Haitong Banco de Investimento do Brasil S.A.

Transcription

1 Haitong Banco de Investimento do Brasil S.A. CNPJ/MF nº / Head-office: Av. Brigadeiro Faria Lima, 3.729, 9º floor, São Paulo/SP Ombusdman: ouvidoria@haitongib.com.br MANAGEMENT REPORT TO OUR STOCKHOLDERS, We hereby submit for your appreciation the financial statements of Haitong Banco de Investimento do Brasil S.A. for the semester ended June 30, 2016, including the notes to the financial statements and the Independent Auditors Report, prepared in accordance with the Corporate Law and the regulatory rules of the Central Bank of Brazil. CONTROL CHANGE Haitong Banco de Investimento do Brasil S.A. (Bank) became a direct subsidiary of Haitong Bank S.A., both with head office in Lisboa (Portugal). On August 12, 2015, the Central Bank of Brazil approved the transfer of the indirect shareholding control of Haitong Banco de Investimento do Brasil S.A. and its subsidiaries Haitong Securities do Brasil S.A. - CCVM and Haitong DTVM S.A. to Haitong International Holdings Limited with head office in Hong Kong, a wholly owned subsidiary of Haitong Securities Co. Ltd, with head office in Shanghai, China. The corporate structure of the Bank and its subsidiaries did not change in Brazil, remaining under the direct control of Haitong Bank S.A.. Finally, the application for authorization to change their company names is being examined by the Central Bank of Brazil. PERFORMANCE For the semester ended June 30, 2016, Haitong Banco de Investimento do Brasil S.A. recorded a net income of R$ 21,314. Shareholders equity totaled R$ 659,229 at the end of the period, after considering the net income and deduction of interest on own capital in the total of R$ 12,000. The capital adequacy ratio as set forth by the Basel Committee and regulated by the Central Bank of Brazil reached 14.4% at the end of the semester in the consolidated prudential, higher than the minimum of 10.5% required by the Central Bank of Brazil. Total assets amounted to R$ 8,107,009 at the end of the period. Interbank funds applied and the securities and derivatives portfolio reached R$ 6,700,279 accounting for 82.6% of the total assets. The securities portfolio reached R$ 3,894,179, accounting for 48.0% of the total assets. Represented by 86.6% of government bonds and 13.4% by private securities. From this portfolio, the Bank classified 74.1% of the securities of this portfolio as trading securities, 5.4% as securities available for sale and 20.5% as securities held to maturity, due to the Management s intention and to the financial capacity of the Bank holding them until maturity. The liquidity position of the Bank, represented by the portfolio of free securities, reached of R$ 637,981 slightly lower amount the final shareholders equity. The loan portfolio reached R$ 646,301 at the end of the period. This portfolio, including guarantees granted in the amount of R$ 333,477, reached the balance of R$ 979,778 at the end of the period. This loan portfolio, 94.9% of operations were classified between the risk levels AA and C in accordance with the regulations of the Central Bank of Brazil. The overdue totaled R$ 6,714 corresponding to 1.0% of the portfolio. The allowance for possible loan losses totaled R$ 29,107 at the end of the period,corresponding to 4.5% of the total loan portfolio, which is above the minimum required by CMN Resolution In addition, provision was made to cover other credit risk and counterparty in the amount of R$ 9,849, which added to the allowance for credit losses totaled R$ 38,956 at the balance sheet date. The amount of funds raised totaled R$ 6,663,094 at the end of the period. These funds raised are represented by R$ 263,649 in interbank deposits, R$ 1,808,092 in time deposits, R$ 4,253,294 money repurchase commitments, R$ 252,896 in repass borrowings from BNDES and R$ 85,163 in financial letters, letters of credit for real state, letters of credit for agribusiness and structure finance certificate. ACKNOWLEDGEMENTS We wish to thank our clients, employees and shareholders for their collaboration, which has enabled us to achieve the results recorded in the period and the constant improvement in our products and services. São Paulo, August 30, 2016 BOARD OF DIRECTORS 1

2 BALANCE SHEETS JUNE 30, 2016 AND 2015 (In thousands of Reais) Assets Current assets... 6,578,182 3,168,128 Cash and cash equivalents... 8,544 30,427 Interbank funds applied... 2,176,210 27,029 Money market... 2,006,694 21,003 Interbank deposits ,516 6,026 Securities and derivative financial instruments... 3,691,967 2,490,052 Own portfolio , ,478 Subject to repurchase commitments... 2,463,185 1,889,187 Subject to guarantees ,145 60,506 Derivative financial instruments ,957 81,881 Loans , ,127 Loans - Private sector , ,531 Loans linked to assignments... 13,855 (Allowance for loan losses)... (12,565) (16,259) Other receivable , ,592 Foreign exchange portfolio ,392 87,224 Income receivable... 5,627 6,580 Securities trading... 36,493 47,932 Other , ,856 (Allowance for loan losses)... (1,666) Other assets... 3,791 2,901 Prepaid expenses... 3,791 2,901 Long- term assets... 1,349,459 2,062,178 Interbank funds applied... 67, ,513 Interbank deposits... 67, ,513 Securities and derivative financial instruments ,662 1,192,809 Own portfolio , ,895 Subject to repurchase commitments , ,251 Subject to guarantees... 9, ,820 Derivative financial instruments ,493 33,843 Loans , ,142 Loans - Private sector , ,668 (Allowance for loan losses)... (14,678) (9,526) Other receivable , ,479 Income receivable... 3,300 Other , ,671 (Allowance for loan losses)... (198) (192) Other assets... 1,109 1,235 Prepaid expenses... 1,109 1,235 Permanent assets , ,653 Investments , ,667 Subsidiaries and affiliates - Domestic , ,688 Other investments... 9,979 9,979 Premises and equipment... 21,761 19,635 Other fixed assets for own use... 28,584 24,953 (Accumulated depreciation)... (6,823) (5,318) Intangible assets Intangible assets (Accumulated amortization)... (488) (403) Total... 8,107,009 5,406,959 Liabilities Current liabilities... 6,076,186 3,426,692 Deposits... 1,231, ,166 Interbank deposits... 60,149 35,548 Time deposits... 1,171, ,618 Money market repurchase commitment... 4,161,965 1,878,469 Own portfolio... 2,501,102 1,878,469 Third-party portfolio... 1,660,863 Resources from securities issuance... 54, ,983 Resources from securities issuance... 48, ,983 Structured Finance Certificates... 5,747 Repass borrowings from public sector... 22,746 29,964 BNDES... 14,095 20,898 FINAME... 8,651 9,066 Derivative financial instruments , ,387 Derivative financial instruments , ,387 Other liabilities , ,723 Collection of taxes Foreign exchange portfolio ,864 86,846 Social and statutory... 26,222 6,630 Taxes payable... 42,091 19,815 Securities trading... 4,843 Other... 10,679 39,570 Long-term liabilities... 1,370,907 1,324,357 Deposits , ,476 Interbank deposits ,500 19,746 Time deposits , ,730 Money market repurchase commitment... 91, ,744 Own portfolio... 91, ,744 Resources from securities issuance... 30,725 13,497 Resources from securities issuance... 30,725 13,497 Repass borrowings from public sector , ,981 BNDES , ,710 FINAME... 10,954 20,271 Derivative financial instruments... 65, ,362 Derivative financial instruments... 65, ,362 Other liabilities , ,297 Taxes payable ,484 97,494 Other... 10,517 12,803 Deferred income Deferred income Shareholders equity , ,062 Capital - Domestic , ,000 Revenue reserve , ,772 Asset valuation adjustments... (3,710) (1,710) Retained earnings... 8,248 Total... 8,107,009 5,406,959 2

3 STATEMENTS OF INCOME SEMESTERS ENDED JUNE 30, 2016 AND 2015 (In thousands of Reais, except for the net income period/year per share) Financial operations income , ,447 Loans... 41,990 80,973 Securities income , ,182 Net income from derivatives financial instruments 342, ,150 Trade finance and foreign exchange income... (936) 26,142 Financial operations expenses... (721,040) (441,771) Deposits, money market and interbank funds... (704,580) (412,330) Loans operations, Assignment and Repass... (10,379) (11,962) Financial Assets Assignment... (4,204) Allowance for losses on doubtful receivables... (6,081) (13,275) Net income on financial operations ,344 (38,324) Other operating income (expenses)... (147,040) 12,422 Service fee income... 7,517 17,826 Personnel expenses... (34,573) (24,955) Other administrative expenses... (16,186) (14,691) Tax expenses... (4,834) (6,563) Equity in earnings of subsidiaries... (5,792) (2,211) Other operating income... 1,527 44,579 Other operating expenses... (94,699) (1,563) Operating result... 85,304 (25,902) Non-operating result... (48) (8) Net income before income taxes and profit sharing 85,256 (25,910) Income tax and social contribution... (63,236) 29,605 Income tax... (23,478) 13,895 Social contribution... (16,593) 7,954 Deferred tax assets... (23,165) 7,756 Profit sharing... (706) (1,474) Net income... 21,314 2,221 Number of shares ,338, ,338,665 Net income for the period per shares in R$... 0,17 0,02 STATEMENTS OF CASH FLOWS SEMESTERS ENDED JUNE 30, 2016 AND 2015 (In thousands of Reais) Operating activities Net income... 21,314 2,221 Adjusted net income ,886 (28,046) Allowance for losses on doubtful receivables... 6,081 13,541 Depreciations and amortizations... 1,278 (606) Equity in earnings of subsidiaries... 5,792 2,211 Current and deferred tax liabilities... 42,769 (21,849) Tax credits... 23,165 (7,756) Other provision... 28,884 4,223 Exchange variation on cash and cash equivalents 1,917 (17,810) (Increase) decrease in operations assets... 1,106, ,363 Interbank funds applied... 18,306 11,752 Securities and Derivative Financial Instruments.. 1,177, ,735 Loans operations , ,374 Other receivable... (199,870) (79,880) Other assets... 4,414 (618) Increase (decrease) in operations liabilities... (16,817) (687,632) Deposits ,863 (396,448) Money market and interbank funds... (519,582) 571,023 Resources from securities issuance... (262,021) (859,511) Interbranch accounts... (32) Borrowings and repasses... (13,871) (35,809) Derivative financial instruments... 29, ,601 Other liabilities ,727 (155,470) Deferred income... (456) (108) Income Tax and Social Contribution paid... (5,010) (878) Net cash provided by/used in operating activities 1,221,381 17,906 Investing activities Acquisition of premises and equipment... (3,261) (1,867) Sale of premises and equipment Net cash provided by/used in investing activities (2,854) (1,573) Financing activities Increase in subordinated debts... (32,137) Interest on own capital paid... (7,400) Net cash provided by/used in financing activities (39,537) Exchange variation on cash and cash equivalents (1,917) 17,810 Increase (Decrease) in cash and cash equivalents 1,216,610 (5,394) Beginning of period ,741 62,850 End of períod... 1,798,351 57,456 Increase (Decrease) in cash and cash equivalents 1,216,610 (5,394) STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY SEMESTERS ENDED JUNE 30, 2016 AND 2015 (In thousands of Reais) Revenue reserves Asset Legal Reserves for valuation Retained Capital reserve expasion Adjustments earnings Total Balances at January 01, (2.384) Other Events: Asset valuation adjustments... (1.326) (1.326) Net income for the semester Allocations: Legal reserve (1.066) Interest on own capital... (12.000) (12.000) Balances at June 30, (3.710) Balances at January 01, (1.550) Other Events: Realization of reserves... (5.579) Asset valuation adjustments... (160) (160) Interest on own capital... (5.579) (5.579) Net income for the semester Allocations: Interest on own capital... (2.221) (2.221) Balances at June 30, (1.710)

4 1) Operating context Haitong Banco de Investimento do Brasil S.A. (Bank) became a direct subsidiary of Haitong Bank S.A. (Banco Espírito Santo de Investimento S.A.), both with head office in Lisboa (Portugal), whose operations are conducted in the context of a group of companies that operate in an integrated manner in the financial market, and certain operations of the former have the involvement or intermediation of related institutions, comprising the financial market, whose activities include distribution of securities and foreign exchange and securities brokerage. On August 12, 2015, the Central Bank of Brazil approved the transfer of the shareholding control of Haitong Banco de Investimento do Brasil S.A. and its subsidiaries Haitong Securities do Brasil S.A. - CCVM and Haitong DTVM S.A. to Haitong International Holdings Limited with head office in Hong Kong, a wholly owned subsidiary of Haitong Securities Co. Ltd, with head office in Shanghai, China, under the terms of the purchase and sale agreement signed in December The corporate structure of the Bank and its subsidiaries did not change in Brazil, remaining under the direct control of Haitong Bank S.A. Finally, the Central Bank of Brazil approved changing the company names of the Bank and its subsidiaries on October 08, As part of its business strategy, we maintained order to expand activities in Haitong Banco de Investimento do Brasil S.A.- Cayman Branch, whose total assets and shareholders equity totaled US$ 177,669,000 (2015 US$ 184,448,000) and US$ 97,550,000 (2015 US$ 94,876,000), respectively. 2) Presentation of the financial statements The financial statements have been prepared in accordance with accounting guidelines issued by Law 6404/76 and amendments introduced by Law 11638/07 and by Provisional Measure 449/08 (transformed into Law 11941/09), for the accounting of operations, in connection with the rules and instructions of the National Monetary Council (CMN) and the Central Bank of Brazil (BACEN). The financial statements were approved by Management on August 30, The financial statements of the foreign branch were adjusted to the accounting practices adopted in Brazil, applicable to institutions authorized to operate by the BACEN, as well, were translated into Brazilian Reais according to the exchange rate of the local currency. These financial statements were consolidated in financial statements of Haitong Banco de Investimento do Brasil S.A.. The balances of assets and liabilities balance sheet and results arising from transactions between the Bank and its foreign Branch have been eliminated, when applicable. As part of the process of convergence with international accounting standards, certain accounting pronouncements and their interpretations were issued by the Brazilian Committee for Accounting Pronouncements (CPC), which are applicable to financial institutions only after approved by CMN. The accounting pronouncements which have already been approved by CMN include the following: a) Resolution 3566/08 - Impairment of Assets (CPC 01), b) Resolution 3604/08 - Statement of Cash Flows (CPC 03), c) Resolution 3750/09 - Related Party Disclosures (CPC 05), d) Resolution 3823/09 - Provisions, Contingent Liabilities and Contingent Assets (CPC 25), e) Resolution 3973/11 - Subsequent Events (CPC 24), f) Resolution 3989/11 - Share-Based Payment (CPC 10), g) Resolution 4007/11 - Accounting Policies, Changes in Accounting Estimates and Errors (CPC 23), h) Resolution 4144/12 - Framework (R1) and i) Resolution 4424/15 - Employee benefits (CPC 33). Presently, it is not practicable to estimate when CMN will approve the other CPC accounting pronouncements or whether their adoption, subsequent to approval, will be effective for future periods or applicable retroactively. As a result, it is not yet possible to estimate the accounting effects arising from the use of these pronouncements on the Bank s financial statements. 3) Significant accounting practices a. Income and expenses are recognized on the accrual basis. b. The securities purchased for the Bank s portfolio are recorded at the amount paid, including brokerage and fees, and are classified according to the intention of the Directors of the Bank into three distinct categories according to BACEN Circular 3068 (see Note 6): a) Trading securities - securities acquired for the purpose of being actively and frequently traded. They are recorded at cost, plus income earned and adjusted to market value recognized in profit or loss account in the statements of income; b) Available-for-sale securities - securities that are not specifically intended for trading purposes or to be held to maturity. They are recorded at cost, plus income earned, which is recorded in profit or loss account in the statements of income and adjusted to market value within shareholders equity, net of tax, which will be recognized in profit or loss only when effectively disposed; and c) Held-to-maturity securities - securities intended and for the financial capacity to be held in the portfolio up to maturity. They are recorded at cost, plus earnings recognized in profit or loss account in the statements of income for the period. c. The Bank uses derivative financial instruments aiming at mitigating its exposure to market, currency and interest rate risks, using for so the instruments available on the BM&F and the over-the-counter markets. These derivative financial instruments are valued at market value and the positive and negative adjustments are accounted for as income or expenses in the income, in accordance with the BACEN Circular 3082 (see Note 7). The derivative financial instruments (items subject to hedge) are considered as hedge instruments used to mitigate risks arising from market exposure to market price valuation of financial assets and liabilities (hedge object) are considered as hedge operations (hedge operation) and, at the moment that operation is contracted, are classified as market risk hedge. These operations have its gains and losses, realized or not, accounted for in income or expense accounts in the income. d. Loans are classified in accordance with the Management s assessment at nine levels of risk, considering the analysis of clients and guarantees, past loan loss experience, as well as specific and general risks relating to operations, in compliance with the parameters established by the CMN Resolution 2682/99. After 60 days, the yield of loans overdue are only recognized as revenue when effectively received. H-rated (maximum risk) past-due operations remain at this level for six months, period after which they are reversed against the existing allowance and controlled in memorandum accounts for at least five years, no longer being recognized in the balance sheets. Renegotiated operations are maintained, at least, at the same classification level as their prior rating. The allowance for doubtful loans was recorded taking into account the current economic scenario and expectations regarding the realization value of the portfolio, so that an adequate provision in an amount sufficient to cover specific and overall risks is recorded, together with the allowance calculated in accordance with the risk levels and the respective minimum percentages established by the BACEN Resolutions 2682 and 2697 (see Note 8 c ). e. The sale operations or transfer of a financial asset are classified into three categories, as determined by the CMN Resolution 3533: a) Operations in which the seller substantially transfers all the risks and rewards of the financial asset; b) Operations with substantial retention of risks and rewards of the financial asset; and c) Operations in which the seller does not substantially retain or transfers all the risks and rewards of the financial asset. The tranfer or retaining of risks and rewards of the financial assets is assessed by consistent and verifiable criteria, using as methodology the comparison of the exposure before and after the sale or transfer, with regard to the variance in the present value of expected cash flows associated with the financial asset discounted by the appropriate market interest rate (Note 8 e ). f. Impairment of assets: An impairment loss is recognized if the book value of an asset or of a cash-generating unit exceeds its recoverable value. Impairment losses are recognized in the income for the period. The carrying value of non-financial assets, except other assets and tax credits, are reviewed once a year, at least, and when there is any sign of loss due to impairment. 4

5 g. Permanent assets are stated at cost, taking the following aspects into consideration: Interests in subsidiaries are valued in accordance with the equity method of accounting (see Note 11). Depreciation of premises and equipment is calculated using the straight-line method at the following annual rates: 20% for data processing systems and vehicles and 10% for furniture and equipment. Intangible assets are basically represented by software licenses. Their amortization is calculated using the straight line method over the term of their contracts. h. Current and noncurrent liabilities are measured at their known or estimated values, plus, when applicable, the charges and monetary variations (on a pro rata diem basis) and foreign exchange variations incurred. i. Provisions, contingent liabilities and legal liabilities are recognized, measured and disclosed in accordance with the criteria defined by CPC 25 (see Note 15), approved by the CMN Resolution 3823: Provisions: recognized taking into consideration the opinion of legal advisors, the nature of the lawsuits, similarity with previous cases, complexity and positioning of the courts, whenever the loss is evaluated as probable, which would cause a probable outflow of funds for the settlement of liabilities and when the amounts involved are measurable with sufficient reliability; Contingent liabilities: according to CPC 25, contingent refers to liabilities whose recognition will depend on whether one or more future and uncertain events beyond the Management s control occur or not. Contingent liabilities do not meet the recognition criteria when being classified as possible losses, and they must only be disclosed in the notes when relevant. Contingent liabilities classified as remote are not recognized nor disclosed; and Legal liabilities: provision for tax risks: result from judicial proceedings, being contested on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully recognized in the financial statements. j. Provisions for Income Tax (IRPJ), Social Contribution (CSLL), PIS (Social Integration Program) and COFINS (Tax for Social Security Financing) are calculated at the rate of 15% plus 10% above a certain limit, 15% until August 31, 2015, 0.65% and 4%, respectively, considering for calculation purposes of the respective bases the legislation applicable to each tax charge (see Note 14 a for Income Tax and Social Contribution). The Law 13,169/15, amending Law 7,689/88, raises the rate of social contribution to 20% of net income from the period of September 1st, 2015 to December 31, In January 1st, 2019, the rate will return to 15%. The Bank also complies with the accounting practice of recognizing tax credits from income and social contribution taxes calculated on tax losses and temporary differences, at the same rates in force for the recognition of provision (see Note 14 b ). Such tax credits are recognized for accounting purposes based on current expectations for realization, considering the technical studies and analyzes made by Management. k. The financial statements, in accordance with Brazilian accounting practices, include some accounts whose amounts are determined using estimates based on past experience, legal and business environment, chances of occurrence of events subject or not to the Management s control etc. These estimates are reviewed at least annually, with the aim of determining amounts that more closely approximate the future settlement values of the assets or liabilities considered. 4) Cash and cash equivalents Cash and cash equivalents, in accordance with the CMN Resolution 3604/08, include cash on hand, bank deposits, and highly liquid short-term investments with very low risk of having their values and limits changed, with maturity equal to or shorter than 90 days. The cash and cash equivalents, presented in the Statements of Cash Flows, comprise: Semester ended June Cash and cash equivalents... 8,225 41,043 - Money market ,578 2,001 - Funds applied abroad ,158 - Interbank deposits... 1,780 19,806 Total - Interbank funds applied ,516 21,807 Beginning of period ,741 62,850 Cash and cash equivalents... 8,544 30,427 - Money market... 1,627,284 21,003 - Funds applied abroad ,523 - Interbank deposits... 6,026 Total - Interbank funds applied... 1,789,807 27,029 End of period... 1,798,351 57,456 Increase (decrease) in cash and cash equivalents... 1,216,610 (5,394) 5) Interbank funds applied Up to 3 months 3 months to 1 year 3 to 5 years Over 5 years Total 2016 Total Public securities - N.T.N.-B , ,670 - Public securities - N.T.N.-F... 1,199, ,066 1,504,884 - Public securities - L.F.T.... 7,003 - Public securities - L.T.N ,796 74, ,140 14,000 Own portfolio position... 1,627, ,410 2,006,694 21,003 Interbank deposits... 6,993 67,440 74, ,539 Funds applied abroad , ,523 Total as of Jun 30, R$... 1,789, ,403 67,440 2,243,650 - % % 17.2% 3.0% 100.0% Total as of Jun 30, R$... 27,029 67,965 80, ,542 - % % 38.7% 45.9% 100.0% 6) Securities and derivative financial instruments a. Composition of securities June 30, 2016 June 30, 2015 Unpledged Pledged Total Unpledged Pledged Total Public securities - L.F.T... 74,897 1,304,414 1,379,311 27,397 27,397 Public securities - L.T.N ,159 1,623,699 1,861, ,401 2,495,964 2,919,365 Public securities - N.T.N.B , , ,065 11,484 11,484 Public securities - N.T.N.F.... 3,979 3,979 Debentures ,741 69, , ,344 64, ,303 Investment fund quotas... 72,159 72,159 49,698 49,698 Quotas of Credit Assignment Investment Funds (F.D.I.C.s) Eurobonds... 23, , ,356 40, , ,511 Certificate of Agribusiness... 9,726 9,726 11,860 11,860 Certificate of real estate... 13,714 13,714 14,410 14,410 Promissory notes... 9,045 9,045 TOTAL ,981 3,256,198 3,894, ,374 2,808,763 3,567,137 5

6 b. Securities portfolio per category June 30, 2016 June 30, 2015 To mature Up to 3 3 to 12 1 to 3 3 to 5 Over 5 Book Cost Book Cost Unpaid months months years years years Value Value Value Value Public securities - L.F.T ,831 1,058,480 1,379,311 1,378,931 27,397 27,392 Public securities - L.T.N , ,101 1,102,544 1,292,745 1,284,779 2,215,324 2,210,319 Public securities - N.T.N.B.... 1,975 29,034 13,904 67,351 14, , ,206 11,484 11,795 Public securities - N.T.N.F.... 3,979 3,979 3,993 Investment fund quotas... 67,802 67,802 67,802 36,303 36,303 Certificate of real estate... 13,714 13,714 14,329 14,410 13,906 Total Trading Securities (b.1)... 67,802 28,711 29, ,984 1,490,726 1,086,995 2,884,616 2,877,040 2,304,918 2,299,715 Debentures... 62,396 76,971 18,041 30, , , , ,214 Investment fund quotas... 4,357 4,357 4,357 13,395 13,395 Quotas of Credit Assignment Investment Funds (F.D.I.C.s) Certificate of Agribusiness... 9,726 9,726 10,050 11,860 11,961 Promissory notes... 9,045 9,045 9,235 Total Available for Sale (b.2)... 4,357 71,441 86,795 18,041 30, , , , ,679 Public securities - L.T.N , , , , ,041 Debentures... 33,127 30,173 63,300 63, , ,839 Eurobond... 18, ,260 20,432 15, , , , ,511 Total Held to maturity (b.3)... 18, , ,260 53,559 45, , ,769 1,066,391 1,066,391 Total as of Jun 30, R$... 72,159 47, , ,039 1,562,326 1,162,509 3,894,179 3,893,349 - % % 1.2% 17.2% 9.8% 40.1% 29.9% 100.0% Total as of Jun 30, R$... 49,698 1,457 90, ,254 2,460, ,962 3,567,137 3,564,785 - % % 0.1% 2.5% 18.6% 69.0% 8.4% 100.0% b.1. Trading securities : The positive adjustment in the amount of R$ 7,576 (2015 R$ 5,203), obtained between the cost R$ 2,877,040 (2015 R$ 2,299,715) and market value R$ 2,884,616 (2015 R$ 2,304,918), was recorded in a specific account in the statement of income. b.2. Securities available for sale : The negative adjustment in the amount of R$ 6,746 ( R$ 2,851), obtained between the cost R$ 217,540 (2015 R$ 198,679) and market value R$ 210,794 (2015 R$ 195,828), was recorded in a specific account in the shareholders equity, net of tax. b.3. Securities held to maturity : The market value of these securities corresponded to R$ 792,513 (2015 R$ 1,023,893), as of the balance sheet date. The market value was obtained through the collection of prices on the market as of the balance sheet date. In case there is no liquidity or price quotation to calculate the market value of a certain security, the values are estimated based on dealer quotations, pricing models or price quotations for securities that present similar features. 7) Derivative financial instruments The Bank uses derivative financial instruments aiming at meeting its needs and the needs of its clients, and to reduce its exposure to market, currency and interest rate risks, using for so the instruments available on the BM&F Bovespa S.A. and the over-the-counter markets. The management and monitoring of the risks involved are performed by an independent area by means of control policies, establishment of operation strategies, determination of limits and constant monitoring of the portfolios contracted using specific techniques, which are consistent with the guidelines established by the Management. a. Risk management The Directorate of Planning, Control, and Risk Management (DPCGR), through the area of Risk Control, is responsible for the management and monitoring of market, liquidity and credit risks, and maintains an integrated and independent structure, in such a manner to meet the guidelines established by the Management. The Bank adopts as principle strategies that aim at mitigating the risks involved in its operations and for the latter to be adherent to its risk management policy and to the goals proposed. Market risk - It refers to the chances of a portfolio to incur in loss due to fluctuation in the rates, mismatches in the terms, currencies and indices of the asset and liability portfolios held by the companies. In the meantime the risk management is carried out by means of daily monitoring of the exposure levels in comparison with the limits established, using instruments such as VaR (Value at Risk), sensitivity analysis (V01) and stress testing. The methodology for the determination of VaR is based on the parametric model, with a 98% confidence interval for the time range of five days and volatility calculated through the EWMA methodology using a 0.94 lambda. The capital requirement for the coverage of risks - supplementing the monitoring, control and market risk management structure - is calculated daily in compliance with the regulations of the Central Bank of Brazil. Liquidity risk - The control of liquidity is done by the Risk Control area while liquidity strategy is defined by the Treasury department, which meets daily before the beginning of the activities of the Bank, aiming to evaluate the various interest, dollar and stock exchange, domestic and overseas market behaviors. The Bank manages the liquidity risk by concentrating its portfolio in high quality and liquidity assets, whose positions are monitored carefully in order to reach a balanced management with respect to the exposure to currency and terms. Additionally, the Bank uses the projected cash flow for liquidity risk control in compliance with the CMN Resolution 4090, adopting assumptions of maturity cash flow of financial operations, payment flow of expenses, the level of late payment in the portfolios, if any, and the anticipated settlement of liabilities for a minimum period of 365 days. Credit risk - Refers to the risk related to a potential loss for the non fulfillment of future obligations (principal and charges) by a customer with whom a direct or indirect financial relationship is maintained. The credit risk management is carried out through the monitoring of the quality of the credit risks in our portfolio, which involves a high level of discipline and control in the analyses and operations performed, preserving the integrity and independence of the processes. The Bank has a credit policy approved by Management that aim the security, quality and liquidity in the application of funds, agility and profitability of the business, established in order to mitigate the risks inherent to any loan, as well as to establish the operating and/or loan granting limits. The DPCGR and the Credit and Risk Committee (CCR) assume, for the execution of the credit policy, a very important role, which consists of deciding on business proposals and analyses performed by the credit analysts. The Bank s methodology includes a process that attributes ratings to customers for different risk segments. This risk classification is based on the intrinsic profile of each client and has a direct correlation with the chances of default regarding his/her obligations with the Bank. The Bank has Credit Risk Management Policy according to the existing resolutions of the Central Bank of Brazil and the area of Credit Risk Management aims at measuring, monitoring and continuous control and integrated positions and risk exposures vis a vis the pre limits approved for all operations carried out by the Group and the risk factors that the Group incurs, whose processes are formalized through periodic reports. The scope of analysis include all operations, regardless of whether classified or not in the trading portfolio. Such risk exposures and positions in own portfolio that guide risk tolerance limits are defined and formalized in specific committees. The loan portfolio and guarantees granted totaled R$ 979,778, distributed among the following main sectors: 27.5% electricity, 22.4% food processing, Telecommunications 11.2%, 9.5% water and sanitation, and 6.5% infrastructure and transport. Of this portfolio, 66.2% of operations are covered by guarantees granted by the customers, which are mainly represented by: 28.9% pledge, 24.9% fiduciary alienation, 1.0% credit letter, 29.1% surety and guarantees from individuals and companies and 3.9% stand by letter of credit (responsibility transferred to the New Bank ). 6

7 Operating risk - The Compliance area is responsible for the management of the operating risk of the Bank. It maintains an independent structure which is able to identify, evaluate and monitor the risks defined in the CMN Resolution As this area is considered an essential activity for the generation of added value, actions were developed aiming the implementation of an operating risk management structure that include the management model, the operating risk categories and policy, the documentation and storage procedures, the operating risk management reports and the disclosure process to comply with the aforementioned Resolution. b. Capital Management The capital management is defined as the continuous process of monitoring and control of capital maintained by the institution, assessing the need for capital to cover the risks to which the institution is subject and goal planning and capital needs, considering the strategic objectives the institution, always adopting a posture prospective and anticipating capital needs arising from potential changes in market conditions. According to current legislation, prepared in CMN Resolution 3988, the Bank has a capital management framework compatible with the nature of its operations, the complexity of products and services offered and the extent of your exposure to risk. As responsible for the management of capital with the Central Bank of Brazil was appointed the Director of Planning, Control and Risk Management - DPCGR currently subordinated to the President of the Group in Brazil. Teams Risk Control and Management Control, both inserted in this Board, comprise the technical and operational framework for the capital management of the Group BESI Brasil. The capital management process is aligned with the best market practices and covers all areas concerned with the identification and evaluation of significant risks incurred by the institution. The Plan of the Capital of the Group Haitong Brasil is prepared consistently with the strategic planning and is prepared concurrently with the annual review of the Business Plan (minimum three years) and annual budget. The responsibilities and the organizational structure of capital management involves the Board, the Board of Directors, the areas of Risk Control and Management Control. The capital management policy is reviewed at least annually or whenever circumstances suffer specific regulatory changes. c. Derivatives The derivative financial instruments are represented by futures, forward, options and swap contract operations, registered at the Futures and Commodities Exchange (BM&F Bovespa S.A.) or at the Clearing House for the Custody and Financial Settlement of Securities (CETIP) or at the Brazilian Company for Custody and Settlement (CBLC), involving prefixed rates, interbank market (DI), exchange variation or price indices. These derivative financial instruments had their amounts recorded in memorandum accounts and the adjustments/difference, in equity accounts, as shown below: June 30, 2016 June 30, 2015 Fair Value Cost Value Fair Value Cost Value Reference Net Exposure Net Exposure Reference Net Exposure Net Exposure Value Asset (Liability) Asset (Liability) Value Asset (Liability) Asset (Liability) BGI... 12, ,175 1,098 1,098 DDI... 2,792,293 (1,951) (1,951) 4,768,619 (4,518) (4,518) DI... 9,878,612 3,180 3,180 13,318,508 (3,156) (3,156) DOLLAR... 1,619,812 7,118 7,118 1,045,702 2,684 2,684 EURO OC1... 2,913,485 (235) (235) 9,662 Future - Purchase and sale... 17,216,900 8,230 8,230 19,205,534 (3,883) (3,883) PRE... 38,630 (1,072) ,712 1,234 4,875 DI... 2,297, , ,714 4,054,980 (368,605) (350,496) DOLLAR ,134 (24,771) (21,496) 4,728,854 15,419 44,524 LIBOR... 83,502 (3,242) (173) 362,068 (4,056) (255) Swaps... 3,049, , ,567 9,280,614 (356,008) (301,352) EURO ,415 4,082 5,065 26,291 (364) (364) DOLLAR... 1,690,870 (65,896) (62,773) 651,562 33,825 37,087 LIBRA... 6,978 (157) (157) 6,128 (77) (77) REAL... 25, Forward... 1,830,263 (61,971) (57,865) 709,964 33,602 36,864 BOI... 13, ,870 (765) (3,695) Commodities... 13, ,870 (765) (3,695) EURO , DOLLAR... 15, ,937 2,929 2,910 SHARES... 3, Purchase with call option... 19, ,088 3,219 3,200 DI... 7,864, ,170 11,981, EURO... 53, ,809 1,638 1,638 DOLLAR... 3, SHARES Purchase with put option... 7,922, ,750 12,278,364 2,196 2,292 EURO ,955 (316) (316) DOLLAR... 16,950 (200) (901) 4,575 (2,826) (240) Sales with call option... 16,950 (200) (901) 167,530 (3,142) (556) DI... 7,861,000 (21) (4,020) 1,988,944 (13) (24) EURO... 52,962 (1) (195) 34,678 (114) (114) DOLLAR COE... (63) (102) SHARES COE... (145) (443) Sales with put option... 7,913,962 (230) (4,760) 2,023,622 (127) (138) Summary: Swaps... 3,049, , ,567 9,280,614 (356,008) (301,352) Forward... 1,830,263 (61,971) (57,865) 709,964 33,602 36,864 Commodities... 13, ,870 (765) (3,695) Options... 15,872, ,676,604 2,146 4,798 Derivatives (Asset - Liabilities) , ,615 (321,025) (263,385) Future - Purchase and sale... 17,216,900 8,230 8,230 19,205,534 (3,883) (3,883) The exposure to credit risk in the futures contracts is mitigated due to the daily financial settlement in cash. The swap contracts have a credit risk in case the adverse party does not have the capacity or willingness to meet their contractual obligations. 7

8 As of June 30, 2016 the total exposure of credit risk in swaps which is referred to in Art. 1 Item III of the BACEN Circular 2770, totaled R$ 973,316 (2015 R$ 748,344). For the measurement of market values the Bank adopted the following criteria: for the Futures operations it uses the stock exchange quotations, for the Options operations it uses own pricing models based on parameters from stock exchange prices and quotations and for the Swap and Forward operations it estimates the cash flows of each of its legs discounted at present value, in accordance with the respective interest curves, which were obtained based on the BM&F Bovespa and/or CETIP prices. d. Maturity dates of the derivative financial instruments Up to from 31 a from 91 a from 181 a Over 30 days 90 days 180 days 360 days 360 days Total 2016 Total 2015 Swaps (a)... (17,178) (14,792) 12,287 16, , ,061 (356,008) Forward (a)... 3,244 (17,366) (22,760) (20,505) (4,584) (61,971) 33,602 Commodities (a) (765) Options (a) (5) ,146 (13,898) (32,091) (10,342) (3,945) 352, ,323 (321,025) Future (b)... 2,648,033 3,264,825 2,433,478 1,291,285 7,579,279 17,216,900 19,205,534 8) Loans The loan portfolio totaled R$ 1,070,476 (2014 R$ 1,710,763) as of the balance sheet date. If the balance of R$ 527,996 (2014 R$ 783,764) of the sureties and guarantees granted recorded in memorandum accounts was included, the portfolio would total R$ 1,598,472 (2014 R$ 2,494,527). a. Composition of the loan portfolio per economic activity and per maturity To mature Overdue Up to 3 3 to 12 1 to 3 3 to 5 Over 5 15 to 91 to 181 to months months years years years 90 days 180 days 210 days Total 2016 Total 2015 Loans - Industry... 8,380 29,780 39,062 1,676 2,580 81, ,124 Loans - Commerce... 14,348 18,107 7,430 39,885 44,138 Loans - Other services... 49,291 59,770 7, , ,563 Loans - Individuals... 4,438 Financing - Industry... 24,978 7,903 34,229 20, , , , ,258 Financing (export) - Commerce... 5,000 Financing - Other services... 4,304 11,917 26,536 18,928 48, , ,678 Financing (export) - Other services... 13,855 Loans , , ,085 40, , , , ,054 Receivables arising from export contracts: - Industry... 76,548 19,853 3,332 99, ,188 - Commerce... 15,234 Other receivable - Other (note 10 a )... 76,548 19,853 3,332 99, ,422 Total as of Jun 30, R$ , , ,085 40, , , ,301 - % % 19.7% 17.8% 6.3% 27.6% 0.1% 0.8% 0.2% 100.0% Total as of Jun 30, R$ , , ,450 64, ,860 2,276 4,013 1,598 1,070,476 - % % 23.5% 32.9% 6.0% 17.5% 0.2% 0.4% 0.1% 100.0% b. Classification of the loan portfolio by risk level The CMN Resolution 2682 introduced the criteria for the classification of loans and for the recording of allowance for doubtful loans. These allowances are based on risk assessment systems of clients and operations. We show as follows the composition of the loan portfolio and of the minimum allowance for doubtful loans required at their corresponding risk levels as established in the aforementioned Resolution. June 30, 2016 June 30, 2015 Loan portfolio Provision Loan portfolio Provision Risk Level % To Mature Overdue Total Minimum Accounting To Mature Overdue Total Minimum Accounting AA , , , ,328 A... 0,5 30,680 30, , , B... 1,0 36,711 36, , , C... 3,0 43,659 43,659 1,310 1, F... 50,0 7,736 3,332 11,068 5,534 5,534 20, ,406 10,703 10,703 H ,0 18,355 3,382 21,737 21,737 21,737 7,000 6,761 13,761 13,761 13,761 TOTAL ,587 6, ,301 29,101 29,107 1,062,589 7,887 1,070,476 25,815 25,977 c. Concentration of Loan portfolio (includes guarantees provided) June 30, 2016 June 30, 2015 Amount % Amount %. Main debtor , % 137, %. 10 main debtors , % 817, %. 20 main debtors , % 1,118, %. 50 main debtors , % 1,517, %. Total - Portfolio , % 1,598, % d. Allowance for doubtful loans As of December 31, 2015 to the allowance for loan losses totaled R$ 23,061, being busy during the semester by: a) additional provision R$ 6,264, b) reversal of provision R$ 183 and c) exchange variation R$ 35, reaching the final balance of R$ 29,107, corresponding to 4.50% ( %) of the loan portfolio, and amount higher than the minimum required by the CMN Resolution During the 1st semester 2016 and 2015 there were no operations recovery and derecognized to loss of credits and the balance of renegotiated operations in the first half 2016 totaled R$ 51,068 (2015 R$ zero). e. Loans assignment During the 1st half of 2016 and 2015 there were not carried out loans assignment operations. As of June 30, 2015, the loans assignment operation carried out with financial market institution reached the balances payable of R$ 14,013 (see note 10 d ) and receivable of R$ 13,855 (see note 8 a ). That assignment was classified in the category Operation with substantial retention of risks and rewards and the result will be recognized by the criterion pro rata temporis methodology for the term of each contract assigned, in accordance with the CMN Resolution

9 9) Foreign exchange portfolio As of June 30 Other receivables Other liabilities Exchange purchases pending settlement ,336 63,617 Exchange sales pending settlement ,637 57,958 Exchange sale receivables ,001 23,607 (-) Advances received in local currency... (2,945) Exchange purchase payables ,227 28,888 TOTAL ,392 87, ,864 86,846 10) Other receivable and other liabilities a. Other receivables - Other: Composed of receivable arising from export contracts (see Note 8 a ) R$ 99,733 (2015 R$ 179,422), tax credits (see Note 14 b ) R$ 66,077 (2015 R$ 50,857), Judicial deposits (see Note 15) R$ 105,350 (2015 R$ 81,911), recoverable amount of debt instrument to receive company in bankruptcy protection R$ 40,365 (2015 R$ zero), taxes to offset R$ 4,130 (2015 R$ 6,928) and advances, payments to be reimbursed and sundry debtors R$ 17,990 (2015 R$ 11,409). b. Other receivables - due in connection with securities dealing (Asset): the balance of R$ 36,493 (2015 R$ 47,932) are represented by guarantee deposits held in banks abroad R$ 28,265 (2015 R$ 47,932) and the operations with financial assets performed on BM&F Bovespa S.A. R$ 8,228 (2015 R$ zero) whose financial settlements occur until the third business day following the date of the balance. c. Other liabilities - Tax and Social Security: Composed of provision for deferred income tax see (Note 14 b ) calculated on the positive adjustment to market value of the securities and derivative financial instruments R$ 32,656 (2015 R$ 24,969), provision for tax contingencies (see Note 15) R$ 105,182 (2015 R$ 82,794), provision for taxes on income R$ 2,405 (2015 R$ 6,220) and taxes and contributions payable R$ 4,332 (2015 R$ 3,326). d. Other liabilities - Other: Composed of assignment of loans with substantial retention of risk (Note 8 e ) in the amount of R$ zero (2015 R$ 14,013), provision for payments due R$ 9,022 (2015 R$ 4,516), provision for other credit risks and counterparty R$ 9,849 (2015 R$ 31,005) and sundry creditors - domestic - R$ 2,325 (2015 R$ 2,839). 11) Investments Composed of Interests in subsidiaries R$ 147,427 (2015 R$ 146,688) and Other investments R$ 9,979 (2015 R$ 9,979), which are represented basically by shares of privately-held companies. Haitong Securities Haitong do Haitong do Brasil do Brasil CCVM S.A. Brasil DTVM S.A. Participações Ltda. TOTAL Capital stock ,000 19,375 40,780 Shareholders equity adjusted... 88,330 5,751 53,346 Net income the period... (3,875) (3,034) 1,117 Number of shares common... 12,809, ,491,836 Number of shares preferred... 12,528,520 Number of quota... 40,779,891 % Interest % % % Equity in earnings of subsidiaries: - for de semester ended June 30, (3,875) (3,034) 1,117 (5,792) - for de semester ended June 30, (2,200) (1,597) 1,586 (2,211) Book value of investment: - as of June 30, ,330 5,751 53, ,427 - as of June 30, ,591 2,241 50, ,688 12) Funds raised a. Composition per economic activity Up to 3 3 to 12 months months 1 to 3 years 3 to 5 years Over 5 years Total 2016 Total 2015 Interbank Deposits (a)... 10,062 50, , ,649 55,294 Time Deposits (b) , , ,308 1,808,092 1,310,348 Total - Deposits , , , ,500 2,071,741 1,365,642 Money Market Repo Commitments... 3,796, ,512 85,597 5,732 4,253,294 2,051,213 Structured Finance Certificates... 5,747 5,747 Letters of credit for agribusiness (c)... 45,678 45, ,196 Financial letters (d)... 3,013 30,725 33, ,284 Repass Borrowings - BNDES (e)... 4,289 9,806 34,215 39, , , ,608 Repass Borrowings - FINAME (e)... 2,184 6,467 10,954 19,605 29,337 Total as of Jun 30, R$... 4,158,288 1,312, , , ,578 6,663,094 - % % 19.7% 10.7% 4.9% 2.2% 99.9% Total as of Jun 30, R$... 2,004,210 1,141, , , ,336 4,046,280 - % % 28.2% 13.2% 4.6% 4.5% 100.0% As of June 30, 2016, the funds that had been raised in Brazil had the following characteristics: (a) Interbank deposits with maturities up to August 2020, indexed to the Interbank Deposit (DI) variation; (b) Time deposits negotiated at a fixed rate to 19.06% pa, maturing until January 2019 and indexed to the Interbank Deposit (DI) and IPCA with maturities until July 2018 (c) Letters of credit for agribusiness issued with maturities up to September 2016 and indexed to the Interbank Deposit (DI) variation; (d) Financial letters issued with maturities up to June 2018, basically indexed to the Interbank Deposit (DI) variation and IPCA; and (e) Repass borrowings (BNDES) with maturity up to March 2034, basically indexed to the variation of the Federal Government Long-Term Interest Rate (TJLP) plus interest rates up to 7.4% p.a.. b. Concentration of Deposits (includes interbank and time deposits) June 30, 2016 June 30, 2015 Amount % Amount %. Main depositor , % 262, %. 10 main depositors... 1,616, % 995, %. 20 main depositors... 1,813, % 1,168, %. 50 main depositors... 1,986, % 1,308, %. Total - Deposits... 2,071, % 1,365, % 9