2006 Annual Report

2 0 0 6A N N U A L R E P O R T

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Message from the Board of Directors

A Success fu l Stra tegy

Main Indicators

Operational Performance

Promoting Susta inable Growth

Risk Management

Stronger Infra-s t ructure

New Products

Social Responsibility

Sta f f

Community

Financial Statements

Corporate Information

Profi le

Main Act iv i t ie s

Rat ings

Products and Services

10 381613060404

4 Annual Report 2006

A successfulstrategy

Credit operationsR$ millions

56

163

425

Dec. 06Dec. 03

150

126205

60

45

Dec. 04

242

73

69

Dec. 05

Our growth was

66% for the overall

credit portfolio and

approximately a 90%

increase in the

middle-market portfolio

■■ Middle-market

■■ Foreign exchange

■■ Credits acquisitions

■■ Consumer fi nance

After selling the consumer fi nance operation in 2004, Indusval Multistock Bank concentrated its efforts in the credit area, focusing on small and mid-size companies that are classifi ed in the segment known as middle-market.

We build up our structure within this strategy, trained our personnel, launched new products, introduced foreign exchange operations and now we have begun to see the results. In 2005, the commercial credit portfolio growth was 25%, after the

outstanding 100% portfolio expansion, achieved in the previous year.

The same strategy was maintained in 2006, however we had prepared the bank for a sustainable growth. The macroeconomic scenario was stable even though the outlook indicated moderate growth in the Brazilian economy. As expected, we expanded our agencies network and we implemented a Structured Finance Area to complement the services already offered to our customers. We

Main Indicators

Message From the Board of Directors

Banco Indusval Multistock 5

Total depositsR$ millions

Total assetsR$ millions

Dec. 03 Dec. 04 Dec. 05 Dec. 06

Dec. 03 Dec. 04 Dec. 05 Dec. 06

526

332

Dec. 03 Dec. 04 Dec. 05 Dec. 06

22.5

Dec. 03 Dec. 04 Dec. 05 Dec. 06

150136127

63

30.431.9

15.4

255189

1.121

772724585

Net worthR$ millions

Basel index%

Minimum 11%

reviewed all management processes and invested in personnel, information technology, compliance and control systems.

We had achieved our goals and obtained a growth of 66% in the overall credit portfolio, and approximately a 90% increase in the middle-market portfolio. After evaluating these results, as well as the investments made in 2006, we reinforced our commitment to the strategy implemented. We believe that our growth direction will be maintained in 2007 while

we will continue to improve the quality of our services and maintain our low credit risk exposure.

We appreciate the cooperation of all our employees and customers. The Bank´s and Consolidated Financial Statements, as well as supporting documents regarding the fi scal years ending on December 31 2005 and December 31, 2006 remain at the disposal of the employees, customers and shareholders.

Board of Directors


At the end of 2005, the economic growth expectations for Brazil in this coming year were not promising. Nevertheless, we were optimistic with the stable outlook and the potential for a favorable performance in the Brazilian foreign trade. As such, we defi ned an investment and growth strategy based on lasting and sustainable principles.

Throughout the year, these efforts have produced positive results that exceeded our expectations. Our credit portfolio increased to approximately R$ 644 million. Credits generated by the bank increased by 90%, while credit acquisition decreased 24%, resulting in an overall growth rate of 66% in comparison to the previous year. Net worth increased by 10%, achieving R$ 150 million. The year-end profi t levels were 17.3%, refl ecting growth of 20.9% in comparison to 2005. During the second half, profi tability reached an even higher level: 21.2%, which is 45% higher than the profi ts recorded in the same period of the previous year.

The expansion rhythm should remain intense during the fi rst half of 2007. Our current capital base is suffi cient to support this growth, as indicated by our Basel Index (capital – asset – risk proportion): 22.5% in 2006, that is the double of the minimum required.

The performance in 2006 was also positive from a qualitative perspective. We maintained high liquid and quality assets

Promoting sustainable growth

that can be measured by two indicators: liquid assets to total assets ratio, maintained at 38%, and the ratio of non performing loans (loans overdue to more than 60 days), decreased from 2.47% of the overall portfolio in December 2005 to 1.21% in 2006.

Our conservative credit processes, and our track record in checking and controlling receivables, sustain these asset quality indicators. In addition, our provision for potential loan losses is adequate to our risk profi le.

During the past year, we improved the governance and management structure for operational risk. We created the Computer and Information Security Committee that manages information security including operational and contingency risks; the Audit and Compliance Committee receives and analyzes internal audit reports, checks updates and fulfi llment to the compliance program; and the Legal Committee that is also focused on legal and image risks. In accordance with Central Bank Resolution Nº 3380, a Statutory Compliance Director was appointed and an Implementation Team was established to defi ne the required targets and actions to enforce this Resolution.

Our performance

in 2006 was positive

and exceeded the

expectations of all

indicators, including

qualitative patterns



Risk ManagementOur risk management practices are

becoming more and more conservative. Weekly meetings are held by the Credit Committee to manage credit risk. The credit control is very severe and when necessary, daily decisions are made by the Committee through electronic meetings. Operation classifi cations are defi ned by a mathematical formula and the Committee is not authorized to make the requirements more lenient. Follow-up of the receivables portfolio performance and collateral control is conducted by the credit department using several instruments including electronic solutions.

Risks generated by commercial activities are managed by the Treasury Department that seeks to eliminate currency and index mismatching, resulting credit department to obtain sustainable growth. To accomplish this, liquid assets are linked to a deposit percentage. Assets, liabilities and tenors are adjusted using fi nancial instruments (futures, swaps, etc.) according to their origin. This year, all parameters were respected and the positions were monitored on a daily basis by other directors and on a weekly basis by the Cash Committee that evaluates scenarios and determines whether the risk parameters (stress test and VAR) should be altered. They also follow projected cash fl ows and possible measures in case of liquidity stress.

Bonds and security positions were classifi ed as “for negotiation” for approximately 98% of the portfolio, 0.5% were classifi ed as “available for sale” and the remaining 1.2% as “held to maturity”. Financial derivative operations are all “mark-to-market” and are basically related to position and operation protection.

Stronger InfrastructureIn order to strengthen our infrastructure,

we invested in processes, policies, systems, equipment, agencies set-ups and remodeling, personnel recruitment and development. During the past year we opened branches in Campinas, Goiânia and Belo Horizonte and in January 2007, in Curitiba.

In January of last year we had 219 employees and in December we reached 255 employees. This growth was more aggressive in the business and business support departments and less aggressive in the back-offi ce. The main reason for this growth was the investment in information technology that ensures that all branches throughout the country can offer the same level of quality services and information as the Head Offi ce. We currently have 30 mainframes and 265 workstations with integrated operation and support from all the required security, backup and contingency systems.

Considering this growth environment, we were also able to improve our Effi ciency Ratio that decreased from 0.59 in 2005 to 0.56 in 2006.

Our risk management

practices are

becoming more and

more conservative



The number of employees increased; and we improved the human resources management policies. In 2006 we introduced a new trainee program that had seven thousand candidates in the selection process. We also restructured the internship program, including evaluation and professional development procedures. Employee training was intensifi ed with 270 enrollments and 1,169 hours/participant.

We also implemented a profi t sharing program for 100% of the operational staff, based on budget accomplishment and performance evaluation program that has already resulted in improved performance. The job position and wage program was modifi ed, the hierarchy levels were restructured and clear-cut rules for transfers and promotions were established.

New productsAlong with the growth in the middle-

market, we expanded our product portfolio. After the meticulous due diligence process we were accepted into the Global Trade Finance Program (GTFP), an International Finance Corporation (IFC) initiative that supports international trade of emerging countries (for more information access the website www.ifc.org/gtfp). Consequently, we have begun operations as a credit agent for pre-export fi nancing, offering special conditions to our customer base.

Other products and services were launched such as “compror”, a line of credit that enables companies to make cash payments to their suppliers, “vendor”; agribusiness operations such as Rural Producer Notes* (CPR) and Certifi cates of Agribusiness Creditor Rights** (CDCA), in addition to other structured operations. We dedicated our attention to product planning, attracting larger customers that are classifi ed in an upper middle-market range.

For these customers we offer personalized, fl exible and effi cient service. We want to cooperate and follow up the growth of these customers, reducing their credit risks by using receivables as guarantees. These operations used to be based only on receivables, but now they are using different methods, for example, part of them could have the risk mitigated by “sale and supply agreements”, company’s exports track record or based on criteria that we also consider real assets.

We also implemented a

profi t sharing program

for 100% of the

operational staff

*CPR: Cédulas do Produtor Rural – a fi nancial instrument through which the farmer sells his crop before harvesting and assumes an obligation to deliver a certain amount of commodities at a future date to a specifi ed location.** CDCA: Certifi cados de Direitos Creditórios do Agronegócio – fi nancial instrument issued to cooperatives or legal entities that store, sell, process or industrialize raw materials or agricultural machinery.


1967Indusval Brokerage House is established.

1971The partners of Ciampolini & Ribeiro purchase Indusval Brokerage House.

1991Indusval Brokerage House becomes a multi-service bank.

1992Indusval Bank begins its foreign exchange portfolio operations.

The bank’s total assets summed R$ 1.121 billion (US$ 524 million at an exchange rate of R$ 2.1376/US$ 1) in December 2006, representing a year-end growth of 45%, we are a commercial bank focused on middle-market companies, with operations guaranteed mainly by receivables. Among the main reasons of our success, is our agility in making decisions and in-depth knowledge of the middle-market segment.

Our activities include:

• Financing and services directed at small and mid-size companies.

• Flexible and personalized services using technological resources and specialized professionals.

• Supply of structured products, including agribusiness services such as CPR and CDCA.

• Investment funding for medium and large scale customers.

• International operations including foreign trade lending, currency exchange and funding.

• Transactions on the Stock Exchange and Mercantile and Futures Exchange.

Main activities

RatingsIndusval Multistock Bank credit ratings by

international risk agencies:

Standard & Poors´s

Worldwide

Local Currency: ‘B/Stable/B’

Foreign Currency: ‘B/Stable/B’

Brazil: ‘brBBB-/Stable/brA-3’

Report issued in September 2006

Fitch Ratings

National

Long Term BBB (Brazil)

Short Term F3 (Brazil)

Stable Outlook

Report issued in October 2006

Passages from the Standard & Poor’s report, which is available on the site: www.indusval.com.br:

Indusval has a good track record

of asset quality. [...]

The bank’s strict credit processes and its track

record in checking and monitoring receivables

support the asset quality indicators. [...]

Indusval’s profi tability is adequate

for its business profi le. [...]

The main reasons for the bank’s success are

its agility in making decisions and its in-depth

knowledge of the middle market segment. [...]

We are a commercial

bank focused on

middle-market companies

Profi le


1993Indusval Bank initiates their middle-market credit operations.

2000Indusval acquires 50% of the fi nance company in partnership with Multistock Bank and begins consumer fi nance sales.

2003Indusval merges with Multistock and starts to operate as Indusval Multistock Bank. Beginning of foreign trade lending operations.

2004The fi nance company is sold to HSBC and the bank focuses its operations on the middle-market segment.

2006Opening of branches in Campinas, Goiânia, Belo Horizonte and Curitiba. Expressive growth in the middle-market portfolio.

2007The institution celebrates its 40th anniversary on October 31st.

PRODUCTS AND SERVICES

Investments / FundingIndusval Multistock Bank offers a full

range of investments, seeking the best combination of returns and security based on the risk profi le option. We highlight:• Banking Certifi cates of Deposit (BCDs),

fi xed and variable rates• Indusval Fixed Income Multifund

In 2006, the volume of deposits from individuals and legal entities increased 59%, achieving R$ 526 million, represented mainly by BCDs with a small portion of Interbank Certifi cates of Deposit (ICD). Despite our excellent liquidity situation (cash on hand represents 44% of total deposits and 155% of net worth), maintained with long term deposits that offer lower costs than other alternatives, we are always aware of other funding methods, such as Receivable Investment Funds (FIDCs) and foreign issues.

Credit and Banking ServicesWe provide a high quality customer

service therefore we can supply specifi c requirements. A specialized team is dedicated to mid-size companies and handles the following banking products: • Checking account, overdraft protection,

line of credit • Working capital loans / Factoring• “Compror”• “Vendor”• Collections• Structured Finance• Agribusiness operations – CPR and

CDCA• Internet banking• Letters of credit

The credit profi le in Reals increased to approximately R$ 644 million in 2006. Credit generated by the Bank increased 76%, while the credit acquisition decreased by 24%, resulting in an overall growth of 66% in relation to the previous year.

The balance in Reais is comprised by 521 customers, who each maintain an average balance of R$ 800 thousand and have contracted operations that amount to roughly R$ 1.35 billion throughout the year.


Foreign Exchange and International Operation

A specialized team advises and follows international operations, combining expertise, technology and partnerships with Brazilian and foreign banks, meeting clients´ needs.• Foreign Exchange Services• International Trade Collection• Export Financing (pre and post shipping)• Import Financing• International Guarantees• Remittance• Advisory service for business structures

backed by foreign trade and pre-payment of exports.

In 2006, export transactions reached US$ 303 million, being US$ 191 million export fi nancing. We also fi nanced US$ 19 million of import transactions. The fi nal credit portfolio balance was US$ 76 million, contracted by 80 customers, representing a growth of 158% in comparison to 2005.

Stock Exchange TransactionsIndusval Multistock Brokerage

House operates in money and capital markets with emphasis on trading shares, gold, options, futures and commodities, mainly on the Bovespa (São Paulo Stock Exchange) term market. It also sets up hedge and swap operations and new share offerings on the primary and secondary markets.

Their customer base includes institutional, Brazilian and foreign individuals and legal entities. Small and medium scale individual customers have access to the website www.industrade.com.br that enables internet trading on Bovespa and the Mercantile and Futures Exchange (BM&F).

Last year, our trading on Bovespa attained R$ 3.6 billion; on BM&F we had 555 thousand contracts; and exchange transactions accounted for US$ 454 million.

Indusval Multistock

Brokage House’s

customer base includes

institutional, Brazilian

and foreign individuals

and legal entities

Profi le


The number of permanent employees grew 26% last year, increasing from 198 to 255. In relation to gender, 74% of the employees are male and 26% are female. The break even point has not yet been achieved but the growth index had a greater impact on the number of female employees (see the table below).

Indusval Multistock treats its employees with respect and appreciates the time they dedicate to our institution. The employees have relevant benefi ts (see the table below) that during the past year summed a total of R$ 4.6 million, equivalent to 20% of the institution’s profi t. Most of these benefi ts are given on a voluntary basis.

Staff

Growth of the operational staff in 2006

January December Growth

Males 167 188 13%

Females 52 67 29%

Total 219 255 16%

Employee benefi tsIn thousands of R$

Healthcare / medical insurance 2,374

Dental plan 111

Meals 1,741

Transportation 341

Life insurance 41

Other 45

Total 4,653

During the past year we strengthened our staff relations, creating the profi t sharing plan that distributed R$ 3.1 million, equivalent to 13.2% of our profi t. We also restructured the career plan, creating internship and traineeship programs. We started to recruit physically challenged people and we had very good results.

TaxesWe earned over R$ 25 million in

taxes, fees and contributions during 2006. This volume was equal to 106% of the year-end profi t.



Social investment in 2006In thousands of RS

Social entities 342

Incentive projects – Lei Rouanet 132

Municipal Fund for the Rights of Children and Adolescents

23

Total 497

We have been setting commitments with several civil society organizations in order to develop projects to transform the lifestyle of children, youths and families from the suburbs of São Paulo city. We do more than just fi nance the projects; some of our top managers help administrating some entities seeking to ensure effective results to the social investment.

Community

We do more than

just fi nance projects;

we participate in the

management of some

social entities

During 2006, those investments were equal to 2.2% of our profi t – almost R$ 500 thousand – as shown in the table below.

These are the social entities that we contribute to:

Associação Obra do BerçoPromotes educational, cultural and health related activities for approximately three thousand children, youths and adults. It has existed in Sao Paulo for 65 years and offers projects related to formal and supplementary education, social inclusion and introduction to the professional market.

Associação Criança BrasilMaintains child care and socio-educational centers for more than 600 children and youths in the southern region of the city of Sao Paulo. Offers quality education and training directed to citizenship.



Instituto de Cidadania EmpresarialThe institute was created from a partnership among São Paulo city’s companies, Government and civil society, in order to implement an innovative development projects to the community. One example is the Casulo Project, focused on cultural education for youths from suburbs in the southern region of the city of Sao Paulo.

Projeto ArrastãoA 38 year-old non-profi t organization that conducts educational projects for 1,300 children, youths and adults to promote citizenship participation and inclusion, acting in the suburbs of São Paulo city.

Financial Statements 2006


Report os Independent AuditorsTo the Board of Directors and StockholdersBanco Indusval S.A.

1 We have audited the accompanying balance sheet of Banco Indusval S.A. (Indusval Multistock) and the consolidated

balance sheet of Banco Indusval S.A. and its subsidiaries (Indusval Multistock Consolidated) as of December 31, 2006, and

the related statements of income, of changes in stockholders’ equity and of changes in fi nancial position of Banco Indusval

S.A. (Indusval Multistock) for the year and six-month period then ended, as well as the consolidated statements of income

and of changes in fi nancial position for the year then ended. These fi nancial statements are the responsibility of the Bank’s

management. Our responsibility is to express an opinion on these fi nancial statements.

2 We conducted our audit in accordance with approved Brazilian auditing standards, which require that we perform the

audit to obtain reasonable assurance about whether the fi nancial statements are fairly presented in all material respects.

Accordingly, our work included, among other procedures: (a) planning our audit taking into consideration the signifi cance

of balances, the volume of transactions and the accounting and internal control systems of the Bank and its subsidiaries,

(b) examining, on a test basis, evidence and records supporting the amounts and disclosures in the fi nancial statements, and

(c) assessing the accounting practices used and signifi cant estimates made by management, as well as evaluating the overall

fi nancial statement presentation.

3 In our opinion, the fi nancial statements audited by us present fairly, in all material respects, the fi nancial position of Banco

Indusval S.A. (Indusval Multistock) and of Banco Indusval S.A. and its subsidiaries (Indusval Multistock Consolidated) at

December 31, 2006, and the results of operations, the changes in stockholders’ equity and the changes in fi nancial position

of Banco Indusval S.A. (Indusval Multistock) for the year and six-month period then ended, as well as the consolidated

results of operations and changes in fi nancial position for the year then ended, in accordance with accounting practices

adopted in Brazil.

4 Our reviews were conducted for the purpose of issuing a report on the fi nancial statements referred to in the fi rst paragraph,

taken as a whole. The statement of added value, presented to provide supplementary information about Banco Indusval S.A.

(Indusval Multistock) and its subsidiaries, is not required by the Brazilian Central Bank as part of the fi nancial statements.

This information has been subjected to the audit procedures described in paragraph 2 and, in our opinion, is fairly presented

in all material respects in relation to the fi nancial statements taken as a whole.

5 The audit of the fi nancial statements for the year ended December 31, 2005, presented for comparison purposes, was

conducted by other independent auditors who issued an unqualifi ed opinion thereon dated February 22, 2006.

São Paulo, February 6, 2007

PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5

Ricardo BaldinContador CRC 1SP110374/O-0


Balance sheets at december 31In thousands of reais

The accompanying notes are an integral part of these fi nancial statements.

Indusval Multistock Indusval Multistock Consolidated

Assets 2006 2005 2006 2005Current assets 976,210 689,250 986,831 704,789

Cash 10,010 1,851 10,074 1,858 Short-term interbank investments 151,008 103,250 151,008 103,250 Open market investments 143,352 76,200 143,352 76,200 Interbank deposits 7,656 27,050 7,656 27,050

Marketable securities and derivative fi nancial instruments 260,705 233,726 261,119 234,114 Own portfolio 166,685 97,170 166,690 97,558 Subject to repurchase agreements 86,558 126,468 86,558 126,468 Linked to guarantees 5,259 8,398 5,668 8,398 Derivative fi nancial instruments 2,203 1,690 2,203 1,690

Interbank accounts 446 306 446 306 Payments and receipts pending settlement 2 8 2 8 Restricted credits Deposits with the Brazilian Central Bank 444 298 444 298

Loans 387,227 280,336 387,227 280,336 Loans - private sector 377,575 283,519 377,575 283,519 Loans - public sector 15,816 15,816 Allowance for loan losses (6,164) (3,183) (6,164) (3,183)

Other receivables 162,549 64,246 172,692 79,390 Foreign exchange portfolio 159,123 61,212 159,123 61,212 Income receivable 34 16 Negotiation and intermediation of securities 548 116 10,192 15,022 Sundry 4,480 4,204 4,945 4,426 Allowance for loan losses (1,602) (1,286) (1,602) (1,286)

Other assets 4,265 5,535 4,265 5,535 Other assets 3,996 5,577 3,996 5,577 Provision for loss (266) (266) Prepaid expenses 269 224 269 224

Long-term receivables 104,930 43,314 105,621 43,966 Marketable securities and derivative fi nancial instruments 118 108 Own portfolio 108 Linked to guarantees 118

Loans 90,687 36,788 90,687 36,788 Loans - private sector 72,997 43,883 72,997 43,883 Loans - public sector 25,865 25,865 Allowance for loan losses (8,175) (7,095) (8,175) (7,095)

Other receivables 14,243 6,526 14,816 7,070 Foreign exchange portfolio 375 375 Sundry 14,279 6,526 14,852 7,070 Allowance for losses (411) (411)

Permanent assets 38,145 32,419 28,197 23,650 Investments 29,290 25,243 19,135 16,255 Subsidiary and associated companies: In Brazil 27,110 23,066 Membership certifi cates 16,149 13,307 Other investments 2,180 2,177 2,986 2,948

Property and equipment 8,855 7,176 9,062 7,395 Properties in use 1,508 1,508 1,508 1,508 Revaluation of properties in use 3,538 3,538 3,538 3,538 Other 6,866 4,845 7,318 5,273 Accumulated depreciation (3,057) (2,715) (3,302) (2,924)

Total assets 1,119,285 764,983 1,120,649 772,405



Balance sheets at december 31In thousands of reais



Liabilities and stockholders' equity 2006 2005 2006 2005

Current liabilities 816,700 500,439 817,412 507,401 Deposits 388,963 216,899 379,544 207,884 Demand deposits 31,385 18,363 31,035 18,142 Interbank deposits 65,001 29,742 52,922 20,334 Time deposits 292,526 168,703 292,040 168,537 Other 51 91 3,547 871

Funds obtained in the open market 188,669 180,856 188,669 180,856 Own portfolio 86,430 126,108 86,430 126,108 Third party portfolio 102,239 54,748 102,239 54,748

Interbank accounts 18 19 18 19 Receipts and payments pending settlement 18 19 18 19

Interdepartmental accounts 27,549 1,331 27,549 1,331 Third party funds in transit 27,549 1,331 27,549 1,331

Borrowings 164,144 72,419 164,144 72,419 Foreign borrowings 164,144 72,419 164,144 72,419

Other liabilities 47,357 28,915 57,488 44,892 Collection and payment of taxes and similar charges 363 168 363 168 Foreign exchange portfolio 9,977 4,167 9,977 4,167 Taxes and social security contributions 8,282 3,887 9,016 4,126 Negotiation and intermediation of securities 15,155 11,447 24,396 26,985 Derivative fi nancial instruments 11,420 7,283 11,420 7,283 Sundry 2,160 1,963 2,316 2,163

Long-term liabilities 152,876 128,269 153,528 128,729 Deposits 146,852 123,970 146,852 123,970 Time deposits 146,852 123,970 146,852 123,970 Other liabilities 6,024 4,299 6,676 4,759 Taxes and social security contributions 6,019 4,294 6,671 4,754 Sundry 5 5 5 5

Stockholders' equity 149,709 136,275 149,709 136,275 Capital Brazilian residents 106,611 106,611 106,611 106,611 Revaluation reserve 2,343 2,417 2,343 2,417 Revenue reserve 32,232 23,871 32,232 23,871 Adjustment to market value - Securities and derivatives 2 32 2 32 Retained earnings 12,356 7,179 12,356 7,179 Treasury shares (3,835) (3,835) (3,835) (3,835)

Total liabilities and stockholders' equity 1,119,285 764,983 1,120,649 772,405


Statement of incomeIn thousands of reais



Six-month period ended December 31

Years ended December 31


2006 2006 2005 2006 2005

Income from fi nancial intermediation 97,786 184,576 151,545 184,623 151,522 Loans 63,441 110,746 94,332 110,746 94,332 Marketable securities 23,987 52,005 52,168 52,100 52,168 Derivative fi nancial instruments (1,868) (3,139) (3,993) (3,187) (4,016) Foreign exchange 12,226 24,964 9,038 24,964 9,038

Expenses on fi nancial intermediation 58,246 116,846 100,471 115,391 93,806 Money market funding 43,193 84,307 83,015 82,852 76,343 Loans, assignments and onlendings 8,289 19,443 7,376 19,443 7,383 Allowance for loan losses 6,764 13,096 10,080 13,096 10,080

Gross profi t from fi nancial intermediation 39,540 67,730 51,074 69,232 57,716

Other operating income (expenses) (21,860) (38,748) (29,795) (39,642) (34,732) Income from services rendered 1,886 3,429 2,689 11,605 9,283 Equity in the earnings of subsidiary and associated companies

1,853 3,699 5,163

Personnel expenses (14,277) (24,850) (21,600) (28,235) (24,989) Other administrative expenses (7,941) (14,867) (11,809) (18,911) (16,492) Taxes (2,616) (4,736) (3,598) (5,690) (4,630) Other operating income 160 279 322 3,701 3,183 Other operating expenses (925) (1,702) (962) (2,112) (1,087)

Operating profi t 17,680 28,982 21,279 29,590 22,984

Non-operating income (expenses) (194) (495) 54 (528) 64

Profi t before taxation 17,486 28,487 21,333 29,062 23,048

Income tax and social contribution (3,727) (4,853) (1,784) (5,428) (3,499) Income tax (3,063) (4,924) (1,787) (5,337) (2,500) Social contribution (1,156) (1,920) (761) (2,082) (1,031) Deferred tax asset 492 1,991 764 1,991 32

Net income for the six-month period/year 13,759 23,634 19,549 23,634 19,549

Number of outstanding shares 31,296,247 31,296,247

Net income per share - R$ 0.76 0.63



Statement of changes in stockholders’ equityIn thousands of reais


CapitalRevaluation

reserveRevenue reserves

Adjustment to market

value

Retained earnings

Treasury shares

Total

At December 31, 2004 106,611 1,167 16,499 30 6,394 (3,835) 126,866 Appropriation to revaluation reserve 1,304 1,304 Realization of revaluation reserve (54) 54 Adjustment to market value 2 2 Net income for the year 19,549 19,549 Appropriation to legal reserve 978 (978) Interest on own capital (11,446) (11,446) Revenue reserve 6,394 (6,394)

At December 31, 2005 106,611 2,417 23,871 32 7,179 (3,835) 136,275

Changes in the year 1,250 7,372 2 785 9,409

At December 31, 2005 106,611 2,417 23,871 32 7,179 (3,835) 136,275 Realization of revaluation reserve (74) 74 Adjustment to market value (30) (30) Net income for the year 23,634 23,634 Appropriation to legal reserve 1,182 (1,182) Interest on own capital (10,170) (10,170) Revenue reserve 7,179 (7,179)

At December 31, 2006 106,611 2,343 32,232 2 12,356 (3,835) 149,709

Changes in the year (74) 8,361 (30) 5,177 13,434

At June 30, 2006 106,611 2,380 31,543 2 3,896 (3,835) 140,597 Realization of revaluation reserve (37) 37 Adjustment to market value 13,759 13,759 Appropriation to legal reserve 689 (689) Interest on own capital (4,647) (4,647)

At December 31, 2006 106,611 2,343 32,232 2 12,356 (3,835) 149,709

Changes in the six-month period (37) 689 8,460 9,112


Statement of changes in fi nancial positionIn thousands of reais



Six-month period ended December 31



2006 2006 2005 2006 2005Financial resources were provided by 424,533 365,279 171,693 360,203 168,775 Adjusted net income for the six-month period/ year 12,396 20,819 14,925 21,747 18,225 Net income for the six-month period/ year 13,759 23,634 19,549 23,634 19,549 Depreciation and amortization 490 914 537 985 609 Equity in the earnings of subsidiary and associated companies (1,853) (3,699) (5,163) Restatement of membership certifi cates (2,842) (1,935) Adjustment to market value - Securities and derivatives (30) 2 (30) 2

Change in deferred income for the six-month period/year (195) (195)

From third parties 412,137 344,460 156,963 338,456 150,745

Increase in liabilities 232,530 340,868 64,563 334,810 94,910 Deposits 112,156 194,946 46,209 194,542 76,556 Funds obtained in the open market 7,813 7,813 Interbank and interdepartmental accounts 26,741 26,217 949 26,217 949 Borrowings and onlendings 79,433 91,725 17,405 91,725 17,405 Other liabilities 14,200 20,167 14,513

Decrease in assets 178,193 54,699 54,699 Short-term interbank investments 177,388 Marketable securities 54,533 54,533 Interbank and interdepartmental accounts 805 85 85 Other assets 81 81

Disposal of assets and investments 1,414 3,592 37,617 3,646 1,136 Assets not for own use 1,349 3,496 1,037 3,496 1,037 Investments 36,512 Property and equipment in use 65 96 68 150 99

Dividends received from subsidiaries 84

Financial resources were used for 416,100 357,120 172,500 351,987 169,732

Interest on own capital 4,647 10,170 11,446 10,170 11,446

Investments 1,318 4,952 6,350 4,755 6,297 Assets not for own use 501 1,915 3,736 1,915 3,736 Equity investments 345 Other investments 3 3 104 38 Property and equipment in use 814 2,689 2,510 2,802 2,561

Investments in deferred charges 346 346

Increase in assets 378,881 341,998 98,802 337,062 95,945 Short-term interbank investments 47,758 47,758 Marketable securities 166,989 26,979 34,299 27,015 34,619 Interbank and interdepartmental accounts 140 140 Loans 138,579 160,790 49,006 160,790 49,006 Other receivables 72,890 106,020 15,497 101,048 12,320 Other assets 423 311 311

Decrease in liabilities 31,254 55,556 55,698 Funds obtained in the open market 31,254 20,729 20,729 Other liabilities 34,827 34,969

Increase (decrease) in cash 8,433 8,159 (807) 8,216 (957)

Changes in fi nancial position Cash At the beginning of the six-month period/year 1,577 1,851 2,658 1,858 2,815 At the end of the six-month period/year 10,010 10,010 1,851 10,074 1,858

Increase (decrease) in cash 8,433 8,159 (807) 8,216 (957)



1 OPERATIONS

Banco Indusval S.A. (commercial bank) and its subsidiaries operate mainly with commercial and foreign exchange portfolios and other transactions related to securities brokers.Indusval Financeira, Crédito Financiamento e Investimento S.A. was merged into Banco Indusval S.A. on October 24, 2005, based on its net asset position at September 30, 2005. This transaction was approved by the Extraordinary General Meeting held on October 24, 2005, and has not yet been approved by the Brazilian Central Bank (BACEN).

2 PRESENTATION OF THE FINANCIAL STATEMENTS

The fi nancial statements of Banco Indusval S.A. (Indusval Multistock) and the consolidated fi nancial statements of Banco Indusval S.A. and its subsidiaries (Indusval Multistock Consolidated) have been prepared in accordance with accounting practices adopted in Brazil and the regulations of the Brazilian Central Bank (BACEN).

3 SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

(a) ConsolidationThe consolidated fi nancial statements comprise the fi nancial statements of Banco Indusval S.A. (Banco Indusval Multistock) and its subsidiaries Indusval S.A. Corretora de Títulos e Valores Mobiliários (Indusval Multistock Corretora), CredRealiza Promotora de Vendas Ltda. and Multistock Companhia Securitizadora de Créditos (Multistock Securitizadora). The results of operations of Indusval Financeira, Crédito, Financiamento e Investimento S.A. (Indusval Multistock Financeira) were consolidated up to October 24, 2005, date on which it was merged into Banco Indusval S.A. Orbix Global Partners Administradora de Recursos Ltda. (Orbix) was consolidated proportionally to the Bank’s ownership, in compliance with Resolution 2723 of the National Monetary Council (CMN), as it forms part of the economic and fi nance conglomerate.The Bank’s investments in these subsidiaries, as well as the assets and liabilities, income and expenses, and the unrealized results of intercompany transactions, were eliminated upon consolidation.

(b) Determination of the results of operationsIncome and expenses are recorded on the accrual basis of accounting.

(c) Short-term interbank investmentsShort-term interbank investments are recorded at cost plus income accrued up to the balance sheet date, net of a provision for losses, when applicable.

(d) Marketable securities and derivative fi nancial instrumentsMarketable securities are classifi ed and valued as follows:

• Trading securities - securities acquired to be traded on a frequent and active basis, adjusted to market value against results for the period;• Securities available for sale - securities that are neither trading securities nor securities held to maturity, adjusted to market value against a stockholders’ equity account, net of tax effects; and

NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 2006 AND 2005In thousands of reais


• Securities held to maturity - securities which management acquires with the intention and fi nancial capacity to hold up to maturity, recorded at acquisition cost plus accrued income with contra entry to results for the period.

Derivative fi nancial instruments are classifi ed at the inception of the operation, taking into consideration the intention of management to use them as hedge instruments or not. They are recorded at market value and realized and unrealized gains and losses are recognized directly in results for the period.Derivative fi nancial instruments which do not meet the hedging criteria established by BACEN, particularly derivatives used to manage overall risk exposure, are recorded at market value and valuations and devaluations are recognized directly in results for the period.

(e) LoansThe loans, in their different categories, are recorded at present value, including income accrued up to the balance sheet date when post fi xed, and net of unearned income, calculated based on the terms of the transactions, when prefi xed.The restatement of loans overdue is recorded as income from loans up to the 60th day and as unearned income as from the 61st day.Loans in arrears classifi ed as level “H” are held in this classifi cation for six months, after which they are written off against the existing allowance and controlled, for up to fi ve years, in memorandum accounts, no longer being recognized in the balance sheet.Renegotiated loans are held in the same level at which they were previously classifi ed. Renegotiations of loans that had al-ready been written off against the allowance and which were recorded in memorandum accounts, are classifi ed as level “H” and any gains on renegotiation are only recognized when actually received.

(f) Allowance for loan lossesThe allowance for loan losses is based on management’s analysis of the operations in order to determine the amount required, case by case, and takes into consideration the economic environment, past experience and the specifi c and overall risks of the portfolios, as well as the rules established by Resolution 2682/99, of December 21, 1999, and in accordance with Circular 2974/00, of March 24, 2000, both of the Brazilian Central Bank.

(g) InvestmentsThe investments in subsidiaries, associated and jointly-owned subsidiaries are recorded on the equity method of accounting.Investments in membership certifi cates, mainly represented by the São Paulo Stock Exchange (BOVESPA) and the Commo-dities and Futures Exchange (BM&F) certifi cates, are recorded at cost and adjusted by the equity increases of the membership certifi cates reported by the respective entities. Other investments are recorded at cost.

(h) Property and equipmentProperty and equipment are stated at cost plus price-level restatements up to December 31, 1995 and revaluation of properties for own use (Note 11(d)). Depreciation is computed on the straight- line method at the annual rates of 5% for buildings, 20% for vehicles and data processing systems, 25% for air-conditioning equipment and 10% for other items.

(i) Interbank and time deposits and funds obtained in the open marketThese deposits and the funds obtained in the open market are stated at their contractual amount plus accrued charges, in proportion to the time elapsed from the day on which the operation was contracted.

(j) BorrowingsForeign currency borrowings are stated at present value, including the charges incurred up to the balance sheet date and restated at the offi cial exchange rates ruling on the balance sheet date.



(k) Share loan contract liabilitiesShare loan agreement liabilities, recorded under “Other liabilities - Negotiation and intermediation of securities”, in current liabilities, are stated at their contractual values, which are adjusted monthly according to the market value of the shares and by the respective adjustments of the derivatives (hedge).

(l) Income tax and social contribution (assets and liabilities)Deferred income tax and social contribution on net income credits, calculated on tax losses and temporary additions, are recorded in “Other receivables - Sundry”. Tax credits on temporary additions are realized upon the use and/or reversal of the provisions on which they were recorded. The tax credits on tax losses are realized in accordance with the generation of taxable income.The provision for income tax was calculated at the rate of 15% plus an additional 10% on taxable income that exceeds R$ 240 thousand per annum, and includes the tax incentives. The provision for social contribution was calculated at the rate of 9% of adjusted taxable income, in accordance with current legislation.

(m) Contingent assets and liabilities and legal obligations - taxes and social security contributionsThe recognition and estimation of contingent assets and liabilities and legal obligations are carried out in accordance with the criteria established by Deliberation 489/05 of the Brazilian Securities Commission (CVM). Contingent liabilities are recorded taking into account the opinion of legal advisors; the nature of the processes; similarities with previous processes and complexity, where there is a probable disbursement of funds for the settlement of the obligations and when the amounts involved can be estimated with a reasonable level of security. Contingent liabilities whose unfavorable outcome is regarded as possible are recorded in the books, based on the individual assessment of management, considering the historical experience with results of processes of the same nature. Cases where an unfavorable outcome is regarded as remote do not require a provision and disclosure.

4 MARKETABLE SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

(a) Valuation, classifi cation and risk managementThe valuations of fi xed income securities, as well as of derivative fi nancial instruments, are obtained from the markets with greatest liquidity or, in the absence of such, from related markets, including interpolation and extrapolation of the terms.All transactions with fi nancial derivatives are “marked to market” and aim to hedge interest rate risks, which are controlled and managed together with other exposures to such risk factors; these mechanisms have proven to be effective in relation to the proposed objectives. The portfolio of share loan contracts (Note 3k) is almost entirely sold in the spot market, with simultaneous purchase of purchase options and sale of sale options, resulting in a funding transaction at prefi xed rates, whose results are recognized over the term of the transaction.

(b) Marketable securitiesThe cost of marketable securities plus accrued income, compared to market values are:


Indusval Multistock

2006 2005

CostMarket/

book valueMaturity (days)


Market/ book value

Trading securities Financial Treasury Bills - LFTs 50,757 50,762 Up to 360 days 5 30,885 Financial Treasury Bills - LFTs 8,888 8,888 Over 360 days National Treasury Bills - LTNs 149,909 149,975 Up to 360 days 66 National Treasury Bills - LTNs 44,520 44,505 Over 360 days (15) 137,399 Variable income securities 510Securities available for sale Financial Treasury Bills - LFTs 4,022 National Treasury Bills - LTNs 1,356 1,359 Up to 360 days 3 56,197Securities held to maturity Private securities - Bank Deposit Certifi cates - CDBs 3,013 3,013 Up to 360 days 3,023

Total 258,443 258,502 59 232,036

Indusval Multistock Consolidated

2006 2005

CostMarket/

book valueMaturity (days)


Market/ book value

Trading securities Financial Treasury Bills - LFTs 51,165 51,171 Up to 360 days 6 30,885 Financial Treasury Bills - LFTs 8,888 8,888 Over 360 days National Treasury Bills - LTNs 149,909 149,975 Up to 360 days 66 National Treasury Bills - LTNs 44,520 44,505 Over 360 days (15) 137,399 Quotas in investment funds 5 5 6 Variable income securities 815Securities available for sale Financial Treasury Bills - LFTs Up to 360 days 4,099 National Treasury Bills - LTNs 1,356 1,359 Up to 360 days 3 56,197Securities held to maturity Private securities - Bank Deposit Certifi cates - CDBs 3,013 3,013 Up to 360 days 3,023 Other 118 118 108

Total 258,974 259,034 60 232,532

c) Financial instruments(i) Position

Indusval Multistock/Indusval Multistock Consolidated

Call option Put option Maturity

Futures market Interest rate 36,974 32,927 Up to 360 days Currencies 2,818 2,685 Up to 360 days

Forward market Currencies 3,649 Up to 360 days

Swap Currencies 9,754 Up to 360 days



(ii) Position of contracts

Indusval Multistock Consolidated

Assets LiabilitiesValue of contracts

recordedResult for the year

Swap 9,754 (19)Forward 90 3,649 (90)Futures 75,404 (450)Options 2,203 11,330 317,752 (2,628)

2,203 11,420 (3,187)

The contracts of derivative fi nancial instruments are registered at the Brazilian Commodities and Futures Exchange (BM&F) and the Central System for Custody and Financial Settlement of Securities (CETIP).

5 LOANS - INDUSVAL MULTISTOCK AND INDUSVAL MULTISTOCK CONSOLIDATED

(a) Analysis of the loan portfolio by type of operation and allowance for loan losses

2006

Levels

Operations AA A B C D E F G H Total

Loans and discounted bills 232,659 156,269 48,649 7,706 6,187 1,141 48 6,739 459,398Foreign currency fi nancing 7,957 3,841 11,798Other fi nancing 21,057 21,057

Total loan operations 261,673 160,110 48,649 7,706 6,187 1,141 48 6,739 492,253

Advances on foreign exchange contracts

53,082 81,682 15,101 649 375 150,889

Other credits 461 101 283 49 894

Total credits 461 314,856 242,075 63,750 8,355 6,187 1,141 97 7,114 644,036

Allowance for loan losses 1,574 2,421 1,913 836 1,856 570 68 7,114 16,352

2005

Levels

Operations AA A B C D E F G H Total

Loans and discounted bills 184,340 73,244 18,238 10,719 717 437 2,026 4,978 294,699Foreign currency fi nancing 10,510 2,250 12,760Other fi nancing 19,943 19,943

Total loan operations 214,793 75,494 18,238 10,719 717 437 2,026 4,978 327,402

Advances on foreign exchange contracts

33,343 17,285 2,727 1,639 1,399 56,393

Other credits 555 277 832

Total credits 555 248,413 92,779 20,965 12,358 717 1,836 2,026 4,978 384,627

Allowance for loan losses 1,242 928 629 1,236 215 918 1,418 4,978 11,564


During the year, the provision for loan losses amounted to R$ 13,096 (R$ 10,080 in 2005), the amount of credits written off against the allowance for loan losses was R$ 8,308 (R$ 4,913 in 2005) and the amount of credits recovered was R$ 2,525 (R$ 1,659 in 2005). At December 31, 2006, the portfolio of renegotiated credits amounted to R$ 25,777 (R$ 9,821 in 2005).

(b) Analysis of loan operations by business sector

2006 2005

Industry 367,838 170,640Commerce 154,679 73,516Financial intermediaries 1,515 1,005Other services 47,817 57,718Individuals 72,187 81,748

644,036 384,627

(c) Analysis of loan operations by index

2006 2005

Fixed rate 288,170 183,357 Floating rate (Interbank Deposit Certifi cate - CDI) 352,861 200,313 Referential rate (TR)/ Basic Financial Rate (TBF) 309 590 Other 2,696 367

644,036 384,627

(d) Analysis of loan operations by maturity at December 31

2006 2005

Overdue From 15 to 60 days 2,746 3,430 From 61 to 180 days 2,367 3,695 Over 180 days 1,860 2,494

6,973 9,619

Not yet due Up to 180 days 462,722 303,222 From 181 to 360 days 82,035 34,861 Over 360 days 92,306 36,925

637,063 375,008

644,036 384,627

(e) Concentration of loans

2006

Clients Amount Percentage Accumulated percentage

10 largest clients 139,296 21.63 21.6311 to 50 largest clients 253,725 39.40 61.0351 to 100 largest clients 170,182 26.42 87.45Other 80,833 12.55 100.00

Total 644,036



2005

Clients Amount Percentage Accumulated percentage

10 largest clients 112,005 29.12 29.1211 to 50 largest clients 164,566 42.79 71.9151 to 100 largest clients 87,552 22.76 94.67Other 20,504 5.33 100.00

Total 384,627

(f) Non-performance loansAmong the transactions classifi ed as “D to H”, only a portion would also be classifi ed as abnormal course credit (overdue for over 60 days). The other transactions received these classifi cations due to criteria of credit analysis, despite the fact that they are performing normally.The table below segregates these transactions: normal course and abnormal course.

Level D E F G H Total

Abnormal course 914 1,468 776 57 4,516 7,731Normal course 7,441 4,720 365 40 2,598 15,164

8,355 6,188 1,141 97 7,114 22,895

(g) Middle market transactionsMiddle market transactions refer to a commercial portfolio comprised essentially of credit to small and middle-sized companies.

Type of transactionTotal

amountNumber of clients

Number of contracts

Average balance per

client

Average balance per

contract

Average term (*)

Current accounts 96,371 288 308 334 312 140Loans 285,559 299 548 955 521 332Discounts 35,829 74 627 484 57 33ACC/ACE/FINIMP 162,687 80 398 2,079 205 135

ACC: Advances Against Exchange ContractsACE: Advances Against Export ContractsFINIMP: Import Financing(*) Considers the contracted term of the transactions.


(h) Middle market transactions - classifi ed as “guaranteed by receivables” and “guaranteed by real guarantees”

Real guarantees

TransactionsTotal of the transactions

Guaranteed by

receivables

Monitored lien/Warrants and CPRs

Other types of

lien

Lien on properties

Lien on vehicles

Securities/ sharesCDBs

OtherTotal

guarantees

Current accounts 96,371 86,711 86,711Loans 285,559 219,039 5,375 20,211 10,214 1,353 3,259 31 259,482Discounts 35,829 35,829 35,829ACC/ACE/ FINIMP

162,687 58,216 19,346 12,672 9,168 99,402

580,446 399,795 24,721 32,883 10,214 1,353 12,427 31 481,424

Percentage - % 68.88 4.26 5.67 1.76 0.23 2.14 82.94

CDB: Bank Deposit Certifi cateCPR: Rural Certifi cate

6 FOREIGN EXCHANGE PORTFOLIO

Indusval Multistock and Consolidated

2006 2005

Assets Exchange purchases pending settlement 150,559 58,934 Rights on sales of exchange 7,410 919 Advances in local currency (965) (98) Other 2,494 1,457

159,498 61,212Liabilities Exchange sales pending settlement 7,037 916 Liabilities for purchases of exchange 151,332 58,228 Advances on foreign exchange contracts (149,098) (54,977) Other 706

9,977 4,167

7 OTHER RECEIVABLES - SUNDRY

Indusval Multistock Indusval Multistock and consolidated

2006 2005 2006 2005

Tax credits (Note 9) 7,170 5,214 7,170 5,214Debtors for purchase of assets 894 832 894 832Debtors for deposits in guarantee 6,737 915 7,310 1,459Taxes and contributions for offset 3,706 3,268 4,149 3,412Notes and credits receivable 26 308 26 308Sundry debtors - local and other 226 193 248 271

18,759 10,730 19,797 11,496

Current 4,480 4,204 4,945 4,426Long-term 14,279 6,526 14,852 7,070



8 INVESTMENTS

(a) Investments in subsidiary and associated companies - Indusval Multistock

2006Indusval

Multistock Corretora

CredRealiza Promotora de Vendas

Multistock Securitizadora

Indusval Multistock Financeira

Orbix (2) Total

Capital 11,500 549Shares owned (number) 4,348 189,314Stockholders' equity 26,521 588

Net income for the period 2nd half of 2006 480 141 2 2006 838 7 12 2005 157 13 3,210 (1) (306)

Interest at December 31, 2006 - % 100 100Interest at December 31, 2005 - % 100 100 100 100 50

Equity in the earnings (loss) 2nd half of 2006 1,710 141 2 1,853 2006 (3) 3,680 7 12 3,699 2005 (3) 2,093 13 3,210 (153)

Investment December 31, 2006 26,522 588 27,110 December 31, 2005 22,841 225 23,066

(1) Results appropriated up to October 24, date on which the company was merged into Banco Indusval S.A.(2) Investment purchased on October 28, 2004 and sold on December 27, 2005.(3) The difference between net income for the period and equity in the earnings (loss) refers to the restatement of membership certifi cates of the Corretora in the amount of R$ 2,842 (R$ 1,899 in 2005).

On August 31, 2006, Multistock Companhia Securitizadora de Créditos Financeiros was merged into Credrealiza Promo-tora de Vendas Ltda., which absorbed the total shares that comprise the capital of Multistock Companhia Securitizadora de Créditos Financeiros. The total assets merged amount to R$ 238.On January 31, 2007, the Bank sold 100% of the quotas that comprise the capital of Credrealiza Promotora de Vendas Ltda. for R$ 988, obtaining a gain of R$ 400.

(b) Other investments - Indusval Multistock Consolidated

2006 2005

Membership certifi cates São Paulo Stock Exchange - BOVESPA 7,191 5,644 Brazilian Commodities and Futures Exchange - BM&F 8,768 7,481 Other 190 182

16,149 13,307

Other investments Brazilian Custody and Settlement Company (CBLC) (formerly Calispa) 771 771 Other (*) 2,215 2,177

2,986 2,948

(*) Refer substantially to works of art and sundry securities.


9 INCOME TAX AND SOCIAL CONTRIBUTION – INDUSVAL MULTISTOCK

(a) Calculation of the expense for the period

2006 2005

Profi t before income tax and social contribution 28,487 21,333

Income tax and social contribution at the rates of 25% and 9%, respectively (9,686) (7,253)

Effect of additions and deductions in the calculation of the taxes Equity in the earnings of subsidiaries 1,258 1,755 Interest on own capital paid 3,458 3,892 Effect of temporary additions and deductions (1,956) (1,705) Offset of tax losses 274 941 Other amounts (192) (178)

Income tax and social contribution expense for the period (6,844) (2,548)

(b) Changes in tax credit

2006 2005

Opening balance 6,678 4,633Appropriation/(write-off) 492 581Total tax credits 7,170 5,214Deferred tax liabilities 828 881Tax credits net of deferred tax liabilities 6,342 4,333Percentage of stockholders' equity 4.23 3.18

(c) Estimate for the realization of tax credits

Balance at December 31,

20062007 2008 2010

Allowance for loan losses 5,557 5,557Social contribution - article 8 - Provisional Measure 1858

901 513 388

Other 712 414 298

7,170 6,070 802 298

(d) Estimates of realizationThe Bank’s management, based on a technical study which considers the maintenance of the historic profi tability and the generation of future tax liabilities, estimates the realization of tax credits within a maximum period of three years. The present value of the tax credits, using the Long-term Interest Rate (TJLP), is R$ 6,970.



10 OTHER LIABILITIES

(a) Negotiation and intermediation of securities - Indusval Multistock ConsolidatedNegotiation and intermediation of securities are represented as follows:

2006 2005

Creditors - pending settlement account 7,027 14,803Clearing houses for the custody and settlement of securities 1,691 158Creditors for share loans (*) 15,155 11,674Transactions with fi nancial assets to be settled 308 199Other 215 151

24,396 26,985

(*) Refers to the liability for share loan contracts (Note 3(k)).

(b) Provision for contingent liabilitiesBanco Indusval and its subsidiaries are challenging in court the legality of various taxes and contributions. Provisions for the amounts involved have been recorded in “Other liabilities - Taxes and social security contributions” in the amount of R$ 5,192 (R$ 3,412 in 2005) in Indusval Multistock and R$ 5,844 (R$ 3,872 in 2005) in Indusval Multistock Consolidated. The Bank and its subsidiaries, based on the opinion of its legal advisors, do not expect to incur losses from the outcome of these lawsuits in excess of the provisions already recorded.

11 DEPOSITS AND FUND RAISING

Deposits and funds obtained abroad by maturity - Indusval Multistock Consolidated are as follows:

2006

Maturities

Deposits No maturity Up to 1 dayUp to

3 monthsFrom 3 to 12 months

Over 1 year Total

Demand 31,035 31,035Interbank 9,396 43,153 373 52,922Time 5,349 227,544 59,621 146,378 438,892Other 3,547 3,547

Total in reais 34,582 14,745 270,697 59,994 146,378 526,396

Foreign borrowings 19,090 93,189 51,865 164,144

34,582 33,835 363,886 111,859 146,378 690,540


2005

Maturities

Deposits No maturity Up to 1 dayUp to

3 monthsFrom 3 to 12 months

Over 1 year Total

Demand 18,142 18,142Interbank 19,599 735 20,334Time 366 108,514 59,677 123,590 292,507Other 871 871

Total in reais 19,013 366 128,113 60,412 123,950 292,507

Foreign borrowings 62,640 9,779 72,419

19,013 366 190,753 70,191 123,590 404,273

12 STOCKHOLDERS’ EQUITY

(a) CapitalFully subscribed and paid-up capital comprises 31,296,247 shares, of which 16,948,594 are common shares and 14,347,653 preferred shares, with no par value. 1,591,879 shares are held in treasury.

(b) Dividends and interest on own capitalThe by-laws provide for the distribution of a minimum annual dividend of 25% of net income adjusted in accordance with article 202 of Law 6404/76.During the year, a distribution of interest on own capital of R$ 10,170 (R$ 11,446 in 2005) was approved, calculated based on the Long-term Interest Rate (TJLP), under the terms of article 9 of Law 9249/95, and recorded for tax purposes as a fi nancial expense. The tax benefi t arising from this distribution was R$ 3,458 (R$ 3,892 in 2005).

(c) Revenue reservesAt the Extraordinary General Meeting held on April 30, 2003, the stockholders approved the new wording of the by-laws of the Bank, enabling the appropriation of a portion of annual net income to: (i) a dividend equalization reserve to ensure the regular fl ow of dividend payments, including interest on own capital; and (ii) a reserve for reinforcement of working capital to guarantee fi nancial resources for the Bank’s operations. The total of these reserves cannot exceed the Bank’s capital.

(d) Revaluation of propertiesThe Bank carried out a revaluation of properties in use in the fi rst half of 2005 (properties in use), based on an appraisal report issued by qualifi ed experts, approved by the stockholders in an Extraordinary General Meeting.The results of this revaluation were recorded as required by Circular 2824/98 of the Brazilian Central Bank (BACEN) and may be summarized as follows:

Book value of land and buildings at June 30, 2005 2,160

Market value of land and buildings in accordance with the appraisal reports 3,986

Recording of the difference represented by the appreciation Appropriation to revaluation reserve 1,826

Income tax and social contribution on net income on the revaluation of land and buildings (522)

Revaluation reserve recorded, net of income tax and social contribution 1,304



13 ANALYSIS OF THE STATEMENT OF INCOME ACCOUNTS

(a) Revenues from services rendered

2006 2005

Indusval Multistock

ConsolidatedIndusval

MultistockConsolidated

Management of funds 34 339 28 428Collection 1,854 1,854 1,581 1,581Transfer of funds 332 332 307 307Guarantees provided 944 944 515 515Custody services 16 16Stock exchange brokerage services 7,451 5,873Foreign exchange brokerage services 271 214Other services 265 398 258 349

3,429 11,605 2,689 9,283

(b) Other administrative expenses

2006 2005

Indusval Multistock



Water, electricity and gas 179 264 86 264Rent 119 140 69 75Communications 1,064 1,460 920 1,187Philanthropic contributions 462 500 346 463Maintenance and conservation of assets 362 553 185 441Materials 267 359 249 339Data processing 695 856 580 751Promotions and public relations 240 282 213 256Advertising and publicity 161 161Publications 222 274 147 231Insurance 87 87 70 70Services of the fi nancial system 1,283 1,538 1,269 1,708Third party services 4,029 6,088 2,283 4,351Surveillance and security 60 60 59 59Specialized technical services 2,609 2,863 3,112 3,563Transport 292 396 187 236Travel 427 496 234 364Other administrative expenses 2,470 2,695 1,639 1,973

14,867 18,911 11,809 16,492

(c) Personnel expenses

2006 2005

Indusval Multistock Consolidated Indusval Multistock Consolidated

Payroll 12,052 13,478 8,850 10,477Fees 3,836 4,358 4,185 4,522Benefi ts 3,829 4,641 3,076 3,853Social charges 4,789 5,409 5,370 6,012Training 199 204 109 115Interns 145 145 10 10

24,850 28,235 21,600 24,989


(d) Tax expenses

2006 2005

Indusval Multistock Consolidated Indusval Multistock Consolidated

Tax on Bank Account Outfl ows (CPMF) 225 264 204 240Service Tax (ISS) 238 629 184 485Social Integration Program (PIS) 536 606 405 500Social Contribution on Revenues (COFINS) 3,301 3,734 2,491 3,067Other 436 457 314 338

4,736 5,690 3,598 4,630

14 OPERATING LIMITS - INDUSVAL MULTISTOCK CONSOLIDATED

In compliance with Resolution 2099/94 of BACEN, a minimum stockholders’ equity has to be maintained equivalent to 11% of the asset transactions weighted by risk levels that range from 0% to 300%. At December 31, 2006, the Bank’s index was 22.45% (30.43% in 2005), calculated based on the consolidated fi nancial statements.

(a) Basel Index Calculation

2006 2005

Percentage Balance Weighted risk Balance Weighted risk

No risk 380,544 309,353Reduced risk 20 35,592 7,118 4,053 811Reduced risk 50 180,576 90,288 104,131 52,066Normal risk 100 539,166 539,166 369,150 369,150Tax credits 300 6,937 20,811 5,099 15,297

1,142,815 657,383 791,786 437,324

Swap credit risk 20 74 15 25 5Market risk - interest 100 927 927 1,117 1,117

1,001 942 1,142 1,122

Basel index - % 22.45 30.43

(b) Operating limits

2006 2005

Requirement (limit)

Situation MarginRequirement

(limit)Situation Margin

Stockholders' equity required 24,000 141,926 117,926 24,000 128,611 104,611Minimum capital 24,000 106,612 82,612 24,000 106,612 82,612Property and equipment 66,273 11,792 54,481 61,036 9,787 51,249



15 RELATED PARTIES

Related party transactions are carried out at normal market amounts, terms and payment conditions, and are represented by:

2006 2005

Assets (liabilities)

Income (expenses)

Assets (liabilities)

Income (expenses)

Demand deposits (350) (221)Time deposits (486) (17) (166) (27)Interbank deposits (12,079) (1,438) (9,408) (1,705)Other (44) (138)

Other non-consolidated related parties Foreign borrowings (30,784) (1,861) (37,239) (2,161)

16 MANAGEMENT OF INVESTMENT FUNDS

The Bank manages the funds listed below, whose net assets at December 31 are as follows:

2006 2005

Valeu - Fundo de Aplicação em Quotas de Fundos de Investimento 10,433 10,369Multi Fundo de Investimento Financeiro Indusval 1,898 2,995Agri-Sus Fundo de Investimento em Quotas de Fundos Multimercado 15,757

17 SUPPLEMENTARY INFORMATION

(a) Guarantees and suretiesAt December 31, the Bank’s responsibility for guarantees and sureties provided to third parties is as follows:

2006 2005

Guarantees - fi nancial institutions 20,165 16,665Guarantees - individuals and non-fi nancial corporate entities 23,571 12,356Credits opened for import 3,270 3,370

47,006 32,391

(b) Indusval Multistock Corretora (Brokerage Firm)The subsidiary Indusval Multistock Corretora acts as an intermediary in the trading of contracts on the forward, futures and options markets totaling R$ 994,717 at December 31, 2006 (R$ 574,484 at December 31, 2005). It is also responsible for the custody of clients’ securities totaling R$ 552,639 at December 31, 2006 (R$ 408,914 at December 31, 2005), deposited with the Brazilian Custody and Settlement Company (CBLC).


(c) Personnel

2006

EmployeesBanco Indusval

MultistockIndusval Multistock

CorretoraTotal

Support and control 98 27 125Operational 115 15 130

Total 213 42 255

(d) Statement of added value

2006 2005

Indusval Multistock



Analysis of added value Gross profi t from fi nancial intermediation 67,730 69,232 51,074 57,716 Revenues from services rendered 3,429 11,605 2,689 9,283 Other operating income/expenses (13,086) (17,850) (7,232) (14,332)

58,073 62,987 46,531 52,667

Distribution of added value Employee compensation 21,105 24,038 18,505 21,428 Payroll 16,034 17,981 14,502 16,497 Benefi ts 3,829 4,641 3,076 3,852 Employment security fund 1,044 1,212 818 959 Other charges 198 204 109 120

Government remuneration 13,334 15,315 8,477 11,690 Tax expenses 4,736 5,690 3,598 4,630 National Institute of Social Security (INSS) 3,745 4,197 3,095 3,561 Income tax and social contribution 4,853 5,428 1,784 3,499

Interest on own capital 10,170 10,170 11,446 11,446

Reinvestment of profi ts 13,464 13,464 8,103 8,103

58,073 62,987 46,531 52,667


Senior Management

PresidentManoel Felix Cintra Neto

Chief Executive Offi cerLuiz Masagão Ribeiro

Managing DirectorsAntônio Geraldo da Rocha Carlos Ciampolini

Company Credit DirectorsMario Fukumitsu Roberto Carlos Carvalho Almeida

Foreign Exchange and International Operations DirectorKátia Moroni

Financial DirectorsGilberto Luiz dos Santos Lima Filho Ziro Murata Júnior

Retail Operations DirectorNey Guaycurú de Carvalho Ferreira

Stock Exchange Operations DirectorJosé Costa Gonçalves

Corporate Information


Companies, addresses and other contact information

Banco Indusval MultistockWebsite: www.indusval.com.brE-mail: [email protected]

Head Offi ceRua Boa Vista, 356 - 5º/12º andaresSão Paulo (SP) Brasil CEP: 01014-000 CNPJ: 61.024.352/0001-71 Telefone: (11) 3315-6777 Fax: (11) 3315-0130

Campinas Branch Offi ceAv. José Bonifácio Coutinho Nogueira, 150 - 6º andar - sala 603Jardim Madalena - Campinas/SP.Cep: 13091-611CNPJ: 61.024.352/0004-14Telefone: (19) 3206.0788 Fax: (19) 3207.3654

Goiânia Branch Offi ceAv. Republica do Líbano, 15517º andar - sala 702Ed. Vanda Pinheiro - Setor Oeste Goiânia (GO)CEP: 74115-030CNPJ: 61.024.352/0005-03Telefone: (62) 3225-6777Fax: (62) 3224-2052

Credits

Publisher and editor: Scriba Comunicação Corporativa

Graphic design: D´Lippi Design+Print

Photography: Ricardo Teles

Printing: Neo.

Belo Horizonte Branch Offi ceAv. Olegário Maciel, 2.144 - 11º andar Salas 1101 e 1102Santo Agostinho - Belo Horizonte - MGCep 30.180-112CNPJ: 61.024.352/0006-86Telefone: (31) 2111-0888Fax: (31) 2111-0861

Curitiba Branch Offi ceRua Pasteur, 463 13º andar - salas 14 e 15Batel - Curitiba - PRCep: 80.250-080CNPJ: 61.024.352/0003-33Telefone: (41) 3312.1662 Fax: (41) 3312.1699

Indusval Multistock Brokerage HouseWebsite: www.indusvaltrade.com.br E-mail: [email protected] Rua Boa Vista, 356 - 5º/12º andares São Paulo (SP) - Brasil CEP: 01014-000 CGC: 65.913.436/0001-17 Telefone: (11) 3315-6777 Fax: (11) 3315-0130

CredRealiza Sales Promotion CompanyE-mail: [email protected] Ezequiel Ramos 2-48 TérreoCEP: 17.010-021 - Centro CNPJ: 03.573.354/0002-02Bauru (SP) - Brasil Telefone: 0800 7715966 ou (11) 3315 6877

w w w . i n d u s v a l . c o m . b r

2006 Annual Report

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