ANNUAL REPORT 2006 ANNUAL REPORT de 112

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1 ANNUAL REPORT 1 de 112

2 MESSAGE FROM THE PRESIDENT Dear Shareholders, marked an important year for your Company. Following a resolution at the General Assembly of 22 March 2005, UNICRE completed its first year of business as IFIC - Instituição Financeira de Crédito. This involved a number of changes to its internal structure, namely the creation of an Internal Audit and Control Unit depending directly from the Board of Directors, for improved reporting and control mechanisms, a Risk Committee, for improved operational and credit control and, finally, adoption of UNICRE s Code of Conduct. Moreover, the market experienced stronger competition in the Company s business scope, in the form of directly competitive products and through creation of alternative products. In the area of merchant acceptance, there is an evident and aggressive offer of products by both national and foreign competitors. Non-bank payment operations are also on the rise. In the cards area, the strong competition comes not only from the banks but from the merchants themselves, both large and small, who are now developing their own private programmes. As for the personal credit sector, the aggressiveness of foreign operators is notorious. With an acceptance network of approximately 58 thousand POS terminals (corresponding to approximately a third of the market), an 8% credit cards market share and a 30 year old experience in the personal credit sector, UNICRE decided to redefine its strategy as far as its product offer is concerned. This implied reorganisation of its structure, which included creation of a Business Committee and changes to its objectives and incentives model towards a more results-driven approach. The volume of activity shows a clear sign of the increased market competition. While the volume of loans granted increased by 6,2%, the financial margin increased by only 1,9%. Likewise, while the volume of transactions acquirer increased by 7%, the average discount rate fell by 16,7%, reaching values as low as 1,3%, around 40% below the rate charged in de 112

3 Another of the Company s reactions to the stronger competitive environment was the implementation of stricter operating costs management: This resulted in a reduction to its cost-income from 76,2% to 69,7% and an increase of 4,1% to its profit before tax in adjusted accounting standards, reaching a total of 17,2 million euros. From a regulatory perspective, also witnessed increased dialogue with all stakeholders, so as to guarantee added benefits to clients, through innovation and service quality as well as better price deals for these services. In the course of UNICRE experienced a change of governance, as a result of the unanimous decision of the General Shareholders Assembly, in July, to elect a new President to the Board of Directors, with an exclusive and independent contract, and following the request for resignation from its previous President, Dr. Vítor Bento. The financial year was thus shared with Dr. Vítor Bento, who leaded the Company for the first six months of the year and to whom the Company owes large part of its results as well as the development of an adequate strategy - an aspect worth noting. The year s results were also possible due to the trust which our clients, merchants and cardholders, deposit in the Company. They are increasingly demanding and a permanent incentive for improved services. Our shareholders support towards prosecution of our strategies and their trust in UNICRE s capacity to accommodate the permanent competitive challenges was yet another contribution to results. Finally, was a decisive year in terms of change: the commercial areas faced increased market demands; the support areas had to adapt to new accounting models as well as new rules and new reporting and operational demands. These changes were only possible through the dedication, effort and competence demonstrated by UNICRE s employees. ANTÓNIO RAMALHO 3 de 112

4 INDEX 1. Main Indicators UNICRE Institutional Situation Organisational Structure Future Perspectives Partnership and Sponsorship activities Social Responsibility Governance Macroeconomic Framework UNICRE s Activity Analysis of Activity per Business Unit in Organization and Internal Resources Risk Management Financial Analysis Summary and Main Indicators Income Statement Balance Sheet Performance Ratios Proposal for Distribution of Profits Final Notes Financial Statements Notes to Financial Statements Legal Certification of Accounts Report and Opinion of the Audit Board Glossary de 112

5 1. MAIN INDICATORS NAS AAS a 2005 Var. / 2005 Value % Balance (million euros) Total Net Assets 215,3 230,5 227,5 225,2 226,7 1,4 0,6% Net Loans and Advances to Customers 177,6 189,0 188,1 188,1 199,9 11,7 6,2% Equity 20,5 21,3 21,3 24,6 35,0 10,4 42,4% Profitability Net Income (million euros) 4,0 12,8 12,8 11,6 12,9 1,3 11,1% Return on Assets - ROA 2,0% 5,9% 6,0% 5,5% 6,0% Return on Equity - ROE 18,9% 58,8% 60,3% 45,8% 48,8% 0,5 p.p. 3,0 p.p. Produtivity / Efficiency Cost-to-Income 72,3% 71,8% 75,0% 76,2% 69,7% (6,5 p.p.) Net Asset per employee (million euros) 0,69 0,78 0,77 0,76 0,80 0,05 6,0% Operating Income from Banking Activity per Employee (million euros) 0,30 0,33 0,32 0,32 0,32 0,00 (0,5%) Asset Quality Hedge for Overdue Credit for more than 90 Days 57,8% 59,6% 64,0% 64,0% 63,7% (0,3 p.p.) Number of employees On active duty (1) (15) (5,1%) Retired ,9% (1) Includes Management Bodies and employees on pre-retirement status a Amounts related to 2005 after account reclassification to AAS Financial Statements. Vide Note 4 to Financial Statements. BANK OF PORTUGAL REFERENCE INDICATORS (in accordance with Banks of Portugal s Instruction 16/2004) NAS AAS a 2005 Solvency (1) Adequacy Ratio of Total Own Funds = Own Funds (2) / (Required Own Funds (2) x 12,5) Adequacy Ratio of Tier I Own Funds = Tier I Own Funds (2) / (Required Funds (2) x 12,5) Credit Quality Overdue Credit Ratio = Overdue Credit (3) / Total Credit Overdue Credit Ratio, net of provisions = Net Overdue Credit Ratio (4) / Net Total Credit n/a n/a n/a n/a 15,9% n/a n/a n/a n/a 14,6% 6,48% 5,84% 5,47% 5,47% 6,70% 2,84% 2,44% 2,04% 2,04% 2,54% Profitability Net income before income tax/average Net Asset (5) 4,6% 8,1% 8,2% 7,8% 8,0% Operating Income from banking activity (6) / Average Net Asset (5) 47,8% 44,5% 44,1% 44,7% 41,6% Net income before income tax / Average Equity (5) 43,0% 80,6% 82,6% 65,1% 65,0% Efficiency Operating Costs + Depreciation / Operating Income from Banking Activity (6) 75,9% 75,5% 78,8% 79,9% 74,7% Personnel Costs / Operating Income from Banking Activity (6) 16,8% 16,0% 18,0% 19,3% 16,6% a Amounts related to 2005 after account reclassification to AAS Financial Statements. Vide Note 4 to Financial Statements. (1) Applicable only from 1 January (2) Calculated in accordance with Bank of Portugal Notices 12/92, 1/93 and 7/96. (3) Overdue Credit = Credit Overdue for more than 90 days + Doubtful Loan Credit Reclassified as Overdue for provisioning purposes (4) Net Overdue Credit = Credit Overdue - (Provisionsfor overdue credit + Provisions for Doubtful Loan Credit) (5) Calculation of Average Net Asset and Average Equity Includes amounts registered for all quarters. (6) Operating Income from Banking Activity = Financial Margin + Yield Bonds + Net Comissions + Income from Financial Operations + Other Operating Income, Net 5 de 112

6 2. UNICRE 2.1. INSTITUTIONAL SITUATION SHAREHOLDERS SHARE CAPITAL At the close of, UNICRE s share capital, of euros, comprising fully paid subscribed shares of 5 euros each, showed the distribution illustrated below. Any changes in relation to the previous year result from merger operations between UNICRE s shareholding financial institutions and from UNICRE s acquisition of joint-ownership shares, at no charge, as approved by the Shareholders General Assembly of March. SHARE DISTRIBUTION Banks Shares % Banco Comercial Português, S.A ,02% Banco Santander Totta, S.A ,09% Caixa Geral de Depósitos, S.A ,60% Banco BPI, S.A ,31% Banco Espírito Santo, S.A ,09% Caixa Económica do Montepio Geral ,84% Banco Internacional do Funchal, S.A ,95% Banco Bilbao Vizcaya Argentária (Portugal), S.A ,78% Banco Comercial dos Açores, S.A ,49% Banco do Brasil, S.A ,29% Banco Activo Bank (Portugal), S.A ,29% Banco Popular Portugal, S.A ,29% Banco Português de Investimento, S.A ,29% Banco Português de Negócios, S.A ,29% Barclays Bank, E.P.C.E ,29% BNP Paribas, S.A ,29% Caixa Central de Crédito Agrícola Mútuo, C.R.L ,29% Finibanco, S.A ,29% Unicre, S.A ,19% 6 de 112

7 GOVERNING BODIES BOARD OF SHAREHOLDERS GENERAL ASSEMBLY Chairman Joaquim Filipe Marques dos Santos, representing Banco Internacional do Funchal, S. A. Secretary Maria do Pilar Teixeira, representing Caixa Central de Crédito Agrícola Mútuo, C.R.L. AUDIT BOARD Deloitte & Associados, SROC, S.A., represented by Luís Augusto Gonçalves Magalhães. BOARD OF DIRECTORS Chairman Vítor Brinquete Bento (until 14 July ) António Palma Ramalho (from 14 July ) Members of the Board Amadeu Ferreira de Paiva Vasco Manuel da Silva Pereira COMPANY SECRETARY João Franco do Carmo 7 de 112

8 2.2. ORGANISATIONAL STRUCTURE ORGANISATION CHART Business Units Issuing Unit Strategy Analysis and Business Support Internal Audit Merchant Acquiring Unit Redunicre BUSINESS UNITS Board of Directors Information Technologies and System Communication Security and Operational Support Services Financial Administration Issuing Unit it issues and manages UNICRE s credit cards, as well as associated products and services, for Private and Corporate cardholders, under its own brand or under brands associated to other entities. Merchant Acquiring Unit (RedUNICRE) it manages the acceptance network of those payment card systems acquired by UNICRE; its work includes market assessment and enrolment of commercial establishments as well as sale of products and services connected to the acquiring business. SERVICES Security and Operational Support it provides back-office and logistics support to the Company s departments as well as to some Portuguese credit card issuers; it controls and acts upon irregular operations which it detects on local and international Merchant networks and card accepting automated teller machines. Finance and Administration it deals with UNICRE s financial and cash management, provides respective internal and external information and manages the accounting system, human resources, procurement and facilities. Information Technologies and System its mission is to accommodate systems and information technology into UNICRE s business strategy, as well as to implement and ensure regular operation and efficient use of those systems. MANAGEMENT AND BUSINESS SUPPORT UNITS Internal Audit it supports the Board of Directors in terms of internal control and internal and external risk management, namely operational risks and compliance. Strategy Analysis and Business Support it supports the Board of Directors in the definition and planning of strategic matters. It also monitors and analyses variables relevant to the business. Communication it is responsible for internal corporate communication, coordination of relationship policies with the Media and other public institutions, definition of corporate image and public relations activities, namely with companies and associations connected to the business sector. 8 de 112

9 2.3. FUTURE PERSPECTIVES Upon becoming Financial Company, UNICRE widened its legal range of operation strengthening its position as a financial operator in several market sectors, namely credit card issuing and acquiring of local and international payment cards. Building on its successful foundations and now better qualified for the competitive environment, UNICRE assumes new ambitions UNICRE s objectives for the future, outlined in the business plan, consider three main lines of business: UNICRE : PRIORITIES Cards Choice card: to be customers choice Niche Solutions: have the capacity to satisfy specific needs Partnerships: collaborate to offer cards which bring added value to merchants Credit Consumer credit: collaborate for a better living standard Transparent information: provide clear information on rights and responsibilities Responsible advice: to evaluate the clients specific characteristics within the local market Merchants Innovation: solutions for new business opportunities in new environments and using new technologies Customization: adequate business solutions adapted to each merchant s needs Efficiency: better solutions at lower costs for the future and for facing a challenging market. With the help of its payment card market expertise, it is UNICRE s intention to regain its benchmark position in merchant and consumer payment solutions, by providing suitable card payment solutions, developing responsible credit offers and establishing merchant partnerships in order to maintain customer loyalty. UNICRE Unicre intends to regain its benchmark position in merchant and consumer payment solutions Provide suitable card payment solutions Cards A stronger issuing portfolio with new card products, breaking into developing market segments; A wider offer of loan facilities, with particular incidence on consumer credit; A strategy for wider and stronger offer to the acquiring business as it currently stands and redefinition of its scope of business, working essentially with valueadded services. In the business support areas, and particularly in information systems, a number of initiatives are underway for increased offer Credit Developing responsible credit offers Merchants Establishing merchant partnerships in order to maintain customer loyalty capacity and for creation of infrastructures for improving the company s performance, reducing costs while keeping to rules and regulations to which UNICRE s activity is bound. In, UNICRE embarked on a thorough examination of its business, so as to develop a strong business plan, prepared to support the development of what it believes are attainable targets. In global terms, UNICRE s business plan for concentrates on a number of strategic assumptions which aim to give added value to the shareholder, through 9 de 112

10 development of a more aggressive commercial model counting on UNICRE s traditional skills as well as on new market opportunities and repositioning of the corporate strategy to centre on value-added services for the merchant as business partner. 10 de 112

11 MAIN ACTIVIES IN JANUARY UNICRE starts off a new form of operation, as defined in Decree-Law 186/2002, of 21 August, and the General Regime for Credit Institutions and Financial Companies ( Regime Geral das Instituições de Crédito e Sociedades Financeiras ). UNICRE adopts Adjusted Accounting Standards, as per Regulation EC 1606/2002of the European Parliament, dated 19 July, and transposed into Portuguese legislation through Decree-Law 35/2005, of 17 February, and Bank of Portugal s Notice 1/2005, On the e-commerce front, a 3D Secure payment solution (Verified by Visa of Visa International) was launched for the 1 st time on one of the Company s clients. MARCH UNICRE s General Annual Assembly takes place, with approval of its annual report and a proposal for distribution of profits. APRIL Unibanco cards join the Let us all support Portugal campaign. Introduction of new discount rates for merchants on the RedUNICRE network. JUNE Launch of the Açoreana Primium card, in partnership with Companhia de Seguros Açoreana. JULY UNICRE s General Assembly and election of António Palma Ramalho for Chairman of the Board of Directors, following Vítor Brinquete Bento s request for resignation. Launch of A Palavra (The Word) Unibanco card. AUGUST Preparation of UNICRE s strategic business plan for begins. Workshop on Strategic Orientation for definition of the main business lines. OCTOBER Relaunch of UNICRE s intranet as interactive instrument for permanent intra-company contact. NOVEMBER Exclusive edition of a Unibanco Collection book, this time on 21 st Century Contemporary Architecture ( XXI Arquitectura Contemporânea Portuguesa ). Workshop for definition of Objectives and Plans for DECEMBER Conclusion of the Strategic Plan for and introduction of the objectives, control and incentives model. The Onde está o Mini Unibanco campaign is distinguished at the 16th edition of The Best in Relationship Marketing ( O Melhor em Marketing Relacional ). The Prémios Neurónio is an event organized by the local Postal Services and the APAP (Portuguese 11 de 112

12 Association of Advertising and Communication Companies) to honour those who make best use of their powers to serve their companies and brand marks. 12 de 112

13 2.4. PARTNERSHIP AND SPONSORSHIP ACTIVITIES In, these were mainly directed at companies and organisations representing those retail sectors with the highest volume of card payments. Highlights were: Sponsorship and editorial support of the Comércio de Lisboa magazine, published every 2 months by the União de Associações do Comércio e Serviços (UACS), the largest Portuguese association from its foundation and one which represents members from a wide range of retail sectors. The artwork produced dealt with both formative and informative issues related with card acceptance at the point of sale, such as UNICRE s activities in Corporate Social Responsibility, information about products and promotion of restaurants belonging to the RedUNICRE merchant acceptance network. Sponsorship of the newsletter Informação para a Empresa, published by Associação Comercial de Braga, undoubtedly the most dynamic organisation among the country s retail and services associations. This activity was equally successful to the previously mentioned, with UACS. Sponsorship of the newsletter Hotelaria, published by UNIHSNOR Portugal - União das Empresas de Hotelaria, de Restauração e de Turismo, an association with a strong presence in the North of Portugal and which today counts with a number of companies from the so-called travel and entertainment sector. Sponsorship of the new UNIHSNOR Portugal site, where UNICRE stands as partner in the area of payment systems. Collaboration with the Boletim da AEHTA Associação das Empresas de Hotelaria e Turismo do Algarve, a monthly publication, known for its statistical information of particular interest to the tourism operators in the South of Portugal, and which now publishes almost 150 monthly issues. Editorial collaboration with the Comércio em Movimento, a paper published by the ACRAL Associação dos Comerciantes da Região do Algarve, with articles and interviews dedicated to UNICRE s activities. Occasional advertising presence in other business-related publications, such as the magazine published by AIHP Associação dos Industriais de Hospedagem de Portugal. Support of Escola de Comércio de Lisboa s training activities, by participation in prizes for the best projects presented by final year students, as well as money contributions to the best pupils at the Curso de Técnico de Informática de Gestão (technical 13 de 112

14 training on information system management) and the Curso de Extensão Profissional em Vitrinismo, Exposição e Merchandising (professional course on window dressing, exhibitions and merchandising) Main sponsor of an e-commerce event (3ª Semana do Comércio Electrónico) organised by ACEP Associação do Comércio Electrónico em Portugal (Portuguese e-commerce association9 in partnership with UMIC Agência para a Sociedade do Conhecimento. UNICRE was responsible for organising the agenda and for invitations to one of the sessions, the one in Energaia - Vila Nova de Gaia, on Desenvolvimento na Era Digital: Comunicação com o Cidadão, Turismo e Comércio Electrónico. Main sponsor of a new edition of the Guia Prático Comprar na Internet (Practical Guide on How to Buy on the Internet), by ACEP and UMIC, an insert on a number of national magazines and placed at hundreds of Internet access points all over the Country. The leaflets contained a new campaign on the Unibanco Net Net card. Sponsorship of a number of lectures organised by the Associação Comercial de Braga on Comércio de Futuro (The Future of Commerce): Arquitectura Comercial Inteligente e Profissionalismo no Atendimento (Intelligent Commercial Architecture), and Vitrinismo Como Fazer Montras (Window Dressing). Sponsorship of a meeting organised by the Fórum para a Competitividade on Competitividade e Simplificação Fiscal (Competitiveness and Fiscal Simplification), in the form of invitation to several merchants and association leaders. So as to mark an interventional presence in the academic environment connected to the economic and management sectors, UNICRE was one of the first exclusive sponsors of the renewed ISEG building, now a college for postgraduation and master s degrees. Among some of the important events with a mind to narrowing relationships with RedUNICRE s business partners, the Company organised a number of meetings with some of RedUNICRE s merchants in Oporto and Vilamoura, addressing past and future activities in the payment cards sector. The meetings provided an opportunity for closer contacts between the Company s Management and the merchant owners. Besides the participation of merchants belonging to the RedUNICRE network, these meetings counted with the presence of several associations and confederations. Following previous interventions of this nature by UNICRE s staff at e-commerce promoting events, the Company s participation in a plenary meeting of the 14 de 112

15 Conselho Consultivo da Aliança Digital, the 4 th Congresso Nacional de Cartões (National Card Congress), was a particularly relevant initiative and one which has won UNICRE s support from its very first edition. Finally, there are two other events which deserve a mention: a dinner-debate at the Associação dos Comerciantes de Moda and the Grupo Pestana s Annual Staff Meeting. As part of UNICRE s partnership with the Instituto de Formação Bancária UNICRE participated in the Seminar on A Prevenção sobre Fraude Financeira (Financial Fraud Prevention). As a consequence of UNICRE s over 30 year old relationship and partnership with the merchant network, the Company was invited to participate in the Conselho Nacional de Ética no Comércio e Serviços (National Ethics Council for Commerce and Services), to whom it issues a regular opinion on the adequacy of the Code of Ethics for Commerce and Services, as well as its practice by companies adhering to the Code. It is important to recall that UNICRE was one of the institutions chosen by CCP - Confederação do Comércio e Serviços de Portugal (Portuguese Confederation of Commerce and Services) to collaborate in the elaboration and launch of the referred Code and its integration in Corporate Social Responsibility. UNICRE s President and CEO was responsible for the opening lecture at the Escola de Comércio de Lisboa s meeting, with a lesson on O Marketing entre Nós ( Marketing Among Us ). 15 de 112

16 2.5. SOCIAL RESPONSIBILITY The general opinion at UNICRE is that, in today s environment, the role of business should no longer be concentrated solely on short-term financial success. On the contrary, it should plan for long term sustainability, guaranteeing social and environmental responsibility in its business strategy s daily operations. This was the aim behind some of the activities promoted during, such as: COMMUNITY A campaign directed at supporting Ajuda de Berço, resulting in a donation which will guarantee a full year s care for 2 of the institution s children who had been abandoned or were in a situation of risk. Organisation of a meeting (on 21 February, at the head offices of the União das Associações do Comércio e Serviços Union of Associations for Commerce and Services) for elucidation on Breast Cancer issues, and handing of a donation to the Liga Portuguesa Contra o Cancro (LPCC Portuguese League Against Cancer) resulting from the 2005 Christmas Campaign. The meeting was addressed at business-women from commercial establishments in Lisbon and their employees and had the participation of two Oncology specialists (Prof. Doutor Mário Bernardo, from Universidade Nova de Lisboa and Prof. Doutor Vítor Rodrigues from Universidade de Coimbra), as well as the League s President. LPCC promotes a permanent country-wide screening campaign. The implementation of software at Unibanco s site for transforming any website text into voice. The initiative, the first time ever at a Portuguese company s site, follows the commitment assumed by European companies to provide ease of access of products and services to all citizens. The intention was to assist those users with special needs, such as the physically or visually impaired, as well as the elderly and those with reading problems. UNICRE was the first company in Portugal to implement this type of service. ENVIRONMENT As for initiatives connected to environmental issues, the following are worth noting: Collection of separated waste produced daily by the Company s different business areas and its delivery to the facilities of local services responsible for its disposal and recycling. Replacement of the traditional Christmas cards and diaries with electronic versions, so as to encourage paper saving and preservation of the local forest. INCITEMENT TO VOLUNTEERING For a number of years now, UNICRE has followed a tradition of blood doning to a regional hospital: o Instituto Português de 16 de 112

17 Oncologia (Cancer Institute). There were 2 such campaigns during the year. 17 de 112

18 2.6. GOVERNANCE INTRODUCTION UNICRE - Instituição Financeira de Crédito, S.A. s governance abides by the applicable law and the published Articles of the Association. These have undergone several alterations so as to adapt to the rapid evolution to UNICRE s area of business and the company s own development. The current Articles of the Association already include some of the international recommendations for Corporate Governance, namely principles approved by the Basel Committee on Banking Supervision (September 1999), and by the Organisation for Economic Cooperation and Development (April 2004). INTERNATIONAL PRINCIPLES OF CORPORATE GOVERNANCE BASEL COMMITTEE ON BANKING SUPERVISION Duties of the Board of Directors: Definition of the company s strategic objectives, including ensuring creation of profits for its shareholders; Protection of stakeholders interests; Provision of guidelines for activities and corporate conduct so as to guarantee that the company acts in a way that is safe and according to laws and regulations. Furthermore, the Board of Directors should: Understand its supervisory role and its duty to act in good faith towards the Company and its shareholders; Maintain adequate levels of checks and balances, so as to avoid decisions in any way influenced by management; Feel confident enough to question and demand clear replies from its management; Recommend healthy practices learnt from previous situations; Ensure unbiased advice; Avoid conflicting interests in the course of its activities and obligations towards other organisations; Meet regularly with head management and internal audit so as to establish and approve policies, general communication guidelines and monitor progress towards strategic objectives; Refrain from subjective decisions; 18 de 112

19 Guarantee adequate supervision of the Company s senior management; Guarantee observance to and safeguarding of independence of external and internal auditors. In order to guarantee good governance of the company, the Board of Directors must rely on several mechanisms, namely: Corporate values, code of conduct and other standards of behaviour appropriate to a control system which guarantees their observance; A corporate strategy articulated in a way which permits measuring global and individual contributions; Well defined responsibilities within the company s hierarchy; Interaction and cooperation mechanisms between the Board of Directors, management and auditors; Strong internal control mechanisms, including internal and external audits, risk management and other forms of checks and balances; Careful risk monitoring where there is greater likelihood of conflicting interests; Financial and management incentives to ensure that management and staff in general are aligned with the global strategy of the Company. OECD In all situations, the members of the Board of Directors must believe that their actions are for the best of the company and its shareholders. Whenever its decisions may affect different groups of shareholders, the Board of Directors must be impartial towards all shareholders and defend the interests of all stakeholders. The Board of Directors has to dispose of resources for objective and independent judgement of issues related to the company and as such must have access to precise, timely and relevant data. 19 de 112

20 MISSION AND VALUES Since 2004, UNICRE has assumed a mission of: MAKING LIFE EASIER FOR CONSUMERS AND COMPANIES, BY PROVIDING EFFICIENT PAYMENT AND CREDIT SOLUTIONS, NAMELY CARD BASED SOLUTIONS, WHICH ARE CONVENIENT, RELIABLE AND SAFE, AS WELL AS ASSOCIATED SERVICES, BUILDING A COMPETTIVE VALUE OFFER BASED ON CONDITIONS OF SUSTAINABILITY With its Mission in mind, UNICRE held internal discussions about its positioning and ambitions, as outlined in its Strategic Plan for , approved in November. The Plan, previously described, is based on three management priorities: To assume its objectives as real commitments To focus the whole Company in priorities known to all Manage costs as a way of transferring value to the client So as to guarantee the Company s alignment with a single attitude towards the market, shareholders, staff and all stakeholders in general, UNICRE approved its Code of Conduct at the start of The Code of Conduct applies to all of UNICRE s employees, including its Board of Directors, and its aim is to: Describe the values and behaviour patterns which should serve as models for UNICRE s employees, not only for internal relationships with colleagues and the Company as a whole, but also with clients, suppliers, competitors, regulators and the media; Encourage sharing of principles and values, so as to strengthen the internal culture and identity and an institutional image of accuracy and competence. The Code of Conduct establishes general principles of behaviour standards and observance of legal demands and defines a number of additional rules of conduct regarding responsibilities, loyalty, relationships among employees, professional development, confidentiality, professional secrecy, conflicting interests, activities outside the Company, acceptance of gifts from and offer of gifts to third parties, use of company resources and relationships with contacts from outside the company, namely with the media. Below is a transcript of those rules which are relevant to UNICRE s relationship with clients, suppliers and competitors. 20 de 112

21 Relationship with clients and suppliers All employees must show high standards of professionalism, respect and cordiality towards clients, observe equal treatment towards all clients and show a level of customer support of quality, efficiency and effectiveness. UNICRE s employees must keep to agreed strict levels of service quality and guarantees and treat eventual complaints in an efficient way and according to the Company s internal rules. UNICRE and its employees must honour commitments with suppliers or service providers and ensure their fulfilment of all norms established by contract. Contracts must be written in clear and straight language and keep to internal rules in force regarding confidentiality of information. Any eventually conflicting interests must be safeguarded. Relationship with competitors UNICRE encourages development of its activity in an active, competent and ethical manner, based on merit and service quality. It acts on strict observance of legal rules in force regarding free competition and business loyalty. UNICRE and its employees cannot execute any agreements which may restrict competition, namely burden sharing or price fixing agreements, and must respect intellectual and commercial property rights. Employees must compete in an open market, in the most vigorous and constructive possible manner, and renounce to any activity which distorts competition, misuses conditions or involves discriminatory practices. Any disloyal misappropriation of clients, as well as misleading or harmful advertising towards competitors is expressly forbidden. OBJECT OF THE COMPANY The object of the company abides by what is permitted to banks, with the exception of accepting deposits. In pursuit of its object, the company may sign any contracts or agreements with national or foreign entities which may deem necessary, as well as participate in nominal capital of associations, companies, national or foreign complementary company groupings, of limited or unlimited liability, even if they have a different object or are regulated by special laws. SHARE CAPITAL AND TRANSFER OF SHARES The Company s share capital is currently of Euros, corresponding to equity shares of 34,5 million Euros, which renders it 21 de 112

22 possible for UNICRE to exhibit an equity ratio on 31 December of 15.9%. This ratio does not include changes to be imposed in 2008 by Basle II and which will translate into substantial changes, on considering operational risk in terms of capital share allocation. In the past three years, UNICRE paid the following dividends: Profit after tax (Thousand Euros) Dividends (Thousand Euros) Payout Ratio (%) % % % The Board of Directors may decide it convenient to increase capital share once or more, by cash contribution of up to a maximum amount of euros. The conditions for the increase, as well as any deadlines for shareholder pre-emptive rights, will be determined by the Board of Directors. Should one of the shareholders decide to transfer part or all of its shares, the other shareholders will have priority rights under the same price and payment conditions established for the deal, and communicated in writing, by registered post with a form for acknowledgement of receipt, by the transferring shareholder to the company and the remaining shareholders. Each shareholder will have priority rights for an amount proportionate to its own shares in the company. Should no shareholder decide to carry out its priority rights within 30 days from the date of receipt of the above mentioned letter, there will be free transmission of shares. GOVERNANCE GENERAL ASSEMBLY According to UNICRE s statutes, the General Assembly must meet regularly and all shareholders must be represented. General Assembly deliberations are binding on all shareholders as long as in agreement with the law in force and the statutes. Further to provisions in the law and in the statutes, it is the General Assembly s duty to: Elect its Board members; Elect the members and President of the Board of Directors; Elect the Permanent Audit Board and its Substitute and decide whether it is convenient to name an independent auditor. General Assembly deliberations are taken by majority of votes cast, except if otherwise stated by law or company statutes, in which case they shall be by qualified majority voting. Any deliberations on alterations to the certificate of incorporation must be approved by two thirds of cast votes. On the other hand, any deliberations on mergers, divisions or conversion must be approved by three quarters of cast votes. In either situation, this applies to a General Assembly meeting on first or second notice. Abstinence is not considered. 22 de 112

23 BOARD OF DIRECTORS According to the statutes, the Company s Board of Directors may consist of 3 to 15 members, elected by the General Assembly for a re-electable three year term. Notwithstanding the general duties arising from their legal obligations, it is the Board of Directors competence to: Manage the Company business, in all aspects related to the Company s object; Acquire, charge and sell any property and rights, movable or immovable, whenever considered convenient for the Company; At its discretion and always abiding by the law, decide whether to invest in other companies, even those operating under a different corporate object, be they headquartered in Portugal or abroad and limited or unlimited corporations, or regulated by special law, complementary company groupings or any other form of corporate association; Mobilize funds and carry out credit operations permitted by law; Hire personnel and determine their income, fringe and cash benefits, and carry out the respective management and disciplinary authority; Nominate representatives to specific acts or types of acts; Fulfil and have fulfilled all legal and statutory requirements and deliberations of the General Assembly; Define the organization and methods of the company s corporate activity; Delegate powers on its members; Represent the company in court and thereout, as defendant and as plaintiff, incur liabilities, file lawsuits, withdraw or reach settlements on proceedings, resort to arbitration, sign undertakings; Prepare prevision reports on the company s planned activity and reports on the respective execution; Deliberate on or propose any necessary increase to capital shares; Study and execute plans for development or expansion of the company s social activity, taking into account any eventual legal restrictions; Decide on any matters not under the competence of other committees. The following members constitute the current Board of Directors: Chairman: António Palma Ramalho Members: Amadeu Ferreira de Paiva and Vasco Manuel da Silva Pereira With the recent election of a new President to the Company s Board of Directors, the shareholders reinforced the model of independent and exclusive management in force for the past years. COMPANY SUPERVISION Supervision of the company business is the responsibility of an Audit Board and a Substitute Audit Board, both Chartered Accountants or Chartered Accountant 23 de 112

24 companies, re-electable for three year terms of office. Deloitte & Associados, SROC S.A is UNICRE s external auditor responsible for Legal Certification of Accounts and the Audit Report. INTERNAL AUDIT AND CONTROL In, an Internal Audit and Control unit was created. It reports to the Board of Directors and depends directly from the Company s President. BUSINESS COMMITTEE RISK COMMITTEE, INTERNAL AUDIT AND BUSINESS COMMITTEE RISK COMMITTEE In order to stimulate and centralize critical risk management processes which may affect UNICRE s business, a Risk Management Committee was created in. This Committee is constituted by members of the Board of Directors and by those responsible for UNICRE s different business and support sectors. It meets once every three months and its mission is to monitor UNICRE s global risk profile and ensure that it is aligned with the Company s strategy. It s main duties are (i) analysis and evaluation of business, credit, operational and compliance risks; (ii) analysis and proposal of methods, policies, procedures and mechanisms for evaluation and mitigation of risks; (iii) follow-up of implementation of corrective or other mitigation measures of identified risks; and (iv) contribution to the promotion of a culture of risk management and control and its adoption by the whole Company. The aim of the Business Committee, also created in, is to integrate all of the company s structures, business and support units and supply them with the necessary means for execution of the Company s objectives. This Committee is constituted by the members of the Board of Directors and by those responsible for the business and support units. It meets once every two weeks. Its main duties are to (i) monitor the market and competition; (ii) analyse the adequacy of proposals and business projects to the Company s strategy, its role in society and the underlying framework; (iii) analyse and discuss products and services and expected results and (iv) to evaluate results obtained from the launch of new services and products. Following publication of Decree-Law 76-A/, of 29 March, there is a plan for alteration of UNICRE s statutes to comply with said Decree-Law, namely in what concerns independence of the President of the General Assembly and composition of the company s Audit Board. 24 de 112

25 3. MACROECONOMIC FRAMEWORK WORLD ECONOMY In, the world economic activity grew at an impressive rate, faster than in the previous year. The dynamic economic activity of the Euro area contributed to this growth, at lower levels than those registered in the American economy but resulting in higher rates of consumer and corporate trust, stronger internal demand and larger export values, due to world demand and the entrance of new Member States to the European Union. REAL GDP GROWTH RATE OF Percentage change from previous year. 5 reference rate, due to signs of economic slowdown in the American economy. EVOLUTION OF REFERENCE RATES Percentage 6% 5% 4% 3% 2% 1% 0% Federal Reserve European Central Bank Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Source: ECB, Federal Reserve In, there was a rise in long-term interest rates, although they remained at relatively low levels considering expectations regarding evolution of inflation and real growth of the economy. Both in the USA and in the Euro Area, the ratio of private bond yield differential to government debt registered a rise in, maintaining the 4 USA downward trend of the higher risk asset 3 Japan 2,6 2 EU25 1,9 Euro Zone 1 1,4 0,9 0, F Source: Eurostat The short-term interest rates continued to rise in. In the Euro Area, the ECB rose the official interest rate five times during the spread. EVOLUTION OF LONG-TERM INTEREST RATES 10 year interest rates government debt. Percentage 4,3 4,3 4,1 3,4 1,5 1,4 4,5 USA Euro Zone 3,9 Japan 1,8 year, a total of 125 b.p., raising the minimum tax rate for main refinancing operations to 3,5% at the end of the year. In the USA the Federal Reserve raised the federal funds benchmark interest rate 100 b.p. This rise occurred until June, which marked the starting point for the Federal Reserve s 5,25% * Data as at 31 October Source: Bank of Portugal * Despite different monetary policies, inflation continued to rise as reflection of the high growth in the international oil prices and other raw materials and the respective dynamic worldwide demand. Thus, within the 25 de 112

26 group of developed world economies, inflation in should be situated at 2,6 %. Despite the restrictive monetary policy adopted by the ECB in, in the first 8 months of the year inflation in the Euro Area remained above the 2% level defined as acceptable for price stability. In September, impelled by favourable evolution of the price of petrol in the international market, the HIPC registered new levels below 2%. INFLATION IN THE EURO ZONE General HICP. Annual change rate. 3 2,5 2 1,5 1 0,5 0 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 * Monthly data with no seazonal or working days adjustments Source: ECB REAL GDP GROWTH AND CONTRIBUTION Real GDP Growth Rate Percentage. Real change rate. 2,6 1,9 1,9 Zona 2 Euro Zone Euro 1,4 0,9 0,8 0,8 1,1 1,2 0,4-1,1 Source Eurostat, Bank of Portugal Portugal Portugal F Contribution to the Portuguese GDP growth Percentage Points 1,9 0,1 0,6-0,1 1,5-2,7 2,2-0,9 Net internal demand 0, F 1,1 0,1-0,4 Net external demand According to Bank of Portugal s estimates, private consumption should have grown at 1,2% in, less than in This was due to higher interest rates, higher tax rates and a null wage rate. Despite higher consumer confidence, a number of factors such as perceived need for correction of public finance instability or small improvement to employment conditions may also have contributed to a lower growth of private consumption. PORTUGUESE ECONOMY The European Commission s forecasts point to a 1,2% growth in the Portuguese economy in, compared to 0,4% in 2005, emphasizing the growth differential with the Euro Area (1% to 1,4%). As opposed to previous years, the growth of the economy was mainly the result of growth in net export values, reflecting a general upturn in the main destination markets (EU). Domestic demand was significantly low due to lower private consumption and investment. PRIVATE CONSUMPTION AND CONSUMER CONFIDENCE INDEX Percentage. Real change rate. Private Consumption 0,1 1,2 2,4 1,5 2,0 1,4 Euro Zone 2,0 1,2 Portugal F Source: Eurostat, Bank of Portugal Consumer Confidence Index IV 2005 II 2005 IV Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 In Portugal, the frequent raises in ECB interest reference rates have not exerted a direct influence on loan interest rates, counterbalanced by a drop in financial margins and the offer of new financial products and contractual arrangements. 26 de 112

27 witnessed a growth in personal debt and debt of non financial companies. The annual rate of change of loans granted by financial institutions to local residents, of around 7,7% in 2005, had reached 8,3% by the second quarter of. Loans for private consumption and other purposes showed the highest growth, mainly due to a continued growth in home loans. LOANS GRANTED BY FINANCIAL INSTITUTIONS TO LOCAL RESIDENTS Annual Growth Rate. 10,5 10,7 10,9 11,1 11,1 11,2 10,8 Mortgages 9,8 7,5 9,9 10,1 9,3 9,3 Total Private 5,1 4,2 5,8 6,8 Consumption and other purposes 10,6 10,3 8,7 8, IQ 2005 IIQ 2005 IIIQ 2005 IVQ 2005 IQ IIQ, and the higher import prices, energy resources excluded, are on the basis of this growth. In the labour market, employment grew by 0,8% during the second half of the year, against -0,1% in the second half of Despite this improvement, long term unemployment continued to rise in the first six months of, at a rate of 53,3% compared to 49,9% at the end of As far as wages are concerned, there was a slowdown in, with a growth of 3% compared to 3,4% in EMPLOYMENT AND LONG-TERM UNEMPLOYMENT Total Employment Annual percentage change 0,8 Long-Term Unemployment Percentage of total unemployment 53,3 Source: Bank of Portugal 0,1-0,1 50,2 Payment default, defined as unpaid over total loan, progressed at a favourable rate in 45,1 : 1,44% compared to 1,51% in December 1st Sem st Sem st Sem. 1st Sem st Sem st Sem This progress results from a rise in total Source: Bank of Portugal, INE loans and the relative balancing of unpaid loans related to the launch of new products in the market and adoption of more adequate risk management policies by the banks. According to the Bank of Portugal, in the average rate of inflation should grow 0,9p.p., reaching a level of approximately 3%. Aspects such as the rise to VAT, in July 2005, the rise of tax over tobacco, at the start of 27 de 112

28 4. UNICRE S ACTIVITY 4.1. ANALYSIS OF ACTIVITY PER BUSINESS UNIT IN ACQUIRING Special attention was paid to operational efficiency levels, which resulted in a 15,2% reduction to internal costs. It was thus possible to improve sharing of efficiency gains with merchants, with two pricing reductions during the year, which translated into a 26 b.p. lower average discount rate (16,67% lower than in 2005). SUMMARY During special attention was paid to maintaining the growth trend of UNICRE s acquiring business, concentrating on efficiency gains and on a better products and services offer. Having given priority to those segments which are more attractive to UNICRE, sales volume increased by 7%, taking into account that the decisive macroeconomic indicators for UNICRE s activity, namely private consumption, kept to stable rates of growth (rate of change of private consumption at competing levels of 1,2% compared to 1,7% in 2005). In 2005, there had been a 8,9% growth in turnover. saw an above average growth in payments with foreign cards (16,5% compared to around 11% in 2005), confirming the relevance for international payments of brands acquired in UNICRE s network. In there were improvements to services and products provided. Of particular relevance is the services pack, targeted at each merchant s specific needs, and the development of new remote payment solutions, reinforcing the already high security and reliability levels. TRANSACTION VALUE ON REDUNICRE Number of transactions (Million) Transaction Value (billion) ,6% % Average transaction value (Euro) Source: Unicre In, transactions with cards of brands acquired by UNICRE amounted to 14.6 billion euros. The number of transactions exceeded 335 million (around 320 million in 2005), of which only 0,1% were not electronic. 28 de 112

29 By the end of the year, the number of acquired establishments had reached 42 thousand and the number of POS terminals 58 thousand, of which approximately 9 thousand were merchant-owned terminals and 27 thousand belonged to the merchants deposit bank. VALUE PROPOSITION In April there was an adjustment to RedUNICRE s MSC (Merchant Service Charge) price schedule (with the exception of petrol stations). The higher rates, of 1,95% for debit cards, dropped to 1,80%. Credit card discount rates of 3,95% were reduced to 2,50%. NUMBER OF ACTIVE REDUNICRE MERCHANTS EVOLUTION OF UNICRE S AVERAGE DISCOUNT VALUE Percentage ,15% 1,96% 1,83% ,56% Stability of network size: Retail consolidation Effort to dinamize merchant network 40% reduction since 2002 (12% per year) 1,30% Source: Unicre Source: Unicre According to the Estudo Regular do Painel de Comerciantes RedUNICRE (a periodic research of a selection of RedUNICRE s merchants), the levels of customer satisfaction/loyalty remained high in : on a scale of 1 to 10, the rate of global satisfaction is 7,4 and the level of recommendation is 7,5; 69% of clients consider themselves loyal to UNICRE. During, new clients signed into the network. However, the current situation of consumption restraint and retail market restructuring weighed on the numbers: approximately 40% of merchants who cancelled their acquiring contract with This reduction covered more than 99% of RedUNICRE s merchant network. SAVINGS TO MERCHANTS AS A RESULT OF RATE REDUCTIONS* Million Euros 7 Over 367 Million between 2001 and * Annual value of transactions * (average discount rate in 2000 average discount rate in current year) Source: Unicre In October there was a discount value adjustment to the petrol stations sector. UNICRE in justify the decision with changes to the company s activity or closure of the business. Only around 4% of cancellations were due to a switch of acquirers. 29 de 112

30 As a whole, these developments gave RedUNICRE the opportunity to follow the international trend of merchant service tax reductions inserted in a context of productivity gains due to healthy and continuous growth of the use of payment cards 1. As an example, we can consider the average merchant service fees in Spain (a natural reference for many of UNICRE s customers, due to the close proximity of the market, in both physical and economic terms), which according to information obtained from the Bank of Spain are very similar to those practiced by RedUNICRE. COMPARISON WITH MERCHANT DISCOUNT RATES IN SPAIN Percentage Source: Unicre 2,15% 1,96% 1,83% 1,59% 1,59% 1,59% Spain 1,56% 1,52% Redunicre 1,30% 1,22% The remote payments channels and, in particular, electronic commerce payments still represent good opportunities for future growth. During the total sales volume in these establishments increased by 25%. In RedUNICRE increased its offer of solutions with an aim to satisfying both merchants and customers expectations 1 From January the bilateral Interchange fees established between UNICRE as acquirer and local issuers were set by the competent authorities for the Visa and MasterCard schemes. regarding remote payments particularly in what concerns convenience and security. In the e-commerce sector, a 3D Secure payment solution (Visa International s Verified by Visa), has already been adopted and is working at a significant number of registered clients. It is expected that these measures result in a significant positive impact in the sustained growth of card payments, due to improvements to the levels of trust and security, as well as associated cost reductions (reduction in levels of fraud and chargebacks). Working with client segmentation, RedUNICRE s merchants were alerted to solutions such as EMV and V-Pay (Visa International s SEPA compliant Chip & Pin debit card), through below-the-line and onsite campaigns. In order to promote usage and acceptance of payment cards in everyday spending, RedUNICRE and Visa International launched an incentive campaign for credit and debit card payments at the following establishments: Zara, C&A, Hakei, Quebramar, Massimo Dutti, Orchestra, Mango, Nike Woman, Pierre Cardin Dalí, Dimoda, Camisaria Moderna, Fnac, Ensitel, and Singer. The campaign, which ran during the 2 nd and 3 rd quarters of, awarded sales vouchers to 300 prize winners among Visa and Visa Electron cardholders and resulted in a 2,8 million euros increase in sales volume at these merchants, in comparison to the same period in the previous year. 30 de 112

31 RedUNICRE also held a number of promotion and customer loyalty campaigns with MasterCard. OPERATIONAL EFFICIENCY Operational efficiency improvements were obtained from process improvements, cost reductions, corporate and resource adjustments and skills reinforcement in addressing market needs. In terms of organisation and information technology, there were improvements to commercial capacity both in structural organisation and working tools and resources. There was continued effort towards automation of the merchant network. In, there was a 30,5% reduction to manual transactions, which contributed towards reduction of costs associated to payment transactions and increased merchant revenue. also witnessed continued migration to EMV2 capable automatic POS terminals, resulting in improved security conditions. This migration operation will continue in Its conclusion is expected in April, as far as UNICRE s POS terminal base is concerned, and before the end of the year for the remaining terminals (stand alone POS terminals). A new RedUNICRE site was launched in. This improved the service level to merchants and increased efficiency in RedUNICRE s administrative processes. Through the site, a number of services are now available to merchants, such as on-line applications or access to a homebanking platform, not to mention general information essential to the client. In, the implementation of a new agreement with integrated services subject to payment of a monthly fee and depending on the merchant equipment and the level of hired services Services Package contributed towards improved efficiency of the operation and increased merchant satisfaction/loyalty levels. The concept resulted in significantly better results of the POS management operation and a positive deviation of over 12% in monthly revenues. EMV CONVERSION RATE. Percentage of terminals converted to EMV. POS 53% ATMs 98% Source: Unicre 31 de 112

32 ISSUING EVOLUTION IN NUMBER OF CARDS Thousand cards SUMMARY OF ACTIVITY In, the priorities of the Issuing Unit concentrated on general management of the current business, development of campaigns for business growth and return of added value to shareholders, reasserting UNICRE s presence as a reference in the credit card market and keeping to high levels of customer satisfaction. Keeping to a strategy centred on maintaining customer loyalty, several monitoring actions occurred during which demonstrated a continued high level of customer satisfaction (91%). The main activities for revitalizing the current Portfolio included renewed offer propositions, the launch of new services and improvement of current service functionalities, so as to capture new clients and grant adequate levels of portfolio renewal. A number of cross-selling activities aimed to improve current contact procedures and contribute towards better retention levels. As in 2005, the focus was on loan facilities for private cardholders, with competitive and flexible value propositions. Source: Unicre Making the most out of new technologies for improving effectiveness and efficiency of commercial actions, in the internet and were used for customer solicitation, adding to the usual telemarketing and direct-mail methods. EVOLUTION IN TRANSACTIONS VALUE Million Euros Source: Unicre For improved loyalty, stimulation of card use and revolving credit facilities, several campaigns were aimed at specific customer sectors and products and contributed to an increase in card usage and customer loyalty and improved the offer to customers. VALUE PROPOSITION In order to provide a wider range of benefits to our clients, a number of cross-selling multi-canal partnerships programmes were developed with suppliers of the latest 32 de 112

33 technology innovations (ipods, GPS, Plasmas, LCDs, cameras, among others) at competitive prices and on convenient payment conditions. Our Unibanco cardholders were offered new forms of credit and with repayment terms of 12 to 48 months. Improvements to the Cash Advance offer resulted in a 51% increase in granted credit. online between 17 March and 1 June, attracted thousands of players. Vamos todos Apoiar Portugal ( Let us all support Portugal ), ran from 1 April to 31 May. The event covered the Unibanco cards with the national colours (card mailers and card statements, for example) and cardholders were offered the possibility of entering a prize draw for plasma TVs. EVOLUTION IN CREDIT FACILITY GRANTED TO CARDHOLDERS Annual average value. Million euros % CAGR Credit (Revolving) On sponsorship activities, the company maintained its institutional relationship with Pedro Lamy, one of the most successful Portuguese car racing pilots. In, he closed the season in 2nd place of the GT1 category. Source: Unicre Credit Despite this, the levels of risk remained even. Unibanco NetNet was promoted at several events connected to ACEP (Portuguese e-commerce Association), for development of e-commerce. AAS Percentage Indicator Ano Ano Var. / Valor % Overdue Credir for more than 90 days Ratio 63,97% 63,72% 0,00 p.p. -0,4% a Amounts related to 2005 after account reclassification to AAS Financial Statements. Vide Note 4 to Financial Statements. Another exclusive Unibanco publication - XXI Arquitectura Contemporânea Portuguesa (XXI Contemporary Portuguese Architecture), introducing a new generation of 21 st Century architects who are distinguishing themselves through the undeniable quality of their work, reinforced the editorial projects. One of the new methods used for promoting the Unibanco brand was through a game, launched online. In direct reference to the Unibanco mini card Onde está o mini? ( Where is mini? ) the game, which was In July UNICRE launched a new credit card, the Unibanco A Palavra ( The Word ), an edition limited in time, valid until March 2007, and carrying the signature of Fernando Pessoa, one of the most renowned Portuguese poets of the XXth Century. The benefits, associated to the life and work of the poet, include discounts at several restaurants, book shops, works of art and the Centro Nacional de Cultura, every-day-life objects engraved with words by Fernando Pessoa and payment facilities on acquisition of the poet s work. A 33 de 112

34 Palavra also offers each client the possibility to personalise his card with one out of a choice of 6 phrases or the poet s heteronym s. A number of improvements were also introduced to information flow and reporting of customer complaints, accessed by several areas within the unit. This contributed to higher efficiency and effectiveness of customer service OTHER SERVICES Concerning partnerships for product development, it is important to mention the launch of Primium, in partnership with the Companhia de Seguros Açoreana (Insurance Company), a chip card offering direct discounts at several establishments as well as Repsol Move and Primium rewards. Reinforcing the strategy for a wider offer of Unibanco services, a new Unibanco Viagens online (Unibanco online Travel), for private and corporate customers, open every day of the year, gives cardholders privileged access to the complete set of services available at a travel agent. OPERATIONAL EFFICIENCY For improved operational efficiency, the company decided to opt for outsourcing several services of the legal and collections unit, with proven results in debt recovery. With the help of new internet and technologies, cardholders were contacted via SMS messages, requesting updated personal details, resulting in improved data quality. During, and with an aim to improving its efficiency ratio, UNICRE rationalised a number of processes, opting for outsourcing several tasks. For example, in the Serviço de Apoio Operacional e de Segurança (Security and Operational Support Department) was restructured. The Central Services Department was extinguished as such, giving way to a new Unidade de Instalações e Expediente (UIE) (Facilities and Expedition Unit), responsible for company mail, card application forms and merchant contracts scanning and for technical support to the company s facilities. Another unit, the Unidade de Gestão de Transacções Reclamadas (UGTR) (Chargeback Management Unit), was attributed responsibility for all national and international chargebacks, replacing activities previously executed by the Foreign Customers and Issuers Support Departments. A unit of proven technical competence, with a necessarily deep knowledge of international payment systems rules (Visa and MasterCard) and permanent updates, resulting from introduction of new systems and technologies such as the chip. 34 de 112