Banco Sumitomo Mitsui Brasileiro S.A. Balance sheets. June 30, 2012 and (In thousands of Reais) Assets Note Liabilities Note

Transcription

1 Banco Sumitomo Mitsui Brasileiro S.A Balance sheets June 30, 2012 and 2011 Assets Note Liabilities Note Current assets Current liabilities Cash Deposits Demand deposits Interbank investments Foreign currency deposits Money market Time deposits Interbank deposits Investments in foreign currencies Money market funding Third party portfolio Securities and derivatives Own portfolio 6.a Interbank accounts Linked to guarantees Receipts and payments for future settlement Derivatives Interbranch accounts Interbank accounts Third-party funds in transit Restricted deposits Receipts and payments for future settlement Borrowings 16.a Deposits at the Brazilian Central Bank Foreign borrowings Interbank repasses Domestic correspondents Domestic onlendings 16.c FINAME Loans Private sector Foreign onlendings Allowance for loan losses (597) (435) Foreign onlendings 16.b Other receivables Derivatives Foreign exchange portfolio Derivatives 6.b Income receivable Sundry Other payables Allowance for loan losses 10 (4.146) (2.224) Collected taxes and other Allowance for other receivable losses (840) (840) Foreign exchange portfolio Tax and social security 17.a Other assets Subordinated debt 17.c Prepaid expenses Sundry 17.b Materials in stock 31 47

2 Assets not for own use Long-term liabilities Long-term assets Domestic onlendings 4 18 Interbank investments FINAME 16.c 4 18 Interbank investments Foreign borrowings Securities and derivatives 6.a Foreign borrowings Own portfolio Linked to guarantees Foreign onlendings Foreign onlendings Interbank accounts Interbank repasses Other payables Tax and social security 17.a Loans Subordinated debt 17.c Private sector Sundry 17.b Allowance for loan losses (130) (3) Deferred income Other receivables Deferred income Sundry Shareholders' equity Other assets Capital Prepaid expenses Residents in Brazil 1 1 Residents abroad Permanent assets Profit reserves Adjustment to fair value - securities and derivatives 589 (490) Investments Accumulated losses (44.901) ( ) Investments in subsidiary Other investments Other investments in Brazil Property and equipment Other property and equipment Accumulated depreciation (4.087) (3.427) Deferred charges Organization and expansion costs Accumulated amortization (1.545) (1.540) Intangible assets Intangible assets Accumulated amortization (4.852) (4.413) Total assets Total liabilities See the accompanying notes to the financial statements.

3 Semesters ended June 30, 2012 and Operations Banco Sumitomo Mitsui Brasileiro S.A. (the Bank ) is a multiple service bank authorized to operate commercial portfolios, including foreign exchange and investment portfolios, under the National Monetary Council (CMN) Resolution 1524/1988. The Bank is responsible for managing investment funds whose net worth was R$323,299 as of June 30, 2012 (R$410,907 in 2011). 2 Presentation of financial statements The financial statements have been prepared and are being disclosed in accordance with Brazilian accounting practices, considering the changes required by Law 11638/2007 and Law 11941/2008, together with the standards and instructions issued by the Central Bank of Brazil (BACEN) through the Accounting Chart for Institutions of the National Financial System (COSIF). The accounting standards approved by Central Bank of Brasil are: Resolution nº 3566/08 Asset Impairment Resolution nº 3604/08 Cash Flow Statement Resolution nº 3750/09 Disclosure of Related Parties Resolution nº 3823/09 Provision, Contingent Liabilities and Contingent Assets Resolution nº 3973/11 Subsequent Events Resolution nº 3989/11 Establishment of criteria and conditions for measurement, recognition and disclosure of transactions with share-based payment Resolution nº 4007/11 Accounting Policies, Changes in Accounting Estimates and Mistakes. The preparation of the financial statements in accordance with accounting practices adopted in Brazil requires that management uses its judgment in determining and recording accounting estimates. Significant assets and liabilities subject to these estimates and assumptions include the residual value of property, plant and equipment, the allowance for loan losses, the provision for contingencies and valuation of securities and derivative instruments. The settlement of transactions involving these estimates may result in different amounts due to the lack of precision inherent to the process of their determination.

4 3 Significant accounting practices The Bank adopts the following significant accounting practices in the preparation of its financial statements: a. Revenue and expense recognition Revenues and expenses are recognized on the accrual basis, on a daily pro rata basis for financial income and expenses. Financial income and expenses are calculated under the exponential method, except those related to discounted notes or foreign transactions, which are calculated under the straightline method. Fixed-rate transactions are stated at redemption value and income and expenses for the future period are stated as a reduction of related assets and liabilities. Floating-rate or foreign currency-denominated transactions are inflation adjusted through the balance sheet date. b. Cash and cash equivalents Cash and cash equivalents are represented by cash in domestic currency and investments in the open market, maturity of which on the actual dates of investments is equal to or less than 90 days, and are subject to an insignificant risk of change in value and are used by the Bank to manage its short-term commitments. c. Interbank investments Stated at cost, plus income earned through the balance sheet date. d. Securities and derivatives Under BACEN Circular 3068, of November 8, 2001, securities are classified according to Management s intent, into the following categories: Trading securities - Securities acquired for the purpose of being actively and frequently traded are adjusted at fair value, with gains and losses included in the income for the semester.

5 Available-for-sale securities - Securities not classified as trading securities or held-tomaturity securities are adjusted at fair value, with gains and losses reported in a separate caption of shareholders equity, net of taxes; Held-to-maturity - Securities for which there is the intent and ability to hold to maturity are stated at cost, plus income earned, included in income for the semester. The Bank conducts derivative transactions to hedge its operations against variations in market prices and to mitigate currency and interest rate risks posed to its assets and liabilities and cash flows agreed by contract for proper terms, rates and amounts. Derivatives are used as a risk-transfer tool to cover the positions of banking book and trading book portfolios. In addition, highly liquid derivatives traded on the stock exchange are used, within the strict limits and under periodical reviews, with the purpose of managing trading portfolio exposures. In order to manage the ensuing risks, internal limits to global and portfolio exposures were set. These limits are monitored daily. Considering the possibility of exceeding the limits as a result of unexpected situations, Management established internal policies which entail the immediate definition of conditions for realignment. These risks are monitored by an area independent from operational areas and daily reported to top management. Under BACEN Circular 3082, of January 30, 2002 and Circular Letter 3026, of July 5, 2002, derivatives are reported at fair value, with gains or losses included in income for the period as follows: Differential receivable or payable recorded in assets or liabilities, respectively, and recognized as income or expense on a pro rata basis through the balance sheet date. Derivative transactions conducted at the request of clients or on one s own, which meet or do not meet the hedging criteria applied to global exposure to risks and which are not considered as related transactions according to the assumptions disclosed by circular 3.150/2002 of BACEN (Brazilian Central Bank), are stated at market value, and valuations and devaluations are recognized as follows: Financial instruments derivatives not designated as hedge - as income or expenses in the statement of income in the result for the period.

6 Financial instruments derivatives designated as hedge: Market risk hedge are intended to hedge against fluctuations in the fair value of the hedged item, and gains and losses are recorded as a contra entry to income and expenses in the statement of income in the result for the period. Cash flow hedges are intended to hedge against fluctuations in estimated future cash flows, and gains and losses are recorded as a contra entry to a separate caption of shareholders equity. Derivatives designated as hedge and the respective hedge items are adjusted at fair value as of the balance sheet date. e. Loans and allowance for loan losses Loans are classified according to Management s risk, taking into consideration economic conditions, past experience and specific risks of the operation, debtors and guarantors, according to the parameters established by the CMN Resolution 2682/1999, procedure which requires a periodic analysis of the portfolio and its classification into nine levels, from AA (minimum risk) to H (loss). The Bank has established policies and procedures for granting credit, approved by the Credit Committee and incorporated into the systems of internal controls of the Bank. These policies and procedures determine the need for evaluation of customer data to define the "Obligor Grade" - "grading" of the client, considering the qualitative and quantitative aspects. Income from loans overdue for more than 60 days, regardless of risk rating, is recognized as income only when earned. Transactions classified into level H (100% allowance) remain under this classification for six months, after with they are written off against the recorded allowance and controlled for five years in memorandum accounts, no longer appearing on the balance sheet. Renegotiated operations are maintained, at least at the same level as previously classified. Renegotiated loans that had already been written off against the allowance and that were controlled memorandum accounts are classified as level H, and any gains resulting from the renegotiation are recognizes as income only when earned.

7 The allowance for loan losses meets the minimum requirements established by the CMN Resolution 2682/1999. f. Other current and long-term assets Stated at cost plus, when applicable, income and inflation rate changes earned, less allowance for losses or adjustments to realizable value. g. Property and equipment Stated at acquisition cost, less accumulated depreciation, calculated through the balance sheet date. Depreciation is calculated under the straight-line method based on the economic useful lives of assets. The main annual depreciation rates are 20% for vehicles and data processing equipment, and 10% for other assets. h. Deferred assets Deferred assets are stated at the cost of acquisition or formation, less the accumulated amortization calculated up to the semester-end date, and are basically represented by leasehold improvements, amortized over the lease contractual term. i. Intangible assets The intangible asset refers to the expenses from acquiring the systems, which are amortized on a straight line basis at an annual rate of 20%. j. Impairment of non monetary assets An impairment loss is recognized if the carrying value of an asset or its cash generating unit exceeds its recoverable value. A cash generating unit is the smallest identifiable group of assets which generates cash flows substantially independent from other assets and groups of assets. Impairment losses are recognized in income for the period. The amounts of nonmonetary assets, except for tax credits, are tested at least annually to determine if there is any indication of impairment.

8 k. Monetary updating of receivables and payables Receivables and payables legally or contractually subject to exchange rate change or variation of index are adjusted through the balance sheet date. The counterparts of these monetary updating are reflected directly in the income for the semester. l. Deposits and money market funding Stated at the original amounts, plus charges incurred through the balance sheet date, recognized on a daily pro rata basis. m. Contingent assets and liabilities and legal obligations The recognition, measurement and disclosure of contingent assets and liabilities and of legal obligations (tax and social security) are performed in accordance with criteria defined by the National Monetary Council (CMN) Resolution 3823/2009, which approved CPC 25 issued by the Committee for Accounting Pronouncements (CPC). The criteria used by the Management for the measurement and disclosure of the contingent assets and liabilities are: Contingent assets They are not recognized in the financial statements, except on the occasions in which there is the existence of supporting evidence that provide assurance as to their realization, on which appeals are no longer admissible. Contingent liabilities They are recognized in the financial statements on the occasions in which, based on the legal advisors and the Management s opinion, the risk of loss of a legal action or administrative proceeding is assessed as probable, and the amounts involved are measurable with sufficient certainty. As for labor contingencies, the provisions are recorded based on the decision rendered in lower court in labor circuit court. Legal obligations tax and social security They refer to legal claims, in which the legality and constitutionality of some taxes and contributions have been challenged. The amounts discussed are fully recorded in the financial statements and corrected in accordance with the legislation in force.

9 Contingent liabilities are disclosed in notes to the financial statements, whereas those whose chances of loss are classified as remote are neither subject to provision nor to disclosure. Judicial deposits are held in asset account, without deducting them from provisions for contingent liabilities and legal obligations, in compliance with the BACEN rules. n. Income tax and social contribution The provision for income and social contribution taxes is calculated based on the rate of 15% plus a surtax of 10% on taxable income in excess of R$ 120 for the semester, adjusted by additions and exclusions established in law. The social contribution determined on the adjusted income in accordance with the legislation in force is calculated at a rate of 15%. Tax credits are recognized according to the provisions included in Resolution 3059 of December 31, 2002 and Resolution 3355 of March 31, 2006, issued by the National Monetary Council. Under those resolutions, in order to recognize and keep in the books of account tax credits arising from income and social contribution tax losses and from temporary differences the entity must fulfill all of the following conditions: i. Report a history of taxable income or revenues for income and social contribution tax purposes in at least three of the last five fiscal years, including the current year; ii. Future taxable income is expected to be generated for income and social contribution tax purposes, as the case may be, in subsequent periods, according to technical studies which allow the realization of tax credit in a maximum period of ten years. Tax credits on income and social contribution tax losses were recognized at the rates of 25% for income tax and 15% for social contribution tax and are presented as Other receivables - sundry, as shown in note 20.b. Tax benefits arising from the right to offset other temporary differences are recognized only when they are actually utilized, as explained in note 20.c

10 4 Cash and cash equivalents Cash and cash equivalents presented in the statement of cash flows are broken down as follows: Cash 30,092 12,779 Interbank investments 425, ,720 Total cash and cash equivalents 455, ,499 5 Interbank investments As of June 30, 2012 and 2011, interbank investments are broken down as follows: 2012 Up to 3 months From 3 to 12 months Over 12 months Total Investments in the open market 397, ,038 Own portfolio 360, ,292 National Treasury Bills (LTN) 133, ,271 National Treasury Notes B tranche 227, ,021 Financed portfolio 36, ,746 National Treasury Bills (LTN) 36, ,746 Investments in interbank deposits 13,122 12,518 24,629 50,269 Not related parties 13,122 12,518 24,629 50,269 Investments in foreign currencies 28, ,290 Total 438,450 12,518 24, ,597

11 Up to 3 months 2011 From 3 to 12 months Over 12 months Total Investments in the open market 274, ,798 Own portfolio 169, ,209 National Treasury Notes B tranche 119, ,708 National Treasury Notes B tranche 49, ,501 Financed portfolio 105, ,589 National Treasury Notes B tranche 105, ,089 National Treasury Notes F tranche Investments in interbank deposits 61,366 34,308 17, ,156 Not related parties 61,366 34,308 17, ,156 Investments in foreign currencies 10, ,922 Total 347,086 34,308 17, ,876 Money market investments and interbank deposits are held in custody at the Special System for Settlement and Custody (SELIC) and Clearing House for the Custody and Financial Settlement of Securities (CETIP S.A. Mercados Organizados), respectively. 6 Securities and derivatives a. Securities It is not the Bank s strategy to acquire securities for the purpose of actively and frequently trading them. Thus, the securities portfolio as of June 30, 2012 and 2011 is classified into the available-for-sale securities category, as shown below:

12 2012 Available-for-sale securities Up to 90 days Market value (book) From 180 to 360 days Over 360 days Total Adjustment fair value Adjustment Cost Own portfolio: Treasury Financial Letters - 92, , , ,685 National Treasury Bills ,763 39, ,407 Investment fund shares Participation Fund Shares FIP (42) , , , ,307 Linked to guarantees: Treasury Financial Letters - 73,671 26,114 99, ,711-73,671 26,114 99, ,711 Grand total - 165, , , , Available-for-sale securities Up to 90 days Market value (book) From 180 to 360 days Over 360 days Total Adjustment fair value Adjustment Cost Own portfolio: Treasury Financial Letters (19) National Treasury Notes F tranche 5,809 19,762 94, ,460 (772) 121,232 5,809 19, , ,577 (791) 600,368 Linked to guarantees: Treasury Financial Letters , ,248 (6) 132, , ,248 (6) 132,254 Grand total 5,809 19, , ,825 (797) 732,622 The market value of marketable securities is calculated in accordance with the rates disclosed by the ANBIMA - Brazilian Financial and Capital Markets Association. Public securities are held in custody with Special Settlement and Custody - SELIC.

13 b. Derivatives Derivative instruments, composed of swap operations, are held in custody with BM&FBOVESPA. The exposure in the asset and liability positions and the amounts recorded in asset, liability and memorandum accounts as of June 30, 2012 and 2011, which are segregated into the categories of index, maturity band, notional and carrying value, counterparty of which are clients, are shown as follows: 2012 Fair value (book) Index Trading location National Amount Up to 90 days Over 90 days Total Adjusted Cost Asset position: US dollar BM&FBOVESPA 81,064-83,561 83,561 82,752 Liability position: Interbank Deposit Rate - CDI BM&FBOVESPA 81,064-81,487 81,487 81,487 Differential receivable (payable) - 2,074 2,074 1,265

14 2011 Fair value (book) Index Trading location National Amount Up to 90 days Over 90 days Total Adjusted Cost Asset position: US dollar BM&FBOVESPA 112,806 47,730 62, , ,680 Liability position: Interbank Deposit Rate- CDI BM&FBOVESPA 112,806 51,630 63, , ,093 Differential receivable (payable) (3,900) ( 786) ( 4,686) (4,413) The market value of derivatives is determined discounting the future values at present value based on the interest rate curves for market methodology, which is mostly based on data disclosed by the BM&FBOVESPA. The book values are composed as follows: Difference receivable (payable) 2,074 (4,686) Net 2,074 (4,686)

15 The results with derivatives for the semester ended June 30, 2012 and 2011, are directly influenced by market interest rates prevailing at the time of your transaction, and exchange rate changes, are presented below: Results Derivatives Income Expense Net Income Expense Net Swap 8,623 (2,595) 6,028 - (32,799) (32,799) c. Amount and type of collateral margin The amount of margin deposited as collateral for derivative transactions at BM&FBOVESPA as of June 30, 2012 and 2011 can be broken down as follows: Market value Available-for-sale securities Treasury Financial Letters 26,114 65,725 Total 26,114 65,725 Other amounts deposited as collateral, which include guarantee, as of June 30, 2012 and 2011, are composed as follows: Market value Available-for-sale securities Treasury Financial Letters 73,671 66,522 Total 73,671 66,522

16 7 Interbank accounts Interbank accounts consist of money borrowed abroad and passed on to a Brazilian financial institution. This transaction matures in June 2013, and totals R$104,289 (R$78,188 in 2011). 8 Loans As of June 30, 2012 and 2011, information on the loan portfolio is summarized as follows: a. By operation Description Overdraft account 59,166 25,247 Resolution 3844/10 (formerly Resolution 63) 40,411 5,038 BNDES on-lending - FINAME - FINEM and EXIM Compror financing 9,111 10,382 Working capital 284,947 30,173 Vendor financing 1,218 1,197 Export Credit Note NCE 3, ,197 Financing for individuals Financing in foreign-currency 9, Advances to depositors 48 2 Total loans 408, ,403 Advances on foreign exchange contracts (note 9) 690, ,241 Income receivable from advances (note 9) 6,627 2,038 Total loan portfolio 1,105, ,682

17 b. By maturity Current: Up to 30 days 88,088 83,792 From 31 to 60 days 273,338 78,511 From 61 to 90 days 103,166 85,013 From 91 to 180 days 191, ,507 From 181 to 360 days 404, ,802 Over 360 days 44, Past-due - 1,497 Total 1,105, ,682 Loans of the 20 largest debtors as of June 30, 2012 represent 87.60% of the loan portfolio (94.42% in 2011) in the amount of R$968,355 (R$535,062 in 2011). c. By risk rating Risk rating Provision rate - % Total transactio ns % of portfolio Allowance recognized Total transactions % of portfolio Allowance recognized AA - 742, , , A , , , ,596 B , ,397 11, C H Total 1,105, , , ,661

18 d. By business sector Private sector: Industry 988, ,377 Trade 86,411 93,039 Other services 30, Individuals Total 1,105, ,682 e. Changes in the allowance for loan losses Opening balances 2,710 17,479 Written off against loss - (12,701) Reversal of provision for receivable - (3,674) Provision recording 2,163 1,557 Closing balances 4,873 2,661 In the semester ended June 30, 2011, the Bank executed by the award of property given as security liens in the amount of R$10,145, which had been bought under a conditional sale agreement, and whose ownership was awarded to the Bank. This recovery credit provided a reversal of the provision of loan losses of R$ 3,043. This property was recorded under "Other assets" see note 11. In the same period, was lowered to prejudice the value of R $ 12,701 of accrued transactions or "H" level to more than 180 days according to Brazilian Central Bank regulations. The difference in the amount of R$ 840, recorded in other receivables without feature credit, refers to the residual balance of the PIS asset to offset subject to litigation (note 10).

19 9 Foreign exchange portfolio (other receivables and other payables) Foreign exchange transactions are recorded in balance sheet accounts as follows: Assets: Foreign exchange purchased pending settlement 829, ,032 Receivables from foreign exchange sold 80,105 73,301 Advances received in local currency (2,677) (3,986) Income receivable from advances granted (note 8) 6,627 2,038 Total 913, ,385 Liabilities: Foreign exchange sold pending settlement 79,617 73,173 Payables for foreign exchange purchased 760, ,574 Advances on foreign exchange contracts (note 8) (690,654) (381,241) Amounts payable in foreign currency 1 - Unearned income from advances granted Total 149, , Other receivables - sundry Represented by the following amounts: Tax credit - income/social contribution tax losses (note 20.b) 76,113 - Receivables from escrow deposits 13,151 11,737 Prepayments of income tax and social contribution 4,513 4,508 State income surtax available for offset Contribution to the Social Integration Program PIS available for offset COFINS/Social Contribution Tax Credit 1,450 6,279 Tax credits on adjustment to fair value securities (note 20.c) Other Total 96,799 24,371

20 Current assets 10,141 4,397 Long-term assets 86,658 19, Other assets In the semester ended June 30, 2012 and 2011, the balance is as follows: Assets not for own use real estate property (i) - 11,687 (-) provision for real estate property not for own use (i) - (3,696) Materials in inventory Prepaid expenses Total 463 8,426 (i) In the semester ended June 30, 2011, the Bank had as asset not for own use the property received as collateral for renegotiated debt and awarded by court order in April The real estate property is recorded at market value according to an evaluation report issued by a specialized firm on April 5, A provision referring to the difference between the market value and the sales value estimated by the aforementioned firm was recorded. This property was sold on April 25, 2012 at its book value. 12 Investments BSMB Consultoria Ltda. ( BCC ) was established on July 1, 2008,and its fully subscribed and paid-up capital as of June 30, 2012 is R$800, represented by 1,000 shares with a par value of R$800 (eight hundred reais) each. The Bank holds 99.9% of that company s capital. BCC is engaged in: (a) planning, preparing, implementing and providing technical and financial advisory on energy and reduction of greenhouse effect gas emissions projects; and (b) intermediation, brokerage, mediation and agency of services and transactions involving the carbon credit market.

21 Information on subsidiary: Capital Shareholders equity 1, Net income for the semester Ownership interest 99.9% 99.9% Change in the investments: Balance of the previous semester Equity in subsidiary in the semester Updated balance of investments: 1, Property and equipment As of June 30, 2012 and 2011, property and equipment are as follows: Annual depreciation Accumulated Description rate - % Cost depreciation Net Net Data processing system 20 2,985 (2,430) Furniture and equipment (624) Communication system (217) Security system (274) Transportation system 20 1,017 (542) Total 5,452 (4,087) 1,365 2,030

22 14 Deposits Breakdown by maturity as of June 30, 2012 and 2011: Description Demand deposits Time deposits Foreign currency deposits Demand deposits Time deposits Foreign currency deposits With no maturity 66,047-8,317 27,081-2,862 Up to 30 days - 14, ,378 - From 31 to 60 days - 11, ,921 - From 61 to 90 days - 16, ,299 - From 91 to 180 days - 45, ,081 - From 181 to 360 days - 382, ,591 - Over 360 days - 178, ,643 - Total 66, ,251 8,317 27, ,913 2,862 The time deposit portfolio was classified in current liabilities because they are entirely registered with Cetip S.A. - Mercados Organizados with early redemption clause. 15 Money market funding Securities Third party portfolio Total Third party portfolio Total National Treasury Bills (LTN) 36,746 36, National Treasury Notes B tranche , ,089 National Treasury Notes F tranche ,746 36, , ,589

23 16 Borrowings and onlendings Foreign funding is basically through the use of credit lines granted by the shareholder Sumitomo Mitsui Banking Corporation, as follows: a. Foreign borrowings The balance as of June 30, 2012 US$378,688, 900,000 and 40 (2011 US$114,054 and 450) is basically composed of import and export financing, maturing through October 28, 2014, subject to normal interest rates plus exchange rate changes for these transactions, in the amount R$790,894 ( R$383,771) b. Foreign onlendings Foreign onlendings as of June 30, 2012, correspond to US$69,866 ( US$83,150). These obligations, translated at the official semester-end buying rate, are ruled by CMN Resolution 3844/10 and are subject to normal interest rates for these transactions, plus exchange rate changes, with repayment periods between 12 and 28 months, in the amount R$143,135 ( R$88,857). c. Domestic onlendings Consist basically National Bank for Economic and Social Development (BNDES) financing under the FINAME program, maturing by September 16, 2013, in the amount of R$18 ( R$32).

24 17 Other payables a. Taxes payable Description Provision for income tax and social contribution (note 20.a) 7,796 8,574 Provision for tax contingencies (note 18) 7,102 6,616 Service tax (ISS) Deferred income tax and social contribution Withholding Income Tax (IRRF) on fixed-income transactions Tax for Social Security Financing (COFINS) Contribution for Social Integration Program (PIS) Severance Pay Fund - FGTS Taxes and contributions outside services 7 18 PIS Offset (note 18) 17,810 16,925 PIS Constitutional amendment (note 18) 4,276 4,148 Payroll taxes and contributions Contribution to Credit Guarantee Fund (FGC) Other Total 39,546 38,199 Current liabilities 10,358 10,510 Long-term liabilities 29,188 27,689 b. Sundry Description Current liabilities Long-term liabilities Total Current liabilities Long-term liabilities Total Provision for contingent liabilities (note 18) - 21,418 21,418-20,867 20,867 Accrued personnel expenses 2,315-2,315 1,967-1,967 Accrued general expenses Sundry Total 2,493 21,418 23,911 2,557 20,867 23,424

25 c. Subordinated debt instruments eligible for capital The Bank obtained a loan in the amount US$ 40 million from the controlling shareholder Sumitomo Mitsui Banking Corporation for a period of 15 years, which was authorized by Bacen on November 10, 2006, to be considered as subordinated debt, being part of Level II of the institution s regulatory capital, pursuant to CMN Resolution 2837/2001. The updated balance as of June 30, 2012 is R$80,926 (R$62,472 as of June 30, 2011). 18 Provision for tax, civil and labor risks Among the lawsuits that involve the Bank, there are processes of tax, civil and labor. The provision amounts and the corresponding court deposits are as follows: Provision Escrow deposits Description Provision for tax risks: ISS Rio de Janeiro Municipality (a) - - 2,820 2,629 ISS São Paulo Municipality (b) ,759 1,636 Legal obligations: PIS Offset (c) 17,810 16, PIS Constitutional amendment (d) 4,276 4, Social Contribution Tax CSLL (e) 6,488 6,049 6,488 6,049 Inspection fee charged by the Brazilian Securities and Exchange Commission CVM (f) Provision for risks: Total 29,188 27,689 11,450 10,666 Civil (g) 16,791 15, Labor (h) 4,627 5,508 1, Total 21,418 20,867 1, Total provisions and escrow deposits 50,606 48,556 12,847 11,432

26 a. The Bank has tax proceedings related to Service Tax (ISS) Rio de Janeiro, in which the corresponding tax on commissions received in borrowings and repass borrowings, and also revenues recorded on the account apportionment of internal income, are charged. Management, based on the opinion of its legal advisors, assesses that the chances of success in this proceeding are possible, and therefore no provision was recorded. The court deposit, required for the development of the proceeding in the legal situation, was maintained. The amount corrected up to June 30, 2012 is R$3,588 (2011 R$3,224) and the court deposit R$2,820 (2011 R$2,629). b. The provision refers to a part of the proceeding under discussion related to Service Tax São Paulo, basically regarding the portion charged in connection with the foreign exchange operations for the period from 2001 to 2003 and guarantees provided in the year of 2004, for which the Bank understands the financial disbursement as probable. As for the unprovisioned part in the amount of R$1,593, Management understands, based on the opinion of its legal advisors, that the chances of success in this proceeding are possible and, therefore, did not record the provision. The court deposit required for the development of the proceeding in the legal situation represents the amount of R$1,759 (2011 R$1,636). c. Refers to the offsetting of PIS claimed in courts due to the disallowance by the Brazilian Federal Revenue Service of the credits offset and not approved. d. The Bank has lawsuits related to PIS precedence EC 10/96 and 17/97, questioning the constitutionality of the taxes. e. The Bank questions the increase in rates from 18% to 30% related to the year of 1996 and the determination of the calculation basis of social contribution. A provision related to the difference paid below the expected figure due to the matters under litigation was recorded. According to the opinion of the legal advisors the chances of loss related this litigation are assessed as possible. f. The Bank is challenging the collection of the inspection fee on the fair value of securities in certain periods and the related provision is being adjusted based on Selic variation. g. The provision refers basically to lawsuits related to the elimination of inflation effects on time deposits when the likelihood of disbursements is probable. Management, based on the opinion of its legal counsel, understands that the applicable legal actions already taken are appropriate.

27 h. The provision refers to lawsuits filed by former employees claiming labor rights they understand are due. Lawsuits are individually controlled and the provision is recognized based on lower labor court decisions. Management, based on the opinion of its legal counsel, understands that the amounts currently accrued are appropriate. Management understands, based on the opinion of the Company s legal advisors, that the chances of success regarding the contingencies described below are possible, and, therefore did not perform the provisioning as determined by the BACEN Resolution The Bank also has civil contingencies related to processes for excessive inflation on interbank deposits, which, based on the arguments and opinions of the legal advisors, which take into consideration the legal uncertainty as to the legal ability of the plaintiff to file the claim, the chances of loss are possible, the Bank s management did not record a provision for the amounts questioned, which updated to June 30, 2012 total approximately R$ 24,359 ( R$ 21,810). - The Bank has contingent liabilities related to a Public Civil Action challenging the fee charge on checks issued above R$ 5. Based on the opinion of legal advisors, the chances of loss are possible, therefore, management did not record a provision for the amounts involved, which updated to June 30, 2012 totaled R$ 270 ( R$255). a. Changes in provisions and legal obligations 2012 Tax Labor Civil Total Balance as of December 31, ,484 5,271 16,390 50,145 Provision recognized Inflation adjustment ,619 Write-offs or reversals - (1,152) (510) (1,662) Balance as of June 30, ,188 4,627 16,791 50,606

28 19 Shareholders equity a. Capital As of June 30, 2012, capital consists of common shares in the amount of R$1.00 each one, distributed as follows: Number of shares (in thousands) Sumitomo Mitsui Banking Corporation (Japan) 667,805 Shareholders domiciled in Brazil 1 Total 667,806 b. Dividends Shareholders are entitled to a minimum dividend of 25% of the net income for the semester, adjusted according to corporate law and by-laws. In the semester ended June 30, 2012 no dividends were proposed or paid as the Bank has accumulated losses. c. Legal reserve The legal reserve was recorded as established in the corporate law, and may be used for offsetting losses or increasing the capital.

29 20 Income tax and social contribution a. As of June 30, 2012 and 2011 income and social contribution tax expenses were calculated as follows: Social contribution Income tax tax Income tax Social contribution Income before taxes on income less profit sharing 31,291 31,291 29,167 29,167 Reversal of operating accruals (1,662) (1,662) (3,674) (3,674) Temporary provisions 4,292 4,292 5,563 5,563 Adjustment to fair value of derivatives (1,420) (1,420) Non-deductible expenses Equity in subsidiary (32) (32) (35) (35) Other deductions (4,721) (4,721) - - Utilization of tax loss carryforwards (8,365) (8,365) (9,384) (9,384) Taxable income 19,520 19,520 21,896 21,896 Income tax 15% (note 3.n) 2,928-3,284 - Income surtax 10% (note 3.n) 1,940-2,177 - Worker s Meal Program and Citizen Company Program - (170) - Social contribution 15% (note 3.n) - 2,928-3,284 Total 4,868 2,928 5,291 3,284 b. Tax credits On June 30, 2012 the Bank recognized a tax credit of R$76,113 based on total income and social contribution tax losses on that date. The Bank understands that it will offset this tax credit within up to eight years. These amounts are recorded in the Other receivables - Sundry account. 1 Breakdown of tax credit as of June 30, 2012 Breakdown of tax credit 06/30/2012 Income tax losses 47,856 Social contribution tax losses 28,257 Total 76,113

30 2 Expected realization of tax credit as of June 30, 2012 Year Deferred income tax Deferred social contribution Total 2 nd semester ,459 1,475 3, ,965 2,979 7, ,701 3,421 9, ,202 3,720 9, ,590 3,954 10, ,998 4,199 11, ,599 4,560 12, ,342 3,949 11,291 Total 47,856 28,257 76,113 c. Other tax credits: Some tax credits have not been recognized as assets on provisions for contingencies of R$22,192 (R$21,132 in 2011), due to their uncertain realization within less than ten years. The Bank also has deferred tax liabilities of R$372 which are solely related to the market value adjustments of transactions with available for sale securities, as established by BACEN Circular These amounts currently total R$359 and are recorded under the caption Other payables tax and social security. 21 Statement of income a. Loans Income from loans 19,162 4,636 Income from financing and onlendings 8, Total 28,076 4,810

31 b. Securities transactions Income from interbank investments 15,753 43,562 Income from securities transactions 32,286 37,411 Total 48,039 80,973 c. Derivatives Revenues (expenses) from swap transactions 6,028 (32,799) Total 6,028 (32,799) d. Foreign exchange transactions Income from foreign exchange transactions 78,644 6,754 Expenses on foreign exchange transactions (369) (14,839) Total 78,275 (8,085) e. Funding operations Expenses on time deposits (25,542) (29,522) Expenses on repurchase commitments (1,215) (8,020) Expenses on contributions to the Credit Guarantee Fund (458) (442) Total (27,215) (37,984)

32 f. Borrowings and onlendings Expenses on BNDES onlendings (1) (1) Expenses on foreign borrowings and onlendings (80,082) (2,121) Expenses on subordinated debt (6,592) (472) Total (86,675) (2,594) g. Income from services provided Income from fees and services Income from business intermediation 6,015 2,663 Revenues from guarantees provided 2,799 1,439 Total 8,874 4,170 h. Personnel expenses Salaries (6,530) (4,923) Payroll taxes (2,985) (2,383) Benefits (1,620) (1,362) Management compensation (1,383) (1,207) Training (91) (20) Interns (6) - Total (12,615) (9,895)

33 i. Other administrative expenses Rental (1,692) (1,428) Data processing (1,051) (1,429) Specialized technical services (1,602) (1,100) Communication (576) (498) Financial system services (127) (142) Maintenance and upkeep of assets (131) (183) Security and surveillance services (256) (208) Transportation (53) (53) Materials (38) (39) Public utilities (77) (77) Outside services (221) (405) Advertising and public relations (119) (154) Insurance (44) (38) Promotion and public relations (28) (24) Charitable contributions (7) (6) Depreciation and amortization (570) (582) Other administrative expenses (624) (726) Total (7,216), (7,092) j. Tax expenses COFINS (Tax for Social Security Financing) (2,215) (1,835) ISS (Service Tax) (476) (243) PIS (Contribution for Social Integration Program) (360) (298) Other (73) (105) Total (3,124) (2,481)

34 k. Other operating income Exchange rate changes - foreign borrowings - 18,974 Exchange rate changes - foreign onlendings - 14,998 Exchange rate changes - subordinated debt - 4,204 Investment fund management fees Income from other accounts receivable Recovery of charges and expenses Reversal of operating provisions 1,662 - Tax credit - COFINS - 6,279 Other assets not for own use - 1,542 Adjustment of escrow deposits Other Total 3,415 47,898 l. Other operating expenses Exchange rate changes - foreign investments - (3,147) Exchange rate changes interbank repasses - (1,225) Provisions for contingent liabilities (2,123) (2,103) Provision for assets not for own use - (3,696) Other (334) (70) Total (2,457) (10,241) m. Non-operational results Profit on disposal of investments CETIP shares Other non-operational income Total

35 22 Balances and transactions with related parties a. Transactions with parent companies (Direct or Indirect) The balances of transactions with related parties (basically Sumitomo Mitsui Banking Corporation), conducted under normal market conditions, concerning agreed-upon maturities and yield are as follows: Assets/(liabilities) Income (expenses) Cash - foreign currency deposits 29,233 11, Investments in foreign currency abroad 28,290 10, (3,126) Receivables - commission on business intermediation - - 6,015 2,633 Foreign borrowings (790,894) (383,771) (68,805) 18,088 Foreign onlendings (143,135) (129,975) (11,277) 13,860 Subordinated debt (80,926) (62,472) (6,592) 3,732 Total (957,432) (554,021) (80,051) 35,187 b. Compensation of key management personnel Pursuant to Resolution 3750/09 of the Central Bank of Brazil and Technical Pronouncement CPC 05 Disclosure of Related Parties, it has been defined as key personnel of this institution all the members of its Board of Executive Officers. The global compensation of the Executive Officers is paid in conformity with the by-laws of Banco Sumitomo Mitsui Brasileiro S.A In the most recent amendment to the by-laws of April 2012, the maximum global monthly compensation of the executive officers was set at R$250 (salaries).

36 Short-term benefits to executive officers Salaries 1,383 1,207 Variable compensation Contributions to INSS (Social Security Contribution) /FGTS (Severance Pay Fund) Total 2,095 2,371 Post-employment benefits In accordance with the pension fund ruling, the Executive Officers may opt to participate in the Defined-Benefit Supplementary Pension Plan, fully sponsored by Banco Sumitomo Mitsui Brasileiro S.A., under the same conditions of the other employees of the Bank (Note 25). Banco Sumitomo Mitsui does not have long-term benefits, benefits for rescission of employment contract or stock-based compensation to its key management personnel. c. Other information Pursuant to current legislation, financial institutions cannot grant loans, financing or advances to: Executive Officers and members of the advisory or administrative councils, tax council and alike, as well as to their respective spouses and second degree relatives; Individuals or legal entities holding more than 10% of its capital; and Legal entities the capital of which are held by more than 10% by the financial institution itself, any Executive Officer or manager of the institution, as well as by their respective spouses and second degree relatives. Based on the foregoing, the Bank does not and did not grant loans, financing or any other advance to the Executive Officers or to any member of their family.

37 The members of the Board of Executive Officers did not hold any interest in the capital of the Bank. 23 Operating limits Basel ratio In accordance with the National Monetary Council Resolution 2099/1994, as amended by resolutions 3444/2007, 3490/2007 and Circular 3360/2007, BACEN established the mandatory maintenance of an Adjusted Shareholder s Equity value compatible with the risk level of the asset structure. Effective in July 1, 2011 the calculation of the Operating Limit was altered by the New Capital Accord (Basel II), with incorporated new risk factors to calculate the Separate Minimum Capital Requirement. As the basis, we used the Required Regulatory Capital (RRC) divided by 11%, with is the minimum capital required by Bacen, and is now calculated as follows: PRE = Pepr + Pcam + Pjur + Pcom + Pacs + Popr, as shown in the table below. Operating Limit calculation for the year ended June 30, 2012 and 2011 is as follows: 2012 Separated amount Risk Credit risk portion (Pepr) 221,827 Foreign exchange risk portion (Pcam) 8,984 Interest rate risk portion (Pjur) 3,031 Operational risk portion (Popr) 10,040 Required Regulatory Shareholders Equity (PRE) 244,882 Risk of part of banking portfolio (Rban) 1,935 Regulatory Shareholders Equity Tier I and Tier II 695,063 Risk factor - 11% on required regulatory capital 76,457 Basel ratio (% of risk factor/ required regulatory capital) 31.22

38 2011 Separated amount Risk Credit risk portion (Pepr) 112,268 Foreign exchange risk portion (Pcam) - Interest rate risk portion (Pjur) 2,040 Operational risk portion (Popr) 8,756 Required tier 1 capital + tier 2 capital (PRE) 123,064 Risk portion of banking portfolio (Rban) 1,821 Tier 1 capital + tier 2 capital 565,501 Risk factor - 11% on required regulatory capital 62,205 Basel ratio (% of risk factor/required regulatory capital) Guarantees provided and responsibilities for opened import credit lines As of June 30, 2012 and 2011, guarantees provided by the Bank total: Domestic 496, ,255 Abroad 26,328 15,406 Total 523, ,661 As of June 30, 2012, the Bank had a balance of R$1,944 in the account of responsibility for claims opened for imports (R$2,922 in 2011).

39 25 Post-employment benefits The Bank sponsors Banco Sumitomo Mitsui Brasileiro Sociedade de Previdência Privada, established on April 20, 1992, the basic purpose of which is granting benefits and/or supplemental income to the Bank s employees and directors by means of a defined benefit plan. Participants (employees) are entitled to a benefit upon termination of the employment relationship, calculated according to the regulation provisions, for with the amount will depend on the participant s salary and length of service at termination date. The Entity s actuarial liabilities were determined in accordance with the model established in the respective plan and represent the amount of commitments made and to be made. The Bank did not have any actuarial liabilities as of June 30, 2012, based on the actuarial calculations in accordance with the CVM Rule 600/2012. The amounts shown below are based on actuarial calculations as of December 31, Description Pension plan Present value of actuarial liabilities 24,264 21,473 Fair value of the plan s assets (24,732) (22,624) Present value of liabilities in excess of the fair value of assets (468) ( 1,151) Adjustments for permitted deferrals Effect deriving from the limit of paragraph 58(b) (including the recommendations of IFRIC 14) 468 1,151 Net actuarial liabilities - - Actuarial assumptions: Nominal discount rate for actuarial liabilities 10.25%p.a %p.a. Expected nominal yield rate on assets 10.77%p.a %p.a. Estimated rate of nominal salary increase 7.63% p.a. 7.63% p.a. Estimated rate of nominal benefit increase 4.50%p.a. 4.50%p.a. Estimated inflation rate 4.50% p.a. 4.50% p.a. Biometric table of general mortality AT AT Biometric table of disability Mercer table Mercer table Expected turnover rate 0.30/(length of service +1) 0.30/(length of service +1) Probability of becoming a retiree 10% on the first date of eligibility to earlier retirement 3% between the first eligibility to earlier and normal retirement 100% on the date of eligibility to normal retirement