Message from the leaders

G4-1

Itaúsa is a holding company in the strict sense that, by complying with its purpose of investing in the capital of other companies, supports the development of responsible and ethical businesses and contributes to the generation of wealth and to the growth of Brazil. The company directs its investments with a focus on maximizing the value added to its stockholders and it is constantly analyzing new opportunities.

The assessment of industries in which there may be opportunities for new business or to increase the investments we already have was one of the main fronts on which we worked in 2016. With the support of an external consulting firm, we conducted studies and analyses that support the decisions related to the strategic allocation of resources.

This investment portfolio assessment process is continuous and has been made in a careful and attentive manner, in line with our strategic guidelines and governance processes. We seek, for example, opportunities to increase our investments in fields that allow for the diversification of market and regulatory risks that exist in the financial industry, in which almost 96% of our investments are concentrated. As an effect of this active portfolio management, at the end of 2016, we announced to the market our formal entry in the competition process for the acquisition of an interest in BR Distribuidora.

In the scope of our current businesses, which are still affected by the sharp slowdown of the Brazilian economy, we achieved positive results. In 2016, Itaúsa’s recurring net income amounted to R$8.6 billion and ROE reached 18.6%.

The consolidated value added of the holding company amounted to R$10.2 billion. The remuneration to our stockholders, in the form of dividends and interest on capital related to 2016, was 37.4% higher than in 2015, totaling R$3.734 billion. At the end of the year, the company’s shares were priced at R$8.28, up 32.4% in relation to 2015. This performance shows the soundness, resilience and capability of the Conglomerate to create value for its stockholders.

The management responsible and geared towards the sustainability of the holding company was once again positively recognized by the market. Itaúsa, for the 10th consecutive year, was included in the portfolio of the Corporate Sustainability Index (ISE) of BM&FBovespa (Sâo Paulo Stock Exchange). For the 13th year, it was selected to compose the Dow Jones Sustainability Index (DJSI). Additionally, it was also recognized as one of the Leading Companies in Transparency in the Climate Change program of CDP Latin America.

Among the Conglomerate’s companies, with more efficient measures and actions for the reduction of default rates, Itaú Unibanco reported, in 2016, a recurring net income of R$23.5 billion, with a growth of 2.7% from 2015. The bank also consolidated its operations in Chile, with the acquisition of the control of Itaú CorpBanca, and made progress in the strategy to become one of the major companies in the Latin American market. It also acquired the control of Recovery do Brasil and became the holder of the totality of the capital of Banco Itaú BMG Consignado. It also entered into an agreement for the acquisition of the retail business of Citibank in Brazil.

Itaúsa continuously assesses its investment portfolio and seeks opportunities to maximize the creation of value for its stockholders

In its governance, Itaú Unibanco continued the process for the succession of the current CEO, Roberto Setubal, and, according to the plan, made changes to the composition of its Executive Committee.

In the industrial segment, Duratex was focused on actions to reduce costs and increase efficiency, reaching a consolidated net income of R$26 million at the end of 2016.

Elekeiroz recognized an impairment of some assets and other adjustments that adversely affected the results of the holding company by R$267 million. In the fourth quarter, the company saw some strengthening of the market and signs of recovery of the chemical industry. Itautec continues to honor its equipment warranty and maintenance agreements.

With a sound and active governance structure, Itaúsa is closely following the evolution of the business of its subsidiaries, ensuring the autonomy of each company’s management. The holding company does not work directly on the management and coordination of operations, but it participates in the companies’ Boards of Directors with a focus on supporting strategic and investment decisions, preserving the corporate values and the ethical integrity of the Conglomerate.

The expectation of market analysts and economists is of a still challenging macroeconomic scenario in 2017, but there are positive signs related to aspects such as inflation control, resumption of consumer confidence and progress on important fiscal reforms. In this context, the search for efficiency and productivity in our subsidiaries will continue to prevail. Accordingly, we will maintain our focus on the assessment of opportunities to diversify the holding company’s portfolio, seeking to identify possibilities that drive the sustainable growth of our assets and businesses.

Alfredo Egydio Arruda Villela Filho
Chairman of the Board of Directors

Alfredo Egydio Setubal
Chief Executive Officer