2010		43.72		31.03		25.90		16.50
2011		40.65		25.15		24.45		14.36
2012		38.94		26.73		22.02		12.88
2011
1st quarter		40.65		34.17		24.32		20.37
2nd quarter		39.47		34.00		24.45		20.81
3rd quarter		36.89		25.15		23.68		14.36
4th quarter		34.97		27.51		19.92		14.59
2012
1st quarter		38.94		33.50		22.02		17.93
2nd quarter		35.58		26.73		19.47		12.88
3rd quarter		35.60		27.55		17.68		13.46
4th quarter		34.47		28.19		16.64		13.90
Share prices for the most recent six months are as follows:
September 2012		35.60		30.41		17.68		14.98
October 2012		31.45		28.19		15.52		13.90
November 2012		32.54		29.47		15.47		14.34
December 2012		34.47		32.20		16.64		15.30
January 2013		36.28		33.80		17.74		16.61
February 2013		35.73		32.91		18.16		16.63
March 2013		37.03		34.57		18.94		17.17
April 2013(1)		36.08		32.30		17.96		16.08

Source: Economática System

⁽¹⁾ Until April 19, 2013.

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The following table sets forth, for the period indicated, the high and low sales prices in U.S. dollars for the ADS in the over the counter market and NYSE during the period indicated.

	US$ per ADS
Calendar Period	High		Low
2008		23.53		6.09
2009		23.95		7.55
2010		26.30		16.33
2011		24.77		14.47
2012		22.00		12.84
2011
1st quarter		24.77		20.61
2nd quarter		24.72		20.93
3rd quarter		23.85		14.47
4th quarter		20.09		14.52
2012
1st quarter		22.00		18.51
2nd quarter		19.50		12.84
3rd quarter		17.83		13.44
4th quarter		16.57		13.93
Share prices for the most recent six months are as follows:
September 2012		17.83		15.04
October 2012		15.58		13.93
November 2012		16.25		14.20
December 2012		16.57		15.21
January 2013		17.80		16.71
February 2013		18.11		16.63
March 2013		19.07		17.13
April 2013(1)		17.99		16.09

Souce: Economática System

⁽¹⁾ Until April 19, 2013.

9B. Plan of Distribution

Not applicable.

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9C.  Markets

The main market in which our preferred shares and common shares are traded is the Bovespa Segment of BM&FBOVESPA, the Brazilian Securities, Commodities and Futures Exchange, the second largest exchange by market capitalization in the Americas and the largest exchange by market capitalization in Latin America.

Currently, BM&FBOVESPA is the only Brazilian exchange operator and manager of organized securities and derivatives markets (the Bovespa Segment and BM&F Segment, respectively) and provides registration, clearing and settlement services for transactions carried out on its trading platforms, acting as central counterparty to ensure multilateral clearing and settlement. BM&FBOVESPA adopts an integrated business model, encompassing the entire chain of trading, clearing and settlement, risk management, central counterparty, central securities depository and custody services, through integrated, fully-electronic systems. Furthermore, BM&FBOVESPA operates four clearing houses (equities, derivatives, bonds and foreign exchange), a securities lending facility, safeguard mechanisms and, through BM&FBovespa Market Surveillance (BM&FBovespa Supervisão de Mercados, or “BSM”), a mutual entity and self-regulatory organization in which it holds a material membership interest, is in charge of overseeing activities by market participants and all trading, clearing and settlement transactions performed within the markets it manages.

In order to better control volatility of the Bovespa Index (IBOVESPA), BM&FBOVESPA has adopted a “circuit breaker” system pursuant to which the trading sessions may be suspended for a period of time if IBOVESPA falls below a predetermined limit (such limit is determined according to the historic volatility of the index). The circuit breaker is activated based on IBOVESPA’s value on the previous day and the trading sessions may be suspended (i) for thirty minutes, in case IBOVESPA drops 10%, (ii) for one additional hour, if IBOVESPA drops another 5% after reopening (15% total drop), or (iii) for a period of time to be determined by BM&FBOVESPA, if IBOVESPA drops another 5% after the second reopening (20% total drop).

We also issued CEDEARs, which represent shares of non-Argentine companies that are traded in Argentina. Our CEDEARs represent preferred shares on a one-for-one basis and are traded on BCBA, which is a private non-profit and self-regulated association. BCBA is responsible for the registration of trades and publication of prices and volume of transactions. Its supervisory powers allows, among other measures, stop trading when it deems necessary, in order to control or prevent abnormal changes in prices.

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Regulation of Brazilian Securities Markets

The Brazilian securities markets are regulated by the CVM, which has authority over stock exchanges and the securities markets generally, the CMN, and the Central Bank. The Central Bank, among other powers, has licensing authority over brokerage firms and regulatory authority over foreign investment and foreign exchange transactions.

Under Brazilian Corporate Law, a company is either public, a companhia aberta, such as we are, or private, a companhia fechada. All public companies are registered with the CVM and are subject to reporting requirements. A company registered with the CVM may have its securities traded either on the BM&FBOVESPA or in the Brazilian over-the-counter market. The shares of a public company may also be traded privately, subject to certain limitations. To be listed on the BM&FBOVESPA, a company must apply for registration with the CVM and the BM&FBOVESPA.

Trading in securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the BM&FBOVESPA or the CVM, based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries by the CVM or the BM&FBOVESPA.

Brazilian securities laws, the Brazilian Corporate Law and the laws and regulations issued by the CVM, the CMN and the Central Bank provide for, among other things, disclosure requirements applicable to issuers of traded securities, restrictions on insider trading and price manipulation, as well as protection of minority shareholders. The CVM has issued several rules regarding disclosure requirements, namely, Rule No. 358 for the regulation of disclosure of material facts, Rules No. 361 and No. 400 for the regulation of public offerings, Rule No. 380 for the regulation of Internet offerings, Rule No. 381 for the regulation of independent auditors, Rule No. 480 for the regulation of registry of security issuers admitted to negotiation in regulated markets in Brazil, and Rule No. 481 for the regulation of information and public request of proxy for shareholders meeting. Rule No. 480 also requires that publicly traded companies file a reference form (Formulário de Referência) which is a regularly updated report containing certain information about the issuer as required by the form, to which supplementary information regarding notes or securities being offered are added at the time of each new public offering.

Corporate Governance Practices

In 2000, the BM&FBOVESPA introduced three special listing segments, known as Levels 1 and 2 of Differentiated Corporate Governance Practices and Novo Mercado aimed at fostering a secondary market for securities issued by Brazilian companies listed on the BM&FBOVESPA by prompting such companies to follow good corporate governance practices. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These listing segments increase shareholders’ rights and enhance the quality of information provided to shareholders.

To become a Level 1 (Nível 1) company, in addition to the obligations imposed by current Brazilian law, an issuer must, among other things, (i) ensure that shares of the issuer representing 25.0% of its total capital are effectively available for trading (free-float); (ii) adopt offering procedures that favor widespread ownership of shares when making a public offering; (iii) comply with minimum quarterly disclosure standards; (iv) follow stricter disclosure policies with respect to transactions by controlling shareholders, directors and officers involving securities issued by the issuer; (v) disclose the terms of agreements entered into with related parties; and (vi) make a schedule of corporate events available to shareholders.

To become a Level 2 (Nível 2) company, in addition to the obligations imposed by current Brazilian law, an issuer must, among other things, (i) comply with all of the listing requirements for Level 1 companies; (ii) grant tag-along rights for all shareholders in connection with a transfer of control of the company, offering the same conditions and price paid per share for the controlling block of common shares; (iii) grant voting rights to holders of preferred shares in connection with certain corporate restructurings and related party transactions, such as (a) any conversion of the company into another corporate form, (b) merger, consolidation or spin-off of the company, (c) approval of transactions between the company and its controlling shareholder, including parties related to the controlling shareholder, (d) approval of any valuation of assets to be delivered to the company in payment for shares issued in a capital increase, (e) appointment of an expert firm to ascertain the fair value of the company in connection with any deregistration and delisting tender offer, and (f) changes to the aforementioned voting rights; (iv) have a board of directors comprised of at least five members at least 20% of whom are independent members as determined by the rules of Level 2, with a maximum two year term; (v) prepare annual financial statements in English, including cash flow statements, in accordance with international accounting standards, such as U.S. GAAP or IFRS; (vi) hold a tender offer by the company’s controlling shareholder if it elects to delist from the Level 2 segment (the minimum price of the shares to be offered will be determined by an appraisal process); and (vii) adhere exclusively to the rules of the BM&FBOVESPA Arbitration Chamber for resolution of disputes between the company and its investors.

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To be listed in the Novo Mercado, an issuer must meet all of the requirements described above, in addition to (i) issuing only voting shares and; (ii) granting tag-along rights for all shareholders in connection with a transfer of control of the company, offering the same price paid per share for the controlling block of common shares.

Our goal is to create value for our shareholders. We believe that one of the ways of reaching this goal is to maintain good corporate governance practices, as a long-term continuous process, designed to ensure sustained growth of the company. For many years we have been following principles relating to disclosure, minority shareholders’ rights and transparency as part of our corporate governance initiatives. For example, we have been registered as a public company with the BM&FBOVESPA and have had our shares traded on the market since our founding in 1944. We voluntarily adhered to BM&FBOVESPA’s Level 1 of Corporate Governance in June, 2001. In February 2002, we listed our Level 2 ADRs on the NYSE and have therefore complied with NYSE requirements, as well as those of the SEC, which include fulfilling U.S. legislative requirements, including the 2002 Sarbanes-Oxley Act.

Public meetings are one of the most important channels of communication and are highly appreciated by investors, analysts and shareholders. The opportunity to interact with members of our senior management and discuss strategies and profitability can be a decisive factor when making an investment decision. The BM&FBOVESPA requires companies listed on the Levels 1 and 2 of Differentiated Corporate Governance Practices to hold at least one meeting with investors every year. We have been holding public meetings at the regional offices of the Association of Capital Market Investment Analysts and Professionals (APIMEC) and making several presentations in the United States and Europe since 1996. When making these presentations, we have the opportunity to provide the financial community with details regarding our performance, strategies for adding value and perspectives for the future as well as other relevant issues. As a commitment to further strengthen our position in the Brazilian capital market, we have also made presentations at APIMEC’s regional offices in different cities covered by APIMEC since 2002. In 2011, we made various presentations at APIMEC, roadshows in the United States, Europe and Asia, teleconferences in Portuguese and teleconferences in English on quarterly reports and relevant facts among other presentations that were made in Brazil at seminars, conferences and congresses on a wide range of subjects related to our performance and the capital markets.

In November 2004, we became the first Brazilian company to voluntarily adopt treasury operational rules based on our review of best practices in the international markets and CVM Rule No. 10. Our senior management believes these rules provide a number of benefits such as decrease in operational, financial and strategic risk, reduced risk of market concentration or improper price formation, reinforcement of the strategy of repurchasing securities aimed at preserving liquidity and value for shareholders and corporate governance best practices, improving transparency for transactions.

On June 8, 2006, we became the first non-U.S. bank listed on the NYSE to comply with all of the requirements set forth in Section 404 of the Sarbanes-Oxley Act, regarding internal controls over financial reporting, one year before the deadline established by the SEC.

We were the first company in Brazil to adopt Brazilian Association of Listed Companies (Associação Brasileira das Companhias Abertas — ABRASCA), Control and Disclosure of Relevant Information Guide in 2007.

In May 5, 2008, our board of directors accepted the proposal of our disclosure and trading committee to establish a corporate governance policy, consolidating our corporate governance principles and practices. Our corporate governance policy is included as Exhibit 11.2 to this Annual Report. The key principle upon which our policy rests is excellence in corporate governance with a view of strengthening and creating the best conditions for the development of our company and subsidiaries. Since then, our Corporate Governance Policy has been amended to include the committees of the board of directors and their respective rules.

In line with best disclosure practices and international trends, we make available our financial statements prepared in accordance with IFRS and Brazilian GAAP.

For more information about the members of our board of directors, stock options plan, fiscal council, audit committee, and other committees of the board of directors and the board of officers, see “Item 6C. Board Practices”.

For more information on our corporate governance practices, including tag-along rights and our Code of Ethics, see “Item 10B. Memorandum and Articles of Association” and “Item 16B. Code of Ethics”.

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Disclosure Requirements

Pursuant to the CVM Rule No. 358 of January 3, 2002, the CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in connection with trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

· establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by controlling shareholders, resolutions of the general meeting of shareholders and of management of the company, or any other facts related to the company’s business (whether occurring within the company or otherwise related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;

· specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that have any managing, financial, technological or administrative functions within or to the company, and any corporate restructuring undertaken among related companies;

· oblige the investor relations officer, controlling shareholders, other officers, directors, members of the fiscal committee and other advisory boards to disclose material facts;

· require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;

· require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;

· establish disclosure requirements in the acquisition and disposal of a material shareholding stake; and

· forbid the use of insider information.

Pursuant to the CVM Rule No. 480 of December 7, 2009, the CVM expanded the quantity and improved the quality of information reported by issuers. This Rule represents a significant step forward in providing the market with greater transparency with respect to issuers. For that purpose, the Annual Information Report (IAN) was replaced by a reference form (Formulário de Referência), which comprised the information required by IAN and additional information required under CVM Rule 400 that was previously only subject to disclosure upon a public offering. Such reference form (Formulário de Referência) is in line with the Shelf Registration System recommended by the International Organization Securities Commission (IOSCO) and adopted in other countries (England and the United States, among others), by means of which the information regarding a specific issuer is consolidated into one document and is subject to periodic updates. This mechanism offers the investor the ability to analyze one single document for relevant information about the issuer.

CVM Rule No. 480 also created two groups of issuers by type of securities traded. Group A issuers are authorized to trade in any securities, whereas Group B issuers cannot trade in stocks, depositary receipts (BDRs, Units) and securities convertible or exchangeable into stocks or depositary receipts. The greater extent of Group A authorization is followed by more stringent disclosure and reporting requirements. As an issuer of stock, we are part of Group A.

CVM has also enacted Rule No. 481 of December 17, 2009 to regulate two key issues involving general meetings of shareholders in publicly held companies: (i) the extent of information and documents to be provided in support of call notices (subject to prior disclosure to shareholders); and (ii) proxy solicitation for exercise of voting rights. CVM Rule No. 481 is intended to (i) improve the quality of information disclosure by publicly held companies to shareholders and to the market in general, favoring the use of Internet as a disclosure mechanism; (ii) make the exercise of voting rights less costly and foster the participation of shareholders in general meetings, specially for companies with widely dispersed capital; and, consequently (iii) facilitate the oversight of corporate businesses.

Changes in the Brazilian Corporate Law

On July 13, 2007, the CVM issued Rule No. 457 (as amended by Rule No. 485, issued on September 1, 2010) to require listed companies to publish their consolidated financial statements according to IFRS and according to standards issued by CPC and approved by CVM, starting with the year ending December 31, 2010.

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On December 28, 2007, Law No. 11,638 amended numerous provisions of the Brazilian Corporate Law relating to accounting principles and authority to issue accounting standards. Law No. 11,638 sought to enable greater convergence between Brazilian GAAP and IFRS. To promote convergence, Law No. 11,638 modified certain accounting principles established in the Brazilian Corporate Law and required the CVM to issue accounting rules conforming such principles to the accounting standards adopted in international markets. Additionally, the statute acknowledged a role in the setting of accounting standards for the CPC, which is a committee of officials from the BM&FBOVESPA, industry representatives and academic bodies that has issued accounting guidance and pursued the improvement of accounting standards in Brazil. Law No. 11,638 allows the CVM and the Central Bank to rely on the accounting standards issued by the CPC in establishing accounting principles for regulated entities.

As a result of the issuance of Law No. 11,638, in a parallel process, CPC has issued approximately 40 standards with the objective of making Brazilian GAAP similar to IFRS as described above.

Additionally, on May 27, 2009, Law No. 11,941 was enacted and, among other things, amended numerous provisions of the Brazilian Corporate Law and tax regulation, to further enable greater convergence between Brazilian GAAP and IFRS. The Law is currently subject to several accounting complementary regulations that affect, among others, the accounting of goodwill, deferred expenses, stocks, provisions, real state investments. Amendments provided additional criteria that financial statements are required to follow. The financial statements of Brazilian publicly held companies as of and for the years ended December 31, 2010, 2011 and 2012 were published according to these new regulations.

Finally, on June 24, 2011, Law No. 12,431 amended the Brazilian Corporate Law, among other laws. Many of the changes in the Brazilian Corporate Law prescribed by, Law No.12,431, such as the possibility for shareholders of public companies to vote without being present at meetings and for physical shareholder registries to be replaced by electronic registries in public companies, still require further regulation by the CVM. Among other changes, the amended Brazilian Corporate Law no longer requires members of the board of directors to be shareholders of the company.

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9D. Selling Shareholders

Not applicable.

9E. Dilution

Not applicable.

9F. Expenses of the Issue

Not applicable.

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ITEM 10  ADDITIONAL INFORMATION

10A. Share Capital

Not applicable.

10B. Memorandum and Articles of Association

Set forth below is certain information concerning our capital stock and a brief summary of certain significant provisions of our bylaws and Brazilian Corporate Law. This description does not purport to be complete and is qualified by reference to our bylaws (an English translation of which is being filed with the SEC as part of this annual report) and to the Brazilian Corporate Law.

Registration and Purpose

We are organized as a publicly held corporation for an unlimited period of time under the laws of Brazil. Our head offices are located in the city of São Paulo, Brazil. We are governed mainly by the Brazilian Corporate Law and our bylaws. Our Tax Payer’s Registry (CNPJ) is 60.872.504/0001-23 and we are registered with the São Paulo Commercial Registry (Junta Comercial do Estado de São Paulo) under NIRE. 35300010230.

Our corporate purpose, as set forth in Article 2 of our bylaws, is to perform banking activity in all its authorized forms, including foreign exchange transactions.

Shareholders’ Meetings

Under Brazilian Corporate Law, shareholders at a general meeting may decide all matters relating to the business objectives of the company, as well as pass resolutions deemed necessary for the protection of their interests. Shareholders voting at a general meeting have the exclusive power, among others, to:

·        amend the bylaws;

·        appoint, elect and dismiss members of our board of directors at any time;

·        appoint members of the fiscal council;

·        receive the yearly accounts prepared by management and accept or reject management’s financial statements, including the appropriation of net income and the distributable amount for payment of the mandatory dividend and allocation to the various reserve accounts;

·        accept or reject the valuation of assets contributed by a shareholder in consideration for the issuance of capital stock;

·        pass resolutions to reorganize our legal form, merge, consolidate or split, dissolve and liquidate, appoint and dismiss our liquidators and examine our accounts;

·        decide with respect to the financial statements and the distribution and allocation of profits;

·        decide with respect to the management report and the board of executive officers’ accounts;

·        establish the aggregate and annual compensation of the members of the board of directors and the board of officers, specifying the amount applicable to each one of these bodies;

·        approve alterations of the capital stock, without prejudice to our board of director’s authority to approve capital increases within authorized capital limits approved at a shareholders’’ meeting;

·        decide on retained profits or the constitution of reserves; and

· decide on plans for stock option grants of shares issued by the company or by its controlled companies.

It is the responsibility of our board of directors to call a shareholders’ meeting. The first notice of the shareholders’ meeting must be published no later than fifteen days before the date of the meeting on the first call. Brazilian Corporate Law establishes that under specified circumstances, the meeting may also be convened by the fiscal council or any shareholder.

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The notice of a shareholders’ meeting must be published three times, on different dates, in official newspapers widely circulated in São Paulo, our principal place of business, setting forth the place, date and time of the meeting, the day’s agenda and, in the event of an amendment to our bylaws, a description of the proposed change. In addition to the requirements of Brazilian Corporate Law, we also publish notices in three different languages (Portuguese, English and Spanish) on our website and email our subscribed investors and shareholders, as well as through CVM, BM&FBOVESPA, the SEC, the NYSE and the BCBA (Bolsa de Comercio de Buenos Aires).

As a general rule, Brazilian Corporate Law provides that a quorum for a shareholders’ meeting consists of shareholders representing at least 25% of a company’s issued and outstanding voting capital stock, on the first date the meeting is called for, and, if a quorum is not reached, any percentage of the company’s voting capital stock on a second date the meeting is called for.

Generally, our meetings are held with a quorum representing two thirds of our voting capital. In order to attend a shareholders’ meeting, a shareholder must present a document evidencing his identity and proof of deposit issued by the financial institution responsible for the bookkeeping of our stock.

A shareholder may be represented at a shareholders’ meeting by a proxy appointed less than a year before the meeting, which proxy must be a shareholder, an officer of the company, a lawyer or a financial institution. An investment fund must be represented by its investment fund officer.

Board of Directors and Board of Officers – Powers

Pursuant to the Brazilian Corporate Law and our bylaws, our board of directors has powers to, among other things:

·        establish the general guidelines of the company;

·        elect and remove from office the company's officers and establish their functions;

·        appoint officers to comprise the boards of officers of the controlled companies as specified;

·        supervise the administration of the officers of the company, examine at any time company accounts and documents, request information on contracts already executed or nearing the point of execution and any other acts;

·        call shareholders’ meetings to be held no earlier than fifteen days from the date the notice is given;

·        give its opinion on the management report, the board of officers' accounts and the financial statements for each fiscal year and submit such documents to the shareholders for approval;

·        decide on budgets for results and investments and respective action plans;

·        appoint and remove from office the independent auditors;

·        decide on the distribution of interim dividends, including distribution to profits or existing revenue accounts contained in the most recent annual or semi-annual balance sheet;

·        make decisions on payment of interest on stockholders’ equity;

·        decide on buy-back operations on a non-permanent basis;

·        decide on the purchase and writing of put and call options supported by the shares issued by the company for the purposes of cancellation, holding as treasury stock or sale, with due observance of the limits set forth the applicable regulations;

·        decide on the institution of committees to handle specific issues within the scope of the board of directors;

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·        elect and remove the members of the audit committee and the compensation committee;

·        approve the operational rules that the audit committee and the compensation committee may establish for its own functioning and be aware of the committee’s activities through its reports;

·        approve investments and divestments direct or indirect in corporate stakes for amounts higher than 15% of the book value of the company as registered in the last audited balance sheet; and

·        decide on the increase of capital within the limits of our authorized capital.

On April 19, 2013, our shareholders approved, subject to approval by the Central Bank, an amendment to our bylaws in order to include, among the board powers, the power to authorize issuances of debt securities and other instruments convertible into shares, within the limit of our authorized capital.

Our board of directors may be composed of a minimum of ten and a maximum of fourteen directors, elected by our shareholders at the annual shareholders’ meeting.  The directors elect one chairman and one to three vice-chairmen from among their peers.  Pursuant to our bylaws, the age limit for holding a position on our board of directors is seventy years old. For more information regarding the composition of our board of directors, see “6A. Directors, Senior Management and Employees – Directors and Senior Management”.

Our board of officers is responsible for our day-to-day management and representation of Itaú Unibanco Holding before third parties. It may be composed of a minimum of five and a maximum of twenty members. Pursuant to our bylaws, the age limit for holding a position on our board of officers is 60 years old. On April 19, 2013, our shareholders approved an increase to the mandatory retirement age for the position of Chief Executive Officer of Itaú Unibanco Holding from 60 to 62 years old, subject to approval by the Central Bank. For more information regarding the composition of our board of officers, see “Item 6A. Directors, Senior Management and Employees – Directors and Senior Management”.

Certain Provisions of Brazilian Law

Under Brazilian Corporate Law, as well as Central Bank and CVM rules, we are required to identify in our financial statements all related party transactions, according to the materiality criteria established by accounting rules.  On December 2012, we adopted a Related Party Transactions Policy so as to ensure we are aligned with best practices in corporate governance.  For further details, see “Item 7B. Related Party Transactions”.

Law No. 7,492, enacted on June 16, 1986, which sets forth crimes against the Brazilian financial system, defines as a criminal offense the extension of credit by a financial institution to any of its controlling shareholders, directors or officers and certain family members of such individuals and any entity controlled directly or indirectly by such financial institution or which is under common control with such financial institution.  Violations of Law No. 7,492 are punishable by two to six years of imprisonment and a fine.  On June 30, 1993, the CMN issued Resolution No. 1,996, which requires any such transaction to be reported to the prosecutor’s office.

Brazilian banking laws and regulations also impose prohibitions on the extension of credit or guarantee to any company which holds more than 10.0% of the financial institution’s capital and to any company in which they hold more than 10% of the capital.  This limitation is also applicable in respect to directors, officers and members of the fiscal council of the financial institution and certain family members of these individuals, as well to those companies in which such persons hold more than 10.0% of the capital.

In addition, directors and officers may not take part in any corporate transaction or deliberate with respect to any corporate transaction in which they have a conflict of interest with the company of which they are a director or officer. Any director or officer who believes he may have a conflict must inform the company’s other officers and/or directors, as the case may be, of the nature and extent of his interest in the transaction.

Directors and Officers Compensation

On November 25, 2010, the CMN issued Resolution No. 3,921, which established new rules related to the compensation of directors and officers of financial institutions. The compensation of directors and officers may be fixed or variable. Variable compensation may be based on specific criteria set forth in Resolution No. 3,921 and is required to be compatible with the financial institution’s risk management policies. At least 50.0% of variable compensation must be paid in shares or share-based instruments and at least 40.0% of variable compensation must be deferred as payment for at least three years and is subject to claw-backs, based on the result of the institution and business unit during the period of deferral. These new rules took effect on January 1, 2012 and are applicable to compensation of directors and officers based on the services rendered during the year of 2012. In addition, financial institutions that are publicly-held companies or that are required by the Central Bank to establish an audit committee must also establish a compensation committee prior to the first shareholders’ meeting of 2012. Such committee must follow the requirements set out in Resolution No. 3,921.

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On October 22, 2012, our board of directors approved a compensation policy (as amended on February 28, 2013) proposed by the compensation committee for the members of the management of Itaú Unibanco Holding and its controlled companies, in compliance with the guidelines established by CMN Resolution No 3,921.

Audit Committee

See “Item 6C. Board Practices – Statutory Bodies – Audit Committee” for information regarding our Audit Committee.

Fiscal Council

See “Item 6C. Board Practices – Statutory Bodies – Fiscal Council” for information regarding our Fiscal Council.

Preferred Shares and Common Shares

General

Each common share entitles its holder to one vote at our shareholders meetings. Holders of common stock are not entitled to any preference relating to our dividends or other distributions or any preference upon our liquidation.

Each preferred share is non-voting except under limited circumstances and entitles its holder to (i) priority in the receipt of a non-cumulative dividend of not less than the dividend entitled to each common share; (ii) priority in the receipt of a minimum annual dividend of R$0.022 per share; and (iii) in the event of a sale of the company’s controlling stake, the right to be included in the public offering of shares, thus assuring such shares the right to a price equal to 80% (eighty percent) of the value paid per voting share to the controlling shareholders.

There are no redemption provisions associated with our common or preferred shares, except as discussed below.

Preemptive Rights, Capital Increases and Payment for Subscribed Stock Shares

Each shareholder has a general preemptive right to subscribe for shares in any capital increase, in proportion to its equity interest, except in the event of the grant and exercise of any option to acquire shares of our capital. Our bylaws authorize our board of directors to increase our capital stock up to a limit of six billion shares, of which three billion must consist of common shares and three billion of preferred shares, without amending our bylaws. Up to the limit of our authorized capital, the issuance of our shares may be made without considering our shareholders preemptive rights if (i) made for the sale on a stock exchange; (ii) by a public subscription; and (iii) exchange for our stock in a public offering for the acquisition of our control. Regardless of this provision, all other increases in our capital stock must be ratified by our shareholders and the Central Bank.

Once a capital increase is duly approved, the shareholder must pay the amount corresponding to the subscribed shares in accordance with the terms of the subscription bulletin. If the shareholder fails to make such payment, the shareholder will be considered to be in default under the terms of the law.

In the event of a capital increase which would maintain or increase the proportion of our capital represented by preferred shares, holders of ADSs, except as described above, would have preemptive rights to subscribe only to newly issued preferred shares. In the event of a capital increase which would reduce the proportion of our capital represented by preferred shares, holders of ADSs, except as described above, would have preemptive rights to subscribe for preferred shares, in proportion to their shareholdings and for common shares only to the extent necessary to prevent dilution of their interest in us.

On April 19, 2013, our shareholders approved an increase in our authorized capital from 6.0 billion to 6.6 billion shares, of which 3.3 billion must consist of common shares and 3.3 billion of preferred shares. This increase is subject to Central Bank approval.

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Liquidation

Pursuant to Brazilian Corporate Law, dissolution may occur under the following circumstances: (i) due to the expiration of the company’s length of life; (ii) in cases set forth by the company’s bylaws; (iii) by resolution of the shareholders’ meeting; (iv) when a company’s stock is held by a single shareholder, except when the single shareholder is a Brazilian corporation, and a minimum of two shareholders is not reinstated by the following annual shareholders’ meeting; (v) when a company’s authorization to operate is legally extinguished; (vi) by judicial decision; or (vii) by decision of the competent administrative authority. A dissolved company retains its legal personality through extinction, in order to conduct liquidation. When a company’s bylaws do not have a provision concerning liquidation, its shareholders at a shareholder’s meeting shall determine the manner in which liquidation shall be conducted. Shareholders shall also appoint a liquidator and the fiscal council, which shall be installed during the period of liquidation.

The liquidator is responsible for, among other things, the winding up of the company’s businesses, sale of its assets, payment of liabilities and distribution of the remaining assets among shareholders.

Before the completion of the liquidation process and after all creditors have been paid, shareholders, at a shareholders’ meeting, may resolve to make a pro-rata distribution among them, as corporate assets are being calculated.

Liability of Our Shareholders for Further Capital Calls

Brazilian Corporate Law does not provide liability for capital calls. If there is an increase in our capital, the ownership interest of our shareholders could be reduced if they elect not to exercise their preemptive rights to subscribe for shares in the capital stock increase.

Calculation of Net Profit

At each annual shareholders’ meeting, our board of directors is required to recommend how our earnings for the preceding fiscal year are to be allocated. For purposes of the Brazilian Corporate Law, a company’s net income after income taxes and social contribution taxes for that fiscal year, net of any accumulated losses from prior fiscal years and amounts allocated to employees’ and management’s participation in earnings, represents its “net income” for that fiscal year derived from financial statements prepared in accordance with Brazilian GAAP. In accordance with Brazilian Corporate Law, an amount equal to our net income as further (i) reduced by amounts allocated to the legal reserve, as explained below; (ii) reduced by amounts allocated to other reserves established by us in compliance with applicable law and (iii) increased by reversions of reserves constituted in prior years, will be available for distribution to shareholders (the “adjusted net income” herein referred to as the “Net Profit”) in any particular year.

Under Brazilian Corporate Law, we are required to maintain a legal reserve to which we must allocate 5.0% of our net income for each fiscal year until the amount of the reserve equals 20.0% of our capital stock. Net losses, if any, may be charged against the legal reserve, after the deduction of the accrued earnings and profit reserves.

Pursuant to our bylaws, we are required to distribute to our shareholders in respect to each fiscal year an amount equal to not less than 25% Net Profit, or the mandatory dividend. See Item 8A. Consolidated Financial Statements and Other Financial Information — Dividend Policy and Dividends”.

According to Brazilian Corporate Law, the payment of dividends must occur prior to the end of the fiscal year in which the dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends in respect of its shares, after which we have no liability for that payment and the dividends will revert to our profit reserve. Shareholders who do not reside in Brazil must generally register with the Central Bank to have dividends and interest on stockholders’ equity, sales proceeds or other amounts with respect to their shares eligible to be remitted in foreign currency outside of Brazil.

Under Brazilian Corporate Law, we may establish other reserves as long as we specify their purpose, the criteria for determining the annual portion of the net income to be allocated to these reserves and their maximum limit may not exceed our capital stock.

Based on that, we have established in our bylaws that, in accordance with a proposal by our board of directors, our shareholders may decide on the creation of the following reserves:

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·        dividend equalization reserve (which has been created by shareholders), limited to 40.0% of the value of our capital stock, for the purpose of paying dividends, including interest on stockholders equity, with the objective of maintaining a payment flow to shareholders. This reserve will be allocated: (i) up to 50.0% of the fiscal year’s net income; (ii) up to 100.0% of the realized portion of reserves arising from revaluation of assets, recorded as retained earnings; (ii) up to 100.0% of the amount of the adjustments from previous fiscal years, recorded as retained earnings; and (iv) credits corresponding to the anticipation of dividends;

·        reinforcement for working capital stock reserve (which has been created by shareholders), limited to 30.0% of the value of our capital, for the purpose of guaranteeing resources for our operations, to be allocated up to 20.0% of the fiscal year’s net income;

·        reserve for capital increase in companies held by Itaú Unibanco Holding (which has been created by shareholders), limited to 30.0% of the value of our capital, for the purpose of guaranteeing the right of first refusal in capital increases of participating companies, and to be allocated up to 50.0% of the fiscal year’s net earnings.

Upon the proposal of our board of directors, amounts will be regularly capitalized from these reserves so that its aggregate balance never exceeds the limit of 95.0% of our capital stock. The balance of these reserves together with the legal reserve may not exceed the value of our capital stock.

Additionally, under Brazilian Corporate Law, we may establish a contingency reserve as a portion of our net income, which may be allocated for an anticipated loss that our shareholders deem probable in future years. Any amount so allocated in a prior year must be either (i) reversed in the fiscal year in which the loss was anticipated if such loss does not in fact occur; or (ii) charged off in the event that the anticipated loss occurs.

We determine our calculation of net income and allocations to reserves for any fiscal year on the basis of financial statements prepared in accordance with Brazilian GAAP. On the other hand, our consolidated financial statements included in this annual report have been prepared in accordance with IFRS and, although our allocations to reserves and dividends will be reflected in these consolidated financial statements, you will be unable to calculate those allocations or required dividend amounts from our consolidated financial statements. Our consolidated statement of changes in stockholders’ equity presents the amount of dividends and interest on stockholders’ equity distributed in each of the years ended December 31, 2012 and 2011.

Brazilian Corporate Law provides that all discretionary allocations of net income are subject to approval by our shareholders at the annual meeting.

Interest on Stockholders’ Equity

We are allowed to pay interest on stockholders’ equity as an alternative form of payment to shareholders. For tax purposes, interest on stockholders’ equity is limited to the daily average of the TJLP, as determined by the Central Bank, over the taxable year, and cannot exceed the greater of (i) 50% of adjusted net income for the period in respect of which the payment is made; and (ii) 50% of the sum of retained earnings and profit reserves. Any payment of interest on stockholders’ equity to holders of preferred shares, whether Brazilian residents or not, including holders of ADSs, is subject to Brazilian withholding tax at the rate of 15%, or 25% if the shareholder is a resident or domiciled in a tax haven jurisdiction. The amount paid to shareholders as interest on stockholders’ equity, net of any withholding tax, may be included as part of the mandatory distribution. In such case, we are required to distribute to shareholders an amount sufficient to ensure that the net amount received by shareholders, after the payment by us of applicable withholding taxes in respect of the dividend of interest on stockholders’ equity, is at least equal to the mandatory dividend. See “Item 4B. Business Overview — Regulation and Supervision — Taxation — Corporate Income Tax and Social Contribution on Profits — Taxation of Profit Distribution”.

Voting Rights

Each common share entitles the holder thereof to one vote at our shareholders meetings. Holders of preferred shares are not entitled to vote at our shareholders’ meetings, except under certain limited circumstances.

Brazilian Corporate Law provides that non-voting preferred shares acquire voting rights when a company has failed for the term provided for in its bylaws (but no longer than a period of three consecutive fiscal years) to pay any fixed or minimum dividend to which such shares are entitled and continuing until payment thereof is made if those dividends are not cumulative or until those cumulative dividends are paid. Our bylaws establish a term of three fiscal years.

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Any change in the preferences or rights of our preferred shares, or the creation of a class of shares having priority over the preferred shares, would require the approval of at least 50% of the voting shareholders with prior or future ratification of a majority of the preferred shares, voting as a class at a special meeting. This meeting, according to the Brazilian Corporate Law, would be called by publication of a notice three times, on different dates, in an official gazette and a newspaper of wide circulation in São Paulo, our principal place of business, with the first notice published at least fifteen days prior to the meeting, but would not generally require any other form of notice. In addition to the requirements of Brazilian Corporate Law , we also publish notices in three different languages (Portuguese, English and Spanish) on our website and email our subscribed investors and shareholders, as well as thought CVM, BM&FBOVESPA, the SEC, the NYSE and the BCBA (Bolsa de Comercio de Buenos Aires).

Brazilian Corporate Law provides for multiple voting rights. Despite our bylaws being silent on the matter, a shareholder representing at least one tenth of our voting capital may request multiple voting rights. Once multiple voting rights have been duly requested within forty eight hours prior to the annual shareholders’ meeting, each share will be attributed as many votes as the number of directors and the shareholders right to accumulate votes for a single candidate or distribute them among various candidates will be recognized. Whenever the election of our board of directors is conducted through a multiple voting process and the holders of common or preferred stock elect a director, the shareholder or group of shareholders bound by a voting agreement holding more than 50% of our voting rights will be entitled to elect directors in a number equal to the number of directors elected by the other shareholders plus one, regardless of the number of directors that, pursuant to our bylaws, comprise the board. It is the responsibility of the presiding officials at a shareholders’ meeting to inform our shareholders in advance about the number of votes necessary for the election of each member of our board of directors.

As our bylaws do not provide for staggered intervals, our directors may be reelected consecutively without interruption. Whenever the election has been conducted through a multiple voting process, the removal from office of any of our directors by our shareholders, at an annual shareholders’ meeting will result in the removal from office of all of the remaining directors and a new election shall be arranged. In order not to affect the management of the company as a result of the removal of directors, Brazilian Corporate Law provides that despite the removal, the same directors may continue to exercise their functions until the newly elected board members take office.

Transfer of Control

Our bylaws do not contain any provision that would have the effect of delaying, deferring or preventing a change in our control or that would operate only with respect to a merger, acquisition or corporate restructuring involving us or any of our subsidiaries. However, Brazilian banking regulations require that any transfer of control of a financial institution follow certain specific procedures of, and be previously approved by, the Central Bank.

Additionally, Brazilian Corporate Law provides that acquisition of control of a publicly held company is contingent on tender offers for all outstanding common shares at a price equivalent to at least 80% of the price per share paid for the controlling block. Our bylaws provide that in the event of a change in our control, the acquirer will be required to pay the holders of our preferred shares 80% of the price per share paid to our controlling shareholders.

Brazilian Corporate Law also obliges our controlling shareholder to make a tender offer for all of our shares if it increases its interest in our capital stock to a level that materially and negatively affects the liquidity of our shares.

Withdrawal Rights

Neither our common shares nor our preferred shares are redeemable except upon delisting, as described below. A dissenting shareholder under the Brazilian Corporate Law may, however, seek to withdraw, subject to certain conditions, following a decision made at a shareholders’ meeting by shareholders representing at least 50% of the voting shares:

·        to create preferred shares or increase disproportionately an existing class of preferred shares relative to the other types or classes of shares, unless this action is provided for or authorized by the bylaws;

·        to modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or create a new class with greater privileges than the existing classes of preferred shares;

·        to reduce the mandatory dividend;

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·        to change our corporate purposes;

·        to transfer all of our stock to another company in order to make us a wholly-owned subsidiary of that company or vice versa (incorporação de ações);

·        to acquire another company, the price of which exceeds certain limits set forth in Brazilian Corporate Law;

·        to merge into another company, including if we are merged into one of our controlling companies, or to consolidate with another company;

·        to participate in a group of companies as defined under Brazilian Corporate Law; or

·        in the event that the entity resulting from (i) a transfer of all our stock to another company in order to make us a wholly owned subsidiary of that company or vice versa, as discussed in the fifth bullet point above, (ii) a spin-off, (iii) a merger or (iv) a consolidation of a Brazilian publicly held company, fails to become a Brazilian publicly held company within one hundred and twenty days of the annual shareholders’ meeting in which such decision was taken.

The right to withdraw in the circumstances discussed in the first and second bullet points above only applies to the holders of the affected shares.

In accordance with the Brazilian Corporate Law, the right to withdraw expires thirty days after publication of the minutes of the relevant shareholders’ meeting unless, in the first two bullet points above, the resolution is subject to confirmation by the preferred shareholders (which must be made at a special meeting to be held within one year), in which case the thirty-day term is counted from the date the minutes of the special meeting are published. We are entitled to reconsider any action giving rise to a stock redemption within ten days following the expiration of the thirty-day term mentioned above if such redemption would jeopardize our financial stability. In addition, the rights to withdrawal in the seventh and eighth bullet points above may only be exercised by holders of shares if those shares are not part of the BM&FBOVESPA Index and if less than 50% of our shares is outstanding.

Brazilian Corporate Law provides that common and preferred shares are redeemable under delisting of shares at a fair price determined upon the criteria provided thereof. If the shareholders’ meeting giving rise to withdrawal rights occurs more than sixty days after the date of the last approved balance sheet, a shareholder may demand that its shares be redeemed at a value on the basis of a new balance sheet that is dated within sixty days of that shareholders’ meeting. In such case, we will pay 80% of the value calculated according to the last approved balance sheet and, after the preparation of the new balance sheet, we will pay the balance within one hundred and twenty days from the date of the relevant shareholders’ meeting.

Other Aspects of Brazilian Corporate Law

The following are also significant aspects of Brazilian Corporate Law:

·        preferred shares representing 10% of the outstanding shares not held by the controlling shareholders are entitled to appoint a representative to our board of directors;

·        disputes among our shareholders as well as among our shareholders and us can be subject to arbitration, as provided for in the shareholders’ agreement with Itaúsa and E. Johnston (though not provided for in our bylaws);

·        a tender offer at a purchase price equal to the fair value of all outstanding stock is required upon a delisting or a substantial reduction in liquidity of our stock as a result of purchases by controlling shareholders;

·        a sale of control requires that shareholders tender for the minority shareholders’ common shares and, as provided for in our bylaws, for the minority shareholders’ preferred shares, at a purchase price equal to 80% of the price per share paid to the controlling shareholder;

·        minority shareholders’ shares may be redeemed if, after a tender offer, controlling shareholders increase their participation in the company’s total share capital to more than 95%;

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·        shareholders are entitled to withdraw upon a spin-off only if it entails a change in the corporate purpose, a reduction in mandatory dividends or participation of the company in a “group of companies” (grupo de sociedades);

·        the controlling shareholders, the shareholders that appoint members to our board of directors and fiscal council, the members of our board of directors and fiscal council and our executive officers are required to disclose any purchase or sale of our stock to the CVM and the BM&FBOVESPA;

·        we are permitted to satisfy our information disclosure requirements through the Internet; and

·        direct or indirect controlling shareholders and shareholders that appoint members to our board of directors or fiscal council, as well as any natural person or corporate entity, or group of persons, acting jointly or representing the same interests, that reach a participation, directly or indirectly, corresponding to 5% or more of type or class of stock representative of the capital of a listed company, must notify the company and, as well as when such participation increases by 5% for the type or class of shares representative of the company’s capital stock. In cases when an acquisition results in or was effected for the purpose of altering the control or the management structure of the corporation, as well as in cases in which the acquisition creates an obligation to conduct a public offering, the acquirer must further publish a notice in the press containing the required legal information about the transaction. The investor relations officer is responsible for informing the CVM, and as the case may be, the BM&FBOVESPA or organized over-the-counter markets.

Form and Transfer

According to the Brazilian Corporate Law, all shares issued by Brazilian companies must be nominative and either registered within the companies’ registry books (Registro de Ações Nominativas) or placed under the custody of a financial institution specifically designated to perform custodial services by each company. The transfer of shares is effected by either an entry made by us in our books by debiting the share account of the transferor and crediting the share account of the transferee or by a book entry by the custodian in case the board of directors authorizes the maintenance of our shares under the custody of a financial institution specifically designated by the shareholders to perform book-entry services.

Under our bylaws, our shares are in the form of book-entry shares and the transfer of those shares is effected through an order to the financial institution that controls the registration of those shares, Itaú Corretora.

Transfers of preferred shares by a foreign investor are made in the same way and executed by that investor’s local agent on the investor’s behalf except that, if the original investment was registered with the Central Bank pursuant to the Annex IV Regulations, the foreign investor also should seek amendment, if necessary, through its local agent, of the certificate of registration to reflect the new ownership.

The BM&FBOVESPA operates a central clearing system. A holder of our shares may choose, at its discretion, to participate in this system and all shares elected to be put into the system will be deposited in custody with the stock exchange (through a Brazilian institution that is duly authorized to operate by the Central Bank or by the CVM, as the case may be, having a clearing account with the stock exchange). The fact that these shares are subject to custody with the stock exchange will be reflected in our registry of shareholders.

Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the stock exchange and will be treated in the same way as registered shareholders.

Limitations on Rights to Own Securities

Except as described above, there are no limitations under Brazilian law on the rights of non-residents or foreign shareholders to own non-voting preferred shares of Brazilian financial institutions, including the rights of such non-resident or foreign shareholders to hold or exercise voting rights due to future circumstances that may grant voting rights to such shareholders. Our bylaws reflect the nonexistence of such limitations in connection with our preferred shares.

Registered Capital

The amount of an investment in preferred shares held by a non-Brazilian holder who qualifies under the CMN Resolution No. 2,689 and obtains registration with the CVM or by the depositary representing that holder, is eligible for registration with the Central Bank. In addition to the repatriation of the principal amount invested, such registration (the amount so registered is referred to as registered capital) allows the remittance outside Brazil of foreign currency, converted at the commercial market rate, equivalent to the amount so distributed in reais in favor of those preferred shares. The registered capital for each preferred share purchased in Brazil, and deposited with the depositary, will be equal to its purchase price (in U.S. dollars). The registered capital for a preferred share that is withdrawn upon surrender of an ADS will be the U.S. dollar equivalent of (i) the average price of a preferred share on the Brazilian stock exchange on which the greatest number of such shares was sold on the day of withdrawal, or (ii) if no preferred shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of preferred shares were sold in the fifteen trading sessions immediately preceding that withdrawal. The U.S. dollar value of the preferred shares is determined on the basis of the average commercial market rates quoted by the Central Bank on such date (or if the average price of preferred shares is determined under clause (ii) of the preceding sentence, the average of such quoted rates on the same fifteen dates used to determine the average price of the preferred shares).

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A non-Brazilian holder of preferred shares may experience delays in effecting such registration, which may delay remittances abroad. Such a delay may adversely affect the amount, in U.S. dollars, received by the non-Brazilian holder. See “Item 3.D Risk Factors — Risks Relating to the Preferred Shares and the ADSs”.

American Depositary Receipts – ADR

The Bank of New York, as depositary, has executed and delivered the ADRs representing our preferred shares. Each ADR is a certificate evidencing a specific number of ADSs. Each ADS represents one preferred share (or a right to receive one preferred share) deposited with the principal São Paulo office of Itaú Unibanco, as custodian for the depositary in Brazil. Each ADS also represents any other securities, cash or other property which may be held by the depositary.

You may hold ADSs either directly (by having an ADR registered in your name) or indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADR holder. We do not treat ADR holders as our shareholders and ADR holders have no shareholder rights. The depositary is the holder of the preferred shares underlying the ADSs. Holders of ADRs have ADR holder rights. Brazilian law governs shareholder rights. A deposit agreement among us, the depositary and you, as an ADR holder, and the beneficial owners of ADRs sets out ADR holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADRs.

10C. Material Contracts

None.

10.D Exchange Controls

As described in item “10B. Memorandum and Articles of Association — Limitations on Rights to Own Securities”, individuals or legal entities domiciled outside Brazil may own our stock. However, the right to convert dividend payments and proceeds from the sale of our shares into foreign currency and to remit such amounts abroad is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investment be registered with the Central Bank and the CVM. Foreign investors may register their direct investment in our shares under Law No. 4,131, dated September 3, 1962, or CMN Resolution No 2,689, dated January 26, 2000.

Law 4,131 is the main legislation concerning foreign capital and direct equity investments in Brazilian companies and applies to any capital that enters the country in the form of foreign currency, goods and services. Except for registration of the capital inflow/outflow with the Central Bank, non-resident investors directly investing in equity of Brazilian companies do not need any specific authorization to make such investments.

Registration under Resolution No. 2,689 affords favorable tax treatment to non-resident investors who are not residents or domiciled in tax haven jurisdictions, as defined by Brazilian tax laws. See “Item 10E. Taxation — Brazilian Tax Considerations” for more information.

Under Resolution No. 2,689, non-resident investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled. In accordance with Resolution No. 2,689, the definition of non-resident investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered outside Brazil. Under Resolution No. 2,689, a non-resident investor must:

· appoint at least one representative in Brazil with powers to perform actions relating to its investment;

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· appoint an authorized custodian in Brazil for its investment;

· register as a non-Brazilian investor with the CVM; and

· register its foreign investment with the Central Bank.

Additionally, the investor operating under the provisions of Resolution No. 2,689 must be registered with the Brazilian internal revenue service (Receita Federal) pursuant to the latter’s Regulatory Instructions No. 1,183, dated August 19, 2011 and 1,042, dated June 10, 2010. This registration process is undertaken by the investor’s legal representative in Brazil.

Pursuant to Resolution No. 2,689, securities and other financial assets held by foreign investors must be registered, safe kept or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM.

The trading of securities under the regime of Resolution No. 2,689 is restricted to transactions carried out in the stock exchanges or through organized over-the-counter markets licensed by the CVM, except for transactions resulting from subscriptions, stock dividends, conversion of debt securities into shares, securities-referenced indexes, purchase and sale of shares of opened-end investment funds in securities and, when previously authorized by the CVM, cases resulting from going private transactions, cancellation or suspension of trading, judicial settlements and trading of shares covered by shareholder agreements.

In addition, any transfer or ownership assignment of investments in securities or other financial instruments held by non-resident investors not foreseen by Resolution No. 2,689 is prohibited, except for transfers resulting from mergers, spin-off, and other corporate reorganizations carried out abroad, as well as the cases of hereditary succession.

10E. Taxation

This summary contains a description of the main Brazilian and U.S. federal income tax considerations of the acquisition, ownership and disposition of our preferred shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to these matters. This summary is based upon tax laws of Brazil and the United States in effect as of the date hereof, which laws are subject to change and to differing interpretations (possibly with retroactive effect). Although there is at present no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may result in such a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect a U.S. Holder (as defined below) of our preferred shares or ADSs.

Prospective purchasers of our preferred shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of our preferred shares and ADSs, including, in particular, the effect of any non-U.S., non-resident, state or local tax laws.

Brazilian Tax Considerations

The following discussion summarizes the main Brazilian tax consequences related to the acquisition, ownership and disposition by holders of our preferred shares (who are registered with the Central Bank as U.S. dollar investors) or of ADSs, both not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”).

Non-Resident Holders Resident or Domiciled in Tax Havens

In accordance with Brazilian law, as regulated by Article 1 of Normative Instruction No. 1,037 of June 4, 2010, as amended, a “tax haven” is defined as a country or location (a) that does not impose any income tax or where the maximum income tax rate is 20% or below or (b) where the local legislation imposes restrictions on disclosure regarding shareholder composition or investment ownership. A list of current tax havens has been published per such Normative Instruction. Non-Resident Holders resident or domiciled in tax havens may be subject to tax in Brazil at higher rates than Non-Resident Holders not resident or domiciled in tax havens, as described below.

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Registration of Our Preferred Shares

Our preferred shares may be registered with the Brazilian Central Bank pursuant to CMN Resolution No. 2,689/00. CMN Resolution No. 2,689/00 allows foreign investors to invest in almost all financial assets and to enter into almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled, such as appointing a representative in Brazil and registering with the Securities and Exchange Commission - CVM. The amount eligible for registration with respect to our preferred shares purchased in Brazil and deposited with the depositary shall be equal to the purchase price of such preferred shares (in U.S. Dollars). According to CMN Resolution No. 2,689/00, foreign investors include individuals, companies, mutual funds and other collective investment entities domiciled or headquartered outside Brazil. See “Item 10D. Exchange Controls” for more information.

A Non-Resident Holder of our preferred shares may encounter delays in registration, which may delay any remittances abroad. Such delays may also adversely affect the amount of U.S. Dollars received by such Non-Resident Holder.

Taxation of Dividends

Payment of dividends derived from profits generated after January 1, 1996, including dividends paid in kind, are not subject to withholding income tax in Brazil. Payment of dividends derived from profits generated before January 1, 1996 may be subject to Brazilian withholding income tax at varying rates, according to the year when the profits were generated.

Taxation of Interest on Net Equity

Law No. 9,249, dated December 26, 1995, as amended, allows a Brazilian corporation, such as ourselves, to make payments of interest on net equity instead of dividend distributions (see “Item 4B. Business Overview — Regulation and Supervision — Taxation” and “Item 10B. Memorandum and Articles of Association — Interest on Net Equity”). Payment of interest on net equity is generally subject to withholding income tax at the rate of 15%, or 25% in the case of a Non-Resident Holder that is resident or domiciled in a tax haven.

Taxation of Gains

(a) Sales or Other Dispositions of ADSs

Gains realized outside Brazil by a Non-Resident Holder from the sale or other disposition of ADSs to another Non-Resident Holder are not subject to Brazilian taxation. However, according to Law No. 10,833/03, the disposition of assets located in Brazil by a Non-Resident Holder may be subject to Brazilian withholding income tax at a general rate of 15% (a 25% rate may apply if the foreign beneficiary is resident or domiciled in a jurisdiction deemed to be a tax haven for Brazilian tax purposes). Although Law No. 10,833/03 is not completely clear with respect to what is considered to be an asset located in Brazil, ADSs generally should not be considered to be assets located in Brazil for purposes of such Law because they represent securities issued and negotiated in an offshore exchange market. It is important to note, however, that even if ADSs were considered to be assets located in Brazil, Non-Resident Holders not resident or domiciled in tax havens may still apply for exemption from capital gains tax according to Article 81 of Law No. 8,981/95.

(b) Conversion of Our Preferred Shares into ADSs

The deposit by a Non-Resident Holder of our preferred shares with the depositary for conversion into ADSs may be subject to Brazilian capital gains tax, if such Non-Resident Holder is resident or domiciled in a tax haven or if such preferred shares were not registered with the Brazilian Central Bank according to CMN Resolution No. 2,689/00. In those cases, the difference between the acquisition cost of such preferred shares or the amount otherwise previously registered with the Brazilian Central Bank and the average price of such preferred shares, according to CMN Resolution 1.927/93, may be considered taxable capital gain, and may be subject to income tax at a general rate of 15%.

Non-Resident Holders that are resident or domiciled in tax havens may be subject to 25% capital gain tax on the sale or transfer of shares out of the financial markets upon such a conversion.

On the other hand, when Non-Resident Holders that are not resident or domiciled in tax havens deposit preferred shares registered according to CMN Resolution No. 2,689/00 in exchange for ADSs, such deposit should not be subject to capital gain tax.

(c) Sale or Other Disposition of Our Preferred Shares

Non-Resident Holders not resident or domiciled in tax havens that register their portfolio according to CMN Resolution No. 2,689/00 benefit from a special tax treatment according to which any capital gain arising from the sale of securities within Brazilian stock exchanges is exempt from income tax. On the other hand, sale of shares not registered according to CMN Resolution No. 2,689/00 or made out of Brazilian stock exchanges is generally subject to 15% capital gain tax.

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Such special treatment is not applicable to Non-Resident Holders resident or domiciled in tax havens, who are subject to general taxation rules applicable to Brazilian residents on the sale of their investments in financial markets, including stock exchanges and over-the-counter markets. The taxation rate is then generally 15%. If such Non-Resident Holders sell shares out of the financial markets, the income taxation rate shall raise to 25%. Any exercise of preemptive rights related to our preferred shares (and in connection with the ADS program) will not be subject to Brazilian taxation. The gains from the sale or assignment of preemptive rights will be subject to income tax according to rates that vary depending on the location of the Non-Resident Holder and the market in which such rights are sold. If the Non-Resident Holder is not resident or domiciled in a tax haven, the sale of preemptive rights is exempt from tax if made within the Brazilian stock exchange markets or is subject to 15% income tax if made beyond stock exchange market. If the Non-Resident Holder is resident or domiciled in a tax haven, the sale of preemptive rights is generally subject to 15% income tax if made within Brazilian financial markets or 25% tax if the rights are sold beyond such markets.

Tax on Foreign Exchange on Financial Transactions

Pursuant to Decree No. 6,306/07, and further amendments, IOF/FX may be levied on foreign exchange transactions, affecting either or both the inflow or outflow of investments. The IOF/FX rates are set by the Brazilian executive branch, and the highest applicable rate is 25.0% (See “Item 4B. Business Overview — Regulation and Supervision — Taxation”).

The rate of IOF/FX imposed on foreign exchange transactions carried out by a Non-Resident Holder for the purpose of investing in the financial and capital markets may vary from time to time as defined by the Brazilian government and the rates may be different based on the type of investment. The inflow of proceeds into Brazil for the acquisition of shares under CMN Resolution No. 2,689/00 is subject to 0.0% IOF/FX tax. IOF/FX rate is also zero in the outflow of foreign investment and on the payment of interest on net equity and dividends.

The acquisition of ADSs is not subject to IOF tax. The IOF/Securities tax is levied at a rate of 1.5% on the assignment of shares traded in the Brazilian stock exchange market in order to permit the issuance of depositary receipts to be negotiated overseas.

Other Brazilian Taxes

There are no Brazilian inheritance, gift or succession taxes applicable to the transfer of ownership or title (ownership without beneficial interest) of our preferred shares or ADSs or the vesting of free beneficial interest of such shares or ADSs outside Brazil by a Non-Resident Holder, except for gift, inheritance and legacy taxes that are levied by some states of Brazil if bestowed in such states of Brazil or abroad when the receiver is resident or domiciled in these states of Brazil. There is no Brazilian stamp, issue, registration, or similar taxes or duties payable by Non-Resident Holders of our preferred shares or ADSs.

U.S. Federal Income Tax Considerations

The following is a general discussion of certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of our preferred shares or ADSs by U.S. Holders (as defined below) who hold such preferred shares or ADSs as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). This discussion does not address all of the tax considerations that may be relevant to U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special rules under U.S. federal income tax laws, such as banks, insurance companies, retirement plans, regulated investment companies, real estate investment trusts, dealers in securities, brokers, tax-exempt entities, certain former citizens or residents of the United States, U.S. Holders who hold our preferred shares or ADSs as part of a “straddle,” “hedging,” “conversion” or other integrated transaction, U.S. Holders who mark their securities to market for U.S. federal income tax purposes, U.S. Holders whose functional currency is not the U.S. dollar, U.S. Holders that own (or are deemed to own) 10% or more (by voting power) of our stock or U.S. Holders that receive our preferred shares or ADSs as compensation. In addition, this discussion does not address the effect of any state, local or non-U.S. tax laws or any U.S. federal estate, gift or alternative minimum tax considerations.

This discussion is based on the Code, the Treasury Regulations promulgated thereunder and administrative and judicial pronouncements, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. This discussion also assumes that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.

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For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of our preferred shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or certain electing trusts that were in existence on August 19, 1996 and were treated as domestic trusts on that date.

If an entity treated as a partnership for U.S. federal income tax purposes invests in our preferred shares or ADSs, the U.S. federal income tax considerations relating to such investment generally will depend in part upon the status and activities of such entity and its partners. Such an entity should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership and disposition of such preferred shares or ADSs.

INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE U.S. FEDERAL INCOME AND OTHER TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR PREFERRED SHARES OR ADSS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR NON-U.S. TAX LAWS.

Except where specifically described below, this discussion assumes that we are not a passive foreign investment company (a “PFIC”), for U.S. federal income tax purposes. Please see the discussion under “Passive Foreign Investment Company Considerations” below.

Treatment of ADSs

A U.S. Holder of ADSs generally will be treated for U.S. federal income tax purposes as the owner of such U.S. Holder’s proportionate interest in our preferred shares held by the depositary that are represented and evidenced by such ADSs. Accordingly, any deposit or withdrawal of our preferred shares in exchange for ADSs generally will not result in the realization of gain or loss to such U.S. Holder for U.S. federal income tax purposes.

Distributions

A U.S. Holder that receives a distribution with respect to our preferred shares (whether held through ADSs or directly), including distributions of interest on stockholders’ equity as described above under “—Brazilian Tax Considerations – Taxation of Interest on Net Equity,” generally will be required to include the amount of such distribution (without reduction for any Brazilian withholding tax with respect thereto) in gross income as a dividend to the extent of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) on the date such U.S. Holder (or the depositary, in the case of ADSs) actually or constructively receives such distribution, and will not be eligible for the dividends received deduction allowed to corporations. A distribution on our preferred shares (whether held through ADSs or directly) in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s basis in such preferred shares or ADSs, as the case may be, and thereafter as gain from the sale or exchange of such preferred shares or ADSs. We have not maintained and do not plan to maintain calculations of earnings and profits for U.S. federal income tax purposes. As a result, a U.S. Holder may need to include the entire amount of any such distribution in income as a dividend.

The U.S. dollar value of any distribution on our preferred shares made in Brazilian reais generally should be calculated by reference to the exchange rate between the U.S. dollar and the Brazilian real in effect on the date of receipt of such distribution by the U.S. Holder (or the depositary, in the case of ADSs), regardless of whether the reais so received are in fact converted into U.S. dollars. If the reais so received are converted into U.S. dollars on the date of receipt, the U.S. Holder of the relevant preferred shares or ADSs generally should not recognize foreign currency gain or loss on such conversion. If the reais so received are not converted into U.S. dollars on the date of receipt, such U.S. Holder generally will have a basis in such reais equal to the U.S. dollar value of such reais on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of such reais by such U.S. Holder generally will be treated as ordinary income or loss and generally will be income or loss from sources within the United States.

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Distributions treated as dividends that are received by certain non-corporate U.S. persons (including individuals) in respect of stock of a non-U.S. corporation (other than a corporation that is, in the taxable year during which the distributions are made or the preceding taxable year, a PFIC) that is readily tradable on an established securities market in the United States generally qualify for a 20% reduced maximum tax rate (and potentially additional tax discussed below under “Medicare Tax”) so long as certain holding period and other requirements are met. Since the ADSs will be listed on the NYSE, unless we are treated as a PFIC with respect to a U.S. Holder, dividends received by such a U.S. Holder in respect of the ADSs should qualify for the reduced rate. Based on existing guidance, it is not entirely clear whether dividends received by such a U.S. Holder of our preferred shares in respect of such shares will qualify for the reduced rate, because our preferred shares are not themselves listed on a United States exchange. Special rules apply for purposes of determining the recipient’s investment income (which may limit deductions for investment interest) and foreign income (which may affect the amount of U.S. foreign tax credit) and to certain extraordinary dividends. Each U.S. Holder that is a non-corporate taxpayer should consult its own tax advisor regarding the possible applicability of the reduced tax rate and the related restrictions and special rules.

Sale, Exchange or Other Disposition of Preferred Shares or ADSs

Upon a sale, exchange or other disposition of our preferred shares or ADSs, a U.S. Holder generally will recognize gain or loss equal to the difference between the amount realized on such sale, exchange or other disposition and such U.S. Holder’s tax basis in such preferred shares or ADSs. Such gain or loss generally will be long-term capital gain or loss if such U.S. Holder held such preferred shares or ADSs for more than one year at the time of disposition. Certain non-corporate U.S. Holders are entitled to preferential treatment for net long-term capital gains. The ability of a U.S. Holder to offset capital losses against ordinary income is limited.

A U.S. Holder that receives Brazilian reais from the sale, exchange or other disposition of our preferred shares generally will realize an amount equal to the U.S. dollar value of such reais on the settlement date of such sale, exchange or other disposition if (i) such U.S. Holder is a cash basis or electing accrual basis taxpayer and our preferred shares are treated as being “traded on an established securities market” or (ii) such settlement date is also the date of such sale, exchange or other disposition. If the reais so received are converted into U.S. dollars on the settlement date, such U.S. Holder generally should not recognize foreign currency gain or loss on such conversion. If the reais so received are not converted into U.S. dollars on the settlement date, such U.S. Holder generally will have a basis in such reais equal to the U.S. dollar value of such reais on the settlement date. Any gain or loss on a subsequent conversion or other disposition of such reais by such U.S. Holder generally will be treated as ordinary income or loss and generally will be income or loss from sources within the United States. Each U.S. Holder should consult its own tax advisor regarding the U.S. federal income tax consequences of receiving reais from the sale, exchange or other disposition of our preferred shares in cases not described in the first sentence of this paragraph.

Foreign Tax Credit Considerations

Distributions on our preferred shares (whether held through ADSs or directly), including distributions of interest on stockholders’ equity as described above under “— Brazilian Tax Considerations — Taxation of Interest on Net Equity,” that are treated as dividends, before reduction for any Brazilian withholding taxes with respect thereto, will generally be included in the gross income of a U.S. Holder. Thus, such U.S. Holder may be required to report income for such purposes in an amount greater than the actual amount such U.S. Holder receives in cash. Distributions treated as dividends generally will constitute income from sources outside the United States and generally will be categorized for U.S. foreign tax credit purposes as “passive category income” or, in the case of some U.S. Holders, as “general category income.” Subject to applicable limitations and holding period requirements, a U.S. Holder may be eligible to elect to claim a U.S. foreign tax credit against its U.S. federal income tax liability for any such Brazilian withholding taxes. Under current law, gain resulting from a sale or other disposal of our preferred shares or ADSs may be subject to Brazilian income or withholding taxes. A U.S. Holder’s use of a foreign tax credit with respect to any such Brazilian income or withholding taxes could be limited, as such gain generally will constitute income from sources within the United States. A U.S. Holder that does not claim a U.S. foreign tax credit generally may instead claim a deduction for any such Brazilian taxes, but only for a taxable year in which such U.S. Holder elects to do so with respect to all non-U.S. income taxes. Foreign currency exchange gain or loss generally will constitute income from sources within the United States. The rules relating to foreign tax credits are very complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.

Passive Foreign Investment Company Considerations

Special U.S. federal income tax rules apply to U.S. persons owning shares of a PFIC. A non-U.S. corporation generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying relevant look-through rules with respect to the income and assets of certain subsidiaries, either: at least 75% of its gross income is “passive income”, or on average at least 50% of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income.

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For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties, gains from the disposition of passive assets and gains from commodities transactions.

The application of the PFIC rules to banks is unclear under present U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules. The United States Internal Revenue Service (or “IRS”), has issued a notice, and has proposed regulations, that exclude from passive income any income derived in the active conduct of a banking business by a qualifying foreign bank, also known as the Active Bank Exception. The IRS notice and proposed regulations have different requirements for qualifying as a foreign bank, and for determining the banking income that may be excluded from passive income under the Active Bank Exception. Moreover, the proposed regulations have been outstanding since 1994 and will not be effective unless finalized.

Based on estimates of our current and projected gross income and gross assets, we do not believe that we will be classified as a PFIC for our current or future taxable years. The determination of whether we are a PFIC, however, is made annually and is based upon the composition of our income and assets (including income and assets of entities in which we hold at least a 25% interest), and the nature of our activities (including our ability to qualify for the Active Bank Exception).

Because final regulations have not been issued and because the notice and the proposed regulations are inconsistent, our status under the PFIC rules is subject to considerable uncertainty. While we conduct, and intend to continue to conduct, a significant banking business, there can be no assurance that we will satisfy the specific requirements for the Active Bank Exception under either the IRS notice or the proposed regulations. Accordingly, U.S. Holders could be subject to U.S. federal income tax under the rules described below.

If we are treated as a PFIC for any taxable year during which a U.S. Holder owns our preferred shares or ADSs, any gain realized on a sale or other taxable disposition of such preferred shares or ADSs and certain “excess distributions” (generally distributions in excess of 125% of the average distribution over the prior three-year period, or if shorter, the holding period for such preferred shares or ADSs) will be treated as ordinary income and will be subject to tax as if (i) the excess distribution or gain had been realized ratably over the U.S. Holder’s holding period for such preferred shares or ADSs, (ii) the amount deemed realized in each year had been subject to tax in each such year at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at such U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (iii) the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years.

We do not expect to provide information that would allow U.S. Holders to avoid the foregoing consequences by making a “qualified electing fund” election.

If we are treated as a PFIC and, at any time, we invest in non-U.S. corporations that are classified as PFICs (“Subsidiary PFICs”), U.S. Holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interest in any such Subsidiary PFIC. If we are treated as a PFIC, a U.S. Holder could incur liability for the deferred tax and interest charge described above if either (i) we receive a distribution from, or dispose of all or part of our interest in, any such Subsidiary PFIC or (ii) such U.S. Holder disposes of all or part of our preferred shares or ADSs.

A U.S. holder of stock in a PFIC (but possibly not a Subsidiary PFIC, as discussed below) may make a “mark-to-market” election, provided the PFIC stock is “marketable stock” as defined under applicable Treasury regulations (i.e., “regularly traded” on a “qualified exchange or other market”). Under applicable Treasury regulations, a “qualified exchange or other market” includes (i) a national securities exchange that is registered with the U.S. Securities and Exchange Commission or the national market system established under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or (ii) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and meets certain trading, listing, financial disclosure and other requirements set forth in applicable Treasury regulations. The NYSE constitutes a qualified exchange or other market. Although the IRS has not addressed whether the BM&FBOVESPA meets the requirements to be treated as a qualified exchange or other market, we believe that the BM&FBOVESPA should be so treated. PFIC stock traded on a qualified exchange or other market is regularly traded on such exchange or other market for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. We cannot assure U.S. Holders that our preferred shares or ADSs will be treated as “marketable stock” for any taxable year.

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The tax consequences that would apply if we were a PFIC would be different from those described above if a U.S. Holder validly makes a mark-to-market election as of the beginning of such U.S. Holder’s holding period. If such an election were made, such U.S. Holder generally would (i) include in gross income, entirely as ordinary income, an amount equal to the excess, if any, of the fair market value of our preferred shares or ADSs as of the close of each taxable year and such U.S. Holder’s adjusted tax basis in such preferred shares or ADSs, and (ii) deduct as an ordinary loss the excess, if any, of such U.S. Holder’s adjusted tax basis in such preferred shares or ADSs over the fair market value of such preferred shares or ADSs at the end of the taxable year, but only to the extent of the net amount previously included in gross income as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of our preferred shares or ADSs in a taxable year in which we were a PFIC would be treated as ordinary income, and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss. A U.S. Holder’s adjusted tax basis in such preferred shares or ADSs would increase or decrease by the amount of the gain or loss taken into account under the mark-to-market regime. Even if a U.S. Holder is eligible to make a mark-to-market election with respect to our preferred shares or ADSs, however, it is not clear whether or how such election would apply with respect to the stock of any Subsidiary PFIC that such U.S. Holder is treated as owning, because such Subsidiary PFIC stock might not be marketable stock. The mark-to-market election is made with respect to marketable stock in a PFIC on a stockholder-by-stockholder basis and, once made, can only be revoked with the consent of the IRS. Special rules would apply if the mark-to-market election is not made for the first taxable year in which a U.S. Holder owns any equity interest in us while we are a PFIC.

A U.S. Holder who owns our preferred shares or ADSs during any taxable year that we are treated as a PFIC generally would be required to file an information return with respect to us and any Subsidiary PFIC in which the U.S. Holder holds a direct or indirect interest. U.S. Holders should consult their own tax advisors regarding the application of the PFIC rules to our preferred shares or ADSs and the availability and advisability of making a mark-to-market election should we be considered a PFIC for any taxable year.

Medicare Tax

Beginning in 2013, in addition to regular U.S. federal income tax, certain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of distributions with respect to and net gain from the disposition of a preferred share or ADS.

Backup Withholding and Information Reporting

Backup withholding and information reporting requirements generally apply to certain U.S. Holders with respect to payments made on or proceeds from the sale, exchange or other disposition of our preferred shares or ADSs. A U.S. Holder not otherwise exempt from backup withholding generally can avoid backup withholding by providing a properly executed IRS Form W-9. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Disclosure Requirements for Specified Foreign Financial Assets

Individual U.S. Holders (and certain U.S. entities specified in U.S. Treasury Department guidance) who, during any taxable year, hold any interest in any “specified foreign financial asset” generally will be required to file with their U.S. federal income tax returns certain information on IRS Form 8938 if the aggregate value of all such assets exceeds certain specified amounts. “Specified foreign financial asset” generally includes any financial account maintained with a non-U.S. financial institution and may also include our preferred shares or ADSs if they are not held in an account maintained with a financial institution. Substantial penalties may be imposed, and the period of limitations on assessment and collection of U.S. federal income taxes may be extended, in the event of a failure to comply. U.S. Holders should consult their own tax advisors as to the possible application to them of this filing requirement.

Disclosure Requirements for Certain U.S. Holders Recognizing Significant Losses

A U.S. Holder that claims significant losses in respect of our preferred shares or ADSs for U.S. federal income tax purposes (generally (i) U.S.$10 million or more in a taxable year or U.S.$20 million or more in any combination of taxable years for corporations or partnerships all of whose partners are corporations, (ii) U.S.$2 million or more in a taxable year or U.S.$4 million or more in any combination of taxable years for all other taxpayers, or (iii) U.S.$50,000 or more in a taxable year for individuals or trusts with respect to a foreign currency transaction) may be subject to certain disclosure requirements for “reportable transactions.” U.S. Holders should consult their own tax advisors concerning any possible disclosure obligation with respect to our preferred shares or ADSs.

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10F. Dividends and Paying Agents

Not applicable.

10G. Statement by Experts

Not applicable.

10H. Documents on Display

We are subject to the informational requirements for foreign private issuers of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy reports and other information filed with the SEC at the public reference facilities maintained by the SEC at 100 F Street, N.W., Washington D.C. 20549 and at the SEC’s regional offices at 500 West Madison Street, Suite 1400, Chicago Illinois 60661, and 233 Broadway, New York, New York 10279. Copies of the materials may be obtained by mail from the Public Reference Room of the SEC at 100 F Street, N.W., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at http://www.sec.gov, from which you can electronically access those materials, including this annual report and the accompanying exhibits. We also file financial statements and other periodic reports with the CVM located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20050-901, Brazil. The CVM maintains an Internet website at http://www.cvm.gov.br.

Copies of our annual report on Form 20-F will be available for inspection upon request at our offices at Praça Alfredo Egydio de Souza Aranha 100 - São Paulo - SP - 04344-902 – Brazil.

10I. Subsidiary Information

Not required.

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ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

Derivative Instruments Qualifying for Hedge Accounting

Below we present an overview of the hedge strategies that are categorized as cash flow hedges and hedges of net investments under IFRS. For the accounting policy regarding these hedges we refer to note 2.4 g III of our consolidated financial statements.

Starting with 2008, we implemented cash flow hedge strategies to hedge the variability of future cash flows of interest payments and utilize DI Futures contracts -traded on BM&FBovespa with respect to certain real-denominated variable-interest liabilities and interest rate swaps with respect to US dollar-denominated redeemable preferred shares issued by one of our subsidiaries.

Our cash flow hedge strategies consist of hedging the exposure to the variability of cash flows of interest payments that are attributable to changes in interest rates with respect to recognized liabilities.

Itaú Unibanco Holding has applied cash flow hedge strategies as follows:

· Time deposits and repurchase agreements: hedge the variability of cash flows of interest payments resulting from changes in the CDI interest rate.

· Redeemable preferred shares: hedge the variability of cash flows of interest payments resulting from changes in the LIBOR interest rate.

· Subordinated certificates of deposit (CDB): hedge the variability of cash flows of interest payments resulting from changes in the CDI interest rate.

The carrying amounts as of December 31, 2012 of time deposits and repurchase agreements, redeemable preferred shares and subordinated certificates of deposit was R$50,193 million and the notional amount of the related derivatives was R$50,057 million. These cash flow hedge strategies will mature between 2013 and 2017.

In addition, in 2011 we implemented a hedging strategy for our net investments in foreign operations consisting of a hedge of the exposure in foreign currency arising from the functional currency of the foreign operation, upon translation to the functional currency of the head office. In connection with our hedging strategy for net investments in foreign operations, we designed DI Futures contracts traded on BM&FBovespa, and forward contracts or non-deliverable forward contracts entered into by our subsidiaries abroad.

The carrying amount as of December 31, 2012 of investments in foreign operations was R$5,156 million and the notional amount of the related derivatives was R$8,593 million. The notional amount of the derivatives includes the overhedge rate of 40% regarding taxes. This hedging strategy has no stated maturity except at time of sale of the investments abroad.

In 2012 we implemented a hedging strategy against market risk consisting of hedging the exposure to variation in market risk related to receipt of interest, resulting from changes in interest rates related to recognized assets. We hedged mortgage notes portfolios in Chile in the amount of R$470 million, which gave rise to an adjustment to market value of R$(4) million which represents the effective hedge portion recognized in income.

The notional amount as of December 31, 2012 of the interest rate swap contracts used to hedge strategy against market risk was R$470 million, which gave rise to an adjustment to market value of R$4 million. The interest rate swaps have maturities between 2020 and 2027.

The fair value of the derivatives used for our hedging strategies our included in note 8 of our consolidated financial statements included in Item 18.

Market Risk

Market risk is the possibility of losses resulting from fluctuations in the market values of positions held by a financial institution, most typically caused by variations in foreign exchange rates, interest rates, price indexes, equity and commodity prices, along with various indexes on these risk factors.

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Market risk management is the process by which our management monitors and controls risk of variations in the value of financial instruments, while aiming to optimize the risk-return ratio through an adequate limits structure, effective risk management models and related management tools.

Our market risk control framework covers all financial instruments contained in all portfolios of the companies under our control. In this respect, Itaú Unibanco Holding’s policies and general market risk management framework are consistent with the principles of CMN Resolution No. 3,464, of June 26, 2007, and subsequent amendments. These principles guide our approach to market risk control and management across all business units and legal entities of the Itaú Unibanco Holding group.

Itaú Unibanco Holding’s market risk management strategy is aimed at balancing corporate business goals, taking into account, among other things:

· Political, economic and market conditions;

· The market risk profile of the portfolio; and

· Expertise within the group to support operations in specific markets.

Itaú Unibanco Holding’s market risk management framework is subject to the governance and hierarchy of committees, with specific limits and established authorities. These range from aggregated risk indicators at the portfolio level, to more granular limits at the individual desk level. They help ensure the effectiveness and coverage of control. Limits are calibrated based on projections of future balance sheet data, stockholders’ equity available to support trading activities, and the risk profile of each organizational entity (defined in terms of risk measurement as used within the risk management process). Limits are monitored on a daily basis, with compliance reported to and discussed at the relevant board and management committees.

The structure of limits and alerts follows the guidelines of our board of directors. These are approved by the Superior Risk Policies Committee (CSRisc), after endorsement by the Superior Institutional Treasury Committee (CSTI). This structure is reviewed at least annually.

Key principles underlying market risk control are as follows:

· All market risk taken should be in line with Itaú Unibanco Holding’s risk-return objectives;

· Through disciplined dialogue, senior management is to be kept informed of the overall market risk profile and its evolution through time;

· There should be transparency as to how the business works to optimize its results;

· The market risk control structure should provide early warning mechanisms to facilitate effective risk management, without obstructing the business objectives, and

· Concentration risks should be avoided.

Itaú Unibanco Holding uses proprietary systems to measure consolidated market risk. These systems have controlled access, high availability, large data storage capacity, capability for data recovery, and the infrastructure to ensure business continuity in case of contingency (disaster recovery). We monitor market developments and emerging regulatory requirements on an ongoing basis, to ensure Itaú Unibanco remains current.

Market risk control is managed by a group that is independent from the “risk origination” business units, and is responsible for performing the daily activities of risk measurement, evaluation, analysis and reporting to responsible individuals and units, according to established governance requirements, and monitoring the necessary actions to readjust the position and/or level of risk. For this purpose, there is a structured process of communication and information flow, which provides information to the Superior Committees and ensures compliance with the requirements of Brazilian and relevant foreign regulatory agencies.

Itaú Unibanco Holding hedges transactions with clients and proprietary positions, including its foreign investments, in order to mitigate risk arising from fluctuations in market risk factors (e.g., prices) and to prevent positions from breaching relevant limits. Derivatives are commonly used for these hedging activities. When these transactions are classified as hedges for accounting purposes, specific supporting documentation is provided, including ongoing follow-up of hedge effectiveness (retrospective and prospective) and other changes in the accounting process. The accounting and managerial hedging procedures are governed by the institutional polices of Itaú Unibanco Holding.

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Our market risk framework categorizes transactions as part of either the banking portfolio or the trading portfolio, in accordance with criteria established by Basel II and by Circular No. 3,354, of June 27, 2007 and CMN Resolution No. 3,464.

The trading portfolio consists of transactions (including derivatives) held with intent to trade in the short term, to benefit from arbitrage opportunities, or to hedge risk within this portfolio, and that have no restriction on trading. Profits are based on changes in actual or expected prices in the short term.

The banking portfolio is composed of transactions that are not classified in the trading portfolio. Treasury transactions in the banking portfolio are executed in conjunction with active management of financial risks inherent in our overall balance sheet, and are held without intent to trade in the short term. The banking portfolio may include derivatives.

Market risk exposures inherent in various financial instruments, including derivatives, are composed of various risk factors. A risk factor refers to a market parameter whose variation impacts a position’s valuation. The main risk factors measured by Itaú Unibanco Holding are as follows:

· Interest rates: the risk of losses from transactions subject to interest rates variations, including:

o Fixed income interest rates denominated in reais; and

o An interest rate index linked to interest rates;

· Foreign exchange-linked: the risk of losses arising from positions in transactions which are subject to a foreign exchange-linked interest rate;

· Foreign exchange rates: the risk of losses from positions subject to foreign exchange rate variation (e.g., foreign currency positions);

· Price index-linked: the risk of losses from transactions subject to the variations in the price of index-linked interest rates;

· Equities: the risk of losses from transactions subject to equity price variations; and

· Commodities: the risk of losses from transactions subject to commodity price variations.

Market risk is analyzed based on the following metrics:

· Value at Risk (VaR): a statistical metric that quantifies the expected potential economic loss in normal market conditions, considering a defined holding period and confidence level;

· Losses in Stress Scenarios (Stress Testing): a simulation technique to evaluate the impact, in the assets, liabilities and derivatives portfolios, of various risk factors in extreme market situations (based on prospective scenarios);

· Stop Loss Alerts: an additional stress scenario where cumulative losses are added to the potential maximum loss in bullish and bearish scenarios;

· Concentration: cumulative exposure of certain assets or risk factors calculated at market value (“MtM - Mark to Market”).

In addition to the risk metrics described above, sensitivity and loss control measures are also analyzed. They include:

· Gap Analysis: accumulated exposure of cash flows by risk factor, which are marked-to-market and positioned by settlement dates;

· Sensitivity (DV01 – Delta Variation Risk): impact on the market value of cash flows when a 1.0 annual basis point change is applied to current interest rates or index rates and 1 percentage point is applied to share prices and currencies;

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· Sensitivities to Various Risk Factors (Greek): partial derivatives of a portfolio of options on the prices of the underlying assets, implied volatilities, interest rates and time; and

· Stop Loss: maximum loss that a portfolio classified in the trading book is authorized to reach.

VaR – Consolidated Itaú Unibanco Holding

The internal VaR model used by Itaú Unibanco Holding considers a one-day holding period and a 99.0% confidence level. Volatilities and correlations are estimated based on a “volatility weighting” methodology that confers higher weight to the most recent information.

The table below shows the Consolidated Global VaR, comprising the portfolios of Itaú Unibanco Holding, and its subsidiaries abroad (Banco Itaú BBA International S.A., Banco Itaú Argentina S.A., Banco Itaú Chile S.A., Banco Itaú Uruguay S.A., Banco Itaú Paraguay S.A. and Itaú BBA Colombia S.A. - Corporación Financiera), showing where there are higher concentrations of market risk.

Itaú Unibanco Holding on a consolidated basis, maintained its conservative management and portfolio diversification in keeping its policy of operating within lower limits in relation to its capital.

In order to improve the quality of quantitative market risk information, beginning in June 2012, Itaú Unibanco Holding changed the composition of the risk factors presented in the following VaR tables, reclassifying and combining certain risks between risk factors. Itaú Unibanco Holding’s total market risk exposure, expressed by total Global VaR, was not impacted by these reclassifications. Prior year figures have been restated, so the figures presented for both current and previous years reflect the revised risk factors, facilitating comparison.

In 2012, our average global VaR was R$289.7 million or 0.38% of our consolidated stockholders’ equity, as of December 31, 2012, compared to R$142.0 million in 2011, or 0.19% of our consolidated stockholders’ equity, as of December 31, 2011. The higher average global VaR in 2012 was primarily the result of the volatility of financial markets related to the changes to the SELIC interest rate and interest on savings accounts, as well as related fluctuations in interest rate structure in the futures market, most of which occurred in the second and fourth quarters of 2012.

Global VaR

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor Group
Brazilian interest rate(1)		348.7			191.2		71.8		427.6
Other Interest rate		11.4			20.4		7.3		49.6
FX rate		8.8			25.7		4.6		53.9
Brazilian inflation indexes		51.2			110.3		14.8		325.0
Equities and commodities		16.8			24.2		13.6		43.5
Banco Itaú BBA International		1.1			1.7		0.7		5.1
Banco Itaú Argentina		5.5			3.0		1.7		5.6
Banco Itaú Chile		4.4			5.5		3.2		9.6
Banco Itaú Uruguay		2.0			1.7		0.3		3.4
Banco Itaú Paraguay		1.0			0.4		0.2		1.4
Itaú BBA Colombia		0.0			0.0		0.0		0.0
Diversification effect(2)		(77.1	)
Total		373.7			289.7		118.0		601.4

(1) Adjusted to reflect the difference in Brazilian tax treatment of investments abroad and investments in Brazil.

(2) Reduction of risk due to the combination of all risk factors.

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Global VaR

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor Group
Brazilian Interest rate(1)		104.8			100.9		24.6		222.6
Other Interest rate		23.6			29.5		12.6		59.0
FX rate		18.0			19.1		5.2		38.8
Brazilian Inflation Indexes		21.1			17.7		2.5		41.6
Equities and Commodities		25.2			36.9		17.4		57.1
Banco Itaú BBA International		1.5			2.9		0.4		6.5
Banco Itaú Argentina		3.7			4.0		1.6		9.4
Banco Itaú Chile		5.3			5.3		1.9		10.3
Banco Itaú Uruguay		0.7			0.5		0.2		1.1
Banco Itaú Paraguay		0.2			0.6		0.2		1.7
Itaú BBA Colombia
Diversification effect(2)		(53.4	)
Total		150.9			142.0		74.0		278.5

(1) Adjusted to reflect the difference in Brazilian tax treatment of investments abroad and investments in Brazil.

(2) Reduction of risk due to the combination of all risk factors.

VaR – Institutional Treasury

The Institutional Treasury maintains its risk management segregated in the Banking and Trading Desks.

Banking Desk

The Banking Desk, which has a portfolio composed of commercial transactions and related financial instruments, increased the Total VaR of its portfolio in 2012, as compared to 2011. The average VaR of the Banking Desk portfolio was R$242.5 million in 2012, compared to R$83.4 million in 2011. The increase in the average VaR of the Banking Desk in 2012 was due to an increase in volatility and in our positions in the Brazilian interest rate risk factor group.

VaR of Banking Portfolio

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor Group
Brazilian interest rate(1)		342.6			173.1		54.9		391.0
Other interest rate		11.4			17.1		6.3		42.3
FX rate		2.0			3.1		0.0		17.4
Brazilian inflation indexes		44.5			102.2		15.4		308.4
Equities and commodities		3.6			3.9		2.5		6.7
Diversification effect(2)		(59.5	)
Total		344.6			242.5		62.4		508.5

(1) Adjusted to reflect the difference in Brazilian tax treatment of investments abroad and investments in Brazil.

(2) Reduction of risk due to the combination of all risk factors.

VaR of Banking Portfolio

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor Group
Brazilian interest rate(1)		95.2			88.2		22.7		193.0
Other interest rate		23.6			24.9		8.6		46.3
FX rate		4.7			2.1		0.0		14.9
Brazilian inflation indexes		17.9			11.7		2.4		33.8
Equities and commodities		5.2			5.5		2.7		10.6
Diversification effect(2)		(49.2	)
Total		97.5			83.4		31.1		171.5

(1) Adjusted to reflect the difference in Brazilian tax treatment of investments abroad and investments in Brazil.

(2) Reduction of risk due to the combination of all risk factors.

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Trading Desk

The Trading Desk takes positions aiming to optimize risk-weighted results. Effective market risk control enabled Itaú Unibanco Holding to manage efficiently market changes, as well as maintain ongoing improvement of diversification and sophistication of its transactions. The Trading Desk seeks the best domestic and foreign market opportunities, within the pre-established limits, and strives to create a well-diversified risk exposure.

The average VaR of the Trading Desk was R$54.3 million in 2012, compared to R$69.1 million in 2011.

VaR of Trading Portfolio

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor Group
Brazilian interest rate(1)		25.2			38.3		12.8		95.4
Other interest rate		6.4			10.7		4.2		27.2
FX rate		9.9			25.1		4.9		55.6
Brazilian inflation indexes		7.1			9.4		1.8		22.2
Equities and commodities		14.8			23.3		13.8		41.5
Diversification effect(2)		(38.6	)
Total		24.7			54.3		21.3		112.3

(1) Adjusted to reflect the difference in Brazilian tax treatment of investments abroad and investments in Brazil.

(2) Reduction of risk due to the combination of all risk factors.

VaR of Trading Portfolio

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor Group
Brazilian interest rate(1)		18.4			31.2		9.5		79.0
Other interest rate		7.5			11.5		5.5		27.1
FX rate		22.0			20.9		7.7		37.8
Brazilian inflation indexes		4.7			6.9		0.9		24.5
Equities and commodities		24.0			7.5		1.5		15.1
Diversification effect(2)		(22.6	)
Total		53.9			69.1		38.4		125.0

(1) Adjusted to reflect the difference in Brazilian tax treatment of investments abroad and investments in Brazil.

(2) Reduction of risk due to the combination of all risk factors.

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VaR – Foreign Units

Itaú Unibanco Holding’s foreign units are financial institutions based in different countries that operate with local treasuries, with market risk exposures monitored by local risk control groups.These treasury and risk control groups report to equivalent structures of Itaú Unibanco Holding. These foreign units are Banco Itaú BBA International, Banco Itaú Argentina, Banco Itaú Chile, Banco Itaú Uruguay, Banco Itaú Paraguay and Itaú BBA Colombia. Our Colombian operations were recently authorized by local authorities and are expected to gradually grow throughout 2013.

In 2012, the average VaR of Banco Itaú BBA International was R$1.7 million, compared to R$2.9 million in 2011.

VaR of Banco Itaú BBA International

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
EURIBOR		0.4			0.4		0.1		2.6
LIBOR		0.4			0.6		0.3		1.1
FX rate		0.2			0.7		0.1		4.5
Equities		0.1			0.1		0.0		0.3
Other		0.5			0.2		0.0		0.6
Diversification effect(1)		(0.4	)
Total		1.1			1.7		0.7		5.1

(1) Reduction of risk due to the combination of all risk factors.

VaR of Banco Itaú BBA International

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
EURIBOR		0.1			0.6		0.1		2.6
LIBOR		0.7			0.7		0.3		1.5
FX rate		0.6			1.7		0.2		5.6
Equities		0.0			0.0		0.0		0.0
Other		0.3			0.1		0.0		0.5
Diversification effect(1)		(0.2	)
Total		1.5			2.9		0.4		6.5

(1) Reduction of risk due to the combination of all risk factors.

In 2012, the average VaR of Banco Itaú Argentina was R$3.0 million, compared to R$4.0 million in 2011.

VaR of Banco Itaú Argentina

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (Argentine peso)		3.8			2.6		1.3		4.8
Badlar(1)		0.1			0.5		0.1		1.9
Inflation index linked interest rate		0.0			0.0		0.0		0.0
FX + interest rate – Dollar		4.2			2.7		1.1		5.5
FX + interest rate – Euro		0.4			0.1		0.0		1.0
Diversification effect(2)		(2.9	)
Total		5.5			3.0		1.7		5.6

(1)          Badlar is the average rate offered by commercial banks based on a survey by Central Bank of Argentina for time deposits over 1 million pesos with a maturity of 30 to 35 days.

(2)          Reduction of risk due to the combination of all risk factors.

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VaR of Banco Itaú Argentina

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (Argentine peso)		2.9			4.2		1.8		10.0
Badlar(1)		2.0			0.7		0.1		2.1
Inflation index linked interest rate		0.0			0.0		0.0		0.2
FX + interest rate – Dollar		3.8			1.8		0.3		7.3
FX + interest rate – Euro		0.2			0.2		0.0		1.1
Diversification effect(2)		(5.2	)
Total		3.7			4.0		1.6		9.4

(1)          Badlar is the average rate offered by commercial banks based on a survey by Central Bank of Argentina for time deposits over 1 million pesos with a maturity of 30 to 35 days.

(2)          Reduction of risk due to the combination of all risk factors.

In 2012, the average VaR of Banco Itaú Chile was R$5.5 million, compared to R$5.3 million in 2011.

VaR of Banco Itaú Chile

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (Chilean peso)		1.4			0.9		0.3		2.0
Inflation index linked interest rate		4.1			5.2		3.1		8.5
FX + interest rate – Dollar		0.7			0.8		0.1		2.1
FX rate - Other currencies		0.0			0.0		0.0		0.0
Diversification effect(1)		(1.8	)
Total		4.4			5.5		3.2		9.6

(1) Reduction of risk due to the combination of all risk factors.

VaR of Banco Itaú Chile

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (Chilean peso)		0.8			1.5		0.5		2.8
Inflation index linked interest rate		4.3			4.4		1.6		8.5
FX + interest rate – Dollar		1.9			0.9		0.3		2.1
FX rate - Other currencies		0.0			0.0		0.0		0.0
Diversification effect(1)		(1.8	)
Total		5.3			5.3		1.9		10.3

(1) Reduction of risk due to the combination of all risk factors.

In 2012, the average VaR of Banco Itaú Uruguay was R$1.7 million, compared to R$0.5 million in 2011.

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VaR of Banco Itaú Uruguay

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (Uruguayan peso)		0.7			0.5		0.0		1.4
Inflation index linked interest rate		0.4			0.8		0.4		2.2
Dollar linked interest rate		1.8			1.4		0.1		3.6
FX rate		0.1			0.1		0.0		0.4
Diversification effect(1)		(1.0	)
Total		2.0			1.7		0.3		3.4

(1) Reduction of risk due to the combination of all risk factors.

VaR of Banco Itaú Uruguay

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (Uruguayan peso)		0.1			0.0		0.0		0.1
Inflation index linked interest rate		0.7			0.4		0.1		1.0
Dollar linked interest rate		0.1			0.3		0.1		0.7
FX rate		0.0			0.2		0.0		0.6
Diversification effect(1)		(0.2	)
Total		0.7			0.5		0.2		1.1

(1) Reduction of risk due to the combination of all risk factors.

In 2012, the average VaR of Banco Itaú Paraguay was R$0.4 million, compared to R$0.6 million in 2011.

VaR of Banco Itaú Paraguay

2012

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (guarani)		1.0			0.3		0.0		1.3
Dollar linked interest rate		0.1			0.2		0.1		0.3
FX rate		0.0			0.1		0.0		0.3
Diversification effect(1)		(0.1	)
Total		1.0			0.4		0.2		1.4

(1) Reduction of risk due to the combination of all risk factors.

VaR of Banco Itaú Paraguay

2011

	December 31			Average		Minimum		Maximum
	(In millions of R$)
Risk Factor
Fixed income interest rate (guarani)		0.0			0.5		0.0		1.7
Dollar linked interest rate		0.2			0.2		0.1		0.5
FX rate		0.0			0.0		0.0		0.3
Diversification effect(1)		(0.1	)
Total		0.2			0.6		0.2		1.7

(1) Reduction of risk due to the combination of all risk factors.

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Backtesting

The effectiveness of the Value at Risk model is validated on a daily basis by the use of backtesting techniques that compare actual daily results with the pre-established VaR. The number of violations with respect to the pre-established VaR limits should be consistent, within an acceptable margin, with the hypothesis of 99.0% confidence intervals (i.e., there is a 1.0% probability that financial losses could be greater than the losses estimated by the model), considering a range of 250 business days (ending on December 31, 2012). Starting in 2012, the backtesting analysis presented below takes into consideration the ranges suggested by the Basel document “Supervisory Framework for the use of backtesting in conjunction with the internal models approach to market risk capital requirements.” The ranges are divided into:

· GREEN (0 to 4 violations): corresponds to backtesting results that do not suggest any problems with the quality or accuracy of the models adopted;

· YELLOW (5 to 9 violations): refers to an intermediate range group, which indicates the need to pay attention and/or monitoring; and

· RED (10 or more violations): demonstrate the need for improvement action.

In order to illustrate the reliability of risk measures generated from the models used by Itaú Unibanco Holding, we present below the backtesting graphs of (i) the global exposure of the Banking Desk portfolio; (ii) the fixed income interest rate risk factor of the Banking Desk portfolio (the most significant risk factor for the Banking Desk portfolio); and (iii) the total Trading Desk portfolio. These analyses are performed for the last 250 business days (ending on December 31, 2012) and consist of a comprehensive analysis and review of positions of both portfolios.

International units are excluded from the backtesting results presented below, due to the limited materiality of their VaR amounts.

The graphs show the adequacy level of the market risk models used by Itaú Unibanco Holding, presenting the risk (absolute value) x return pairs for the period considered.

Since the diagonal line represents the threshold where risk equals results, all the dots below this line indicate violations to the estimated risk.

For the global exposure of the Banking Desk portfolio, financial losses exceeded the VaR estimated by the model on two days in the period, placing the tested portfolio result in the range GREEN.

For the fixed income interest rate risk factor of the Banking Desk portfolio, financial losses exceeded the VaR estimated by the model on two days in the period, placing the tested portfolio in the range GREEN.

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For the global exposure of the Trading Desk portfolio, actual financial losses never exceeded the VaR estimated by the model, placing the tested portfolio in the range GREEN.

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ITEM 12       DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12A.       Debt Securities

Not applicable.

12B.       Warrants and Rights

Not applicable.

12C.       Other Securities

Not applicable.

12D.       American Depositary Shares

In the United States, our preferred shares trade in the form of ADSs. Since 2005 each ADS represents one preferred share, issued by The Bank of New York Mellon, as depositary, under a Deposit Agreement, dated as of May 31, 2001, as amended and restated as of February 20, 2002 and as of March 30, 2009, effective as of  April 3, 2009, among us, the depositary and the owners and beneficial owners of ADSs from time to time.¹ The depositary’s principal executive office is located at One Wall Street, New York, New York 10286.

We do not treat ADR holders as our shareholders and ADS holders have no shareholder rights. Brazilian Corporate Law governs shareholder rights. The depositary is the holder of the preferred shares underlying the ADSs. Holders of ADSs have ADS holder rights.

Fees and Expenses

The following table summarizes the fees and expenses payable by holders of ADSs:

Persons depositing preferred shares or ADR holders must pay:	For:
US$5.00 (or less) per 100 ADSs (or portion thereof) plus any additional fees charged by any governmental authorities or other institutions for the execution and delivery or surrender of ADRs.	Issuance of ADSs, including issuances resulting from a distribution of preferred shares or rights or other property. Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates.
US$0.02 (or less) per ADS (or portion thereof).	Any cash distribution to you.
A fee equivalent to the fee that would be payable if securities distributed to you had been preferred shares and the shares had been deposited for issuance of ADSs.	Distribution of securities by the depositary to ADS holders.
US$0.02 (or less) per ADS (or portion thereof) per calendar year (in addition to cash distribution fee of US$0.02 per ADS during the year).	Depositary services.
Registration fees.	Registration of transfers of preferred shares on our preferred share register to or from the name of the depositary or its agent when you deposit or withdraw preferred shares.
Foreign currency conversion expenses.	Expenses of the depositary in converting foreign currency to U.S. dollars.
Expenses of the depositary.	Cable, telex and facsimile transmissions (when expressly provided in the Deposit Agreement).
Taxes and other governmental charges the depositary or the custodian have to pay on any ADR or preferred share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes.	As necessary.
Any other charges incurred by the depositary or its agents for servicing the deposited securities.	No charges of  this type are currently made in the Brazilian market.

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Payment of Taxes

The depositary may deduct the amount of any taxes owed from any payments to you. It may also sell deposited securities, by public or private sale, to pay any taxes owed. You will remain liable if the proceeds of the sale are not sufficient to pay the taxes. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to you any proceeds, or send to you any property, remaining after it has paid the taxes.

Reimbursement of Fees

The Bank of New York Mellon, as depositary, has agreed to reimburse us for expenses we incur that are related to establishment and maintenance of the ADS program. The depositary has agreed to reimburse us for our continuing annual stock exchange listing fees. The depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADSs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of United States federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse us annually for certain investor relationship programs or special investor relations promotional activities. In certain instances, the depositary has agreed to provide additional payments to us based on any applicable performance indicators relating to the ADS facility. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to the Company is not necessarily tied to the amount of fees the depositary collects from investors.

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deducting from cash distributions by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services have been paid.

Reimbursement of Fees Incurred in 2012

In 2012, the Company received from the depositary US$12.0 million for promoting and encouraging the ADR program in the market, out-of-pocket maintenance costs for the ADSs (consisting of the expenses of postage costs and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, telephone calls and meetings with investment analysts and investors), any applicable performance indicators relating to the ADS facility, underwriting fees and legal fees.

PART II

ITEM 13          DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

No matters to report.

ITEM 14          MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

No matters to report.

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ITEM 15       CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer (“CEO”), and our chief financial officer (“CFO”), of the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as required by paragraph (b) of the Exchange Act Rules 13a-15 or 15d-15, as of December 31, 2012. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Therefore, our management does not expect that the controls will prevent all errors and all fraud.

Based upon the evaluation performed, our CEO and CFO have concluded that as of December 31, 2012, Itaú Unibanco Holding’s disclosure controls and procedures were effective to provide reasonable assurance that material information relating to Itaú Unibanco Holding and its consolidated subsidiaries is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by IASB.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, it used the criteria established by the Internal Control – Integrated Framework of the Committee of Sponsoring Organizations - COSO. Based on its evaluation and those criteria, our management has concluded that our internal control over financial reporting was effective as of December 31, 2012.

The effectiveness of internal control over financial reporting as of December 31, 2012, was audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report appearing on page F-2 of this Form 20-F.

(c) Attestation Report of the Independent Registered Public Accounting Firm

For the report of PricewaterhouseCoopers Auditores Independentes, our independent registered public accounting firm, dated April 26, 2013, on the effectiveness of our internal control over financial reporting as of December 31, 2012, see “Item 18. Financial Statements.”

(d) Changes in Internal Control over Financial Reporting

In connection with the evaluation required by the Exchange Act Rule 13a-15(d), our management, including our CEO and CFO, concluded that the changes that occurred during the year ended December 31, 2012 have not materially affected, or are not reasonably likely to materially affect, our internal controls over financial reporting.

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ITEM 16 [RESERVED]

16A.       Audit Committee Financial Expert

Our board of directors has determined that one member of our audit committee, Mr. Guy Almeida Andrade, is our audit committee financial expert and meets the requirements set forth by the SEC and the NYSE. Our audit committee financial expert, along with the other members of our audit committee, are independent pursuant to CMN Resolution No. 3,198, which requires that the members not be, or have been in the last year, an officer or employee of the company or its affiliates or an employee with managerial responsibilities in the internal audit division of the financial institution. Other members of our audit committee are financially literate and we believe the skills, experience and education of our audit committee members qualify them to carry out all of their duties as members of the audit committee, including overseeing the preparation of our IFRS financial statements. In addition, our audit committee has the ability to retain independent accountants, financial advisors or other consultants, advisors and experts whenever it deems appropriate.

16B.        Code of Ethics

We have adopted a Code of Ethics that applies to all of our employees, including directors, principal executive officers, principal financial officers, principal controllers, other officers and certain third parties, such as suppliers, who have relationship with us. Our board of directors approved our current code of ethics on March 28, 2013. The full text of our Code of Ethics is published on our website, at the following address: http://ww13.itau.com.br/Portalri/HTML/ing/download/Codigo_Etica_2013.pdf.

16C.       Principal Accountant Fees and Services

PricewaterhouseCoopers Auditores Independentes acted as our independent registered public accounting firm for the fiscal years ended December 31, 2012, 2011 and 2010. The chart below sets forth the total amount billed to us by PricewaterhouseCoopers Auditores Independentes for services performed in the years 2012, 2011 and 2010, and breaks down these amounts by category of service in thousands of reais:

	Total Fees
	(in thousands of R$)
	2012		2011		2010
Audit Fees		37,191		37,834		41,614
Audit-Related Fees (1)		3,330		2,583		2,448
Tax Fees		64		181		74
All Other Fees (1)		1,491		936		367
Total		42,075		41,534		44,503

⁽¹⁾ For years ended December 31, 2011 and 2010, R$ 94 thousands and R$ 81 thousands, respectively, related to assurance services on the Greenhouse Gas Emissions controls and policies were reclassified from All Other Fees to Audit-Related Fees.

Audit Fees

Audit fees in 2012, 2011 and 2010 substantially refer to the audit of our annual consolidated financial statements, for the review of our quarterly financial statements, as well as the audit and review of financial statements of our subsidiaries, services relating to issuance of comfort letters in securities offerings and audit of internal controls in connection with the Sarbanes-Oxley Act.

Audit-Related Fees

Audit-related fees in 2012, 2011, and 2010 refer to services provided in connection with the preparation of accounting appraisal reports, assistance related to the preparation of documents to be sent to local and foreign regulatory bodies, including documents regarding compliance with legislation and regulations, audit of specific financial statements, compliance with Greenhouse Gas Emissions controls and policies, due diligence activities and assurance of special purpose reports.

Tax Fees

Tax fees in 2012, 2011 and 2010 were related to tax compliance, tax consulting and other consulting services.

229

All Other Fees

Other fees paid in 2012, 2011 and 2010 included internet safety testing, evaluation of business continuity management, consultancy for new projects, use of electronic databases, technical materials, training, assistance in operations analysis and the compliance project Global Investment Performance Standards – GIPS.

Pre-Approval Policies and Procedures

Among the audit committee’s responsibilities is the approval, on an annual basis, of policies and procedures regarding non-audit services that (i) can be provided by our external auditors, as well as the list of those services which are pre-approved, (ii) cannot be provided by our external auditors, due to the fact that such services could affect the independence of the external auditors, and (iii) need to be previously approved by the audit committee. We enhanced our corporate governance ensuring its alignment with the Sarbanes-Oxley Act requirements.

16D.       Exemptions from the Listing Standards for Audit Committees

Under the listed company audit committee rules of the NYSE and the SEC, we must comply with Rule 10A-3 of the Exchange Act (Listing Standards Relating to Audit Committees). Rule 10A-3 requires that we either establish an audit committee composed of members of the board of directors that meets specified requirements, or designate and empower a board of auditors or similar body to perform the role of the audit committee in reliance on the general exemption for audit committees of foreign private issuers set forth in Rule 10A-3(c)(3) of the Exchange Act.

In accordance with Central Bank regulations, we have established a body similar to the audit committee of the board of directors of a U.S. company, which we are required to call an “audit committee.” For more information, see “Item 6C. Board Practices — Statutory Bodies — Audit Committee”.

Our audit committee, to the extent permitted under Brazilian law, performs all the functions required of an audit committee under Rule 10A-3. As required by Brazilian law, our board of directors and audit committee are separate corporate bodies. Only one of the six members of our audit committee is also member of our board of directors. In addition, under Brazilian law, the function of hiring independent auditors is a power reserved exclusively for a company’s board of directors. Therefore, our board of directors acts as our audit committee, as permitted under Rule 10A-3(c)(3)(v) of the Exchange Act for the purpose of the appointment of our independent auditors.

Except in these respects, our audit committee is comparable to, and performs the functions of, an audit committee of the board of directors of a U.S. company. We believe that our audit committee is able to act independently in performing the responsibilities of an audit committee under Sarbanes-Oxley, satisfies the other requirements of the exemption of Rule 10A-3(c)(3) and therefore is in compliance with Rule 10A-3 of the Exchange Act.

230

16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Period (1)	(a) Total number of preferred shares purchased		(b) Average price paid per preferred share (2)		(c) Total number of preferred shares purchased as part of publicly announced plans or programs		(d) Maximum number of preferred shares that may yet be purchased under the plans or programs
01/02 to 01/31/2012		-		-		-		56,700,000
02/01 to 02/29/2012		-		-		-		56,700,000
03/01 to 03/30/2012		-		-		-		56,700,000
04/02 to 04/30/2012		-		-		-		56,700,000
05/02 to 05/31/2012		3,500,000		28.30		3,500,000		53,200,000
01/06 to 29/06/2012		-		-		3,500,000		53,200,000
07/02 to 07/31/2012		-		-		3,500,000		53,200,000
08/01 to 08/31/2012		-		-		3,500,000		53,200,000
09/03 to 09/29/2012		-		-		3,500,000		53,200,000
10/01 to 10/31/2012		800,000		29.11		4,300,000		52,400,000
11/01 to 11/30/2012		-		-		4,300,000		86,300,000
12/03 to 12/31/2012		-		-		4,300,000		86,300,000

⁽¹⁾ On October 31, 2011 our board of directors approved the purchase of up to 56,700,000 of our preferred shares, ending on November 5, 2012.

On October 22, 2012 our board of directors approved the purchase of up to 86,300,000 of our preferred shares, ending on November 4, 2013.

⁽²⁾ Includes brokerage costs.

16F.      Change in Registrant’s Certifying Accountant

Not applicable.

16G.      Corporate Governance

Principal Differences Between Brazilian and U.S. Corporate Governance Practices

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than those applied to U.S. listed companies. Under the NYSE rules, we are only required to: (i) have an audit committee or audit board that meets certain requirements, as discussed below; (ii) provide certification by our chief executive officer to the NYSE each year that he is not aware of any violation by the company of NYSE corporate governance listing standards; (iii) submit an executed written affirmation annually to the NYSE and submit an interim written affirmation each time a change occurs to the board or any of our committees subject to Section 303A of the NYSE rules; and (iv) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

Majority of Independent Directors

The NYSE rules require that a majority of the board must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company.

Brazilian law does not have a similar requirement. Under Brazilian law, neither our board of directors nor our management is required to test the independence of directors before their election to the board. However, Brazilian Corporate Law, the Central Bank and the CVM have established rules that require directors to meet certain qualification requirements relating to professional qualifications and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s officers and directors and our directors meet the qualification requirements of Brazilian Corporate Law, the Central Bank and the CVM. Our corporate governance policy discloses the criteria used by our board of directors to determine if a director is independent. According to those criteria, four of our directors are considered independent: Nildemar Secches, Israel Vainboim, Gustavo Jorge Laboissiere Loyola and Pedro Luiz Bodin de Moraes. Brazilian Corporate Law requires that our directors be elected by our shareholders at an annual shareholders’ meeting. Four of our directors, Alfredo Egydio Arruda Villela Filho, Roberto Egydio Setubal, Alfredo Egydio Setubal and Ricardo Villela Marino, are members of the Egydio de Souza Aranha family and one of our directors, Pedro Moreira Salles, is a member of the Moreira Salles family. The families are owners of IUPAR, the controlling shareholder for Itaú Unibanco Holding.

231

Executive Sessions

NYSE rules require that non-management directors meet at regularly scheduled executive sessions without the presence of management. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the board of directors can be elected from management. Our president Roberto Setubal, our executive vice presidents Alfredo Egydio Setubal and Candido Botelho Bracher and the executive officer of Itaú Unibanco, Ricardo Villela Marino, are members of our board of directors. There is no requirement that non-management directors meet regularly without management. As a result, the non-management directors do not typically meet in executive sessions. Our board of directors consists of eight non-management directors.

Committees

NYSE rules require that listed companies have a nominating and corporate governance committee and a compensation committee composed entirely of independent directors and governed by written charters addressing the committees’ required purposes and detailing their required responsibilities. The responsibilities of the nominating and corporate governance committee include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. The responsibilities of the compensation committee, in turn, include, among other things, reviewing and approving corporate goals and objectives relevant to the chief executive officer’s compensation, evaluating the chief executive officer’s performance, approving the chief executive officer’s compensation levels and recommending non-chief executive officer compensation, incentive-compensation and equity-based plans to the board.

We are not required under applicable Brazilian Corporate Law to have a nominating committee or a corporate governance committee. However, we have an appointment and corporate governance committee responsible for matters relating to our governance, including corporate governance guidelines, guidelines for selection and appointment of members of the board of directors and guidelines for evaluation of the board of directors.

We are required under Resolution No. 3,921 to establish a compensation committee pursuant to certain requirements. Our compensation committee is responsible for all matters regarding compensation of the members of the management and employees of the Itaú Unibanco Group. Under Brazilian law our compensation committee is not required to be comprised solely of independent directors.

Audit Committee and Audit Committee Additional Requirements

NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate; (ii) meets the SEC rules regarding audit committees for listed companies; (iii) has at least one member who has accounting or financial management expertise; and (iv) is governed by a written charter addressing the committee’s required purpose and annual performance evaluation of the audit committee and detailing its required responsibilities.

Brazilian banking law (CMN Resolution No. 3,198) requires us to have an audit committee of at least three members, and Brazilian Corporate Law requires us to have a fiscal council, which is composed of three to five members. Pursuant to Brazilian Corporate Law and CMN Resolution No. 3,198, the fiscal council members are elected at the annual shareholders’ meeting and the audit committee is elected by the board of directors among its members and independent members, one of which must be a financial expert, provided that, according to our bylaws, its chairman must be also a member of our board of directors.

The fiscal council operates independently from our management and from our external auditors. Its main function is to examine the financial statements for each fiscal year and provide a formal report to our shareholders. We have a fiscal council that is currently composed of three members and three alternates.

According to the SEC, foreign private issuers are exempt from the audit committee requirements if the issuer meets certain requirements. We believe that our Audit Committee is able to act independently in performing the responsibilities of an audit committee under Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), satisfies the other requirements of the exemption of Rule 10A-3(c)(3) and therefore is in compliance with Rule 10A-3 of the Exchange Act. Our audit committee, to the extent permitted under Brazilian law, performs all the functions required of an audit committee under Rule 10A-3. As required by Brazilian law, our board of directors and audit committee are separate corporate bodies. In addition, under Brazilian law, the authority to hire independent auditors is reserved exclusively for a company’s board of directors. Therefore, our board of directors acts as our audit committee, as permitted under Rule 10A-3(c)(3)(v) of the Exchange Act, for the purpose of the appointment of our independent auditors. Our audit committee is currently composed of five members, one of whom is also member of our board of directors.

232

Shareholder Approval of Equity Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, including material increases in the number of shares available under the plans, with limited exceptions. Under Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval.

Corporate Governance Guidelines

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We comply with the corporate governance guidelines imposed by applicable Brazilian law. We believe the corporate governance guidelines applicable to us under Brazilian law are consistent with the guidelines established by the NYSE. We have adopted standards beyond what is required by applicable Brazilian law: we voluntarily adhere to BM&FBovespa’s Level 1 of Corporate Governance and have tag-along rights for all shareholders, regardless of their voting rights.

In addition, we have adopted (i) the Policy of Material Information Disclosure, which deals with the public disclosure of all relevant information as per CVM Rule No. 358, of January 3, 2002, as amended, guidelines; and (ii) the Policy on Trading of Securities, which restricts the trading in securities during certain periods and requires management to publicly announce all transactions relating to our securities, and which was an optional device included in the CVM Rule No. 358. Going beyond the requirements of applicable Brazilian law, in July 2002 we created the disclosure and trading committees, which were unified in the disclosure and trading committee in April 2006.

Code of Business Conduct and Ethics

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement. However, we adopted a code of ethics in 2000 which regulated the conduct of our managers in connection with the registration and control of financial and accounting information and their access to privileged and non-public information. In 2004, we included a supplement to our code of ethics in order to comply with the requirements of Sarbanes-Oxley and the NYSE rules. In October 2005, we announced our newly and updated code of ethics, and this code was reviewed in February 2010 in connection with the Association. In February 2013, we adopted a revised code of ethics in order to update and consolidate our guiding principles. The new document is available at http://ww13.itau.com.br/Portalri/HTML/ing/download/Codigo_Etica_2013.pdf.

Internal Audit

NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control.

Our internal auditing directorate has the independence from management to conduct methodologically structured examinations, analyses, surveys and fact-finding to evaluate the integrity, adequacy, effectiveness and efficiency of the information systems processes and internal controls related to our risk management. The directorate is subordinated to the presidency of our board of directors and its activities are supervised by the audit committee. In carrying out its duties, the internal auditing directorate has access to all documents, records, systems, locations and people involved with the activities under review.

Sarbanes-Oxley Act

We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Although the maintenance of such controls and procedures is required by the Sarbanes-Oxley Act, financial information prepared in accordance with Brazilian GAAP is not subject to such Act.

233

16H.      Mine Safety Disclosure

Not applicable.

234

PART III

ITEM 17       FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of responding to this item.

ITEM 18       FINANCIAL STATEMENTS

The following financial statements, together with the report of the independent registered public accounting firm, are filed as part of this annual report:

Consolidated Financial Statements

Management’s Report on Internal Control Over Financial Reporting.	F-1
Report of Independent Registered Public Accounting Firm.	F-2
Consolidated Balance Sheet as of December 31, 2012, 2011 and 2010.	F-3
Consolidated Statement of Income for the years ended December 31, 2012, 2011 and 2010.	F-5
Consolidated Statement of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010.	F-6
Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2012, 2011 and 2010.	F-7
Consolidated Statement of Cash Flows for the years ended December 31, 2012, 2011 and 2010.	F-8
Notes to the Consolidated Financial Statements.	F-9

235

Management´s Report on Internal Control over Financial Reporting

The management of Itaú Unibanco Holding S.A is responsible for establishing and maintaining adequate internal control over financial reporting for the company.

The company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). The company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposals of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to allow for the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2012, based on the criteria set forth by the COSO – Committee of Sponsoring Organization of the Treadway Commission in Internal Control – Integrated Framework.

Management's assessment included documenting, evaluating and testing of the design and operating effectiveness of its internal control over financial reporting. Based on that assessment, management has concluded that as of December 31, 2012 the company’s internal control over financial reporting is effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2012, has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report which appears herein.

/s/ Roberto Egydio Setubal	/s/ Caio Ibrahim David
Roberto Egydio Setubal	Caio Ibrahim David
Chief Executive Officer	Chief Financial Officer

A signed original copy of this report has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

Date: April 29, 2013

F.1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Itaú Unibanco Holding S.A.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of comprehensive income, of cash flows and of changes in stockholders’ equity present fairly, in all material respects, the financial position of Itaú Unibanco Holding S.A. and its subsidiaries at December 31, 2012 and December 31, 2011 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management's Report on Internal Control over Financial Reporting”. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our audits (which were integrated audits in 2012 and 2011). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and International Standards on Auditing. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/                                                 

PricewaterhouseCoopers

Auditores Independentes

São Paulo, Brazil

April 26, 2013

F.2

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet

(In millions of Reais)

ASSETS	NOTE	12/31/2012			12/31/2011
Cash and deposits on demand	4		13,967			10,668
Central Bank compulsory deposits	5		63,701			98,053
Interbank deposits	6		23,826			27,821
Securities purchased under agreements to resell	6		162,737			92,248
Financial assets held for trading	7a		145,516			121,889
Pledged as collateral			2,348			12,142
Other			143,168			109,747
Financial assets designated at fair value through profit or loss	7b		220			186
Derivatives	8 and 9		11,597			8,754
Available-for-sale financial assets	10		90,869			47,510
Pledged as collateral			25,929			8,455
Other			64,940			39,055
Held-to-maturity financial assets	11		3,202			3,105
Pledged as collateral			120			230
Other			3,082			2,875
Loan operations and lease operations portfolio, net	12		341,271			322,391
Loan operations and lease operations portfolio			366,984			346,264
(-) Allowance for loan and lease losses			(25,713	)		(23,873	)
Other financial assets	20a		44,492			40,254
Investments in unconsolidated companies	13		3,005			2,544
Fixed assets, net	15		5,628			5,358
Intangible assets, net	16		4,671			3,825
Tax assets			32,412			26,088
Income tax and social contribution - current			3,198			2,857
Income tax and social contribution - deferred	27b		28,381			22,745
Other			833			486
Assets held for sale	36		117			85
Other assets	20a		9,923			7,357
TOTAL ASSETS			957,154			818,136

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

F.3

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Balance Sheet

(In millions of Reais)

LIABILITIES AND STOCKHOLDERS' EQUITY	NOTE	12/31/2012			12/31/2011
Deposits	17		243,200			242,636
Securities sold under repurchase agreements	19a		267,405			185,413
Financial liabilities held for trading	18		642			2,815
Derivatives	8 and 9		11,069			6,747
Interbank market debt	19a		97,073			90,498
Institutional market debt	19b		72,028			54,807
Other financial liabilities	20b		50,255			44,119
Reserves for insurance and private pension	30c lll		90,318			70,904
Liabilities for capitalization plans			2,892			2,838
Provisions	32		19,209			15,990
Tax liabilities			7,109			7,408
Income tax and social contribution - current			2,560			1,872
Income tax and social contribution - deferred	27b II		3,038			4,319
Other			1,511			1,217
Other liabilities	20b		19,956			18,625
Total liabilities			881,156			742,800
Capital	21a		45,000			45,000
Treasury shares	21a		(1,523	)		(1,663	)
Additional paid-in capital			888			738
Appropriated reserves	21d		22,423			24,279
Unappropriated reserves			7,379			5,561
Cumulative other comprehensive income			1,735			26
Total stockholders’ equity attributed to the owners of the parent company			75,902			73,941
Non-controlling interests			96			1,395
Total stockholders’ equity			75,998			75,336
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			957,154			818,136

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

F.4

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Income

Periods ended

(In millions of Reais, except for earnings per share information)

	NOTE	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Banking product			81,172			74,276			69,415
Interest and similar income	23a		96,364			97,352			77,818
Interest and similar expense	23b		(48,067	)		(55,599	)		(36,840	)
Dividend income			323			361			326
Net gain (loss) from investment securities and derivatives	23c		1,463			1,251			2,862
Foreign exchange results and exchange variation on transactions			3,755			4,998			1,824
Banking service fees	24		18,944			19,410			17,092
Income from insurance, private pension and capitalization operations before claim and selling expenses			6,108			5,345			4,923
Income from insurance and private pension	30b III		24,748			18,179			14,239
Premium reinsurance	30b III		(1,166	)		(1,010	)		(602	)
Change in reserves for insurance and private pension			(17,970	)		(12,311	)		(9,143	)
Revenue from capitalization plans			496			487			429
Other income	25		2,282			1,158			1,410
Losses on loans and claims			(21,354	)		(16,072	)		(12,938	)
Expenses for allowance for loan and lease losses	12b		(23,982	)		(20,038	)		(15,547	)
Recovery of loans written-off as loss			4,663			5,477			4,195
Expenses for claims			(3,320	)		(2,446	)		(2,301	)
Recovery of claims under reinsurance			1,285			935			715
Operating margin			59,818			58,204			56,477
Other operating income (expenses)			(42,402	)		(39,953	)		(38,447	)
General and administrative expenses	26		(38,080	)		(35,674	)		(34,632	)
Tax expenses			(4,497	)		(4,166	)		(4,164	)
Share of profit or (loss) of unconsolidated companies	13		175			(113	)		349
Income before income tax and social contribution	27		17,416			18,251			18,030
Current income tax and social contribution			(7,716	)		(6,956	)		(4,042	)
Deferred income tax and social contribution			3,491			3,315			(1,494	)
NET INCOME			13,191			14,610			12,494
Net income attributable to owners of the parent company	28		12,634			13,837			11,708
Net income attributable to non-controlling interests			557			773			786
EARNINGS PER SHARE - BASIC
Common			2.80			3.06			2.58
Preferred			2.80			3.06			2.58
EARNINGS PER SHARE - DILUTED	28
Common			2.79			3.05			2.57
Preferred			2.79			3.05			2.57
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC	28
Common			2,289,284,300			2,289,284,275			2,289,284,273
Preferred			2,228,675,507			2,240,026,557			2,246,784,818
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED	28								-
Common			2,289,284,300			2,289,284,275			2,289,284,273
Preferred			2,239,708,939			2,251,061,836			2,260,240,831

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

F.5

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Comprehensive Income

Periods ended

(In millions of Reais)

	NOTE	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Net income			13,191			14,610			12,494
Available-for-sale financial assets			1,231			(226	)		170
Change in fair value			2,760			39			434
(Gains)/losses transferred to income on disposal	10		(705	)		(444	)		(151	)
Income tax effect	18		(824	)		179			(113	)
Cash flow hedge and hedge of net investment in foreign operation	9		(465	)		(445	)		(17	)
Change in fair value			(778	)		(735	)		(28	)
Income tax effect			313			290			11
Foreign exchange differences on foreign investments			530			392			(274	)
Share of other comprehensive income of unconsolidated companies – Available-for-sale financial assets - (Disposal of the Banco BPI S.A.)	26		413			(189	)		(166	)
Change in fair value	-		-			(286	)		(251	)
(Gains)/losses transferred to income on disposal			626			-			-
Income tax effect			(213	)		97			85
Total comprehensive income			14,900			14,142			12,207
Comprehensive income attributable to non-controlling interests			557			773			786
Comprehensive income attributable to the owners of the parent company			14,343			13,369			11,421

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

F.6

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Changes in Stockholders’ Equity (Notes 21 and 22)

Periods ended December 31, 2012 and 2011

(In millions of Reais)

	Attributed to owners of the parent company
																		Other comprehensive income
	Capital		Treasury shares			Additional paid-in capital			Appropriated reserves			Unappropriated reserves			Retained earnings			Available for sale (1)			Cumulative translation adjustments abroad			Gains and losses – hedge (2)			Total stockholders’ equity – owners of the parent company			Total stockholders’ equity – non- controlling interests			Total
Balance at 01/01/2010		45,000		(1,031	)		356			6,801			5,219			-			771			-			10			57,126			1,564			58,690
Transactions with owners		-		403			134			1,304			(29	)		(4,484	)		-			-			-			(2,672	)		(673	)		(3,345	)
Treasury shares - Granting of stock options – exercised options		-		403			3			-			-			-			-			-			-			406			-			406
Stock option plan – expenses recognized for the year		-		-			131			-			-			-			-			-			-			131			-			131
Acquisition/Increase of interest of controlling stockholders		-		-			-			-			-			-			-			-			-			-			(206	)		(206	)
Dividends and interest on capital (Note 21b)		-		-			-			1,308			-			(4,484	)		-			-			-			(3,176	)		(714	)		(3,890	)
Decrease  of interest of controlling stockholders		-		-			-			-			-			-			-			-			-			-			247			247
Other		-		-			-			(4	)		(29	)		-			-			-			-			(33	)		-			(33	)
Total comprehensive income		-		-			-			-			-			11,708			4			(274	)		(17	)		11,421			786			12,207
Net income		-		-			-			-			-			11,708			-			-			-			11,708			786			12,494
Other comprehensive income for the year		-		-			-			-			-			-			4			(274	)		(17	)		(287	)		-			(287	)
Appropriations:		-		-			-			-			-			-			-			-			-			-			-			-
Legal reserve		-		-			-			514			-			(514	)		-			-			-			-			-			-
Unrealized revenue reserve		-		-			-			(358	)		-			358			-			-			-			-			-			-
Statutory reserve		-		-			-			8,643			(1,575	)		(7,068	)		-			-			-			-			-			-
Balance at 12/31/2010		45,000		(628	)		490			16,904			3,615			-			775			(274	)		(7	)		65,875			1,677			67,552
Change in the year		-		403			134			10,103			(1,604	)		-			4			(274	)		(17	)		8,749			113			8,862
Balance at 01/01/2011		45,000		(628	)		490			16,904			3,615			-			775			(274	)		(7	)		65,875			1,677			67,552
Transactions with owners		-		(1,035	)		248			1,847			-			(5,054	)		-			-			-			(3,994	)		(1,055	)		(5,049	)
Treasury shares - Granting of stock options – exercised options		-		(1,035	)		248			-			-			-			-			-			-			(787	)		-			(787	)
Granting of stock options – exercised options		-		268			85			-			-			-			-			-			-			353			-			353
Acquisition of treasury shares		-		(1,303	)		-			-			-			-			-			-			-			(1,303	)		-			(1,303	)
Granted options recognized		-		-			163			-			-			-			-			-			-			163			-			163
Acquisition/Increase of interest of controlling stockholders		-		-			-			-			-			-			-			-			-			-			(391	)		(391	)
Dividends and interest on capital (Note 21b)		-		-			-			1,847			-			(5,054	)		-			-			-			(3,207	)		(664	)		(3,871	)
Dividends/Interest on capital paid in 2011 - Year 2010 - Statutory Reserve		-		-			-			(1,308	)		-			-			-			-			-			(1,308	)		-			(1,308	)
Other		-		-			-			-			(1	)		-			-			-			-			(1	)		-			(1	)
Total comprehensive income		-		-			-			-			-			13,837			(415	)		392			(445	)		13,369			773			14,142
Net income		-		-			-			-			-			13,837			-			-			-			13,837			773			14,610
Other comprehensive income for the period		-		-			-			-			-			-			(415	)		392			(445	)		(468	)		-			(468	)
Appropriations:		-		-			-			-			-			-			-			-			-			-			-			-
Legal reserve		-		-			-			594			-			(594	)		-			-			-			-			-			-
Statutory reserve		-		-			-			6,242			1,947			(8,189	)		-			-			-			-			-			-
Balance at 12/31/2011		45,000		(1,663	)		738			24,279			5,561			-			360			118			(452	)		73,941			1,395			75,336
Change in the period		-		(1,035	)		248			7,375			1,946			-			(415	)		392			(445	)		8,066			(282	)		7,784
Balance at 01/01/2012		45,000		(1,663	)		738			24,279			5,561			-			360			118			(452	)		73,941			1,395			75,336
Transactions with owners		-		140			150			(7,479	)		-			(5,177	)		-			-			-			(12,366	)		(1,458	)		(13,824	)
Treasury shares - Granting of stock options		-		140			150			-			-			-			-			-			-			290			-			290
Granting of stock options – exercised options		-		262			(53	)		-			-			-			-			-			-			209			-			209
Acquisition of treasury shares		-		(122	)		-			-			-			-			-			-			-			(122	)		-			(122	)
Granted options recognized		-		-			203			-			-			-			-			-			-			203			-			203
Acquisition/Increase of interest of controlling stockholders		-		-			-			-			-			-			-			-			-			-			(141	)		(141	)
Dividends / Interest on capital (Note 21b)		-		-			-			(119	)		-			(5,177	)		-			-			-			(5,296	)		(378	)		(5,674	)
Purchase of additional interest from non-controlling stockholders – Redecard (Note 3c)		-		-			-			(7,360	)		-			-			-			-			-			(7,360	)		(939	)		(8,299	)
Other		-		-			-			-			(16	)		-			-			-			-			(16	)		(398	)		(414	)
Total comprehensive income		-		-			-			-			-			12,634			1,644			530			(465	)		14,343			557			14,900
Net income		-		-			-			-			-			12,634			-			-			-			12,634			557			13,191
Other comprehensive income for the period		-		-			-			-			-			-			1,644			530			(465	)		1,709			-			1,709
Appropriations:		-		-			-			-			-			-			-			-			-			-			-			-
Legal reserve		-		-			-			540			-			(540	)		-			-			-			-			-			-
Statutory reserve		-		-			-			5,083			1,834			(6,917	)		-			-			-			-			-			-
Balance at 12/31/2012		45,000		(1,523	)		888			22,423			7,379			-			2,004			648			(917	)		75,902			96			75,998
Change in the period		-		140			150			(1,856	)		1,818			-			1,644			530			(465	)		1,961			(1,299	)		662

(1) Includes Share of other comprehensive income of unconsolidated companies – Available-for-sale financial assets

(2) Includes Cash flow hedge and hedge of net investment in foreign operation

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

F.7

ITAÚ UNIBANCO HOLDING S.A.

Consolidated Statement of Cash Flows

(In millions of Reais)

	NOTE	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
ADJUSTED NET INCOME			49,136			43,182			40,100
Net income			13,191			14,610			12,494
Adjustments to net income:			35,945			28,572			27,606
Granted options recognized	22d		203			163			131
Effects of changes in exchange rates on cash and cash equivalents			(1,546	)		(2,168	)		629
Expenses for allowance for loan and lease losses	12b		23,982			20,038			15,547
Interest and foreign exchange expense from operations with subordinated debt			4,374			4,441			2,602
Interest expense from operations with debentures			138			165			224
Change in reserves for insurance and private pension			17,970			12,311			9,143
Revenue from capitalization plans			(496	)		(487	)		(429	)
Depreciation and amortization	15 and 16		2,190			2,168			2,143
Deferred taxes			(3,491	)		(3,315	)		1,494
Share of profit or (loss) of unconsolidated companies			(175	)		113			(349	)
(Gain) loss from available-for-sale securities	10		(705	)		(444	)		(151	)
Interest and foreign exchange income from available-for-sale financial assets			(4,725	)		(3,744	)		(2,895	)
Interest and foreign exchange income from held-to-maturity financial assets			(495	)		(408	)		(445	)
(Gain) loss from sale of assets held for sale	25 and 26		(52	)		(36	)		(33	)
(Gain) loss from sale of investments	25 and 26		(1,194	)		(53	)		(28	)
(Gain) loss from sale of fixed assets	25 and 26		20			(43	)		7
(Gain) loss from termination of operations of intangible assets			3			(44	)		(56	)
Impairment losses of fixed assets and intangible assets	15 and 16		7			45			20
Other			(63	)		(130	)		52
CHANGE IN ASSETS AND LIABILITIES (*)			(501	)		(50,622	)		(70,972	)
(Increase) decrease in Assets			(93,875	)		(107,909	)		(187,938	)
Interbank deposits			323			(1,354	)		3,195
Securities purchased under agreements to resell			(61,519	)		(23,218	)		20,504
Compulsory deposits with the Central Bank of Brazil			34,525			(12,187	)		(71,945	)
Financial assets held for trading			(23,627	)		(6,378	)		(60,023	)
Derivatives (assets/liabilities)			1,565			98			(1,849	)
Financial assets designated at fair value			(34	)		120			67
Loan operations			(39,837	)		(66,850	)		(66,254	)
Financial assets			(4,003	)		751			(14,015	)
Other tax assets			994			1,377			1,302
Other assets			(2,262	)		(268	)		1,080
(Decrease) increase in Liabilities			93,374			57,287			116,966
Deposits			(3,056	)		38,607			12,165
Deposits received under securities repurchase agreements			81,953			(14,252	)		67,661
Financial liabilities held for trading			(2,173	)		1,480			672
Funds from interbank markets			6,256			27,853			17,891
Other financial liabilities			5,886			3,024			14,200
Technical reserve for insurance and private pension			1,444			1,729			(202	)
Liabilities for capitalization plans			550			722			771
Provisions			2,771			593			(466	)
Tax liabilities			6,157			(645	)		5,530
Other liabilities			229			2,185			1,852
Payment of income tax and social contribution			(6,643	)		(4,009	)		(3,108	)
NET CASH FROM (USED IN) OPERATING ACTIVITIES			48,635			(7,440	)		(30,872	)
Interest on capital/dividends received from investments in unconsolidated companies			204			70			104
Cash received from sale of available-for-sale financial assets			15,905			35,107			17,517
Cash received from redemption of held-to-maturity financial assets			397			533			286
Cash upon sale of assets held for sale			131			140			368
Cash upon sale of investments  in unconsolidated companies			1,796			-			-
Disposal of investment in Unibanco Saúde Seguradora S.A.			-			-			55
Alienação do Investimento no Unibanco Rodobens Adm. De  Consórcios S.A.			-			-			41
Alienação do Investimento na Cia. Hipotecária Unibanco Rodobens			-			-			12
Cash upon sale of fixed assets	15		226			190			71
Cash received from termination of contracts of intangible assets	16		22			184			146
Purchase of available-for-sale financial assets			(51,796	)		(33,600	)		(17,629	)
Purchase of held-to-maturity financial assets			-			(60	)		(582	)
Purchase of investments  in unconsolidated companies	13		(816	)		-			-
Purchase of fixed assets	15		(1,914	)		(1,903	)		(1,924	)
Purchase of intangible assets	16		(1,738	)		(1,972	)		(582	)
NET CASH FROM (USED IN) INVESTING ACTIVITIES			(37,583	)		(1,311	)		(2,117	)
Funding from institutional markets			26,494			14,246			12,953
Redemptions in institutional markets			(14,017	)		(8,574	)		(1,796	)
Acquisition/Increase of interest of non-controlling stockholders			(141	)		(391	)		41
Purchase of additional interest from non-controlling stockholders – Redecard S.A.	3c		(11,752	)		-			-
Granting of stock options – exercised options			209			353			406
Purchase of treasury shares			(122	)		(1,303	)		-
Dividends and interest on capital paid to non-controlling interests			(378	)		(664	)		(714	)
Dividends and interest on capital paid			(5,206	)		(4,588	)		(4,315	)
NET CASH FROM (USED IN) FINANCING ACTIVITIES			(4,913	)		(921	)		6,575
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2.4c and 4		6,139			(9,672	)		(26,414	)
Cash and cash equivalents at the beginning of the period	4		38,105			45,609			72,652
Effects of changes in exchange rates on cash and cash equivalents			1,546			2,168			(629	)
Cash and cash equivalents at the end of the period	4		45,790			38,105			45,609
Additional information on cash flow
Interest received			89,533			94,911			79,799
Interest paid			39,304			36,159			40,484
Non-cash transactions
Loans transferred to assets held for sale			-			4			68
Dividends and interest on capital declared and not yet paid			1,358			1,309			1,447

(*) Includes the amounts of interest received and paid as shown above.

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

F.8

ITAÚ UNIBANCO HOLDING S.A.

Notes to the Consolidated Financial Statements

At December 31, 2012, 2011 and 2010

(In millions of Reais, except information per share)

NOTE 01 – OVERVIEW

ITAÚ UNIBANCO HOLDING S.A. (ITAÚ UNIBANCO HOLDING) is a publicly-held company, organized and existing under the Laws of Brazil. The head office of ITAÚ UNIBANCO HOLDING is located at Praça Alfredo Egydio de Souza Aranha, n° 100, in the city of São Paulo, Brazil.

ITAÚ UNIBANCO HOLDING provides a wide range of financial products and services to individual and corporate clients in Brazil and abroad, whether these clients are Brazilian-related or non-related customers throughout its international branches, subsidiaries and affiliates. In Brazil we serve retail clients through the branch network of Itaú Unibanco S.A. (“Itaú Unibanco”) and to wholesale clients through Banco Itaú BBA S.A. (“Itaú BBA”), and overseas through branches in New York, Grand Cayman, Tokyo, and Nassau, and through subsidiaries mainly in Argentina, Chile, the US (New York and Miami), and Europe (Lisbon, London, Luxembourg and Switzerland), Cayman Islands, Paraguay and Uruguay. In 2012, we started operations in Colombia, which will gradually strengthen over 2013.

ITAÚ UNIBANCO HOLDING is a holding company controlled by Itaú Unibanco Participações S.A. (“IUPAR”), a holding company which owns 51% of our common shares, and which is jointly controlled by (i) Itaúsa Investimentos Itaú S.A., (“Itaúsa”), a holding company controlled by members of the Egydio de Souza Aranha family, and (ii) Companhia E. Johnston de Participações (“E. Johnston”), a holding company controlled by the Moreira Salles family. Itaúsa also directly holds 38.7% of ITAÚ UNIBANCO HOLDING common shares.

As described in Note 34, the operations of ITAÚ UNIBANCO HOLDING are divided into four operating and reportable segments: (1) Commercial Bank, which offers a wide range of banking services for retail individuals (retail banking, under several areas specialized in distribution and under several brands, such as Itaú, Uniclass, and Personnalité, or high net worth clients (Private Bank) and for companies (very small, small and medium-sized companies), including services such as asset management, investor services, insurance, private pension plans, capitalization plans, and credit cards issued to account holders; (2) Itaú BBA, which offers wholesale products and services to large companies, as well as investment bank activities; (3) Consumer Credit, which offers financial products and services to an universe beyond account holders, such as vehicle financing, credit card transactions and consumer financing, and (4) Activities with the Market + Corporation, which manages interest income associated with capital surplus, subordinated debt surplus, and the results of certain treasury activities, carry forwards of the net balance of deferred tax assets and liabilities, the net interest income from the negotiation of financial assets, from the management of currency interest rate gaps, fair value adjustments and other risks, from arbitrage opportunities in the foreign and domestic markets, and from the effect of marking-to-market of financial assets and liabilities (held for trading, financial assets designated at fair value and available for sale financial assets).

These consolidated financial statements were approved by the Executive Board on March 4th, 2013.

F.9

NOTE 02 – SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below.

2.1 BASIS OF PREPARATION

These consolidated financial statements of ITAÚ UNIBANCO HOLDING were prepared taking into consideration that the National Monetary Council (CMN) Resolution No. 3,786 established that starting December 31, 2010, annual consolidated financial statements shall be prepared in accordance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standard Board (IASB).

These consolidated financial statements have been presented following the accounting practices described in this note.

In the preparation of these consolidated financial statements, ITAÚ UNIBANCO HOLDING adopted the criteria for recognition, measurement, and disclosure established in the IFRS pronouncements issued by the IASB, and the interpretations of the International Financial Reporting Interpretation Committee (IFRIC) described in this note. For this reason, these Consolidated Financial Statements are in full conformity with the pronouncements issued by the IASB and the interpretations issued by the IFRIC.

The Consolidated Statement of Cash Flows shows the changes in cash and cash equivalents during the period from operating, investing, and financing activities. Cash and cash equivalents include highly-liquid financial investments (Note 2.4c).

Cash flows from operating activities are presented under the indirect method. Consolidated net income is adjusted for non-monetary items, such as measurement gains and losses, changes in provisions and in receivables and liabilities balances. All income and expense arising from non-monetary transactions, attributable to investing and financing activities, are eliminated. Interest received or paid is classified as operating cash flows.

In order to improve the presentation and classification of insurance operations in the Consolidated Statement of Income, in accordance with IFRS 4, reclassifications adjustments were made in relation to insurance operations. Previously, income from insurance activities was presented in the Consolidated Statement of Income net of reinsurance held under the line item Income from Insurance and Private Pension and gross figures were presented in Note (30b III). In these financial statements this information will be presented by their gross amounts on separate line items in the Consolidated Statement of Income under the line items Income from insurance and private pension and Reinsurance premiums. Expenses for claims which previously were presented net under the line item Expenses for claims will also be presented gross of the recovery values of claims with reinsurance held under the line items  Expenses for claims and Recovery with Reinsurance Claims.

2.2.        NEW PRONOUNCEMENTS; CHANGES TO AND INTERPRETATIONS OF EXISTING PRONOUNCEMENTS

a) Accounting pronouncements applicable as of January 01, 2012

· Changes to IFRS 7 – “Financial Instruments: Disclosures” – in October 2010, an amendment to this pronouncement was issued requiring additional disclosure on transfers of financial assets with remaining risks. The effects of these disclosure requirements are incorporated in Note 12.

· Amendment to IAS 12 – “Income taxes” - in December 2010 an amendment to this pronouncement was issued, which included an exception for the measurement of deferred tax assets and liabilities regarding investments in property measured at fair value. This amendment did not impact the consolidated financial statements.

F.10

b) Accounting pronouncements recently issued and applicable in future periods

The following pronouncements will become applicable for periods after the date of these consolidated financial statements and were not early adopted:

· IAS 32 – “Financial Instruments: Presentation” – this change was issued to clarify the offsetting requirements for financial instruments in the balance sheet. The change is not effective until January 1, 2014. The possible impacts arising from the adoption of this change are being analyzed.

· IFRS 7 – “Financial Instruments: Disclosures” - in December 2011, a new change to this pronouncement was issued requiring additional disclosures on the offsetting process. These requirements are not effective until January 1, 2013. This pronouncement application will not result in significant impacts in the consolidated financial statements.

· IFRS 9 – “Financial Instruments” – the pronouncement is the first step in the process of replacing IAS 39 - “Financial Instruments: Recognition and Measurement”. IFRS 9 introduces new requirements for classifying and measuring financial assets, and it is expected to significantly affect the accounting for financial instruments of ITAÚ UNIBANCO HOLDING. It is not effective until January 1, 2015, early adoption is permitted by IASB, but barred by the Central Bank of Brazil.

· IAS 19 – “Employee Benefits” – this change excludes the alternative of using the “corridor” method, requires that all changes should be recorded in Cumulative other comprehensive income, and determines that the interest cost for the following year be calculated on the recognized amount in assets or liabilities. It is not effective until January 1, 2013. This pronouncement application will not result in significant impacts in the consolidated financial statements.

· IFRS 10 – “Consolidated Financial Statements” – the pronouncement changes the current principle, identifying the concept of control as a determining factor in whether an entity should be included within the consolidated financial statements of the parent company. It provides additional guidance to assist in the determination of control where this is difficult to assess. It is not effective until January 1, 2013. This pronouncement application will not result in significant impacts in the consolidated financial statements.

· IFRS 11 – “Joint Arrangements” – the pronouncement provides a different approach for analyses of “Joint Arrangements” focused on the rights and obligations of the arrangements rather than on the legal form. IFRS 11 divides the “Joint Arrangements” into two types: “Joint Operations” and “Joint Ventures”, in accordance with the rights and obligations of the parties. For investments in “Joint Ventures”, proportionate consolidation is no longer permitted. It is not effective until January 1, 2013. This pronouncement application will not result in significant impacts in the consolidated financial statements.

· IFRS 12 – “Disclosures of Interests in Other Entities” – the pronouncement includes new requirements for disclosure of all types of investments in other entities, such as “Joint Arrangements”, associates, and special purpose entities. It is not effective until January 1, 2013. This pronouncement application will not result in significant impacts in the consolidated financial statements.

· IFRS 13 – “Fair Value Measurement” – the purpose of this pronouncement is a better alignment between IFRS and USGAAP, increasing consistency and reducing the complexity of the disclosures by using consistent definitions of fair value. It is not effective until January 1, 2013. The possible impacts arising from the adoption this pronouncement are being analyzed.

· Annual improvements cycle (2009-2011) – IASB makes, on an annual basis, minor changes within a number of pronouncements with the purpose of clarifying current rules and avoiding dual meaning. In this cycle, IFRS 1 – “First-time adoption of IFRS”, IAS 1 – “Presentation of financial statements”, IAS 16 – “Property, plant and equipment”, IAS 32 – “Financial instruments presentation” and IAS 34 – “Interim financial reporting” were reviewed. Changes are not effective until January 1, 2013. There will be no significant impact in the consolidated financial statements.

· Investment Entities - Amendments to IFRS 10 – “Consolidated Financial Statements”, IFRS 12 – “Disclosure of Interests in Other Entities” and IAS 27 – “Separate Financial Statements” – Applicable to investment entities, which invest in funds exclusively for obtaining return on capital valuation, investment income or both. It is not effective until January 1, 2014. Any possible impacts of these amendments are being assessed.

F.11

2.3 ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of consolidated financial statements in accordance with IFRS requires Management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue, expenses, gains, and losses over the reporting and subsequent periods, because actual results may differ from those determined in accordance with such estimates and assumptions.

All estimates and assumptions made by Management are in accordance with IFRS and represent the current best estimates made in conformity with the applicable rule standards. Estimates and judgments are evaluated on an ongoing basis, considering past experience and other factors.

The Consolidated Financial Statements reflect a variety of estimates and assumptions. The critical accounting estimates and assumptions that have the most significant impact on the carrying amounts of assets and liabilities are described below:

a) Allowance for Loan and Lease Losses

ITAÚ UNIBANCO HOLDING periodically reviews its portfolio of loans and receivables to evaluate the existence of impairment.

In order to determine the amount of the allowance for loan and lease losses in the Consolidated Statements of Income with respect to certain receivables or group of receivables, ITAÚ UNIBANCO HOLDING exercises its judgment to determine whether objective evidence indicates that an event of loss has occurred. This evidence may include observable data that indicates that an adverse change has occurred in relation to the expected cash inflows from the counterparty or the existence of a change in local or international economic conditions that correlates with impairment. Management uses estimates based on the history of loss experience in loan operations with similar characteristics and with similar objective evidence of impairment. The methodology and assumptions used for estimating future cash flows are regularly reviewed by Management, considering the adequacy of models and sufficiency of provision volumes in view of the experience of incurred loss.

ITAÚ UNIBANCO HOLDING uses statistical models to calculate the Allowance for Loan and Lease Losses in the homogeneous loan portfolio. ITAÚ UNIBANCO HOLDING periodically carries out procedures to improve these estimates by aligning the required provisions to the levels of losses observed by the historical behavior (as described in Note 2.4g VIII). This alignment aims at ensuring that the volume of allowances reflects the current economic conditions, the composition of the loan portfolios, the quality of guarantees obtained and the profile of our clients. In 2012, the improvement of model assumptions gave rise to a growth in the level of provisions in the amount of R$ 1,492.

The allowance amounted to R$ 25,713 (R$ 23,873 at December 31, 2011.)

If the present value of the estimated cash flows were to have a positive or negative variation of 1%, the Allowance for Loan and Lease Losses would be increased or decreased by approximately R$ 3,413 (R$ 3,224 at December 31, 2011).

The details on methodology and assumptions used by the Management are disclosed in note 2.4g VIII.

b) Deferred Income Tax and Social Contribution

As explained in item 2.4n, deferred tax assets are recognized only in relation to temporary differences and loss carryforwards to the extent that it is probable that ITAÚ UNIBANCO HOLDING will generate future taxable profit for their utilization. The expected realization of ITAÚ UNIBANCO HOLDING´s deferred tax asset is based on the projection of future income and other technical studies, as disclosed in Note 27. The carrying amount of deferred tax assets was R$ 35,003 (R$ 28,810 as of December 31, 2011).

F.12

c) Fair Value of Financial Instruments, Including Derivatives

Financial instruments recorded at fair value are assets amounting to R$ 248,202 (R$ 178,339 at December 31, 2011) of which R$ 11,597 are derivatives (R$ 8,754 at December 31, 2011) and liabilities in the amount of R$ 11,711 (R$ 9,562 at December 31, 2011) of which R$ 11,069 are derivatives (R$ 6,747 at December 31, 2011). The fair value of financial instruments, including derivatives that are not traded in active markets, is calculated by using valuation techniques. This calculation is based on assumptions that take into consideration ITAÚ UNIBANCO HOLDING Management´s judgment about market information and conditions existing at the balance sheet date.

ITAÚ UNIBANCO HOLDING ranks the fair value measurements using a fair value hierarchy that reflects the significance of inputs adopted in the measurement process. There are three broad levels related to the fair value hierarchy, detailed in Note 31.

ITAÚ UNIBANCO HOLDING believes that all methodologies adopted are appropriate and consistent with market participants. Regardless of this fact, the adoption of other methodologies or use of different assumptions to estimate fair values may result in different fair value estimates.

The methodologies used to estimate the fair value of certain financial instruments are described in Note 31.

d) Defined Benefit Pension Plan

At December 31, 2012, an amount of R$ 29 (R$ 97 at December 31, 2011) was recognized as an asset related to pension plans. The current amount of the pension plan obligations is obtained from actuarial calculations that use a variety of assumptions. Among the assumptions used for estimating the net cost (income) of these plans is the discount rate. Any changes in these assumptions will affect the carrying amount of pension plan assets and liabilities.

ITAÚ UNIBANCO HOLDING determines the appropriate discount rate at the end of each year, which is used for determining the present value of estimated future cash outflows necessary for settling the pension plan liabilities. In order to determine the appropriate discount rate, ITAÚ UNIBANCO HOLDING considers the interest rates of the Brazilian federal government bonds that are denominated in Brazilian reais, the currency in which the benefits will be paid, and that have maturity terms approximating the terms of the related liabilities.

Should the discount rate currently used be lower by 0.5% than Management’s estimates, the actuarial amount of the pension plan obligations would be increased by approximately R$ 868.

Other important assumptions for pension plan obligations are in part based on current market conditions. Additional information is disclosed in Note 29.

e) Contingent Assets and Liabilities

ITAÚ UNIBANCO HOLDING periodically reviews its contingencies. These contingencies are evaluated based on Management´s best estimates, taking into account the opinion of legal counsel, when there is a likelihood that financial resources will be required to settle the obligations and the amounts may be reasonably estimated.

Contingencies classified as probable losses are recognized in the Balance Sheet under Provisions.

Contingent amounts are measured using appropriate models and criteria, despite the uncertainty surrounding the ultimate timing and amounts, as detailed in Note 32.

The carrying amount of these contingencies was R$ 19,209 (R$ 15,990 at December 31, 2011).

F.13

f) Technical Provisions for Insurance and Pension Plan

Technical provisions are liabilities arising from obligations of ITAÚ UNIBANCO HOLDING to its policyholders and participants. These obligations may be short-term liabilities (property and casualty insurance) or medium and long-term liabilities (life insurance and pension plans).

The determination of the actuarial liability is subject to several uncertainties inherent in the coverage of insurance and pension contracts, such as assumptions of persistence, mortality, disability, life expectancy, morbidity, expenses, frequency and severity of claims, conversion of benefits into annuities, redemptions and return on assets.

The estimates for these assumptions are based on the historical experience of ITAÚ UNIBANCO HOLDING, benchmarks and experience of the actuary, in order to comply with best market practices and the continuous review of the actuarial liability. The adjustments resulting from these continuous improvements, when necessary, are recognized in the statement of income for the corresponding period.

Additional information is described in Note 30.

2.4 SUMMARY OF MAIN ACCOUNTING PRACTICES

a) CONSOLIDATION AND PROPORTIONATE CONSOLIDATION

I- Subsidiaries

In accordance with IAS 27 – “Consolidated and Separate Financial Statements”, subsidiaries are entities in which ITAÚ UNIBANCO HOLDING has the power to govern the financial and operating policies so as to obtain benefits from its activities, and normally correspond to ownership of more than 50% of the voting capital.

II- Special Purpose Entities (SPEs)

In accordance with SIC 12 – “Consolidation – Special Purpose Entities”, ITAÚ UNIBANCO HOLDING consolidates special purpose entities (SPEs), when the substance of the relationship between ITAÚ UNIBANCO HOLDING and the SPEs indicates that the SPEs are controlled by ITAÚ UNIBANCO HOLDING. The following circumstances may show evidence of control:

· In substance, the activities of the SPEs are being conducted on behalf of ITAÚ UNIBANCO HOLDING, according to its specific business needs so that ITAÚ UNIBANCO HOLDING obtains benefits from their operations;

· In substance, ITAÚ UNIBANCO HOLDING has the decision-making powers to obtain the majority of the benefits of the activities of SPEs or ITAÚ UNIBANCO HOLDING has the ability to delegate such powers;

· In substance, ITAÚ UNIBANCO HOLDING has the right to obtain the majority of the benefits of the SPEs and therefore may be exposed to risks incident to their activities;

· In substance, ITAÚ UNIBANCO HOLDING retains the majority of the residual risks related to the SPEs or their assets in order to obtain benefits from their activities.

III- Joint Ventures

IAS 31 – “Interests in Joint Ventures”, defines joint ventures as entities jointly controlled by two or more unrelated entities (venturers). Joint ventures include contractual agreements in which two or more entities have joint-control over entities or over operations or over assets, so that the strategic financial and operating decisions that affect them require the unanimous decision of the venturers.

F.14

Also in accordance with IAS 31, the accounting treatment for investments in joint ventures can be either proportionate consolidation or the equity method. ITAÚ UNIBANCO HOLDING has elected to use proportionate consolidation.

The following table shows the main consolidated subsidiaries and proportionally consolidated joint ventures, as well as the interests of ITAÚ UNIBANCO HOLDING in their voting capital at December 31, 2012, and December 31, 2011:

				Interest in voting capital at						Interest in total capital at
		Incorporation Country	Activity	12/31/2012			12/31/2011			12/31/2012			12/31/2011
Banco Dibens S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Fiat S.A.		Brazil	Financial institution		100.00	%		100.00	%		99.99	%		99.99	%
Banco Itaú Argentina S.A.		Argentina	Financial institution		100.00	%		100.00	%		99.99	%		99.99	%
Banco Itaú BBA S.A.		Brazil	Financial institution		99.99	%		99.99	%		99.99	%		99.99	%
Banco Itaú Consignado S.A.	(1) Note 3d	Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaú Chile		Chile	Financial institution		99.99	%		99.99	%		99.99	%		99.99	%
Banco Itaú Europa Luxembourg S.A.		Luxembourg	Financial institution		99.99	%		99.99	%		99.99	%		99.99	%
Banco Itaú BBA International, S.A.	(2)	Portugal	Financial institution		99.99	%		99.99	%		99.99	%		99.99	%
Banco Itaú Paraguay S.A.		Paraguay	Financial institution		99.99	%		99.99	%		99.99	%		99.99	%
Banco Itaú Uruguay S.A.		Uruguay	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaucard S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itaucred Financiamentos S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Banco Itauleasing S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
BIU Participações S.A.	Note 13a	Brazil	Holding company		-			66.15	%		-			66.15	%
Cia. Itaú de Capitalização		Brazil	Capitalization		99.99	%		99.99	%		99.99	%		99.99	%
Dibens Leasing S.A. - Arrendamento Mercantil		Brazil	Leasing		100.00	%		100.00	%		100.00	%		100.00	%
FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento	Note 3b	Brazil	Consumer finance credit		100.00	%		-			100.00	%		-
Fiat Administradora de Consórcios Ltda.		Brazil	Consortia administrator		99.99	%		99.99	%		99.99	%		99.99	%
Hipercard Banco Múltiplo S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Administradora de Consórcios Ltda.		Brazil	Consortia administrator		99.99	%		99.99	%		99.99	%		99.99	%
Itaú Ásia Securities Ltd		Hong Kong	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itau Bank, Ltd.	(3)	Cayman Islands	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Companhia Securitizadora de Créditos Financeiros		Brazil	Securitization		99.99	%		99.99	%		99.98	%		99.99	%
Itaú Corretora de Valores S.A.		Brazil	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Distribuidora de Títulos e Valores Mobiliários Ltda.		Brazil	Dealer		100.00	%		100.00	%		99.99	%		99.99	%
Itaú Japan Asset Management Limited		Japan	Asset management		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Middle East Limited		Arab Emirates	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Seguros S.A.		Brazil	Insurance		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Unibanco S.A.		Brazil	Financial institution		100.00	%		100.00	%		100.00	%		100.00	%
Itaú USA, INC.		United States	Broker		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Vida e Previdência  S.A.		Brazil	Pension plan		100.00	%		100.00	%		100.00	%		100.00	%
Itaú Unibanco Serviços e Processamento de Informações Comerciais S.A.	(4)	Brazil	Technology services		100.00	%		100.00	%		100.00	%		100.00	%
Redecard S.A.	Note 3c	Brazil	Acquirer		100.00	%		50.01	%		100.00	%		50.01	%
Unibanco Participações Societárias S.A.	(5)	Brazil	Holding company		-			99.99	%		-			99.99	%
Joint Ventures
Banco Investcred Unibanco S.A.		Brazil	Financial institution		50.00	%		50.00	%		50.00	%		50.00	%
FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento	Note 3b	Brazil	Consumer finance credit		-			50.00	%		-			50.00	%
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento		Brazil	Consumer finance credit		50.00	%		50.00	%		50.00	%		50.00	%
Luizacred S.A. Soc. Cred. Financiamento Investimento		Brazil	Consumer finance credit		50.00	%		50.00	%		50.00	%		50.00	%

(1) New company name of Banco Banerj S.A.;

(2) New company name of Banco Itaú Europa, S.A.;

(3) Does not include Redeemable Preferred Shares;

(4) New company name of Orbitall Serviços e Processamento de Informações Comerciais S.A.;

(5) Merged in 10/31/2012 into Unibanco Negócios Imobiliários Ltda controlled by Dibens Leasing S.A. - Arrendamento Mercantil.

Other information

The table below shows the amounts included in the consolidated balance sheets and statements of income of the jointly-controlled entities (Joint Ventures), proportionally consolidated by ITAÚ UNIBANCO HOLDING:

	12/31/2012			12/31/2011			12/31/2010
Current assets		3,336			3,869			4,303
Non-current assets		230			393			323
Total assets		3,566			4,262			4,626
Current liabilities		3,034			3,537			3,743
Non-current liabilities		17			31			46
Total liabilities		3,051			3,568			3,789
Total income		1,683			1,647			1,605
Total expense		(1,603	)		(1,600	)		(1,494	)

ITAÚ UNIBANCO HOLDING is committed to maintaining the minimum capital required by all those jointly controlled entities, for all entities FIC - Financeira Itaú CBD S.A Crédito, Financiamento e Investimento, and FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento (just in 12/31/2012 - Note 3c), the minimum capital percentage is 25% higher than that required by the Central Bank of Brazil (Note 33).

F.15

IV - Business combinations

Accounting for business combinations under IFRS 3 (R) is only applicable when a business is acquired. Under IFRS 3 (R), a business is defined as an integrated set of activities and assets that is conducted and managed for the purpose of providing a return to investors, or cost reduction or other economic benefits. In general, a business consists of inputs, processes applied to those inputs and outputs that are, or will be, used to generate income. If there is goodwill in a set of activities or transferred assets, this is presumed to be a business. For acquisitions that meet the definition of business, accounting under the purchase method is required.

The acquisition cost is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the exchange date, plus costs directly attributable to the acquisition. Acquired assets and assumed liabilities and contingent liabilities identifiable in a business combination are initially measured at fair value at the date of acquisition, regardless of the existence of non-controlling interests. The excess of the acquisition cost, plus non-controlling interests, if any, over the fair value of identifiable net assets acquired, is accounted for as goodwill.

The treatment of goodwill is described in Note 2.4k. If the cost of acquisition, plus non-controlling interests, if any, is lower than the fair value of identifiable net assets acquired, the difference is directly recognized in income.

For each business combination, the purchaser should measure any non-controlling interest in the acquired company at the fair value or amount proportional to its interest in net assets of the acquired company.

F.16

b) FOREIGN CURRENCY TRANSLATION

I- Functional and presentation currency

The consolidated financial statements of ITAÚ UNIBANCO HOLDING are presented in reais, which is its functional currency and the presentation currency of these consolidated financial statements. For each subsidiary, joint venture and investment in an unconsolidated company, ITAÚ UNIBANCO HOLDING defined the functional currency.

IAS 21 – “The effects of changes in foreign exchange rates” defines the functional currency as the currency of the primary economic environment in which the entity operates. If the indicators are mixed and the functional currency is not obvious, Management has to use its judgment to determine the functional currency that most faithfully represents the economic effects of the entity’s operations, focusing on the currency that mainly influences the pricing of transactions. Additional indicators are the currency in which financing is made or in which funds from operating activities are generated or received, as well as the nature of activities and the extent of transactions between the foreign subsidiaries and the other entities of the consolidated group.

The assets and liabilities of subsidiaries with a functional currency other than the Brazilian real are translated as follows:

· assets and liabilities are translated at the closing rate at the balance sheet date;

· income and expenses are translated at monthly average exchange rates;

· exchange differences arising from currency translation are recorded in other comprehensive income.

II- Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of income as part of foreign exchange operations and foreign exchange gains/losses and amount to R$ 1,109 for the period for the period January 1, to December 31, 2012 (R$ 2,186 for the period January 1 to December 31, 2011 and R$ (814) for the period January 1 to December 31, 2010).

In the case of changes in the fair value of monetary assets denominated in foreign currency classified as available-for-sale, the exchange differences resulting from a change in the amortized cost of the instrument are separated from all other changes in the carrying amount of the instrument. The exchange differences resulting from a change in the amortized cost of the instrument are recognized in the income statement, while those resulting from other changes in the carrying amount, except impairment losses, are recognized in other comprehensive income until derecognition or impairment.

c) CASH AND CASH EQUIVALENTS

ITAÚ UNIBANCO HOLDING defines cash and cash equivalents as cash and current accounts in banks (included in the heading cash and deposits on demand on the consolidated balance sheet), interbank deposits and securities purchased under agreements to resell that have original maturities of up to 90 days or less, as shown in Note 4.

d) CENTRAL BANK COMPULSORY DEPOSITS

The Central Banks of the countries in which ITAÚ UNIBANCO HOLDING operates currently impose a number of compulsory deposit requirements on financial institutions. Such requirements are applied to a wide range of banking activities and operations, such as demand, savings, and time deposits. In the case of Brazil, the acquisition and deposit of Brazilian federal government securities is also required.

Compulsory deposits are initially recognized at fair value and subsequently at amortized cost, using the effective interest rate method as detailed in Note 2.4g VI.

F.17

e) INTERBANK DEPOSITS

ITAÚ UNIBANCO HOLDING recognizes its interbank deposits in the balance sheet initially at fair value and subsequently at the amortized cost using the effective interest method as detailed in Note 2.4g VI.

f) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SOLD UNDER REPURCHASE AGREEMENTS

ITAÚ UNIBANCO HOLDING has purchased securities with resale agreement (resale agreements), and sold securities with repurchase agreement (repurchase agreement) of financial assets. Resale and repurchase agreements are accounted for under Securities purchased under agreements to resell and Securities sold under repurchase agreements, respectively.

The amounts invested in resale agreement transactions and borrowed in repurchase agreement transactions are initially recognized in the balance sheet at the amount advanced or raised, and subsequently measured at amortized cost. The difference between the sale and repurchase prices is treated as interest and recognized over the life of the agreements using the effective interest rate method. Interest earned in resale agreement transactions and incurred in repurchase agreement transactions is recognized in Interest and similar income and Interest and similar expense, respectively.

The financial assets accepted as collateral in our resale agreements can be used by us, if provided for in the agreements, as collateral for our repurchase agreements or can be sold.

In Brazil, control over custody of financial assets is centralized and the ownership of investments under resale and repurchase agreements is temporarily transferred to the buyer. ITAÚ UNIBANCO HOLDING strictly monitors the fair value of financial assets received as collateral under our resale agreements and adjusts the collateral amount when appropriate.

Financial assets pledged as collateral to counterparties are also recognized in the consolidated financial statements. When the counterparty has the right to sell or re-pledge such instruments, they are presented in the balance sheet under the appropriate class of financial assets.

g) FINANCIAL ASSETS AND LIABILITIES

In accordance with IAS 39, all financial assets and liabilities, including derivative financial instruments, shall be recognized in the balance sheet and measured based on the category in which the instrument is classified.

Financial assets and liabilities can be classified into the following categories:

· Financial assets and liabilities at fair value through profit or loss – held for trading.

· Financial assets and liabilities at fair value through profit or loss – designated at fair value.

· Available-for-sale financial assets.

· Held-to-maturity financial assets.

· Loans and receivables.

· Financial liabilities at amortized cost.

The classification depends on the purpose for which financial assets were acquired or financial liabilities were assumed. Management determines the classification of financial instruments at initial recognition.

ITAÚ UNIBANCO HOLDING classifies financial instruments into classes that reflect the nature and characteristics of these financial instruments.

ITAÚ UNIBANCO HOLDING classifies as loans and receivables the following classes of balance sheet headings: Cash and deposits on demand, Central Bank compulsory deposits, Interbank deposits (Note 2.4e), Securities purchased under agreement to resell (Note 2.4f), Loan operations (Note 2.4g VI) and Other financial assets (Note 2.4g IX).

Regular purchases and sales of financial assets are recognized and derecognized, respectively, on the trade date.

F.18

Financial assets are derecognized when the rights to receive cash flows from the assets have expired or when ITAÚ UNIBANCO HOLDING has substantially transferred all risks and rewards of ownership, and such transfer qualifies for derecognition, according to the requirements of IAS 39. Therefore, if the risks and rewards were not substantially transferred, ITAÚ UNIBANCO HOLDING evaluates the extent of control in order to determine whether the continuous involvement related to any retained control does not prevent derecognition. Financial liabilities are derecognized when discharged or extinguished.

Financial assets and liabilities are offset against each other and the net amount is reported in the balance sheet solely when there is a legally enforceable right to offset the recognized amounts and there is intention to settle them on a net basis, or simultaneously realize the asset and settle the liability.

I- Financial assets and liabilities at fair value through profit or loss - held for trading

These are financial assets and liabilities acquired or incurred principally for the purpose of selling them in the short term or when they are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent history of short-term profit taking.

The financial assets and liabilities included in this category are initially and subsequently recognized at fair value. Transaction costs are directly recognized in the consolidated statement of income. Gains and losses arising from changes in fair value are directly included in the consolidated statement of income under Net gain (loss) from investment securities and derivatives. Interest income and expenses are recognized in Interest and similar income and Interest and similar expense, respectively.

II- Financial assets and liabilities at fair value through profit or loss – designated at fair value

These are assets and liabilities designated at fair value through profit or loss upon initial recognition (fair value option). This designation cannot be subsequently changed. In accordance with IAS 39, the fair value option can only be applied if it reduces or eliminates an accounting mismatch when the financial instruments are part of a portfolio for which risk is managed and reported to Management based on its fair value or when these instruments consist of hosts and embedded derivatives that shall otherwise be separated.

The financial assets and liabilities included in this category are initially and subsequently recognized at fair value. Transaction costs are directly recognized in the consolidated statement of income. Gains and losses arising from changes in fair value are directly included in the consolidated statement of income under Net gain (loss) from investment securities and derivatives - Financial assets designated at fair value through profit or loss. Interest income and expenses are recognized in Income and similar income and Interest and similar expense, respectively.

ITAÚ UNIBANCO HOLDING designated certain assets at fair value through profit or loss upon their initial recognition, because they are reported to Management and their performance is daily evaluated based on their fair value.

III- Derivatives

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. All derivatives are recognized as assets when the fair value is positive, and as liabilities when negative.

Certain derivatives embedded in other financial instruments are treated as separate derivatives, when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not recognized at fair value through profit or loss. These embedded derivatives are accounted for separately at fair value, with changes in fair value recognized in the consolidated statement of income in Net gain (loss) from investment securities and derivatives – Financial assets held for trading and derivatives - except when ITAÚ UNIBANCO HOLDING designates these hybrid contracts as a whole as fair value through profit or loss.

F.19

Derivatives can be designated as hedging instruments under hedge accounting and in the event they qualify, depending upon the nature of the hedged item, the method for recognizing gains or losses from changes in fair value will be different. These derivatives, which are used to hedge exposures to risk or modify the characteristics of financial assets and liabilities, and that meet IAS 39 criteria, are recognized as hedge accounting.

In accordance with IAS 39, to qualify for hedge accounting, all of the following conditions are met:

· at the inception of the hedge there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge.

· the hedge is expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedged risk, consistent with the originally documented risk management strategy for that particular hedging relationship.

· for a cash flow hedge, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit or loss.

· the effectiveness of the hedge can be reliably measured, i.e. the fair value or cash flows of the hedged item that are attributable to the hedged risk and the fair value of the hedging instrument can be reliably measured.

· the hedge is assessed on an ongoing basis and it is determined that the hedge has in fact been highly effective throughout the periods for which the hedge was designated.

IAS 39 presents three hedge accounting categories: fair value hedge, cash flow hedge, and hedge of net investments in a foreign operation.

ITAÚ UNIBANCO HOLDING uses derivatives as hedging instruments under cash flow hedge strategies, fair value hedge and hedge of net investments, as detailed in Note 09.

Fair value hedge

For derivatives that are designated and qualify as fair value hedges, the following practices are adopted:

a) The gain or loss arising from the new measurement of the hedge instrument at fair value should be recognized in income; and

b) The gain or loss arising from the hedged item, attributable to the effective portion of the hedged risk, should adjust the book value of the hedged item and also be recognized in income.

When the derivative expires or is sold or the hedge no longer meets the accounting hedge criteria or the entity revokes the designation, the entity should prospectively discontinue the accounting hedge. In addition, any adjustment in the book value of the hedged item should be amortized in income.

Cash flow hedge

For derivatives that are designated and qualify as a cash flow hedge, the effective portion of derivative gains or losses are recognized in Other comprehensive income – Gains and losses – Cash flow hedge, and reclassified to Income in the same period or periods in which the hedged transaction affects income. The portion of gain or loss on derivatives that represents the ineffective portion or the hedge components excluded from the assessment of effectiveness is recognized immediately in income. Amounts originally recorded in Other comprehensive income and subsequently reclassified to Income are recorded in the corresponding income or expense lines in which the related hedged item is reported.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting and also when ITAU UNIBANCO HOLDING redesignates a hedge, any cumulative gain or loss existing in Other comprehensive income is frozen and is recognized in income when the hedged item is ultimately recognized in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss recognized in Other comprehensive income is immediately transferred to the statement of income.

F.20

Hedge of net investments in foreign operations

A hedge of a net investment in a foreign operation, including hedge of a monetary item that is accounted for as part of the net investment, is accounted for in a manner similar to a cash flow hedge:

a) the portion of gain or loss on the hedge instrument determined as effective is recognized in other comprehensive income.

b) the ineffective portion is recognized in income.

Gains or losses on the hedging instrument related to the effective portion of the hedge which is recognized in comprehensive income are reclassified to the income statement upon the disposal of the investment in the foreign operation.

IV- Available-for-sale financial assets

In accordance with IAS 39, financial assets are classified as available-for-sale when in the Management’s judgment they can be sold in response to or in anticipation of changes in market conditions, and that were not classified into the categories of financial assets at fair value through profit or loss, loans and receivables or held to maturity.

Available-for-sale financial assets are initially and subsequently recognized in the consolidated balance sheet at fair value, plus transaction costs. Unrealized gains and losses (except losses for impairment, foreign exchange differences, dividends and interest income) are recognized, net of applicable taxes, in Other comprehensive income. Interest, including the amortization of premiums and discounts, is recognized in the consolidated statement of income under Interest and similar income. The average cost is used to determine the realized Gains and losses on Disposal of available-for-sale financial assets, which are recorded in the consolidated statement of income under Net gain (loss) from financial assets and liabilities – Available-for-sale financial assets. Dividends on available-for-sale assets are recognized in the consolidated statement of income as Dividend income when ITAÚ UNIBANCO HOLDING is entitled to receive such dividends, and inflow of economic benefits is probable.

ITAÚ UNIBANCO HOLDING assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is evidence of impairment, resulting in the recognition of an impairment loss. If any impairment evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in income, is recognized in the consolidated statement of income as a reclassification adjustment from Other comprehensive income.

Impairment losses recognized in the consolidated statement of income on equity instruments are not reversed through the statement of income. However, if in a subsequent period the fair value of a debt instrument classified as an available-for-sale financial asset increases and such increase can be objectively related to an event that occurred after the loss recognition, such loss is reversed through the statement of income.

F.21

V- Held-to-maturity financial assets

In accordance with IAS 39, the financial assets classified into the held-to-maturity category are non-derivative financial assets that ITAÚ UNIBANCO HOLDING has the positive intention and ability to hold to maturity.

These assets are initially recognized at fair value, plus transaction costs, and subsequently measured at amortized cost, using the effective interest rate method (as detailed in item VI below). Interest income, including the amortization of premiums and discounts, is recognized in the consolidated statement of income under Interest and similar income.

When there is impairment of held-to-maturity financial assets, the loss is recorded as a reduction in the carrying amount through the use of an allowance account and recognized in the consolidated statement of income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the loss was recognized, the previously recognized loss is reversed. The reversal amount is also recognized in the consolidated statement of income.

VI- Loan operations

Loan operations are initially recognized at fair value, plus transaction costs and are subsequently measured at amortized cost using the effective interest rate method.

The effective interest rate approach is a method of calculating the amortized cost of a financial asset or liability and of allocating the interest income or expense over the relevant period. The effective interest rate is the discount rate that is applied to future payments or receipts through the expected life of the financial instrument that results in an amount equal to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, ITAÚ UNIBANCO HOLDING estimates cash flows considering all contractual terms of the financial instrument, but does not consider future credit losses. The calculation includes all commissions paid or received between parties to the contract, transaction costs, and all other premiums or discounts.

ITAÚ UNIBANCO HOLDING classifies a loan operation as on non-accrual status if the payment of the principal or interest has been in default for 60 days or more. When a loan is placed on non-accrual status, the accrual of interest of the loan is discontinued.

When a financial asset or group of similar financial assets is impaired and its carrying amount is reduced through an allowance for loan losses, the subsequent interest income is recognized on the reduced carrying amount using the interest rate used to discount the future cash flows for purposes of measuring the allowance for loan losses.

Our Individuals portfolio consists primarily of vehicle financing to individuals, credit card, personal loans (including mainly consumer finance and overdrafts) and residential mortgage loans. The Corporate portfolio includes loans made to large corporate clients. Our Small/Medium Business Portfolio corresponds to loans to a variety of customers from small to medium-sized companies. The Foreign Loans Latin America is substantially comprised of loans granted to individuals in Argentina, Chile, Paraguay, and Uruguay.

At a corporate level, there are two groups (independent from the business areas): the credit risk group and the finance group, which are responsible for defining the methodologies used to measure the allowance for loan losses and for performing the corresponding calculations on a recurring basis.

The credit risk group and the finance group, at the corporate level, monitor the trends observed in the allowance for loan losses at the portfolio segment level, in addition to establishing an initial understanding of the variables that may trigger changes in the allowance for loan losses, the probability of default or the loss given default.

F.22

Once the trends have been identified and an initial assessment of the variables has been made at the corporate level, the business areas are responsible for further analyzing these observed trends at a detailed level and for each portfolio, for understanding the underlying reasons for the trends observed and for deciding whether changes are required in our credit policies.

VII - Lease operations (as lessor)

When assets are subject to a finance lease, the present value of lease payments is recognized as a receivable in the consolidated balance sheet under Loan operations and Lease Operations.

Initial direct costs when incurred by ITAÚ UNIBANCO HOLDING are included in the initial measurement of the lease receivable, reducing the amount of income to be recognized over the lease period. Such initial costs usually include commissions and legal fees.

The recognition of interest income reflects a constant return rate on the net investment of ITAÚ UNIBANCO HOLDING and is recognized in the consolidated statement of income under Interest and similar income.

VIII- Allowance for loan and lease losses

General

ITAÚ UNIBANCO HOLDING periodically assesses whether there is any objective evidence that a receivable or group of receivables is impaired. A receivable or group of receivables is impaired and there is a need for recognizing an impairment loss if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows that can be reliably estimated.

The allowance for loan and lease losses is recognized as probable losses inherent in the portfolio at the balance sheet date. The determination of the level of the allowance rests upon various judgments and assumptions, including current economic conditions, loan portfolio composition, prior loan and lease loss experience and evaluation of credit risk related to individual loans. Our process for determining the allowance for loan and lease losses includes Management's judgment and the use of estimates. The adequacy of the allowance is regularly analyzed by Management.

The criteria adopted by ITAÚ UNIBANCO HOLDING for determining whether there is objective evidence of impairment include the following:

· default in principal or interest payment;

· financial difficulties of the debtor and other objective evidence that results in the deterioration of the financial position of the debtor (for example, debt-to-equity ratio, percentage of net sales or other indicators obtained through processes adopted to monitor credit, particularly for retail portfolios);

· breach of loan clauses or terms;

· entering into bankruptcy;

· loss of competitive position of the debtor.

The estimated period between the loss event and its identification is defined by Management for each identified portfolio of similar receivables. The periods adopted by Management are of twelve months, considering that the observed period for homogenous receivables portfolios vary, depending upon the specific portfolio, between nine and twelve months Management chose to use twelve months period as being the most representative, with those observed for portfolios of loans individually evaluated for impairment are at most 12 months, considering the review cycle for each credit.

F.23

Assessment

ITAÚ UNIBANCO HOLDING first assesses whether objective evidence of impairment exists for receivables that are individually significant, and individually or collectively for receivables that are not individually significant.

To determine the amount of the allowance for individually significant receivables with objective evidence of impairment, methodologies are used that consider both the quality of the client and the nature of the transaction, including its collateral, to estimate the cash flows expected from these loans.

If no objective evidence of impairment exists for an individually assessed receivable, whether significant or not, the asset is included in a group of receivables with similar credit risk characteristics and collectively assessed for impairment. Receivables that are individually assessed for impairment and for which an impairment loss is recognized are not included in the collective assessment. The amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.

For collectively assessed loans, the calculation of the present value of the estimated future cash flows for which there is collateral reflects the historical performance of the foreclosure and recovery of fair value, considering the cash flows that may arise from foreclosure less costs for obtaining and selling that collateral.

For the purpose of a collective evaluation of impairment, receivables are grouped on the basis of similar credit risk characteristics. The characteristics are relevant to the estimation of future cash flows for such receivables by being indicative of the debtors’ ability to pay all amounts due, according to the contractual terms of the receivables being evaluated. Future cash flows in a group of receivables that are collectively evaluated for purposes of identifying the need for recognizing impairment are estimated on the basis of the contractual cash flows of the group of receivables and historical loss experience for receivables with similar credit risk characteristics. The historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.

For individually significant receivables with no objective evidence of impairment, ITAÚ UNIBANCO HOLDING classifies these loans into certain rating categories based on several qualitative and quantitative factors applied through internally developed models. Considering the size and the different risk characteristics of each contract, the rating category determined according to internal models can be reviewed and modified by our Corporate Credit Committee, the members of which are executives and officers in corporate credit risk. ITAÚ UNIBANCO HOLDING estimates inherent losses for each rating category considering an internally developed approach for low-default portfolios, that uses our historical experience for building internal models, that are used both to estimate the PD (probability of default) and to estimate the LGD (loss given default.)

To determine the amount of the allowance for individually non-significant items loans are segregated into classes considering the underlying risks and characteristics of each group. The allowance for loan and lease losses is determined for each of those classes through a process that considers historical delinquency and loan loss experience over the most recent years.

Measurement

The methodology used to measure the allowance for loan and lease losses was developed internally by the credit risk and finance areas at the corporate level.In those areas and considering the different characteristics of the portfolios, different areas are responsible for defining the methodology to measure the allowance for each:Corporate (including loan operations with objective evidence of impairment and individually significant loan operations but with no objective evidence of impairment), Individuals, Small and Medium Businesses, and Foreign Units Latin America.Each of the four portfolio areas responsible for defining the methodology to measure the allowance for loan and lease losses is further divided into groups, including groups that develop the methodology and groups that validate the methodology.A centralized group in the credit risk area is responsible for measuring the allowance on a recurring basis following the methodologies developed and approved for each of the four areas.

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The methodology is based on two components to determine the amount of the allowance: The probability of default by the client or counterparty (PD), and the potential economic loss that may occur in the event of default, being the debt that cannot be recovered (LGD) which are applied to the outstanding balance of the loan. Measurement and assessment of these risk components is part of the process for granting credit and for managing the portfolio. The estimated amounts of PD and LGD are measured based on statistical models that consider a significant number of variables which are different for each class and include, among others, income, equity, past loan experiences, level of indebtedness, economic sectors that affect collectability and other attributes of each counterparty and of the economic environment. These models are regularly updated for changes in economic and business conditions.

A model updating process is started when the modeling area identifies that it is not capturing significant effects of the changes of economic conditions, in the performance of the portfolio or when a change is made in the methodology for calculating the allowance for loan and lease losses. When a change in the model is made, the model is validated through back-testing and statistical methods are used to measure its performance through detailed analysis of its documentation, by describing step-by-step how the process is carried out. The models are validated by an area independent from the one developing it, by issuing a technical report on the assumptions used (integrity, consistency, and replicability of the bases) and on the mathematical methodology used. The technical report is subsequently submitted to CTAM (Model assessment technical committee), which is the highest level of approval of model reviews.

Considering the different characteristics of the loans at each of the four portfolio areas (Corporate (with no objective evidence of impairment), Individuals, Small and Medium Businesses, and Foreign Units Latin America), different areas within the corporate credit risk area are responsible for developing and approving the methodologies for loans in each of those four portfolio areas. Management believes that the fact that different areas focus on each of the four portfolios results in increased knowledge, specialization and awareness of the teams as to the factors that are more relevant for each portfolio area in measuring the loan losses. Also considering such different characteristics and other factors, different inputs and information are used to estimate the PD and LGD as further detailed below:

· Corporate (with no evidence of impairment) - factors considered and inputs used are mainly the history of the customer relationship with us, the results of analysis of the customer’s accounting statements and the information obtained through frequent contacts with its officers, aiming at understanding the strategy and the quality of its management. Additionally, industry and macroeconomic factors are also included in the analysis. All those factors (which are quantitative and qualitative) are used as inputs to the internal model developed to determine the corresponding rating category. This approach is also applied to the corporate credit portfolio outside Brazil.

· Individuals – factors considered and inputs used are mainly the history of the customer relationship with us, and information available through credit bureaus (negative information).

· Small/Medium Businesses – factors considered and inputs used include, in addition to the history of the customer relationship and credit bureau information about the customer’s revenues, industry expertise, and information about its shareholders and officers, among others.

· Foreign Units – Latin America - considering the relative smaller size of this portfolio and its more recent nature, the models are simpler and use the past due status and an internal rating of the customer as main factors.

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Reversal, write-off, and renegotiation

If, in a subsequent period, the amount of the impairment loss decreases and the decrease is objectively related to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the previously recognized impairment is reversed. The amount of reversal is recognized in the consolidated statement of Income under Expense for allowance for loan and lease losses.

When a loan is uncollectible, it is written-off in the balance sheet under allowance for loan and lease losses. Write-off as losses occur after 360 days of credits have matured or after 540 days for loans with maturities over 36 months.

In almost all cases for loan products, renegotiated loans require at least one payment to be made under the renegotiated terms in order for it to be removed from nonperforming and nonaccrual status. Renegotiated loans return to nonperforming and nonaccrual status when they reach 60 days past due under the renegotiated terms, which typically corresponds to the borrower missing two or more payments.

IX- Other financial assets

ITAÚ UNIBANCO HOLDING presents these assets, which composition is detailed in Note 20a, in the consolidated balance sheet initially at fair value and subsequently at amortized cost using the effective interest method.

Interest income is recognized in the consolidated statement of income under Interest and similar income.

X- Financial liabilities at amortized cost

The financial liabilities that are not classified as at fair value through profit or loss are classified into this category and initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method. Interest expenses are presented in consolidated statement of income under Interest and similar expense.

The following financial liabilities are presented in the consolidated balance sheet and recognized at amortized cost:

· Deposits. (See Note 17).

· Securities sold under repurchase agreements (Note 2.4f).

· Funds from interbank markets.

· Funds from institutional markets.

· Liabilities for capitalization plans.

· Other financial liabilities (Note 20b).

h) INVESTMENTS IN UNCONSOLIDATED COMPANIES

Unconsolidated companies (the term ITAÚ UNIBANCO HOLDING uses for associates under IAS 28) are those companies in which the investor has significant influence, but does not have control. Significant influence is usually presumed to exist when an interest in voting capital from 20% to 50% is held. Investments in these companies are initially recognized at cost of acquisition and subsequently accounted for on the equity method. Investments in unconsolidated companies include the goodwill identified upon acquisition, net of any cumulative impairment loss.

ITAÚ UNIBANCO HOLDING’s share in profits or losses of its unconsolidated companies after acquisition is recognized in the consolidated statement of income. Its share of the changes in the reserves of corresponding stockholders’ equity of its unconsolidated companies is recognized in its own reserves of stockholders’ equity. The cumulative changes after acquisition are adjusted against the carrying amount of the investment. When the ITAÚ UNIBANCO HOLDING share of losses of an unconsolidated company is equal or above its interest in the unconsolidated company, including any other receivables, ITAÚ UNIBANCO HOLDING does not recognize additional losses, unless it has incurred any obligations or made payments on behalf of the unconsolidated company.

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Unrealized profits on transactions between ITAÚ UNIBANCO HOLDING and its unconsolidated companies are eliminated to the extent of the interest of ITAÚ UNIBANCO HOLDING. Unrealized losses are also eliminated, unless the transaction provides evidence of impairment of the transferred asset. The accounting policies on unconsolidated companies are consistent with the policies adopted by ITAÚ UNIBANCO HOLDING.

If the interest in the unconsolidated company decreases, but ITAÚ UNIBANCO HOLDING retains significant influence, only the proportional amount of the previously recognized amounts in Other comprehensive income is reclassified in Income, when appropriate.

Gains and losses from dilution arising from investments in unconsolidated companies are recognized in the consolidated statement of income.

I) LEASE COMMITMENTS (as lessee)

As a lessee, ITAÚ UNIBANCO HOLDING has finance and operating lease agreements.

ITAÚ UNIBANCO HOLDING leases certain fixed assets. Leases of fixed assets, in which ITAÚ UNIBANCO HOLDING substantially holds all risks and rewards incidental to the ownership are classified as finance leases. They are capitalized on the commencement date of the leases at the lower of the fair value of the asset and the present value of the lease future minimum payments.

Each lease installment is allocated part to the liability and part to financial charges, so that a constant rate is obtained for the outstanding debt balance. The corresponding obligations, net of future financial charges, are included in Other financial liabilities. The interest expense is recognized in the consolidated statement of income over the lease term, to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Fixed assets acquired through finance lease are depreciated over their useful lives.

Expenses of operating leases are recognized in the consolidated statement of income, on a straight-line basis, over the period of lease.

When an operating lease is terminated before the end of the lease term, any payment to be made to the lessor as a penalty is recognized as an expense in the period the termination occurs.

j) FIXED ASSETS

In accordance with IAS 16 – Property, plant and equipment, fixed assets are recognized at the cost of acquisition less accumulated depreciation, calculated using the straight-line method and rates based on the estimated useful lives of these assets. Such rates are presented in Note 15.

The residual values and useful lives of assets are reviewed and adjusted, if appropriate, at the end of each year.

ITAÚ UNIBANCO HOLDING reviews its assets in order to identify whether any indications of impairment exist. If such indications are identified, fixed assets are tested for impairment. In accordance with IAS 36 – Impairment of assets, impairment losses are recognized for the difference between the carrying and recoverable amount of an asset (or group of assets), in the consolidated statement of income. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and its value in use. For purposes of assessing impairment, assets are grouped at the lowest level for which independent cash flows can be identified (cash-generating units). The assessment may be made at an individual asset level when the fair value less the cost to sell may be reliably determined.

ITAÚ UNIBANCO HOLDING in the period ended December 31, 2012, did not recognize any impairment losses related to fixed assets. (At December 31, 2011, we recognized impairment losses of R$ 15 and in the period ended December 31, 2010, did not recognize any impairment losses).

Gains and losses on disposals of fixed assets are recognized in the consolidated statement of income under Other income or General and administrative expenses.

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k) GOODWILL

In accordance with IFRS 3 (R) – “Business Combinations”, goodwill may arise on an acquisition and represents the excess of the consideration transferred plus non-controlling interest over the net fair value of the net identifiable assets and contingent liabilities of the acquiree. Goodwill is not amortized, but its recoverable amount is tested for impairment annually or when there is any indication of impairment, using an approach that involves the identification of cash-generating units and estimates of fair value less cost to sell and/or value in use.

As defined in IAS 36, a cash-generating unit is the lowest identifiable group of assets that generates cash inflows that are independent of the cash inflows from other assets or groups of assets. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination.

IAS 36 determines that an impairment loss shall be recognized for a cash-generating unit if the recoverable amount of the cash-generating unit is less than its carrying amount. The loss shall be allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit on a pro rata basis applied to the carrying amount of each asset. The loss cannot reduce the carrying amount of an asset below the higher of its fair value less costs to sell and its value in use. The impairment loss of goodwill cannot be reversed. At December 31, 2012 and December 31, 2011, ITAÚ UNIBANCO HOLDING did not have any goodwill balance in our consolidated financial statements.

Goodwill of unconsolidated companies is reported as part of investment in the consolidated balance sheet under Investments in unconsolidated companies, and the impairment test is carried out in relation to the total balance of the investments (including goodwill).

l) INTANGIBLE ASSETS

Intangible assets are non-physical assets, including software and other assets, and are initially recognized at cost. Intangible assets are recognized when they arise from legal or contractual rights, their costs can be reliably measured, and in the case of intangible assets not arising from separate acquisitions or business combinations, it is probable that future economic benefits may arise from their use. The balance of intangible assets refers to acquired assets or those internally generated.

Intangible assets may have finite or indefinite useful lives. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. Intangible assets with indefinite useful lives are not amortized, but periodically tested in order to identify any impairment.

ITAÚ UNIBANCO HOLDING semi-annually assesses its intangible assets in order to identify whether any indications of impairment exist, as well as possible reversal of previous impairment losses. If such indications are found, intangible assets are tested for impairment. In accordance with IAS 36, impairment losses are recognized as the difference between the carrying and the recoverable amount of an asset (or group of assets), and recognized in the consolidated statement of income. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and its value in use. For purposes of assessing an impairment, assets are grouped into the minimum level for which cash flows can be identified. The assessment can be made at an individual asset level when the fair value less its cost to sell can be determined reliably.

In the period ended December 31, 2012, ITAÚ UNIBANCO HOLDING recognized impairment losses in the amount of R$ 7 (R$ 30 at December 31, 2011 and R$ 20 at December 31, 2010), related to the association for the promotion and offer of financial products and services, caused by results below expectations.

As set forth in IAS 38, ITAÚ UNIBANCO HOLDING elected the costing model to measure its intangible assets after its initial recognition.

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m) ASSETS HELD FOR SALE

Assets held for sale are recognized in the balance sheet when they are actually repossessed or there is intention to sell. These assets are initially recorded at their fair value.

Subsequent reductions in the carrying value of the asset are recorded as a loss due to decreases in fair value less costs to sell, in the consolidated statement of income under General and administrative expenses. In the case of recovery of the fair value less cost to sell, the recognized losses can be reversed.

n) INCOME TAX AND SOCIAL CONTRIBUTION

There are two components of the provision for income tax and social contribution: current and deferred.

Current income tax expense approximates taxes to be paid or recovered for the applicable period. Current assets and liabilities are recorded in the balance sheet under Tax assets – income tax and Social contribution credits and Tax liabilities – current, respectively.

Deferred income tax and social contribution represented by deferred tax assets and liabilities are obtained based on the differences between the tax bases of assets and liabilities and the amounts reported in the financial statements at each year end. The tax benefit of tax loss carryforwards is recognized as an asset. Deferred tax assets are only recognized when it is probable that future taxable income will be available for offset. Deferred tax assets and liabilities are recognized in the balance sheet under Tax assets – Income tax and social contribution – Deferred and Tax liabilities – Income tax and social contribution - Deferred, respectively.

Income tax and social contribution expense is recognized in the consolidated statement of income under Income tax and social contribution, except when it refers to items directly recognized in Other comprehensive income, such as: deferred tax on fair value measurement of available-for-sale financial assets, and tax on cash flow hedges. Deferred taxes of such items are initially recognized in other comprehensive income and subsequently recognized in Income together with the recognition of the gain/loss originally deferred.

Changes in tax legislation and rates are recognized in the consolidated statement of income under Income tax and social contribution in the period in which they are enacted. Interest and fines are recognized in the consolidated statement of income under General and administrative expenses. Income tax and social contribution are calculated at the rates shown below, considering the respective taxable bases, based on the current legislation related to each tax, which in the case of the operations in Brazil are for all the reporting periods as follows:

	12/31/2012
Income tax		15	%
Additional income tax		10	%
Social contribution (*)		15	%

(*) For non-financial operations consolidated in the financial statements the social contribution rate regards 9%.

To determine the proper level of provisions for taxes to be maintained for uncertain tax positions, a two-phased approach was applied, according to which a tax benefit is recognized if it is more probable than not that a position can be sustained. The benefit amount is then measured to be the highest tax benefit which probability of realization is over 50%.

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o) INSURANCE CONTRACTS AND PRIVATE PENSION

IFRS 4 – “Insurance contracts” defines insurance contracts as contracts under which the issuer accepts a significant insurance risk of the counterparty, by agreeing to compensate it if a specified uncertain future event adversely affects it.

ITAÚ UNIBANCO HOLDING, through its subsidiaries, issues contracts to clients that have insurance risks, financial risks or a combination of both. A contract under which ITAÚ UNIBANCO HOLDING accepts significant insurance risks from its clients and agrees to compensate them upon the occurrence of a specified uncertain future event is classified as an insurance contract. The insurance contract may also transfer a financial risk, but is accounted for as an insurance contract, should the insurance risk be significant.

As permitted by IFRS 1, upon adoption of IFRS for the first time, ITAÚ UNIBANCO HOLDING elected not to change its accounting policies for insurance contracts, which follow accounting practices adopted in Brazil (“BRGAAP”).

Investment contracts are those that transfer a significant financial risk. Financial risk is the risk of a future change in one or more variables, such as interest rate, price of financial assets, price of commodities, foreign exchange rate, index of prices or rates, credit risk rating, credit index or other variable.

Investment contracts may be reclassified as insurance contracts after their initial classification, should the insurance risk become significant.

Investment contracts with discretionary participation features are financial instruments, but they are treated as insurance contracts, as established by IFRS 4.

Once the contract is classified as an insurance contract, it remains as such until the end of its life, even if the insurance risk is significantly reduced during such period, unless all rights and obligations are extinguished or expired.

Note 30 presents a detailed description of all products classified as insurance contracts.

Private pension plans

In accordance with IFRS 4, an insurance contract is one that exposes its issuer to a significant insurance risk. An insurance risk is significant only if the insurance event could cause an issuer to pay significant additional benefits in any scenario, except for those that do not have commercial substance. Additional benefits refer to amounts that exceed those that would be payable if no insured event occurred.

Contracts that contemplate retirement benefits after an accumulation period (known as PGBL, VGBL and FGB) assure, at the commencement date of the contract, the basis for calculating the retirement benefit (mortality table and minimum interest). The contracts specify the annuity fees and, therefore, the contract transfers the insurance risk to the issuer at the commencement date, and they are classified as insurance contracts.

The payment of additional benefits is considered significant in all scenarios with commercial substance, since survival of the beneficiary may exceed the survival estimates in the actuarial table used to define the benefit agreed in the contract. The option of conversion into a fixed amount to be paid for the life of the beneficiary is not available. All contracts give the right to the counterparty to choose a life annuity benefit.

Insurance premiums

Insurance premiums are recognized over the period of the contracts in proportion to the amount of the insurance coverage. Insurance premiums are recognized as income in the consolidated statement of income.

If there is evidence of impairment losses with respect to receivables for insurance premiums, ITAÚ UNIBANCO HOLDING recognizes a provision, sufficient to cover this loss, based on the risk analysis of realization of insurance premiums receivable with installments overdue for over 60 days.

F.30

Reinsurance

Reinsurance premiums are recognized over the same period in which the related insurance premiums are recognized in the consolidated statement of income.

In the ordinary course of business, ITAÚ UNIBANCO HOLDING reinsures a portion of the risks underwritten, particularly property and casualty risks that exceed the maximum limits of responsibility that we determine to be appropriate for each segment and product (after a study which considers size, experience, specificities, and the necessary capital to support these limits). These reinsurance agreements allow the recovery of a portion of the losses from the reinsurer, although they do not release the insurer from the main obligation as direct insurer of the risks contemplated in the reinsurance.

Reinsurance assets are valued according to consistent basis of risk assignment contracts, and in the event of losses effectively paid are revalued after 365 days elapse in relation to the possibility of non-recovery of such losses. In the event of doubt, these assets are reduced based on the provision recognized for credit risk associated to reinsurance.

Acquisition Costs

Acquisition costs include direct and indirect costs related to the origination of insurance. These costs, except for the commissions paid to brokers and others, are expensed directly in income as incurred. Commissions, on the other hand, are deferred and expensed in proportion to the recognition of the premium revenue, i.e. over the period of the corresponding insurance contract.

Liabilities

Reserves for claims are established based on historical experience, claims in process of payment, estimated amounts of claims incurred but not yet reported, and other factors relevant to the required reserve levels. A liability for premium deficiencies is recognized if the estimated amount of premium deficiencies exceeds deferred acquisition costs. Expenses related to recognition of liabilities for insurance contracts are recognized in the consolidated statement of income under Change in reserves for insurance and private pension.

Embedded derivatives

ITAÚ UNIBANCO HOLDING analyzes all contracts in order to check for any embedded derivates. In the cases where these derivatives meet the definition of insurance contracts on their own, we do not separate them. We have not identified any embedded derivatives in our insurance contracts, which may be separated or measured at fair value in accordance with IFRS 4 requirements.

Liability adequacy test

IFRS 4 requires that the insurance companies analyze the adequacy of their insurance liabilities in each reporting period through a minimum adequacy test. The liability adequacy test for IFRS was conducted by adopting the current actuarial assumptions for future cash flows of all insurance contracts in force on the balance sheet date.

As a result of this test, if the assessment shows that the carrying amount of the insurance liabilities (less related deferred acquisition costs of contracts and related intangible assets) is lower than the value of the estimated future cash flows, any identified deficiency (after recording the deferred acquisition costs and intangible assets related to deficit portfolios, in compliance with the accounting policy) will have to be recognized in income for the period. In order to perform the adequacy test, insurance contracts are grouped in portfolios that are broadly subject to similar risks and which risks are jointly managed as a single portfolio.

The assumptions used to conduct the liability adequacy test are detailed in Note 30.

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p) CAPITALIZATION PLANS

ITAÚ UNIBANCO HOLDING sells capitalization certificates, in which clients deposit specific amounts, depending on the plan, which are redeemable at the original amount plus interest. Clients enter, during the term of the plan, into raffles of cash prizes.

While for regulatory purposes in Brazil they are regulated by the insurance regulator, these plans do not meet the definition of an insurance contract under IFRS 4, and therefore they are classified as a financial liability at amortized cost under IAS 39.

Revenue from capitalization plans is recognized during the period of the contract and measured as the difference between the amount deposited by the client and the amount that ITAÚ UNIBANCO HOLDING has to reimburse.

q) EMPLOYEE BENEFITS

ITAÚ UNIBANCO HOLDING is required to make contributions to government social security and labor indemnity plans, in Brazil and in other countries where it operates, which are expensed in the consolidated statement of income as an integral part of general and administrative expenses, when incurred. Those contributions totaled R$ 1,488 from January 1 to December 31, 2012 (R$ 1,429 from January 1 to December 31, 2011 and R$ 1.415 from January 1 to December 31, 2010).

Additionally, ITAÚ UNIBANCO HOLDING also sponsors defined benefit plans and defined contribution plans, accounted for pursuant to IAS 19 – “Employee benefits”.

Pension plans - Defined benefit plans

The liability (or asset, as the case may be) recognized in the consolidated balance sheet with respect to the defined benefit plan corresponds to the present value of the defined benefit obligations on the balance sheet date less the fair value of the plan assets. The defined benefit obligation is annually calculated by an independent actuarial company using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated amount of future cash flows of benefit payments based on the Brazilian government securities denominated in reais and with maturity periods similar to the term of the pension plan liabilities.

Actuarial gains and losses are fully recognized in income in the period in which they arise under General and administrative expenses – retirement plans and post-employment benefits.

The following amounts are recognized in the consolidated income of statement:

· the expected return on plan assets, and gains or losses corresponding to the difference between expected and effective returns;

· actuarial gains and losses that are defined as those that result from differences between the previous actuarial assumptions and what has actually occurred and include the effects of changes in actuarial assumptions;

· current service cost – defined as the increase in the present value of obligations resulting from employee service in the current period;

· past service cost – representing the change in the present value of defined benefit obligations caused by employee services in prior periods and that affect the current period.

· interest cost – defined as the increase during the year in the present value of obligations which arises from the passage of time.

In accordance with IAS 19, a curtailment is an event that significantly decreases the years of future service by current employees or that eliminates or reduces, for a significant number of employees, the qualification for benefits for all or part of future services. Settlement is a transaction in which an irrevocable action relieves the employer (or plan) of the primary responsibility for a pension or post-retirement benefit and therefore eliminates significant risks related to the obligation and to the related assets.

F.32

A gain or loss in the curtailment of the plan is the sum of two elements: (a) The recognition in income of deferred past service cost associated with the years of service that no longer will have to be provided, and (b) change in the projected benefit obligation. If the curtailment causes the reduction of the defined benefit obligation, the result will be a curtailment gain. If the curtailment causes the increase of the defined benefit obligation, the result will be a curtailment loss.

Upon a settlement, a gain or loss will be recognized.

Pension plans - Defined contribution

For defined contribution plans, contributions to plans made by ITAÚ UNIBANCO HOLDING are recognized as an expense when due.

Other Post-Employment Benefit Obligations

Certain companies that merged into ITAÚ UNIBANCO HOLDING over the past few years were sponsors of post-employment healthcare benefit plans and ITAÚ UNIBANCO HOLDING is committed as per the acquisition contracts to maintain such benefits over specific periods. Such benefits are also accounted for in accordance with IAS 19, in a manner similar to defined benefit plans.

r) STOCK-BASED COMPENSATION

Stock-based compensation is accounted for in accordance with IFRS 2 - “Share-based payment” which requires the entity to measure the value of equity instruments granted, based on their fair value at the option grant date. This cost is recognized during the vesting period of the right to exercise the instruments.

The total amount to be expensed is determined by reference to the fair value of the options granted excluding the impact of any service and non-market performance vesting conditions (notably remaining an employee of the entity over a specified time period.) The fulfillment of on-market vesting conditions is included in the assumptions about the number of options that are expected to be exercised. At the end of each period, ITAÚ UNIBANCO HOLDING revises its estimates of the number of options that are expected to be exercised based on non-market vesting conditions. It recognizes the impact of the revision of the original estimates, if any, in the consolidated statement of income, with a corresponding adjustment to stockholders’ equity.

When the options are exercised, the ITAÚ UNIBANCO HOLDING treasury shares are generally delivered to the beneficiaries.

The fair value of stock options is estimated by using option pricing models that take into account the exercise price of the option, the current stock price, the risk-free interest rate, the expected volatility of the stock price and the life of the option.

All stock based compensation plans established by ITAÚ UNIBANCO HOLDING correspond to plans that can be settled exclusively through the delivery of shares.

s) FINANCIAL GUARANTEES

In accordance with IAS 39, the issuer of a financial guarantee contract has an obligation and should recognize it initially at its fair value. Subsequently, this obligation should be measured at: (i) the amount initially recognized less accumulated amortization and (ii) the amount determined pursuant to IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, whichever is higher.

ITAÚ UNIBANCO HOLDING recognizes the fair value of the guarantees issued in the consolidated balance sheet under Other liabilities. Fair value is generally represented by the fee charged to client for issuing the guarantee. This amount at the issuance date is amortized over the life of the guarantee issued and recognized in the consolidated statement of income under Banking Service Fees.

After issuance, if based on the best estimate ITAÚ UNIBANCO HOLDING concludes that the occurrence of a loss regarding a guarantee issued is probable, and if the loss amount is higher than the initial fair value less cumulative amortization of the guarantee, a provision is recognized for such amount.

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t) PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES

These are assessed, recognized and disclosed in accordance with IAS 37. Contingent assets and contingent liabilities are rights and obligations arising from past events for which materialization depends on future events.

Contingent assets are not recognized in the consolidated financial statements, except when the Management of ITAÚ UNIBANCO HOLDING understands that realization is virtually certain which, generally corresponds to lawsuits with favorable rulings, in final and unappealable judgments, withdrawal from lawsuits as a result of a payment in settlement or as a result of an agreement to offset against an existing liability.

Contingent liabilities mainly arise from administrative proceedings and lawsuits, inherent in the ordinary course of business, filed by third parties, former employees and governmental bodies, in connection with civil, labor, and tax and social security claims.

These contingencies are evaluated based on the Management’s best estimates, taking into account the opinion of legal counsel when there is a likelihood that financial resources are required to settle the obligations and the amounts can be estimated with reasonable certainty.

Contingent losses are classified as:

· probable: in which liabilities are recognized in the consolidated balance sheet under Provisions;

· possible: in which case they are disclosed in the financial statements but no provision is recorded;

· remote: which require neither a provision nor disclosure.

Contingent liabilities recorded under Provisions and those disclosed as possible are measured using best estimates through the use of models and criteria which allow their appropriate measurement even if there is uncertainty as to their ultimate timing and amount, and the criteria are detailed in Note 32.

The amount of court escrow deposits is adjusted in accordance with current legislation.

Contingent liabilities guaranteed by indemnity clauses provided by third parties, such as in business combinations carried out before the transition date to IFRS, are recognized when a claim is asserted, and a receivable is recognized simultaneously subject to its collectability. For business combinations carried out after the transition date, indemnification assets are recognized at the same time and measured on the same basis as the indemnified item, subject to collectability or contractual limitations on the indemnified amount.

u) CAPITAL

Common and preferred shares, which are equivalent to common shares but without voting rights are classified in Stockholders’ equity. The additional costs directly attributable to the issue of new shares are included in Stockholders’ equity as a deduction from the proceeds, net of taxes.

v) TREASURY SHARES

Common and preferred shares repurchased are recorded in Stockholders’ equity under Treasury shares at their average purchase price.

Shares that are subsequently sold, such as those sold to grantees under our stock option plan, are recorded as a reduction in treasury shares, measured at the average price of treasury stock held at such date.

The difference between the sale price and the average price of the treasury shares is recorded as a reduction or increase in Additional paid-in capital. The cancellation of treasury shares is recorded as a reduction in Treasury shares against Appropriated reserves, at the average price of treasury shares at the cancellation date.

F.34

w) DIVIDENDS AND INTEREST ON CAPITAL

Pursuant to the Company's bylaws, stockholders are entitled to a mandatory minimum dividend of 25% of net income for the year, as determined in accordance with the corporate law. Minimum dividend amounts established in the bylaws are recorded as liabilities at the end of each year. Any other amount above the mandatory minimum dividend is accounted for as liabilities, when approved by the stockholders at a Stockholder´s Meeting. Since January 1, 1996, Brazilian companies have been permitted to attribute a tax-deductible nominal interest rate charge on net equity (called interest on capital.)

Interest on capital is treated for accounting purposes as a dividend, and it is presented as a reduction of stockholders' equity in the consolidated financial statements. The related tax benefit is recorded in the consolidated statement of income.

Dividends have been and continue to be calculated and paid based on the financial statements prepared under BRGAAP and not based on these consolidated financial statements prepared under IFRS.

x) EARNINGS PER SHARE

Earnings per share are computed by dividing net income attributable to the owners of ITAÚ UNIBANCO HOLDING by the weighted average number of common and preferred shares outstanding for each reporting year. Weighted average shares are computed based on the periods for which the shares were outstanding.

Earnings per share are presented based on the two types of shares issued by ITAÚ UNIBANCO HOLDING. Both types, common and preferred, participate in dividends on substantially the same basis, except that preferred shares are entitled to a priority non-cumulative minimum annual dividend of R$ 0.022 per share. Earnings per share are computed based on the distributed earnings (dividends and interest on capital) and undistributed earnings of ITAÚ UNIBANCO HOLDING after giving effect to the preference indicated above, without regard to whether the earnings will ultimately be fully distributed. Earnings per share amounts have been determined as if all earnings were distributed and computed following the requirements of IAS 33 – Earnings per share.

ITAÚ UNIBANCO HOLDING grants stock-based compensation whose dilutive effect is reflected in diluted earnings per share, with the application of the “treasury stock method“. Under the treasury stock method, earnings per share are calculated as if shares under stock-based compensation plans had been issued and as if the assumed proceeds (funds to be received upon exercise of the stock options and the amount of compensation cost attributed to future services and not yet recognized) were used to purchase shares of ITAÚ UNIBANCO HOLDING.

y) REVENUE FROM SERVICES

ITAÚ UNIBANCO HOLDING provides a number of services to its clients, such as investment management, credit card, investment banking services and certain commercial banking services.

Services related to current accounts are offered to clients either in the format of packages or individually. These revenues are recognized when such services are provided.

Revenue from certain services such as fees from funds management, performance, collection for retail clients, custody, and those related to credit cards is recognized over the life of the related contracts on a straight-line basis.

The breakdown of the banking service fees is detailed in Note 24.

F.35

z) SEGMENT INFORMATION

IFRS 8 – “Operating Segments” requires that operating segments are disclosed consistently with information provided to the chief operating decision maker, who is the person or group of persons that allocates resources to the segments and assesses their performance. ITAÚ UNIBANCO HOLDING considers that its Executive Board is the chief operating decision maker.

ITAÚ UNIBANCO HOLDING has four reportable segments: (i) Commercial Bank, (ii) Itaú BBA, (iii) Consumer Credit, and (iv) Activities with the Market + Corporation.

Segment information is presented in Note 34.

aa) TRANSACTIONS WITH NON-CONTROLLING STOCKHOLDERS

IAS 27 – “Consolidated and Separate Financial Statements” establishes that changes in ownership interest in a subsidiary, which do not result in loss of control, are accounted for as capital transactions and any difference between the amount paid and the carrying amount of non-controlling stockholders is recognized directly in consolidated stockholders' equity.

F.36

NOTE 3 - BUSINESS DEVELOPMENT

a) BSF Holding S.A.

On April 14, 2011, Itaú Unibanco Holding S.A. entered into a sale and purchase agreement for the purchase and sale of shares with Carrefour Comércio e Indústria Ltda. (“Carrefour”) to acquire 49% of BSF Holding S.A. (“Banco Carrefour”), the entity responsible for the offer and distribution, on an exclusive basis, of financial, insurance and private pension products and services in the distribution channels of Carrefour Brazil operated under the “Carrefour” brand in Brazil. The completion of the operation was subject to the approval of the Central Bank of Brazil, which was obtained on April 23, 2012 and to the transfer of shares of BSF to Itaú Unibanco Holding S.A., which was carried out on May 31, 2012.

Since May 31, 2012 we have accounted for this interest in BSF under the equity method (Note 13) and as transactions with related parties (Note 35).

In the first half of 2013, we will complete the final allocation of the difference between the amount paid for BSF and the interest in its net assets at fair value.

b) FAI - Financeira Americanas Itaú S.A.Crédito, Financiamento e Investimento (“FAI”)

On August 9, 2012, ITAÚ UNIBANCO HOLDING S.A. informed that conclusion its partnership with LOJAS AMERICANAS S.A. (“LASA”), entered into in 2005, for the offering, distribution and sale, on an exclusive basis by FAI (entity jointly controlled by ITAÚ UNIBANCO HOLDING S.A. and LASA), of financial, insurance and pension plan products and services to customers of LASA and its affiliated companies.

As a consequence of said termination, ITAÚ UNIBANCO HOLDING S.A. and LASA entered into, on that date, a purchase agreement and other covenants under which LASA has agreed (i) to sell to ITAÚ UNIBANCO HOLDING S.A. the total interest it holds in the capital of FAI for the approximate amount of R$ 83 million; and (ii) to acquire the operating right held by FAI with respect to the offering, distribution and sale, on an exclusive basis, of financial products and services through the distribution channels of LASA and/or its affiliates, at the approximate amount of R$ 112 million.The completion of the transaction was subject to approval of the Central Bank of Brazil, which was obtained on December 27, 2012.

As a result of this transaction, FAI is no longer an entity controlled jointly by ITAÚ UNIBANCO HOLDING S.A. and LASA, becoming a whole-owned subsidiary of ITAÚ UNIBANCO HOLDING S.A.. At December 31, 2012 the balance of FAI’s balance sheet accounts were fully consolidated; the net income for 2012, however, was partially consolidated.

In 2013 we will complete the final appropriation of the difference between the amount paid by FAI and the interest in its net assets at fair value.

F.37

c) Redecard

On September 24, 2012, ITAÚ UNIBANCO HOLDING S.A. completed the auction of the Tender Public Offer (OPA) to cancel Redecard’s listed company register, pursuant to the OPA call notice published on August 23, 2012.

As a result of the auction, ITAÚ UNIBANCO HOLDING S.A. purchased, through its non-financial subsidiary Banestado Participações, Administração e Serviços Ltda., 298,989,237 common shares issued by Redecard, representing 44.4% of its capital, and now it holds 635,474,593 common shares, representing 94.4% of its capital.The shares were purchased for the unit price of R$ 35.00, totaling R$ 10,469.

With the purpose of completing the purchase of the remaining minority interest, ITAÚ UNIBANCO HOLDING acquired, by way of its subsidiary Banestado Participações, Administração e Serviços Ltda., 36,423,856 common shares (24,207,582 shares in October 2012; 9,893,659 shares in November 2012; and 2,322,615 shares in December 2012) for the amount, offered at the OPA of September 24, 2012, of R$ 35.00, plus SELIC variation for the period, redeemed 999,884 common shares and canceled 72,372 treasury shares, thus increasing its interest in the capital, from 94.4% to 100.0%, totaling the amount of R$ 1,283 (including fees and brokerage).

On October 18, 2012, the Brazilian Securities and Exchange Commission (CVM) cancelled Redecard’s registration as a publicly-held company.

Changes in stockholders’ equity of ITAÚ UNIBANCO HOLDING S.A., due to the purchase of shares from non-controlling stockholders of Redecard, are shown below:

	2012
Effect of change in interest		(11,151	)
Recognition of deferred income tax on temporary difference (*)		3,791
Decrease in stockholders’ equity due to the purchase of Redecard’s shares		(7,360	)

(*) For non-financial subsidiaries, tax rate of Income Tax and Social Contribution is 34%.

d) Association with Banco BMG S.A.

On July 9, 2012 ITAÚ UNIBANCO HOLDING entered into an Association Agreement with Banco BMG S.A. ("BMG"), aiming at the offering, distribution and commercialization of payroll debit loans through the incorporation of a financial institution, the Banco Itaú BMG Consignado S.A. (“Itaú BMG Consignado”). After obtaining the previous approval required for starting operations, issued by the Administrative Council for Economic Defense (CADE) on October 17, 2012, the final documents were signed on December 13, 2012 and Banco BMG has been a stockholder of Itaú BMG Consignado since January 7, 2013. The association is subject to the approval of the Central Bank of Brazil.

F.38

NOTE 04 - CASH AND CASH EQUIVALENTS

For purposes of consolidated statements of cash flows, Cash and Cash Equivalents in this note comprises the following items:

	12/31/2012		12/31/2011
Cash and deposits on demand		13,967		10,668
Interbank deposits		14,347		18,921
Securities purchased under agreements to resell		17,476		8,516
Total		45,790		38,105

Amounts related to interbank deposits and securities purchased under agreements to resell not included in cash equivalent are R$ 9,479 (R$ 8,900 at December 31, 2011) and R$ 145,261 (R$ 83,732 at December 31, 2011), respectively.

NOTE 05 - CENTRAL BANK COMPULSORY DEPOSITS

	12/31/2012		12/31/2011
Non-interest bearing deposits		6,448		5,730
Interest-bearing deposits		57,253		92,323
Total		63,701		98,053

NOTE 06 - INTERBANK DEPOSITS AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

	12/31/2012						12/31/2011
	Current		Non- current		Total		Current		Non- current		Total
Interbank deposits		23,430		396		23,826		25,384		2,437		27,821
Securities purchased under agreements to resell (*)		162,558		179		162,737		92,248		-		92,248
Total		185,988		575		186,563		117,632		2,437		120,069

(*) The amounts of R$ 9,106 (R$ 7,046 at December 31, 2011) are pledged in guarantee of operations on BM&F Bovespa S.A. - Bolsa de Valores, Mercadorias e Futuros the amounts of R$ 116,922 (R$ 49,701 at December 31, 2011) are pledged in guarantee of repurchase agreement transactions, in conformity with the policies described in Note 2.4f.

F.39

NOTE 07 – FINANCIAL ASSETS HELD FOR TRADING AND DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

a) Financial assets held for trading recognized at their fair value are presented in the following table:

	12/31/2012									12/31/2011
	Cost/ Amortized		Unrealized results							Cost/ Amortized		Unrealized results
	cost		Gain		Loss			Fair value		cost		Gain		Loss			Fair value
Investment funds		1,422		47		(1	)		1,468		1,326		35		(22	)		1,339
Brazilian government securities (1a)		110,999		212		(5	)		111,206		93,914		184		(184	)		93,914
Brazilian external debt bonds		1,250		39		(3	)		1,286		868		42		-			910
Government securities – abroad (1b)		860		16		(4	)		872		787		28		(13	)		802
Argentina		105		5		(4	)		106		226		12		(13	)		225
United States		335		10		-			345		280		12		-			292
Mexico		224		1		-			225		201		4		-			205
Chile		108		-		-			108		50		-		-			50
Uruguai		33		-		-			33		27		-		-			27
Colombia		34		-		-			34		3		-		-			3
Other		21		-		-			21		-		-		-			-
Corporate securities (1c)		30,613		185		(114	)		30,684		24,965		84		(125	)		24,924
Shares		2,777		137		(99	)		2,815		2,325		69		(97	)		2,297
Securitized real estate loans		21		-		-			21		23		1		-			24
Bank deposit certificates		2,933		-		-			2,933		7,820		-		-			7,820
Debentures		4,629		8		(1	)		4,636		3,525		2		(1	)		3,526
Eurobonds and other		1,587		39		(14	)		1,612		1,446		12		(27	)		1,431
Financial credit bills		18,440		1		-			18,441		8,973		-		-			8,973
Promissory notes		20		-		-			20		290		-		-			290
Other		206		-		-			206		563		-		-			563
TOTAL		145,144		499		(127	)		145,516		121,860		373		(344	)		121,889

(1) Assets held for trading pledged as collateral of funding transactions of financial institutions and clients were: a) R$ 1,881 (R$ 12,010 at December 31, 2011), b) (R$ 84 at December 31, 2011) and c) R$ 467 (R$ 48 at December 31, 2011), totaling R$ 2,348 (R$ 12,142 at December 31, 2011).

F.40

Realized and unrealized gains and losses

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2011
Financial assets held for trading
Gains		4,808			2,995			1,668
Losses		(1,609	)		(2,559	)		(1,266	)
Total		3,199			436			402

The cost/amortized cost and fair value of financial assets held for trading by maturity are as follows:

	12/31/2012				12/31/2011
	Cost/ Amortized cost		Fair value		Cost/ Amortized cost		Fair value
Current		32,225		32,334		37,701		37,706
Non-stated maturity		4,199		4,284		3,650		3,635
Up to one year		28,026		28,050		34,051		34,071
Non-current		112,919		113,182		84,159		84,183
From one to five years		85,418		85,581		72,064		72,088
From five to ten years		17,878		17,934		8,570		8,550
After ten years		9,623		9,667		3,525		3,545
TOTAL		145,144		145,516		121,860		121,889

Financial assets held for trading include assets with a fair value of R$ 75,146 (R$ 57,734 at December 31, 2011) that belong to investment funds wholly owned by Itaú Vida e Previdência S.A. The return of those assets (positive or negative) is fully transferred to customers of our PGBL and VGBL private pension plans whose premiums (less fees charged by us) are used by our subsidiary to purchase quotas of those investment funds.

F.41

b) Financial assets designated at fair value through profit or loss are presented in the following table:

	12/31/2012
	Cost/
	Amortized		Unrealized results
	cost		Gain		Loss		Fair value
Brazilian external debt bonds		217		3		-		220

	12/31/2011
	Cost/
	amortized		Unrealized results
	cost		Gain		Loss		Fair value
Brazilian external debt bonds		182		4		-		186

Realized and unrealized gains and losses

	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
Designated at fair value through profit or loss
Gain		17		20		-
Losses		-		-		(1	)
Total		17		20		(1	)

The cost or amortized cost and fair value by maturity of financial assets designated as fair value through profit or loss were as follows:

	12/31/2012				12/31/2011
	Cost/ Amortized cost		Fair value		Cost/ Amortized cost		Fair value
Non-current		217		220		182		186
After ten years		217		220		182		186

F.42

NOTE 08 – DERIVATIVES

ITAÚ UNIBANCO HOLDING enters into derivative financial instruments with various counterparties to manage its overall exposures and to assist its customers in managing their own exposures.

Futures - Interest rate and foreign currency futures contracts are commitments to buy or sell a financial instrument at a future date, at a contracted price or yield and may be settled in cash or through delivery. The notional amount represents the face value of the underlying instrument. Commodity futures contracts or financial instruments are commitments to buy or sell commodities (mainly gold, coffee and orange juice), at a future date, at a contracted price, which are settled in cash. The notional amount represents the quantity of such commodities multiplied by the future price at the contract date. Daily cash settlements of price movements are made for all instruments.

Forwards - Interest forward contracts are agreements to exchange payments on a specified future date, based on a market change in interest rates from trade date to contract settlement date. Foreign exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed price, at an agreed settlement date. Financial instrument forward contracts are commitments to buy or sell a financial instrument on a future date at a contracted price and are settled in cash.

Swaps - Interest rate and foreign exchange swap contracts are commitments to settle in cash at a future date or dates, based on differentials between specified financial indices (either two different interest rates in a single currency or two different rates each in a different currency), as applied to a notional principal amount. Swap contracts presented in Other in the table below correspond substantially to inflation rate swap contracts.

Options - Option contracts give the purchaser, for a fee, the right, but not the obligation, to buy or sell within a limited time a financial instrument including a flow of interest, foreign currencies, commodities, or financial instruments at a contracted price that may also be settled in cash, based on differentials between specific indices.

Credit Derivatives – Credit derivatives are financial instruments with value relating to the credit risk associated to the debt issued by a third party (the reference entity), which permits that one party (the purchaser of the hedge) transfers the risk to the counterparty (the seller of the hedge). The seller of the hedge should make payments as set forth in the contract when the reference entity undergoes a credit event, such as bankruptcy, default or debt restructuring. The seller of the hedge receives a premium for the hedge, but, on the other hand, assumes the risk that the underlying asset referenced in the contract undergoes a credit event, and the seller would have to make the payment to the purchaser of the hedge, which could be the notional amount of the credit derivative.

The total value of margins pledged in guarantee by ITAÚ UNIBANCO HOLDING was R$ 4,895 (R$ 8,225 at 12/31/2011) and was basically comprised of government securities.

F.43

The following table shows the composition of derivatives by index:

	Off-Balance Sheet Notional amount		Amortized cost			Gains /(Losses)			Fair value
	12/31/2012		12/31/2012			12/31/2012			12/31/2012
Futures contracts		537,449		46			(69	)		(23	)
Purchase commitments		349,872		47			-			47
Foreign currency		15,013		29			-			29
Interbank market		289,816		11			-			11
Indices		38,012		6			-			6
Securities		6,731		-			-			-
Commodities		294		1			-			1
Other		6		-			-			-
Commitments to sell		187,577		(1	)		(69	)		(70	)
Foreign currency		58,848		2			(68	)		(66	)
Interbank market		107,854		(5	)		-			(5	)
Indices		13,429		2			(1	)		1
Securities		7,196		-			-			-
Commodities		250		-			-			-
Swap contracts				(906	)		(476	)		(1,382	)
Asset position		130,949		2,131			1,555			3,686
Foreign currency		12,851		518			140			658
Interbank market		44,778		366			(7	)		359
Fixed rate		35,527		444			379			823
Floating rate		4,742		13			4			17
Indices		32,492		741			1,011			1,752
Securities		559		49			25			74
Other		-		-			3			3
Liability position		131,855		(3,037	)		(2,031	)		(5,068	)
Foreign currency		14,899		(860	)		(227	)		(1,087	)
Interbank market		28,081		(89	)		24			(65	)
Fixed rate		45,070		(735	)		(444	)		(1,179	)
Floating rate		6,652		(54	)		(4	)		(58	)
Indices		36,526		(1,184	)		(1,410	)		(2,594	)
Securities		569		(115	)		30			(85	)
Commodities		28		-			-			-
Other		30		-			-			-
Option contracts		2,027,095		(168	)		(207	)		(375	)
Purchase commitments – long position		525,476		428			(202	)		226
Foreign currency		15,634		227			(109	)		118
Interbank market		80,332		57			(55	)		2
Floating rate		174		1			(1	)		-
Indices		428,463		125			(46	)		79
Securities		632		7			13			20
Commodities		200		11			(4	)		7
Other		41		-			-			-
Commitments to sell – long position		578,535		1,058			622			1,680
Foreign currency		12,098		130			(16	)		114
Interbank market		20,343		125			100			225
Floating rate		923		1			-			1
Indices		541,676		614			478			1,092
Securities		3,054		165			37			202
Commodities		109		11			(3	)		8
Other		332		12			26			38
Purchase commitments – short position		296,683		(473	)		263			(210	)
Foreign currency		11,990		(212	)		91			(121	)
Interbank market		45,296		(47	)		46			(1	)
Indices		238,695		(195	)		139			(56	)
Securities		592		(7	)		(17	)		(24	)
Commodities		84		(12	)		5			(7	)
Other		26		-			(1	)		(1	)
Commitments to sell – short position		626,401		(1,181	)		(890	)		(2,071	)
Foreign currency		9,379		(178	)		6			(172	)
Interbank market		117,429		(143	)		(322	)		(465	)
Indices		497,633		(668	)		(513	)		(1,181	)
Securities		1,455		(168	)		(38	)		(206	)
Commodities		173		(12	)		3			(9	)
Other		332		(12	)		(26	)		(38	)

F.44

	Off-Balance Sheet Notional amount		Amortized cost			Gains / (Losses)			Fair Value
	12/31/2012		12/31/2012			12/31/2012			12/31/2012
Forward operations (onshore)		23,641		1,227			10			1,237
Purchases receivable		4,103		1,170			(3	)		1,167
Foreign currency		3,116		185			(3	)		182
Fixed rate		727		727			-			727
Floating rate		258		258			-			258
Commodities		2		-			-			-
Purchases payable		5,894		(1,077	)		13			(1,064	)
Foreign currency		5,759		(82	)		13			(69	)
Fixed rate		-		(727	)		-			(727	)
Floating rate		-		(258	)		-			(258	)
Commodities		135		(10	)		-			(10	)
Sales receivable		12,054		2,368			(5	)		2,363
Foreign currency		6,788		107			(3	)		104
Interbank market		2,908		7			-			7
Fixed rate		868		891			(1	)		890
Floating rate		395		396			(1	)		395
Indices		5		5			-			5
Securities		961		951			(2	)		949
Commodities		129		11			2			13
Sales deliverable		1,590		(1,234	)		5			(1,229	)
Foreign currency		1,558		(58	)		4			(54	)
Fixed rate		-		(779	)		-			(779	)
Floating rate		-		(396	)		1			(395	)
Commodities		32		(1	)		-			(1	)
Credit derivatives		6,198		630			8			638
Asset position		3,150		734			(6	)		728
Fixed rate		2,307		734			(12	)		722
Securities		650		-			5			5
Other		193		-			1			1
Liability position		3,048		(104	)		14			(90	)
Fixed rate		2,810		(104	)		20			(84	)
Securities		232		-			(6	)		(6	)
Other		6		-			-			-
Forwards operations (offshore)		39,875		(47	)		80			33
Asset position		18,969		315			64			379
Foreign currency		18,522		305			64			369
Floating rate		410		8			-			8
Indices		25		2			-			2
Securities		12		-			-			-
Liability position		20,906		(362	)		16			(346	)
Foreign currency		20,890		(362	)		16			(346	)
Interbank market		14		-			-			-
Indices		2		-			-			-
Swap with USD check		1,087		(1	)		(41	)		(42	)
Asset position – Interbank market		543		-			-			-
Liability position - Interbank market		544		(1	)		(41	)		(42	)
Foreign currency		479		(1	)		(40	)		(41	)
Interbank market		65		-			(1	)		(1	)
Check of swap – Asset position - Foreign currency		547		-			35			35
Other derivative financial instruments		6,677		276			131			407
Asset position		5,493		1,291			42			1,333
Foreign currency		485		104			5			109
Fixed rate		1,633		776			40			816
Floating rate		285		262			-			262
Securities		2,994		149			(4	)		145
Other		96		-			1			1
Liability position		1,184		(1,015	)		89			(926	)
Foreign currency		179		(92	)		94			2
Fixed rate		-		(637	)		2			(635	)
Floating rate		-		(286	)		(1	)		(287	)
Securities		819		-			(5	)		(5	)
Other		186		-			(1	)		(1	)
		ASSETS		9,495			2,102			11,597
		LIABILITIES		(8,438	)		(2,631	)		(11,069	)
		TOTAL		1,057			(529	)		528

Derivative contracts mature as follows (in days):
Off-Balance Sheet – Notional amount	0 - 30		31 - 180		181 - 365		Over 365		12/31/2012
Futures		107,856		116,709		147,543		165,341		537,449
Swaps		14,159		29,218		21,019		64,422		128,818
Options		1,000,052		97,773		420,582		508,688		2,027,095
Forwards (onshore)		7,057		9,140		3,512		3,932		23,641
Credit derivatives		224		1,806		154		4,014		6,198
Forwards (offshore)		11,037		22,537		4,186		2,115		39,875
Swaps with USD check		-		-		-		543		543
Check of swap		-		-		-		547		547
Other		132		1,498		710		4,337		6,677

F.45

The following table shows the composition of derivatives by index:

	Off-Balance Sheet Notional amount		Amortized cost			Gains / (Losses)			Fair value
	12/31/2011		12/31/2011			12/31/2011			12/31/2011
Futures contracts		268,806		75			(49	)		26
Purchase commitments		251,094		75			19			94
Foreign currency		59,087		(1	)		12			11
Interbank market		144,154		1			-			1
Indices		41,365		75			7			82
Securities		6,338		-			-			-
Commodities		122		-			-			-
Other		28		-			-			-
Commitments to sell		17,712		-			(68	)		(68	)
Foreign currency		15,796		-			(63	)		(63	)
Interbank market		52		-			-			-
Indices		1,106		-			-			-
Securities		230		-			(3	)		(3	)
Commodities		513		-			(2	)		(2	)
Other		15		-			-			-
Swap contracts				72			(120	)		(48	)
Asset position		94,806		2,155			595			2,750
Foreign currency		9,883		605			7			612
Interbank market		39,936		545			50			595
Fixed rate		16,808		227			241			468
Floating rate		3,809		3			-			3
Indices		23,995		739			312			1,051
Securities		28		23			(26	)		(3	)
Commodities		3		-			-			-
Other		344		13			11			24
Liability position		94,734		(2,083	)		(715	)		(2,798	)
Foreign currency		11,171		(608	)		22			(586	)
Interbank market		24,958		(100	)		10			(90	)
Fixed rate		21,733		(325	)		(301	)		(626	)
Floating rate		6,144		(133	)		2			(131	)
Indices		29,225		(816	)		(477	)		(1,293	)
Securities		112		(85	)		34			(51	)
Commodities		108		(1	)		(4	)		(5	)
Other		1,283		(15	)		(1	)		(16	)
Option contracts		1,108,517		576			(739	)		(163	)
Purchase commitments – long position		237,863		1,122			(373	)		749
Foreign currency		17,481		887			(289	)		598
Interbank market		36,911		65			(36	)		29
Floating rate		278		1			(1	)		-
Indices		181,517		124			(58	)		66
Securities		1,162		31			11			42
Commodities		501		14			-			14
Other		13		-			-			-
Commitments to sell – long position		354,697		1,457			237			1,694
Foreign currency		7,635		149			(41	)		108
Interbank market		27,212		293			(49	)		244
Fixed rate		2		-			1			1
Floating rate		218		1			-			1
Indices		315,903		915			(2	)		913
Securities		2,821		82			317			399
Commodities		768		14			-			14
Other		138		3			11			14
Purchase commitments – short position		174,398		(778	)		47			(731	)
Foreign currency		10,325		(454	)		(97	)		(551	)
Interbank market		23,954		(47	)		11			(36	)
Indices		139,248		(258	)		144			(114	)
Securities		795		(15	)		(13	)		(28	)
Commodities		65		(4	)		2			(2	)
Other		11		-			-			-
Commitments to sell – short position		341,559		(1,225	)		(650	)		(1,875	)
Foreign currency		10,757		(309	)		113			(196	)
Interbank market		35,433		(178	)		(239	)		(417	)
Fixed rate		2		-			(1	)		(1	)
Indices		293,394		(647	)		(197	)		(844	)
Securities		1,636		(79	)		(316	)		(395	)
Commodities		197		(9	)		1			(8	)
Other		140		(3	)		(11	)		(14	)

F.46

	Off-Balance Sheet Notional amount		Amortized cost			Gains / (Losses)			Fair Value
	12/31/2011		12/31/2011			12/31/2011			12/31/2011
Forwards operations (onshore)		17,248		1,092			(31	)		1,061
Purchases receivable		8,702		921			(62	)		859
Foreign currency		7,883		623			(62	)		561
Interbank market		520		-			-			-
Fixed rate		-		35			-			35
Floating rate		262		262			-			262
Commodities		37		1			-			1
Purchases payable		1,351		(324	)		(9	)		(333	)
Foreign currency		1,218		(43	)		(8	)		(51	)
Floating rate		-		(262	)		-			(262	)
Commodities		131		(19	)		(1	)		(20	)
Other		2		-			-			-
Sales receivable		2,230		1,013			7			1,020
Foreign currency		1,181		24			9			33
Interbank market		48		1			-			1
Fixed rate		148		148			(1	)		147
Floating rate		110		110			-			110
Securities		731		726			(1	)		725
Commodities		12		4			-			4
Sales deliverable		4,965		(518	)		33			(485	)
Foreign currency		4,905		(342	)		32			(310	)
Fixed rate		-		(54	)		-			(54	)
Floating rate		-		(110	)		-			(110	)
Commodities		60		(12	)		1			(11	)
Credit derivatives		6,598		153			351			504
Asset position		3,406		242			368			610
Foreign currency		117		-			1			1
Fixed rate		1,858		226			354			580
Floating rate		-		5			11			16
Indices		-		11			(1	)		10
Securities		1,430		-			3			3
Other		1		-			-			-
Liability position		3,192		(89	)		(17	)		(106	)
Fixed rate		2,900		(89	)		(8	)		(97	)
Securities		292		-			(9	)		(9	)
Forwards operations (offshore)		31,285		69			56			125
Asset position		16,257		421			30			451
Foreign currency		15,862		415			30			445
Interbank market		19		-			-			-
Floating rate		376		6			-			6
Liability position		15,028		(352	)		26			(326	)
Foreign currency		14,946		(348	)		26			(322	)
Interbank market		13		-			-			-
Floating rate		69		(1	)		-			(1	)
Indices		-		(1	)		-			(1	)
Securities		-		(2	)		-			(2	)
Swap with USD check		102		-			(2	)		(2	)
Asset position – Interbank market		51		-			-			-
Liability position - Interbank market		51		-			(2	)		(2	)
Check of swap – Asset position - Foreign currency		53		-			4			4
Other derivative financial instruments		5,490		695			(195	)		500
Asset position		4,893		769			(178	)		591
Foreign currency		608		55			31			86
Fixed rate		935		521			(220	)		301
Securities		3,345		193			11			204
Other		5		-			-			-
Liability position		597		(74	)		(17	)		(91	)
Foreign currency		235		(74	)		(12	)		(86	)
Securities		300		-			(3	)		(3	)
Other		62		-			(2	)		(2	)
		ASSETS		8,175			579			8,754
		LIABILITIES		(5,443	)		(1,304	)		(6,747	)
		TOTAL		2,732			(725	)		2,007

Derivative contracts mature as follows (in days):
Off-Balance Sheet - Notional amount	0 - 30		31 - 180		181 - 365		Over 365		12/31/2011
Futures		75,850		67,789		36,072		89,095		268,806
Swaps		9,939		16,691		19,679		46,342		92,651
Options		846,277		58,377		176,965		26,898		1,108,517
Forwards (onshore)		3,393		7,970		3,626		2,259		17,248
Credit derivatives		190		2,774		589		3,045		6,598
Forwards (offshore)		6,636		14,066		6,899		3,684		31,285
Swaps with USD check		-		-		-		51		51
Check of swap		-		-		-		53		53
Other		10		500		1,196		3,784		5,490

F.47

Derivative financial instruments

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

	12/31/2012
	Fair value		%		0-30 days		31-90 days		91-180 days		181-365 days		366-720 days		Over 720 days
ASSETS
Swaps – Difference receivable		3,686		31.7		275		215		171		519		568		1,938
BM&F Bovespa		471		4.1		5		10		13		17		145		281
Financial institutions		420		3.6		86		137		19		27		32		119
Companies		2,746		23.6		180		68		136		463		389		1,510
Individuals		49		0.4		4		-		3		12		2		28
Option premiums		1,906		16.4		936		176		83		295		358		58
BM&F Bovespa		1,396		12.0		853		31		14		220		278		-
Financial institutions		118		1.0		26		32		20		17		16		7
Companies		392		3.4		57		113		49		58		64		51
Forwards (onshore)		3,530		30.5		547		652		677		427		718		509
BM&F Bovespa		961		8.3		285		502		149		25		-		-
Financial institutions		172		1.5		171		1		-		-		-		-
Companies		2,396		20.7		91		149		528		402		718		508
Individuals		1		-		-		-		-		-		-		1
Credit derivatives		728		6.3		119		564		1		1		2		41
Forwards (offshore)		379		3.3		66		86		56		58		49		64
Financial institutions		126		1.1		38		45		26		14		2		1
Companies		253		2.2		28		41		30		44		47		63
Check of swap – Companies		35		0.3		-		-		-		-		1		34
Other		1,333		11.5		-		900		-		90		60		283
Financial institutions		786		6.8		-		576		-		71		6		133
Companies		547		4.7		-		324		-		19		54		150
Total (*)		11,597		100.0		1,943		2,593		988		1,390		1,756		2,927
% per maturity term						16.8		22.4		8.5		12.0		15.1		25.2

(*) Of the total asset portfolio of Derivative Financial Instruments, R$ 6,914 refers to current and R$ 4,683 to non-current.

F.48

Derivative financial instruments

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

	12/31/2011
	Fair value			%		0-30 days		31-90 days			91-180 days		181-365 days			366-720 days			Over 720 days
ASSETS
Futures		26			0.4		1		51			5		(1	)		(3	)		(27	)
BM&F Bovespa		31			0.4		1		57			5		(1	)		(4	)		(27	)
Financial institutions		(4	)		-		-		(2	)		-		(2	)		-			-
Companies		(1	)		-		-		(4	)		-		2			1			-
Swaps – Difference receivable		2,750			31.4		230		351			168		502			534			965
BM&F Bovespa		332			3.8		13		25			31		61			22			180
Financial institutions		259			3.0		29		63			13		28			49			77
Companies		2,155			24.6		187		262			122		413			463			708
Individuals		4			-		1		1			2		-			-			-
Option premiums		2,443			27.9		1,252		182			223		660			113			13
BM&F Bovespa		1,689			19.3		1,162		11			35		471			10			-
Financial institutions		286			3.3		45		67			59		87			27			1
Companies		468			5.3		45		104			129		102			76			12
Forwards (onshore)		1,879			21.3		644		384			156		209			146			340
BM&F Bovespa		727			8.3		461		219			47		-			-			-
Financial institutions		80			0.9		74		-			1		2			3			-
Companies		1,072			12.1		109		165			108		207			143			340
Credit derivatives - Financial institutions		610			7.0		50		465			12		2			22			59
Financial institutions		610			7.0		50		465			12		2			22			59
Forwards (offshore)		451			5.2		96		101			73		67			44			70
Financial institutions		279			3.2		83		73			45		31			8			39
Companies		172			2.0		13		28			28		36			36			31
Check of Swap – Companies		4			-		-		-			-		-			-			4
Other		591			6.8		4		20			8		34			104			421
Financial institutions		263			3.1		4		17			6		11			54			171
Companies		328			3.7		-		3			2		23			50			250
Total (*)		8,754			100		2,277		1,554			645		1,473			960			1,845
% per maturity term							26.0		17.8			7.4		16.8			11.0			21.1

(*) Of the total asset portfolio of Derivative Financial Instruments, R$ 5.949 refers to current and R$ 2,805 to non-current.

F.49

	12/31/2012
	Fair value			%		0 - 30 days			31 - 90 days			91 - 180 days			181 - 365 days			366 - 720 days			Over 720 days
LIABILITIES
Futures - BM&F Bovespa		(23	)		0.2		-			-			-			(8	)		(6	)		(9	)
Swaps – Difference payable		(5,068	)		45.8		(351	)		(186	)		(536	)		(404	)		(902	)		(2,689	)
BM&F Bovespa		(819	)		7.4		(3	)		(10	)		(169	)		(13	)		(170	)		(454	)
Financial institutions		(1,111	)		10.0		(238	)		(78	)		(66	)		(184	)		(100	)		(445	)
Companies		(2,882	)		26.1		(102	)		(87	)		(294	)		(195	)		(623	)		(1,581	)
Individuals		(256	)		2.3		(8	)		(11	)		(7	)		(12	)		(9	)		(209	)
Option premiums		(2,281	)		20.5		(1,145	)		(152	)		(145	)		(275	)		(508	)		(56	)
BM&F Bovespa		(1,720	)		15.5		(1,104	)		(34	)		(31	)		(131	)		(420	)		-
Financial institutions		(335	)		3.0		(24	)		(91	)		(54	)		(52	)		(64	)		(50	)
Companies		(226	)		2.0		(17	)		(27	)		(60	)		(92	)		(24	)		(6	)
Forwards (onshore)		(2,293	)		20.7		(152	)		(50	)		(492	)		(381	)		(710	)		(508	)
Financial institutions		(138	)		1.2		(131	)		-			(1	)		(1	)		(5	)		-
Companies		(2,155	)		19.5		(21	)		(50	)		(491	)		(380	)		(705	)		(508	)
Credit derivatives		(90	)		0.8		(4	)		(1	)		-			-			(7	)		(78	)
Forwards (offshore)		(346	)		3.2		(72	)		(153	)		(40	)		(58	)		(18	)		(5	)
Financial institutions		(185	)		1.7		(48	)		(77	)		(26	)		(33	)		(1	)		-
Companies		(161	)		1.5		(24	)		(76	)		(14	)		(25	)		(17	)		(5	)
Swaps with USD check - Companies		(42	)		0.4		-			-			-			-			(1	)		(41	)
Other		(926	)		8.4		-			(826	)		(1	)		(85	)		(2	)		(12	)
Financial institutions		(606	)		5.5		-			(512	)		-			(84	)		-			(10	)
Companies		(320	)		2.9		-			(314	)		(1	)		(1	)		(2	)		(2	)
Total (*)		(11,069	)		100.0		(1,724	)		(1,368	)		(1,214	)		(1,211	)		(2,154	)		(3,398	)
% per maturity term							15.6			12.4			11.0			10.9			19.5			30.6

(*) Of the total liability portfolio of Derivative Financial Instruments, R$ (5,517) refers to current and R$ (5,552) to non-current.

F.50

	12/31/2011
	Fair value			%		0 - 30 days			31 - 90 days			91 - 180 days			181 - 365 days			366 - 720 days			Over 720 days
LIABILITIES
Swaps – Difference payable		(2,798	)		41.5		(211	)		(177	)		(116	)		(534	)		(497	)		(1,263	)
BM&F Bovespa		(518	)		7.7		(6	)		(11	)		(24	)		(131	)		(102	)		(244	)
Financial institutions		(682	)		10.1		(134	)		(75	)		(13	)		(41	)		(110	)		(309	)
Companies		(1,557	)		23.1		(70	)		(89	)		(73	)		(342	)		(274	)		(709	)
Individuals		(41	)		0.6		(1	)		(2	)		(6	)		(20	)		(11	)		(1	)
Option premiums		(2,606	)		38.6		(1,205	)		(289	)		(235	)		(712	)		(153	)		(12	)
BM&F Bovespa		(1,768	)		26.2		(1,114	)		(87	)		(20	)		(484	)		(63	)		-
Financial institutions		(687	)		10.2		(86	)		(185	)		(180	)		(162	)		(63	)		(11	)
Companies		(151	)		2.2		(5	)		(17	)		(35	)		(66	)		(27	)		(1	)
Forwards (onshore)		(818	)		12.1		(42	)		(92	)		(194	)		(56	)		(99	)		(335	)
Financial institutions		(67	)		1.0		(6	)		(31	)		(30	)		-			-			-
Companies		(751	)		11.1		(36	)		(61	)		(164	)		(56	)		(99	)		(335	)
Credit derivatives - Financial institutions		(106	)		1.6		-			(5	)		(9	)		(5	)		(7	)		(80	)
Forwards (offshore)		(326	)		4.8		(68	)		(67	)		(61	)		(49	)		(47	)		(34	)
Financial institutions		(246	)		3.6		(55	)		(51	)		(40	)		(33	)		(38	)		(29	)
Companies		(80	)		1.2		(13	)		(16	)		(21	)		(16	)		(9	)		(5	)
Swaps with USD check – Companies		(2	)		-		-			-			-			-			-			(2	)
Other		(91	)		1.4		-			-			-			(8	)		(82	)		(1	)
Financial institutions		(80	)		1.2		-			-			-			-			(80	)		-
Companies		(11	)		0.2		-			-			-			(8	)		(2	)		(1	)
Total (*)		(6,747	)		100.0		(1,526	)		(630	)		(615	)		(1,364	)		(885	)		(1,727	)
% per maturity term							22.6			9.3			9.1			20.2			13.1			25.6

(*) Of the total liability portfolio of Derivative Financial Instruments, R$ (4,135) refers to current and R$ (2,612) to non-current.

F.51

Realized and unrealized gains and (losses) in the portfolio of derivatives

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Swap		(911	)		(476	)		169
Forwards		71			(139	)		29
Futures		(2,148	)		91			1,370
Options		322			323			924
Credit derivatives		191			185			87
Other		17			367			(269	)
Total		(2,458	)		351			2,310

a) Information on credit derivatives

ITAÚ UNIBANCO HOLDING buys and sells credit protection mainly related to securities of Brazilian listed companies in order to meet the needs of its customers. When ITAÚ UNIBANCO HOLDING sells contracts for credit protection, the exposure for a given reference entity may be partially or totally offset by a credit protection purchase contract of another counterparty for the same reference entity or similar entity. The credit derivatives for which ITAÚ UNIBANCO HOLDING is protection seller are credit default swaps, total return swaps and credit-linked notes.

Credit Default Swaps – CDS

CDS are credit derivatives in which, upon a credit event related to the reference entity pursuant to the terms of the contract, the protection buyer is entitled to receive, from the protection seller, the amount equivalent to the difference between the face value of the CDS contract and the fair value of the liability on the date the contract was settled, also known as the recovered amount. The protection buyer does not need to hold the debt instrument of the reference entity for it to receive the amounts due pursuant to the CDS contract terms when a credit event occurs.

Total Return Swap – TRS

TRS is a transaction in which a party swaps the total return of a reference entity or of a basket of assets for regular cash flows, usually interest and a guarantee against capital loss. In a TRS contract, the parties do not transfer the ownership of the assets.

The table below presents the portfolio of credit derivatives in which ITAÚ UNIBANCO HOLDING sells protection to third parties, by maturity, and the maximum potential of future payments, gross of any guarantees, as well as its classification by instrument, risk and reference entity.

	12/31/2012
	Maximum potential of future payments, gross		Before 1 year		From 1 to 3 years		From 3 to 5 years		Over 5 years		Fair value
By instrument
CDS		3,847		858		1,983		1,006		-		(72	)
TRS		1,285		1,275		10		-		-		672
Total by instrument		5,132		2,133		1,993		1,006		-		600
By risk rating
Investment grade		5,132		2,133		1,993		1,006		-		600
Total by risk		5,132		2,133		1,993		1,006		-		600
By reference entity
Private entities		5,132		2,133		1,993		1,006		-		600
Total by entity		5,132		2,133		1,993		1,006		-		600

	12/31/2011
	Maximum potential of future payments, gross		Before 1 year		From 1 to 3 years		From 3 to 5 years		Over 5 years		Fair value
By instrument
CDS		3,427		1,302		1,106		925		94		(92	)
TRS		982		973		-		9		-		511
Total by instrument (*)		4,409		2,275		1,106		934		94		419
By risk rating
Investment grade		4,409		2,275		1,106		934		94		419
Total by risk (*)		4,409		2,275		1,106		934		94		419
By reference entity
Private entities		4,409		2,275		1,106		934		94		419
Total by entity (*)		4,409		2,275		1,106		934		94		419

(*) In the period we aligned the procedures for disclosing credit derivative information in order to state the position in the same disclosure standard as that of the Risk Management (www.itau-unibanco.com.br/ri, under section Corporate Governance/Risk Management – Circular 3,477).

F.52

ITAÚ UNIBANCO HOLDING assesses the risk of a credit derivative based on the credit ratings attributed to the reference entity by independent credit rating agencies. Investment grade are those entities for which credit risk is rated as Baa3 or higher, as rated by Moody's, and BBB- or higher, according to the ratings of Standard & Poor’s and Fitch Ratings. The maximum potential loss that may be incurred with the credit derivative is based on the notional amount of the derivative. ITAÚ UNIBANCO HOLDING believes, based on its historical experience, that the amount of the maximum potential loss does not represent the actual level of loss. This is so because, should there be an event of loss, the amount of maximum potential loss should be reduced from the notional amount by the recoverable amount.

The credit derivatives sold are not covered by guarantees, and during this period, ITAÚ UNIBANCO HOLDING has not incurred any loss related to credit derivative contracts.

The following table presents the notional amount of purchased credit derivatives whose underlying amounts are identical to those for which ITAÚ UNIBANCO HOLDING operates as seller of the credit protection.

	12/31/2012
	Notional amount of credit protection sold			Notional amount of credit protection purchased with identical underlying amount		Net position
CDS		(3,847	)		1,066		(2,781	)
TRS		(1,285	)		-		(1,285	)
Total		(5,132	)		1,066		(4,066	)

	12/31/2011
	Notional amount of credit protection sold			Notional amount of credit protection purchased with identical underlying amount		Net position
CDS		(3,427	)		1,001		(2,426	)
TRS		(982	)		1,188		206
Total (*)		(4,409	)		2,189		(2,220	)

 (*) In the period we aligned the procedures for disclosing credit derivative information in order to state the position in the same disclosure standard as that of the Risk Management (www.itau-unibanco.com.br/ri, under section Corporate Governance/Risk Management – Circular 3,477).

F.53

NOTE 09 – HEDGE ACCOUNTING

Hedge accounting varies depending on the nature of the hedged item and of the transaction. Derivatives may qualify for hedging instrument for accounting purposes if they are designated as hedging instruments under fair value hedges, cash flow hedge or hedge of net investment in foreign operations.

Cash flow hedge

To hedge the variability of future cash flows of interest payments, ITAÚ UNIBANCO HOLDING uses DI Futures contracts exchange-traded at BM&FBOVESPA with respect to certain real-denominated variable-interest liabilities and interest rate swaps with respect to US dollar-denominated redeemable preferred shares issued by one of our subsidiaries.

Under a DI Futures contract, a net payment (receipt) is made for the difference between a normal amount multiplied by the CDI rate and an amount computed and multiplied by a fixed rate. Under interest rate swap, a net payment (receipt) is made for the difference between an amount computed and multiplied by LIBOR and a notional amount computed and multiplied by a fixed rate.

ITAÚ UNIBANCO HOLDING cash flow hedge strategies consist of the hedge of the exposure to the variability in cash flows on interest payments that are attributable to changes in interest rates with respect to recognized liabilities.

ITAÚ UNIBANCO HOLDING has applied cash flow hedge strategies as follows:

· Hedge of time deposits and repurchase agreements: hedge of the variability in cash flows of interest payments resulting from changes in the CDI interest rate;

· Hedge of redeemable preferred shares: hedge of the variability in cash flows of interest payments resulting from changes in the LIBOR interest rate;

· Hedge of subordinated certificates of deposit (CDB): hedge of the variability in the cash flows of interest payments resulting from changes in the CDI interest rate;

To evaluate the effectiveness and to measure the ineffectiveness of such strategies, ITAÚ UNIBANCO HOLDING uses the hypothetical derivative method. The hypothetical derivative method is based on a comparison of the change in the fair value of a hypothetical derivative with terms identical to the critical terms of the variable-rate liability, and this change in the fair value of a hypothetical derivative is considered a proxy of the present value of the cumulative change in the future cash flow expected for the hedged liability.

The accounting hedge strategies were originally established in 2008 (subordinated CDB hedge), 2009 (hedge of redeemable preferred shares) and 2010 (hedge of deposits denominated in Brazilian reais and agreements to resell) and related derivatives will mature between 2013 and 2017. Periods in which expected cash flows should be paid and affect the income statement are as follows:

· Hedge of time deposits and agreements to resell: interest paid/received daily;

· Hedge of redeemable preferred shares: interest paid/received every half year;

· Subordinated CDB hedge: interest paid/received at the end of the operation.

ITAÚ UNIBANCO HOLDING strategies of net investments in foreign operations consist of a hedge of the exposure in foreign currency arising from the functional currency of the foreign operation, with respect to the functional currency of the head office.

To hedge the changes of future cash flows of exchange variation of net investments in foreign operations, ITAÚ UNIBANCO HOLDING uses DDI Futures contracts traded at BM&FBOVESPA, Financial Assets and Forward contracts or NDF contracts entered into by our subsidiaries abroad.

In DDI Future contracts, the gain (loss) from exchange variation is computed as the difference between two periods of market quotation between the US dollar and Real. In the Forward or NDF contracts and Financial Assets, the gain (loss) from exchange variation is computed as the difference between two periods of market quotation between the functional currency and the US dollar.

F.54

Hedge of net investment in foreign operations

ITAÚ UNIBANCO HOLDING applies the hedge of net investment in foreign operations as follows:

· To hedge the risk of variation in the investment amount, when measured in Brazilian Reais (the head office’s functional currency), arising from changes in exchange rates between the functional currency of the investment abroad and the Brazilian Real.

To evaluate the effectiveness and to measure the ineffectiveness of such strategies, ITAÚ UNIBANCO HOLDING uses the Dollar Offset Method. The Dollar Offset Method is based on a comparison of the change in fair value (cash flow) of the hedge instrument, attributable to changes in exchange rate and gain (loss) arising from the variation in exchange rates, on the amount of investment abroad designated as a hedged item.

Hedge relationships were designated in 2011 and the hedge instruments will mature on the sale of investments abroad, which will be in the period when the cash flows of exchange variation are expected to occur and affect the statement of income.

Fair value hedge

The fair value hedge strategy of ITAÚ UNIBANCO HOLDING consists of hedging the exposure to variation of the fair value, of interest receipts, which is attributable to changes in interest rates related to recognized assets.

To hedge the variation in market risk in the receipt of interest, ITAÚ UNIBANCO HOLDING uses interest rate swap contracts to hedge assets that are prefixed items, expressed in UF (Chilean Unit of Account - CLF), issued in Chile, with maturities between 2020 and 2027.

Under an interest rate swap contract, net receipt (payment) is made for the difference between the amount computed and multiplied by ICPR (Índice de Camera Promédio Real) and an amount computed and multiplied by a fixed rate.

ITAÚ UNIBANCO HOLDING has applied fair value hedge as follows:

· To protect the risk of variation in the fair value of receipt of interest resulting from variations in the fair value of the ICPR rate.

To evaluate the effectiveness and to measure the ineffectiveness of such strategy, ITAÚ UNIBANCO HOLDING uses the percentage approach method. The percentage approach is based on the calculation of change in the fair value of the reviewed estimate for the hedged position (hedge item) attributable to the protected risk versus the change in the fair value of the hedged derivative instrument.

Hedge relationships were designated in 2012 and the respective swaps will mature between 2020 and 2027. Receipts (payments) of interest flows are expected to occur on a monthly basis, and they will affect the statement of income.

F.55

The amounts in the following tables are presented in millions of Brazilian reais:

	12/31/2012						12/31/2011
Hedge instruments used in cash flow hedge	Accumulated Gain or (Loss) recognized in Other Comprehensive Income and Cash Flow Hedge (effective portion)			Line item where the ineffective portion is recognized in the statement of income	Gain or (Loss) recognized in derivatives (ineffective portion) (*)		Accumulated Gain or (Loss) recognized in Other Comprehensive Income and Cash Flow Hedge (effective portion)			Line item where the ineffective portion is recognized in the statement of income	Gain or (Loss) recognized in derivatives (ineffective portion) (*)
Interest rate futures		(316	)	Net Gain (Loss) from investment securities and derivatives		-		(282	)	Net Gain (Loss) from investment securities and derivatives		1
Interest rate swap		(10	)	Net Gain (Loss) from investment securities and derivatives		-		(30	)	Net Gain (Loss) from investment securities and derivatives		-
Total		(326	)			-		(312	)			1

(*) At December 31, 2012, the gain (loss) related to the cash flow hedge expected to be reclassified from Comprehensive Income to Income in the following 12 months is R$ (376) (R$ (167) at December 31, 2011).

	12/31/2010
Hedge instruments used in cash flow hedge	Accumulated Gain or (Loss) recognized in Other Comprehensive Income and Cash Flow Hedge (effective portion)			Line item where the ineffective portion is recognized in the statement of income	Gain or (Loss) recognized in derivatives (ineffective portion) (*)
Interest rate futures		8		Net Gain (Loss) from investment securities and derivatives		1
Interest rate swap		(20	)	Net Gain (Loss) from investment securities and derivatives		-
Total		(12	)			1

(*) At December 31, 2010, the gain (loss) related to the cash flow hedge expected to be reclassified from Comprehensive Income to Income in the following 12 months is R$ 1.

	12/31/2012							12/31/2011
Hedge instrument used in Hedge of Net Investment in Foreign Operations	Accumulated Gain or (Loss) recognized in Other Comprehensive Income and Cash Flow Hedge (effective portion)			Line item where the ineffective portion is recognized in the statement of income	Other Gain or (Loss) recognized in derivatives (ineffective portion)			Accumulated Gain or (Loss) recognized in Other Comprehensive Income and Cash Flow Hedge (effective portion)			Line item where the ineffective portion is recognized in the statement of income	Other Gain or (Loss) recognized in derivatives (ineffective portion)
DDI Futures (1)		(1,473	)	Net Gain (Loss) from investment securities and derivatives		66			(890	)	Net Gain (Loss) from investment securities and derivatives		42
Forward		67		Net Gain (Loss) from investment securities and derivatives		(6	)		130		Net Gain (Loss) from investment securities and derivatives		19
NDF (2)		207		Net Gain (Loss) from investment securities and derivatives		4			335		Net Gain (Loss) from investment securities and derivatives		2
Financial Assets		-		Net Gain (Loss) from investment securities and derivatives		-			(10	)	Net Gain (Loss) from investment securities and derivatives		-
Total		(1,199	)			64			(435	)			63

(1) DDI Futures is a Futures contract in which participants may trade a clean coupon for any period between the first maturity of the futures contract of foreign currency coupon (DDI) and a later maturity.

(2) NDF (Non Deliverable Forward), or Forward Contract of Currency without Physical Delivery is a derivative traded on over-the-counter market, which has the foreign exchange rate of a given currency as its subject.

	12/31/2012
Hedge instrument used in Hedge of Fair Value	Cumulative gain (loss) recognized in result hedge instrument		Cumulative gain (loss) recognized in result hedge item (effective portion)			Gain or (loss) recognized in result (ineffective portion)		Line item in which the ineffective portion is recognized in the statement of income
Interest rate swap		4		(4	)		-	Net Gain (Loss) from investment securities and derivatives
Total		4		(4	)		-

F.56

The tables below present, for each strategy, the notional amount and the fair value of hedge instruments and the carrying amount of the hedged item:

	12/31/2012							12/31/2011
Strategies	Hedge instruments					Hedged item		Hedge instruments					Hedged item
	Notional amount		Fair value			Carrying value		Notional amount		Fair value			Carrying value
Hedge of deposits and repurchase agreements		50,057		1			50,193		19,113		(4	)		19,083
Hedge of redeemable preferred shares		803		(20	)		803		737		(37	)		737
Hedge of subordinated CDB		87		-			129		87		-			118
Hedge of net investment in foreign operations (*)		8,593		30			5,156		6,886		31			4,131
Hedge of fair value of interest receipts		470		4			470		-		-			-
Total		60,010		15			56,751		26,823		(10	)		24,069

(*) Hedge instruments include the overhedge rate of 40% regarding taxes.

	Strategies
Maturity	Hedge of deposits and repurchase agreements		Hedge of redeemable preferred shares		Hedge of subordinated CDB		Hedge of net investment in foreign operations		Hedge of fair value		Total
2013		41,170		-		-		8,593		-		49,763
2014		7,559		-		87		-		-		7,646
2015		515		803		-		-		-		1,318
2017		813		-		-		-		-		813
2020		-		-		-		-		46		46
2022		-		-		-		-		210		210
2025		-		-		-		-		47		47
2027		-		-		-		-		167		167
Total		50,057		803		87		8,593		470		60,010

F.57

NOTE 10 – AVAILABLE-FOR-SALE FINANCIAL ASSETS

The fair value and corresponding cost or amortized cost of available-for-sale financial assets are as follows:

	12/31/2012									12/31/2011
	Cost/ Amortized		Unrealized results							Cost/ Amortized		Unrealized results
	cost		Gain		Loss			Fair value		cost		Gain		Loss			Fair value
Investment funds		250		5		-			255		802		4		-			806
Brazilian government securities (1a)		24,706		847		(91	)		25,462		12,296		183		(55	)		12,424
Brazilian external debt bonds (1b)		17,217		868		(20	)		18,065		5,667		240		(1	)		5,906
Government securities – abroad (1c)		7,174		6		(43	)		7,137		4,327		5		(15	)		4,317
United States		375		-		-			375		-		-		-			-
Mexico		-		-		-			-		10		1		-			11
Denmark		2,554		-		-			2,554		1,949		-		-			1,949
Spain		-		-		-			-		418		-		-			418
Korea		1,662		-		-			1,662		295		-		-			295
Chile		1,538		2		(6	)		1,534		992		4		(1	)		995
Paraguay		528		-		(37	)		491		358		-		(14	)		344
Uruguay		292		2		-			294		268		-		-			268
Belgium		70		1		-			71		-		-		-			-
France		56		1		-			57		37		-		-			37
United Kingdon		83		-		-			83		-		-		-			-
Other		16		-		-			16		-		-		-			-
Corporate securities (1d)		38,228		1,862		(140	)		39,950		23,174		1,699		(816	)		24,057
Shares		3,350		553		(91	)		3,812		3,458		698		(178	)		3,978
Securitized real estate loans		7,916		681		(29	)		8,568		7,806		707		(499	)		8,014
Bank deposit certificates		391		-		-			391		274		-		-			274
Debentures		13,656		316		(8	)		13,964		7,165		139		(68	)		7,236
Eurobonds and others		5,311		297		(12	)		5,596		3,554		152		(68	)		3,638
Promissory notes		777		-		-			777		646		-		-			646
Rural Product Note		770		8		-			778		108		-		-			108
Financial bills		5,720		-		-			5,720		-		-		-			-
Other		337		7		-			344		163		3		(3	)		163
TOTAL		87,575		3,588		(294	)		90,869		46,266		2,131		(887	)		47,510

(1) Available-for-sale assets pledged as collateral of funding of financial institutions and Clients were: a) R$ 9,969 (R$ 2,208 at December 31, 2011), b) R$ 11,646 (R$ 3,880 at December 31, 2011), c) R$ 450 (R$ 12 at December 31, 2011) and d) R$ 3,864 (R$ 2,355 at December 31, 2011), totaling R$ 25,929 (R$ 8,455 at December 31, 2011).

F.58

Realized gains and losses

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Available-for-sale financial assets
Gain		970			597			230
Loss		(265	)		(153	)		(79	)
Total		705			444			151

The cost or amortized cost and fair value of available-for-sale financial assets by maturity are as follows:

	12/31/2012				12/31/2011
	Cost/ Amortized cost		Fair value		Cost/ Amortized cost		Fair value
Current		25,963		26,515		13,239		13,904
Non-stated maturity		3,595		4,060		4,257		4,779
Up to one year		22,368		22,455		8,982		9,125
Non-current		61,612		64,354		33,027		33,606
From one to five years		28,914		29,470		16,875		17,042
From five to ten years		19,924		20,480		9,792		9,655
After ten years		12,774		14,404		6,360		6,909
Total		87,575		90,869		46,266		47,510

During the periods ended December 31, 2012, 2011 and 2010, ITAÚ UNIBANCO HOLDING has not recognized any impairment losses on available-for-sale financial assets.

NOTE 11 - HELD-TO-MATURITY FINANCIAL ASSETS

The amortized cost of held-to-maturity financial assets is as follows:

	12/31/2012		12/31/2011
	Amortized cost		Amortized cost
Brazilian government securities		3,013		2,812
Brazilian external debt bonds (1a)		118		196
Government securities – abroad		20		-
Corporate securities (1b)		51		97
Debentures		-		30
Eurobonds and others		51		65
Securitized real estate loans		-		2
Total		3,202		3,105

(1) Held-to-maturity financial assets pledged as collateral of funding transactions of financial institutions and clients were: a) R$ 76 (R$ 189 at December 31, 2011) and b) R$ 44 (R$ 41 at December 31, 2011), totaling R$ 120 (R$ 230 at December 31, 2011).

The interest income from held-to-maturity financial assets was R$ 471 (R$ 360 from 01/01 to 12/31/2011 e R$ 456 from 01/01 to 12/31/2010).

The fair value of held-to-maturity financial assets is disclosed in Note 31.

F.59

The amortized cost of Held-to-Maturity Financial Assets by maturity is as follows:

	12/31/2012		12/31/2011
	Amortized cost		Amortized cost
Current		188		120
Up to one year		188		120
Non-current		3,014		2,985
From one to five years		147		242
From five to ten years		1,087		1,077
After ten years		1,780		1,666
Total		3,202		3,105

During the periods ended December 31, 2012, 2011 and 2010, ITAÚ UNIBANCO HOLDING has not recognized any impairment losses on held-to-maturity financial assets.

F.60

NOTE 12 - LOAN OPERATIONS AND LEASE OPERATIONS PORTFOLIO

a)  Composition of loan operations and lease operations

Below is the composition of the carrying amount of loan operations and lease operations by type, sector of debtor, maturity and concentration:

Loan operations and lease operations by type	12/31/2012			12/31/2011
Individuals		150,879			149,277
Credit card		40,531			38,961
Personal loan		40,655			36,403
Vehicles		51,646			60,463
Mortgage loans		18,047			13,450
Corporate		103,771			92,079
Small and medium businesses		85,185			85,649
Foreign loans - Latin America		27,149			19,259
Total loan operations and lease operations		366,984			346,264
Allowance for loan and lease losses		(25,713	)		(23,873	)
Total loan operations and lease operations, net of allowance for loan and lease losses		341,271			322,391

By maturity	12/31/2012		12/31/2011
Overdue as from 1 day		13,234		14,879
Falling due up to 3 months		101,273		95,449
Falling due more than 3 months but less than 1 year		94,350		85,438
Falling due after 1 year		158,127		150,498
Total loan operations and lease operations		366,984		346,264

By concentration	12/31/2012		12/31/2011
Largest debtor		4,186		2,331
10 largest debtors		18,429		13,613
20 largest debtors		26,751		21,603
50 largest debtors		41,798		35,504
100 largest debtors		57,034		48,280

The breakdown of the Loan and Lease Operations Portfolio by debtor’s industry is evidenced in Note 36 item 5.1. Maximum exposure of Financial Assets segregated by business sector.

The accretion of the net present value of impaired loan operations and lease operations and the respective allowance for loan and lease losses are not presented using their gross amounts in the statement of income but on a net basis within interest and similar income. If they were presented at gross amounts, there would be an increase of R$ 1,852 and R$ 1,914 in interest and similar income as of December 31, 2012 and 2011, respectively, with the same impact on the allowance for loan and lease losses expenses.

F.61

b) Allowance for loan and lease losses

The changes in the allowance for loan and lease losses are shown in the table below:

Composition of the carrying amount by class of assets	Opening balance 12/31/2011		Write-offs 01/01 to 12/31/2012			Net increase / (Reversal) 01/01 to 12/31/2012		Closing balance 12/31/2012
Individuals		13,679		(13,199	)		14,361		14,841
Credit card		3,825		(5,335	)		4,373		2,863
Personal loans		5,393		(5,134	)		7,446		7,705
Vehicles		4,415		(2,696	)		2,508		4,227
Mortgage loans		46		(34	)		34		46
Corporate		708		(314	)		971		1,365
Small and medium businesses		9,197		(8,407	)		8,301		9,091
Foreign loans - Latin America		289		(222	)		349		416
Total		23,873		(22,142	)		23,982		25,713

Composition of the carrying amount by class of assets	Opening balance 12/31/2010		Write-offs 01/01 to 12/31/2011			Net increase / (Reversal) 01/01 to 12/31/2011		Closing balance 12/31/2011
Individuals		10,717		(8,631	)		11,593		13,679
Credit card		3,306		(3,558	)		4,077		3,825
Personal loans		3,590		(2,959	)		4,762		5,393
Vehicles		3,709		(2,041	)		2,747		4,415
Mortgage loans		112		(73	)		7		46
Corporate		973		(294	)		29		708
Small and medium businesses		8,041		(7,001	)		8,157		9,197
Foreign loans - Latin America		263		(233	)		259		289
Total		19,994		(16,159	)		20,038		23,873

Composition of the carrying amount by class of assets	Opening balance 01/01/2010		Write-offs 01/01 to 12/31/2010			Net increase / (Reversal) 01/01 to 12/31/2010			Closing balance 12/31/2010
Individuals		12,969		(9,091	)		6,839			10,717
Credit card		4,173		(2,731	)		1,864			3,306
Personal loans		4,491		(3,908	)		3,007			3,590
Vehicles		4,022		(2,377	)		2,064			3,709
Mortgage loans		283		(75	)		(96	)		112
Corporate		1,244		(466	)		195			973
Small and medium businesses		5,646		(5,793	)		8,188			8,041
Foreign loans - Latin America		386		(448	)		325			263
Total		20,245		(15,798	)		15,547			19,994

The composition of the allowance for loan and lease losses by customers sector is shown in the following table:

	12/31/2012		12/31/2011
Public sector		2		1
Industry and commerce		6,443		6,266
Services		3,742		3,476
Natural resources		411		273
Other sectors		16		32
Individuals		15,099		13,825
Total		25,713		23,873

ITAÚ UNIBANCO HOLDING assesses the objective evidence of impairment for loan operations and lease operations on an individual basis for financial assets that are individually significant and, in aggregate, for financial assets that are not individually significant. (Note 2.4g VIII)

F.62

The composition of the allowance for loan and lease losses by type of assessment for objective evidence of impairment is shown in the following table:

	12/31/2012												12/31/2011
	Impaired				Not Impaired				Total				Impaired				Not Impaired				Total
	Loan		Allowance		Loan		Allowance		Loan		Allowance		Loan		Allowance		Loan		Allowance		Loan		Allowance
I – Individually
evaluated
Corporate (*)		1,467		845		102,304		520		103,771		1,365		1,012		429		91,067		279		92,079		708
II- Collectively
evaluated
Individuals		11,593		7,530		139,286		7,311		150,879		14,841		10,589		6,617		138,688		7,062		149,277		13,679
Credit card		2,296		1,463		38,235		1,400		40,531		2,863		3,083		1,919		35,878		1,906		38,961		3,825
Personal loans		4,862		3,397		35,793		4,308		40,655		7,705		3,380		2,042		33,023		3,351		36,403		5,393
Vehicles		4,250		2,647		47,396		1,580		51,646		4,227		4,016		2,630		56,447		1,785		60,463		4,415
Mortgage loans		185		23		17,862		23		18,047		46		110		26		13,340		20		13,450		46
Small and medium businesses		6,335		4,886		78,850		4,205		85,185		9,091		6,721		4,785		78,928		4,412		85,649		9,197
Foreign loans - Latin America		116		68		27,033		348		27,149		416		63		36		19,196		253		19,259		289
Total		19,511		13,329		347,473		12,384		366,984		25,713		18,385		11,867		327,879		12,006		346,264		23,873

(*) As detailed in Note 2.4.g.VIII, corporate loans are first evaluated on an individual basis. In the event there is no objective indication of impairment, these are subsequently evaluated on an aggregate basis in accordance with the characteristics of the operation. As a result, an allowance for loan and lease losses for corporate loans is recognized, both in the individual and the aggregate evaluation.

F.63

c) Present value of lease operations

Below is the analysis of the present value of minimum future payments receivable from finance leases by maturity basically composed of individual operations - vehicles:

	12/31/2012
	Minimum future		Future financial			Present
	payments		income			value
Current		10,811		(1,168	)		9,643
Up to 1 year		10,811		(1,168	)		9,643
Non-current		10,158		(2,751	)		7,407
From 1 to 5 years		9,938		(2,704	)		7,234
Over 5 years		220		(47	)		173
Total		20,969		(3,919	)		17,050

	12/31/2011
	Minimum future		Future financial			Present
	payments		income			value
Current		15,244		(1,172	)		14,072
Up to 1 year		15,244		(1,172	)		14,072
Non-current		18,133		(5,361	)		12,772
From 1 to 5 years		17,901		(5,310	)		12,591
Over 5 years		232		(51	)		181
Total		33,377		(6,533	)		26,844

The allowance for loan and lease losses related to the lease portfolio amounts to: R$ 1,513 (R$ 2,020 at December 31, 2011).

d) Sale or Transfer of Financial Assets

ITAÚ UNIBANCO HOLDING carried out operations for the sale or transfer of financial assets in which there was the retention of credit risks of financial assets transferred, through joint obligation clauses or the acquisition of subordinated quotas of credit right funds. Therefore, such operations remained recorded as loan operations and are represented by the following information at December 31, 2012:

	12/31/2012
	Assets				Liabilities (*)
Nature of operation	Book value		Fair value		Book value		Fair value
Individuals – mortgage loan		394		434		394		400

(*) Under Interbank Market Debt

F.64

NOTE 13 - INVESTMENTS IN UNCONSOLIDATED COMPANIES

a) Composition

	Interest % at at 12/31/2012				12/31/2012											12/31/2011												12/31/2010
	Total		Voting		Stockholders’ equity		Net income		Investment		Equity in earnings			Market value		Stockholders’ equity		Investment		Market value		Net income			Equity in earnings			Equity in earnings
Porto Seguro Itaú Unibanco Participações S.A. (a) (b)		42.93		42.93		2,898		436		2,076		157			2,309		2,681		2,014		2,094		415			144			161
BSF Holding S.A. (c)		49.00		49.00		607		131		880		64			-		-		-		-		-			-			-
Banco BPI S.A. (d)		-		-		-		-		-		(102	)		-		1,151		219		219		(1,880	)		(343	)		75
Serasa S.A. (e)		-		-		-		-		-		70			-		1,119		273		1,161		310			102			80
Other (f)		-		-		-		-		49		(14	)		-		-		38		-		-			(16	)		33
Total		-		-		-		-		3,005		175			-		-		2,544		-		-			(113	)		349

(a) For purpose of recording the participation in earnings, at 12/31/2012 the position at 11/30/2012 was used, in accordance with IAS 27;

(b) For purposes of market value, the quoted share price of Porto Seguro S.A. was taken into account. The investment included the amounts of R$ 832 at 12/31/2012 and R$ 862 at 12/31/2011 that correspond to the difference between the interest in the net assets at fair value of Porto Seguro Itaú Unibanco Participações S.A. and the investment book value;

(c) In May 2012 Itaú Unibanco S.A. acquired 137,004,000 common shares of BSF Holding S.A. (parent company of Banco Carrefour) per R$ 816 which corresponds to 49% of interest in its capital. The investment amount includes R$ 583 at 12/31/2012, which correspond to goodwill.

(d) Investments disposed of in 04/20/2012;

(e) Indirect investment of ITAÚ UNIBANCO HOLDING as a result of its 66% interest in subsidiary company BIU Participações S.A. which holds 24% of Serasa S.A.’s voting capital. Investments disposed of in 11/23/2012 (Note 25);

(f) At 12/31/2012, includes interest in total capital and voting capital of the following companies: Compañia Uruguaya de Medios de Procesamiento S.A. (30.06% total and voting capital), Latosol Empreendimentos e Participação Ltda (32.11% total and voting capital); Redebanc SRL (20.00% total and voting capital) and Tecnologia Bancária S.A. (24.81% total capital and voting capital).

At December 31, 2012, ITAÚ UNIBANCO HOLDING received/recognized for dividends and interest on capital of the unconsolidated companies, being the main Porto Seguro Itaú Unibanco Participações S.A. in the amount of R$ 161 (R$ 148 at December 31, 2011).

F.65

b)    Other information

The table below shows the summary of the proportional interest in the aggregate financial information of the investees under the equity method of accounting.

	12/31/2012		12/31/2011			12/31/2010
Total assets (*)		3,505		107,783			107,250
Total liabilities (*)		-		102,831			100,114
Total income		567		8,739			8,275
Total expenses		-		(9,894	)		(7,066	)

(*) Basically represented by Banco BPI S.A., in the amount of R$ 103,696 at 12/31/2011 (R$ 103,472 at 12/31/2010) related to assets, of R$ 102,544 at 12/31/2011 (R$ 99,883 at 12/31/2010) related to liabilities, of R$ 7,081 at 12/31/2011 (R$ 6,428 at 12/31/2010) related to income and of R$ 8,961 at 12/31/2011 (R$ 5,986 at 12/31/2010) related to expenses. This investiment was disposed on 04/20/2012.

The investees do not have contingent liabilities to which ITAÚ UNIBANCO HOLDING is significantly exposed.

NOTE 14 – LEASE COMMITMENTS AS LESSEE

a) Finance lease

ITAÚ UNIBANCO HOLDING is the lessee in finance lease contracts of data processing equipment, with the option of purchase or extension, without contingent rental payments or imposed restrictions. The net carrying amount of these assets is R$ 248 (R$ 339 at 12/31/2011).

The table below shows the total future minimum payments:

	12/31/2012		12/31/2011
Current		174		220
Up to 1 year		174		220
Non-Current		74		120
From 1 to 5 years		74		120
Total future minimum payments		248		340
(-) Future interest		-		1
Present value		248		339

b) Operating leases

ITAÚ UNIBANCO HOLDING leases many properties, for use in its operations, under standard real estate leases that normally can be cancelled at its option and include renewal options and escalations clauses. No lease agreement imposes any restriction on our ability to pay dividends, engage in debt or equity financing transactions, or enter into further lease agreements, and there is no contingent payments related to the agreements.

Minimum payments of services provided by third parties and rents according to operating and capital lease agreements with non-cancelable initial and remaining lease terms of more than one year are as follows:

	12/31/2012		12/31/2011
Current		948		882
Up to 1 year		948		882
Non-current		3,412		3,131
From 1 to 5 years		2,910		2,537
Over 5 years		502		595
Total future minimum payments		4,360		4,013

F.66

NOTE 15 – FIXED ASSETS

	Annual				CHANGES
FIXED ASSETS (1)	depreciation rates	Balance at 12/31/2011			Acquisitions		Depreciation expense			Impairment		Disposals			Exchange variation			Other			Balance at 12/31/2012
REAL ESTATE IN USE (2)			1,941			278		(78	)		-		(182	)		4			(69	)		1,894
Land			1,184			53		-			-		(173	)		2			(37	)		1,029
Buildings			757			225		(78	)		-		(9	)		2			(32	)		865
Cost			2,340			225		-			-		(15	)		4			(82	)		2,472
Accumulated depreciation	4		(1,583	)		-		(78	)		-		6			(2	)		50			(1,607	)
OTHER FIXED ASSETS			3,417			1,636		(1,268	)		-		(64	)		22			(9	)		3,734
Improvements			638			226		(263	)		-		-			13			26			640
Cost			1,245			226		-			-		(251	)		10			23			1,253
Accumulated depreciation	10		(607	)		-		(263	)		-		251			3			3			(613	)
Installations			390			202		(68	)		-		-			10			(20	)		514
Cost			937			202		-			-		(10	)		6			(263	)		872
Accumulated depreciation	10 to 20		(547	)		-		(68	)		-		10			4			243			(358	)
Furniture and equipment			488			139		(77	)		-		(23	)		(11	)		(11	)		505
Cost			848			139		-			-		(38	)		(14	)		(13	)		922
Accumulated depreciation	10 to 20		(360	)		-		(77	)		-		15			3			2			(417	)
EDP systems (3)			1,644			1,008		(801	)		-		(38	)		11			(8	)		1,816
Cost			4,988			1,008		-			-		(504	)		2			(14	)		5,480
Accumulated depreciation	20 to 50		(3,344	)		-		(801	)		-		466			9			6			(3,664	)
Other (communication, security and transportation)			257			61		(59	)		-		(3	)		(1	)		4			259
Cost			548			61		-			-		(7	)		-			4			606
Accumulated depreciation	10 to 20		(291	)		-		(59	)		-		4			(1	)		-			(347	)
TOTAL FIXED ASSETS			5,358			1,914		(1,346	)		-		(246	)		26			(78	)		5,628
Cost			12,090			1,914		-			-		(998	)		10			(382	)		12,634
Accumulated depreciation			(6,732	)		-		(1,346	)		-		752			16			304			(7,006	)

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

(2) Includes the amount of R$ 2 related to attached real estate; fixed assets under construction in the amount of R$ 349, consisting of R$ 235 in real estate in use, R$ 65 in improvements, and R$ 49 in equipment;

(3) Includes lease contracts, mainly related to data processing equipment, which are accounted for as lease operations. The asset and the liability are recognized in the Financial Statements.

F.67

	Annual					CHANGES
FIXED ASSETS (1)	depreciation rates		Balance at 12/31/2010			Acquisitions		Depreciation expense			Impairment			Disposals			Exchange variation			Other			Balance at 12/31/2011
REAL ESTATE IN USE (2)				1,844			248		(96	)		-			(60	)		(11	)		16			1,941
Land				1,045			167		-			-			(20	)		2			(10	)		1,184
Buildings				799			81		(96	)		-			(40	)		(13	)		26			757
Cost				2,321			81		-			-			(67	)		(11	)		16			2,340
Accumulated depreciation		4		(1,522	)		-		(96	)		-			27			(2	)		10			(1,583	)
OTHER FIXED ASSETS				2,957			1,655		(1,088	)		(15	)		(87	)		17			(22	)		3,417
Improvements				626			229		(242	)		-			(4	)		(5	)		34			638
Cost				1,116			229		-			-			(131	)		(1	)		32			1,245
Accumulated depreciation		10		(490	)		-		(242	)		-			127			(4	)		2			(607	)
Installations				267			179		(53	)		-			(1	)		8			(10	)		390
Cost				770			179		-			-			(18	)		5			1			937
Accumulated depreciation		10 a 20		(503	)		-		(53	)		-			17			3			(11	)		(547	)
Furniture and equipment				433			220		(63	)		(15	)		(21	)		(19	)		(47	)		488
Cost				863			220		-			(15	)		(165	)		(13	)		(42	)		848
Accumulated depreciation		10 a 20		(430	)		-		(63	)		-			144			(6	)		(5	)		(360	)
EDP Systems (3)				1,404			942		(677	)		-			(56	)		28			3			1,644
Cost				4,746			942		-			-			(671	)		39			(68	)		4,988
Accumulated depreciation		20 a 50		(3,342	)		-		(677	)		-			615			(11	)		71			(3,344	)
Other (communication, security and transportation)				227			85		(53	)		-			(5	)		5			(2	)		257
Cost				529			85		-			-			(66	)		3			(3	)		548
Accumulated depreciation		10 a 20		(302	)		-		(53	)		-			61			2			1			(291	)
TOTAL FIXED ASSETS				4,801			1,903		(1,184	)		(15	)		(147	)		6			(6	)		5,358
Cost				11,390			1,903		-			(15	)		(1,138	)		24			(74	)		12,090
Accumulated depreciation				(6,589	)		-		(1,184	)		-			991			(18	)		68			(6,732	)

(1) Includes a contractual commitment for the purchase of fixed assets in the amount of R$ 166.

(2) Includes the amount of R$ 2 related to attached real estate; fixed assets under construction in the amount of R$ 131, consisting of R$ 56 in real estate in use, R$ 51 in improvements, and R$ 24 in equipment.

(3) Includes lease contracts, mainly related to data processing equipment, which are accounted for as lease operations. The asset and the liability are recognized in the Financial Statements.

F.68

	Annual					CHANGES
FIXED ASSETS (1)	depreciation rates (%)		Balance at 01/01/2010			Acquisitions		Depreciation expense			Impairment		Disposals			Exchange variation			Other			Balance at 12/31/2010
REAL ESTATE IN USE (2)				1,754			208		(102	)		-		(9	)		8			(15	)		1,844
Land				959			90		-			-		(3	)		-			(1	)		1,045
Buildings				795			118		(102	)		-		(6	)		8			(14	)		799
Cost				2,218			118		-			-		(8	)		(3	)		(4	)		2,321
Accumulated depreciation		4		(1,423	)		-		(102	)		-		2			11			(10	)		(1,522	)
OTHER FIXED ASSETS				2,424			1,716		(1,064	)		-		(69	)		(25	)		(25	)		2,957
Improvements				592			225		(208	)		-		(3	)		11			9			626
Cost				1,084			225		-			-		(161	)		8			(40	)		1,116
Accumulated depreciation		10		(492	)		-		(208	)		-		158			3			49			(490	)
Installations				296			145		(191	)		-		-			5			12			267
Cost				606			145		-			-		(146	)		4			161			770
Accumulated depreciation		10 to 20		(310	)		-		(191	)		-		146			1			(149	)		(503	)
Furniture and equipment				383			275		(49	)		-		(3	)		(30	)		(143	)		433
Cost				763			275		-			-		(9	)		(31	)		(135	)		863
Accumulated depreciation		10 to 20		(380	)		-		(49	)		-		6			1			(8	)		(430	)
EDP systems (3)				951			954		(570	)		-		(60	)		22			107			1,404
Cost				4,015			954		-			-		(414	)		11			180			4,746
Accumulated depreciation		20 to 50		(3,064	)		-		(570	)		-		354			11			(73	)		(3,342	)
Other (communication, security and transportation)				202			117		(46	)		-		(3	)		(33	)		(10	)		227
Cost				509			117		-			-		(12	)		(55	)		(30	)		529
Accumulated depreciation		10 to 20		(307	)		-		(46	)		-		9			22			20			(302	)
TOTAL FIXED ASSETS				4,178			1,924		(1,166	)		-		(78	)		(17	)		(40	)		4,801
Cost				10,154			1,924		-			-		(753	)		(66	)		131			11,390
Accumulated depreciation				(5,976	)		-		(1,166	)		-		675			49			(171	)		(6,589	)

(1) There are no contractual commitments for the purchase of new fixed assets.

(2) Includes the amount of R$ 2 related to attached real estate; fixed assets under construction in the amount of R$ 166, consisting of R$ 27 in real estate in use; R$ 113 in improvements, and R$ 26 in equipment;

(3) Includes lease contracts, mainly related to data processing equipment, which are accounted for as finance lease operations. The asset and the liability are recognized in the Financial Statements.

F.69

NOTE 16 – INTANGIBLE ASSETS

						CHANGES
INTANGIBLE ASSETS (1)	Amortization period (2)		Balance at 12/31/2011			Acquisitions		Amortization expense			Impairment (3)			Terminated agreements/ Write off			Exchange variation			Other			Balance at 12/31/2012
ACQUISITION OF RIGHTS TO CREDIT PAYROLL				751			320		(369	)		(3	)		(1	)		-			-			698
Cost				1,648			320		-			(3	)		(500	)		-			14			1,479
Accumulated amortization		Up to 9		(897	)		-		(369	)		-			499			-			(14	)		(781	)
OTHER INTANGIBLE ASSETS				3,074			1,418		(475	)		(4	)		(24	)		26			(42	)		3,973
Association for the promotion and offer of financial products and services				1,289			12		(135	)		(4	)		(24	)		6			8			1,152
Cost				1,400			12		-			(4	)		(95	)		7			10			1,330
Accumulated amortization		Up to 5		(111	)		-		(135	)		-			71			(1	)		(2	)		(178	)
Acquisition/Development of software				1,338			1,295		(269	)		-			-			9			24			2,397
Cost				2,133			1,295		-			-			-			8			(147	)		3,289
Accumulated amortization		20		(795	)		-		(269	)		-			-			1			171			(892	)
Other intangible assets				447			111		(71	)		-			-			11			(74	)		424
Cost				621			111		-			-			(1	)		23			(66	)		688
Accumulated amortization		10 to 20		(174	)		-		(71	)		-			1			(12	)		(8	)		(264	)
TOTAL INTANGIBLE ASSETS				3,825			1,738		(844	)		(7	)		(25	)		26			(42	)		4,671
Cost				5,802			1,738		-			(7	)		(596	)		38			(189	)		6,786
Accumulated amortization				(1,977	)		-		(844	)		-			571			(12	)		147			(2,115	)

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

(2) All intangible assets have a defined useful life.

(3) Note 2.4l.

F.70

						CHANGES
INTANGIBLE ASSETS (1)	Amortization period (2)		Balance at 12/31/2010			Acquisitions		Amortization expense			Impairment (3)			Terminated agreements/ Write off			Exchange variation			Other			Balance at 12/31/2011
ACQUISITION OF RIGHTS TO CREDIT PAYROLL				1,130			366		(603	)		(24	)		(112	)		-			(6	)		751
Cost				2,415			366		-			(24	)		(1,097	)		-			(12	)		1,648
Accumulated amortization		Up to 9		(1,285	)		-		(603	)		-			985			-			6			(897	)
OTHER INTANGIBLE ASSETS				1,804			1,606		(381	)		(6	)		(28	)		28			51			3,074
Association for the promotion and offering of financial products and services				1,115			318		(114	)		(6	)		(28	)		1			3			1,289
Cost				1,171			318		-			(6	)		(94	)		1			10			1,400
Accumulated amortization		Up to 5		(56	)		-		(114	)		-			66			-			(7	)		(111	)
Acquisition/Development of software				532			981		(208	)		-			-			10			23			1,338
Cost				1,327			981		-			-			(116	)		16			(75	)		2,133
Accumulated amortization		20		(795	)		-		(208	)		-			116			(6	)		98			(795	)
Other intangible assets				157			307		(59	)		-			-			17			25			447
Cost				271			307		-			-			(7	)		25			25			621
Accumulated amortization		10 to 20		(114	)		-		(59	)		-			7			(8	)		-			(174	)
TOTAL INTANGIBLE ASSETS				2,934			1,972		(984	)		(30	)		(140	)		28			45			3,825
Cost				5,184			1,972		-			(30	)		(1,314	)		42			(52	)		5,802
Accumulated amortization				(2,250	)		-		(984	)		-			1,174			(14	)		97			(1,977	)

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

(2) All intangible assets have a defined useful life.

(3) Note 2.4l.

F.71

						CHANGES
INTANGIBLE ASSETS (1)	Amortization period (2)		Balance at 01/01/2010			Acquisitions		Amortization expense			Impairment (3)			Terminated agreements/ Write off			Exchange variation			Other			Balance at 12/31/2010
ACQUISITION OF RIGHTS TO CREDIT PAYROLL				1,684			182		(649	)		(17	)		(70	)		-			-			1,130
Cost				2,598			182		-			(17	)		(348	)		-			-			2,415
Accumulated amortization		Up to 9		(914	)		-		(649	)		-			278			-			-			(1,285	)
OTHER INTANGIBLE ASSETS				1,725			400		(328	)		(3	)		(20	)		(10	)		40			1,804
Association for the promotion and offer of financial products and services				1,076			195		(133	)		(3	)		(20	)		-			-			1,115
Cost				1,091			195		-			(3	)		(112	)		-			-			1,171
Accumulated amortization		Up to 5		(15	)		-		(133	)		-			92			-			-			(56	)
Expenditures on acquisition/ developement of software				457			205		(165	)		-			-			(8	)		43			532
Cost				1,173			205		-			-			(158	)		(18	)		125			1,327
Accumulated amortization		20		(716	)		-		(165	)		-			158			10			(82	)		(795	)
Other Intangible Assets				192			-		(30	)		-			-			(2	)		(3	)		157
Cost				256			-		-			-			-			17			(2	)		271
Accumulated amortization		10 to 20		(64	)		-		(30	)		-			-			(19	)		(1	)		(114	)
TOTAL INTANGIBLE ASSETS				3,409			582		(977	)		(20	)		(90	)		(10	)		40			2,934
Cost				5,118			582		-			(20	)		(618	)		(1	)		123			5,184
Accumulated amortization				(1,709	)		-		(977	)		-			528			(9	)		(83	)		(2,250	)

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

(2) All intangible assets have a defined useful life.

(3) Note 2.4.l.

F.72

NOTE 17 - DEPOSITS

The table below shows the breakdown of deposits:

	12/31/2012						12/31/2011
	Current		Non-current		Total		Current		Non-current		Total
Interest-bearing deposits		140,742		67,542		208,284		130,523		83,181		213,704
Time deposits		49,897		67,335		117,232		61,560		82,909		144,469
Interbank deposits		7,394		207		7,601		1,793		272		2,065
Savings deposits		83,451		-		83,451		67,170		-		67,170
Non-interest bearing deposits		34,916		-		34,916		28,932		-		28,932
Demand deposits		34,916		-		34,916		28,932		-		28,932
Total		175,658		67,542		243,200		159,455		83,181		242,636

NOTE 18 – FINANCIAL LIABILITIES HELD FOR TRADING

Financial liabilities held for trading are presented in the following table:

	12/31/2012		12/31/2011
Financial liabilities held for trading
Structured notes		642		2,815
Total		642		2,815

The result from financial liabilities held for trading was R$ (2) (R$ 49 from 01/01 to 12/31/2011 and R$ (26) from 01/01 to 12/31/2010).

The effect of the changes in credit risk of these instruments is not significant at 12/31/2012 and 12/31/2011.

The balance is composed of shares in the amount of R$ 298 (R$ 1,666 at 12/31/2011) and debt securities in the amount of R$ 344 (R$ 1,149 at 12/31/2011). For shares, in view of the characteristics of the instrument, there is no definite value to be paid at the maturity date. For debt securities, the amount to be paid at maturity comprises several exchange rates and indices, and there is no contractual amount for settlement.

The fair value of financial liabilities held for trading by maturity is as follows:

	12/31/2012		12/31/2011
	Fair value		Fair value
Current		79		1,803
Up to one year		79		1,803
Non-current		563		1,012
From one to five years		522		909
From five to ten years		36		89
After ten years		5		14
Total		642		2,815

F.73

NOTE 19 – SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND INTERBANK AND INSTITUTIONAL MARKET DEBTS

a) Securities sold under repurchase agreements and interbank market debt

The table below shows the breakdown of funds:

	12/31/2012						12/31/2011
	Current		Non- current		Total		Current		Non- current		Total
Securities sold under repurchase agreements		157,120		110,285		267,405		78,408		107,005		185,413
Transactions backed by own financial assets		57,080		110,285		167,365		43,145		92,576		135,721
Transactions backed by third-party financial assets		100,040		-		100,040		35,263		14,429		49,692
Interbank market debt		53,542		43,531		97,073		47,265		43,233		90,498
Mortgage notes		44		183		227		37		207		244
Real estate credit bills		12,432		864		13,296		14,470		1,281		15,751
Agribusiness credit bills		2,735		2,586		5,321		1,422		1,862		3,284
Financial credit bills		7,593		11,102		18,695		2,544		11,764		14,308
Import and export financing		18,878		4,175		23,053		17,755		3,697		21,452
On-lending - domestic		11,860		24,188		36,048		11,037		24,422		35,459
Other		-		433		433		-		-		-

Funding for import and export financing represents credit facilities available for financing of imports and exports of Brazilian companies, in general denominated in foreign currency. The interest rate for each one of the operations (p.a.) is presented in the table below:

	Brazil	Foreign
Securities sold under repurchase agreements	40% of CDI  to 13.23%	0.15% to 5.0%
Mortgage notes	-	2.7% to 7.5%
Real estate credit bills	82% to 100% of CDI	-
Financial credit bills	IGPM to 113% of CDI	-
Agribusiness credit bills	85% to 96% of CDI	-
Import and export financing	0.4% to 105.25% of CDI	0.63% to 11.75%
On-lending - domestic	0.5% to 10% of TJLP	-

In “Securities sold under repurchase agreements”, we present the liabilities in transactions in which ITAÚ UNIBANCO HOLDING sells to customers in exchange for cash debt securities issued by its consolidated subsidiaries previously held in treasury, and where it undertakes to repurchase them at any time after the sale up to a repurchase deadline, at which time they must be repurchased by ITAÚ UNIBANCO HOLDING. The repurchase price is computed as the price paid on the sale date plus interest at rates ranging from 40% CDI to 13.23%. The deadline for repurchase expires in January 2027.

b) Institutional market debt

The table below presents the breakdown of funds obtained in Institutional markets:

	12/31/2012						12/31/2011
	Current		Non- current		Total		Current		Non- current		Total
Subordinated debt (*)		3,382		51,797		55,179		10,719		28,996		39,715
Debentures		1,569		-		1,569		1,039		-		1,039
Foreign borrowings through securities		7,119		8,161		15,280		8,143		5,910		14,053
Total		12,070		59,958		72,028		19,901		34,906		54,807

(*) At December 31, 2012, the amount of R$ 51,134 (R$ 38,257 at 12/31/2011) is included in the Reference Equity, under the proportion defined by CMN Resolution No. 3,444, of February 28, 2007, as amended by CMN Resolution No. 3,532, of January 31, 2008.

The interest rate for each one of the operations (p.a.) is presented in the table below.

	Brazil	Foreign
Subordinated debt	CDI+ 0.35% to IPCA + 7.8%	3.04% to 6.2%
Debentures	104.7% of CDI	-
Foreign borrowings through securities	1.40% to 8.0%	0.24% to 16.43%

F.74

NOTE 20 - OTHER ASSETS AND LIABILITIES

a) Other assets

	12/31/2012						12/31/2011
	Current		Non- current		Total		Current		Non- current		Total
Financial (1)		31,293		13,199		44,492		28,521		11,733		40,254
Receivables from credit card issuers		20,429		-		20,429		18,317		-		18,317
Insurance and reinsurance operations		4,407		-		4,407		3,590		-		3,590
Deposits in guarantee for contingent liabilities (Note 32)		1,270		11,846		13,116		2,211		10,632		12,843
Deposits in guarantee for foreign borrowing program		758		-		758		601		-		601
Negotiation and intermediation of securities		2,532		110		2,642		1,734		-		1,734
Receivables from reimbursement of contingent liabilities (Note 32c)		237		553		790		195		431		626
Receivables from services provided		1,372		-		1,372		1,260		-		1,260
Amounts receivable from FCVS – Salary Variations Compensation Fund (2)		-		690		690		-		670		670
Foreign exchange portfolio		-		-		-		268		-		268
Operations without credit granting characteristics		288		-		288		345		-		345
Non-financial		8,284		1,639		9,923		5,872		1,485		7,357
Prepaid expenses		2,561		1,615		4,176		2,335		1,485		3,820
Retirement plan assets (Notes 29b and c)		2,815		-		2,815		1,785		-		1,785
Sundry domestic		1,392		-		1,392		897		-		897
Sundry foreign		326		24		350		113		-		113
Other		1,190		-		1,190		742		-		742

(1) There were no impairment losses for other financial assets in these periods.

(2) The Salary Variation Compensation Fund – FCVS was established through Resolution No. 25, of June 16, 1967, of the Board of the former BNH (National Housing Bank), and its purpose is to settle balances remaining after the end of real estate financing contracted up to March 1990, relating to agreements financed under the SFH (National Housing System), and provided that they are covered by FCVS.

b) Other liabilities

	12/31/2012						12/31/2011
	Current		Non- current		Total		Current		Non- current		Total
Financial		50,033		222		50,255		43,999		120		44,119
Credit card operations		45,125		-		45,125		41,195		-		41,195
Foreign exchange portfolio		144		-		144		-		-		-
Negotiation and intermediation of securities		4,105		148		4,253		2,504		-		2,504
Finance leases (Note 14a)		174		74		248		219		120		339
Funds from consortia participants		86		-		86		81		-		81
Other		399		-		399		-		-		-
Non-financial		19,539		417		19,956		17,939		686		18,625
Collection and payment of taxes and contributions		399		-		399		868		-		868
Sundry creditors - domestic		1,648		-		1,648		1,228		-		1,228
Funds for clients in transit		7,207		-		7,207		6,092		-		6,092
Provision for sundry payments		2,011		273		2,284		1,574		570		2,144
Social and statutory		3,004		55		3,059		2,891		85		2,976
Related to insurance operations		922		-		922		914		-		914
Liabilities for official agreements and rendering of payment services		370		-		370		1,507		-		1,507
Provision for retirement plan benefits (Note 29b and d)		569		37		606		343		31		374
Personnel provision		1,163		52		1,215		1,113		-		1,113
Provision for health insurance		635		-		635		623		-		623
Deferred income		1,110		-		1,110		570		-		570
Other		501		-		501		216		-		216

F.75

NOTE 21 – STOCKHOLDERS’ EQUITY

a) Capital

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; preferred shares have tag-along rights, in the event of a possible change in control, at a price equal to 80% of the amount per share paid for the controlling common shares. Capital stock amounts to R$ 45,000 (R$ 45,000 at December 31, 2011), of which R$ 31,159 (R$ 31,552 at December 31, 2011) refers to stockholders resident in Brazil and R$ 13,841 (R$ 13,448 at December 31, 2011) refers to stockholders resident abroad.

The table below shows the breakdown of and change in shares of paid-in capital and the reconciliation of balances at the beginning and end of the period:

	12/31/2012
	NUMBER
	Common		Preferred			Total			Amount
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
Shares of capital stock at 12/31/2011		2,289,286,400		2,281,649,700			4,570,936,100
Shares of capital stock at 12/31/2012		2,289,286,400		2,281,649,700			4,570,936,100
Residents in Brazil at 12/31/2012		2,280,400,056		884,649,441			3,165,049,497
Residents abroad at 12/31/2012		8,886,344		1,397,000,259			1,405,886,603
Treasury shares at 12/31/2011 (*)		2,100		57,293,971			57,296,071			(1,663	)
Purchase of shares		-		4,300,000			4,300,000			(122	)
Exercised options – Granting of stock options		-		(5,783,920	)		(5,783,920	)		126
Disposals – Stock option plan		-		(3,255,812	)		(3,255,812	)		136
Treasury shares at 12/31/2012 (*)		2,100		52,554,239			52,556,339			(1,523	)
Shares outstanding at 12/31/2012		2,289,284,300		2,229,095,461			4,518,379,761
Shares outstanding at 12/31/2011		2,289,284,300		2,224,355,729			4,513,640,029

	12/31/2011
	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 on 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	)
Purchase of shares		-			40,970,900			40,970,900			(1,303	)
Exercised options - Granting of stock options – Simple and Partners’ options		-			(5,977,962	)		(5,977,962	)		117
Disposals – Stock option plan		(27	)		(4,264,938	)		(4,264,965	)		151
Cancellation of Shares – ESM of 04/25/2011		(75	)		(44	)		(119	)		-
Treasury shares at 12/31/2011 (*)		2,100			57,293,971			57,296,071			(1,663	)
Shares outstanding at 12/31/2011		2,289,284,300			2,224,355,729			4,513,640,029
Shares outstanding at 12/31/2010		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 of replacement in the market.

F.76

We detail below the costs of shares purchased in the period, as well as the average cost of treasury shares and their market price (in Brazilian reais per share):

	01/01 to 12/31/2012
Cost/Market value	Common		Preferred
Minimum		-		27.25
Weighted average		-		28.45
Maximum		-		28.98
Treasury shares
Average cost		9.65		28.99
Market value at 12/31/2012		31.18		33.39

	01/01 to 12/31/2011
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 at 12/31/2011		27.01		33.99

F.77

b) Dividends

Stockholders are entitled to an annual mandatory dividend of not less than 25% of adjusted profit, pursuant to the provisions of the Brazilian Corporate Law. Both common and preferred 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 the mandatory minimum dividend is based on the share position on the last day of the prior month, with payment being made on the first business day of the subsequent month, in the amount of R$ 0.012 per share, and beginning with the payment of April 2012, it will be increased by 25%, to R$ 0.015 per share, according to the Board of Directors’ meeting held on February 6, 2012.

At March 13, 2012, interest on capital was paid in the amount of R$ 1,847 – R$ 0.4092 per share, which at December 31, 2011 was recorded in stockholders Equity in the Special Revenue Reserve (Appropriated Reserves).

On August 15, 2012, Interest on Capital was paid in the amount of R$ 1,253 – R$ 0.2774 per share related to the 1^st half of 2012.

Additionally, interest on capital was declared after December 31, 2012, segregated into stockholders' equity in special revenue reserves in the amount of R$ 1,728 - R$ 0.3824 per share, which, net of withholding income tax, totals R$ 1,468 (R$ 1,847 – R$ 0.4092 per share, which, net of withholding income tax, totals R$ 1,570 in 12/31/2011).

Payments/Provision for interest on capital and dividends

	12/31/2012
	Gross		WHT			Net
Paid / Prepaid		1,971		(188	)		1,783
Dividends - 2 monthly installments of R$ 0.012 per share paid from February to March 2012		108		-			108
Dividends - 9 monthly installments of R$ 0.015 per share paid from April to December 2012		610		-			610
Interest on capital - R$ 0.2774  per share paid on August 15, 2012		1,253		(188	)		1,065
Declared until 12/31/2012  (Recorded in Other liabilities)		1,478		(212	)		1,267
Dividends - 1 monthly installment of R$ 0.015 per share paid on January 2, 2013		68		-			68
Interest on capital - R$ 0.3120 per share, credited in 12/28/2012 and to be paid until 04/30/2013		1,410		(212	)		1,199
Declared after December 31, 2012 (Recorded in Revenue Reserves - Unrealized Profits Reserve)		1,728		(259	)		1,468
Interest on capital - R$ 0.3824 per share to be paid until 04/30/2013		1,728		(259	)		1,468
Total from 01/01 to 12/31/2012 - R$ 1.0000 net per share		5,177		(658	)		4,518

Payments/Provision for interest on capital and dividends

	12/31/2011
	Gross		WHT			Net
Paid / Prepaid		1,820		(183	)		1,637
Dividends - 11 monthly installments of R$ 0.012 per share paid from February to December 2011		598		-			598
Interest on capital - R$ 0.2706  per share paid on August 22, 2011		1,222		(183	)		1,039
Declared until 12/31/2011 (Recorded in Other liabilities)		1,387		(200	)		1,187
Dividends - 1 monthly installment of R$ 0.012 per share paid on January 2, 2012		54		-			54
Interest on capital - R$ 0.2880 per share, credited in 12/29/2012 and paid between 01/01/2012 and 04/30/2012		1,300		(195	)		1,105
Interest on capital - R$ 0.0072 per share and paid between 01/01/2012 and 04/30/2012		33		(5	)		28
Declared after December 31, 2012 (Recorded in Revenue Reserves - Unrealized Profits Reserve)		1,847		(277	)		1,570
Interest on capital - R$ 0.4092 per share and paid between 01/01/2012 and 04/30/2012		1,847		(277	)		1,570
Total from 01/01 to 12/31/2011 - R$ 0.9727 net per share		5,054		(660	)		4,394

Payments/Provision of interest on capital and dividends

	12/31/2010
	Gross		WTF			Net
Paid / Prepaid		1,716		(168	)		1,548
Dividends - 11 monthly installments of R$ 0.012 per share paid from February to December 2010		598		-			598
Interest on capital - R$ 0.2465 per share, paid on 08/20/2010		1,118		(168	)		950
Declared until December 31, 2010 (Recorded in Other Liabilities)		1,460		(210	)		1,250
Dividends - 1 monthly installment of R$ 0.012 per share, paid on 01/02/2011		55		-			55
Interest on capital - R$ 0.2150 per share, credited at 12/30/2010 and paid between 01/01/2011 and 04/30/2011		977		(147	)		830
Interest on capital - R$ 0.0943 per share paid between 01/01/2011 and 04/30/2011		428		(63	)		365
Declared after December 31, 2010 (Recorded in Revenue Reserve)		1,308		(196	)		1,112
Interest on capital - R$ 0.2879 per share paid between 01/01/2011 and 04/30/2011		1,308		(196	)		1,112
Total from 01/01 to 12/31/2010 - R$ 0.8605 net per share		4,484		(574	)		3,910

F.78

c) Additional paid-in capital

Additional paid-in capital corresponds to: (i) the difference between the proceeds from the sale of treasury shares and the average cost of such shares, and (ii) the compensation expenses recognized in accordance with the stock option plan.

d) Appropriated reserves

	12/31/2012			12/31/2011		12/31/2010
CAPITAL RESERVES (1)		285			285		285
Premium on subscription of shares		284			284		284
Reserves from tax incentives and restatement of equity securities and other		1			1		1
REVENUE RESERVES		22,138			23,994		16,619
Legal (2)		4,388			3,848		3,254
Statutory		23,382			18,299		13,365
Dividends equalization (3)		6,291			3,751		3,403
Working capital increase (4)		6,274			5,257		3,963
Increase in capital of investees (5)		10,817			9,291		5,999
Purchase of additional interest from non-controlling stockholders – Redecard (Note 3 c)		(7,360	)		-		-
Unrealized profits (6)		1,728			1,847		-
Total reserves at parent company		22,423			24,279		16,904

(1) Refers to amounts received by Itaú Unibanco Holding that were not included in the statement of income, since they do not refer to compensation for the provision of goods or services.

(2) Legal reserve - may be used to increase capital or to absorb losses, but it cannot be distributed as dividends.

(3) Reserve for dividends equalization - its purpose is to reserve funds for the payment or advances of dividends, including interest on capital, to maintain the flow of the stockholders' compensation.

(4) Reserve for working capital - its purpose is to guarantee funds for operations.

(5) Reserve for increase in capital of investees - its purpose is to guarantee the preemptive right in the capital increases of investees.

(6) Refers to interest on capital declared after December 31, 2012.

e) Unappropriated reserves

Refers to balance of profit remaining after the distribution of dividends and appropriations to statutory reserves in the statutory accounts of ITAÚ UNIBANCO HOLDING.

F.79

NOTE 22 – STOCK OPTION PLAN

a) Purpose and Guidelines of the Plan

ITAÚ UNIBANCO HOLDING has a stock option plan for its executives. This program aims at involving the members of management in the medium and long-term corporate development process, by granting simple stock options or partner options, that are personal and cannot be pledged or transferred, entitling the holder to subscribe one authorized capital share or, at the discretion of the management, one treasury share which has been acquired for the purpose of reselling.

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. ITAÚ UNIBANCO HOLDING’s Personnel Committee is responsible for defining the quantity, the beneficiaries, the type of option, the life of the option under each series, which may vary between a minimum of 5 years and a maximum of 10 years, and the vesting and lockup periods for exercising the options. The executive officers and members of the Board of Directors of ITAÚ UNIBANCO HOLDING and of its subsidiaries, as well as employees may participate in this program, based on assessment of potential and performance.

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

b) Characteristics of the Programs

I – Simple Options

Prior programs

Before the merger, both Itaú and Unibanco each had Stock Option Plans (Prior Programs). The eligible beneficiaries of the program were granted simple options, depending upon the individual 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 and at the most three months prior to the option issue date; the price is subject to a 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, depending 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 granting date or alternatively subject to the positive or negative adjustments of up to 20% in the period. 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 – Partner 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 from three to five years and they are subject to market fluctuation. At the times they acquire own shares and/or share-based instruments, partner options are granted in accordance with the classification of executives. Vesting periods of partner options or share-based instruments are from one to seven years. Share-based instruments and partner options are converted into shares of ITAÚ UNIBANCO HOLDING in the ratio of one preferred share for each instrument after the respective vesting period, with no payment of exercise price in cash.

F.80

The acquisition price of own shares and Share-Based Instruments is established every six months and 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 five to eight years, as from the acquisition date of the shares.

The weighted average of the fair value of share-based instruments on the grant date was estimated for shares purchased in the fiscal year ended December 31, 2012 - R$ 36.00 per share (R$ 37.00 per share at December 31, 2011).

The fair value of Share-Based Instruments is the market price at the grant date for the preferred shares of ITAÚ UNIBANCO HOLDING, less the cash price paid by the beneficiaries. The amount received for the purchase of Share-Based Instruments was R$ 50 at December 31, 2012 (R$ 48 at December 31, 2011).

F.81

Summary of changes in the plan

						Exercised options				Number of shares
Granting		Vesting	Exercise	Restated exercise		Weighted average		Weighted average		Prior balance							Forfeited (*) /			To be exercised
No.	Date	period until	deadline	price (R$1)		exercise price		market value		12/31/2011		Granted		Exercised			Canceled			at 12/31/2012
Simple options
11th	2/21/2005	12/31/2009	12/31/2012		20.27		19.79		33.68		937,275		-		(937,275	)		-			-
11th	8/6/2007	12/31/2009	12/31/2012		20.27		19.79		33.68		11,357		-		(11,357	)		-			-
12th	2/21/2006	12/31/2010	12/31/2013		30.15		28.25		37.00		6,854,365		-		(1,946,485	)		-			4,907,880
12th	8/6/2007	12/31/2010	12/31/2013		30.15		-		-		15,867		-		-			-			15,867
16th	8/10/2009	12/31/2010	12/31/2014		34.28		-		-		874,167		-		-			-			874,167
34th	3/21/2007	3/21/2011	3/20/2012		37.27		-		-		75,901		-		-			(75,901	)		-
35th	3/22/2007	3/22/2011	3/21/2012		38.95		-		-		29,518		-		-			(29,518	)		-
36th	5/14/2008	5/14/2011	5/13/2012		46.72		-		-		25,301		-		-			(25,301	)		-
30th	7/4/2006	7/4/2011	7/3/2012		29.90		-		-		52,707		-		-			(52,707	)		-
33rd	8/30/2006	8/30/2011	8/29/2012		33.36		32.70		38.42		21,083		-		(21,083	)		-			-
13th	2/14/2007	12/31/2011	12/31/2014		38.39		35.91		38.32		7,732,975		-		(344,650	)		(1,145,825	)		6,242,500
13th	8/6/2007	12/31/2011	12/31/2014		38.39		-		-		30,649		-		-			-			30,649
13th	10/28/2009	12/31/2011	12/31/2014		38.39		-		-		45,954		-		-			-			45,954
34th	3/21/2007	3/21/2012	3/20/2013		39.00		-		-		75,901		-		-			-			75,901
35th	3/22/2007	3/22/2012	3/21/2013		38.95		-		-		29,514		-		-			-			29,514
36th	5/14/2008	5/14/2012	5/13/2013		48.46		-		-		25,300		-		-			-			25,300
17th	9/23/2009	9/23/2012	12/31/2014		39.61		-		-		29,551		-		-			-			29,551
14th	2/11/2008	12/31/2012	12/31/2015		44.27		-		-		9,266,066		-		-			(2,097,144	)		7,168,922
14th	5/5/2008	12/31/2012	12/31/2015		44.27		-		-		20,625		-		-			-			20,625
14th	10/28/2009	12/31/2012	12/31/2015		44.27		-		-		45,954		-		-			-			45,954
Total options to be exercised							26.63		36.18		26,200,030		-		(3,260,850	)		(3,426,396	)		19,512,784
36th	5/14/2008	5/14/2013	5/13/2014		48.46		-		-		25,300		-		-			-			25,300
15th	3/3/2009	12/31/2013	12/31/2016		28.95		27.12		35.16		14,114,940		-		(1,452,840	)		(21,340	)		12,640,760
15th	10/28/2009	12/31/2013	12/31/2016		28.95		-		-		45,954		-		-			-			45,954
18th	4/17/2010	12/31/2014	12/31/2017		47.02		-		-		6,052,223		-		-			(119,229	)		5,932,994
18th	5/11/2010	12/31/2014	12/31/2017		47.02		-		-		1,163,919		-		-			(49,928	)		1,113,991
37th	4/19/2011	12/31/2015	12/31/2018		45.93		-		-		9,769,432		-		-			(167,211	)		9,602,221
37th	1/13/2012	12/31/2015	12/31/2018		45.93		-		-		-		15,383		-			-			15,383
38th	1/13/2012	12/31/2016	12/31/2019		34.35		-		-		-		15,097		-			-			15,097
38th	4/27/2012	12/31/2016	12/31/2019		34.35		-		-		-		10,373,657		-			(40,264	)		10,333,393
Total options outstanding							27.12		35.16		31,171,768		10,404,137		(1,452,840	)		(397,972	)		39,725,093
Total simple options							26.78		35.87		57,371,798		10,404,137		(4,713,690	)		(3,824,368	)		59,237,877
Partner options
4th	3/3/2008	3/3/2011	-		-		-		-		39,906		-		-			(39,906	)		-
5th	9/3/2008	9/3/2011	-		-		-		-		46,710		-		-			(46,710	)		-
6th	3/6/2009	3/6/2012	-		-		-		35.90		719,023		-		(681,490	)		(37,533	)		-
7th	6/19/2009	3/6/2012	-		-		-		35.90		79,446		-		(79,446	)		-			-
1st	9/3/2007	9/3/2012	-		-		-		32.05		309,508		-		(309,294	)		(214	)		-
3rd	2/29/2008	9/3/2012	-		-		-		-		33,474		-		-			-			33,474
Total options to be exercised					-		-		34.79		1,228,067		-		(1,070,230	)		(124,363	)		33,474
4th	3/3/2008	3/3/2013	-		-		-		-		388,432		-		-			(15,488	)		372,944
8th	8/17/2010	8/16/2013	-		-		-		-		339,632		-		-			(11,120	)		328,512
9th	8/30/2010	8/16/2013	-		-		-		-		329,711		-		-			(7,750	)		321,961
11th	9/30/2010	8/16/2013	-		-		-		-		17,717		-		-			-			17,717
5th	9/3/2008	9/3/2013	-		-		-		-		449,442		-		-			(26,875	)		422,567
10th	9/30/2010	9/29/2013	-		-		-		-		1,862,409		-		-			(48,015	)		1,814,394
17th	6/14/2012	2/27/2014	-		-		-		-		-		7,791		-			-			7,791
12th	2/28/2011	2/28/2014	-		-		-		-		1,558,584		-		-			(28,176	)		1,530,408
6th	3/6/2009	3/6/2014	-		-		-		-		704,604		-		-			(45,197	)		659,407
7th	6/19/2009	3/6/2014	-		-		-		-		79,445		-		-			-			79,445
14th	11/4/2011	8/18/2014	-		-		-		-		509		-		-			-			509
17th	6/14/2012	8/18/2014	-		-		-		-		-		2,527		-			-			2,527
13th	8/19/2011	8/19/2014	-		-		-		-		706,397		-		-			(19,628	)		686,769
17th	6/14/2012	2/23/2015	-		-		-		-		-		8,187		-			-			8,187
15th	2/24/2012	2/24/2015	-		-		-		-		-		1,583,044		-			(10,952	)		1,572,092
16th	2/24/2012	2/24/2015	-		-		-		-		-		69,156		-			-			69,156
8th	8/17/2010	8/16/2015	-		-		-		-		338,923		-		-			(11,508	)		327,415
9th	8/30/2010	8/16/2015	-		-		-		-		329,152		-		-			(7,928	)		321,224
11th	9/30/2010	8/16/2015	-		-		-		-		17,712		-		-			-			17,712
10th	9/30/2010	9/29/2015	-		-		-		-		1,858,518		-		-			(50,048	)		1,808,470
17th	6/14/2012	2/27/2016	-		-		-		-		-		7,790		-			-			7,790
12th	2/28/2011	2/28/2016	-		-		-		-		1,557,215		-		-			(29,532	)		1,527,683
14th	11/4/2011	8/18/2016	-		-		-		-		508		-		-			-			508
17th	6/14/2012	8/18/2016	-		-		-		-		-		2,527		-			-			2,527
13th	8/19/2011	8/19/2016	-		-		-		-		706,338		-		-			(20,011	)		686,327
17th	6/14/2012	2/23/2017	-		-		-		-		-		8,186		-			-			8,186
15th	2/24/2012	2/24/2017	-		-		-		-		-		1,582,979		-			(11,248	)		1,571,731
16th	2/24/2012	2/24/2017	-		-		-		-		-		69,151		-			-			69,151
Total options outstanding							-		-		11,245,248		3,341,338		-			(343,476	)		14,243,110
Total partner options							-		34.79		12,473,315		3,341,338		(1,070,230	)		(467,839	)		14,276,584
TOTAL SIMPLE/PARTNER OPTIONS							26.78		35.67		69,845,113		13,745,475		(5,783,920	)		(4,292,207	)		73,514,461

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

F.82

Summary of changes in the plan

							Exercised options				Number of shares
Granting		Vesting	Exercise		Restated exercise		Weighted average		Weighted average		Prior balance						Forfeited(*) /		To be exercised
No.	Date	period until	deadline		price (R$1)		exercise price		market value		12/31/2010		Granted		Exercised		Canceled		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
4th	3/3/2008	3/3/2011		-		-		-		37.22		416,487		-		376,581		-		39,906
5th	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
6th	3/6/2009	3/6/2012		-		-		-		-		740,362		-		-		21,339		719,023
7th	6/19/2009	3/6/2012		-		-		-		-		79,446		-		-		-		79,446
1st	9/3/2007	9/3/2012		-		-		-		-		329,181		-		-		19,673		309,508
3rd	2/29/2008	9/3/2012		-		-		-		-		33,474		-		-		-		33,474
4th	3/3/2008	3/3/2013		-		-		-		-		415,930		-		-		27,498		388,432
8th	8/17/2010	8/16/2013		-		-		-		-		376,916		-		-		37,284		339,632
9th	8/30/2010	8/16/2013		-		-		-		-		359,991		-		-		30,280		329,711
11th	9/30/2010	8/16/2013		-		-		-		-		17,717		-		-		-		17,717
5th	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
6th	3/6/2009	3/6/2014		-		-		-		-		739,608		-		-		35,004		704,604
7th	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
8th	8/17/2010	8/16/2015		-		-		-		-		376,876		-		-		37,953		338,923
9th	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/PARTNER OPTIONS						-		22.84		32.92		64,323,249		14,447,900		5,977,962		2,948,074		69,845,113

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

F.83

Summary of Changes in Share-Based Instruments (SBI)

Number	Vesting period		Prior balance 12/31/2011		New SBI's		Converted into shares			Canceled			Balance at 12/31/2012
1st	8/17/2010	8/16/2012		110,588		-		(109,069	)		(1,519	)		-
1st	8/17/2010	8/16/2013		110,577		-		-			(3,206	)		107,371
1st	8/30/2010	8/16/2012		10,216		-		(10,216	)		-			-
1st	8/30/2010	8/16/2013		10,212		-		-			-			10,212
1st	9/30/2010	8/16/2012		3,971		-		(3,971	)		-			-
1st	9/30/2010	8/16/2013		3,970		-		-			-			3,970
2nd	9/30/2010	9/29/2012		424,163		-		(412,329	)		(11,834	)		0
2nd	9/30/2010	9/29/2013		424,154		-		-			(11,834	)		412,320
3rd	2/28/2011	2/27/2011		444,040		-		(444,040	)		-			-
3rd	2/28/2011	2/27/2012		444,030		-		-			(8,679	)		435,351
3rd	2/28/2011	2/27/2013		444,020		-		-			(8,678	)		435,342
4th	2/24/2012	2/24/2013		-		468,852		-			(4,671	)		464,181
4th	2/24/2012	2/24/2014		-		468,836		-			(4,671	)		464,165
4th	2/24/2012	2/24/2015		-		468,821		-			(4,671	)		464,150
Total				2,429,941		1,406,509		(979,625	)		(59,763	)		2,797,062

Number	Vesting period		Prior balance 12/31/2010		New SBI's		Converted into shares			Canceled			Balance at 12/31/2011
1st	8/17/2010	8/16/2011		114,980		-		(110,598	)		(4,382	)		-
1st	8/17/2010	8/16/2012		114,969		-		-			(4,381	)		110,588
1st	8/17/2010	8/16/2013		114,958		-		-			(4,381	)		110,577
1st	8/30/2010	8/16/2011		10,221		-		(10,221	)		-			-
1st	8/30/2010	8/16/2012		10,216		-		-			-			10,216
1st	8/30/2010	8/16/2013		10,212		-		-			-			10,212
1st	9/30/2010	8/16/2011		3,972		-		(3,972	)		-			-
1st	9/30/2010	8/16/2012		3,971		-		-			-			3,971
1st	9/30/2010	8/16/2013		3,970		-		-			-			3,970
2nd	9/30/2010	9/29/2011		424,172		-		(424,172	)		-			-
2nd	9/30/2010	9/29/2012		424,163		-		-			-			424,163
2nd	9/30/2010	9/29/2013		424,154		-		-			-			424,154
3rd	2/28/2011	2/27/2011		-		444,040		-			-			444,040
3rd	2/28/2011	2/27/2012		-		444,030		-			-			444,030
3rd	2/28/2011	2/27/2013		-		444,020		-			-			444,020
Total				1,659,958		1,332,090		(548,963	)		(13,144	)		2,429,941

F.84

c) Fair value and economic assumptions for cost recognition

ITAÚ UNIBANCO HOLDING recognizes, at the grant 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 time the option was issued 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 BM&FBOVESPA on the calculation base date.

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

Risk-free interest rate: the risk-free rate used 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 BM&FBOVESPA, adjusted by the IGP-M variation.

Granting		Vesting	Exercise		Price of the underlying				Expected			Risk-free			Expected
No.	Date	period	period until		asset		Fair value		dividends			interest rate			volatility
Simple options
37th	1/13/2012	12/31/2015		12/31/2018		35.50		8.85		2.97	%		5.25	%		30.32	%
38th	1/13/2012	12/31/2016		12/31/2019		35.50		12.45		2.97	%		5.25	%		30.32	%
38th	4/27/2012	12/31/2016		12/31/2019		29.70		7.82		3.02	%		3.91	%		29.93	%
Partner options (*)
15th	2/24/2012	2/24/2015		-		36.00		32.94		2.97	%		-			-
15th	2/24/2012	2/24/2017		-		36.00		31.04		2.97	%		-			-
16th	2/24/2012	2/24/2015		-		36.00		32.94		2.97	%		-			-
16th	2/24/2012	2/24/2017		-		36.00		31.04		2.97	%		-			-
17th	6/14/2012	8/18/2014		-		29.57		27.69		3.02	%		-			-
17th	6/14/2012	2/27/2014		-		29.57		28.08		3.02	%		-			-
17th	6/14/2012	2/23/2015		-		29.57		27.26		3.02	%		-			-
17th	6/14/2012	8/18/2016		-		29.57		26.06		3.02	%		-			-
17th	6/14/2012	2/27/2016		-		29.57		26.44		3.02	%		-			-
17th	6/14/2012	2/23/2017		-		29.57		25.65		3.02	%		-			-

(*) The fair value of partner options is measured based on the fair value of ITAÚ UNIBANCO HOLDING share at the granting date.

d) 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. The accounting entries related to the plan are recorded during the vesting period, at the portion 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, 2012 was R$ (177) (R$ (163) from January 1 to December 31, 2011 and R$ (131) from January 1 to December 31, 2010), with a corresponding amount to Additional Paid-in Capital – Granted Options Recognized.

In the stockholders’ equity, the effect was as follows:

	12/31/2012			12/31/2011			12/31/2010
Amount received for the sale of shares – exercised options		209			353			406
(-) Cost of treasury shares sold		(262	)		(268	)		(403	)
Effect of sale (*)		(53	)		85			3

(*) Recorded in Additional paid-in capital.

F.85

NOTE 23 - INTEREST AND SIMILAR INCOME AND EXPENSE AND NET GAIN (LOSS) FROM INVESTIMENT SECURITIES AND DERIVATIVES

a) Interest and similar income

	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
Central Bank compulsory deposits		5,334		9,182		4,025
Interbank deposits		1,042		890		824
Securities purchased under agreements to resell		10,096		9,961		9,940
Financial assets held for trading		13,324		14,676		8,028
Available-for-sale financial assets		3,771		2,888		2,997
Held-to-maturity financial assets		471		360		456
Loan and lease operations		61,139		58,492		50,693
Other financial assets		1,187		903		855
Total		96,364		97,352		77,818

b) Interest and similar expense

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Deposits		(10,544	)		(12,186	)		(10,591	)
Securities sold under repurchase agreements		(17,539	)		(22,133	)		(15,774	)
Interbank market debt		(5,747	)		(5,536	)		(2,100	)
Institutional market debt		(7,693	)		(10,505	)		(4,337	)
Financial expense from technical reserves for insurance and private pension plans		(6,513	)		(5,239	)		(4,038	)
Other		(31	)		-			-
Total		48,067	)		(55,599	)		(36,840	)

c) Net gain (loss) from investment securities and derivatives

	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
Financial assets held for trading and Derivatives, including the ineffective portion of hedge accounting related derivatives		741		787		2,712
Financial assets designated at fair value through profit or loss		17		20		(1	)
Available-for-sale financial assets		705		444		151
Total		1,463		1,251		2,862

NOTE 24 - BANKING SERVICE FEES

	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
Current account services		5,272		5,445		4,275
Asset management fees		2,159		2,745		2,570
Collection commissions		1,176		1,047		1,076
Fees from credit card services		7,888		7,446		6,408
Fees for guarantees issued and credit lines		1,135		1,393		1,422
Brokerage commission		243		361		471
Other		1,071		973		870
Total		18,944		19,410		17,092

F.86

NOTE 25 - OTHER INCOME

	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
Gains on sale of assets held for sale, fixed assets and investments in unconsolidated companies (*)		1,684		271		280
Recovery of expenses		121		184		214
Reversal of provisions		234		366		338
Other		243		337		578
Total		2,282		1,158		1,410

(*) Basically composed of the result of the full disposal of investment in Serasa S.A. in the amount of R$ 1,542.

NOTE 26 - GENERAL AND ADMINISTRATIVE EXPENSES

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Personnel expenses		(14,332	)		(13,373	)		(13,006	)
Compensation		(5,961	)		(5,910	)		(5,585	)
Charges		(2,109	)		(2,036	)		(1,978	)
Welfare benefits		(1,845	)		(1,479	)		(1,442	)
Retirement plans and post-employment benefits (Note 29)		760			82			(129	)
Defined benefit		(125	)		(192	)		(1,170	)
Defined contribution		885			274			1,041
Stock option plan (Note 21d)		(177	)		(163	)		(131	)
Training		(242	)		(259	)		(233	)
Employee profit sharing		(2,560	)		(2,316	)		(2,285	)
Dismissals		(462	)		(398	)		(343	)
Provision for labor claims (Note 32)		(1,736	)		(894	)		(880	)
Administrative expenses		(12,665	)		(12,490	)		(12,351	)
Data processing and telecommunications		(3,523	)		(3,450	)		(3,271	)
Third-party services		(3,255	)		(3,014	)		(2,734	)
Installations		(962	)		(1,135	)		(1,281	)
Advertising, promotions and publications		(942	)		(981	)		(1,235	)
Rent		(974	)		(916	)		(861	)
Transportation		(500	)		(583	)		(596	)
Materials		(386	)		(460	)		(456	)
Financial services		(512	)		(438	)		(443	)
Security		(511	)		(482	)		(451	)
Utilities		(290	)		(295	)		(283	)
Travel		(188	)		(189	)		(168	)
Other		(622	)		(547	)		(572	)
Depreciation		(1,346	)		(1,184	)		(1,166	)
Amortization		(844	)		(984	)		(977	)
Insurance acquisition expenses		(1,253	)		(1,268	)		(1,330	)
Other expenses		(7,640	)		(6,375	)		(5,802	)
Expenses related to credit cards		(2,108	)		(1,796	)		(1,697	)
Reimbursement related to acquisitions		(51	)		(148	)		(116	)
Losses with third-party frauds		(734	)		(753	)		(558	)
Loss on sale of assets held for sale, fixed assets and investments in unconsolidated companies (*)		(458	)		(139	)		(226	)
Provision for civil lawsuits (Note 32)		(2,329	)		(1,616	)		(1,327	)
Provision for tax and social security lawsuits		(1,004	)		(1,038	)		(1,170	)
Refund of interbank costs		(215	)		(195	)		(186	)
Impairment (Notes 15 and 16)		(7	)		(45	)		(20	)
Other		(734	)		(645	)		(502	)
Total		(38,080	)		(35,674	)		(34,632	)

(*) Basically composed of the result of the full disposal of investment in Banco BPI S.A. in the amount of R$ (302).

F.87

NOTE 27 - INCOME TAX AND SOCIAL CONTRIBUTION

ITAÚ UNIBANCO HOLDING and each of its subsidiaries file separate, for each fiscal year, corporate income tax returns and social contribution on net income.

a) Composition of income tax and social contribution expenses

I - Demonstration of Income Tax and Social Contribution expense:

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Income before income tax and social contribution		17,416			18,251			18,030
Charges (income tax and social contribution) at the rates in effect (Note 2.4 n)		(6,966	)		(7,300	)		(7,212	)
Increase/decrease to income tax and social contribution charges arising from:
Share of profit or (loss) of unconsolidated companies, net		68			45			113
Foreign exchange variation on assets and liabilities abroad		447			916			(255	)
Interest on capital		1,789			1,662			1,496
Dividends, interest on external debt bonds and tax incentives		188			269			289
Other		249			767			33
Total income tax and social contribution		(4,225	)		(3,641	)		(5,536	)

b) Deferred taxes

I - The deferred tax asset balance and respective changes are as follows:

	12/31/2011		Realization / Reversal			Increase		12/31/2012
Reflected in income		28,466		(11,438	)		14,032		31,060
Related to income tax and social contribution tax carryforwards		4,188		(1,480	)		1,247		3,955
Allowance for loan and lease losses		12,889		(4,837	)		8,223		16,275
Adjustment to market value of derivative financial instruments		302		(302	)		229		229
Goodwill on purchase of investments		4,261		(1,923	)		423		2,761
Legal liabilities – tax and social security		1,417		(4	)		232		1,645
Provision for contingent liabilities		2,766		(1,585	)		2,306		3,487
Civil lawsuits		1,185		(633	)		870		1,422
Labor claims		984		(844	)		1,084		1,224
Tax and social security		577		(107	)		352		822
Other		20		(1	)		-		19
Adjustments of operations carried out in futures settlement market		11		(4	)		1		8
Provision related to health insurance operations		249		-			5		254
Other		2,383		(1,303	)		1,366		2,446
Reflected in stockholders’ equity		344		(192	)		3,791		3,943
Purchase of additional interest from non-controlling stockholders – Redecard (Note 3 c)		-		-			3,791		3,791
Adjustment to market value of available-for-sale securities		344		(192	)		-		152
Total (*)		28,810		(11,630	)		17,823		35,003

 (*) Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 28,381 (R$ 22,745 at December 31, 2011) and R$ 3,038 ( R$ 4,319 at December 31, 2011).

	12/31/2010		Realization / Reversal			Increase		12/31/2011
Reflected in income		25,788		(10,948	)		13,626		28,466
Related to income tax and social contribution tax carryforwards		2,998		(1,330	)		2,520		4,188
Allowance for loan and lease losses		10,423		(4,318	)		6,784		12,889
Adjustment to market value of derivative financial instruments		22		(39	)		319		302
Goodwill on purchase of investments		5,905		(2,896	)		1,252		4,261
Legal liabilities – tax and social security		1,313		(39	)		143		1,417
Provision for contingent liabilities		2,418		(1,024	)		1,372		2,766
Civil lawsuits		1,038		(349	)		496		1,185
Labor claims		884		(608	)		708		984
Tax and social security		462		(53	)		168		577
Other		34		(14	)		-		20
Adjustments of operations carried out in futures settlement market		47		(45	)		9		11
Provision related to health insurance operations		242		-			7		249
Other		2,420		(1,257	)		1,220		2,383
Reflected in stockholders’ equity - Adjustment to market value of available-for-sale securities		132		(66	)		278		344
Total (*)		25,920		(11,014	)		13,904		28,810

 (*) Deferred income tax and social contribution assets and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 22,745 and R$ 4,319 .

F.88

II- The provision for deferred tax liability balance and respective changes are as follows:

	12/31/2011		Realization/ reversal			Increase		12/31/2012
Reflected in income		9,885		(3,385	)		1,872		8,372
Depreciation in excess – finance lease		7,560		(2,785	)		678		5,452
Taxation of results abroad – capital gains		78		-			89		167
Adjustments of operations carried out in futures settlement market		83		(2	)		35		117
Adjustments to market value of securities and derivative financial instruments		175		(175	)		234		234
Restatement of escrow deposits and contingent liabilities		806		(225	)		330		911
Pension plans		594		-			321		915
Other		589		(199	)		185		575
Reflected in stockholders’ equity accounts – adjustment to market value of available-for-sale securities		499		-			789		1,288
Total (*)		10,384		(3,385	)		2,660		9,660

(*) Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 28,381 (R$ 22,745 at 12/31/2011) and R$ 3,038 (R$ 4,319 at 12/31/2011).

	12/31/2010		Realization/ reversal			Increase		12/31/2011
Reflected in income		10,395		(2,919	)		2,409		9,885
Depreciation in excess – finance lease		8,295		(2,365	)		1,630		7,560
Taxation of results abroad – capital gains		34		-			44		78
Adjustments of operations carried out in futures settlement market		43		(3	)		43		83
Adjustments to market value of securities and derivative financial instruments		264		(264	)		175		175
Restatement of escrow deposits and contingent liabilities		701		(157	)		262		806
Pension plans		543		-			51		594
Other		515		(130	)		204		589
Reflected in stockholders’ equity accounts – adjustment to market value of available-for-sale securities		721		(474	)		252		499
Total (*)		11,116		(3,393	)		2,661		10,384

(*) Deferred income tax and social contribution asset and liabilities are recorded in the balance sheet offset by a taxable entity and total R$ 22,745 and R$ 4,319.

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, 2012, in accordance with the expected generation of future taxable income, based on the history of profitability and technical feasibility studies, are:

	Deferred tax assets
	Temporary differences		%			Tax loss/social contribution loss carryforwards		%			Total		%			Deferred tax liabilities			%			Net deferred taxes		%
2013		11,203		36	%		572		14	%		11,775		34	%		(2,302	)		24	%		9,473		37	%
2014		3,663		12	%		571		14	%		4,234		12	%		(1,615	)		17	%		2,619		10	%
2015		5,357		17	%		405		10	%		5,762		16	%		(2,052	)		21	%		3,710		15	%
2016		2,420		8	%		1,164		29	%		3,584		10	%		(1,002	)		10	%		2,582		10	%
2017		1,424		5	%		1,141		29	%		2,565		7	%		(631	)		7	%		1,934		8	%
After 2017		6,981		22	%		102		4	%		7,083		21	%		(2,058	)		21	%		5,025		20	%
Total		31,048		100	%		3,955		100	%		35,003		100	%		(9,660	)		100	%		25,343		100	%
Present value (*)		27,151					3,514					30,665					(8,480	)					22,185

(*) 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, due to differences between accounting criteria and tax legislation, besides corporate aspects. Accordingly, it is recommended that the trend of the realization of deferred tax assets arising from temporary differences, and tax loss carryforwards should not be used as an indication of future net income.

There are no deferred tax assets and liabilities which have not been recognized.

F.89

NOTE 28 – EARNINGS PER SHARE

Basic and diluted earnings per share were computed as shown in the table below for the periods indicated. Basic earnings per share are computed by dividing the net income attributable to the stockholder of ITAÚ UNIBANCO HOLDING by the average number of shares for the period, and by excluding the number of shares purchased and held as treasury shares by the company. Diluted earnings per share are computed on a similar way, but with the adjustment made in the denominator when assuming the conversion of all shares that may be diluted.

Net income attributable to owners of the parent company – Basic earnings per share	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Net income		12,634			13,837			11,708
Minimum non-cumulative dividend on preferred shares in accordance with our bylaws		(49	)		(49	)		(49	)
Subtotal		12,585			13,788			11,659
Retained earnings to be distributed to common equity owners in an amount per share equal to the minimum dividend payable to preferred equity owners		(50	)		(50	)		(50	)
Subtotal		12,535			13,738			11,609
Retained earnings to be distributed to common and preferred equity owners on a pro-rata basis
To common equity owners		6,352			6,944			5,859
To preferred equity owners		6,183			6,794			5,750
Total net income available to common equity owners		6,402			6,994			5,909
Total net income available to preferred equity owners		6,232			6,843			5,799
Weighted average number of shares outstanding
Common shares		2,289,284,300			2,289,284,275			2,289,284,273
Preferred shares		2,228,675,507			2,240,026,557			2,246,784,818
Earnings per share - Basic – R$
Common shares		2.80			3.06			2.58
Preferred shares		2.80			3.06			2.58

Net income attributable to owners of the parent company – Diluted earnings per share	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Total net income available to preferred equity owners		6,232			6,843			5,799
Dividend on preferred shares after dilution effects		15			17			17
Net income available to preferred equity owners considering preferred shares after the dilution effect		6,247			6,860			5,816
Total net income available to ordinary equity owners		6,402			6,994			5,909
Dividend on preferred shares after dilution effects		(15	)		(17	)		(17	)
Net income available to ordinary equity owners considering preferred shares after the dilution effect		6,387			6,977			5,892
								-
Adjusted weighted average of shares
Common shares		2,289,284,300			2,289,284,275			2,289,284,273
Preferred shares		2,239,708,939			2,251,061,836			2,260,240,831
Preferred shares		2,228,675,507			2,240,026,557			2,246,784,818
Incremental shares from stock options granted under our Stock Option Plan		11,033,432			11,035,279			13,456,013
								-
Earnings per share - Diluted – R$
Common shares		2.79			3.05			2.57
Preferred shares		2.79			3.05			2.57

Potential anti-dilution effects of shares under our stock option plan, which were excluded from the calculation of diluted earnings per share, totaled 16,575,701 preferred shares at 12/31/2012, 11,846,655 preferred shares at 12/31/2011 and 3,549,386 preferred shares at 12/31/2010.

F.90

NOTE 29 – EMPLOYEE BENEFITS

As prescribed in IAS 19, we present the policies of ITAÚ UNIBANCO HOLDING and its subsidiaries regarding employee benefits, as well as the accounting procedures adopted:

ITAÚ UNIBANCO HOLDING and some of its subsidiaries sponsor defined benefit plans, including variable contribution plans, the basic purpose of which is to provide benefits that, in general, represent 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 of individual accounts at the eligibility date, according to the plan’s regulation, which does not require actuarial calculation.

Employees hired up to July 31, 2002, by Itaú, and up to February 27, 2009, by Unibanco, are beneficiaries of the above-mentioned plans.As regards the new 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:

F.91

Entity	Benefit plan
Fundação Itaubanco - Previdência Complementar	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 Defined Contribution Plan (3)
	Itaubank Retirement Plan (3)
	Itaú Defined Benefit Plan (1)
	Itaú Defined Contribution Plan (2)
	Unibanco Pension Plan (3)
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)
Múltipla - Multiempresas de Previdência Complementar	Redecard Basic Retirement Plan (1)
	Redecard Supplementary Retirement Plan (2)
	Redecard Supplementary Plan (3) (4)
UBB-PREV - Previdência Complementar	UBB PREV Defined Benefit Plan (1) (5)
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) 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.

(5) Plan arising from the process of merging the IJMS Plan by the Basic Plan, both managed by UBB Prev, approved by the Superintendency of Supplementary Social Security(PREVIC) on December 28, 2012.

F.92

b) Defined benefit plans

I - Main assumptions used in actuarial valuation of retirement plans

	12/31/2012	12/31/2011
Discount rate (1)	8.16% a.a.	9.72% a.a.
Expected return rate on assets (1)	8.16% a.a.	11.32% a.a.
Mortality table (2)	AT-2000	AT-2000
Turnover (3)	Exp.Itaú 2008/2010	Exp.Itaú 2008/2010
Future salary growth	7.12% a.a.	7.12% a.a.
Growth of the pension fund and social security benefits	4.00% a.a.	4.00% a.a.
Inflation	4.00% a.a.	4.00% a.a.
Actuarial method (4)	Projected Unit Credit	Projected Unit Credit

(1) The Discount Rate and Expected Return Rate on Assets assumptions were changed in order to be consistent with the economic scenario observed at the balance sheet date.

(2) 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.

(3) The turnover assumption is based on the effective experience of active participants linked to ITAÚ UNIBANCO HOLDING, resulting in the average of 2.4 % p.a. based on the 2008/2010 experience.

(4) Using the Projected Unit Credit method, the mathematical reserve is calculated as the current projected benefit amount multiplied by the ratio between the length of service 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.

II – Management of defined benefit plan assets

The management of funds of the closed-end private pension entities seeks to achieve the long-term balance between pension 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 avoiding the risk of mismatching assets and liabilities in each pension plan.

F.93

The allocation of plan assets and the allocation target by type of asset are as follows:

	At				% Allocation
Types	12/31/2012		12/31/2011		12/31/2012			12/31/2011			2013 Target
Fixed income securities		13,736		10,341		91.14	%		87.85	%		53% to 100%
Variable income securities		763		1,051		5.06	%		8.93	%		0% to 20%
Structured investments		16		14		0.11	%		0.11	%		0% to 10%
Foreign Investments		-		-		0.00	%		0.00	%		0% to 5%
Real estate		532		344		3.53	%		2.92	%		0% to 7%
Loans to participants		25		23		0.17	%		0.19	%		0% to 5%
Total		15,072		11,773		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$ 589 (R$ 531 at 12/31/2011), and real estate rented to Group companies, with a fair value of R$ 498 (R$ 298 at 12/31/2011).

The expected income from portfolios of benefit plan assets is based on projections of returns for each of the asset types detailed above. For the fixed-income segment, the interest rates were taken from long-term securities included in the portfolios, and the interest rates practiced in the market at the balance sheet date. For the variable-income segment, the 12-month expected returns of the market for this segment 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:

	12/31/2012			12/31/2011
1 - Net assets of the plans		15,072			11,773
2- Actuarial liabilities		(12,906	)		(10,413	)
3- Surplus (1-2)		2,166			1,360
4- Asset ceiling  (*)		(2,137	)		(1,263	)
5- Net amount recognized in the balance sheet		29			97
Amount recognized in assets (Note 20a)		487			342
Amount recognized in liabilities (Note 20b)		(458	)		(245	)

(*) Corresponds to the excess of present value of the available economic benefit, in conformity with paragraph 58 of IAS 19.

F.94

IV - Change in plan net assets, defined benefit obligations, and surplus

	12/31/2012									12/31/2011
	Plan net assets			Defined benefit obligation			Surplus			Plan net assets			Defined benefit obligation			Surplus
Present value – beginning of the period		11,773			(10,413	)		1,360			11,229			(9,871	)		1,358
Inclusion of Itaú Defined Contribution Plan		-			-			-			12			(13	)		(1	)
Effects of the partial spin-off of Redecard (1)		-			-			-			(44	)		42			(2	)
Expected return on assets (2)		1,303			-			1,303			1,342			-			1,342
Cost of current service		-			(85	)		(85	)		-			(91	)		(91	)
Interest cost		-			(985	)		(985	)		-			(930	)		(930	)
Benefits paid		(671	)		671			-			(601	)		601			-
Contributions of sponsors		57			-			57			42			-			42
Contributions of participants		15			-			15			9			-			9
Actuarial gain/(loss) (2) (3) (4)		2,595			(2,094	)		501			(216	)		(151	)		(367	)
Present value - end of the period		15,072			(12,906	)		2,166			11,773			(10,413	)		1,360

(1) During the fiscal year 2011, a process of migration of participants from Redecard Retirement Plan, structured as a defined benefit plan, to the Redecard Pension Plan, which is structured as a defined contribution plan, was carried out. For those participants who migrated to the Redecard Pension Plan, the accumulation of future benefit is now performed as a defined contribution, and therefore there is no replacement for the same type of benefit.

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

(3) At December 31, 2012 losses in Actuarial Liabilities basically correspond to the effects arising from the change in the Interest Rate assumption (from 9.72% to 8.16%).

(4) The actual return on assets amounted to R$ 3,898 (R$ 1,126 at 12/31/2011).

The history of actuarial gains and losses is as follows:

	12/31/2012			12/31/2011			12/31/2010			12/31/2009			12/31/2008
Plan net assets		15,072			11,773			11,229			14,817			12,493
Defined benefit obligation		(12,906	)		(10,413	)		(9,871	)		(11,234	)		(11,264	)
Surplus		2,166			1,360			1,358			3,583			1,229
Experience adjustments in plan net assets		2,595			(216	)		703			1,067			(979	)
Experience adjustments in defined benefit obligation		(2,094	)		(151	)		(886	)		162			(823	)

The amounts for the years 2008 through 2009, calculated based on the Brazilian standards equivalent to IAS 19, are presented only for change effects, considering that in conformity with the exemption set forth in IFRS 1, assets, liabilities, and gains and losses were recognized at 01/01/2010.

F.95

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

Total expenses recognized for defined benefit plans include the following components:

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Cost of current service		(85	)		(91	)		(87	)
Interest cost		(985	)		(930	)		(943	)
Expected return on the plan net assets		1,303			1,342			1,342
Effects of the partial spin-off of PAC		-			-			(2,437	)
Effects of the partial spin-off of Redecard		-			(1	)		-
Effects on asset ceiling		(874	)		(154	)		1,098
Gain/(loss) for the period		501			(367	)		(183	)
Contributions of participants		15			9			40
Total revenue (expenses) recognized in income for the period		(125	)		(192	)		(1,170	)

During the period, the contributions made totaled R$ 57 (R$ 42 from 01/01 to 12/31/2011). The contribution rate increases based on the beneficiary’s salary.

In 2013, contribution to the retirement plans sponsored by ITAÚ UNIBANCO HOLDING is expected to amount to R$ 35.

The estimate for payment of benefits for the next 10 years is as follows:

Period	Payment estimate
2013		708
2014		741
2015		762
2016		784
2017		806
2018 to 2022		4,399

c) Defined contribution plans

The defined contribution plans have assets relating to sponsors’ contributions not yet included in the participant’s account balance due to loss of eligibility to a plan benefit, as well as 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.

The amount recognized in assets is R$ 2,328 (R$ 1,443 from 01/01 to 12/31/2011) (Note 20a).

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

	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Effects of the partial spin-off of PAC		-			-			1,477
Contribution		(146	)		(144	)		(111	)
Gain/(Loss) in Plan Assets		1,035			150			256
Effects on asset ceiling		(4	)		268			(581	)
Total revenue recognized in income for the period		885			274			1,041

F.96

During the period, the contributions to the defined contribution plans, including PGBL, totaled R$ 196 (R$ 193 at 12/31/2011), of which R$ 146 (R$ 144 at 12/31/2011) were 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 obligations under acquisition agreements signed by ITAÚ UNIBANCO HOLDING, in accordance with the terms and conditions established, in which health plans are totally or partially sponsored for former 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:

	12/31/2012			12/31/2011			12/31/2010
At the beginning of the period		(120	)		(105	)		(100	)
Interest cost		(11	)		(10	)		(10	)
Benefits paid		6			6			5
Actuarial loss		(23	)		(11	)		-
At the end of the period (Note 20b)		(148	)		(120	)		(105	)

The estimate for payment of benefits for the next 10 years is as follows:

Period	Payment estimate
2013		6
2014		7
2015		7
2016		8
2017		8
2018 a 2022		52

II- Assumptions and sensitivity at 1%

For calculation of projected benefits obligations in addition to the assumptions used for the defined benefit plans (Note 29b I), an 8.16% p.a. increase in medical costs assumption is assumed.

Assumptions about medical care cost trends have a significant impact on the amounts recognized in income. A change of one percentage point in the medical care cost rates would have the following effects:

	1.0% increase		1.0% decrease
Effects on service cost and interest cost		2		(2	)
Effects on present value of obligation		26		(21	)

F.97

NOTE 30 – INSURANCE CONTRACTS

a) Insurance contracts

ITAÚ UNIBANCO HOLDING, through its subsidiaries, offers to the market Insurance and private pension. Products are offered through insurance brokers (third parties operating in the market and its own brokers), Itaú Unibanco branches and electronic channels, according to their characteristics and regulatory requirements.

In all segments, a new product is created when new demands and opportunities arise in the market or from a specific negotiation.

The products developed are submitted to a committee, coordinated and controlled by the Governance of Products, in which all flows comprising the operational, commercial, legal, accounting, financial, internal control and technology aspects are analyzed, discussed and approved by the various areas involved.

The governance process of product evaluation is regulated by the Corporate Policy on Product and Operations Evaluation, and requires the integration of activities between product and evaluation areas, forming an organized group of activities that aims to add value to customers and to promote competitive differentials.

Internal rules provide for and support product evaluation and approval flows, attribution of responsibilities, provisions for carrying out processes, and also maximum and minimum balance limits, contribution, minimum premium and other, which aim at preserving the consistency of the process and product results.

There are also policies on underwriting risks in each segment, such as technical actuarial limits per insurance line and coverage, which are controlled systemically or operationally.

This product creation process involves the following steps:

· Development of the product by managers in order to meet a market demand.

· Submission of the detailed product characteristics to Governance.

· Parameterization of new products in IT systems with the concomitant evaluation of the need for developing new implementation.

· Launch of the product after authorization from the Product Governance Committee.

For private pension products, registration with the Brazilian Securities and Exchange Commission (CVM) and approval of actuarial technical notes and rules from SUSEP for sales is also required. It is also possible to custom minimum amounts, fund management and entry fees, actuarial table and interest upon negotiation with evaluation of an internal pricing model agreed in a specific contract.

There are policies on appropriate balances and minimum contributions to each negotiation. Risk benefits, considered ancillary coverage, follow their own and specific conditions, such as coverage limits, target audience and proof of good health, among others, according to each agreement. In addition, increased risks may exceed the loss coverage through reinsurance.

Each product has rules according to the channel and segment to which it will be sold. Pricing policies are determined according to internal models, in compliance with the corporate standard pricing model developed by the Risk and Financial Controls Area, in the context of the Governance of product evaluation.

The cost management of insurance and private pension products includes the groups of administrative, operating and selling expenses, where administrative expenses based on the recognition by cost centers, are allocated to products and sales channels according to the definition of the respective activities, following the corporate managerial model of the ITAÚ UNIBANCO HOLDING. Operating and selling expenses are based on the line for product identification and policy segmentation in order to define the sales channel.

F.98

b) Main products

I- Insurance

ITAÚ UNIBANCO HOLDING, through its insurance companies, supplies the market with insurance products with the purpose of assuming risks and restoring the economic balance of the assets of the policyholder if damaged.

In this segment, clients are mainly divided into the Individual (Retail, UniClass, Personnalité and Private) and Corporate (Companies, Corporate and Condominium) markets.

The contract entered into between the parties aims at guaranteeing the protection of the client's assets. Upon payment of a premium, the policyholder is protected through previously-agreed replacement or indemnification clauses for damages. ITAÚ UNIBANCO HOLDING insurance companies then recognize technical reserves administered by themselves, through specialized areas within the conglomerate, with the objective of indemnifying the policyholder's loss in the event of claims of insured risks.

The insurance risks sold by insurance companies of ITAÚ UNIBANCO HOLDING are divided into property and casualty, and life insurance.

· Property and casualty insurance: covers losses, damages or liabilities for assets or persons, excluding from this classification life insurance lines.

· Life insurance: includes coverage for death and personal accidents.

	Loss ratio				Sales ratio
	%				%
Main insurance lines	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2012		01/01 to 12/31/2011
Mandatory insurance for personal injury caused by motor vehicles (DPVAT)		87.7		86.4		1.5		1.5
Commercial multiple peril		43.7		43.6		15.7		17.7
Group life		44.6		39.0		10.8		11.5
Credit life		21.4		21.8		23.1		25.2
Extended warranty - assets		17.9		19.5		65.1		65.4
Specified and all risks		85.6		71.0		4.5		6.0
Group accident insurance		7.9		6.3		37.8		45.3

II- Private pension

Developed as a solution to ensure the maintenance of the quality of life of participants, as a supplement to the government plans, through long-term investments, private pension products are divided into three major groups:

· PGBL - Plan Generator of Benefits: The main objective of this plan is the accumulation of financial resources, but it can be purchased with additional risk coverage. Recommended for clients that file the full version of income tax return (rather than the simplified version), because they can deduct contributions paid for tax purposes up to 12% of the annual taxable gross income.

· VGBL - Redeemable Life Insurance: This is an insurance structured as a pension plan. Its taxation differs from the PGBL; in this case, the tax basis is the earned income.

· FGB - Fund Generator of Benefits: This is a pension plan with minimum income guarantee, and possibility of receiving earnings from asset performance. Once recognized the distribution of earnings at a certain percentage, as established by the FGB policy, it is not at management's discretion, but instead represents an obligation to ITAÚ UNIBANCO HOLDING. Although there are plans still in existence, they are no longer sold.

F.99

III – Income from insurance and private pension

The revenue from the main insurance and private pension products is as follows:

	Premiums and contributions direct issued						Reinsurance									Retained premiums and contributions
	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010		01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010			01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
VGBL		15,890		10,010		7,036		-			-			-			15,890		10,010		7,036
PGBL		1,554		1,424		1,247		-			(1	)		-			1,554		1,423		1,247
Warranty extension - assets		1,368		1,365		1,158		-			-			-			1,368		1,365		1,158
Group life		1,299		1,165		1,150		(41	)		(24	)		(17	)		1,258		1,141		1,133
Group accident insurance		642		661		625		-			(1	)		-			642		660		625
Mandatory insurance for personal injury caused by motor vehicles (DPVAT)		404		308		284		-			-			-			404		308		284
Credit life		460		461		424		(2	)		-			(1	)		458		461		423
Traditional		278		369		391		-			-			-			278		369		391
Multiple risks		221		207		238		(54	)		(36	)		(34	)		167		171		204
Commercial multiple peril		204		176		84		(49	)		(38	)		-			155		138		84
Serious or terminal diseases		130		111		-		-			-			-			130		111		-
Specified and all risks		479		480		360		(361	)		(384	)		(209	)		118		96		151
Individual accident		104		108		117		(2	)		-			-			102		108		117
General liability		125		80		87		(57	)		(27	)		(38	)		68		53		49
Petroleum risks		282		257		61		(237	)		(220	)		(43	)		45		37		18
Individual life		18		20		22		-			-			-			18		20		22
Engineering risks		104		72		88		(88	)		(64	)		(74	)		16		8		14
Other lines		1,186		905		867		(275	)		(215	)		(186	)		911		690		681
Total		24,748		18,179		14,239		(1,166	)		(1,010	)		(602	)		23,582		17,169		13,637

c) Technical reserves for insurance and private pension

Technical reserves for insurance and private pension are recognized according to the criteria established by the National Council of Private Insurance (CNSP) Resolution No. 162 of December 26, 2006 and subsequent amendments.

I - Insurance:

· Reserve for unearned premiums – Recognized based on premiums issued, calculated on a “pro rata” basis, and represents the portion of premium corresponding to the policy period not yet elapsed. The reserve for unearned premiums for risks in force but not yet issued is recognized based on a technical actuarial note, and has the objective of estimating a portion of unearned premiums related to risks assumed by insurance companies and that are for policies that are still in the process of issuance;

· Reserve for premium deficiency – Recognized according to a technical actuarial note if a premium deficiency is found;

· Reserve for unsettled claims – Recognized based on claims of loss in an amount sufficient to cover future commitments. In order to determine the amount to be provided for claims awaiting judicial decision, court-appointed experts and legal advisors make assessments based on the insured amounts and technical rules, taking into consideration the likelihood of an unfavorable outcome to the insurance company.

· Reserve for claims incurred but not reported - IBNR – Recognized for the estimated amount of claims occurred for risks assumed in the portfolio but not yet 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.

F.100

II – Private pension:

The mathematical reserves 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 reserves 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 when insufficient premiums or contribution are determined;

· Reserve for unexpired risks – Recognized to reflect the estimate of risks in force but not expired;

· Reserve for claims incurred but not reported - IBNR – Recognized based on the estimated amount of claims incurred but not reported;

· Reserve for financial surplus – Refers to the difference between the contributions adjusted daily by the gains/losses in the investment portfolio and the accumulated fund recorded;

· Other reserves – Mainly refer to the reserve for administrative expenses recognized according to an actuarial technical note to cover expenses arising from the payment of benefits provided for in the plan, in view of the claims incurred and to be incurred. It also includes the heading Redemptions and/or Other Policy Benefits that refers to amounts not yet paid through the balance sheet date.

III - Change in reserves for insurance and private pension

The details about the changes in balances of reserves for insurance and private pension operations are as follows:

F.101

	12/31/2012												12/31/2011
	Property, individuals and life insurance			Private pension			Life with survivor benefits			Total			Property, individuals and life insurance			Private pension			Life with survivor benefits			Total
Opening balance		7,609			20,893			42,402			70,904			5,527			18,296			33,041			56,864
(+) Additions arising from premiums/contribution		6,940			1,893			15,710			24,543			6,775			1,706			9,936			18,417
(-) Deferral of risk		(6,576	)		-			-			(6,576	)		(5,788	)		-			-			(5,788	)
(-) Payment of claims/benefits		(2,126	)		(92	)		(6	)		(2,224	)		(1,508	)		(103	)		(6	)		(1,617	)
(+) Reported claims		3,073			-			-			3,073			2,020			-			-			2,020
(-) Redemptions		(4	)		(985	)		(5,213	)		(6,202	)		(152	)		(917	)		(3,745	)		(4,814	)
(+/-) Net portability		-			161			57			218			(115	)		152			(14	)		23
(+) Adjustment of reserves and financial surplus		3			1,891			4,440			6,334			1			1,658			3,362			5,021
(+/-) Other (recognition/reversal)		201			(32	)		79			248			849			101			(172	)		778
Reserves for insurance and private pension		9,120			23,729			57,469			90,318			7,609			20,893			42,402			70,904

	INSURANCE				PRIVATE PENSION				TOTAL
	12/31/2012		12/31/2011		12/31/2012		12/31/2011		12/31/2012		12/31/2011
Mathematical reserve for benefits to be granted and benefits granted		19		17		79,733		61,953		79,752		61,970
Unearned premiums		3,371		3,026		-		-		3,371		3,026
Unsettled claims (*)		3,222		2,297		-		-		3,222		2,297
IBNR (*)		821		712		12		10		833		722
Premium deficiency		336		313		-		-		336		313
Insufficient contribution		-		-		750		692		750		692
Financial surplus		1		2		514		475		515		477
Other (Note 30c I)		1,350		1,242		189		165		1,539		1,407
Total		9,120		7,609		81,198		63,295		90,318		70,904

(*) The provision for unsettled claims and IBNR is detailed in Note 30e.

F.102

d) Deferred selling expenses

Deferred acquisition costs of insurance are direct and indirect costs incurred to sell, underwrite and originate a new insurance contract.

Direct costs are basically commissions paid for brokerage services, agency and prospecting efforts and are deferred for amortization in proportion to the recognition of revenue from earned premiums, that is, over the coverage period, for the term of effectiveness of contracts, according to the calculation rules in force.

Balances are recorded under gross reinsurance assets and changes are shown in the table below:

Balance at 01/01/2012	2,064
Increase	207
Amortization	(40	)
Balance at 12/31/2012	2,231
Balance to be amortized in up to 12 months	1,412
Balance to be amortized after 12 months	819
Balance at 01/01/2011	1,649
Increase	583
Amortization	(168	)
Balance at 12/31/2011	2,064
Balance to be amortized in up to 12 months	1,495
Balance to be amortized after 12 months	569

The amounts of deferred selling expenses from reinsurance are stated in Note 30I.

F.103

e) Table of loss development

Changes in the amount of obligations of the ITAÚ UNIBANCO HOLDING may occur at the end of each annual reporting period. The table below shows the development by the claims incurred method. The first part of the table shows how the final loss estimate changes through time. The second part of the table reconciles the amounts pending payment and the liability disclosed in the balance sheet at December 31, 2012.

The reserve for unsettled claims is comprised as follows, at December 31, 2012:

I – Gross of reinsurance
Reserve for unsettled claims and for claims incurred but not reported
Liability claims presented in the development table	2,526
DPVAT operations	226
Retrocession and other estimates	470
Total of provision (*)	3,222

(*) The total provision refers to provision for unsettled claims stated in note 30c III.

Occurrence date	12/31/2008		12/31/2009		12/31/2010		12/31/2011		12/31/2012		Total
At the end of reporting period		1,766		1,444		1,882		1,534		2,353
After 1 year		1,757		1,452		2,069		1,711
After 2 years		1,763		1,452		2,065
After 3 years		1,730		1,463
After 4 years		1,806
Current estimate		1,806		1,463		2,065		1,711		2,353		9,398
Accumulated payments through base date		1,638		1,359		1,824		1,368		1,144		7,333
Liabilities recognized in the balance sheet		168		104		241		343		1,209		2,065
Liabilities in relation to years prior to 2008												461
Total liabilities included in balance sheet												2,526

II - Net of reinsurance

Reserve for unsettled claims and for claims incurred but not reported
Liability claims presented in the development table	756
DPVAT operations	226
Reinsurance, retrocession and other estimates	2,240
Total of provision (*)	3,222

(*) The total provision refers to provision for unsettled claims stated in note 30c III.

Occurrence date	12/31/2008		12/31/2009		12/31/2010		12/31/2011		12/31/2012		Total
At the end of reporting period		1,144		1,151		1,184		1,177		1,387
After 1 year		1,134		1,155		1,159		1,231
After 2 years		1,146		1,157		1,184
After 3 years		1,143		1,160
After 4 years		1,150
Current estimate		1,150		1,160		1,184		1,231		1,387		6,112
Accumulated payments through base date		1,101		1,116		1,130		1,138		1,038		5,523
Liabilities recognized in the balance sheet		49		44		54		93		349		589
Liabilities in relation to years prior to 2008												167
Total liabilities included in balance sheet												756

Variations observed in the estimates of losses occurred in 2010 result mainly from atypical events, with gross amounts frequently higher than the average previously observed. However, as the percentages for reinsurance are high, the net analysis is not affected by this factor. In addition, in view of the high volatility inherent in the analysis of reinsurance gross data, particularly in all risks operations, the analysis of amounts net of reinsurance is recommended.

F.104

f) Liability adequacy test

As established in IFRS 4 – “Insurance Contracts”, an insurance company must carry out the Liability Adequacy Test, comparing the amount recognized for its technical reserves with the current estimate of projected cash flow. The estimate should consider all cash flows related to the business, which is the minimum requirement for carrying out the adequacy test.

The Liability Adequacy Test did not show any deficiency in this period.

The assumptions used in the test were as follows:

a) The risk grouping criteria are Insurance plans consider groups subject to similar risks jointly managed as a single portfolio.

b) The relevant structure of risk-free interest rate was obtained from the curve of securities deemed to be credit risk free, available in the Brazilian financial market and determined pursuant to an internal policy of ITAÚ UNIBANCO HOLDING, considering the addition of spread, which took into account the impact of the market result of held-to-maturity securities of the Guarantee Assets portfolio.

c) The methodology for testing all products is based on the projection of cash flows. Specifically for insurance products, cash flows were projected using the method known as chain-ladder triangle of quarterly frequency.

d) Cancellations, partial redemptions, future contributions, conversions into annuity income and administrative expenses are periodically reviewed pursuant to the best practices and analysis of the experience in the subsidiaries. Accordingly, they represent the current best estimates for projections.

e) Mortality: biometric tables broken down by gender, adjusted according to life expectancy development (improvement).

g) Insurance risk – effect of changes on actuarial assumptions

Property insurance is a short-lived insurance, and the main actuarial assumptions involved in the management and pricing of the associated risks are claims frequency and severity. Volatility above the expected number of claims and amount of claim indemnities may result in unexpected losses.

Life insurance and pension plans are, in general, medium or long-lived products and the main risks involved in the business may be classified as biometric risk, financial risk and behavioral risk.

Biometric risk relates to: i) more than expected increase in life expectancies for products with survivorship coverage (mostly pension plans); ii) more than expected decrease in mortality rates for products with survivorship coverage (mostly life insurance).

Products offering financial guarantee predetermined under contract involve financial risk inherent in the underwriting risk, with such risk being considered insurance risk.

Behavioral risk relates to a more than expected increase in the rates of conversion into annuity income, resulting in increased payments of retirement benefits.

The estimated actuarial assumptions are based on the historical evaluation of ITAÚ UNIBANCO HOLDING benchmarks and the experience of the actuaries.

F.105

Sensitivity analysis were carried out with the amounts of current estimates based on the variations of the main actuarial assumptions. The results of LAT (liability adequacy test) sensitivity analysis were as follows:

	12/31/2012		12/31/2011
	Impact on the result of LAT		Impact on the result of LAT
Sensitivity analysis	Gross of reinsurance	Net of reinsurance	Gross of reinsurance	Net of reinsurance
5% increase in mortality rates	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
5% decrease in mortality rates	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
0.1% increase in risk-free interest rates	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
0.1% decrease in risk-free interest rates	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
5% increase in conversion in income rates	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
5% decrease in conversion in income rates	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
5% increase in claims	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency
5% decrease in claims	Without insufficiency	Without insufficiency	Without insufficiency	Without insufficiency

h) Risks of insurance and private pension

ITAÚ UNIBANCO HOLDING has specific committees to define the management of funds from the technical reserves for insurance and private pension, issue guidelines for managing these funds with the objective of achieving long-term return, and define evaluation models, risk limits and strategies on allocation of funds to defined financial assets. Such committees are comprised not only of executives and those directly responsible for the business management process, but also for an equal number of professionals that head up or coordinate the commercial and financial areas.

Large risks products are distributed by brokers. In the case of the extended warranty product, this is marketed by the retail company that sells the product to consumer. The DPVAT production results from the participation that the insurance companies of ITAÚ UNIBANCO HOLDING have in the Leading Insurance Company of the DPVAT consortium.

F.106

There is no product concentration in relation to insurance premiums, reducing the concentration risk of products and distribution channels. For large risks products, the strategy of lower retention is adopted, in accordance with certain lines shown below:

	01/01 to 12/31/2012						01/01 to 12/31/2011
	Insurance premiums		Retained premium		Retention (%)		Insurance premiums		Retained premium		Retention (%)
PROPERTY AND CASUALTY
Extended warranty		1,368		1,368		100.0		1,365		1,365		100.0
Credit life		460		458		99.6		461		461		100.0
Mandatory personal injury caused by motor vehicle (DPVAT)		404		404		100.0		308		308		100.0
INDIVIDUALS
Group life		1,299		1,258		96.8		1,165		1,141		97.9
Group accident insurance		642		642		100.0		661		660		99.8
Individual accident		104		102		98.1		109		108		99.1
Individual life		18		18		100.0		20		19		95.0
LARGE RISKS
Specified and operational risks		479		118		24.6		480		96		20.0
Petroleum risks		282		45		16.0		257		37		14.4
Engineering		104		16		15.4		72		8		11.1

F.107

i) Underwriting risk management structure

· Centralized control over underwriting risk

The risk control of the insurance company is centralized by the independent executive area responsible for risk control, while the management of risk is the responsibility of the business units exposed to underwriting risk and the risk management area of ITAÚ UNIBANCO HOLDING insurance subsidiaries.

· Decentralized management of underwriting risk

The underwriting risk management is the responsibility of the business area coordinated by the risk management area of ITAÚ UNIBANCO HOLDING insurance subsidiaries with the participation of the institutional actuarial area and product units and managers. These units, in their daily operations, accept risks based on the profitability of their businesses.

j) Duties and responsibilities

I- Independent executive area responsible for risk control

This area has the following attributes:

· Validation and control of underwriting risk models.

· Control and evaluation of changes in the policies of insurance and private pension.

· Monitoring the performance of the insurance and private pension portfolios.

· Construction of underwriting risk models.

· Risk assessment of insurance and private pension products when created and on an ongoing basis.

· Establishment and publication of the underwriting risk management structure.

· Adoption of remuneration policies that discourage behavior incompatible with a risk level considered prudent in the policies and long-term strategies established by ITAÚ UNIBANCO HOLDING.

II- Executive area responsible for operational and efficiency risk

· Devise methods for identifying, assessing, monitoring, controlling and mitigating operational risk.

· Report, on a regular basis, operational risk events to the independent executive area responsible for risk control.

· Respond to requests from the Central Bank of Brazil, and other Brazilian regulatory authorities related to operational risk management, as well as monitor the adherence of business units and control areas of ITAÚ UNIBANCO HOLDING under the coordination of the legal compliance area to the regulation of the legal oversight authorities.

III- Business units exposed to underwriting risk

· Set out and/or adjust products to the requirements of the independent executive area responsible for risk control and the risk management area of the ITAÚ UNIBANCO HOLDING insurance subsidiaries.

· Respond to requests of the independent executive area responsible for risk control, preparing or providing databases and information for preparation of managerial reports or specific studies, when available.

· Guarantee the quality of the information used in probability of loss models and claim losses.

· Guarantee an appropriate level of knowledge about the concepts of risks for their identification and classification, ensuring the proper understanding for modeling by the independent executive area responsible for risk control and the risk management area of the insurance company.

IV - Reinsurance area

· Formulate policies on access to reinsurance markets, regulating the underwriting operations aligned with the underwriting credit rating by the independent executive area responsible for risk control and the risk management area of the ITAÚ UNIBANCO HOLDING insurance subsidiaries.

F.108

· Guarantee an appropriate level of knowledge about the concepts of risks for their identification and classification, ensuring the proper understanding for modeling by the independent executive area responsible for risk control and the risk management area of the ITAÚ UNIBANCO HOLDING insurance subsidiaries.

· Submit managerial reports to the independent executive area responsible for risk control and the risk management area of the ITAÚ UNIBANCO HOLDING insurance subsidiaries.

· Guarantee the update, reach, scope, accuracy and timeliness of information on reinsurance.

V- Risk management area of ITAÚ UNIBANCO HOLDING insurance subsidiaries

· Formulate underwriting policies and procedures that address the entire underwriting cycle.

· Develop strategic indicators, informing about possible gaps to higher levels.

· Submit managerial reports to the independent executive area responsible for risk control.

· Guarantee an appropriate level of knowledge about the concepts of risks for their identification and classification, ensuring the proper understanding and modeling by the independent executive area responsible for risk control.

· Monitor the risks incurred by business units exposed to underwriting risk.

· Report with quality and speed the required information under its responsibility to the Brazilian regulatory authorities.

VI- Actuarial area

· Construct and improve models of Provisions and Reserves and submit them duly documented to the independent executive area responsible for the risk control and the risk management area of ITAÚ UNIBANCO HOLDING insurance subsidiaries.

· Submit managerial reports to the independent executive area responsible for risk control.

· Guarantee the reach, scope, accuracy and timeliness of information related to operations for which the accounting reconciliation was properly carried out.

· Guarantee an appropriate level of knowledge about the concepts of risks for their identification and classification, ensuring the proper understanding and modeling by the independent executive area responsible for risk control.

VII- Internal controls area

· Check, on a regular basis, the adequacy of the internal controls system.

· Conduct periodic reviews of the risk process of Insurance operations to ensure completeness, accuracy and reasonableness.

VIII- Internal audit

Carry out independent and periodic checks as to the effectiveness of the risk control process of insurance and private pension operations, according to the guidelines of the audit committee.

Insurance and private pension managers work together with the investment manager to ensure that assets backing long-term products, with guaranteed minimum returns are managed according to the characteristics of the liabilities aiming at actuarial balance and long-term solvency.

A detailed mapping of the liabilities of long-term products that result in payment flows of projected future benefits is performed annually. This mapping is carried out in accordance with actuarial assumptions.

The investment manager, having this information, uses Asset Liability Management models to find the best asset portfolio composition that enables the mitigating of risks entailed in this type of product, considering its long-term economic and financial feasibility. The portfolio of backing assets are periodically balanced based on the fluctuations in market prices of assets, liquidity needs, and changes in characteristics of liabilities.

F.109

k) Market, credit and liquidity risk

Market risk

Market risk is the possibility of incurring losses due to fluctuations in the market values of positions held by a financial institution, including risks of transactions subject to variations in foreign exchange and interest rates, share values, of prices indexes and commodity prices, among other indexes on these risk factors.

The market risk limit structure and warnings follow the guidelines of the Board of Directors and is approved by the Superior Risk Committee (CSRisc) after discussions and deliberations of the Superior Institutional Treasury Committee (CSTI) on metrics and market risk limits. The review of this structure of limits is performed at least annually.

Market risk is analyzed based on the following metrics:

· Value at Risk (VaR): statistical metric that estimates the expected maximum potential economic loss under normal market conditions, taking into consideration a certain time horizon and confidence interval (Note 36);

· Losses in Stress Scenarios (Stress Test): simulation technique to assess the behavior of assets, liabilities and derivatives of a portfolio when various risk factors are subject to extreme market situations (based on prospective scenarios) in the portfolio;

· Sensitivity (DV01- Delta Variation Risk): in relation to insurance operations, impact on the cash flows market value when submitted to a 1 annual basis point increase in the current interest rates or index rate and 1 percentage point in the share price and currency.

	12/31/2012					12/31/2011
Class	Account balance		DV01			Account balance		DV01
	(R$ million)					(R$ million)
Government securities
NTN-C		3,254		(3.53	)		2,936		(2.66	)
NTN-B		1,821		(2.20	)		1,544		(1.29	)
NTN-F		7		-			21		(0.00	)
LTN		168		(0.00	)		-		-
DI Future		1		-			19		(0.00	)
Private securities
Indexed to IGPM		26		(0.00	)		139		(0.02	)
Indexed to IPCA		289		(0.22	)		217		(0.17	)
Indexed to PRE		67		(0.01	)		74		-
Shares		523		5.23			376		3.76
Floating assets		5,660		-			5,622		-
Under agreements to resell		4,574		-			6,237		-

F.110

Liquidity Risk

Liquidity risk is the risk that ITAÚ UNIBANCO HOLDING may have insufficient net funds available to honor its current obligations at a given moment. The liquidity risk is managed continuously based on the monitoring of payment flows related to its liabilities vis-à-vis the inflows generated by its operations and financial assets portfolio. Additionally, according to the principles of prudence and conservative accounting, ITAÚ UNIBANCO HOLDING has funds invested in short-term assets, available on demand, to cover its regular needs and any liquidity contingencies.

Liabilities	12/31/2012				12/31/2011				Assets	12/31/2012				12/31/2011
	Amount		DU (*)		Amount		DU (*)			Amount		DU (*)		Amount		DU (*)
Technical provision									Backing asset
PPNG, PPNG-RVNE, PCP and OPT (1)		1,746		17		1,690		12	LFT, Repurchase Agreements, NTN-B, CDB, LF and Debentures		1,746		7		1,690		7
Reserve for premium deficiency		253		182		233		187	LFT, Repurchase Agreements, NTN-B, CDB, LF and Debentures		253		7		233		7
IBNR and Provision for unsettled claims (2)		1,409		18		1,401		19	LFT, Repurchase Agreements, NTN-B, CDB, LF and Debentures		1,409		7		1,401		7
Other Reserves		345		-		303		-	LFT, Repurchase Agreements, NTN-B, CDB and Debentures		345		-		303		-
Subtotal		3,753				3,627			Subtotal		3,753				3,627
Provisions
Administrative expenses		41		126		43		125	LFT, Repurchase Agreements, NTN-B, CDB, LF and Debentures		41		7		43		7
Mathematical reserve for benefits granted		1,066		126		977		126	LFT, Repurchase Agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and Debentures		1,066		136		977		124
Mathematical reserve for benefits to be granted – PGBL/ VGBL		75,055		133		57,626		109	LFT, Repurchase Agreements, LTN, LTN-B, NTN-C, NTN-F, CDB, LF and Debentures (3)		75,055		27		57,626		8
Mathematical reserve for benefits to be granted – Traditional		3,630		179		3,365		116	LFT, Repurchase Agreements, NTN-B, NTN-C, Debentures		3,630		136		3,365		109
Insufficient contribution		751		179		692		109	LFT, Repurchase Agreements, NTN-B, CDB, LF and Debentures		751		136		692		109
Financial surplus		515		179		477		109	LFT, Repurchase Agreements,   NTN-B, CDB, LF and Debentures		515		136		477		109
Subtotal		81,058				63,180			Subtotal		81,058				63,180
Total technical reserves		84,811				66,807			Total backing assets		84,811				66,807

(*) DU – Duration in months

(1) Net amount of Credit Right.

(2) Net of escrow deposits and reserves retained IRB.

(3) Excluding PGBL / VGBL reserves allocated in variable income.

F.111

Credit Risk

For reinsurance operations, the internal policy prohibits excess concentration in only one reinsurer. At present the reinsurer with the largest share of our operations represents less than 39% of total. In addition, we follow the SUSEP rules about reinsurers with which we operate, mainly with respect to “solvency rating, issued by a rating agency”, with the following minimum levels:

Rating agency	Minimum required level
Standard & Poor's	BBB-
Fitch	BBB-
Moody´s	Baa3
AM Best	B+

I) Reinsurance

Expenses and revenues from reinsurance premiums ceded are recognized in the period when they occur, according to the accrual basis, with no offset of assets and liabilities related to reinsurance except in the event there is a contractual provision for the offset of accounts between the parties. Analyses of reinsurance required are made to meet the current needs of ITAÚ UNIBANCO HOLDING, maintaining the necessary flexibility to comply with changes in management strategy in response to the various scenarios to which it may exposed.

With the approval of the Supplementary Law No. 126 of January 15, 2007, the reinsurance market was opened with the creation of three categories of companies authorized to operate in Brazil: local, admitted and occasional (the last two being respectively reinsurance companies with or without representative office in Brazil). The transition to the new market was made progressively, maintaining the right of local reinsurance companies at 60% of premiums ceded by insurance companies until January 2010; after this period, this percentage may be reduced to 40%. From March 31, 2011, this percentage of 40% shall be obligatorily ceded to local reinsurance companies.

Reinsurance assets

Reinsurance assets represent the estimated amounts recoverable from reinsurers in connection with losses incurred. Such assets are evaluated based on risk assignment contracts, and for cases of losses effectively paid, they are reassessed after 365 days as to the possibility of impairment; in case of doubts, such assets are reduced by recognizing an allowance for losses on reinsurance.

Reinsurance transferred

ITAÚ UNIBANCO HOLDING transfers, in the normal course of its businesses, reinsurance premiums to cover losses on underwriting risks to its policyholders and is in compliance with the operational limits established by the regulating authority. In addition to proportional contracts, non-proportional contracts are also entered into in order to transfer a portion of the responsibility to the reinsurance company for losses that exceed a certain level of losses in the portfolio. Non-proportional reinsurance premiums are included in Other assets - prepaid expenses and amortized to Other operating expenses over the effectiveness period of the contract on a daily accrual basis.

F.112

I- Changes in balances of transactions with reinsurance companies

	Credits						Debits
	12/31/2012			12/31/2013			12/31/2012			12/31/2011
Opening balance		214			176			313			106
Issued contracts		-			-			1,106			926
Recoverable claims		26			52			-			-
Prepayments/Payments to Reinsurer		(7	)		32			(1,043	)		(751	)
Monetary adjustment and interest of claims		-			-			8			32
Other increase/reversal		1			(46	)		-			-
Closing balance		234			214			384			313

II – Balances of technical reserves with reinsurance assets

	12/31/2012			12/31/2011
Reinsurance claims		2,098			1,394
Reinsurance premiums		700			535
Reinsurance commission		(45	)		(58	)
Closing balance		2,753			1,871

III – Changes in balances of technical reserves for reinsurance claims

	12/31/2012			12/31/2011
Opening balance		1,394			1,185
Reported claims		1,313			615
Paid claims		(598	)		(101	)
Other increase/reversal		(11	)		(305	)
Closing balance		2,098			1,394

IV – Changes in balances of technical reserves for reinsurance premiums

	12/31/2012			12/31/2011
Opening balance		535			404
Receipts		1,049			814
Payments		(884	)		(683	)
Closing balance		700			535

V – Changes in balances of technical reserves for reinsurance commission

	12/31/2012			12/31/2011
Opening balance		(58	)		(59	)
Receipts		(64	)		(50	)
Payments		77			51
Closing balance		(45	)		(58	)

F.113

m) Regulatory authorities

Insurance and private pension operations are regulated by the National Council of Private Insurance (CNSP) and the Superintendence of Private Insurance (SUSEP). These authorities are responsible for regulating the market, and consequently for assisting in the mitigation of risks inherent in the business.

The National Council of Private Insurance (CNSP) is the regulatory authority of insurance activities in Brazil, created by Decree-Law No. 73, of November 21, 1966. The main attribution of CNSP, at the time of its creation, was to set out the guidelines and rules of government policy on private insurance segments, and with the enactment of Law No. 6,435, of July 15, 1977, its attributions included private pension of public companies.

The Superintendence of Private Insurance (SUSEP) is the authority responsible for controlling and overseeing the insurance, private pension, and reinsurance markets. An agency of the Ministry of Finance, it was created by the Decree-Law No. 73, of November 21, 1966, which also created the National System of Private Insurance, comprising the National Council of Private Insurance (CNSP), IRB Brasil Resseguros S.A. – IRB Brasil Re, the companies authorized to have private pension plans and the open-ended private pension companies.

n) Capital requirements for insurance activity

The National Council of Private Insurance (CNSP), following the worldwide trend towards the strengthening of the insurance market, disclosed on December 6, 2010, CNSP Resolution No. 227, (which revoked Resolutions No. 178 of December 28, 2007 and No. 200 of December 16, 2008), and Circular No. 411 of December 22, 2010. These documents define the rules on the regulatory capital required for authorization and operation of insurance and private pension companies, and rules for the allocation of capital to underwriting risk for the various insurance lines. In January 2011, CNSP Resolution No. 228, of December 6, 2010, which provides for the criteria for establishment of additional capital based on credit risk of the supervised companies, came into effect.

The adjusted stockholders’ equity of ITAÚ UNIBANCO HOLDING companies exclusively engaged in insurance and private pension activities is higher than the required regulatory capital. The insurance companies of ITAÚ UNIBANCO HOLDING present capital exceeding the regulatory minimum capital at R$ 1,362 (R$ 2,049 at 12/31/2011) in Itaú Seguros S.A., and R$ 553 (R$ 1,565 at 12/31/2011) Itaú Vida e Previdência S.A..

F.114

NOTE 31 – FAIR VALUE OF FINANCIAL INSTRUMENTS

In cases where market prices are not available, fair values are based on estimates using discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions adopted, including the discount rate and estimate of future cash flows. The estimated fair value achieved through these techniques cannot be substantiated by comparison with independent markets and, in many cases, it cannot be realized in the immediate settlement of the instrument.

The following table summarizes the carrying and estimated fair values for financial instruments:

	12/31/2012				12/31/2011
	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Financial assets
Cash and deposits on demand and Central Bank compulsory deposits		77,668		77,668		108,721		108,721
Interbank deposits		23,826		23,853		27,821		27,849
Securities purchased under agreements to resell		162,737		162,737		92,248		92,248
Financial assets held for trading (*)		145,516		145,516		121,889		121,889
Financial assets designated at fair value through profit or loss (*)		220		220		186		186
Derivatives (*)		11,597		11,597		8,754		8,754
Available-for-sale financial assets (*)		90,869		90,869		47,510		47,510
Held-to-maturity financial assets		3,202		4,517		3,105		3,713
Loan operations and lease operations		341,271		343,375		322,391		323,021
Other financial assets		44,492		44,492		40,254		40,254
Financial liabilities
Deposits		243,200		243,127		242,636		242,554
Securities sold under repurchase agreements		267,405		267,405		185,413		185,413
Financial liabilities held for trading (*)		642		642		2,815		2,815
Derivatives (*)		11,069		11,069		6,747		6,747
Interbank market debt		97,073		96,858		90,498		90,350
Institutional market debt		72,028		71,036		54,807		54,681
Liabilities for capitalization plans		2,892		2,892		2,838		2,838
Other financial liabilities		50,255		50,255		44,119		44,119

(*) These assets and liabilities are recorded in the balance sheet at their fair value.

Financial instruments not included in the Balance Sheet (Note 36) are represented by Standby Letters of Credit and Guarantees Provided, which amount to R$ 60,310 (R$ 51,530 at 12/31/2011) with an estimated fair value of R$ 728 (R$ 695 at 12/31/2011).

The methods and assumptions adopted to estimate the fair value are defined below:

a) Cash and Deposits on Demand, Central Bank Compulsory Deposits and Securities Purchased under Agreements to Resell – The carrying amounts for these instruments approximate their fair values.

b) Interbank Deposits – ITAÚ UNIBANCO HOLDING estimates the fair values of interbank investments by discounting the estimated cash flows and adopting the market interest rates.

c) Financial Assets Held for Trading, including Derivatives (Assets and Liabilities), Financial Assets designated at Fair Value through Profit or Loss, Available-for-sale Financial Assets and Held-to-Maturity Financial Assets – Under normal conditions, market prices are the best indicators of the fair values of financial instruments. However, not all instruments have liquidity or quoted market prices and, in such cases, the adoption of present value estimates and other pricing techniques are required. The fair value of government securities are determined based on the interest rates provided by third parties in the market and they are validated by comparing them with the information disclosed by ANDIMA. The fair values of corporate debt securities are computed by adopting criteria similar to those applied to interbank deposits, as described above. The fair values of shares are computed based on their prices quoted in the market. The fair values of derivative financial instruments were determined as follows:

· Swaps: The cash flows are discounted to present value based on yield curves that reflect the appropriate risk factors. These yield curves may be drawn mainly based on the exchange price of derivatives at BM&FBOVESPA, of Brazilian government securities in the secondary market or derivatives and securities traded abroad. These yield curves may be used to obtain the fair value of currency swaps, interest rate swaps and swaps based on other risk factors (commodities, stock exchange indices, etc.).

· Futures and forwards: Quotations on exchanges or criteria identical to those applied to swaps.

F.115

· Options: The fair values are determined based on mathematical models (such as Black&Scholes) that are fed with implicit volatility data, interest rate yield curve and fair value of the underlying asset. Current market prices of options are used to compute the implicit volatilities. All these data are obtained from different sources (usually Bloomberg).

· Credit Risk: Inversely related to the probability of default (PD) in a financial instrument subject to credit risk. The process of adjusting the market price of these spreads is based on the differences between the yield curves with no risk and the yield curves adjusted for credit risk.

d) Loan operations and lease operations – The fair value is estimated based on groups of loans with similar financial and risk characteristics, using valuation models. The fair value of fixed-rate loans was determined by discounting estimated cash flows, applying interest rates close to ITAÚ UNIBANCO HOLDING current rates for similar loans. For the majority of loans at floating rate, the carrying amount was considered close to their fair value. The fair value of loan and lease operations not overdue was calculated by discounting the expected payments of principal and interest through maturity, at the aforementioned rates. The fair value of overdue loan and lease transactions was based on the discount of estimated cash flows, using a rate proportional to the risk associated with the estimated cash flows, or on the underlying collateral. The assumptions related to cash flows and discount rates are determined using information available in the market and the borrower’s specific information of the debtor.

e) Other Financial Assets – primarily composed of receivables from credit card issuers, deposits in guarantee for contingent liabilities and trading and intermediation of securities. The carrying amounts for these assets substantially approximate their fair values, since they principally represent amounts to be received in the short term from credit card holders and to be paid to credit card acquirers, judicially required deposits (indexed to market rates) made by ITAÚ UNIBANCO HOLDING as guarantees for lawsuits or very short-term receivables (generally with a maturity of approximately 5 (five) business days). All of these items represent assets without significant associated market or credit risks.

In accordance with IFRS, ITAÚ UNIBANCO HOLDING classifies fair value measurements in a fair value hierarchy that reflects the significance of inputs adopted in the measurement process.

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market is a market in which transactions for the asset or liability being measured occur often enough and with sufficient volume to provide pricing information on an ongoing basis.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Level 2 generally includes: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or quoted prices vary substantially either over time or among market makers, or in which little information is released publicly; (iii) inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, etc.); (iv) inputs that are mainly derived from or corroborated by observable market data through correlation or by other means.

Level 3: Inputs are unobservable for the asset or liability. Unobservable information shall be used to measure fair value to the extent that observable information is not available, thus allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Financial Assets for Trading, Available for Sale, and Designated at Fair Value through Profit or Loss:

Level 1: Highly-liquid securities with prices available in an active market are classified in Level 1 of the fair value hierarchy. This classification level includes most of the Brazilian Government Securities (mainly LTN, LFT, NTN-B, NTN-C and NTN-F), securities of foreign governments, shares and debentures traded on stock exchanges and other securities traded in an active market.

Level 2: When the pricing information is not available for a specific security, the assessment is usually based on prices quoted in the market for similar instruments, pricing information obtained for pricing services, such as Bloomberg, Reuters and brokers (only when the prices represent actual transactions) or discounted cash flows, which use information for assets actively traded in an active market. These securities are classified into Level 2 of the fair value hierarchy and are comprised of certain Brazilian government securities, debentures and some government securities quoted in a less-liquid market in relation to those classified into Level 1, and some share prices in investment funds. ITAÚ UNIBANCO HOLDING does not hold positions in alternative investment funds or private equity funds.

F.116

Level 3: When no pricing information in an active market, ITAÚ UNIBANCO HOLDING uses internally developed models, from curves generated according to the proprietary model. The Level 3 classification includes some Brazilian government and private securities (mainly NTN-I, NTN-A1, CRI, TDA and CCI falling due after 2025, CVS and promissory notes) and securities that are not usually traded in an active market.

Derivatives:

Level 1: Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.

Level 2: For derivatives not traded on stock exchanges, ITAÚ UNIBANCO HOLDING estimates the fair value by adopting a variety of techniques, such as Black&Scholes, Garman & Kohlhagen, Monte Carlo or even the discounted cash flow models usually adopted in the financial market. Derivatives included in Level 2 are credit default swaps, cross currency swaps, interest rate swaps, plain vanilla options, certain forwards and generally all swaps. All models adopted by ITAÚ UNIBANCO HOLDING are widely accepted in the financial services industry and reflect all derivative contractual terms. Considering that many of these models do not require a high level of subjectivity, since the methodologies adopted in the models do not require major decisions and information for the model are readily observed in the actively quotation markets, these products were classified in Level 2 of the measurement hierarchy.

Level 3: The derivatives with fair values based on non-observable information in an active market were classified into Level 3 of the fair value hierarchy, and are comprised of non-standard options, certain swaps indexed to non-observable information, and swaps with other products, such as swap with option and USD Check, credit derivatives and futures of certain commodities. These operations have their pricing derived from a range of volatility using the basis of historical volatility.

All aforementioned valuation methodologies may result in a fair value that may not be indicative of the net realizable value or future fair values. However, ITAÚ UNIBANCO HOLDING believes that all methodologies used are appropriate and consistent with the other market participants. However, the adoption of other methodologies or assumptions different than those used to estimate fair value may result in different fair value estimates at the balance sheet date.

F.117

Distribution by level

The following table presents the breakdown of risk levels at 12/31/2012 and 12/31/2011 for financial assets held for trading and available-for-sale financial assets.

	12/31/2012								12/31/2011
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets held for trading		118,548		26,948		20		145,516		100,041		21,558		290		121,889
Investment funds		-		1,468		-		1,468		-		1,339		-		1,339
Brazilian government securities		111,045		161		-		111,206		93,727		187		-		93,914
Brazilian external debt bonds		1,286		-		-		1,286		910		-		-		910
Government securities – other countries		710		162		-		872		722		80		-		802
Argentina		106		-		-		106		225		-		-		225
United States		345		-		-		345		292		-		-		292
Mexico		225		-		-		225		205		-		-		205
Chile		-		108		-		108		-		50		-		50
Uruguay		-		33		-		33		-		27		-		27
Colombia		34		-		-		34		-		3		-		3
Other		-		21		-		21		-		-		-		-
Corporate securities		5,507		25,157		20		30,684		4,682		19,952		290		24,924
Shares		2,815		-		-		2,815		2,241		56		-		2,297
Securitized real estate loans		-		21		-		21		-		24		-		24
Bank deposit certificates		-		2,933		-		2,933		-		7,820		-		7,820
Debentures		2,692		1,944		-		4,636		2,434		1,092		-		3,526
Eurobonds and others		-		1,612		-		1,612		7		1,424		-		1,431
Promissory notes		-		-		20		20		-		-		290		290
Financial credit bills		-		18,441		-		18,441		-		8,973		-		8,973
Other		-		206		-		206		-		563		-		563
Available-for-sale financial assets		48,351		40,029		2,489		90,869		20,988		24,926		1,596		47,510
Investment funds		-		255		-		255		-		806		-		806
Brazilian government securities		25,131		25		306		25,462		12,120		45		259		12,424
Brazilian external debt bonds		18,065		-		-		18,065		5,906		-		-		5,906
Government securities – other countries		602		6,535		-		7,137		11		4,306		-		4,317
United States		375		-		-		375		-		-		-		-
Denmark		-		2,554		-		2,554		-		1,949		-		1,949
Spain		-		-		-		-		-		418		-		418
Korea		-		1,662		-		1,662		-		295		-		295
Mexico		-		-		-		-		11		-		-		11
Chile		-		1,534		-		1,534		-		995		-		995
Paraguay		-		491		-		491		-		344		-		344
Uruguay		-		294		-		294		-		268		-		268
Belgium		71		-		-		71		-		-		-		-
France		57		-		-		57		-		37		-		37
United Kingdom		83		-		-		83		-		-		-		-
Other		16		-		-		16		-		-		-		-
Corporate securities		4,553		33,214		2,183		39,950		2,951		19,769		1,337		24,057
Shares		2,258		1,554		-		3,812		808		3,170		-		3,978
Securitized real estate loans		-		7,200		1,368		8,568		-		7,323		691		8,014
Bank deposit certificates		-		391		-		391		-		274		-		274
Debentures		2,280		11,684		-		13,964		2,103		5,133		-		7,236
Eurobonds and others		15		5,576		5		5,596		40		3,598		-		3,638
Promissory notes		-		-		777		777		-		-		646		646
Rural Product Note		-		778		-		778		-		108		-		108
Financial credit bills		-		5,720		-		5,720		-		-		-		-
Other		-		311		33		344		-		163		-		163
Financial assets designated at fair value through profit or loss		-		220		-		220		-		186		-		186
Brazilian government securities		-		220		-		220		-		186		-		186
Financial liabilities designated at fair value		-		642		-		642		-		2,815		-		2,815
Structured notes		-		642		-		642		-		2,815		-		2,815

The following table presents the breakdown of risk levels at 12/31/2012 and 12/31/2011 for our derivative assets and liabilities.

	12/31/2012												12/31/2011
	Level 1			Level 2			Level 3			Total			Level 1		Level 2			Level 3			Total
Derivatives - Assets		-			11,284			313			11,597			17		7,832			905			8,754
Options		-			1,759			147			1,906			-		1,755			688			2,443
Forwards		-			3,528			2			3,530			-		1,876			3			1,879
Swap – Differential receivable		-			3,661			25			3,686			-		2,732			18			2,750
Check of swap		-			35			-			35			-		4			-			4
Credit derivatives		-			728			-			728			-		399			-			399
Forwards		-			379			-			379			-		450			1			451
Futures		-			-			-			-			17		9			-			26
Other derivatives		-			1,194			139			1,333			-		607			195			802
Derivatives - Liabilities		(23	)		(10,877	)		(169	)		(11,069	)		-		(6,047	)		(700	)		(6,747	)
Options		-			(2,132	)		(149	)		(2,281	)		-		(1,930	)		(676	)		(2,606	)
Forwards		-			(2,291	)		(2	)		(2,293	)		-		(811	)		(7	)		(818	)
Swap – Differential payable		-			(5,053	)		(15	)		(5,068	)		-		(2,782	)		(16	)		(2,798	)
Swap with USD check		-			(42	)		-			(42	)		-		(2	)		-			(2	)
Credit derivatives		-			(90	)		-			(90	)		-		(110	)		-			(110	)
Forwards		-			(343	)		(3	)		(346	)		-		(325	)		(1	)		(326	)
Futures		(23	)		-			-			(23	)		-		-			-			-
Other derivatives		-			(926	)		-			(926	)		-		(87	)		-			(87	)

F.118

Measurement of Fair value Level 2 based on pricing services and brokers

When pricing information is not available for securities classified as Level 2, pricing services, such as Bloomberg or brokers, are used to value such instruments.

In all cases, to assure that the fair value of these instruments is properly classified as Level 2, internal analysis of the information received are conducted, so as to understand the nature of the input used in the establishment of such values by the service provider.

Prices provided by pricing services that meet the following requirements are considered Level 2: input is immediately available, regularly distributed, provided by sources actively involved in significant markets and it is not proprietary.

Of the total of R$ 67,197 million in financial instruments classified as Level 2, at December 31, 2012, pricing service or brokers were used to evaluate securities at the fair value of R$ 20,545 million, substantially represented by:

· Debentures: When available, we use price information for transactions recorded in the Brazilian Debenture System (SND), an electronic platform operated by CETIP, which provides multiple services for transactions involving debentures in the secondary market. Alternatively, prices of debentures provided by ANBIMA are used. Its methodology includes obtaining, on a daily basis, illustration and non-binding prices from a group of market players deemed to be significant. Such information is subject to statistical filters established in the methodology, with the purpose of eliminating outliers.

· Global and corporate securities: The pricing process for these securities consists in capturing from 2 to 8 quotes from Bloomberg, depending on the asset. The methodology consists in comparing the highest purchase prices and the lowest sale prices of trades provided by Bloomberg for the last day of the month. Such prices are compared with information from purchase orders that the Institutional Treasury of Itaú Unibanco provides for Bloomberg. Should the difference between them be lower than 0.5%, the average price of Bloomberg is used. Should it be higher than 0.5% or if the Institutional Treasury does not provide information on this specific security, the average price gathered directly from other banks is used. The price of the Institutional Treasury is used as a reference only and never in the computation of the final price.

F.119

Level 3 recurring fair value measurements

The tables below show the changes in balance sheet for financial instruments classified by ITAÚ UNIBANCO HOLDING in Level 3 of the fair value hierarchy.

	Fair value at 12/31/2011		Total gains or losses (realized/unrealized)			Purchases and issues		Settlements			Transfers in and/or out of Level 3		Fair value at 12/31/2012		Total gains (losses) related to assets and liabilities still held at reporting date
Financial assets held for trading		290		(238	)		71		(103	)		-		20		-
Corporate securities		290		(238	)		71		(103	)		-		20		-
Promissory notes		290		(238	)		71		(103	)		-		20		-
Available-for-sale financial assets		1,596		234			3,028		(2,369	)		-		2,489		638
Brazilian government securities		259		75			364		(392	)		-		306		17
Corporate securities		1,337		159			2,664		(1,977	)		-		2,183		621
Securitized real estate loans		691		123			684		(130	)		-		1,368		623
Promissory notes		646		37			1,941		(1,847	)		-		777		-
Eurobonds and others		-		(3	)		8		-			-		5		(3	)
Outros		-		2			31		-			-		33		1

	Fair value at 12/31/2011			Total gains or losses (realized/unrealized)			Purchases and issues			Settlements			Transfers in and/or out of Level 3		Fair value at 12/31/2012			Total gains (losses) related to assets and liabilities still held at reporting date
Derivatives - Assets		905			20			243			(855	)		-		313			12
Options		688			25			218			(784	)		-		147			17
Swap – Differential receivable		18			(6	)		13			-			-		25			4
Forwards		3			-			6			(7	)		-		2			1
Forwards		1			-			-			(1	)		-		-			-
Other derivatives		195			1			6			(63	)		-		139			(10	)
Derivatives - Liabilities		(700	)		19			(238	)		750			-		(169	)		(30	)
Options		(676	)		21			(228	)		734			-		(149	)		(17	)
Forwards		(7	)		-			(7	)		12			-		(2	)		1
Swap – Differential payable		(16	)		(2	)		-			3			-		(15	)		(14	)
Forwards		(1	)		-			(3	)		1			-		(3	)		-

	Fair value at 12/31/2010		Total gains or losses (realized/unrealized)		Purchases and issues		Settlements			Transfers in and/or out of Level 3			Fair value at 12/31/2011		Total gains (losses) related to assets and liabilities still held at reporting date
Financial assets held for trading		159		89		1,422		(1,391	)		11			290		-
Corporate securities		159		89		1,422		(1,391	)		11			290		-
Securitized real estate loans		157		85		562		(804	)		-			-		-
Promissory notes		-		3		697		(410	)		-			290		-
Other		2		1		163		(177	)		11			-		-
Available-for-sale financial assets		1,647		767		3,217		(3,530	)		(505	)		1,596		266
Brazilian government securities		320		-		38		(64	)		(35	)		259		(100	)
Corporate securities		1,327		767		3,179		(3,466	)		(470	)		1,337		366
Shares		-		-		227		-			(227	)		-		-
Securitized real estate loans		62		686		1,125		(1,103	)		(79	)		691		366
Promissory notes		1,265		78		1,666		(2,363	)		-			646		-
Other		-		3		161		-			(164	)		-		-

	Fair value at 12/31/2010			Total gains or losses (realized/unrealized)			Purchases and issues			Settlements			Transfers in and/or out of Level 3		Fair value at 12/31/2011			Total gains (losses) related to assets and liabilities still held at reporting date
Derivatives - Assets		485			811			835			(1,226	)		-		905			(93	)
Options		56			89			690			(147	)		-		688			(63	)
Swap – Differential receivable		5			(15	)		28			-			-		18			3
Forwards		-			-			3			-			-		3			-
Credit derivatives		261			57			104			(422	)		-		-			-
Forwards		-			-			1			-			-		1			-
Other derivatives		163			680			9			(657	)		-		195			(33	)
Derivatives - Liabilities		(335	)		130			(166	)		(329	)		-		(700	)		(316	)
Options		(188	)		82			(110	)		(460	)		-		(676	)		(302	)
Forwards		-			-			(7	)		-			-		(7	)		-
Swap – Differential payable		(6	)		(13	)		(16	)		19			-		(16	)		(14	)
Credit derivatives		(119	)		55			(5	)		69			-		-			-
Forward		-			-			(1	)		-			-		(1	)		-
Futures		(9	)		6			(27	)		30			-		-			-
Other derivatives		(13	)		-			-			13			-		-			-

Derivative financial instruments classified in Level 3 mainly correspond to other derivatives – credit default swaps linked to shares.

There were no significant transfers between Level 1 and Level 2 during the periods ended 12/31/2012 and 12/31/2011.

F.120

Sensitivity analyses operations of Level 3

The fair value of financial instruments classified in Level 3 is measured through assessment techniques comprising assumptions not evidenced by current transaction prices in active markets, as explained in item f above. The table below shows the sensitivity of these fair values in scenarios of changes of interest rates, asset prices, or in scenarios mixing shocks in prices with shocks in volatility for non-linear assets (volatility arising from lack of alignment between the derivative and underlying asset prices):

		(Amounts in R$ million)
Sensitivity – Level III Operations		12/31/2012
		Impact
Risk factor groups	Scenarios	Result			Stockholders' equity
Interest rates	I		(0.0	)		(1.1	)
	II		(0.4	)		(27.5	)
	III		(0.9	)		(54.3	)
Currency, commodities, and ratios	I		(0.4	)		-
	II		(0.8	)		-
Nonlinear	I		(3.6	)		-
	II		(8.3	)		-

The following scenarios are used to measure the sensitivity:

Interest rate

Shocks at 1, 25 and 50 basis points (scenarios I, II and III respectively) in the interest curves, both for increase and decrease, considering the largest losses resulting in each scenario.

Currencies, Commodities and Ratios

Shocks at 5 and 10 basis points (scenarios I and II respectively) in prices of currencies, commodities and ratios, both for increase and decrease, considering the largest losses resulting in each scenario.

Non linear

Scenario I: Combined shocks at 5 percentage points in prices and 25 percentage points in volatility, both for increase and decrease, considering the largest losses resulting in each scenario.

Scenario II: Combined shocks at 10 percentage points in prices and 25 percentage points in volatility, both for increase and decrease, considering the largest losses resulting in each scenario.

F.121

NOTE 32 – PROVISIONS, CONTINGENCIES AND OTHER COMMITMENTS

Provision	12/31/2012		12/31/2011
Civil		3,732		3,166
Labor		4,852		4,014
Tax and social security		10,433		8,645
Other		192		165
Total		19,209		15,990
Current		4,116		3,140
Non-current		15,093		12,850

In the ordinary course of its businesses, ITAÚ UNIBANCO HOLDING is subject to 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 appropriate to the specific characteristics of civil, labor and tax litigation, as well as other risks.

- Civil lawsuits

Collective lawsuits (related to claims of a similar nature and with individual amounts 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 court (Small Claims Court or Regular Court).

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): determined periodically, based on the amount claimed and the likelihood of loss, which, in turn, is estimated according to the factual and legal characteristics related to such lawsuit. The amounts considered as probable losses are recorded as provisions.

Contingencies generally arise from revision of contracts and compensation for damages and pain and suffering; most of these lawsuits are filed in the Small Claims Court and therefore limited to 40 minimum monthly wages. ITAÚ UNIBANCO HOLDING is also party to specific lawsuits over alleged understated inflation adjustments to savings accounts in connection with economic plans implemented by the Brazilian government.

The case law at the Federal Supreme Court (STF) is favorable to banks in relation to economic phenomena similar to savings, as in the case of adjustment to time deposits and contracts in general. Additionally, the Superior Court of Justice (STJ) has 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.

No amount is recognized in the financial statements in relation to civil lawsuits which represent possible losses and which have a total estimated risk of R$ 1,660 (R$ 603 at 12/31/2011); these refer to claims for compensation or collection, the individual amounts of which are not significant and in this total there are no values resulting from interests in Joint Ventures.

F.122

- Labor claims:

Collective lawsuits (related to claims of a similar nature and with individual amounts not considered significant): the expected amount of loss is determined and accrued monthly based on the statistical share pricing model plus the average cost of legal fees. These are adjusted for the amounts deposited as guarantee for their execution when realized.

Individual lawsuits (related to claims with unusual characteristics or involving significant amounts): determined periodically, based on the amount claimed and the likelihood of loss, which, in turn, is estimated according to the factual and legal characteristics related to such lawsuit. The amounts considered as probable losses are recorded as provisions.

Contingencies are related to lawsuits in which alleged labor rights based on labor legislation, such as overtime, salary equalization, reinstatement, transfer allowance, pension plan supplement and other, are claimed.

There are no off-balance sheet contingencies relating to labor claims.

- Other risks

These are quantified and recorded as provisions mainly based on the evaluation of agribusiness credit transactions with joint obligation and FCVS (salary variations compensation fund) credits transferred to Banco Nacional.

F.123

The table below shows the changes in the balances of provisions for civil, labor and other provision and the respective escrow deposits:

	01/01 to 12/31/2012
	Civil			Labor			Other			Total
Opening balance		3,166			4,014			165			7,345
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(137	)		(930	)		-			(1,067	)
Subtotal		3,029			3,084			165			6,278
Interest (Note 26)		146			126			-			272
Changes in the period reflected in results (Note 26)		2,183			1,610			27			3,820
Increase (*)		3,161			1,672			34			4,867
Reversal		(978	)		(62	)		(7	)		(1,047	)
Payment		(1,744	)		(916	)		-			(2,660	)
Subtotal		3,614			3,904			192			7,710
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		118			948			-			1,066
Closing balance		3,732			4,852			192			8,776
Escrow deposits at 12/31/2012 (Note 20a)		2,048			2,471			-			4,519

(*) Civil provisions include the provision for economic plans amounting to R$ 526.

	01/01 to 12/31/2011
	Civil			Labor			Other			Total
Opening balance		2,974			3,986			173			7,133
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(309	)		(1,113	)		-			(1,422	)
Subtotal		2,665			2,873			173			5,711
Interest (Note 26)		113			110			-			223
Changes in the period reflected in results (Note 26)		1,503			784			(8	)		2,279
Increase (*)		1,981			992			12			2,985
Reversal		(478	)		(208	)		(20	)		(706	)
Payment		(1,252	)		(683	)		-			(1,935	)
Subtotal		3,029			3,084			165			6,278
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		137			930			-			1,067
Closing balance		3,166			4,014			165			7,345
Escrow deposits at 12/31/2011		2,023			2,409			-			4,432

(*) Civil provisions include the provision for economic plans amounting to R$ 431.

	01/01 to 12/31/2010
	Civil			Labor			Other			Total
Opening balance		2,394			3,156			192			5,742
(-) Contingencies guaranteed by indemnity clause (Note 2.4.t)		(98	)		(573	)		-			(671	)
Subtotal		2,296			2,583			192			5,071
Interest (Note 26)		142			77			-			219
Changes in the period reflected in results (Note 26)		1,185			803			(19	)		1,969
Increase (*)		1,801			905			-			2,706
Reversal		(616	)		(102	)		(19	)		(737	)
Payment		(958	)		(590	)		-			(1,548	)
Subtotal		2,665			2,873			173			5,711
(+) Contingencies guaranteed by indemnity clause (Note 2.4.t)		309			1,113			-			1,422
Closing balance		2,974			3,986			173			7,133
Escrow deposits at 12/31/2010		1,619			2,318			-			3,937

(*) Civil provisions include the provision for economic plans amounting to R$ 708.

F.124

- Tax and social security lawsuits

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

The table below shows the changes in the balances of provisions and respective escrow deposits for tax and social security lawsuits:

Provision	01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Opening balance		8,645			7,324			7,886
(-) Contingencies guaranteed by indemnity clause		(58	)		(44	)		(35	)
Subtotal		8,587			7,280			7,851
Interest (1)		906			548			400
Changes in the period reflected in results		973			917			1,074
Increase (1)		1,215			1,046			1,728
Reversal (1)		(242	)		(129	)		(654	)
Payment		(94	)		(157	)		(2,045	)
Subtotal		10,372			8,588			7,280
(+) Contingencies guaranteed by indemnity clause		61			57			44
Closing balance (2)		10,433			8,645			7,324

(1) The amounts are included in the headings Tax Expenses, General and Administrative Expenses and Current Income Tax and Social Contribution.

(2) Includes amounts arising from investments in joint ventures of R$ 9.

F.125

Escrow deposits	12/31/2012			12/31/2011
Opening balance		5,178			4,677
Appropriation of interest		302			365
Changes in the period		(25	)		136
Deposits made		239			265
Withdrawals		(246	)		(115	)
Deposits released		(18	)		(14	)
Closing balance (Note 20a)		5,455			5,178
Reclassification of assets pledged as collateral for contingencies (Note 32d)		(898	)		-
Closing balance after Reclassification		4,557			5,178

The main discussions related to “Provisions” for tax are described as follows:

· PIS and COFINS – Calculation basis – R$ 3,493: we are claiming that those contributions on revenue should be applied only to the revenue from sales of assets and services. The escrow deposit balance totals R$ 938.

· CSLL – Isonomy – R$ 1,974: as the law increased the CSLL rate for financial and insurance companies to 15%, we argue that there is no constitutional support for this measure and, due to the principle of isonomy, we believe we should only pay the regular rate of 9%. The escrow deposit balance totals R$ 379.

· IRPJ and CSLL – Taxation of profits earned abroad – R$ 516: we are challenging the calculation basis for these taxes on profits earned abroad and argue that Regulatory Instruction SRF No. 213-02 is not applicable since it goes beyond the text of the law. The escrow deposit balance totals R$ 476.

· PIS – Principles of anteriority over 90 days and non-retroactivity – R$ 383: we request the rejection of Constitutional Amendments No. 10/96 and No. 17/97 in view of the principles of anteriority and non-retroactivity, seeking authorization to make payment based on Supplementary Law No. 07/70. The corresponding escrow deposit totals R$ 110.

Tax contingencies not recognized in the balance sheet - in the accounting books no amount is recognized in relation to tax and social security lawsuits with possible loss, which total estimated risk is R$ 8,395. The main discussions are as follows:

· INSS – Non-compensatory amounts – R$ 1,401: we defend the non-taxation of these amounts, mainly profit sharing, transportation vouchers and sole bonus.

· IRPJ, CSLL, PIS and COFINS – request for offset dismissed - R$ 1,355: cases in which the liquidity and the offset of credits are discussed.

· IRPJ and CSLL - Interest on capital - R$ 903: we defend the deductibility of interest on capital declared to stockholders based on the Brazilian long-term interest rate applied to stockholders’ equity for the year and prior years.

· IRPJ and CSLL - Losses and discounts granted on receipt of credits – R$ 454: deductibility of effective losses as operating expense – credit assignment and renegotiation.

· ISS – Banking Institutions – R$ 392: these are banking operations, the revenue from which cannot be interpreted as compensation for service rendered and/or arise from activities not listed in a Supplementary Law.

· IRPJ and CSLL – Goodwill – Deductibility – R$ 370: deductibility of goodwill on acquisition of portfolio of clients and/or investments with future expected profitability.

· IRPJ and CSLL – Profit made available abroad R$ 329: Application of the Brazilian tax rule (taxable income) - IN 213/2002 and non availability of profit with the simple transfer of capital between the Holding’s investees.

F.126

c) Receivables - Reimbursement of contingencies

The Receivables balance arising from reimbursements of contingencies totals R$ 790 (R$ 626 at 12/31/2011) (Note 20a), basically represented by the guarantee received in the Banco Banerj S.A. privatization process of 1997, whereby the State of Rio de Janeiro created a fund to guarantee the equity recomposition with respect to civil, labor and tax contingencies.

d) Assets pledged as collateral for contingencies

Assets pledged as collateral for lawsuits involving contingent liabilities are restricted or deposited as shown below:

	12/31/2012		12/31/2011
Financial assets held for trading and Available-for-sale financial assets (basically Financial Treasury Bills)		1,528		1,696
Escrow deposits (Note 20a)		4,040		3,233

Escrow deposits are generally required to be made with the court in connection with lawsuits in Brazil and they are held by the court until a decision is made by the relevant court. In case of a decision against ITAÚ UNIBANCO HOLDING, the deposited amount is released from escrow and transferred to the counterparty in the lawsuit. In case of a decision in favor of ITAÚ UNIBANCO HOLDING, the deposited amount is released at the full amount deposited adjusted.

In general, provisions related to lawsuits of ITAÚ UNIBANCO HOLDING are long term, considering the time required for the termination of these lawsuits in the Brazilian judicial system, reason why estimate for specific year in which these lawsuits will be terminated have not been disclosed.

In the opinion of the legal advisors, ITAÚ UNIBANCO HOLDING and its subsidiaries are not parties to any other administrative proceedings or legal lawsuits that could significantly impact the results of their operations.

F.127

NOTE 33 – REGULATORY CAPITAL

ITAÚ UNIBANCO HOLDING is subject to regulation by the Central Bank of Brazil which issues rules and instructions regarding currency and credit policies for financial institutions operating in Brazil. The Central Bank also determines minimum capital requirements, fixed assets limits, lending limits, accounting practices and compulsory deposit requirements, and requires banks to comply with regulation based on the Basel Accord as regards to capital adequacy. Furthermore, the National Council of Private Insurance and SUSEP issue regulations on capital requirements which affect our insurance, private pension and capitalization operations.

The Basel Accord requires banks to have a ratio of regulatory capital to risk exposure assets of a minimum of 8%. The regulatory capital is basically composed of two tiers:

· Tier I: In general, certain capital, reserves and retained earnings, less certain intangibles.

· Tier II: includes, among other items and subject to certain limitations, asset revaluation reserves, general allowance for losses and subordinated debt, and is limited to the amount of Tier I Capital.

However, the Basel Accord allows the regulatory authorities of each country to establish their own parameters for regulatory capital composition and to determine the portions exposed to risk. Among the main differences arising from the adoption of own parameter pursuant to the Brazilian legislation are the following: (i) the requirement of a ratio of regulatory capital to risk-weighted assets at a minimum of 11%; (ii) certain risk-weighted factors attributed to certain assets and other exposures; (iii) the requirement that banks allocate a portion of their equity to cover operational risks, ranging from 12% to 18% of the average gross income from financial operations. In addition, in accordance with Central Bank rules, banks can calculate compliance with the minimum requirement:

· Based on the consolidation of all financial subsidiaries supervised by the Central Bank, including branches and investments abroad, and

· Based on full consolidation, considering all companies which are statutorily or operationally controlled by ITAÚ UNIBANCO HOLDING, regardless of whether they are supervised or not by the Central Bank.

Management manages capital with the intention to meet the minimum capital required by the Central Bank of Brazil. During the period ITAÚ UNIBANCO HOLDING complied with all externally imposed capital requirements to which we are subject.

The following table summarizes the composition of regulatory capital, the minimum capital required and the Basel ratio computed in accordance with the Central Bank of Brazil, both on a financial institution consolidation basis and on a full consolidation basis.

	12/31/2012						12/31/2011
	Financial institutions (partial consolidation)			Full consolidation			Financial institutions (partial consolidation)			Full consolidation
Regulatory capital
Tier 1		79,711			72,007			71,052			71,601
Tier 2		40,654			37,833			21,564			21,565
Other deductions required by Central Bank of Brazil		(420	)		(420	)		(55	)		(55	)
Total		119,945			109,421			92,561			93,111
Requirement for coverage of risk exposures:
Credit		65,964			64,580			59,189			57,629
Market		3,027			3,100			1,079			1,076
Operational		3,807			4,356			3,460			3,851
Minimum regulatory capital required		72,798			72,036			63,728			62,556
Excess of regulatory capital over minimum regulatory capital required		47,148			37,385			28,833			30,555
Exposure weighted by risk		661,797			654,872			579,338			568,693
Capital to risk-weighted assets ratio - %		18.1			16.7			16.0			16.4

F.128

The funds obtained through the issue of subordinated debt securities are considered capital Tier II for purposes of capital to risk-weighted assets ratio, as follows:

Name of security / Currency	Principal Amount (Original Currency)		Issue		Maturity		Return p.a.	Account Balance
Subordinated CDB - BRL
		1,558		2008		2013	100% of CDI + 0.5% to 0.6%		2,597
		48					106% to 107% of CDI		79
		40		2003		2013	102% of CDI		121
		1,865		2007		2014	100% of CDI + 0.35% to 0.6%		3,329
		33					IGPM + 7.22%		68
		1,000		2008		2014	112% of CDI		1,554
		400		2008		2015	119.8% of CDI		657
		50		2010		2015	113% of CDI		69
		466		2006		2016	100% of CDI + 0.7% (*)		892
		2,665		2010		2016	110% to 114% of CDI		3,654
		122					IPCA + 7.21%		173
		367		2010		2017	IPCA + 7.33%		524
		8,614					TOTAL		13,717
Subordinated financial bills - BRL
		365		2010		2016	100% of CDI + 1.35% to 1.36%		375
		1,874					112% to 112.5% of CDI		1,924
		30					IPCA + 7%		39
		206		2010		2017	IPCA + 6.95% to 7.2%		244
		3,224		2011		2017	108% to 112% of CDI		3,309
		352					IPCA + 6.15% to 7.8%		408
		138					IGPM + 6.55% to 7.6%		163
		3,650					100% of CDI + 1.29% to 1.52%		3,716
		42		2011		2018	IGPM + 7%		50
		30					IPCA + 7.53% to 7.7%		34
		2		2011		2019	109% to 109.7% of CDI		2
		500		2012		2017	100% of CDI + 1.12%		503
		6		2011		2021	109.25% to 110.50% of CDI		7
		461		2012		2018	IPCA + 4.40% to 6.58%		508
		2,597					100% of CDI + 1.05% to 1.32%		2,640
		5,761					108% to 113% of CDI		5,902
		112					PRE + 9.95 to 11.95%		118
		12		2012		2019	PRE + 11.96%		13
		100					IPCA + 4.70% to 6.30%		108
		1					110% of CDI		1
		20		2012		2020	IPCA + 6.% to 6.17%		22
		1					111% of CDI		1
		1,317		2012		2022	IPCA + 5.40% to 5.83%		1,375
		20							20
		20,821					TOTAL		21,482
Subordinated euronotes - USD
		990		2010		2020	6.2%		2,043
		1,000		2010		2021	5.75%		2,095
		730		2011		2021	5.75% to 6.2%		1,493
		550		2012		2021	6.2%		1,140
		2,600		2012		2022	5.50% to 5.65%		5,354
		1,851		2012		2023	5.13%		3,810
		7,721					TOTAL		15,935
TOTAL									51,134

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

F.129

NOTE 34 – SEGMENT INFORMATION

ITAÚ UNIBANCO HOLDING is a banking institution that offers its customers a wide range of financial products and services.

The four operational and reporting segments of ITAÚ UNIBANCO HOLDING are: Commercial Bank, Itaú BBA, Consumer Credit, and Activities with the Market + Corporation.

The current operational and reporting segments of ITAÚ UNIBANCO HOLDING are described below:

· Itaú Unibanco – Commercial Bank

The Commercial Bank segment provides a broad range of banking services to a diversified client base of individuals and companies, among which are the following: retail clients (individuals and very small companies), high net worth clients, private banking clients, and small and medium-sized companies.

The products and services provided by the Commercial Bank include insurance, private pension and capitalization plans, credit cards, asset management and loans, among others. The segment provides solutions specifically developed to meet the needs of clients, devising marketing strategies appropriate to each of the different profiles and using the most convenient distribution channels. Accordingly, ITAÚ UNIBANCO HOLDING is constantly seeking to increase the number of products provided to clients, diversifying the sources of income. The segment is an important source of funding to our operations and provides significant interest and banking services income.

Itaú Unibanco – Itaú BBA

Itaú BBA is the segment responsible for banking operations of large companies and investment banking services. Itaú BBA offers a wide range of products and services to the largest economic groups of Brazil. The management model of Itaú BBA is focused on the development of close relationships with its clients, gaining an in-depth knowledge of their needs and providing customized solutions. The investment banking activities comprise lending to the corporate segment composed of funds through fixed and variable income instruments. In addition, it performs activities related to mergers and acquisitions.

· Itaú Unibanco – Consumer Credit

The Consumer Credit segment is responsible for the development of the strategy of increasing the range of financial products and services beyond the universe of clients who are account holders. Thus the consumer credit segment comprises vehicle financing services provided by units other than the branch network, credit cards to clients who are not account holders, and credit to low income individuals. The business of vehicle financing comprises: new vehicles, used vehicles, heavy vehicles and motorcycles. The credit approval process of vehicle operations is based on scoring models that provides prompt approval of credit proposals for the clients, using the Internet to process these proposals with security and efficiency.

· Itaú Unibanco – Activities with the Market + Corporation

The Activities with the Market + Corporation segment basically manages the interest income associated with ITAÚ UNIBANCO HOLDING capital surplus, subordinated debt surplus and the net balance of tax credits and debits, as well as the net interest income from the trading of financial assets through proprietary positions (desks), management of currency interest rate gaps and other risk factors, arbitrage opportunities in the foreign and domestic markets, and mark to market of financial assets. In this segment, the effect of non-recurring items that are not considered in the managerial statement of income is also presented.

F.130

Basis of presentation of segment information

Segment information is prepared based on the reports used by top management (Executive Committee) to assess the performance and to make decisions regarding the allocation of funds for investment and other purposes.

The top management (Executive Committee) of ITAÚ UNIBANCO HOLDING uses a variety of information for such purposes including financial and non-financial information that is measured on different bases as well as information prepared based on accounting practices adopted in Brazil.

The segment information has been prepared following accounting practices adopted in Brazil modified for the adjustments described below. Financial segment information differs from accounting practices adopted in Brazil because: (i) It includes recognition of the impact related to allocated capital using a proprietary model; (ii) it presents net interest income using certain management criteria. The main impacts are described below:

Capital allocation to each segment

The book value of stockholders' equity and subordinated debt were replaced by funding at estimated market price, and interest income and expense were allocated to the segments, based on Tier I Capital, following a proprietary model, with the surplus capital and subordinated debt being allocated to the Activities with the Market + Corporation segment. The tax effects of payments of interest on capital by each segment have been reversed and reallocated to the segments in amounts proportional to the amount of the Tier I capital. Share of profit of unconsolidated companies which are not related to each segment and non-controlling interest were allocated to the Activities with the Market + Corporation segment.

Net Interest Income

ITAÚ UNIBANCO HOLDING adopts a strategy to manage the foreign exchange risk of subsidiaries outside Brazil in order to economically hedge against impacts on the results arising from variation in exchange rates. In order to achieve this objective, derivative instruments to hedge against such foreign currency risk are used. Hedge accounting is not applied for those derivatives; they are recorded instead at fair value with gains and losses included in income.

The hedging strategy considers all tax effects: Either the ones not related to taxes or to non-deductibility of the exchange variation on the investments abroad, or the gains and losses on derivative financial instruments used. When the parity of the Brazilian Real against foreign currencies is considerable, there is a significant impact on interest income and expense.

As a result of the above, a managerial statement of income to report segment information is adopted. The managerial statement of income is prepared by making reclassifications to the financial statements in accordance with the accounting practices adopted in Brazil. Tax effects of the hedge of these investments abroad, which are presented in tax expenses (PIS and COFINS), and income tax and social contribution expense were reclassified for the segment information.

Additionally, the managerial financial margin includes, for each operation, allocation of its opportunity cost.

The adjustments and reclassifications column shows the effects of the differences between the accounting principles followed for the presentation of segment information, which are substantially in line with the accounting practices adopted in Brazil, except as described above, and the policies used in the preparation of these consolidated financial statements according to IFRS.

F.131

ITAÚ UNIBANCO HOLDING S.A.

From January 1 to December 31, 2012

(In millions of reais, except for share information)

Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			ACTIVITIES WITH THE MARKET + CORPORATION			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		51,551			7,491			14,211			5,808			78,978			2,194			81,172
Interest margin (1)		32,770			5,334			8,310			5,555			52,013			1,825			53,838
Banking service fees		12,289			2,261			5,890			249			20,622			(1,678	)		18,944
Income from insurance, private pension, and capitalization operations before claim and selling expenses		6,030			38			(7	)		4			6,065			43			6,108
Other income		462			(142	)		18			-			278			2,004			2,282
Losses on loans and claims		(15,292	)		(795	)		(5,179	)		251			(21,015	)		(339	)		(21,354	)
Expenses for allowance for loan and lease losses		(16,577	)		(871	)		(6,111	)		(85	)		(23,644	)		(338	)		(23,982	)
Recovery of loans written off as loss		3,320			76			932			336			4,664			(1	)		4,663
Expenses for claims/Recovery of claims under reinsurance		(2,035	)		-			-			-			(2,035	)		-			(2,035	)
Operating margin		36,259			6,696			9,032			6,059			57,963			1,855			59,818
Other operating income (expenses)		(27,030	)		(3,301	)		(7,476	)		(281	)		(38,041	)		(4,361	)		(42,402	)
Non-interest expenses (2)		(24,539	)		(2,891	)		(6,551	)		(449	)		(34,383	)		(3,697	)		(38,080	)
Tax expenses for ISS, PIS and COFINS and Other		(2,704	)		(410	)		(968	)		(148	)		(4,230	)		(267	)		(4,497	)
Share of profit or (loss) of unconsolidated companies, net		108			5			58			316			487			(312	)		175
Other		105			(5	)		(15	)		-			85			(85	)		-
Income before income tax and social contribution		9,229			3,395			1,556			5,778			19,922			(2,506	)		17,416
Income before income tax and social contribution		(2,981	)		(1,066	)		(311	)		(968	)		(5,326	)		1,101			(4,225	)
Non-controlling interest in subsidiaries		-			-			-			(589	)		(553	)		(4	)		(557	)
NET INCOME		6,248			2,329			1,245			4,221			14,043			(1,409	)		12,634

(1) Includes net interest and similar income and expenses of R$ 48,297, dividend income of R$ 323, net gain (loss) from investment securities and derivatives of R$ 1,463, and results from foreign exchange results and exchange variation of transactions abroad of R$ 3,755.

(2) Refers to general and administrative expenses including depreciation expenses of R$ 1,346 and amortization expenses of R$ 844.

Total assets (1)	745,032	233,430	90,096	134,544	1,014,425	(57,271	)	957,154
Total liabilities	710,521	220,137	79,982	117,418	939,302	(58,146	)	881,156
(1) Includes:
Investments in unconsolidated companies	-	5	847	1,293	2,144	861		3,005
Fixed assets, net	4,672	395	499	-	5,566	62		5,628
Intangible assets, net	1,813	411	1,255	1,109	4,589	82		4,671

The Consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

The management reviews the financial margin on a net basis.

F.132

ITAÚ UNIBANCO HOLDING S.A.

From January 1 to December 31, 2011

(In millions of reais except per share information)

Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			ACTIVITIES WITH THE MARKET + CORPORATION			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		48,236			6,897			14,102			5,109			74,257			19			74,276
Interest margin (1)		31,584			4,896			8,356			4,801			49,601			(1,238	)		48,363
Banking service fees		10,915			2,123			5,719			309			19,048			362			19,410
Income from insurance, private pension, and capitalization operations before claim and selling expenses		5,229			-			(13	)		(1	)		5,215			130			5,345
Other income		508			(122	)		40			-			393			765			1,158
Losses on loans and claims		(11,011	)		(134	)		(4,270	)		(521	)		(15,936	)		(136	)		(16,072	)
Expenses for allowance for loan and lease losses		(13,845	)		(266	)		(5,270	)		(531	)		(19,912	)		(126	)		(20,038	)
Recovery of loans written off as loss		4,346			132			1,000			10			5,488			(11	)		5,477
Expenses for claims/Recovery of claims under reinsurance		(1,512	)		-			-			-			(1,512	)		1			(1,511	)
Operating margin		37,225			6,763			9,832			4,588			58,321			(117	)		58,204
Other operating income (expenses)		(25,829	)		(2,911	)		(7,911	)		(390	)		(37,025	)		(2,928	)		(39,953	)
Non-interest expenses (2)		(23,315	)		(2,605	)		(6,948	)		(935	)		(33,787	)		(1,887	)		(35,674	)
Tax expenses for ISS, PIS and COFINS and Other		(2,596	)		(341	)		(953	)		51			(3,839	)		(327	)		(4,166	)
Share of profit or (loss) of unconsolidated companies, net		(43	)		6			-			447			410			(523	)		(113	)
Other		125			29			(10	)		47			191			(191	)		-
Income before income tax and social contribution		11,396			3,852			1,921			4,198			21,296			(3,045	)		18,251
Income tax and social contribution		(3,833	)		(1,287	)		(477	)		(244	)		(5,841	)		2,200			(3,641	)
Non-controlling interest in subsidiaries		-			-			-			(885	)		(814	)		41			(773	)
NET INCOME		7,563			2,565			1,444			3,069			14,641			(804	)		13,837

⁽¹⁾ Includes net interest and similar income and expenses of R$ 41,753, net income of R$ 361, net gain (loss) from investment securities and derivatives of R$ 1,251 and foreign exchange results and exchange variation on transactions of abroad R$ 4,998.

⁽²⁾ Refers to general and administrative expenses including depreciation expenses R$ 1,184 and amortization R$ 984.

Total assets (1)	571,315	191,620	101,453	115,171	851,332	(33,196	)	818,136
Total liabilities	542,701	181,226	91,820	90,325	777,845	(35,045	)	742,800
(1) Includes:
Investments in unconsolidated companies	-	3	-	1,681	1,684	860		2,544
Fixed assets, net	4,454	366	467	-	5,287	71		5,358
Intangible assets, net	2,803	339	668	-	3,810	15		3,825

The Consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

The management reviews the financial margin on a net basis.

F.133

ITAÚ UNIBANCO HOLDING S.A.

From January 1 to December 31, 2010

(In millions of Reais, except per share information)

Consolidated Statement of Income	COMMERCIAL BANK			ITAÚ BBA			CONSUMER CREDIT			CORPORATE + TREASURY			ITAÚ UNIBANCO			ADJUSTMENTS			IFRS CONSOLIDATED
Banking product		41,238			6,400			15,148			3,657			66,390			3,025			69,415
Interest margin (1)		27,068			4,601			9,044			3,356			44,050			1,940			45,990
Banking service fees		9,246			1,932			5,765			182			17,101			(9	)		17,092
Income from insurance, private pension and capitalization operations before claim and selling expenses		4,469			-			254			(12	)		4,711			212			4,923
Other income		455			(133	)		85			131			528			882			1,410
Losses on loans and claims		(9,523	)		186			(3,754	)		(2	)		(13,093	)		155			(12,938	)
Expenses for allowance for loan and lease losses		(10,808	)		(182	)		(4,702	)		(2	)		(15,694	)		147			(15,547	)
Recovery of loans written-off as loss		2,893			368			948			-			4,209			(14	)		4,195
Expenses for claims/Recovery of claims under reinsurance		(1,608	)		-			-			-			(1,608	)		22			(1,586	)
Operating margin		31,715			6,586			11,394			3,655			53,297			3,180			56,477
Other operating income (expenses)		(22,927	)		(2,721	)		(7,826	)		(860	)		(34,327	)		(4,120	)		(38,447	)
Non-interest expenses (2)		(20,827	)		(2,379	)		(6,857	)		(1,005	)		(31,062	)		(3,570	)		(34,632	)
Tax expenses for ISS, PIS and COFINS and Other		(2,139	)		(387	)		(969	)		(274	)		(3,769	)		(395	)		(4,164	)
Share of comprehensive income of unconsolidated companies, net		19			(6	)		-			409			423			(74	)		349
Other		20			51			-			10			81			(81	)		-
Income before income tax and social contribution		8,788			3,865			3,568			2,795			18,970			(940	)		18,030
Income tax and social contribution		(2,509	)		(1,023	)		(1,054	)		(495	)		(5,081	)		(455	)		(5,536	)
Non-controlling interest in subsidiaries		2			-			-			(914	)		(866	)		80			(786	)
NET INCOME		6,281			2,842			2,514			1,386			13,023			(1,315	)		11,708

⁽¹⁾ Includes net interest and similar income and expenses of R$ 40,978. dividend income of R$ 326, net gains (loss) from investment securities and derivatives of R$ 2,862 and foreign exchange results and exchange variation on transactions of R$ 1,824.

⁽²⁾ Refers to general and administrative expenses including depreciation expenses R$ 1,166 and amortization R$ 977.

Total assets (1)	532,928	209,988	92,125	66,287	751,443	(24,361	)	727,082
Total liabilities	511,868	197,266	84,214	43,589	687,052	(27,522	)	659,530
(1) Includes:
Investments in unconsolidated companies	-	1	-	2,058	2,059	889		2,948
Fixed assets, net	3,661	232	835	-	4,728	73		4,801
Intangible assets, net	2,321	11	602	-	2,934	-		2,934

The Consolidated figures do not represent the sum of the segments because there are intercompany transactions that were eliminated only in the consolidated financial statements. Segments are assessed by top management, net of income and expenses between related parties.

The management reviews the financial margin on a net basis.

F.134

Information on income from financial operations by geographical area is as follows:

	01/01 to 12/31/2012						01/01 to 12/31/2011						01/01 to 12/31/2010
	Brazil		Foreign		Total		Brazil		Foreign		Total		Brazil		Foreign		Total
Income from financial operations (*)		95,063		6,842		101,905		99,083		4,879		103,962		79,236		3,594		82,830
Non-current assets		9,515		784		10,299		8,487		696		9,183		7,145		590		7,735

(*) Includes interest and similar income, dividend income, net gain (loss) from financial assets and liabilities, foreign exchange results, and exchange variation on transactions.

NOTE 35 – RELATED PARTIES

a) Transactions between related parties 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 (Note 2.4a) were eliminated from the consolidated financial statements and take into consideration the absence of risk.

The unconsolidated related parties are the following:

· Itaú Unibanco Participações S.A. (IUPAR) and ITAÚSA, parent companies of ITAÚ UNIBANCO HOLDING;

· The 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 HOLDING and subsidiaries to act in their respective areas of interest; and

· Investments in unconsolidated companies (Note 13) - Porto Seguro Itaú Unibanco Participações S.A., SERASA S.A. and BSF Holding S.A..

Additionally, there are operations with entities under joint control, particularly Banco Investcred Unibanco S.A., Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento, Luizacred S.A. Soc. Créd. Financiamento Investimento, FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento (Note 3b), FIC Promotora de Vendas Ltda. and Ponto Frio Leasing S.A. Arrendamento Mercantil.

The transactions with these related parties are mainly as follows:

F.135

	ITAÚ UNIBANCO HOLDING CONSOLIDATED
		ASSETS/ (LIABILITIES)						REVENUE /(EXPENSES)
	Annual rate	12/31/2012			12/31/2011			01/01 to 12/31/2012			01/01 to 12/31/2011			01/01 to 12/31/2010
Interbank deposits			1,604			1,836			144			189			112
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento	103% of CDI 7,25% to 13,79% Pre-fixed average 7,95%		614			619			48			56			35
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento			-			236			14			31			18
Luizacred S.A. Sociedade de Crédito, Financiamento e Investimento	103% of CDI		990			981			82			102			59
Deposits			(3	)		(77	)		(1	)		-			(16	)
Duratex S.A.			(2	)		(2	)		(1	)		-			-
Porto Seguro S.A.			(1	)		-			-			-			(16	)
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento			-			(57	)		-			-			-
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento			-			(18	)		-			-			-
Securities sold under repurchase agreements			(54	)		(100	)		(7	)		(21	)		(18	)
Duratex S.A.	100% of SELIC		(11	)		-			(2	)		(4	)		(2	)
Elekeiroz S.A.			-			-			(1	)		(3	)		(2	)
Itautec S.A.	100% of SELIC		(2	)		-			-			-			-
FIC Promotora de Venda Ltda.	100% of SELIC		(18	)		(6	)		(1	)		(1	)		-
Facilita Promotora S.A.	100% of SELIC		(2	)		(7	)		-			(1	)		-
Banco Investcred Unibanco S.A.	100% of SELIC		(19	)		(14	)		(2	)		(1	)		(1	)
Maxfácil Participações S.A.			-			(64	)		-			(7	)		-
Other			(2	)		(9	)		(1	)		(4	)		(13	)
Amounts receivable from (payable to) related companies			(117	)		(97	)		-			-			-
Porto Seguro S.A.			12			11			-			-			-
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento			(4	)		-			-			-			-
FIC Promotora de Venda Ltda.			-			-			-			-			-
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento			-			(1	)		-			-			-
Luizacred S.A. Sociedade de Crédito, Financiamento e Investimento			(5	)		(1	)		-			-			-
Fundação Itaubanco			1			1			-			-			-
Caixa de Prev.dos Func. do Banco Beg - PREBEG			(6	)		(9	)		-			-			-
Fundação BEMGEPREV			(9	)		(3	)		-			-			-
UBB Prev Previdência Complementar			(25	)		(19	)		-			-			-
Fundação Banorte Manuel Baptista da Silva de Seguridade Social			(81	)		(76	)		-			-			-
Banking service fees (expenses)			-			-			57			(17	)		4
Fundação Itaubanco			-			-			25			21			10
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			5			5			3
Itaúsa Investimentos S.A.			-			-			1			1			1
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento			-			-			1			(20	)		2
FAI Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento			-			-			-			(2	)		-
Porto Seguro S.A.			-			-			32			(26	)		(18	)
UBB Prev Previdência Complementar			-			-			-			-			3
Other			-			-			(7	)		4			3
Rental revenues (expenses)			-			-			(37	)		(38	)		(29	)
Itaúsa Investimentos S.A.			-			-			-			-			(1	)
Fundação Itaubanco			-			-			(27	)		(27	)		(15	)
FUNBEP - Fundo de Pensão Multipatrocinado			-			-			(10	)		(10	)		(8	)
Other			-			-			-			(1	)		(1	)
Donation expenses			-			-			(72	)		(56	)		(45	)
Associação Clube "A"			-			-			(3	)		-			-
Instituto Itaú Cultural			-			-			(69	)		(56	)		(44	)
Other			-			-			-			-			(1	)
Data processing expenses			-			-			(270	)		(314	)		(296	)
Itautec S.A.			-			-			(270	)		(314	)		(296	)
Other revenues			-			-			-			48			-
Itaúsa			-			-			-			48			-

In addition to the aforementioned operations, ITAÚ UNIBANCO HOLDING and non-consolidated related parties, as an integral part of ITAÚ UNIBANCO HOLDING Agreement for Apportionment of Common Costs, recorded in General and Administrative Expenses - Other, the amount of R$ 8 (R$ 8 from 01/01 to 12/31/2011 and R$ 17 from 01/01 to 12/31/2010) due to the use of the common structure.

Pursuant to the current rules, financial institutions cannot grant loans or advances to the following:

a) any individuals or companies that control the Institution or any entity under common control with the institution, or any executive officer, director, member of the fiscal council, or the immediate family members of these individuals;

b) any entity controlled by the institution; or

c) any entity in which the bank directly or indirectly holds more than 10% of the capital stock.

Therefore, no loans or advances were granted to any subsidiary, executive officer, director or family members.

F.136

ITAÚ UNIBANCO HOLDING has made donations regularly to Fundação Itaú Social, a charitable foundation whose objectives are: to create the “Programa Itaú Social” (Itaú Social Program), aimed at coordinating activities of interest to the community, supporting and developing social, scientific and cultural projects, mainly in the elementary education and health care areas; to support ongoing projects or initiatives, supported or sponsored by entities qualified under "Programa Itaú Social”. ITAÚ UNIBANCO HOLDING is the founding partner and maintainer of Instituto Itaú Cultural - IIC, an entity whose purpose is the promotion and preservation of the Brazilian cultural heritage.

b) Compensation of the key management personnel

Compensation for the period paid to key management members of ITAÚ UNIBANCO HOLDING consisted of:

	01/01 to 12/31/2012		01/01 to 12/31/2011		01/01 to 12/31/2010
Compensation		244		271		294
Board of directors		8		5		3
Executives		236		266		291
Profit sharing		160		192		261
Board of directors		2		1		2
Executives		158		191		259
Contributions to pension plans		8		5		8
Board of directors		-		-		1
Executives		8		5		7
Stock option plan – executives		163		150		128
Total		575		618		691

F.137

NOTE 36 – MANAGEMENT OF FINANCIAL RISKS

Credit Risk

1. Credit risk measurement

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

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

ITAÚ UNIBANCO HOLDING manages credit risk aims at creating shareholder value, by means of the analysis of return adjusted to risk, focused on maintaining the quality of the loan portfolio in levels appropriate to each market area in which it operates.

ITAÚ UNIBANCO HOLDING takes into account the probability of default by customer or counterparty (PD), the estimated value of the exposure at default (EAD) and loss given default (LGD), in addition to the concentration on borrowers and its relation among the several economic activity sectors to calculate credit risk. The assessment of these risk components is a part of the credit granting process, the portfolio management and definition of limits.

ITAÚ UNIBANCO HOLDING defines the concentration maximum risk and its correlation deemed as adequate by the Conglomerate. The ongoing monitoring on the concentration level of portfolios, by assessing the economic activity sectors and major debtors, enables it to take preventive measures to prevent that defined limits be breached and ensure a properly diversified customer distribution.

ITAÚ UNIBANCO HOLDING establishes its credit policies based on internal factors, such as the client rating criteria, performance of and changes in portfolio, default levels, return rates, and the allocated economic capital; and external factors, related to the economic environment, market share, interest rates, market default indicators, inflation, changes in consumption.

The centralized control area analyzes the impact of creating or changing credit policies or products, before its implementation, so as to permit the identification and quantification of uncertainties inherent in each business unit. The process for analyzing the policy and products enables Itaú Unibanco to identify potential risks, so as to make sure that credit decisions make sense from an economic and risk perspective.

The centralized process for validation and validation of the approval of credit policies and models of ITAÚ UNIBANCO HOLDING assures the synchrony of credit actions and optimization of business opportunities.

ITAÚ UNIBANCO HOLDING takes into account three components to quantify the credit risk: the probability of default by the client or counterparty (PD), the estimated exposure in the event of default (EAD), and the potential for recovery on defaulted credits (LGD). Measurement and assessment of these risk components is part of the process for granting credit and for managing the portfolio and the setting of limits.

The table below shows the correspondence between risk levels attributed by the group’s internal models (strong, satisfactory, higher risk and impairment) and the probability of default associated with each of these levels.

Internal rating	PD
Strong	Lower than 4.44%
Satisfactory	From 4.44% up to 25.95%
Higher risk	Higher than 25.95%
Impaired	Corporate operations with a PD higher than 31.84%
	Operations past due for over 90 days
	Renegotiated operations past due for over 60 days

F.138

The credit rating in corporate transactions is based on information such as economic and financial condition of the potential borrower, its cash-generating capabilities, the economic group to which it belongs, the current and prospective situation of the economic sector in which it operates, the collateral offered and the use of proceeds. The credit proposals are analyzed on a case by case basis, through an approval-level mechanism subordinated to the Superior Credit Committee.

Regarding retail (individuals, small and middle-market companies), the rating is assigned based on application and behavior score statistical models. Decisions are made based on scoring models that are continuously followed up by an independent structure. Exceptionally, there may also be individualized analysis of specific cases where approval is subject to competent credit approval levels.

Government securities and other debt instruments are classified by ITAÚ UNIBANCO HOLDING according to their credit quality aiming at managing their exposures.

2. Management risk limits

ITAÚ UNIBANCO HOLDING maintains management credit risk on a centralized and independent basis, segregated from other business units and internal audit, as required by regulation. Credit risk is managed in a decentralized manner by each business unit.

The centralized management of portfolios is maintained by an independent executive area responsible for management credit risk, which uses risk and performance indicators to analyze the credit portfolio on an aggregate basis, by business line, areas, product and other variables that it deems relevant.

The decentralized management of portfolios, focused on management, is performed by all credit areas of the business units, which assess the portfolios in detail. Monitoring for management purposes analyzes the loan portfolio in detail, and it may be performed on an aggregate basis (preferably following the same parameters used in credit policy) or in client level.

ITAÚ UNIBANCO HOLDING strictly controls the credit exposure of clients and counterparties, taking action to address situations in which the actual exposure exceeds the desired one. For that purpose, contractually provided actions can be taken, such as early payment or requirement of additional collateral.

3. Collateral and policies for mitigating credit risk

As a way to control the credit risk, ITAÚ UNIBANCO HOLDING has corporate guidelines that establish general rules and responsibilities for the use of guarantees; additionally, each business unit responsible for the credit risk management formalizes the use of such guarantees in its credit policies.

ITAÚ UNIBANCO HOLDING uses guarantees to increase its recovery capacity in transactions involving credit risk. The guarantees used may be personal, collateral, legal structures with mitigation power and offset agreements.

For the guarantees to be considered a risk mitigating instrument, requirements and guidelines of the standards that regulate them, either internal or external ones, must be complied with.

ITAÚ INIBANCO HOLDING ensures that any collateral kept is sufficient, legally valid (effective), enforceable and periodically reassessed.

ITAÚ UNIBANCO HOLDING also uses credit derivatives, such as single name CDS, to mitigate credit risk of its portfolios of loans and securities; these instruments are priced based on models that use the fair value of market inputs, such as credit spreads, recovery rates, correlations and interest rates.

The credit limits are continually monitored and changed according to customer behavior. Thus, the potential loss values represent a fraction of the amount available.

4. Policy on the Provision

The policies on the provision adopted by ITAÚ UNIBANCO HOLDING are aligned with the guidelines of IFRS and the Basel Accord. As a result, an allowance for loan losses is recognized when there are indications of the impairment of the portfolio and takes into account a horizon of loss appropriate for each type of transaction. We consider as impaired loans overdue for more than 90 days, renegotiated loans overdue by more than 60 days and corporate loans below a specific internal rating. Loans are written-down 360 days after such loans become past due or 540 days of being past due in the case of loans with original maturities over 36 months.

F.139

5. Credit risk exposure

	12/31/2012						12/31/2011
	Brazil		Abroad		Total		Brazil		Abroad		Total
Interbank deposits		9,254		14,572		23,826		9,820		18,001		27,821
Securities purchased under agreements to resell		162,235		502		162,737		91,643		605		92,248
Financial assets held for trading		139,699		5,817		145,516		116,615		5,274		121,889
Financial assets designated at fair value through profit or loss		4		216		220		-		186		186
Derivatives		7,615		3,982		11,597		5,864		2,890		8,754
Available-for-sale financial assets		36,214		54,655		90,869		7,323		40,187		47,510
Held-to-maturity financial assets		2,656		546		3,202		2,500		605		3,105
Loan operations and lease operations		259,540		81,731		341,271		251,034		71,357		322,391
Other financial assets		41,284		3,208		44,492		38,199		2,055		40,254
Off balance sheet		274,822		14,653		289,475		254,711		14,830		269,541
Endorsements and sureties		56,470		3,840		60,310		48,908		2,622		51,530
Letters of credit		14,605		-		14,605		11,172		-		11,172
Commitments to be released		203,747		10,813		214,560		194,631		12,208		206,839
Mortgage loans		13,004		-		13,004		14,308		-		14,308
Overdraft accounts		96,935		-		96,935		91,904		-		91,904
Credit cards		82,478		669		83,147		83,767		489		84,256
Other pre-approved limits		11,330		10,144		21,474		4,652		11,719		16,371
Total		933,323		179,882		1,113,205		777,709		155,990		933,699

F.140

The table above presents the maximum exposure at December 31, 2012 and December 31, 2011, without considering any collateral received or other additional credit improvements.

For assets recognized in the balance sheet, the exposures presented are based on net carrying amounts.This analysis includes only financial assets subject to credit riskand excludes non-financial assets.

The contractual amounts of endorsements and sureties and letters of credit represent the maximum potential of credit risk in the event the counterparty does not meet the terms of the agreement.The vast majority of commitments (real estate loans, overdraft accounts, credit card and other pre-approved limits) mature without being drawn, since they are renewed monthly and we have the power to cancel them at any time.As a result, the total contractual amount does not represent our effective future exposure to credit risk or the liquidity needs arising from such commitments.

As shown in the table, the most significant exposures correspond to loan operations, financial assets held for trading, and securities purchased under agreements to resell, in addition to sureties, endorsements and other commitments.

The maximum exposure to the quality of the financial assets presented highlights that:

· 70.8 % of loan operations and other financial assets exposure (Table 6.1 and 6.1.2) are categorized as low probability of default in accordance with our internal rating.

· only 6.2% of the total loans exposure (Table 6.1) is represented by overdue credits not impaired;

· 5.3% of the total loans exposure (Table 6.1) corresponds to overdue loans impaired.

5.1) Maximum exposure of financial assets segregated by business sector

a) Loan operations and lease operations portfolio

	12/31/2012		%			12/31/2011		%
Public sector		877		0.2	%		1,990		0.6	%
Industry and commerce		107,405		29.3	%		99,859		28.9	%
Services		77,922		21.2	%		70,642		20.4	%
Natural resources		16,649		4.5	%		16,109		4.7	%
Individuals		2,194		0.6	%		1,497		0.4	%
Other sectors		161,937		44.2	%		156,167		45.1	%
Total		366,984		100.0	%		346,264		100.0	%

b) Other financial assets (*)

	12/31/2012		%			12/31/2011		%
Natural resources		1,924		0.4	%		1,029		0.3	%
Public sector		110,012		25.1	%		88,174		29.3	%
Industry and commerce		7,563		1.7	%		5,381		1.8	%
Services		129,223		29.5	%		72,281		24.0	%
Other sectors		2,633		0.6	%		14,574		4.8	%
Individuals		49		0.0	%		5		0.0	%
Financial		186,563		42.6	%		120,069		39.8	%
Total		437,967		100.0	%		301,513		100.0	%

 (*) includes financial assets held for trading, derivatives, assets designated at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, interbank deposits and securities purchased under agreements to resell.

c) The credit risks of off balance sheet items (endorsements and sureties, letters of credit and commitments to be released) are not categorized or managed by business sector.

F.141

6. Credit quality of financial assets

6.1 The following table shows the breakdown of loans operations and lease operations portfolio considering: loans not overdue and loans overdue either impaired or not impaired:

	12/31/2012												12/31/2011
Internal rating	Loans not overdue and not impaired			Loans overdue not impaired			Loans overdue and impaired			Total loans			Loans not overdue and not impaired			Loans overdue and  not impaired			Loans overdue and impaired			Total loans
Lower Risk		249,282			5,438			-			254,720			221,315			5,800			-			227,115
Satisfactory		61,075			9,436			-			70,511			63,762			10,956			-			74,718
Higher Risk		14,190			8,052			-			22,242			16,911			9,135			-			26,046
Impaired		-			-			19,511			19,511			-			-			18,385			18,385
Total		324,547			22,926			19,511			366,984			301,988			25,891			18,385			346,264
%		88.5	%		6.2	%		5.3	%		100.0	%		87.2	%		7.5	%		5.3	%		100.0	%

The following table shows the breakdown of loans operations and lease operations by portfolios of areas and classes, based on indicators of credit quality:

	12/31/2012															12/31/2011
	Lower Risk			Satisfactory			Higher Risk			Impaired			Total			Lower Risk			Satisfactory			Higher Risk			Impaired			Total
Individuals		85,616			40,781			12,889			11,593			150,879			74,483			49,346			14,859			10,589			149,277
Credit cards		24,551			11,692			1,992			2,296			40,531			19,332			13,061			3,485			3,083			38,961
Personal		14,402			13,543			7,848			4,862			40,655			8,894			15,986			8,143			3,380			36,403
Vehicles		29,887			14,493			3,016			4,250			51,646			33,934			19,379			3,134			4,016			60,463
Mortgage loans		16,776			1,053			33			185			18,047			12,323			920			97			110			13,450
Corporate		97,655			4,648			1			1,467			103,771			87,224			3,500			343			1,012			92,079
Small and medium businesses		47,825			22,129			8,896			6,335			85,185			51,548			17,452			9,928			6,721			85,649
Foreign loans - Latin America		23,624			2,953			456			116			27,149			13,860			4,420			916			63			19,259
Total		254,720			70,511			22,242			19,511			366,984			227,115			74,718			26,046			18,385			346,264
%		69.4	%		19.2	%		6.1	%		5.3	%		100.0	%		65.6	%		21.6	%		7.5	%		5.3	%		100.0	%

F.142

The table below shows the breakdown of loans operations and lease operations portfolio not overdue and not impaired, by portfolio of segments and classes, based on indicators of credit quality.

	12/31/2012								12/31/2011
	Lower risk		Satisfactory		Higher risk		Total		Lower risk		Satisfactory		Higher risk		Total
I – Individually evaluated
Corporate
Large companies		96,859		4,647		-		101,506		85,842		3,423		314		89,579
II- Collectively-evaluated
Individuals		82,227		32,970		7,540		122,737		71,651		40,320		8,953		120,924
Credit card		24,385		11,076		1,352		36,813		19,246		12,580		2,502		34,328
Personal		14,211		12,659		5,439		32,309		8,798		14,893		5,870		29,561
Vehicles		27,347		8,737		736		36,820		31,515		12,247		567		44,329
Mortgage loans		16,284		498		13		16,795		12,092		600		14		12,706
Small and medium businesses		47,163		20,739		6,293		74,195		50,774		15,899		6,828		73,501
Foreign loans and Latin America		23,033		2,719		357		26,109		13,048		4,120		816		17,984
Total		249,282		61,075		14,190		324,547		221,315		63,762		16,911		301,988

6.1.1 Loan operations and lease operations by portfolios of areas and classes, are classified by maturity as follows (Loans overdue not impaired):

	12/31/2012								12/31/2011
	Overdue by up to 30 days		Overdue from 31 to 60 days		Overdue from 61 to 90 days		Total		Overdue by up to 30 days		Overdue from 31 to 60 days		Overdue from 61 to 90 days		Total
Individuals		10,732		4,075		1,743		16,550		11,765		4,112		1,908		17,785
Credit card		832		308		283		1,423		805		344		401		1,550
Personal		2,045		991		449		3,485		2,056		871		555		3,482
Vehicles		7,099		2,559		918		10,576		8,457		2,760		902		12,119
Mortgage loans		756		217		93		1,066		447		137		50		634
Corporate		686		88		23		797		1,232		185		51		1,468
Small and medium businesses		2,912		1,171		572		4,655		3,433		1,349		645		5,427
Foreign loans - Latin America		794		98		32		924		1,144		41		26		1,211
Total		15,124		5,432		2,370		22,926		17,574		5,687		2,630		25,891

F.143

6.1.2 The table below shows other financial assets, individually evaluated, classified by rating:

	12/31/2012
Internal rating	Interbank deposits and securities purchased under agreements to resell			Held-for-trading financial assets			Financial assets designated at fair value through profit or loss			Derivatives  assets			Available-for- sale financial assets			Held-to- maturity financial assets			Total
Lower Risk		186,563			98,147			220			4,458			22,808			3,084			315,280
Satisfactory		-			47,369			-			7,122			68,037			118			122,646
Higher risk		-			-			-			17			24			-			41
Total		186,563			145,516			220			11,597			90,869			3,202			437,967
%		42.7	%		33.2	%		0.1	%		2.6	%		20.7	%		0.7	%		100.0	%

	12/31/2011
Internal rating	Interbank deposits and securities purchased under agreements to resell			Held-for-trading financial assets			Financial assets designated at fair value through profit or loss			Derivatives  assets			Available-for- sale financial assets			Held-to- maturity financial assets			Total
Lower Risk		120,069			111,938			186			4,750			26,849			3,101			266,893
Satisfactory		-			9,197			-			3,742			20,580			4			33,523
Higher Risk		-			754			-			262			81			-			1,097
Total		120,069			121,889			186			8,754			47,510			3,105			301,513
%		39.8	%		40.4	%		0.1	%		2.9	%		15.8	%		1.0	%		100.0	%

F.144

6.1.3 Collateral held for loan and lease operations portfolio

	12/31/2012								12/31/2011
	(l) Over-collateralized assets				(II) Under-collateralized assets				(l) Over-collateralized assets				(II) Under-collateralized assets
Financial effect of collateral	Carrying value of the assets		Fair value of collateral		Carrying value of the assets		Fair value of collateral		Carrying value of the assets		Fair value of collateral		Carrying value of the assets		Fair value of collateral
Individuals		60,635		140,466		8,021		6,933		67,786		146,078		7,608		6,924
Personal		329		946		17		12		635		1,607		88		70
Vehicles		42,610		73,709		7,809		6,813		54,062		82,309		7,216		6,638
Mortgage loans		17,695		65,812		196		108		13,089		62,162		304		216
Small, Medium Businesses and Corporate		127,655		439,665		33,917		14,408		115,349		238,458		61,710		42,887
Foreign loans - Latin America		5,441		8,695		21,708		12,053		-		-		19,259		13,497
Total		193,731		588,827		63,646		33,394		183,135		384,536		88,577		63,308

The difference between the total loan portfolio and collateralized loan portfolio is generated by non-collateralized loans amounting to R$ 109,607 (R$ 74,553 at December 31, 2011).

ITAÚ UNIBANCO HOLDING uses collateral to reduce the occurrence of losses in operations with credit risk and manages and regularly reviews its collateral with the objective that collateral held is sufficient, legally exercisable (effective) and feasible. Thus, collateral is used to maximize the recoverability potential of impaired loans and not to reduce the exposure value of customers and counterparties.

Individuals

Personal – This category of credit products usually requires collateral, focusing on endorsements and sureties.

Vehicles – For this type of operation, clients' assets serve as collateral, which are also the leased assets in leasing operations.

Mortgage Loans – Regards buildings themselves given in guarantee.

Small, Medium Businesses and Corporate – For these operations, any collateral can be used within the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, assignment trust, surety/joint debtor, Mortgage and others).

Foreign loans - Latin America – For these operations, any collateral can be used within the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, assignment trust, surety/joint debtor, Mortgage and others).

F.145

7. Renegotiated loan operations

Renegotiation activities include agreements for changes in maturities, payment schedules and deferral of payments. After the restructuring, the client status (previously overdue) is no longer considered to be past due and is rated (considering all available information including the renegotiation) in the appropriate rating category.

The total amount of Renegotiated Loans, of R$ 19,483 (R$ 14,570 at December 31, 2011), includes operations arising from current operations or operations overdue for less than 30 days, an effect of changes in the original contractual terms, in the amount of R$ 4,964 (R$ 2,726 at December 31, 2011 ).

Accordingly, Renegotiated loan operations totaled R$ 14,519 (R$ 11,844 at December 31, 2011).

8. Repossessed assets

Repossessed assets are recognized as assets when possession is effectively obtained.

Assets received from the foreclosure of loans, including real estate, are initially recorded at the lower of: (i) the fair value of the asset less the estimated selling expenses, and (ii) the carrying amount of the loan.

Further impairment of assets is recorded as a provision, with a corresponding charge to income. The maintenance costs of these assets are expensed as incurred

The policy for sales of these assets (assets not for use) includes periodic auctions that are announced in advance and considers that the assets cannot be held for more than one year as stipulated by the BACEN. This period may be extended at the discretion of BACEN.

The amounts below represent total assets repossessed in the period from January 1 to December 31, 2012 and January 1 to December 31, 2011.

	01/01 to 12/31/2012		01/01 to 12/31/2011
Real estate not for own use		4		8
Residential properties - mortgage loans		67		34
Vehicles - linked to loan operations		2		4
Other (Vehicles/Furniture/Equipments) - Dation		9		1
Total		82		47

F.146

Market risk

Market risk is the possibility of losses resulting from fluctuations in the market values of positions held by a financial institution, including risks of transactions subject to variations in foreign exchange and interest rates, share, of prices indexes and commodity prices among other indexes on these risk factors.

Market risk management is the process through which the institution plans, monitors and controls risks arising from changes in market prices of financial instruments, aiming at maximizing the risk-return ratio, through adequate limit structure, models and management tools.

The market risk control exercised by ITAÚ UNIBANCO HOLDING includes all financial instruments of its subsidiaries. Accordingly, the corporate guidelines of risk management is in line with the principles of CMN Resolution No. 3,464, of June 26, 2007 and posterior amendments, comprising a set of principles that drive the institution’s strategy of control and management of market risks in all business units and legal entities of ITAÚ UNIBANCO HOLDING.

The document set forth by the corporate guidelines on market risk management may be viewed on the website www.itau-unibanco.com.br/ri, in the section Corporate Governance/Rules and Policies/Public Access Report - Market Risk.

The risk management strategy of ITAÚ UNIBANCO HOLDING tries to achieving a balance between business objectives, considering among others:

· Political, economic and market context;

· Market risk portfolio of ITAÚ UNIBANCO HOLDING;

· Capacity to operate in specific markets.

The process for managing market risk of ITAÚ UNIBANCO HOLDING 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 (portfolio level) to the monitoring of granular limits (individual desks level), 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 organization unit, which are defined in terms of risk measures used by management. Limits are monitored and controlled daily and excesses are reported and discussed in the corresponding committees.

The limit structure and warnings follow the guidelines of the Board of Directors and is established and approved by the Superior Risk Committee (CSRisc) after discussions and resolutions of the Superior Institutional Treasury Committee (CSTI) on metrics and market risk limits. The review of this structure of limits is performed at least annually.

The purpose of this structure is:

· Providing more assurance to all executive levels that the assumption of market risks is in line with the ITAÚ UNIBANCO HOLDING and the risk-return objective, by conducting an organized and educated dialogue on the risk profile and its development;

· Promoting the disciplined and educated discussion on the global risk profile and its evolution over time;

· Increasing transparency on the way the business seeks the optimization of results;

· Providing early warning mechanisms in order to make the effective risk management easier, without jeopardizing the business purposes; and

· Avoiding risk concentration.

ITAÚ UNIBANCO HOLDING uses proprietary systems to measure the consolidated market risk. The processing of these systems mainly takes place in São Paulo, in an access-controlled, of high availability, environment, with data safekeeping and recovery processes, and counts on such an infrastructure to ensure the continuity of business in contingency (disaster recovery) situations. The use of market solutions is currently in analysis to supplement the risk technology architecture as part of the evolutionary process that will meet any future regulatory and managerial requirements.

F.147

The market risk control and management process is periodically reviewed with the purpose of keeping the process aligned with best market practices and complies with continuous improvement processes at ITAÚ UNIBANCO HOLDING.

The market risk is controlled by an area independent from the business areas, which is responsible for carrying out daily measurement, assessment, analysis and reporting activities to the areas and people in charge, in accordance with the governance established and following up the actions required for adjusting the position and/or risk level. For that purpose, the ITAÚ UNIBANCO HOLDING has a structured reporting and information flow with the objective of providing input for the follow-up by senior-level committees and complying with the requirements of Brazilian and foreign regulatory agents.

ITAÚ UNIBANCO HOLDING hedges transactions with clients and proprietary positions, including foreign investments, aiming at mitigating risks arising from fluctuations in significant market factors and adjusting the transactions into the current exposure limits. Derivatives are the most frequently used instruments for these hedges. When these transactions are designed for as hedge accounting, specific supporting documentation is prepared, including continuous review of the hedge effectiveness and other changes in the accounting process. Accounting and managerial hedge are governed by corporate guidelines of ITAÚ UNIBANCO HOLDING.

Measurement of market risk segregates operations in the trading portfolio and the banking portfolio, pursuant to the criteria set forth in the New Capital Accord and regulations: Basel II and in the CMN Resolution No. 3,464 of June 26, 2007 and BACEN Circular No. 3,354 of June 27, 2007 instructions.

The trading portfolio consists of all transactions, including derivatives, which are entered into with the intention of trading or hedging other financial instruments of this portfolio, and which are not subject to trading restrictions. These are transactions expected to benefit from changes in expected or actual prices in the short term, or for entering into arbitration opportunities.

The banking portfolio consists of all transactions not classified within the trading book. Treasury operations in the Banking portfolio are carried out jointly with the active management of financial risks inherent in the global balance of ITAÚ UNIBANCO HOLDING and held not for trading in the short term. Its composition may include derivatives.

The exposures to market risks inherent in the various products, including derivatives, are broken down into a number of risk factors. Market factors are primary components of pricing. The main risk factors measured by ITAÚ UNIBANCO HOLDING are:

· Interest rates risk: risk of financial losses on operations subject to changes in interest rates, including the following:

- Fixed rates in Brazilian reais;

- Rates of coupon indexed to certain interest rates;

· Foreign exchange linked interest rate: risk of losses on positions in operations subject to foreign currency coupon rate;

· Foreign exchange rates: risk of losses on positions in foreign currency in operations subject to foreign exchange variation;

· Price indices: risk of financial losses on operations subject to changes in price index coupon rates;

· Shares: risk of loss on transactions subject to changes in equities prices;

· Commodities: Risk of losses in operations subject to variation in goods prices.

Market risk for interest rate in the Banking Portfolio is managed by a combination of processes, including marking-to-market positions, determining sensitivity to interest rate variations, Value at Risk (VaR) modelling and running stress tests across the portfolio. These processes are consistent with ITAÚ UNIBANCO HOLDING’s institutional policies incorporated into the market risk framework.

To evaluate the share position of the banking and trading portfolios, Value at Risk (VaR) is applied, in addition to stress tests, as presented below in the paragraph about metrics.

Market risk is analyzed based on the following metrics:

· Value at risk (VaR): statistical metric that estimates the expected maximum potential economic loss under normal market conditions, taking into consideration a certain d time horizon and confidence level;

F.148

· Losses in stress scenarios (Stress Test): simulation technique to assess the behavior of assets, liabilities and derivatives of a portfolio when several risk factors are taken to extreme market situations (based on prospective scenarios) in the portfolio;

· Stop Loss alert: effective losses added to the potential maximum loss in optimistic and pessimistic scenarios;

· Concentration: Cumulative exposure of a certain asset or risk factor calculated at market value (“MtM – Mark to Market”);

In addition to the risk measures, sensitivity and loss control measures are also analyzed. They comprise:

· Gap analysis: accumulated exposure, by risk factor, of cash flows expressed at market value, allocated at the maturity dates;

· Sensitivity (DV01 – Delta Variation): the impact on the cash flows market value when submitted to an one annual basis point increase in the current interest rates or index rate and 1 percentage point in the share price and currency;

· Sensitivity to the Several Risk Factors (Greeks): partial derivatives of an options portfolio in relation to the underlying assets price, implicit volatility, interest rate and timing;

· Stop Loss: the maximum loss that transactions classified in the trading book may reach.

VaR - Consolidated ITAÚ UNIBANCO HOLDING

The internal VaR model used by ITAÚ UNIBANCO HOLDING considers a one-day holding period and a 99% confidence level. Volatilities and correlations are estimated based on a volatility weighted methodology that gives greater weight to the most recent information.

The Consolidated Global VaR table provides an analysis of the exposure to market risk of ITAÚ UNIBANCO HOLDING portfolios, and to its foreign subsidiaries by showing where the largest concentrations of market risk are found. (foreign subsidiaries: Banco Itaú BBA International S.A., Banco Itaú Argentina S.A., Banco Itaú Chile S.A., Banco Itaú Uruguai S.A., Banco Itaú Paraguai S.A. and Itaú BBA Colômbia S.A. – Corporación Financiera).

In April 2012, we obtained authorization to incorporate Itaú BBA Colômbia S.A.– Corporación Financiera. This new unit was incorporated in June 2012 and the operation license was issued by the Superintendencia Financiera de Colombia in October 2012. The unit will gradually strengthen operations over 2013.

With the purpose of enhancing quality of quantitative information of Market Risk, in the second quarter of 2012 ITAÚ UNIBANCO HOLDING relocated risk factors within their respective groups in the VaR table. This relocation does not affect the institution’s exposure to market risk, which may be observed by the lack of changes in the values of Total Global Var. The figures presented in this publication that refer to cumulative amounts in current and prior years already reflect this relocation of risk factors, making comparison easier.

ITAÚ UNIBANCO HOLDING maintaining its conservative management and portfolio diversification, continued with its policy of operating within low limits in relation to its capital.

In this period, the average global VaR was R$ 290 million, or 0.38% of total stockholders’ equity (throughout 2011 it was R$ 142 million or 0.19%).

F.149

(in R$ million)

	VaR Global (*)
	Average		Minimum		Maximum		12/31/2012			Average		Minimum		Maximum		12/31/2011
Risk factor group
Brazilian Interest rate		191.2		71.8		427.6		348.7			100.9		24.6		222.6		104.8
Other Interest rate		20.4		7.3		49.6		11.4			29.5		12.6		59.0		23.6
FX rate		25.7		4.6		53.9		8.8			19.1		5.2		38.8		18.0
Brazilian Inflation Indexes		110.3		14.8		325.0		51.2			17.7		2.5		41.6		21.1
Equities and Commodities		24.2		13.6		43.5		16.8			36.9		17.4		57.1		25.2
Foreign units (**)
Itaú BBA International		1.7		0.7		5.1		1.1			2.9		0.4		6.5		1.5
Itaú Argentina		3.0		1.7		5.6		5.5			4.0		1.6		9.4		3.7
Itaú Chile		5.5		3.2		9.6		4.4			5.3		1.9		10.3		5.3
Itaú Uruguay		1.7		0.3		3.4		2.0			0.5		0.2		1.1		0.7
Itaú Paraguay		0.4		0.2		1.4		1.0			0.6		0.2		1.7		0.2
Itaú BBA Colombia		-		-		-		-
Effect of diversification								(77.1	)								(53.4	)
Global Risk		289.7		118.0		601.4		373.7			142.0		74.0		278.5		150.9

(*) Adjusted to reflect the tax treatment of individual classes of assets.

(**) Determined in local currency and converted into Brazilian reais at the closing price on the reporting date.

F.150

Interest rate

Management of interest rate risk is performed based on mark-to-market amounts at maturity of several products, grouping them by common dates, calculating the sensitivity to interest rates and applying shocks in the interest rates. The table on the position of accounts subject to interest rate risk shows a different view, grouping them by products, book value of accounts distributed by maturity. This table is not used directly to manage interest rate risks; it is mostly used to enable the assessment of mismatching between accounts and products associated thereto and to identify possible risk concentration.

The following table sets forth our interest-earning assets and interest-bearing liabilities and therefore does not reflect interest rate gap positions that may exist as of any given date. In addition, variations in interest rate sensitivity may exist within the repricing periods presented due to differing repricing dates within the period.

Position of accounts subject to interest rate risk (1)

	12/31/2012																	12/31/2011
	0-30 days			31-180 days			181-365 days			1-5 years			Over 5 years			Total		0-30 days			31-180 days			181-365 days			1-5 years			Over 5 years			Total
Interest-bearing assets		255,232			191,194			78,496			246,502			97,228			868,652		236,921			142,241			90,272			221,692			54,704			745,830
Interbank deposits		15,321			3,274			4,835			395			1			23,826		18,911			3,226			3,247			2,177			260			27,821
Securities purchased under agreements to resell		87,829			71,539			3,190			179			-			162,737		50,131			40,462			1,655			-			-			92,248
Central Bank compulsory deposits		63,701			-			-			-			-			63,701		98,053			-			-			-			-			98,053
Held-for-trading financial assets		17,163			7,251			7,920			85,581			27,601			145,516		7,188			3,369			27,149			72,088			12,095			121,889
Financial assets held for trading and designated at fair value through profit or loss		220			-			-			-			-			220		186			-			-			-			-			186
Available-for-sale financial assets		13,120			7,914			5,481			29,470			34,884			90,869		6,139			3,997			3,768			17,042			16,564			47,510
Held-to-maturity financial assets		-			118			70			147			2,867			3,202		87			-			33			242			2,743			3,105
Derivatives		1,943			3,581			1,390			3,742			941			11,597		2,277			2,199			1,473			2,315			490			8,754
Loan and lease operations portfolio		55,935			97,517			55,610			126,988			30,934			366,984		53,949			88,988			52,947			127,828			22,552			346,264
Interest-bearing liabilities		233,991			78,742			59,229			210,743			76,688			659,393		167,707			69,188			47,978			220,434			51,515			556,822
Savings deposits		83,451			-			-			-			-			83,451		67,170			-			-			-			-			67,170
Time deposits		12,369			20,861			16,667			62,226			5,109			117,232		30,918			19,167			11,475			79,542			3,367			144,469
Interbank deposits		2,643			3,550			1,201			207			-			7,601		665			683			445			272			-			2,065
Deposits received under repurchase agreements		123,001			17,838			16,281			82,424			27,861			267,405		55,866			11,403			11,139			89,261			17,744			185,413
Interbank market		5,606			26,871			21,065			38,802			4,729			97,073		5,904			24,588			16,773			38,781			4,452			90,498
Institutional market		2,299			7,018			2,753			22,062			37,896			72,028		2,772			11,248			5,881			9,565			25,341			54,807
Derivatives		1,724			2,582			1,211			4,500			1,052			11,069		1,526			1,245			1,364			2,104			508			6,747
Financial liabilities held for trading		6			22			51			522			41			642		48			854			901			909			103			2,815
Liabilities for capitalization plans		2,892			-			-			-			-			2,892		2,838			-			-			-			-			2,838
Difference asset/ liability (2)		21,241			112,452			19,267			35,759			20,540			209,259		69,214			73,053			42,294			1,258			3,189			189,008
Cumulative difference		21,241			133,693			152,960			188,719			209,259					69,214			142,267			184,561			185,819			189,008
Ratio of cumulative difference to total interest-bearing assets		2.4	%		15.4	%		17.6	%		21.7	%		24.1	%				9.3	%		19.1	%		24.7	%		24.9	%		25.3	%

(1) Remaining contractual terms.

(2) The difference arises from the mismatch between the maturities of all remunerated assets and liabilities, at the respective period-end date, considering the contractually agreed terms.

F.151

Position of accounts subject to currency risk

	12/31/2012
ASSETS	Dollar		Euro		Yen		Other		Total
Cash and deposits on demand		5,681		388		39		2,602		8,710
Central Bank compulsory deposits		-		-		1		2,528		2,529
Interbank deposits		11,160		1,209		1		2,202		14,572
Securities purchased under agreements to resell		463		-		-		39		502
Financial assets held for trading		4,909		646		-		262		5,817
Financial assets designated at fair value through profit or loss		-		216		-		-		216
Derivatives		3,100		588		-		294		3,982
Available-for-sale financial assets		50,828		354		-		3,473		54,655
Held-to-maturity financial assets		546		-		-		-		546
Loan operations and lease operations portfolio, net		44,417		4,950		1		32,363		81,731
TOTAL ASSETS		121,104		8,351		42		43,763		173,260

	12/31/2012
LIABILITIES	Dollar			Euro		Yen			Other		Total
Deposits		32,602			1,917		441			26,836		61,796
Securities sold under repurchase agreements		17,156			-		-			622		17,778
Financial liabilities held for trading		-			720		-			-		720
Derivatives		2,755			493		-			205		3,453
Interbank market debt		27,430			150		-			2,393		29,973
Institutional market debt		52,421			3,065		-			2,411		57,897
TOTAL LIABILITIES		132,364			6,345		441			32,467		171,617
NET POSITION		(11,260	)		2,006		(399	)		11,296		1,643

The exposure to share price risk is disclosed in Note 7 related to financial assets held for trading and Note 10, related to available-for-sale financial assets.

Position of accounts subject to currency risk

	12/31/2011
ASSETS	Dollar		Euro		Yen		Other		Total
Cash and deposits on demand		2,560		323		64		2,221		5,168
Central Bank compulsory deposits		-		13		-		2,098		2,111
Interbank deposits		15,681		1,274		2		1,044		18,001
Securities purchased under agreements to resell		478		-		-		127		605
Financial assets held for trading		4,327		643		-		304		5,274
Financial assets designated at fair value through profit or loss		-		186		-		-		186
Derivatives		2,018		614		-		258		2,890
Available-for-sale financial assets		37,880		98		-		2,209		40,187
Held-to-maturity financial assets		605		-		-		-		605
Loan operations and lease operations portfolio, net		40,494		5,338		2,832		22,693		71,357
TOTAL ASSETS		104,043		8,489		2,898		30,954		146,384

	12/31/2011
LIABILITIES	Dollar			Euro			Yen		Other		Total
Deposits		36,830			2,390			409		19,438		59,067
Securities sold under securities repurchase agreements		7,228			-			-		176		7,404
Financial liabilities held for trading		-			2,815			-		-		2,815
Derivatives		1,684			537			-		137		2,358
Interbank market debt		28,022			643			2		2,015		30,682
Institutional market debt		47,643			3,530			-		1,230		52,403
TOTAL LIABILITIES		121,407			9,915			411		22,996		154,729
NET POSITION		(17,364	)		(1,426	)		2,487		7,958		(8,345	)

The exposure to share price risk is disclosed in Note 7 related to financial assets held for trading and Note 10, related to available-for-sale financial assets.

F.152

Liquidity risk

Liquidity risk is defined as the existence of imbalances between marketable assets and liabilities due – mismatching between payments and receipts - which may affect payment capacity of ITAÚ UNIBANCO HOLDING, taking into consideration the different currencies and payment terms and their respective rights and obligations.

Policies and procedures

The management of liquidity risks seeks to guarantee liquidity sufficient to support possible outflows in market stress situations, as well as the compatibility between funding and the terms and liquidity of assets.

ITAÚ UNIBANCO HOLDING has a structure dedicated to improve the monitoring, control and analysis, through models of projections of the variables that affect cash flows and the level of reserves in local and foreign currencies.

The liquidity risk measurement process makes use of corporate and own in-house developed application systems.ITAÚ UNIBANCO HOLDING manages proprietary IT systems to support the liquidity risk measurement process.

Additionally, ITAÚ UNIBANCO HOLDING establishes guidelines and limits. Compliance with these guidelines and limits is periodically analyzed in technical committees, and their purpose is to provide an additional safety margin to the minimum projected needs. The liquidity management policies and the respective limits are established based on prospective scenarios periodically reviewed and on the definitions of the top management.

These scenarios may be reviewed in view of cash requirements resulting from atypical market situations or arising from strategic decisions of ITAÚ UNIBANCO HOLDING.

In compliance with the requirements of CMN Resolution No. 2,804 of December 21, 2000 and BACEN Circular No. 3,393 of June 3, 2008 , the Statement of Liquidity Risk (DRL) is sent to BACEN on a monthly basis, and the following items for monitoring and supporting decisions are periodically prepared and submitted to top management:

· Different scenarios projected for changes in liquidity.

· Contingency plans for crisis situations.

· Reports and charts that describe the risk positions.

· Assessment of funding costs and alternative sources of funding.

· Monitoring of changes in funding through a constant control over sources of funding, considering the type of investor and maturities, among other factors.

Primary sources of funding

ITAÚ UNIBANCO HOLDING has different sources of funding, of which a significant portion is from the retail segment. Total funding from clients reached R$ 481.1 billion (R$ 448.1 billion at 12/31/2011), particularly funding from time deposits. A considerable portion of these funds – 29.4% of total, or R$ 141.4 billion – is available on demand to the client. However, the historical behavior of the accumulated balance of the two largest items in this group – demand and savings deposits - is relatively consistent with the balances increasing over time and inflows exceeding outflows for monthly average amounts.

F.153

	12/31/2012						12/31/2011
Funding from clients	0-30 days		Total		%		0-30 days		Total		%
Deposits		133,377		243,199				127,686		242,638
Demand deposits		34,916		34,916		7.3		28,933		28,933		6.5
Savings deposits		83,451		83,451		17.3		67,170		67,170		15.0
Time deposits		12,368		117,232		24.4		30,917		144,469		32.2
Other		2,642		7,600		1.6		666		2,066		0.5
Funds from acceptances and issuance of securities (1)		3,863		55,108		11.5		4,862		51,557		11.5
Funds from own issue (2)		3,394		127,652		26.5		2,913		114,155		25.5
Subordinated debt		797		55,179		11.5		60		39,715		8.9
Total		141,431		481,138				135,521		448,065

(1) Includes mortgage notes, real estate credit bills, agribusiness and financial credit bills recorded in interbank and institutional market debts and liabilities for issue of debentures and foreign borrowings and securities recorded in funds from institutional markets.

(2) Refer to deposits received under securities repurchase agreements with securities from own issue.

F.154

Control over liquidity

ITAÚ UNIBANCO HOLDING manages its liquidity reserves based on estimates of funds that will be available for investment, considering the continuity of business in normal conditions.

During 2012, ITAÚ UNIBANCO HOLDING maintained appropriate levels of liquidity in Brazil and abroad. Liquid assets (cash and deposits on demand, securities purchased under agreements to resell - funded position and free government securities) totaled R$ 120.8 billion and accounted for 85.4% of the short-term redeemable obligations, 25.1% of total funding, and 17.7% of total assets.

The table below shows the indicators used by ITAÚ UNIBANCO HOLDING in the management of liquidity risk:

Liquidity indicators	12/31/2012 %		12/31/2011 %
Net assets (1) / funds within 30 days (2)		85.4		59.6
Net assets (1) / total funds (3)		25.1		18.0
Net assets (1) / total assets (4)		17.7		15.4

(1) Net assets: Cash and deposits on demand, Securities purchased under agreements to resell – Funded position and Government securities - available. Detailed in the table Undiscounted future flows – Financial Assets

(2) Table Funding from clients (Total Funding from clients 0-30 days)

(3) Table Funding from clients (Total Funding from clients)

(4) Detailed in the table Undiscounted future flows – Financial Assets, total present value regards R$ 682,867 (R$ 524,416 at 12/31/2011).

F.155

The following table presents assets and liabilities according to their remaining contractual maturities, considering their undiscounted flows.

Undiscounted future flows except for derivatives	12/31/2012										12/31/2011
FINANCIAL ASSETS (1)	0 - 30 days		31 - 365 days		366-720 days		Over 720 days		Total		0 - 30 days		31 - 365 days		366-720 days		Over 720 days		Total
Cash and deposits on demand		13,967		-		-		-		13,967		10,633		-		-		-		10,633
Interbank investments		109,340		61,934		320		159		171,753		68,277		36,721		2,295		287		107,580
Securities purchased under agreements to resell – Funded position (2)		22,895		-		-		1		22,896		25,438		-		-		-		25,438
Securities purchased under agreements to resell – Financed position		71,124		53,678		-		-		124,802		23,948		29,706		-		-		53,654
Interbank deposits		15,321		8,256		320		158		24,055		18,891		7,015		2,295		287		28,488
Securities		102,046		7,293		9,261		78,689		197,289		50,127		5,368		3,979		54,096		113,570
Government securities - available		83,980		-		-		-		83,980		44,741		-		-		-		44,741
Government securities – subject to repurchase commitments		13,581		2,208		1,024		37,165		53,978		686		1,779		916		23,210		26,591
Private securities - available		4,482		4,229		7,968		37,201		53,880		4,693		3,299		2,332		28,648		38,972
Private securities – subject to repurchase commitments		3		856		269		4,323		5,451		7		290		731		2,238		3,266
Derivative financial instruments		1,943		4,971		1,756		2,927		11,597		2,277		3,672		960		1,845		8,754
Loan and lease operations portfolio (3)		48,460		153,079		82,459		116,066		400,064		48,966		133,015		78,609		110,750		371,340
Total Financial Assets		275,756		227,277		93,796		197,841		794,670		180,280		178,776		85,843		166,978		611,877

(1) The assets portfolio does not take into consideration the balance of compulsory deposits in Central Bank, amounting to R$ 63,701 (R$ 98,053 at December 31, 2011), which release of funds is linked to the maturity of the liability portfolios. The amounts of PGBL and VGBL are not considered in the assets portfolio because they are covered in Note 30.

(2) Net of R$ 9,106 (R$ 7,227 at 12/31/2011) which securities are restricted to guarantee transactions at BM&FBOVESPA S.A. and the Central Bank of Brazil.

(3) Net of payment to merchants of R$ 27,382 (R$ 25,749 at 12/31/2011).

F.156

Undiscounted future flows except for derivatives	12/31/2012															12/31/2011
FINANCIAL LIABILITIES	0 – 30 days			31 – 365 days			365 – 720 days			Over 720 days			Total			0 – 30 days			31 – 365 days			365 – 720 days			Over 720 days			Total
Deposits		133,310			42,494			15,290			74,632			265,726			122,173			38,410			33,101			67,913			261,597
Demand deposits		34,916			-			-			-			34,916			28,933			-			-			-			28,933
Savings deposits		83,451			-			-			-			83,451			67,170			-			-			-			67,170
Time deposit		12,261			37,620			15,150			74,402			139,433			25,423			37,239			32,903			67,806			163,371
Interbank deposits		2,682			4,874			140			230			7,926			647			1,171			198			107			2,123
Compulsory deposits		(35,238	)		(9,761	)		(3,744	)		(14,959	)		(63,702	)		(39,562	)		(15,790	)		(13,951	)		(28,750	)		(98,053	)
Demand deposits		(8,590	)		-			-			-			(8,590	)		(9,939	)		-			-			-			(9,939	)
Savings deposits		(23,582	)		-			-			-			(23,582	)		(18,843	)		-			-			-			(18,843	)
Time deposit		(3,066	)		(9,761	)		(3,744	)		(14,959	)		(31,530	)		(10,780	)		(15,790	)		(13,951	)		(28,750	)		(69,271	)
Securities sold under repurchase agreements (1)		134,028			35,529			54,086			85,195			308,838			56,618			24,205			45,139			91,587			217,549
Funds from acceptances and issuance of securities (2)		3,793			29,349			11,049			15,526			59,717			4,365			25,714			12,998			13,274			56,351
Borrowings and onlending (3)		2,938			27,596			11,277			24,083			65,894			3,339			25,276			10,617			24,484			63,716
Subordinated debt (4)		831			4,352			7,726			61,698			74,607			69			11,338			3,174			40,941			55,522
Derivative financial instruments		1,724			3,793			2,154			3,398			11,069			1,526			2,609			885			1,727			6,747
Total Financial Liabilities		241,386			133,352			97,838			249,573			722,149			148,528			111,762			91,963			211,176			563,429

(1) Includes Own and Third Parties’ Portfolios.

(2) Includes mortgage notes, real estate credit bills, agribusiness and financial bills recorded in interbank and institutional market funds and liabilities for issue of debentures and foreign securities recorded in funds from institutional markets.

(3) Recorded in funds from interbank markets.

(4) Recorded in funds from institutional markets.

F.157

	12/31/2012										12/31/2011
Off Balance sheet	0 – 30 days		31 – 365 days		365 – 720 days		Over 720 days		Total		0 – 30 days		31 – 365 days		365 – 720 days		Over 720 days		Total
Endorsements and sureties		1,526		13,271		3,078		42,435		60,310		1,014		10,488		4,269		35,759		51,530
Commitments to be released		94,197		25,452		15,675		79,236		214,560		92,260		22,068		12,993		79,518		206,839
Letters of credit to be released		14,605		-		-		-		14,605		11,172		-		-		-		11,172
Total		110,328		38,723		18,753		121,671		289,475		104,446		32,556		17,262		115,277		269,541

F.158

ITEM 19	EXHIBITS
Exhibit
Number	Description
1.1	Bylaws of Itaú Unibanco Holding S.A. (unofficial English translation).	*
2.(a)	Amended and Restated Deposit Agreement among the Registrant, The Bank of New York, as depositary, and the Holders from time to time of American Depositary Shares issued thereunder, including the form of American Depositary Receipts.	(1)
4.(a)1	Share Purchase and Sale Agreement, dated November 4, 2002, among Fernão Carlos Botelho Bracher, Antonio Beltran Martinez and Banco Itaú S.A.	(2)
4.(a)2	Shareholders’ Agreement, dated as of January 27, 2009, between Itaúsa — Investimentos Itaú S.A. and the Moreira Salles family (unofficial English translation).	(3)
6	See note 28 to our consolidated financial statements explaining how earnings per share information was calculated under IFRS. See “Item 3A. Selected Financial Data — Earnings and Dividend per Share Information” for information explaining how earnings per share information was calculated under Brazilian Corporate Law.	*
8.1	List of subsidiaries.	*
11.1	Code of Ethics (unofficial English translation)	*
11.2	Corporate Governance Policy (unofficial English translation)	*
12.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
12.2	Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
13	Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as Enacted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*

We hereby agree to furnish to the SEC copies of any of our long term debt instruments and agreements as the SEC requests.

(1) Incorporated herein by reference to our annual report on F-6 filed with the Commission on February 20, 2009.

(2) Incorporated herein by reference to our annual report on Form 20-F filed with the Commission on June 30, 2003.

(3) Incorporated herein by reference to our annual report on Form 20-F filed with the Commission on May 17, 2010.

* Filed herewith.

236

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act, as amended, the registrant certifies that it meets all of the requirements for filing this annual report on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

ITAÚ UNIBANCO HOLDING S.A.
By:	/s/ Roberto Egydio Setubal
Name: Roberto Egydio Setubal
Title: Chief Executive Officer
By:	/s/ Caio Ibrahim David
Name: Caio Ibrahim David
Title: Chief Financial Officer

Dated: April 29, 2013

237

EX-1.1

Exhibit 1.1

Itaú Unibanco Holding S.A.

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

CORPORATE BYLAWS

Article 1 - DENOMINATION, TERM AND HEAD-OFFICE - The publicly listed joint stock company governed by these bylaws and denominated ITAÚ UNIBANCO HOLDING S.A., incorporated with no final term and has its head office and address for legal purposes in the city of São Paulo and state of São Paulo.

Article 2 - OBJECTIVE - The company has as its purpose banking activity in all its authorized forms including foreign exchange transactions.

Article 3 - CAPITAL AND SHARES – The subscribed and paid-in capital stock is R$ 45,000,000,000.00 (forty-five billion reais), represented by 4,570,936,100 (four billion, five hundred and seventy million, nine hundred and thirty-six thousand, one hundred) book entry shares, with no par value, being 2,289,286,400 (two billion, two hundred and eighty-nine million, two hundred and eighty-six thousand, four hundred) common and 2,281,649,700 (two billion, two hundred and eighty-one million, six hundred and forty-nine thousand, seven hundred) preferred shares, the latter having no voting rights but with the following advantages: I - priority in receiving the minimum non-cumulative annual dividend of R$ 0.022 per share, which shall be adjusted in the event of a stock split or reverse stock split; II - in the event of a sale of the company's controlling stake, the right to be included in the public offering of shares, thus assuring such shares the right to a price equal to 80% (eighty percent) of the value paid per voting share to the controlling stockholders and guaranteeing a dividend at least equal to that of the common shares.

3.1. Authorized Capital – The company is authorized to increase the capital stock by decision of the Board of Directors, independently of any change in the bylaws, up to a limit of 6,000,000,000 (six billion) shares, being 3,000,000,000 (three billion) common and 3,000,000,000 (three billion) preferred shares. Share issues through the Stock Exchanges, public subscription and exchange of shares via a public offering for acquisition of control may be performed irrespective of the preemptive rights of the preexisting stockholders (Article 172 of Law 6,404/76).

3.2. Purchase of Share Options - Within the limits of the Authorized Capital and in accordance with the plan approved by the General Meeting, the purchase of share options may be granted to management and employees of the company itself as well as controlled companies.

3.3. Book Entry Shares – Without any changes in the rights and restrictions which are inherent to them, under the provisions of this article, all of the company’s shares shall be in book entry form, being registered in deposit accounts at Itaú Corretora de Valores S.A., in the name of their holders, without the issue of share certificates, pursuant to Articles 34 and 35 of Law 6,404/76, the remuneration cited in Paragraph 3 of Article 35 of the said law being payable by stockholders.

3.4. Share Buybacks - the company can acquire its own shares on the authorization of the Board of Directors, for the purposes of cancellation, holding as treasury stock for subsequent sale or for use under the stock option plan for the purchase of shares according to item 3.2 of these Bylaws.

3.5. Acquisition of Voting Rights by the Preferred Shares – the preferred shares will acquire voting rights pursuant to the provisions of Article 111, Paragraph 1 of Law 6,404/76, should the company fail to pay the priority dividend for three consecutive fiscal years.

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Article 4 – GENERAL MEETING – The General Meeting shall meet annually within the 4 (four) months following the end of the fiscal year, pursuant to legal requirements, and extraordinarily whenever corporate interests so demand.

4.1. The work of any General Meeting shall be chaired by a member of management nominated by the Meeting with a stock holder appointed by the chair as secretary.

4.2. Each common share is entitled to one vote in the resolutions of the General Meetings.

4.3. The following is the exclusive prerogative of the General Meeting:

a) decisions with respect to the financial statements and the distribution and allocation of profits;

b) decisions with respect to the management report and the Board of Officers’ accounts;

c) establishment of the aggregate and annual compensation of the members of the Board of Directors and the Board of Officers, specifying the amount applicable to each one of these bodies;

d) appoint, elect and remove members of the Board of Directors;

e) approve alterations of the capital stock, with the proviso of the powers attributed to the Board of Directors by item 3.1 above, of mergers, amalgamations, spin-offs or any other forms of corporate reorganization involving the company;

f) decide on retained profits or the constitution of reserves; and

g) decide on plans for stock option grants of shares issued by the company or by its controlled companies.

Article 5 - MANAGEMENT - The company will be managed by a Board of Directors and by a Board of Officers. Pursuant to the law and these Bylaws, the Board of Directors will act in guidance, elective and supervisory roles and excluding operating and executive functions, which shall be the within the powers of the Board of Officers.

5.1. Investiture - The Directors and Officers will be invested in their positions against a signature to their terms of office in the minute book of the Board of Directors or the Board of Executive Officers, as the case may be, conditional on the prior signature of the members of management’s Instrument of Agreement, pursuant to the provision in the Level 1 Corporate Governance Regulations of BM&FBOVESPA S.A. – Securities, Commodities and Futures Exchange (“BM&FBOVESPA”).

5.2. Management Compensation – The Management shall receive both remuneration and a participation in the net income pursuant to the statutory limits. Payment of remuneration shall be established annually by the General Stockholders Meeting in the form of a global and annual amount, which may or may not be indexed, the amounts destined for remunerating the Board of Directors and Board of Officers being duly specified. It is incumbent on the Board of Directors to regulate the use of the amount set aside for remuneration and the apportionment of the participation in the net income to the members of this Board of Directors and the Board of Officers.

Article 6 - BOARD OF DIRECTORS - The Board of Directors will be comprised by natural persons elected by the General Meeting, and will have 1 (one) Chairman and 1 (one) to 3 (three) Vice-Chairmen chosen by the Directors from among their peers.

6.1. The positions of chairman of the Board of Directors and of Chief Executive Officer or principal executive of the corporation shall not be held by the same person.

6.2. The Board of Directors shall have at least 10 (ten) and at the most 14 (fourteen) members. Within these limitations, it is the responsibility of the General Meeting that elects the Board of Directors to initially establish the number of Directors who will comprise this body for each term of office.

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6.3. In the case of the position of Chairman becoming vacant or the Chairman being otherwise absent or incapacitated, the Chairman will be substituted by one of the Vice-Chairmen, designated by the Board of Directors.

6.4. The term of office of a member of the Board of Directors is for 1 (one) year as from the date he or she is elected by the General Meeting, extendable until the date of the investiture of the existing members’ successors.

6.5. No individual may be elected to the position of Director who is 70 (seventy) years of age on the date of his/her election.

6.6. The Board of Directors, which is convened by the Chairman, will meet ordinarily, 8 (eight) times annually and, extraordinarily, whenever corporate interests so demand its decisions only being valid in the presence of at least an absolute majority of its appointed members.

6.7. It is incumbent on the Board of Directors:

I. to establish the general guidelines of the company;

II. to elect and remove from office the company's Officers and establish their functions;

III. to appoint officers to comprise the Boards of Officers of the controlled companies as specified;

IV. to supervise the administration of the Officers of the company, examine at any time company accounts and documents, request information on contracts already executed or nearing the point of execution and any other acts;

V. to call General Meetings with a 15 (fifteen) day minimum grace period before the effective date, the number of days being counted from the notice date of the first call;

VI. to opine on the report of the management and the Board of Officers’ accounts and the financial statements for each fiscal year to be submitted to the General Meeting;

VII. to decide on budgets for results and for investments and respective action plans;

VIII. to appoint and remove from office the independent auditors, without restriction as to the provision in Article 7;

IX. to decide on the distribution of interim dividends, including distribution to profits or existing revenue accounts contained in the most recent annual or semi-annual balance sheet;

X. to make decisions on payment of interest on stockholders’ equity;

XI. to decide on buy-back operations on a non-permanent basis;

XII. to decide on the purchase and writing of put and call options supported by the shares issued by the company for the purposes of cancellation, holding as treasury stock or sale, observing the limits pursuant to article 2, II of the CVM Instruction 390, of July 8, 2003 and subsequent changes.

XIII. to decide on the institution of committees to handle specific issues within the scope of the Board of Directors;

XIV. to elect and remove the members of the Audit Committee and the Compensation Committee;

XV. to approve the operational rules that the Audit and Compensation Committees may establish for its own functioning and be aware of the Committees’ activities through its reports;

XVI. to approve investments and divestments direct or indirect in corporate stakes for amounts higher than 15% (fifteen per cent) of the book value of the company as registered in the last audited balance sheet; and

3

XVII. to decide on the increase of capital within the limit of the authorized capital, pursuant to item 3.1.

Article 7 - AUDIT COMMITTEE – The supervision (i) of the internal controls and risks management; (ii) of activities of the internal audit; and (iii) of the activities of the independent audit shall be undertaken by the Audit Committee, upon which it shall be incumbent to recommend to the Board of Directors the choice and dismissal of the independent auditors.

7.1. The Audit Committee shall comprise from 3 (three) to 7 (seven) members, elected annually by the Board of Directors from among the members of the Board itself and professionals of recognized competence and outstanding knowledge, conditional on: (i) the chair being held by one of the members of the Board of Directors; and (ii) at least one of the members of this Committee, being designated the Financial Specialist, shall have proven knowledge of the accounting and auditing areas.

7.1.1. The basic conditions for the exercise of a member of the Audit Committee are:

a) not to be, or not to have been, in the past (12) twelve months: (i) an officer of the company or its affiliates; (ii) an employee of the company or its affiliates; (iii) a responsible technician, director, manager, supervisor or any other member, with a managerial function, of the team involved in auditing work at the company or its affiliates; (iv) a member of the Fiscal Council of the company or its affiliates; (v) a controlling stockholder of the company or its affiliates; or (vi) a private individual owner of a direct or indirect stake higher than ten percent of the voting capital of the company or its affiliates;

b) not to be a spouse, or family member in a direct or a collateral line or by affinity, up to twice removed, of the said persons in section “a”.

7.1.2. The Board of Directors shall terminate the term of office of any member of the Audit Committee if his/her independence should be affected by any conflict of interest or potential conflict of interest.

7.1.3. Members of the Audit Committee may be reappointed to their posts four times over a five-year period, after which they may only reoccupy a post on the Committee at least three years following the expiry date of the last term of office.

7.2. The Audit Committee shall meet on the convening of the President and shall be responsible for: I) the quality and integrity of the financial statements; II) compliance with the prevailing legal and regulatory requirements; III) the activities, independence and quality of the work of the independent auditing companies and the internal audit; and IV) the quality and efficacy of the internal controls and risk management systems.

7.3. The Board of Directors shall establish the amount for compensating the Audit Committee’s members, based upon market parameters as well as the budget for covering expenses for the Committee’s functioning, including the hiring of specialists for assisting in fulfilling its responsibilities.

7.3.1. The Audit Committee shall not receive any other type of compensation from the company or its connected companies unrelated to his/her function as a member of the Audit Committee, except in those cases in which the member of the Audit Committee is also a member of the Board of Directors and opts to receive his/her compensation for the function performed as a member of the latter body.

7.4. At the end of each fiscal year, the Audit Committee shall prepare a report on the monitoring of activities related to the independent and internal audits and the Internal Controls and Risk Management System, forwarding a copy to the Board of Directors and maintaining the said report on file and available to the Central Bank of Brazil and the Superintendence of Private Insurance for at least five years. In the same way, a semi-annual report shall be prepared at the end of the first semester of each fiscal year.

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7.4.1. The summary of the Audit Committee’s Report, providing the principal data, shall be published together with the financial statements.

Article 8 – COMPENSATION COMMITTEE – The execution of the duties and responsibilities related to the compensation policy for the members of management of the company shall be incumbent on the Compensation Committee, which shall report directly to the Board of Directors.

8.1. The Compensation Committee shall be made up of 3 (three) to 10 (ten) members, elected by the Board of Directors, one of its members being nominated to the position of President.

8.1.1. The Compensation Committee shall be made up of (i) professionals with the qualifications and experience necessary to pass competent and independent judgment on the Company’s compensation policy, including on the repercussions in the management of risks, and (ii) at least, one member not a member of management.

8.1.2. The term of office of the members of the Compensation Committee shall be 1 (one) year as from the date of the Meeting of the Board of Directors which elects them, the said term expiring on the date on which their substitutes take office.

8.1.3. The members of the Compensation Committee may be reelected to the post, although remaining a member of the Compensation Committee for a period of more than 10 (ten) years shall not be permitted. Having reached this term, the member may only rejoin the Committee once a period of at least 3 (three) years has elapsed.

8.2. It is incumbent on the Compensation Committee to:

I. prepare the compensation policy for the members of management of the company, proposing to the Board of Directors the various forms of fixed and variable compensation in addition to benefits and special recruiting and severance programs;

II. supervise the implementation and operating of the compensation policy for the company’s members of management;

III. review annually the compensation policy for the members of management of the company, recommending its correction or improvement to the Board of Directors;

IV. propose to the Board of Directors the amount of aggregate compensation of the members of management to be submitted to the General Meeting;

V. evaluate future internal and external scenarios and their possible impacts on management compensation policy;

VI. examine the compensation policy for the members of management of the company in relation to market practices with a view to identifying significant discrepancies in relation to similar companies, proposing the necessary adjustments; and

VII. ensure that the compensation policy for the members of management is permanently compatible with the risk management policy, with the targets and the current and expected financial situation for the company and with the provision in the National Monetary Council’s Resolution 3.921/2010.

8.3. The Board of Directors may attribute powers to the Compensation Committee in addition to those pursuant to these Bylaws.

8.4. The Board of Directors shall set an amount for allocation to the compensation of members of the Compensation Committee, pursuant to market parameters, as well as the budget for covering the expenses for its functioning.

5

8.5. At the end of each fiscal year, the Compensation Committee shall prepare a report of the activities undertaken within the scope of its functions, submitting a copy to the Board of Directors and maintaining the said report at the disposal of the Central Bank of Brazil for a minimum term of 5 (five) years.

Article 9 - BOARD OF OFFICERS - The management and representation of the company is incumbent on the Board of Officers, elected by the Board of Directors, to take place within a term of 10 (ten) business days from the date of the General Stockholders’ Meeting which elects the said Board of Directors.

9.1. The Board of Officers shall comprise 5 (five) to 20 (twenty) members, to include the Chief Executive Officer, Executive Vice Presidents Executive Officers and Officers, in accordance with what is decided by the Board of Directors when establishing these positions.

9.2. In the case of absence or incapacity of any Officer, the Board of Officers will choose the interim deputy from among its members. The Chief Executive Officer and President shall be substituted in his/her absences or incapacity, by the Executive Vice President appointed by him/her.

9.3. Should any position become vacant, the Board of Directors may designate an Officer to act as deputy in order to complete the term of office of the substituted Officer.

9.4. The Officers will have mandates of 1 (one) year's duration, are eligible for reelection and remain in their positions until their successors take office.

9.5. An Officer who will be 60 (sixty) years of age on the date of his/her election may not be elected to take office.

Article 10 – OFFICERS’ RESPONSIBILITIES AND POWERS - Two Officers, one of them mandatorily the President and Chief Executive Officer or Executive Vice President or Executive Officer, shall have powers to represent the company, assuming obligations or exercising rights in any act, contract or document implying a commitment on the part of the company, including the rendering of guarantees on behalf of third parties.

10.1. Two Officers, one of them mandatorily the President and Chief Executive Officer or Vice-President or Executive Officer, shall have the powers to accede to and waive rights, also being able, without restriction as to the provision in sub-paragraph XVI of item 6.7., to pledge and sell permanent assets and decide on the installation, extinguishment and reorganization of branch offices.

10.2. The company may be represented, jointly, (i) by an Officer and an Attorney-in- Fact, or (ii) by two Attorneys-in-Fact. Outside the domain of the company’s registered offices, representation may be made in isolation by an Attorney-in-Fact, with specific powers. In the appointment of Attorneys-in-Fact, the company shall be represented by two Officers, one of whom shall be obligatorily Chief Executive Officer or Vice-President or Executive Officer. With the exception of those of a judicial nature, power of attorney shall have a mandatory term of no more than one year.

10.3. It is the responsibility of the Chief Executive Officer to convene and preside at meetings of the Board of Executive Officers, supervise its activities, to structure the services of the company and establish the internal and operational norms.

10.4. The Executive Vice Presidents and the Executive Officers are responsible for the management of the banking operations.

6

10.5. It is incumbent on the Officers to manage areas or specific portfolios of the company the responsibility for which is attributed to them by the Board of Officers.

Article 11 - FISCAL COUNCIL - The company will have a Fiscal Council, to function on a non-permanent basis, comprising from 3 (three) to 5 (five) effective members and an equal number of deputies. The election, installation and the functioning of the Fiscal Council will be in accordance with the provisions of articles 161 to 165 of Law 6,404/76.

Article 12 - FISCAL YEAR - The fiscal year will end on December 31 of each year. Semi-annual balance sheets will be prepared and on a discretionary basis, interim balances at any date including for the purposes of the payment of dividends, according to the legal provisions.

Article 13 - ALLOCATION OF NET INCOME - Together with the financial statements, the Board of Directors will present a proposal to the Annual General Meeting as to the allocation of net income for the fiscal year, pursuant to Articles 186 and 191 to 199 of Law 6,404/76 and subsequent provisions as follows:

13.1. before any other distribution, 5% (five percent) will be allocated to the Legal Reserve, which may not exceed 20% (twenty percent) of the capital stock;

13.2. the value to be allocated to dividend payments to the stockholders will be specified in accordance with the provisions in Article 14 and the following norms:

a) the preferred shares will have the right to the priority minimum annual dividend (Article 3, sub-paragraph I);

b) the amount of the mandatory dividend that remains after the dividend payment in the previous item will be applied firstly to remunerating the common shares for a dividend equal to the priority dividend distributed to the preferred shares;

c) the shares of both types will participate in the net income to be distributed under equal conditions once a dividend identical to the minimum dividend on the preferred shares is also assured to the common shares;

13.3. the remaining balance will be allocated in accordance with what is proposed by the Board of Directors, including the reserve cited under Article 15, "ad referendum" of the General Meeting.

Article 14 – MANDATORY DIVIDEND – The stockholders have the right to receive as a mandatory dividend for each fiscal year, an amount of not less than 25% (twenty-five percent) of the net income recorded in the same fiscal year, restated according to the decline or increase of the specific values under letters “a” and “b” of sub-paragraph I of Article 202 of Law 6,404/76, and complying with sub-paragraphs II and III of the same law.

14.1. The portion of the mandatory dividend that may have been paid in advance as interim dividends for account of the “Dividend Equalization Reserve” will be credited back to this same reserve account.

14.2. If so decided by the Board of Directors, interest on stockholders’ equity may be paid, offsetting the amount against the value of the mandatory dividend according to Articles 9, Paragraph 7 of Law 9,249/95.

Article 15 – STATUTORY RESERVES – According to the proposal of the Board of Directors, the General Meeting may decide on the constitution of the following reserves: I – Dividend Equalization Reserve; II – Reinforcement for Working Capital Reserve; III – Reserve for Capital Increase in Investees.

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15.1. The Dividend Equalization Reserve will be limited to 40% of the value of the capital stock and its purpose is to grant funds to the payment of dividends, including interest on stockholders’ equity (item 14.2), or interim payments of the same, with the objective of maintaining a remuneration flow to stockholders, and made up with funds from:

a) the equivalent of 50% of the fiscal year’s net profit, restated according to article 202 of Law 6,404/76;

b) equivalent to at most 100% of the paid-up portion of the Revaluation Reserves, recorded as retained earnings;

c) equivalent to at most 100% of the restated amounts for previous fiscal years, recorded as retained earnings;

d) originating from the credits corresponding to interim dividend payments (item 14.1).

15.2. Reinforcement for Working Capital Reserve will be limited to 30% of the value of capital stock and its purpose will be to guarantee the financial backing for corporate operations, comprising funds equivalent to at most 20% of the fiscal year’s net profit, restated according to Article 202 of Law 6,404/76.

15.3. Reserve for Capital Increase in Investee will be limited to 30% of the value of capital stock and its purpose is to guarantee the preemptive rights in capital increases of such companies, being made up of funds equivalent to at most 50% of the fiscal year's net earnings, adjusted according to Article 202 of Law 6,404/76.

15.4. From time to time when proposed by the Board of Directors, portions of this reserve will be capitalized to ensure that the respective outstanding balance does not exceed the limit of 95% (ninety-five percent) of the capital stock. The outstanding balance of these reserves, plus the Legal Reserve, may not exceed the capital stock.

15.5. The reserves will be separated into different sub-accounts according to the originating fiscal years to which they apply, the income allocated to their constitution and the Board of Directors will specify the profits used in the distribution of interim dividends, which may be charged to different sub-accounts, according to the category of the stockholders.

Article 16 - BENEFICIAL OWNERS – The company is prohibited from issuing participation certificates of the Beneficial Owner type.

Article 17 – LISTING SEGMENT – With the admission of the company to the special listing segment denominated Level 1 Corporate Governance of BM&FBOVESPA, the company, its shareholders, management and members of the Fiscal Council, when installed are subject to the provisions of the Listing Regulations for Level 1 Corporate Governance of BM&FBOVESPA (“Level 1 Regulations”).

8

EX-8.1

Exhibit 8.1

List of Subisidiaries

	Incorporation		Interest in voting capital at
Subsidiaries	Country	Activity	12/31/2012			12/31/2011
Banco Dibens S.A.	Brazil	Bank		100.00	%		100.00	%
Banco Fiat S.A.	Brazil	Bank		100.00	%		100.00	%
Banco Itaú Argentina S.A.	Argentina	Bank		100.00	%		100.00	%
Banco Itaú BBA S.A.	Brazil	Bank		99.99	%		99.99	%
Banco Itaú Consignado S.A.	Brazil	Bank		100.00	%		100.00	%
Banco Itaú Chile	Chile	Bank		99.99	%		99.99	%
Banco Itaú Europa Luxembourg S.A.	Luxembourg	Bank		99.99	%		99.99	%
Banco Itaú BBA International, S.A.	Portugal	Bank		99.99	%		99.99	%
Banco Itaú Paraguay S.A.	Paraguay	Bank		99.99	%		99.99	%
Banco Itaú Uruguay S.A.	Uruguay	Bank		100.00	%		100.00	%
Banco Itaucard S.A.	Brazil	Bank		100.00	%		100.00	%
Banco Itaucred Financiamentos S.A.	Brazil	Bank		100.00	%		100.00	%
Banco Itauleasing S.A.	Brazil	Bank		100.00	%		100.00	%
BIU Participações S.A.	Brazil	Holding company of non-financial institutions		-			66.15	%
Cia. Itaú de Capitalização	Brazil	Capitalization		99.99	%		99.99	%
Dibens Leasing S.A. - Arrendamento Mercantil	Brazil	Leasing		100.00	%		100.00	%
FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento	Brazil	Consumer finance company		100.00	%		-
Fiat Administradora de Consórcios Ltda.	Brazil	Consortia administrator		99.99	%		99.99	%
Hipercard Banco Múltiplo S.A.	Brazil	Bank		100.00	%		100.00	%
Itaú Administradora de Consórcios Ltda.	Brazil	Consortia administrator		99.99	%		99.99	%
Itaú Ásia Securities Ltd	Hong Kong	Broker		100.00	%		100.00	%
Itau Bank, Ltd.	Cayman Islands	Bank		100.00	%		100.00	%
Itaú Companhia Securitizadora de Créditos Financeiros	Brazil	Securitization company		99.99	%		99.99	%
Itaú Corretora de Valores S.A.	Brazil	Broker		100.00	%		100.00	%
Itaú Distribuidora de Títulos e Valores Mobiliários Ltda.	Brazil	Dealer		100.00	%		100.00	%
Itaú Japan Asset Management Limited	Japan	Asset management		100.00	%		100.00	%
Itaú Middle East Limited	Arab Emirates	Broker		100.00	%		100.00	%
Itaú Seguros S.A.	Brazil	Insurance		100.00	%		100.00	%
Itaú Unibanco S.A.	Brazil	Bank		100.00	%		100.00	%
Itaú USA, INC.	United States	Broker		100.00	%		100.00	%
Itaú Vida e Previdência  S.A.	Brazil	Pension plan		100.00	%		100.00	%
Itaú Unibanco Serviços e Processamento de Informações Comerciais S.A.	Brazil	Technology service		100.00	%		100.00	%
Redecard S.A.	Brazil	Card administrator		100.00	%		50.01	%
Unibanco Participações Societárias S.A.	Brazil	Holding		-			99.99	%
Joint Ventures
Banco Investcred Unibanco S.A.	Brazil	Bank		50.00	%		50.00	%
FAI - Financeira Americanas Itaú S.A. Crédito, Financiamento e Investimento	Brazil	Consumer finance company		-			50.00	%
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento	Brazil	Consumer finance company		50.00	%		50.00	%
Luizacred S.A. Soc. Cred. Financiamento Investimento	Brazil	Consumer finance company		50.00	%		50.00	%

EX-11.1

Exhibit 11.1

ITAÚ UNIBANCO HOLDING S.A.
CNPJ 60.872.504/0001-23	A Publicly Listed Company	NIRE 35300010230

ITAÚ UNIBANCO CODE OF ETHICS

Contents	2
From the leadership	3
The principle of identity	4
Corporate social responsibility	4
Compliance with laws, standards and regulations	4
Labor Relations	5
The principle of interdependence	6
Clients and consumers	6
Shareholders and investors	7
Suppliers	8
Competitors	8
Public sector	9
Third Sector	10
Media	10
The principle of good faith	12
The principle of excellence	13
Professional conduct	13
Conflicts of interest	14
Information and know-how	14
Family and proximity ties	15
Outside activities and personal connections with clients and suppliers	16
Gifts and contributions	16
Scope and management of the Code of Ethics	18
Doubts and exceptions	18
Guidance and notification channels	18
Disciplinary action	19

Itaú Unibanco Code of Ethics Page 2

From the leadership

The world changes. This inescapable truth leads us to constantly rethink how we relate to society and the marketplace. This is why we felt a need to update our Code of Ethics. This document, together with our Vision and the corporate culture we call Our Way of Doing Things, contributes to the registration of our most essential values. We believe that abiding by the principles it contains contributes to ensuring Itaú Unibanco’s longevity and credibility.

Our Code is based on four basic principles: identity (what sets us apart from other companies), interdependence (the engine of social coexistence), good faith (trust generates trust) and excellence (the constant pursuit of superior quality). These principles are the inspiration for our standards. And our standards have been rewritten to become even clearer and more easily understood without losing their essence.

The Code of Ethics is and must be a document both managers and employees at our organization refer to often. Above all, its nature is educational, in addition to disciplinary, and provides attitudinal guidance appropriate to and consistent with our guidelines. This document very clearly illustrates what conducts are deemed correct, and thereby necessary, and what are regarded as incorrect, and therefore unacceptable.

Relying on this Code for guidance is like using a moral compass that enables determining the best behavior to adopt and the best decision to make with a constant eye on the common good. The Code expresses our conviction that we do not accept gain at any price and that success depends on the ability to ethically and responsibly lead.

If we all dedicate to implementing the code on an everyday, routine basis, we will surely build an even sounder and more ethical organization in which that can all take pride.

April 2013

Pedro Moreira Salles	Roberto Setubal
Chairman of the Board	CEO

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The principle of identity

¨ We are a growth, efficiency and customer satisfaction-oriented company, based on ethical business conduct and sustainable development.

Like any individual whose personal traits tell them from everyone else, each lasting organization has a corporate identity that makes it unmistakable. Identity answers a key question: who are we? That is, what traits describe us and allow the publics with which we relate and society in general to recognize us as a company apart from all others?

We, as an organization, take pride in acting correctly. To this end, we strive to build effective bonds with our stakeholders, prize the quality of our products and services, evaluate the socio-environmental impacts of our financial activities, and adopt practices that support generating shared value.

These identity traits of Itaú Unibanco’s are chiefly defined in our organizational culture and in the guidelines and governance practices summarized ahead.

Corporate social responsibility

To prevent deviation from morality and inappropriate benefits to Itaú Unibanco or third parties, we encourage ethics-oriented decision making. In order to implement this guideline:

¨ We align the business and operations of Group companies with the Vision, Culture, Sustainability Policy, Code of Ethics and other commitments reflected in our policies for people management, risk management, financial controls, audit, compliance, internal controls and corporate security (prevention against illicit acts, information security and more).

¨ We clearly and accurately disclose the information our stakeholders and society in general need to make decisions relative to our organization.

¨ We do not use any form of ruse, imposition or constraint in our activities, operations and business.

¨ We protect non-public information (restricted, confidential and internal) in such a manner as to prevent leaks from harming the organization, our stakeholders and society in general, as well as the relationships of trust formed between ourselves and stakeholders.

¨ Our operations and business take account of the dilemmas and risks associated with sensitive topics connected with the preservation of the environment and the fight against crime, such as: arms trade, power generation, mining, biodiversity, casinos, the use of asbestos, animal studies, genetic engineering, among others.

Compliance with laws, standards and regulations

¨ We abide by the laws, standards and regulations in force in the countries in which we operate.

¨ We maintain institutional policies and practices to prevent and combat all forms of corruption (bribery, malfeasance, inappropriate favors, etc.), money laundering, fraud and all other unlawful or criminal acts.

¨ We embrace the ethics and self-regulation guidelines of the business associations of which we are members.

¨ We promote internally the perception that laws, standards and regulations do not exhaustively cover the ethical implications of all situations. For this reason, we encourage reflection on how our actions influence our stakeholders, society and the environment from an ethical perspective.

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Labor Relations

We value and appreciate our employees by:

¨ Respecting human rights and promoting social diversity. This is why we adopt policies and practices to prevent and combat all manner of discrimination, harassment, prejudice and undignified working conditions (such as child or forced labor).

¨ Compensating, promoting and acknowledging appropriately based on meritocratic criteria.

¨ Maintaining education and labor safety and health programs.

¨ Assuring your rights of collective bargaining and free partisan, religious and labor union affiliation.

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The principle of interdependence

¨ Our interactions with stakeholders and society aim to share with them values and actions that foster common good.

Coexistence in society assumes recognizing that, as we depend on others, so do others depend on us. The realization of our interests cannot be had at the expense of the interests of others, under pain of stressing the bonds built with our stakeholders. For this reason, we believe that shared value is beneficial to all parties involved, and leads to perennial relations.

As a result, we foster dialog and cooperation with our stakeholders, attempt to align their interests with ours, welcome suggestions and criticism to leverage our performance, provide nimble and accurate answers to their inquiries, ceaselessly improve our products and services. In this way, we strive to turn our service into value-generation opportunities.

Clients and consumers

Clients and consumers are our raison d’être. Determining their expectations and needs and improving our actions in a perpetual effort towards synchronization are the appropriate forms of action in the banking market. Therefore:

We must

¨ Respect their freedom of choice, providing them the information they need to make crucial decisions in a clear, accurate and timely manner.

¨ Adopt easily understood contracts that clearly indicate the parties’ rights and obligations and emphasize the risks involved, so that no doubt or misunderstanding remains.

¨ Make available service channels equipped to hear them attentively and capable of quickly addressing requests, complaints and suggestions.

¨ Value their privacy and use information security and protection devices to make sure that they are used with the owners’ knowledge and to their benefit, so as to strengthen the trust they put in us.

¨ Understand clients’ needs so that we can provide information and financial solutions to help individuals and business firms maintain a wholesome relationship with money.

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It is unacceptable

¨ To use matched sales and other forms of imposition or constraint to do business.

¨ To get results at any cost, raising unrealistic expectations about a product or service, or misleading clients and consumers and thereby putting their needs and interests in the background.

¨ To disseminating information, provide advice, or negotiate based on rumors or unreliable data, under pain of causing losses to the parties.

Shareholders and investors

In order to preserve the specific interests of shareholders and investors, Itaú Unibanco deems it:

Necessary

¨ To embrace transparent, objective and impartial practices to monitor conflicts of interest involving shareholders, managers and Itaú Unibanco.

¨ To comply with previously established rules as approved by the Shareholders’ Meeting and disclosed to the marketplace in carrying out deals or operations with related parties (controlling shareholders, managers and their respective relatives and spouses; controlled and affiliated companies, etc.), in order to maintain equitability and abide by Itaú Unibanco policies and procedures.

¨ To clearly, accurately and objectively provide the information required so that stakeholders may make informed decisions, thereby enhancing transparence.

¨ To establish mechanisms to prevent privileged information from leaking, thereby making an effective contribution to corporate governance.

¨ To prepare accounting and financial statements that strictly and clearly represent the transactions made and enable appropriate decision making on the part of stakeholders.

¨ To carry out preventive analyses of operational, financial, social, environmental and reputational risks, with the perpetuity of the business in mind.

It is Unacceptable

¨ To do business or carry out transactions with related parties with the exclusive intent to cater to the private interests of shareholders, managers or third parties, as such an action would imply misuse of power.

¨ To fail to welcome suggestions, criticism and inquiries from any related party, or to fail to respond to them in a timely, accurate and professional manner, giving rise to discontent and potential complaints.

¨ To benefit from privileged information in the sale or purchase of financial assets (shares, debentures, etc.) whether directly or by means of third parties, as such an action would involve a breach of trust.

¨ To exploit business opportunities or prospects identified by Itaú Unibanco companies, harming shareholders and investors.

¨ To leak any information whose use may interfere with the market value of Itaú Unibanco shares, as such an action may cause harm to shareholders and investors.

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Suppliers

Companies like Itaú Unibanco form value chains with their goods suppliers, services providers, commercial and business partners. Our responsibility is as comprehensive as our partnerships network. As such:

We must

¨ Adopt objective, transparent and fair selection and hiring criteria to prevent any kind of undue benefits and the discredit of partnerships formed.

¨ Support the sustainable development of suppliers, the promotion of dignified labor and compliance with legal, labor, environmental, sanitary and safety requirements, with particular emphasis on fighting unlawful or criminal action (corruption, inappropriate influence, fraud, money laundering, smuggling and others), in order to maintain alignment with the principles of our Code of Ethics.

It is unacceptable

¨ To tolerate any form of undignified labor (child and forced labor, among others) or working conditions that pose health hazards, as well as physical or psychological abuse, so as not to contribute to the underground economy and jeopardize our image.

¨ To maintain commercial and personal tie with suppliers that may influence decision making and compromise our lack of bias.

Competitors

Competition is essential for clients and consumers to exercise their freedom of choice. We must, however, remain attentive to two kinds of practices: unlawful competition, which resorts to ruses to privilege certain firms over others, and the formation of trusts or cartels that subject the market to uncompetitive conditions that directly harm buyers of goods or services. For this reason:

We must

¨ Act in compliance with the precepts of free competition and respect our competitors’ reputation and opinions.

¨ Take part in business associations in the spirit of cooperation, with the sole purpose of improving the industries in which we operate.

¨ Respect intellectual property and refrain from using competitors’ information without their explicit consent.

It is unacceptable

¨ To engage in economic espionage practices or to obtain competitors’ plans and actions by means of shady methods.

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¨ To make comments that may affect the image of our competitors, or to contribute to the dissemination of rumors about them.

¨ To engage in discussion with our competitors about sensitive matters that concern our strategic edges, such as business strategies, competitive advantages, pricing policies, contractual terms, costs, market surveys, accounting and managerial results, the development of new products, services and technologies.

Public sector

Relationships and contacts with public officials and servants demand broad transparency and strict accountability on our part. Therefore:

We must

¨ Keep our corporate decisions free from partisan or ideological preferences in order not to compromise Itaú Unibanco’s absence of bias.

¨ Maintain relationships with a constant concern for the appearance of conflicts of interests, or the perception others may have of our conduct, in order not to cast doubt on the integrity of Itaú Unibanco.

¨ Limit our partnerships and contributions (sponsorships, donations and other), to collective good and with a view towards improved public service, as an active means to exercise our corporate citizenship.

¨ Condition any contributions to political parties or candidates to the contents of the local law and compliance with our guidelines for the improvement of citizenship and society, and all funds donated must be accounted for in accounting documents and reported pursuant to the applicable law of the countries in which we operate.

¨ Respect the strictly personal manifestation of opinion and political activities of managers and employees, as long as such practices do not explicitly represent the position of Itaú Unibanco nor amount to a hidden form of institutional support.

It is unacceptable

¨ To cater to private interests over the common good or to contribute to the private appropriation of public resources, as such practices are harmful to general interests and jeopardize the reputation of Itaú Unibanco.

¨ To enlist public officials, public servants, utility permit holders or candidates for office by means of gifts or personal benefit, whether to facilitate business or to cause them to fulfill their own legal obligations or expedite procedures, as such actions are forms of corruption in addition to being in breach of the law.

¨ To show any corporate preference for the acts and statements of governmental agents, as well as to make comments of a political nature that compromise the maintenance of strictly commercial relationships.

¨ To condition any contributions (sponsorships, donations and other) to inappropriate benefits for Itaú Unibanco, for yourself or for third parties, given the harmful effects on public interest and the Bank’s reputation.

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Third Sector

This is the sector made up of non-governmental organizations with non-economic purposes, such as associations, foundations, Social Organizations (SOs) and Public Interest Civil Society Organizations (“Organizações da Sociedade Civil de Interesse Público” – OSCIPs), of services of a public nature. Our relationship with this sector is one of the most important aspects of our corporate citizenship, insofar as it associates economic effectiveness with social investment and aims to contribute to the construction of a society that is more equitable in the opportunities it provides. For this reason:

We must

¨ Build partnerships with an aim towards promoting society’s sustainable development, in such a manner as to not compromise the ability of future generations to meet their own needs, strictly within the boundaries of local law and in compliance with our corporate guidelines.

¨ Target sponsorships and donations at the social, economic, educational, cultural and environmental development of the communities with which we relate.

¨ Support and encourage social actions Itaú Unibanco already develops through its Institutes and Foundations.

It is unacceptable

¨ To form partnerships with or make contributions (sponsorships, donations and other) to Third Sector organizations based on personal relationships or relationships not in line with the law and corporate guidelines.

¨ To carry out social investment actions associated with business interests.

¨ To condition social investment on the beneficiary organizations’ purchase of the bank’s products or services.

Media

We acknowledge the importance of mass media as the front line of defense of freedom of speech, of public interests and of the diversity of opinion, all of which are essential values to consolidating national democracy. Their dissemination of news and analyses is essential to inform the population and equip it with required instruments to take an informed stance before all manner of issues. Therefore:

We must

¨ Maintain a truthful and independent relationship with the media, with the clear purpose of contributing to the fulfillment, by the means of communication, of their purpose of correctly informing public opinion.

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It is unacceptable

•!• To confuse the obligation of accountability with marketing or publicity actions, in order to avoid misunderstandings that may mislead our stakeholders.

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The principle of good faith

¨ We act in good faith and take responsibility for our actions and choices.

Evidence shows that trust generates trust, sometimes redoubled. We therefore apply the traditional golden rule: to unto others what we would have them to do to us.

We are driven by three main reasons: we know that we are not worthy of credit if we fail to give others the fair treatment they expect; we know that by being responsible for our actions and choices, we provide proof of the honesty of our purposes; we know that no business can last without firm trust among the parties. Therefore, to ensure the credibility of Itaú Unibanco and consolidate the trust put into us:

We must

¨ Practice dialogue, which means remaining open to different opinions of a constructive nature, as this makes for a lighter working atmosphere, favors socialization, opens new vistas and multiplies opportunities for innovation.

¨ Give due credit to the ideas and accomplishments of colleagues in an effort to dignify their work and safeguard what is theirs.

¨ Share non-confidential information whose lack may jeopardize others’ activities or decisions, thereby strengthening our relationship with stakeholders and society in general and improving the quality of our relationships.

It is unacceptable

¨ To mislead others into error and harm them, even if Itaú Unibanco benefits.

¨ To use Itaú Unibanco’s name or one’s position to secure personal benefits or advantages for relatives or third parties, which creates a risk of staining one’s own professional reputation and the organization’s as well.

¨ To present personal ideas, opinions and preferences as if they were Itaú Unibanco’s, its managers’ or employees’, as this undermines trust and a collaborative atmosphere.

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The principle of excellence

¨ We constantly improve the quality of our work and cultivate atmospheres that are motivational and conducive to collaboration.

In order to stand out in a highly competitive market, we must attain superior quality standards for the services we provide. Such standards, however, depend on: continued improvement of our work and the processes that support it, and a motivational, highly collaborative atmosphere of mutual respect.

Therefore, the excellence of our work emerges from a collective construction and depends, first and foremost, on the quality of our professional conduct and on how we resolve conflicts of interest.

Professional conduct

Our choices and attitudes can both have a positive influence on the trust we receive and generate discredit, giving rise to personal and professional dissatisfaction. Hence the importance of qualitative professional conduct. As a result:

We must

o Learn from our mistakes, acknowledging them and proposing potential preventive mechanisms, given their potential to harm colleagues and Itaú Unibanco.

o Do our jobs with conscience, integrity, diligence and loyalty to the interests of Itaú Unibanco.

o Care for the facilities, resources, equipment, machines and other working materials made available, and only use them for private purposes in emergencies and with extreme moderation.

o Make responsible use of the benefits provided, such as medical and dental care, banking products, food and meal vouchers, transport, parking, recreation clubs and others, as a sensible display of collaboration.

o Exercise our corporate citizenship by respecting the right of free partisan, religious and labor union association, complying with labor conventions and collective bargains, and abiding by labor rights and obligations.

o Embrace the guidelines of consumer awareness by not wasting resources such as water, power, paper, disposables, office supplies, fuel and others, in an effort to preserve the environment and recycle wherever possible.

o Ensure and respect elective and voluntary participation in drives or collections for internal celebrations, gifts for colleagues, secret Santa games, or donations, without allowing the amounts given to be disclosed, in order to maintain a wholesome and cordial atmosphere.

o Avoid: raffles, bet pools or games with prizes; asking or giving loans from or to colleagues.

o Use moderation in the consumption of alcohol at internal celebrations and refrain from making excessive noise so as not to harm relationships and the proper conduction of work.

o Inform our direct superior of our intent to run for public office at least three months prior to filing an application for candidacy, so as to maintain orderly service.

o Prevent against financial imbalance, as it causes moral, psychological, professional and social damage. Use planning, prudence and responsibility to manage your personal and family affairs, making conscious use of financial resources.

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o Base our investments, financing and loans on public information, abiding by the law and the restrictions as provided in internal policies, standards and procedures that ban the use of privileged information.

o Inform our manager or the relevant channel, with specific grounds, of any breach of the present Code, as proof of a vigilant spirit of collaboration with Itaú Unibanco.

It is unacceptable

o Discriminate against anyone for their gender, culture or ethnicity, race or skin color, social status, religion, age, marital status, sexual orientation, political or philosophical convictions, permanent or temporary physical characteristics, disabilities, and other, as such a behavior would be an act of intolerance and harmful to people’s dignity.

o To practice or tolerate moral harassment, which damages the personal integrity of the victims, or sexual harassment, which is an attempt to obtain sexual favors, with legal and harmful consequences for the workplace.

o To punish or retaliate against anyone who makes a good faith report to the relevant channels of events of harassment, discrimination or any breach of the present Code, creating an internal atmosphere of persecution, fear and discredit.

o To carry out personal business based on Itaú Unibanco’s information or to the detriment of one’s own responsibilities as an employee.

o To buy or sell merchandise or services within Itaú Unibanco facilities, so as not to waste time and embarrass colleagues.

o To reproduce rumors and slander against colleagues, competitors, clients and business partners, leading to discomfort, embarrassment and even retaliation against one’s self and Itaú Unibanco.

o To address the press on behalf of Itaú Unibanco or any of its companies if you are not a previously authorized source.

o To carry out or tolerate business or transactions that may contribute to unlawful or criminal conduct, such as corruption, bribery, money laundering or fraud, in breach of the law and exposing Itaú Unibanco to severe penalties.

o To disseminate content opposite the values and guidelines of Itaú Unibanco (pornographic, prejudiced, illegal and others).

o To use illicit drugs, jeopardizing the image of Itaú Unibanco and compromising functional performance and the workplace.

Conflicts of interest

Conflicts of interest arise when the private interests of individuals or groups clash with and supersede those of Itaú Unibanco or its stakeholders. In this case, the unbiased nature of our actions is compromised and jeopardizes the reputation of Itaú Unibanco its managers and employees. Therefore, in order to not abuse the prerogatives of our position and avoid practices that might generate personal benefits or undue advantages to third parties, we promptly inform the relevant channels of any and all circumstances where the possibility of a conflict of interests exists and request guidance in connection with such.

Information and know-how

How we use the information and know-how (knowledge, techniques, technologies, methods, systems, software and others) available may lead to positive or negative outcomes, as this use has an impact both on business and people’s reputations. For this reason, the secrecy of non-public information (restricted, confidential and internal) is very important both professionally and personally. In this sense:

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We must

o Use our information and knowledge for the good of Itaú Unibanco and, where applicable, for the good of our stakeholders.

o Respect the privacy of our clients and suppliers, maintaining confidentiality over their files, information, operations and services hired, under pain of jeopardizing the trust we earned.

o Protect and prevent the leaking of any document or information that may cause discomfort or damage to individuals or business firms. Make sure that non-public information only circulates in the authorized areas.

o Request authorization from an Officer prior to using non-public information or know- how in external activities or publications, such as lectures, conferences, speeches, scientific papers, books, reviews and social media (social networks, video or photo sharing, blogs and micro-blogs), as their disclosure or amendment may cause financial losses, favor competitors, or generate negative impacts on the business or image of Itaú Unibanco.

It is unacceptable

o To use non-public information for private purposes or hand them to third parties without the prior consent of the owners of the information, as this may cause harm to Itaú Unibanco and its stakeholders.

o Remove copies of information, processes, methodologies, software and other property of Itaú Unibanco, even if developed by the employee in his or her workplace, as this would amount to intellectual property theft.

o Use social networks to disclose information that is the property of Itaú Unibanco, as well as to disseminate rumors or soil the reputation of managers, employees or the organization.

Family and proximity ties

Referring and hiring relatives, spouses and life partners are allowed, but may lead to actual or presumed conflicts of interests, such as the prevalence of subjective criteria about the matter where inappropriately handled.

This group of ties comprehends spouses, blood relations, affinity relations, relations by adoption, ascendants (parents, grandparents...), descendants (children, grandchildren...) or collaterals (brothers and sisters in-law, cousins, nephews and nieces, children in-law, etc.); it also includes life partners and affective relationship also includes life partners and affective relationships (boyfriend, girlfriend, etc.). In the light of this:

We must

o Inform the direct manager and the person responsible for hiring where we would like to refer a spouse or relative for refer a spouse or relative for a job at Itaú Unibanco, so that the presence of any impediment may be determined.

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It is unacceptable

To allow conflicts of interest or practices involving favoritism as a result of family or affinity ties on the part of managers and employees working: under the same officer; under different officers; or allocated in the same physical space (e.g.: branch).

Outside activities and personal connections with clients and suppliers

Any connections between managers or employees and other companies may lead to undue favor, which may soil or destroy reputations. As a result:

We must

o Keep our direct manager informed of our intent to pursue activities in other organizations and await their opinion based on the Corporate Ethics Policy (HF-5).

o Request our Officer’s explicit consent before entering into partnerships with professionals, companies and managers that are Itaú Unibanco clients or suppliers, so that the implications may be properly evaluated.

o Request guidance from Media Relations before taking part in interviews and media programs associated with the activities performed at Itaú Unibanco, in order to avoid misunderstandings.

It is unacceptable

o To do private business with workers or companies that are Itaú Unibanco customers or suppliers, or that maintain any form of relationship with Itaú Unibanco, without the prior and explicit consent of our direct manager and in non-compliance with corporate guidelines, as such ties may raise questions.

o To work in other organizations as a manager, employee, service provider, consultant or advisor, partner, managing partner or investing partner, where the activities of such an organization are in any way in conflict with the activities we perform at Itaú Unibanco, be it as a result of their nature or of the time spent on them, as such a circumstance creates dilemmas and may occupy some of the employee’s attention.

Gifts and contributions

Outside relationships or commercial customs may now be labeled as attempts at solicitation or means to influence decision makers in the commercial and political realms. We may name, by way of illustration: meal invitations, gifts, offers of bonuses, prizes, personal discounts, business or leisure travel, sports events, performances, cultural spectacles, favors of any kind.

These advantages, emerging from the justification of creating affinity between parties or building closer functional ties, may be easily confused with means to circumvent rules, or interpreted as illegitimate means to expedite business. Before such a delicate issue:

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We must

o Avoid receiving and offering such artifices that may directly or indirectly induce ties or commitments harmful to the transparency of business, except where market practices demand the exchange of courtesy and that such action is authorized within the limits provided by the corporate standards of the markets in which we operate relative to the matter.

o Make contributions on behalf of Itaú Unibanco (sponsorships or donations) in line with the corporate standards on the matter, especially as concerns the public sector.

o Keep the Internal Controls and Risks Officer in our area informed of any courtesy of contribution received.

It is unacceptable

o To suggest, offer, give, promise or receive gifts, contributions and favors of any kind to or from people and companies in the public and private sectors, the third sector or members of political parties, as well as to or from governmental bodies, in exchange for or for the purposes of expediting business, operations or activities for Itaú Unibanco, or with the intent of obtaining undue benefits for one’ self or third parties.

o In the position of a manager or employee of the Itaú Unibanco Procurement Department, to offer or receive gifts and contributions of any kind of worth, even if only minor, to avoid rising any suspicion of impropriety.

Note: To increase our understanding of the matter, the Corporate Ethics Policy (HF-5) and the Corporate Policy against Corruption and Bribery (HF-22) specify the rules applicable to gifts and contributions.

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Scope and management of the Code of Ethics

The Code of Ethics has been approved by the Board of Directors of Itaú Unibanco Holding S.A. and applies indiscriminately to all managers and employees of the Itaú Unibanco Conglomerate in Brazil and elsewhere.

The Collegiate Ethics Bodies (Higher Ethics Commission, Ethics Committees of Itaú Unibanco companies in Brazil and elsewhere, and Conduct Committees at the Executive Areas) monitor compliance with Itaú Unibanco’s Code of Ethics and Corporate Ethics Policy (HF-5) and resolve any doubts relative to those guidelines.

The Audit Committee oversees the Corporate Ethics Program.

Doubts and exceptions

Doubts and the determination of exceptions in relation to the topics covered by the

Code of Ethics must be submitted to the e-mail key:

Companies in Brazil and elsewhere: Ombudsman

Guidance and notification channels

The commitment of each and every one of us to the guidelines provided in this Code is the effective pillar of the soundness and longevity of Itaú Unibanco. This means that where we encounter a breach or suspected breach of a guidelines, law, regulation or standard, we must promptly report it to the appropriate channels under the following conditions:

¨ Confidentiality over the determination of facts will be strictly kept;

¨ Anonymity will be assured to those who desire it;

¨ The determination of facts will be impartial and independent;

¨ Reports or accusations without consistent grounds will be disregarded;

¨ Reports or accusations made in ill faith and with the intent of harming another will be subject to disciplinary sanctions;

¨ Disciplinary sanctions are in place against any attempt at retaliation.

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Chanel	subjects	contacts
Ethics Superintendence and Ombudsman ship	Manifestations – doubts, suspicions, reports, complaints, suggestions, etc. involving: ¨      Itaú Unibanco Code of Ethics; ¨      Corporate Ethics Policy (HF-5); ¨      Relationship conflicts; ¨      Ethical dilemmas; ¨      Conflicts of interests.	Phone No.: 0800 721 4040 External e-mails: ombudsman@ombudsman.itau- unibanco.com.br or ombudsman.itub@terra.com.br Internal e-mail: OMBUDSMAN Intranet site: Portal Digital Itaú>Ombudsman>Site / Blog Personal contact
Inspection Superintendence	Doubts, suspicions and reports involving: ¨      Electronic channel fraud; ¨      Document fraud of any kind; ¨      Acts of corruption and bribery; ¨      Theft and robbery of units and extensions, clients and employees; ¨      Breaking and entering in general; ¨      Kidnapping for ransom; ¨      Information, physical, personal and assets security incidents. ¨      Deviation of conduct on the part of employees.	Internal e-mail: INSPETORIA Call Center: 0800 723 0010 System: log the event on the Itaú Events Handing System (“Sistema Itaú de Tratamento de Ocorrências” - SITO) External e-mail: inspetoria@itau- unibanco.com.br Internal correspondence: addressee: Gerência de Inspetoria/São Paulo Postal Address: A/C Inspetoria –Av. Dr. Hugo Beolchi, 900 – piso -1 Torre Eudoro Villela – São Paulo/SP – CEP 04310-030
Audit Committee	Suspicions and reports involving: ¨      Non-compliance with laws or regulations; ¨      Fraud and error in audit, accounting and internal controls activities.	External e-mail: comite.auditoria@itau- unibanco.com.br Internal e-mail: COMITE AUDITORIA; Postal Address: A/C Comitê de Auditoria Itaú Unibanco Holding S.A. – Praça Alfredo Egydio de Souza Aranha, 100 – Torre Olavo Setubal, Piso PM, São Paulo – SP – CEP: 04344-902.

Note: The guidance and notification channels for the Institution’s International Units are specified in their versions of the Code of Ethics.

Disciplinary action

Failure to comply with the guidelines provided in this Code and the Corporate Ethics Policy (HF-5) may give rise to administrative penalties as per the internal standards of Itaú Unibanco.

EX-11.2

Exhibit 11.2

Itaú Unibanco Holding S.A.

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

CORPORATE GOVERNANCE POLICY

Index

1. PURPOSE	1
2. REGULATORY AND SELF-REGULATORY ENVIRONMENT	2
3. ITAÚ UNIBANCO VISION	2
4. CODE OF ETHICS	3
5. SENIOR MANAGEMENT	3
6. STOCKHOLDERS’ RIGHTS	10
7. TRANSPARENCY	11
8. STOCK OPTION PLAN	13
9. BUSINESS WITH RELATED PARTIES	13
10. SUSTAINABILITY	13
11. SCOPE	14
12. APPROVAL	14

1. PURPOSE

This Corporate Governance Policy (Policy) consolidates the Corporate Governance principles and practices adopted by Itaú Unibanco Holding S.A. (Itaú Unibanco or Company).

Corporate Governance involves the management and monitoring of the relationship between the Company, the Board of Directors and the Committees related to it, including the Audit and Compensation Committees, the Executive Board, the Independent Audit, the Fiscal Council, its stockholders and the market. Good Corporate Governance practices add value to the Company, facilitating access to capital and contributing to Itaú Unibanco’s long-term viability.

The foundation stone on which Itaú Unibanco’s Policy rests is the search for excellence in Corporate Governance with a view to strengthening and creating the best conditions for the development of the institution and that of its subsidiaries.

The Policy is cross references to the Company’s Bylaws, the Internal Charters of the Board of Directors and other statutory bodies and Committees, the Code of Ethics and other internal regulations of Itaú Unibanco in such a way as to reflect and consolidate the existing structures for protecting the interests of the stockholders and the market, serving as signposts for the management of the Company.

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2. REGULATORY AND SELF-REGULATORY ENVIRONMENT

Itaú Unibanco is a financial institution with shares listed on three stock exchanges: the São Paulo Stock Exchange (BM&FBOVESPA), the Buenos Aires Stock Exchange (BCBA) and the New York Stock Exchange (NYSE). In the case of the latter two, trading takes place through depositary receipts representing the company’s shares (ADRs on the NYSE and CEDARs in the case of BCBA).

As a financial institution, the company is subject to the norms of the National Monetary Council (CMN) and to the rules of and inspection by the Central Bank of Brazil.

As a listed company with shares trading on the above mentioned stock exchanges in Brazil, Argentina and the United States, Itaú Unibanco is subject to the rules and inspection of the local authorities which regulate the respective capital markets: the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM), Comisión Nacional de Valores (CNV) and the Securities and Exchange Commission (SEC), respectively, including the rules relative to Corporate Governance.

In addition, as a holding company controlling a range of companies acting in various segments of the market, it includes under its umbrella, controlled companies which are subject to the rules of the respective regulatory and self-regulatory authorities (if signatories) for these sectors such as, among others, the National Council of Private Insurance (CNSP), Superintendency of Private Insurance (SUSEP), the Complementary Pension Secretariat (SPC), the Brazilian Financial and Capital Markets Entities Association (ANBIMA) and the Brazilian Association of Listed Companies (ABRASCA).

In Brazil, one of the principal regulations applicable to Itaú Unibanco reflects the adherence to a BM&FBOVESPA’s Corporate Governance Level 1 listing, to which the company signed up on a voluntary basis in June 2001. Pursuant to Level 1 listing rules, Itaú Unibanco must adopt differentiated practices of corporate governance, such as greater transparency in disclosure to the market, maintenance of a minimum free float and share dispersion via public offerings of shares, respecting the interests of the minority stockholders. In addition, in 2011, Itaú Unibanco signed up to the ABRASCA Self-Regulatory Code for Good Practices of Publicly Held Companies.

In the United States, Itaú Unibanco is subject to the Sarbanes-Oxley Act of July 2002, and also NYSE and SEC requirements applicable to foreign issuers, among them the necessity of constituting an Audit Committee and validation of the Company’s internal controls and financial statements. The establishment of the Audit Committee is also a determination of the Brazilian legislation (CMN 3198/04 and CNSP 118/04 resolutions) as well as the constitution of the Compensation Committee (CMN Resolution 3921/10).

3. ITAÚ UNIBANCO VISION

Itaú Unibanco’s vision is “To be the leading bank in sustainable performance and customer satisfaction”.

For Itaú Unibanco, sustainable performance is to create shared values for employees, customers, stockholders and society, guaranteeing the long-term viability of the businesses.

In the context of creating shareholder value, one of the ways of achieving this is the adoption of best practices of Corporate Governance, an ongoing and long-term process, focused on the Company’s sustainable performance.

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In this context, Itaú Unibanco has established a set of 10 attitudes (Our Way of Making it Happen) which guide the way we do business, the manner in which we relate to customers, stockholders, employees, competitors, suppliers, government and class entities and, above all, the way we establish our vision of the future and achieve our business objectives. These attitudes are as follows:

(1) All for the client

(2) Passion for performance

(3) Ethical, responsible leadership

(4) All-stars who are team players

(5) Focus on innovation and focused innovation

(6) Processes serving people

(7) Nimble and uncomplicated

(8) Leave your stripes at the door

(9) A sparkle in one’s eyes

(10) Dream big

4. CODE OF ETHICS

Itaú Unibanco’s operations are based on principles that sustain an organizational culture focused on the development of people, on strict compliance with the rules and regulations and on a permanent vocation for development. To assist in the implementation of these principles, since 2000, Itaú Unibanco has maintained its Code of Ethics, widely disseminated within the Company and publicly disclosed in the Investor Relations website and periodically updated to better adjust Itaú Unibanco’s positioning in the domestic and international context.

5. SENIOR MANAGEMENT

Itaú Unibanco’s senior management encompasses the General Stockholders’ Meeting and the following bodies: Board of Directors, Executive Board, Fiscal Council as well as the Committees directly related to the Board of Directors, namely the Strategy Committee, the Appointments and Corporate Governance Committee, the People Committee, Risk Management and Capital Committee, Compensation Committee and the Audit Committee, the latter two also being a statutory committees.

The above mentioned committees (Committees) maintain a relationship with the Board of Directors, their members being elected or nominated by this body, the purpose being to create the conditions for the uniform handling and systemization of matters of strategic relevance and for control of Itaú Unibanco. The Board of Directors and the Committees operate as collegiate bodies, seeking to arrive at a consensus through dialog and the systemic view which characterize Itaú Unibanco’s management.

5.1 General Stockholders’ Meetings

The Company’s supreme body is the General Stockholders’ Meeting, which brings stockholders together, either on an ordinary or extraordinary basis, through a convening notice as called for under Law 6.404/76 (Corporate Law).

The Annual General Meeting is held in the first four months of each year, for examination, discussion and voting of the financial statements reported by management, decision on the allocation of the net income for the fiscal year, payout of dividends and election of members to the Board of Directors and the Fiscal Council. The Extraordinary General Meeting is held when convened to decide on key matters when not the exclusive responsibility of the Annual General Meeting.

As from 2012, the Electronic Voting Platform for Annual and Extraordinary General Meetings has been made available allowing stockholders to exercise voting rights from anywhere and in advance through the intermediary of an electronic power of attorney without the need for an onsite presence at the General Stockholders Meeting.

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5.1.1 Voting and Share Types

The Corporate Bylaws provide for two types of shares: common and preferred, both book entry, with no par value and in a single class. Each common share gives its holder the right to one vote in the General Meetings.

Preferred shares carry no voting rights except in specific cases enshrined in the legislation. However they give their holder (i) priority in the receipt of the annual minimum, non-accumulative dividend of R$ 0.022 per share, which will be adjusted in the event of stock or reverse stock splits; (ii) participation on equal terms with common shares in the receipt of distributed profits, once the payout of dividends on common shares as determined in (i) above, and (iii) the right, in an eventual sale of control, to be included in a public offering for acquisition of shares, guaranteeing a price equal to 80% of the value paid on a share with voting rights, part of the controlling group (tag along).

5.2 Board of Directors and Committees

Operating on a collegiate basis, the Board of Directors is a mandatory body in a listed company. Among other functions, it is incumbent on the Board to provide general guidance on the Company’s businesses, elect the members of the Executive Board and supervise its management. It is incumbent on the Executive Board to exercise operational and executive functions in line with the guidelines established by the Board of Directors.

The structure, make up and powers of the Board of Directors is enshrined in the Bylaws of Itaú Unibanco and its rules for functioning are established in the Internal Charter. To promote the renovation of members on the Board of Directors and pursuant to best practices of Corporate Governance, Itaú Unibanco’s Bylaws provide for the ineligibility to the Board of Directors of persons of 70 years of age and older.

The Board of Directors is made up of natural persons and can have between 10 (ten) and 14 (fourteen) members. At the first meeting immediately subsequent to the Annual General Meeting which elected it, the members of the Board shall choose the Chairman from among their peers and from 1 (one) to 3 (three) Vice Chairmen.

5.2.1 Independent Member of the Board of Directors

The independence of the Board members is designed especially to safeguard the Company’s interests and those of its minority stockholders, to foster debate of ideas which may eventually differ from those of the Directors nominated by the controlling group. In this context, the Board’s Internal Charter states that the independent Directors may meet to examine specific themes relevant to the Company, reporting back to the Chairman of the Board on the matters discussed and eventual suggestions of measures to be adopted.

An independent Director is one that has neither a commercial relationship nor one of any other nature with the Company, with a company under the same control, with a stockholder part of the controlling group or with a member of the management body which could potentially (i) result in a conflict of interests; or (ii) negatively affect the said Director’s capacity and impartiality of analysis and appreciation.

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In this context for example, a person may not be deemed independent who:

- holds either a direct or indirect stake in the capital stock of the Company or any other company controlled by it or under common control, equal to or more than 5% (five percent);

- is included in a stockholders’ agreement or is connected to the controlling shareholding group, directly or indirectly (through a corporate entity or due to family member ties*);

- is or has been in the past three years an employee or officer of the Company or of a company under the same control or whose family relative* is or has been an officer of the Company or a company subject to the same control;

- is or has been (or whose family member* is or has been), in the last three years, the responsible technician, partner, director, manager, supervisor or any other member, with a managerial function, of the team involved in external auditing work for the Company or of a company subject to the same control.

The Appointments and Corporate Governance Committee shall vouch for the independence of the Director, the said Committee’s examination not necessarily being restricted to the limits or the relationships exemplified above.

(*) Family members are spouses, blood relatives or related by direct or collateral affinity to the second degree of affinity.

5.2.2 Committees related to the Board of Directors

a) Strategy Committee

Within the scope of the Board of Directors, the Strategy Committee has as its principal function, the discussion of relevant matters and those of a significant impact. It is also incumbent on the said Committee to: (i) support the Board of Directors in the discussion with the Executive Board of Itaú Unibanco on the strategic guidelines for business matters; (ii) issue opinions and recommendations on strategic guidelines, thus enriching discussions and decisions of the Board of Directors; (iii) within the scope of the Board of Directors, take the initiative in discussions on key matters and those with a significant impact; (iv) review opportunities for investment submitted by the Executive Board and which have a critical impact on the business; and (v) issue opinions and recommendations on proposed investment opportunities, providing input for Board of Directors’ discussions and decisions.

With respect to Itaú Unibanco’s budgetary guidelines, it is incumbent on the Strategy Committee to (i) propose budgetary guidelines to the Board of Directors; (ii) conduct an in-depth discussion with the Executive Board in order to allow the budgetary guidelines to be defined; (iii) make recommendations to the Board of Directors, following discussion with the Executive Board, on the budget for the current year; and (iv) advise and support the Chief Executive Officer in the monitoring of the corporate strategy for the budget.

The members of the Strategy Committee are elected annually by the Board of Directors and may be members of the Board itself, the Executive Board of the Company and of controlled companies or professionals of proven knowledge in the area.

b) Appointments and Corporate Governance Committee

The Appointments and Corporate Governance Committee’s principal function is to monitor the governance of the Company, especially in relation to matters concerning the Board of Directors.

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In this context, it is incumbent on the Appointments and Corporate Governance Committee to: (i) identify, analyze and propose candidates to the Board for submission to the General Meeting, determining if the candidate shall be deemed, if elected, an internal, external or independent director; (ii) review periodically criteria for defining an independent director in accordance with the principles of governance and the applicable regulations, recommending to the Board any modifications deemed necessary and reevaluating the situation of each Director in the light of any new criteria for defining independence which may eventually be established; (iii) evaluate the functioning of the Board of Directors; (iv) discuss and make recommendations on succession of the chairman of the Board of Directors and of the Directors, establishing a succession plan; (v) discuss and make recommendations on guidelines and processes of selection and nomination of the Chief Executive Officer; (vi) discuss and make recommendations on the succession of the Chief Executive Officer, establishing a succession plan; and (vii) assist in the identification of the Directors qualified to fill vacancies on the Committees which are subordinate to the Board, including the Appointments and Corporate Governance Committee, in this context specifically furnishing an opinion on the proposed Directors’ independence and financial specialization for the Audit Committee. The Appointments and Corporate Governance Committee shall, and whenever deemed appropriate, propose changes in the make-up of the Board of Directors and the Committees that are subordinated to it, as well as propose changes to the structure of the Committees which are subordinated to it, including the creation and/or extinguishment of Committees.

The Appointments and Corporate Governance Committee is also responsible for processes involving appraisal of Board performance, being incumbent on the Committee to (i) recommend appraisal processes for the Board, Directors, Chairman of the Board, Committees and Chief Executive Officer; and (ii) provide methodological and procedural support to the evaluation of the Board, Board Directors, Chairman of the Board, Committees and Chief Executive Officer. It is also incumbent upon this Committee to propose the apportionment of the aggregate compensation set by the General Stockholders’ Meeting among the Directors.

Finally and based on criteria preliminarily established by the Board of Directors, the Appointments and Corporate Governance Committee shall also examine and disclose situations where there is a potential conflict of interests between the Directors and the companies under the umbrella of the Itaú Unibanco Conglomerate, particularly in relation to (i) situations arising from external activities carried on by the Directors, such as participation of members of the Board of Directors or the Executive Board in statutory bodies of other companies not part of the Itaú Unibanco Conglomerate; and (ii) transactions between Directors and companies under the umbrella of the Itaú Unibanco Conglomerate.

On an annual basis, the Board of Directors shall nominate Directors to sit as members of the Appointments and Corporate Governance Committee. Notwithstanding, the Committee may also invite company executives and specialists in the area of human resources and corporate governance to make up the Committee.

c) People Committee

The People Committee is responsible deciding the principal guidelines with respect to policies for people.

With respect to the guidelines for attracting and retaining talents, it is incumbent on the People Committee to (i) debate strategies for the domestic and international attraction and mobility of executives; (ii) discuss, monitor and advise the Executive Board on the career of strategic talents in the Itaú Unibanco Conglomerate; (iii) monitor the performance of the key executives in the Itaú Unibanco Conglomerate and the result of the trainees program; (iv) be informed of the system for appraisal of employees; (v) provide support in establishing guidelines for monitoring and mentoring executives and (vi) suggest to the Compensation Committee policies for compensation of employees including the various forms of fixed and variable compensation.

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Furthermore, the said Committee has a function for advising on the skills and profile of talents required for the Itaú Unibanco Conglomerate to achieve its medium to long-term aspirations; to be cognizant of the tendencies for hiring at other companies in the same sector; to discuss the culture, suitability of profile and training needs; to be informed on the policy for training courses and processes for upgrading the skills; and to provide support for decisions on further education programs.

Finally, the People Committee is responsible for institutional decisions within the scope of the stock options plans sponsored by Itaú Unibanco and to approve the grant of Partners’ Stock Options and Simple Options.

The Board of Directors shall annually nominate the Directors to comprise the People Committee. Notwithstanding, the Committee may also invite officers from the Company and specialists in the area of human resources and corporate governance to sit on the Committee.

d) Risk Management and Capital Committee

It is incumbent on the Risk Management and Capital Committee to support the Board of Directors in the performance of its responsibilities with respect to the management of risks and capital of the Company, submitting reports and recommendations on these issues for the resolution of the Board with respect to i) decisions on the Company’s appetite for risk in terms of capital, liquidity, results and company franchise, ensuring these aspects are in alignment with the strategy and including: acceptable levels of capital and liquidity for the Company, types of risk to which the Company could be exposed as well as aggregate limits for each type of risk, tolerances to volatility of results and risk concentrations, general guidelines on tolerance to risks that may have an impact on the value of the Company’s franchise (example: risk of image); ii) supervision of the Company’s risk control management activities in order to ensure their suitability to the levels of risk assumed and to the complexity of the operations as well as the meeting of regulatory requirements; iii) revision and approval of policies and strategies for the management of capital, which establish mechanisms and procedures for maintaining the capital compatible with the risks that are taken by the institution; iv) establishing the minimum return expected on the Company’s capital stock as a whole and its lines of business as well as monitoring performance; v) supervision of the incentive structures, including compensation, for ensuring alignment to the objectives of risk control and creation of value; and vi) fostering improvement in the Company’s risk culture.

The Risk Management and Capital Committee shall be made up of at least 3 (three) and at the most, 10 (ten) members, elected annually by the Board of Directors from among its members and professionals of notorious knowledge in the area. The Chairman shall be nominated from among the elected Directors, members of the Committee. The function of a member of the Committee is not delegable. The election of the members of the Committee shall take place at the first meeting of the Board of Directors immediately following the Annual General Meeting. The Board of Directors may elect or remove members at any time.

e) Compensation Committee

The Compensation Committee is the statutory body instituted by the General Stockholders’ Meeting in April 2012 covering the decisions and discussions on the compensation policies for the Itaú Unibanco Conglomerate. In the light of the growing discussions on the compensation of management in financial institutions and in order to adhere to best governance practices in effect both domestically and internationally, it is incumbent on the Compensation Committee to ensure the equilibrium of the institution’s risk management practices.

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The principal functions of the Compensation Committee are to: (i) prepare the compensation policy for the management of Itaú Unibanco, proposing to the Board of Directors the various forms of fixed and variable compensation as well as special benefits and programs for recruitment and termination; (ii) discuss, analyze and supervise the implementation and operation of the existing compensation models for Itaú Unibanco S.A. and for Banco Itaú BBA S.A. (including the treasury areas), discussing the general principles for the employee compensation policy and recommending its correction or improvement to the Board of Directors; (iii) supervise the implementation and operation of Itaú Unibanco’s compensation policy for management; (iv) review the Company’s compensation policy for management on an annual basis, recommending its correction or improvement to the Board of Directors; (v) propose to the Board of Directors the aggregate compensation for management to be submitted to the General Stockholders Meeting; (vi) evaluate and propose a compensation package for the Company’s Chief Executive Officer for Board of Director approval; (vii) evaluate and approve compensation packages, proposed by the Chief Executive Officer, for the Executive Vice Presidents of Itaú Unibanco S.A. and for the Chief Executive Officer and for the Executive Vice Presidents of Banco Itaú BBA S.A., including fixed and variable salaries, benefits and long-term incentives, as the case may be, also evaluating the compensation packages of the remaining members of management of the Itaú Unibanco Conglomerate; (viii) evaluate future internal and external scenarios and their possible impacts on the management compensation policy; (ix) examine the management compensation policy of the Company in relation to market practices with a view to identifying significant discrepancies in relation to similar companies, proposing the necessary adjustments; (x) ensure that the compensation policy for management is permanently compatible with the risk management policy, with the targets and the current and expected financial situation of the Company and with the provision in National Monetary Council CMN Resolution 3.921/2010; and (x) prepare the “Compensation Committee Report” on an annual basis.

In addition to complying with CMN Resolution 3921/10, the Compensation Committee shall evaluate the impact of other legislations with respect to compensation existing in other countries where the Company’s subsidiaries are operating, it being incumbent on the Committee to propose the necessary measures to ensure compliance with these rules.

On an annual basis, the Board of Directors shall nominate the members who shall comprise the Compensation Committee with at least one member not being a member of management. Notwithstanding, the Committee may also invite officers of the Company and specialists in the area of human resources and corporate governance to sit on the Committee.

f) Audit Committee

A statutory body instituted by the General Stockholders’ Meeting in April 2004, the Audit Committee is only required for institutions authorized to operate by the Central Bank of Brazil and for companies under the supervision of the Superintendency of Private Insurance that are part of the Itaú Unibanco Conglomerate and reporting to the Board of Directors. This Committee fully meets the provisions of CMN Resolution 3198/2004, CNSP Resolution 118/2004, and the Sarbanes-Oxley Act and NYSE rules in these latter two cases where applicable to foreign private issuers.

Pursuant to its Internal Charter, approved by the Board of Directors, it is incumbent on the Audit Committee to supervise: (i) the processes of internal controls and risk management; (ii) the internal audit activities and (iii) the activities of the independent audit companies of the Itaú Unibanco Conglomerate.

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It is also incumbent on the Committee to safeguard (i) the quality and integrity of the financial statements; (ii) compliance with the legal and regulatory requirements; (iii) operation, independence and quality of the work of the independent audit companies; (iv) the operation, independence and quality of the work of the Internal Audit; and (v) the quality and effectiveness of the internal control and risk management systems.

The Audit Committee is made up of at least (3) three and at the most, (7) seven members elected annually by the Board of Directors from among the latter’s members and from professionals of proven technical capacity compatible with the Committee’s responsibilities contingent on (i) the chair – to be appointed by the Board of Directors – being exercised by a Director; and (ii) one of the members of this Committee, at least, being designated as Financial Specialist. The election of the members of the Audit Committee shall take place normally at the meeting of the Board of Directors at which the Executive Board of Itaú Unibanco is elected. In the election, the criteria of independence in the Audit Committee Regulations and the applicable regulation shall be taken into account.

In addition, the Committee must, individually or jointly with the respective independent audit companies for the Itaú Unibanco Conglomerate, formally notify the Central Bank of Brazil and the Superintendency of Private Insurance of any eventual evidence of: (i) non-compliance with the legal and regulatory norms, which might put the continuity of any of the Itaú Unibanco Conglomerate’s companies at risk; (ii) fraud of any value perpetrated by the management of any of the companies in the Itaú Unibanco Conglomerate; (iii) significant fraud practiced by employees of any of the companies in the Itaú Unibanco Conglomerate, or by third parties; and (iv) errors which result in critical inaccuracies in the financial statements of any of the companies in the Itaú Unibanco Conglomerate.

For the semesters ending June 30 and December 31, the Audit Committee is responsible for preparing the "Audit Committee Report", which covers information required by the prevailing regulations. In addition to the mandatory information, the report of December 31 also includes aspects relative to (i) a formal evaluation of the work carried out by the internal and external audit in the fiscal year; (ii) the self-evaluation of the Committee; and (iii) training of the Committee members.

Together with the semi-annual and annual financial statements of Itaú Unibanco Conglomerate, a summary of the Audit Committee Report is published containing its principal findings. Finally, the Audit Committee Report is made available to the Central Bank of Brazil, Superintendency of Private Insurance, and the Board of Directors for a minimum term of five years as from the date of its conclusion.

5.3 Fiscal Council

The Fiscal Council is an independent management body comprising from 3 (three) to 5 (five) members elected by the General Meeting to supervise the activities of management and the independent auditors. The composition, functioning, duties and responsibilities of the Fiscal Council are established in its Internal Charter. Its responsibilities include the preparation of a technical opinion on the quarterly and annual reports submitted for approval of the stockholders (which should be made available to the stockholders up to one month prior to the date set for the Annual General Meeting). The holders of the preferred shares have the right to elect an effective member and respective alternate to this Council. Minority stockholders are equally entitled to elect an effective member where they represent jointly, 10% (ten percent) or more of the shares with voting rights.

Pursuant to Itaú Unibanco’s Bylaws, the Fiscal Council is not permanently installed and its installation depends on a decision by the General Meeting in accordance with the Corporate Law. The Fiscal Council has been uninterruptedly installed since 2000. The members nominated by the controlling stockholders of Itaú Unibanco are independent professionals with wide experience in the financial market.

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6. STOCKHOLDERS’ RIGHTS

6.1 Dividend Policy

Since July 1980, Itaú Unibanco has maintained as its dividend distribution policy the monthly payout of dividends and complementary semi-annual and annual payments.

During each fiscal year, the stockholders have the right to receive as a mandatory dividend, an amount no less than 25% (twenty-five percent) of the posted net income in the same fiscal year, adjusted up or down for the specific values in letters "a" and "b" of subsection I of Article 202 of Law 6.404/76 and pursuant to subsections II and III of the same legal provision. In addition to the mandatory dividend, the Board of Directors may (i) propose to the Annual General Meeting the payout of dividends calculated on the basis of retained earnings, revenue reserves and, in some cases, capital reserves and (ii) establish the payment of interest on capital. Payment of interim dividends or interest on capital is incorporated as an integral part of the mandatory dividend for the fiscal year. The values per share paid out in dividends and/or interest on capital are equal both for common and preferred shares.

The Stockholders Compensation Policy is available from the Investor Relations website (www.itau-unibanco.com/ir > Corporate Governance > Rules and Policies).

6.1.1 Dividend Reinvestment Program

The Dividend Reinvestment Program (PRD) was launched in 2004 as a further benefit to Itaú Unibanco stockholders, permitting the automatic investment of the dividends in the purchase of preferred or common shares of the Company. Any stockholder with an Itaú Unibanco S.A. current account, whether a personal or corporate entity, may participate in the PRD.

Itaú Unibanco’s PRD was the first CVM-registered and approved dividend reinvestment program of a Brazilian company with the following advantages for Itaú Unibanco stockholders: (i) offers a safe, efficient, systematic and organized share purchase alternative; (ii) allows individual share purchase offers to be combined with the offers of all the other stockholders of the same company which have adhered to the PRD, thus increasing investment volumes and the consequent reduction in brokerage fees when compared to a regular acquisition of shares; and (iii) promotes a gradual increase of participation in the capital stock of the Company and in distributed dividends.

6.2 Tag Along

The Tag Along is a minority stockholder defense mechanism (those stockholders not part of the controlling group) which guarantees a minimum price for the shares of minorities in an eventual sale of the company’s control.

Brazilian corporate legislation requires that in the event of the sale of a publicly listed company, the acquiring party must make a public offering for the acquisition of the common shares of the non-controlling stockholders at a minimum price equal to 80% (eighty percent) of the value paid per share to the controlling group. A General Meeting of Itaú Unibanco, held in April 2002, extended to the holders of preferred shares the same tag along right. Thus, at Itaú Unibanco, the tag along is a right granted not only to the holders of common shares (as prescribed in law), but also to the holders of the preferred shares.

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BM&FBOVESPA has included Itaú Unibanco as a component with a significant participation in the ITAG – Special Tag Along Stock Index created to differentiate and enhance the importance of companies dispensing greater attention to their minority stockholders.

7. TRANSPARENCY

7.1 Investor Relations

The prime objective of the Investor Relations area (IR) is to transparently and accessibly disseminate information on Itaú Unibanco on which an investment in shares of its own issue can be based. Hence, the IR area seeks to consolidate and maintain Itaú Unibanco’s image of leadership and innovation in the capital markets, always underscoring respect for legal and ethical principles.

Public meetings held by the IR area are one of the most important communication channels and appreciated by investors, analysts and stockholders alike. The opportunity to discuss strategies and reported results with Senior Management can represent a decisive factor in making investment decisions. It is mandatory for companies included in BM&FBOVESPA’s corporate governance listing levels to hold at least one investor meeting annually. It is worth noting that over the last few years we have run more than 20 public meetings on an annual basis.

Since 1996, Itaú Unibanco has held public meetings at the APIMEC’s (Association of Capital Markets Analysts and Investment Professionals) regional offices as well as various presentations overseas. At these meetings and presentations, Itaú Unibanco aims to give a clear picture to the domestic and international financial community as to its performance, strategy for the creation of stockholder value and perspectives for the future, among other themes of investor interest. With a view to increasing access to personal investors, Itaú Unibanco has also held these meetings at the Expo Money financial fairs.

Other important aspects of Investor Relations policy are the IR website and the Domestic and International Conference Calls with stockholders, analysts and potential investors which take place quarterly 1 (one) day after the announcement of Itaú Unibanco Financial Conglomerate’s results and, in certain instances, following the announcement of material facts. Itaú Unibanco also provides Investor Relations information via Twitter (@itauunibanco_ri). These initiatives play an important role in Corporate Governance practices and in a dynamic and democratic manner provide the opportunity for direct contact between the stockholders, the market and Itaú Unibanco, facilitating access to key information on the Company.

7.2 National and International Stock Indices

In the pursuit of corporate governance excellence, Itaú Unibanco has been successful in being included in the principal stock indices that measure the degree of adherence of the company to recognized effective practices in this area. These indices include ITAG, already cited, and the IGC - BM&FBOVESPA Corporate Governance Stock Index, a listing which groups companies able to offer greater investor security.

In the same line, Itaú Unibanco’s shares are also now components of the BM&FBOVESPA Corporate Sustainability Stock Index (ISE), created jointly with various institutions, among them the Brazilian Corporate Governance Institute (IBGC), the institution becoming a benchmark for socially responsible investment and a catalyst for good practices in the Brazilian corporate sector.

The shares of Itaú Unibanco have also been part of the Dow Jones Sustainability World Index (DJSI World) since the latter’s inception in 1999. DJSI World selects companies of recognized corporate sustainability, with the capacity to create long-term stockholder value, through the ability to leverage opportunities and manage the risks associated with economic, environmental and social factors. Selection not only takes into account financial performance, but principally the quality of management, which should combine economic values with social and environmental activities as a means to long-term sustainability.

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7.3 Policy for Disclosure of an Act or Material Fact, Share Trading Policy and Disclosure and Trading Committee

CVM Instruction 358 of July 2002 established that listed companies should adopt a Policy for Disclosure of an Act or Material Fact (Disclosure Policy) and may adopt a Policy for Trading of Own Shares (Trading Policy). Both were adopted by Itaú Unibanco.

In addition to the adoption of a Disclosure Policy and a Trading Policy, Itaú Unibanco has exceeded the scope of the above Instruction by creating a specific committee for the management of the Policies. Among the listed companies in Brazil, it was a pioneer in the creation and operation of such a committee, always with a view to best corporate governance practice.

The Disclosure and Trading Committee has the prime function of administering the Trading and Disclosure Policy. Its function shelters a range of internal initiatives for improving information flow and safeguarding the ethical conduct of its management and staff signatories to the Policies in order to: (i) assure the transparency, quality, equality and safety of the information provided to stockholders, investors, the press, governmental authorities and to other capital market agents; (ii) respect and to apply the criteria established in the Policies such that members of management, stockholders, controlling stockholders and employees, as well as third parties that have a professional relationship or one of trust with the Company, adhere to ethical and legal standards in the trading of the Company’s securities, or securities benchmarked to them; (iii) evaluate Trading Policy guidelines and procedures and those which must be pursued in the disclosure of an act or material fact and in maintaining the confidentiality of such information, established by the Disclosure Policy as well as to examine the content of press releases prior to their publication; (iv) monitor and regulate adherence of the management and other employees of the Itaú Unibanco Financial Conglomerate to the policies, and (v) verify cases of violations of the policies, making eventual infringements known to the Board of Directors and the Ethics Committee.

The Committee meets quarterly when so convened by the Investor Relations Officer, the latter being a permanent member. The Committee is made up of between 2 (two) and 10 (ten) members nominated annually from among the members of the Company’s Board of Directors, the Executive Board and controlled companies and among professionals of proven knowledge in the capital markets area.

7.4 Operational Rules for Treasury

In November 2004, following a broad-based national and international survey of best Corporate Governance practices, Itaú Unibanco became the first Brazilian company on a voluntary basis to adopt Operating Rules for the Trading of Shares for Treasury Stock (Rules). These Rules now govern trading in shares issued by Itaú Unibanco on Stock Exchanges where its shares are eligible for trading.

In Itaú Unibanco management’s view, the adherence to these Rules has brought innumerous benefits, among which the reduction in operational, financial and strategic risk, the creation of an internal culture for these operations in the capital markets, the reduction in the possibility of market concentration or improper price fixing, the underscoring of the strategy for the repurchase of securities focused on the preservation of liquidity and creation of stockholder value. All this leads to a greater transparency for this type of operation.

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8. STOCK OPTION PLAN

Since 1995, Itaú Unibanco has offered grants of stock options on its shares permitting the alignment of the interests of the executives with those of Itaú Unibanco, so that the same risks and gains from the appreciation of the Company’s securities are shared.

The purpose of the Stock Option Plan is to make officers and directors parties to the medium and long-term development of the Company, thus allowing them to participate in the added value which their work and dedication has brought to the shares of the Company. The People Committee is responsible for the management of the Plan, designating each year those eligible to receive options, their quantity and price as well as taking institutional decisions according to the scope of the Stock Option Plan which covers both the executives of Itaú Unibanco and also the other companies of the Conglomerate.

9. BUSINESS WITH RELATED PARTIES

The business between Itaú Unibanco and related parties is conducted according to the legal and ethical norms.

These norms do not limit the capacity of Itaú Unibanco to conclude operations in the interbank market with its affiliates which are financial institutions, these operations being conducted at the same prices, terms and rates as prevailing in the market as a whole. The operations are excluded from the consolidated position and from the result of Itaú Unibanco’s operations, and are inspected by independent auditors and published quarterly in the Account Statements.

The remaining agreements with related parties follow the same criterion of strict submission to the legal rules, to avoid any intercompany favoritism or favoritism to controlling stockholders. For this reason, any agreements are always subject to exhaustive analysis by Senior Management. Should transactions be conducted involving parties, members of the Board of Directors of Itaú Unibanco, these must be examined by the Appointments and Corporate Governance Committee.

10. SUSTAINABILITY

For Itaú Unibanco, sustainability is the essential means in order that the quest for sustainable performance is built from the incorporation out of the real needs of our clients, the comprehension of the new social dynamics and the addressing of the growing environmental challenges.

Itaú Unibanco’s sustainability strategy has a strategic focus which addresses issues of major importance for the Company and for the businesses in the Conglomerate: financial education, risks and socio-environmental opportunities, dialog and transparency.

In order to bolster the sustainability agenda in the decision-making process at Itaú Unibanco, sustainability governance has been structured in three parts: a Sustainability Supervision Committee (made up of members of the Board of Directors); an Executive Sustainability Committee (made up of members of the Executive Committee); a Sustainability Committee (made up of officers and area heads).

Other Itaú Unibanco collegiate organs (Board of Directors, committees and commissions) also cover matters related to sustainability. Among these organs, those of particular importance are: the Senior Ethics Commission, the Audit Committee, the Disclosure and Trading Committee, the Products and Processes Evaluation Committee, the Socio-environmental Risk Committee and the Prevention Commission for Combating Illicit Acts.

Itaú Unibanco is signatory to various voluntary national and international commitments, among them: Global Compact, Equator Principles, Carbon Disclosure Project (CDP), Responsible Investment Principles (PRI) and the Global Reporting Initiative (GRI). To access all the voluntary commitments signed by the Conglomerate, access: www.itau.com.br/sustentabilidade > No Itaú > Compromissos, Parcerias e Representações > Compromissos e Pactos Voluntários (in Portuguese only).

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Itaú Unibanco implements its social and cultural investments through the Itaú Social Foundaiton, the Unibanco Institute and the Itaú Cultural Institute, the first institution focusing on public education and the third, on the dissemination of Brazilian culture.

11. SCOPE

Itaú Unibanco’s Corporate Governance Policy is published in the website www.itau-unibanco.com.br/ir.

This is applicable to Itaú Unibanco Holding S.A. and to its controlled companies in Brazil and overseas.

The operating companies with shares listed on the stock exchange have their own rules of corporate governance.

12. APPROVAL

This Policy was approved by the meeting of the Company’s Board of Directors on June 29, 2012.

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EX-12.1

Exhibit 12.1

Certification

I, Roberto Egydio Setubal, certify that:

1. I have reviewed this annual report on Form 20-F of Itaú Unibanco Holding S.A. (the “company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 29, 2013

/s/ Roberto Egydio Setubal

Roberto Egydio Setubal

Chief Executive Officer

EX-12.2

Exhibit 12.2

Certification

I, Caio Ibrahim David, certify that:

1. I have reviewed this annual report on Form 20-F of Itaú Unibanco Holding S.A. (the “company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 29, 2013

/s/ Caio Ibrahim David

Caio Ibrahim David

Chief Financial Officer

EX-13

Exhibit 13

Itaú Unibanco Holding S.A.

Certification Pursuant to 18 U.S.C. Section 1350 as Enacted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Itaú Unibanco Holding S.A. (the “company”) is filing with the U.S. Securities and Exchange Commission, on the date hereof, its annual report on Form 20-F for the fiscal year ended December 31, 2012 (the “Report”). Pursuant to Exchange Act Rules 13a - 14(b) or 15d - 14(b) and to 18 U.S.C. Section 1350 as enacted pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, we, Roberto Egydio Setubal, Chief Executive Officer, and Caio Ibrahim David, Chief Financial Officer, hereby certify that:

To the best of our knowledge:

(A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

Date: April 29, 2013

/s/ Roberto Egydio Setubal	/s/ Caio Ibrahim David
Roberto Egydio Setubal	Caio Ibrahim David
Chief Executive Officer	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the company and will be retained by the company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.