Annual Report 2008
| Corporate Profile |
A middle-market focused business Banco Indusval Multistock is a commercial bank focused on medium-sized companies, with over 40 years of activities in the Brazilian financial market. It offers its customers unique credit products tailored to their needs, both in the Brazilian currency and in foreign currencies. Its experience in offering foreign exchange, trade finance and structured operations is a differential towards competition. The main reasons for its success include quick decision-making, in-depth knowledge of the middle market and its strict credit risk management. The experience of its professionals, its ability to constantly innovate, nimble management and a serious concern about its customers’ needs add value to the Bank’s financial services. BIM’s line of products meets both its customers’ credit and investment needs. It offers credit operations for working capital, imports and exports, as well as alternatives for investments of cash both in fixed or equity instruments. The Bank develops viable structures for the financing of middle market companies through its agreements with multilateral institutions, such as the International Finance Corporation (IFC) and the Inter-American Development Bank (IDB) and also as a financing agent for the Brazilian Social and Economic Development Bank (BNDES). BIM has eleven branches strategically located in areas with a large number of medium-sized corporations and sharp economic growth. Moreover, it acts as an intermediary in operations on the São Paulo Securities, Commodities and Futures Exchange (BM&FBOVESPA) through its brokerage firm, Indusval Corretora.
São Paulo Belo Horizonte Campinas Campo Grande Curitiba Goiânia Maringá Porto Alegre Recife Rio de Janeiro Uberlândia
| Main Indicators | Consolidated . RS Million Results
2005 151.5 57.7 23.0 19.5
2006 187.8 69.2 30.5 23.6
2007(a) 289.0 129.2 61.0 45.4
2008 641.0 200.1 110.9 71.8
Credit Portfolio Credit Portfolio incl. Guarantees and Letters of Credit Cash and short-term interbank Investments Marketable Securities and Derivatives Total Assets
384.6 417.0 105.1 234.2 772.4
644.0 691.0 161.1 261.2 1.120.6
1.255.2 1.329.0 264.0 649.1 2.211.2
1.723.0 1.793.7 110.9 331.5 2.225.4
Total Deposits Foreign Currency Borrowings Local Currency Borrowings Local Onlending Shareholders' Equity
331.9 72.4 136.3
526.4 164.1 149.7
810.4 229.7 406.7
824.9 487.9 128.2 159.6 448.5
14.7% 2.6% 11.1% 2.5% 30.4% 59.0%
16.5% 2.5% 9.8% 1.2% 22.5% 56.3%
16.3% 2.7% 9.3% 1.4% 33.2% 63.0%
16.8% 3.2% 9.5% 2.7% 24.0% 46.6%
198 1
255 5
331 11
329 11
Financial Intermediation Income Financial Intermediation Result Operating Result Net Profit
Balance sheet
Performance Return on Average Equity Return on Average Assets Net Interest Margin (NIM) (b) NPL / Total Credit Portfolio(c) Basel Index Efficiency Ratio(d)
Operating Indicators Number of Employees Number of Branches
(a) Excluding the non-recurring IPO expenses of R$ 9.7 million(net of taxes) net profit in the period would total R$55.1 million, leading to a 19.8% ROAE, 3.3% ROAA, 9.3% NIM and 54.6% Efficiency Ratio. (b) (Gross Result from Financial Intermediation – Prov. for Doubt. Debtors)/Average Interest Earning Assets. (c) NPL (Non-Performing Loans) – Total outstanding of contracts with one of the installments overdue for more than 60 days. (d) Ratio between Operating Expenses and Operating Income. A fall in this index shows improved performance.
| About this Annual Report |
Photography: the art of transforming people cover photo . Dayana
Bruna Gomes Ribeiro, 17 years old
Credit portfolio . R$ million
05
06
07
08
06
07
08
Net Profit . R$ million
05
06
07
08
05
23.6
19.5
150
136
45.4
449
407
Shareholders Equity . R$ million
05
71.8
384
404
646
687
1,040
1,256
1,600
Foreign Currency Local Currency
1,723
Foreign Currency Local Currency
Total Funding . R$ million
06
07
08
More than an incredible tool for documenting people, places and historical facts, the photography is an instrument to express ideas and to observe reality through new perspectives. By detecting that the art of photography is able to assist in transforming people, the Project named “Image Capturing: Photography” was designed and executed in 2007 and 2008. This project was a partnership between the NGO Arrastão Project and Tomie Ohtake Institute which was sponsored by Banco Indusval Multistock. By means of theoretical and practical lessons a group of students from Arrastão Project was introduced to the fantastic image capturing universe. The pictures that illustrate this Annual Report are just a sample of these young photographers’ transformation process. The complete result of the experience was exhibited to the public at the Tomie Ohtake Institute studio. We thank these young photographers for the beautiful images. But, more than that, we thank them for letting their transformation process be an inspiration to conduct our daily business.
| Index |
Annual Report 2008 2
Message from the President
6
Corporate Governance Governance Structure Corporate Governance and the Capital Market Investor Relations
16
Strategic Management Administrative Management Risk Management
26
Markets and Products Credit Operations Structured Operations Treasury Operations in the Stock, Mercantile & Futures Exchanges
42
Economic Environment and Performance Economic and Financial Performance Added Value Statement Cash Flow Ratings
58
Capital Market Capital Breakdown Treasury Shares Stock Options Plan Stock Performance Shareholding Base Shareholder Remuneration
64
Intangible Assets
68
People Management Training Indusval Multistock's Employees' Profile Remuneration and Benefits
74
Sustainability Annual Social Report 2008
82 116 | Annual Report
2008
Financial Statements Corporate Information
| Message from the President |
A more modern and solid structure ensured successful operations in 2008 The year of 2008 was marked by two contrasting phases. During the first nine months, the Brazilian economy grew rapidly, with a very strong domestic market, in spite of the apparent difficulties that were already taking place abroad. For us, consequently, credit volume in the local financial system rose sharply in that period. In the last quarter, however, the economic crisis, which had started in the USA in 2007, ended up spreading worldwide and quickly deepened after the US bank Lehman Brothers collapsed in September. We started 2008 with a more modern and solid structure, stemming from the changes introduced in the previous year. We were aware of the challenges that were posed ahead of us from the beginning of the year. Therefore, we monitored the global economy even more closely. We successfully consolidated our branch network during the first half of the year and managed to sustain the growth rates of our credit portfolio and other operations. Our credit portfolio increased considerably following the opening of six new branches in late 2007. We invested in process mapping, system and control improvement, and business risk management throughout the year. Thus, we ensured the continuity of high quality, agile, safe and profitable operations.
2
1
01 |
2
3
4
5
6
7
8
9
Manoel Felix Cintra Neto President
02 |
Luiz Masagão Ribeiro Superintendent Officer
03 |
Carlos Ciampolini Executive Officer
04 |
Ziro Murata Junior CFO and Investor Relations Officer
05 | Gilberto L. dos Santos Lima Filho
There have been many periods of economic turmoil over the 41 years of Banco Indusval Multistock’s history. However, none of them has had such a powerful, far-reaching impact. The performance of every financial institution whose core business is lending is closely connected to economic growth and liquidity. Therefore, until September, we pursued our expansion strategy and took advantage of every market opportunity. The experience acquired throughout the many years of operations allowed us to make swift and efficient decisions, reacting to the reversal of the economic scenario, so as to ensure the safety of our operations and the sustainability of our business in the long term.
Treasury Officer – SPB 06 |
Roberto Carlos de C. Almeida Commercial Officer
07 |
Gilmar Melo de Azevedo Commercial Officer – Branches
08 |
Katia Aparecida Rocha Moroni International Department Officer
09 |
We reviewed our business strategy in the second half of 2008, when the global financial market was shaken by an unprecedented combination of adverse factors and effects. The world changed, and so did BIM. Worth of note is our excellent technical team, which had been closely monitoring the foreign market and promoted, in a creative and agile fashion, the necessary measures to safely face the economic turbulences.
Eliezer Lizardo Ribeiro da Silva Credit Officer
| Annual Report
2008
3
| Message from the President |
One of the major changes was that we suspended the Bank's and the Broker's expansion plans until the market conditions and risk levels are more stable. We also decided to discontinue the used car financing project started in April. That measure led to dismissals to adjust the BIM’s staff to the new situation. Even when economic volatility peaked, the Bank continued to grant loans, however with stricter credit policies to ensure safety. In response, we reduced loan amounts, started requiring more guarantees and diversified our customer base and funding sources. In 2008, BIM increased funding in Brazil, including BNDES funds, and abroad, where it has agreements with correspondent banks, the International Finance Corporation (IFC) and the Inter-American Development Bank (IDB).
Experience allowed us to introduce the changes needed to safely go through market turbulence. We believe that BIM 2008 results that are shown in this Annual Report are positive, especially considering that the crisis has severely hit many foreign banks. It is true that the favorable economic situation until mid-September contributed to this performance. Nevertheless, aside from the already mentioned measures taken, our conservative risk management policy was another contributing factor. We place utmost importance on asset liquidity, thus maintaining free cash of at least 20% of total deposits. Moreover, we have a contingency plan to mitigate risks arising from a sudden shortage in liquidity. We also consider our ethical and social principles essential for BIM’s health and perpetuity. The adoption of good corporate governance standards is part of this belief. Therefore, we voluntarily fulfilled almost all the requirements for Novo Mercado listed companies. Furthermore, we believe that being socially responsible means contributing to the community’s economic and social development, even during economic downturns. As a result, we continue to carry out the activities organized by the Indusval Multistock Sustainability Institute, in spite of the crisis.
4
When the economy recovers, we want to be prepared to pursue our efficient and agile expansion strategy. Our experience and conservative policies were the guidelines for our operations throughout 2008, mainly during the last quarter, and continue applying these guidelines to our activities. We remain optimistic and still believe that the current crisis will hit Brazil less heavily than other countries. When the economy recovers, we want to be prepared to pursue our efficient and agile expansion strategy, thus adding value for all of our stakeholders. In a year full of challenges, we profusely thank our shareholders, customers and business partners for their trust in the Bank, as well as all our employees and collaborators. It is with the commitment of each one of them that we believe that BIM is prepared to overcome the challenges of 2009.
Manoel Felix Cintra Neto President
| Annual Report
2008
5
| Corporate Governance |
A commitment to ethics, transparency and disclosure Long before Banco Indusval Multistock went public in July 2007, its Management believed the adoption of the best practices in Corporate Governance was crucial for better business performance. The wide and transparent information disclosure provides reliability and results in easier access to funding at a lower cost and directly contributes to its profitability. Good corporate governance must be based on a strategy, risk management, internal controls, and wide, efficient and fair disclosure. In view of those principles, BIM’s top management constantly seeks to improve its decision-making process. Therefore, the integration of the Board of Directors, the top Corporate Governance body, with the Resources and Risk Management, through its Executive Board, and with the Resources and Risk Control, is ensured by regular and direct reporting by the External and Internal Auditing. The joint effort of the Legal, Accounting and Controls, Risk Management, Internal Controls and Investor Relations Departments, aligned to Management's strategy, ensures that Company information is appropriately disclosed to the whole market.
6
Respect
7
Kaio Bastos, 17 years old
| Corporate Governance |
| Governance Structure Board of Directors The Board of Directors is the Bank’s top governing body. It is responsible for outlining strategies and general policies, besides guiding and supervising the Executive Board’s activities. It also ensures that all financial information posted is accurate and, therefore, it is its responsibility to choose independent auditors and supervise the internal audit activities. Regular meetings are held four times a year. Meetings are called by the Chairman of the Board, who can also call special meetings whenever deemed necessary.
High corporate governance standards are essential for BIM's performance and perpetual business. Pursuant to BIM’s Bylaws, the Board of Directors must be composed by a minimum of 6 (six) and a maximum of 10 (ten) members elected by the General Shareholders’ Meeting for a joint two-year term. Re-election is permitted. Banco Indusval Multistock’s Board of Directors was made up of eight members at the close of 2008: five shareholders, one external director and two independent directors. The current composition includes a percentage of independent members higher than that required by the Bank’s bylaws and the Novo Mercado rules. BIM’s Board of Directors has executives widely recognized for their skills and broad experience in very important fields for the Bank’s business management. They are prominent financial market professionals specializing in different areas. The fact that members’ skills complemented one another, as well as each member’s professional knowledge, was taken into consideration when the Board was formed. Consequently, the discussion of strategies and goals that guide the Bank’s activity is sure to include different points of view.
8
The contribution of the shareholders in the Board is their extensive and active experience in the Company and in the financial market. Mr. Júlio dos Santos Oliveira Júnior, lawyer and former member of BOVESPA’s Board of Directors, greatly contributes to discussions by offering a legal perspective. Mr. Adroaldo Moura da Silva, economist, former Chairman of the Brazilian Securities and Exchange Commission (CVM) is an asset to the group because of his sound experience in economic matters and regulatory issues. Mr. Wladimir Antonio Puggina has a Master's degree in business administration and is a prominent business management and finance professional.
Bruna Oliveira de Araújo, 16 years old
In 2009, the above members were re-elected with the additional contribution of Mr. Mário Fukumitsu, economist, with a large experience in financial institutions’ commercial area, holding a position in BIM’s executive office for many years before being transferred to the Board of Directors; and Mr. Odilson Lírio Moré, auditor and consultant for BOVESPA in operating and tax matters and, therefore, brings the auditor’s point of view and contributes to the ongoing improvement in terms of Corporate Governance.
Members of the Board of Directors elected at the 03/12/09 General Shareholders’ Meeting Luiz Masagão Ribeiro – Chairman Manoel Felix Cintra Neto – Vice Chairman Maria Cecília C. Ciampolini – Director Carlos Ciampolini – Director Antonio Geraldo da Rocha - Director Mário Fukumitsu – External Director Júlio dos Santos Oliveira Júnior – External Director Adroaldo Moura da Silva – Independent Director Wladimir Antônio Puggina – Independent Director Odilson Lírio Moré – Independent Director
Statutory Audit Committee BIM’s Bylaws provides for the establishment of the Audit Committee by decision of the General Shareholders’ Meeting or upon shareholders’ request, in the cases and manner described in the Brazilian Corporate Law. When established, the Audit Committee will be composed by a minimum of 3 (three) and a maximum of 5 (five) elected members that can be ousted at any time by the General Shareholders' Meeting. The Audit Committee was not established in 2008.
Executive Board The Board of Executive Officers is responsible for managing the Bank, supervising business and operating activities, and enforcing the guidelines and general policies outlined by the Board of Directors. Its duties include preparing the annual budget and monitoring compliance with it, after approval by the Board of Directors. | Annual Report
2008
9
| Corporate Governance |
At the end of 2008, the Board of Executive Officers had 9 (nine) members. The Company's Bylaws provide that it must consist of a minimum of 4 (four) and a maximum of 11 (eleven) members. Officers have a joint two-year term. Reelection by the Board of Directors is permitted. The Executive Board is composed of financial market professionals, each of whom with at least 25 years’ experience. Top executives’ skills and dedication ensure that BIM's business is conducted in an effective manner.
Committees Dayana Bruna Gomes Ribeiro, 17 years old
Six committees are an integral part of BIM’s management structure.
Remuneration and Benefit Committee The Remuneration and Benefit Committee exists to support the Board of Directors in issues related to officer remuneration and focuses on adding value in the long term. It regularly reviews the remuneration and benefits offered to the Bank's Executive Board to attract, retain, motivate and remunerate executives appropriately. It also recommends changes in remuneration and benefit amounts to the Board of Directors. This Committee also manages incentive plans such as the Stock Options Programs and Pension Plans. The Committee consists of at least 3 (three) members, independent or not, elected annually by the Board of Directors. It meets twice a year, at the close of each half, on a regular basis. Special committee meetings are held whenever needed or whenever a member of the Board of Directors or of the Remuneration and Benefit Committee itself calls one.
Cash Committee The main purpose of this Committee is to control BIM's liquidity. It also analyzes cash flow projections for Treasury activities, discussing new funding alternatives, transactions and operating limits. It consists of the Bank’s President, the Chief Executive Officer, the Treasury Officers – Proprietary Position and Cash Management – and the Officer in charge of the activities of the brokerage house and the international area. The Cash Committee meets on a weekly basis.
10
Credit Committee This Committee outlines credit risk management policies and approves credit limits granted to customers. It is composed of 7 (seven) members from the following areas: President, CEO and Commercial, Treasury, International and Credit Officers. Its decisions are made by majority vote. The Credit Committee meets ordinarily on a weekly basis. It can also meet electronically at any time to assess changes or minor exceptions related to formal details and guarantee coverage in credit limits previously approved at regular meetings.
The establishment of Committees ensures maximum agility and safety in the discussion and implementation of business strategies. Compliance and Internal Audit Committee This Committee’s duties are to establish operating policies and rules, as well as outline strategies to promote the practice of internal controls, risk mitigation and compliance with legal requirements. Its primary responsibility is to systematically monitor the Bank’s activities to assess the effectiveness of the internal control systems in fulfilling legal requirements, and to analyze any suspected cases of money laundering. It also helps the Board of Directors monitor the accounting practices adopted in preparing the financial statements. Regular meetings are held on monthly basis. The Compliance and Internal Audit Committee consists of five members: Chief Executive Officer; the Risk, Compliance and Information Safety Superintendent; the Accounting and Control Superintendent; and supervising professionals from the internal control and audit areas. Members of the Board of Directors are permanent guests of this Committee.
| Annual Report
2008
11
| Corporate Governance |
Information Technology and Safety Committee BIM’s IT and information safety policies are developed by this Committee. Its duties include setting rules for information use to ensure its protection and guaranteeing managers’, employees’, and service providers’ compliance with policies and procedures. This Committee is also responsible for discussing and planning activities and investments to ensure sustainable and safe operation development. The IT and Information Safety Committee meets on a monthly basis. It is composed of eight members – the Chief Executive Officer; the Risk, Compliance and Information Safety Superintendent; the IT Superintendent; the Administrative Superintendent; the IT Systems Development Manager; the IT Project Manager; the IT Infrastructure Manager; and the Controlling Department Manager.
Legal Committee This Committee analyzes and discusses legal and regulatory rules for Bank operations and any legal issues related to its institutional aspects. Therefore, it analyzes and recommends legal structures that ensure products and operations are formally perfect. In addition, it sets collection and loan recovery policies and strategies. The Legal Committee consists of the Chief Executive Officer, the Legal Manager, the Litigation Department Manager and an external Legal Advisor. The four members of this Committee meet on a monthly basis.
| Corporate Governance and the Capital Market When BIM listed its preferred shares on the Stock Exchange, currently BM&FBOVESPA S.A. – Securities, Commodities and Futures Exchange –, it adhered to Level 1 of special Corporate Governance practices and voluntarily fulfilled further requirements applying only for companies listed on Novo Mercado, the highest Corporate Governance level in BM&FBOVESPA’s rules.
Sheila Rosa dos Santos, 17 years old
12
Differences among Level 1, Novo Mercado and BIM practices Requirements
Level 1
Novo Mercado
BIM
Minimum free float
Minimum 25%
Minimum 25%
33.9%
Types of shares
Common and Preferred shares
Only Common shares
Common and Preferred shares
Board of Directors
At least three members
Ten members, A minimum of five 2 of whom are external members, 20% of whom and 3 are independent must be independent (30%)
Annual Financial Statements under International Standards
Optional
US GAAP or IFRS
Adhesion to IFRS
Tag Along*
80% for Common shares
100%
100%
Adoption of the Market Arbitration Chamber
Optional
Compulsory
Adopted
Status
Conversion to only 1 class in progress
In progress
* Tag Along is the total or partial extension to all minority shareholders of the conditions provided to majority shareholders in the disposal of the Company’s Control. Consequently, 100 percent tag-along rights means that minority shareholders will have the right to receive 100% of the amount per share received by the controller if a company’s control is sold.
In order to achieve the highest Governance standards required by the Novo Mercado segment, BIM is working to have:
Capital Stock Consisting of a Single Share Class Novo Mercado requires that all the company's capital consists of common shares, therefore, with voting rights. Pursuant to current legislation, foreigners can only own a share of financial institutions' voting stock under a recommendation of Brazil's Central Bank (BACEN) and a Presidential Executive Order stating the country’s interest in this operation. Since foreign investors account for a large share of BM&FBOVESPA’s trading, BIM requested from BACEN, in September 2007, an authorization for foreigners to have a minority interest of up to 45% of its voting stock. The Executive Order was signed in late May 2008.
| Annual Report
2008
13
| Corporate Governance |
The next step for the conversion of preferred shares into common shares is its approval by the Special Preferred Shareholders’ Meeting and the Special Shareholders' Meeting, so that they decided on the share conversion process, ensuing bylaw changes and the final migration to Novo Mercado . Pursuant to the current rules, the first Special Preferred Shareholders' Meeting was called for August 2008. Even though the meeting unanimously voted for share conversion, it did not have a sufficient quorum to approve it, i.e., a majority of preferred shareholders. Consequently, Banco Indusval Multistock filed a special request with the Securities and Exchange Commission (CVM) for an authorization to call other Special Preferred Shareholders' Meetings and a permission to approve the agenda item with a reduced quorum at the third meeting. CVM approved the request in December 2008. Therefore, other meetings will be called and the process will proceed as soon as market conditions allow doing so.
BIM voluntarily fulfilled Corporate Governance requirements applying only for Novo Mercado companies. Financial Statements under International Standards Banco Indusval Multistock’s Accounting and Control Superintendence is working jointly with a specialized consulting firm to post the consolidated financial statements to the market in keeping with the International Financial Reporting Standards (IFRS) by 2010. That measure complies with the disclosure requirements for Novo Mercado Companies and BACEN's Notice # 14259, of March 10, 2006.
14
| Investor Relations The Investor Relations Department exists to effectively implement the information disclosure transparency policy, a major commitment of the Bank’s management. Its main duty is to ensure an effective and quick communication process with shareholders and capital markets professionals by releasing data and information about the Bank's business performance and disclosing its main strategic guidelines. The Investor Relations department has its own area on BIM’s website (www. indusval.com.br/ir), where it posts up-to-date information conveniently accessible to all stakeholders. This is an important tool that complements the wide dissemination of information to the public through CVM, BM&FBOVESPA, newspapers and e-mail messages among others. The Investor Relations Department assisted over 100 analysts and Brazilian and foreign investors at private meetings in 2008. In addition to the private meetings, BIM attended public meetings, roadshows and Brazilian and foreign events at which it presented the Bank and its performance to about 300 analysts and investors throughout 2008. Highlights are:
| “Goldman Sachs Banks Trip 2008” – January – São Paulo, SP, Brazil | “VI Banking Field Trip – Credit Suisse” – January – São Paulo, SP, Brazil | Non-deal Roadshow – January – São Paulo, Geneva, London, New York and Miami; | HSBC Brazil Forum – June – New York and Boston – USA; | Public Meeting with Analysts and Investors – APIMEC – September – São Paulo, SP, Brazil; | Brazil Capital Markets Day – The London Stock Exchange – September – London . Pedro Augusto de Souza, 16 years old
| Annual Report
2008
15
| Strategic Management |
Ongoing search for efficiency, quality and safety Banco Indusval Multistock’s business strategy aims at the sustainable expansion of its activities, based on the balance between profitability and safety. Consequently, it has constantly been investing in improving its management and risk control structure to optimize its operating structure, gain efficiency and ensure returns for its investors and a quality relationship with its employees, customers, suppliers and other stakeholders. The middle market financing segment presented high growth rates and good business opportunities in recent years. As a result, BIM chose to remain focused on it and expand its activities. That was achieved by increasing its branch network since 2006, when the Bank expanded its operations from its São Paulo headquarters and opened branches in Belo Horizonte, Campinas, Campo Grande, Curitiba, Goiânia, Maringá, Porto Alegre, Recife, Rio de Janeiro e Uberlândia. Six of those branches were opened in late 2007 and performed well, which greatly contributed to the 2008 results. With the new scenario for the global economy, the continuity of the branch network expansion plan was suspended until there are prospects of greater economic stability and growth. It is worth noting that the eleven existing branches were kept and integrated into Banco Indusval Multistock’s activity consolidation plan.
16
Welbert David Mendes, 18 years old
Sustainable Growth
17
| Strategic Management |
Branches focus primarily on corporate customer service. They abide by BIM’s philosophy, which is to know its customers very well and closely monitor their businesses. This practice aims at understanding customers’ needs, as well as assess and control their risks. Support and operating control activities are all concentrated in the São Paulo headquarters and made viable with investments in technology and communications. This is the only manner in which it is possible to increase geographical coverage safely and quickly without overburdening costs. BIM’s strategy is fully based on its experience of over 15 years in the middle market; nimble and extremely efficient credit analysis; and strengthened administrative management, risk control, compliance and technology structures.
Sustainable growth: equilibrium between quality, profitability and safety. | Administrative Management The expansion process started in 2006 and gained momentum in 2007 with the capital increase resulting from the Initial Public Offering and the new branches. As a matter of fact, "growth and evolution" was the motto that year. In 2008, the motto became “quality and safety”, and the operations of the new branches were consolidated. The administrative management and infrastructure initiatives ensured that the Bank's activities and operations were adequately conducted. The strengthening of means, tools and management and control policies aimed at carrying out a quality work. As a result, operations can be expanded with a leaner, nimbler and safer structure.
18
Investment in Infrastructure The improvement in corporate data environment safety and business continuity, once more, guided the main investments in 2008. Throughout the year, BIM allocated funds to the purchase of equipment to develop the Information Technology (IT) department by increasing the voice and data transmission capacity to ensure safe, speedy and top-quality operations. Those investments were also intended to reduce costs and preserve branch connectivity. Additionally, a redundant link was created with the data center that is located in a safe and controlled environment, at a reliable supplier since 2007. This parallel link is intended to ensure system stability at any time. Letícia Muniz de Souza, 17 years old
Another IT action in 2008 was the expansion and upgrade of the contingency site, situated away from the headquarters. That measure ensures the perpetuity of business even under adverse conditions and when headquarter facilities are inaccessible and complies with all the requirements of the Business Continuity Plan pursuant to BACEN’s Resolution 3,380 and of BM&FBOVESPA's Operating Quality Plan. Even though the measures described above are of utmost importance, the most important project in this area was the redesign of BIM’s technology infrastructure. The R$ 2.9 million project was designed to improve information flow performance and availability in the Bank’s network and increase safety and scalability. The project is divided into four subprojects:
| Backbone – the data network was redesigned, involving communication between headquarters and the data center. It includes purchasing new equipment, links and services to ensure a better communication performance; | Servers redesign – the best market practices for the architecture and installation of operating systems and server services were reviewed and implemented; | Branch integration – review and implementation of the best market practices for servers, links, applications and computers at Banco Indusval Multistock branches; | Branch contingency – a contingency structure through the Internet was created in case data flow between branches and the data center is interrupted.
| Annual Report
2008
19
| Strategic Management |
Investments in Systems Systems play a key role in the Bank’s administrative management. The interaction of the different operating areas with the IT department is essential for business development. The IT department greatly contributed to the acquisition of legacy systems to manage many processes such as: accounts payable (ERP), payroll, the new risk control system and homebroker for the Brokerage firm and the new derivative system for the Bank.
Débora Maria Ferreira de Oliveira, 15 years old
This department also collaborated with specialized companies in the integration and training for the use of those systems that improved operation control and the management information systems. In addition, it ensured high competitiveness and business agility.
Improved Work Flows and Processes With the purpose to further improve processes and work flows, in 2008, the Bank restructured and strengthened customer service in all levels through cells geared to the internal and external publics:
Internal Public
| Internal Service: this department was created in 2007 and focuses exclusively on internal customers, mainly from the Commercial (headquarters and branches), Funding, International and Treasury departments. The Service is the front door to the production environments and is responsible for screening and monitoring the document flow of ongoing operations being able to track all the steps of the process at any time.
| IT User Support: this department was completely redesigned in 2008 after a specialized company was hired and the services were outsourced with a technical team based in BIM’s facilities. Besides cost reduction, that measure allows the Bank’s IT professionals to focus on their main activities.
External Public
| Commercial Customer Service: a team consisting of commercial assistants helps customers and solves problems with contracts, money orders, collection and other negotiations of the Bank's corporate companies. It also supports commercial managers at the São Paulo headquarters and the ten branches.
20
| Customer Service: it receives customer information, queries, suggestions, praises or complaints. BIM acknowledges any complaints and take them into consideration to improve services on an ongoing basis. Customer service staff is trained to give information promptly and kindly about any Bank services or, depending on the case, transfer customers' requests to the appropriate department. This service can be accessed by Internet at www.indusval.com. br > “Contact us”, or by phone at 0800-704-0418 (option 1).
| Ombudsman: its main duty is to ensure strict compliance with legal rules and regulations as concerns consumer rights. It is also a communication channel between the Bank and its customers and users of its products and services. It can be accessed by Internet at www.indusval.com.br > “Ombudsman”, or by phone at 0800-704-0418 (option 2).
Processes The Organization, Systems and Methods (OSM) department was created to better organize work flows and processes. Its duty is to develop and structure processes and work flows to make them quicker and less prone to flaws. In 2008, this department introduced the system called Workflow, which is the backbone to add control systems for processes and different administrative routines. This effort includes reviewing and redesigning management processes and flows in the Credit, Information Safety, Supplies, Treasury and Collection departments. These processes were reviewed and redesigned to eliminate unnecessary steps and, therefore, improve department performance and reduce costs and duplication of work. The Supplies department was also better structured throughout the year, with a change in the scope of its activity. It is now responsible for managing the Bank's material resources. To that end, the supply processes and logistics between headquarters and the branches were automated to make them faster and reduce costs.
Accounting and Control Just like the other Bank departments, the Accounting and Control department seeks ongoing improvement and greater safety in business development. During the course of 2008, this team faced even greater challenges to monitor and prepare for all the changes in legislation and regulation resulting from Law 11,638/07, which concerns adhesion to the International Financial Reporting Standards (IFRS).
| Annual Report
2008
21
| Strategic Management |
This department is training the team in order to maintain the quality level of all financial information posted under the new accounting standards being adopted. Moreover, it is working to make the financial statements and explanatory notes an efficient communication tool with the market.
| Risk Management
Jessica MĂĄrio Martins, 19 years old
The success of a Financial Institution is directly related to its ability to assess and manage risks incurred in its activities. Not only does Banco Indusval Multistock have vastly experienced professionals, but it also improves its assessment and control tools continuously and has highly-skilled teams to assess and effectively manage risk, which is always kept within very strict limits. The Bank’s governing bodies and Committees outline strategies and policies that are based on the best market practices. The careful mapping of potential risks, accurate assessment of occasional losses, adoption of measures to practically and consciously mitigate them and the constant monitoring of this process make it possible for Banco Indusval Multistock to develop in a balanced and sustainable manner. The assessment and monitoring of the main risks are done through specialized systems using mathematical and statistical models. Risk management involves an integrated array of controls and processes, including credit, market, liquidity and operating risks.
Credit Risk Credit Risk is connected to the possibility of customer insolvency. Its management involves using different assessment and control tools. A thorough analysis of each borrower and the structure of the guarantees offered in each operation is prepared by the credit analysis department and submitted to the Credit Committee at its weekly meeting. Customer risk ratings, based on Resolution 2,682 of the National Monetary Council, are made on the basis of a mathematical model. Any change in this risk classification can only be made by the Credit Committee to make them more restrictive. Customer economic and financial performance is regularly monitored by relationship managers and the credit analysis department. Furthermore, guarantees are monitored by systems that track volumes, liquidity and potential shortages on a daily basis, in the case of operations guaranteed by receivables.
22
Furthermore, the list of items assessed for credit extension has included social and environmental responsibility since 2008. A survey of the customer is conducted, and its involvement in social and environmental crimes is checked on the Internet and at governmental and non-governmental organizations. Assessment of those risks enhances the analysis of borrowers’ nonperformance risk.
Market Risk Market Risk is related to the fluctuation of the value of assets and liabilities. This fluctuation may result from changes in market prices and rates and in their co-relation and volatility. BIM daily monitors the Bank's treasury and the Brokerage’s portfolio in an individual and consolidated basis. The calculations and information used are totally separated from those of the Treasury.
The ability in assessing and managing risks ensures safe and sustainable business development. BIM manages that risk by adopting the best practices in the Brazilian and international markets and complying with the National Monetary Council’s Resolution 3,464. Its Risk Management model is mainly based on the VaR (Value at Risk) methodology. VaR is a statistical measure for the probability of a maximum loss of the value of the Bank’s portfolio in normal market conditions, within a given time frame. VaR Stress is also used. It calculates these potential losses in a stress scenario due to extreme market conditions. Another tool used by BIM is Capital Allocation, by calculating the portions of Required Reference Equity (PRE) corresponding to exposure to changes in pre-fixed interest rates (Pjur1), in foreign exchange coupon rates (Pjur2), in price index coupon rates (Pjur3), in interest rate coupon rates (Pjur4), in stock prices (PACS), in commodity prices (Pcom) and also exposure to changes in gold prices, foreign exchange and assets and liabilities subject to exchange variation (Pcam), pursuant to BACEN’s regulation.
| Annual Report
2008
23
| Strategic Management |
Those tools are used to ensure the ability to absorb the impact of unexpected losses and continue operating in adverse scenarios. Capital Allocation is also the calculation basis for the return of operations in relation to the risks incurred. Due to Banco Indusval Multistock’s conservative policy, the Bank’s VaR is traditionally very low in comparison to the total volume of its operations. The primary mission of BIM’s Treasury is to eliminate mismatches between assets and liabilities. At the close of 2008, the Bank’s VaR was R$1.3 million, with 95% confidence interval. The Basel Index was 23.95%.
Conservative cash management helps to mitigate risks resulting from a sudden market liquidity loss. Liquidity Risk There is a Liquidity Risk when an organization’s reserves and cash do not suffice to settle its obligations, albeit temporarily. Banco Indusval Multistock continuously monitors and analyzes its liquidity. Statistical, economical and financial projection models are used to assess assets and liabilities influencing cash flow, both in local and foreign currencies. The liquidity management mechanisms include monitoring and controlling the limits set in the Bank's Liquidity Policy; maintaining an up-to-date Contingency Plan regularly reviewed; monitoring the Maturity Mismatch Analyses for assets and liabilities (GAPs); developing and effectively implementing the Cash Flow; analyzing scenarios and periodic risk positions stress testing; developing reversal alternatives for extremely risky positions; in addition to regularly informing top management about Cash positions and projections.
24
1 Free Cash: Liquid assets (Cash + short term interbank cash investments + Marketable Securities + Derivative Financial Instruments) less Funding in the Open Market and Derivative Financial Instruments.
BIM adopts a conservative cash management policy, emphasizing asset liquidity and quality. A minimum of 20% of total deposits is kept as free cash1 to mitigate risks from a sudden market liquidity loss. At the close of 2008, free cash amounted to R$422.6 million, corresponding to 51.2% of total deposits and 94.2% of shareholders' equity. The current liquidity level is monitored on a daily basis by the Treasury and Risk Management department. At weekly meetings, the Cash Committee assesses scenarios and validates the risk parameters and projected cash flow. In addition, it determines the Bank’s assets and liabilities cash management action.
Operating Risk Operating Risks are the probability of losses resulting from internal processes; inadequate or faulty people or systems, problems with contracts or due to external events. The operating risk management model used by BIM is in line with the main risk and control frameworks, such as the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and Control Objectives of Information and Related Technology (COBIT), which include business and technology aspects. With the ongoing effort to be aligned with the best operating risk management practices in the market, the Bank constantly trains compliance agents and regularly reviews processes and policies to keep them up-to-date and effective.
Pedro Augusto de Souza, 16 years old
| Annual Report
2008
25
| Markets and Products |
A clear focus and agility to better serve customers Banco Indusval Multistock focuses its activities on granting credit to medium-sized companies, mainly those with annual sales between R$ 20 million and R$ 500 million and have over 200 employees, which need to finance their current activities. About 60% of the Brazilian middle market companies are located in the Southeastern Region, 20% in the Southern Region and the remainder in the Northern, Northeastern and Mid-Western Regions. Moreover, the Bank developed supplementary products designed for larger companies, especially to keep pace with its customers’ growth to a certain extent. Brazilian medium-sized companies depend on bank loans to meet their cash flow needs even though they are comparatively less heavily leveraged than their counterparts in other countries. They usually deal with several banks in view of the limited volume of credit lines granted by each financing bank. Companies in this segment have more limited access to financing sources than large companies. Therefore, they often resort to bank loans with shorter maturities, such as working capital and discount of trade notes and receivables. In addition, these companies usually have dispersed sales and purchases. Consequently, they need services for payment and receipts – cash management. Another important characteristic of companies in this segment is the fact that they are becoming more and more international, in spite of their focus on the domestic market. As a result, there has been a growing demand for foreign exchange products and trade finance in recent years.
26
Josivelton Nascimento Nunes, 16 years old
Agility
27
| Markets and Products |
A scenario of growth and stability for the Brazilian economy is essential to maintain a consistent credit supply. These are still the determining factors in the middle market expansion. Since early 2004, credit operations have grown sharply in Brazil due to the consolidation of the macroeconomic stability in the country. Increased economic activity led to a greater demand for credit by companies seeking to fund their growth. The increase in Gross Domestic Product (GDP), drop in interest rates, one-digit inflation rate under control and rise in total wage bill are some of the contributing factors for credit expansion. The deepening crisis, which started in the USA in 2007, finally reached all the world's economies during 2008. Brazil was affected more noticeably in the last quarter of the year due to the market liquidity drop, resulting from the outflow of cash from the financial market, channeled to the sovereign risk in search for more safety, as well as the falling economic growth rate. Credit supply was affected, which reduced the amount of funds available and increased loan costs. Additionally, companies’ sales, cost structures, default/delinquency ratios and, consequently, cash flows were hit. This situation led to an even greater caution in liquidity and risk management. That resulted in a slower pace of growth in credit portfolios.
Stability and increased economic activity promoted a huge expansion of Small and Medium-sized enterprises in the recent years. Therefore, the middle market segment has had high growth rates in recent years due to Brazil's increased economic activity and easier access to credit owing to lower interest rates. Since this situation has changed, a slower growth in credit portfolios is a natural consequence.
28
Banco Indusval Multistock has focused on financial operations to middle market companies since 1993. The Bank offers a diverse array of products and services and always seeks to meet its customers’ needs with customized solutions. BIM is able to make quick decisions even amidst turbulence owing to its highly skilled lean team, with easy access to top Management and its long experience. In the scenario prevailing since late 2008, the experience and in-depth knowledge about the customers, mainly in the middle market segment, are paramount. In this regard, BIM has a very close relationship with its customers and seeks to monitor and understand each one's management, economic activity and operating cycle. These are essential aspects for a safe credit extension process, with a strict model for credit analysis, operation structure and later monitoring of guarantees.
| Credit Operations Total Credit Portfolio
Banco Indusval Multistock’s total credit portfolio amounted to R$1.7 billion at the close of 2008, with a 37% rise in comparison to the previous year. Its customer base included 699 companies and 5,581 individuals. The latter was mainly connected to the used car financing project, which was discontinued in October.
In Reais million
Guarantees and Letters of Credit Trade Finance Loans and Financing in Local Currency
05
Banco Indusval Multistock’s Credit Policy bans the inference of credit committee members to increase ratings set by the model. In December 2008, 95% of the credit portfolio was among the highest ratings (AA-C) and 84% of the operations were supported by real guarantees. Customer performance is regularly monitored by account managers and the credit analysis department. Furthermore, guarantees are monitored by systems that track volumes, liquidity and potential non-performing loans on a daily basis.
691.0
417.0
1,329.0
1,793.7
CAGR = 62.6%
06
| Annual Report
07
Banco Indusval Multistock recognizes the crucial importance of strict control over the risks that are intrinsic to credit operations for medium-sized enterprises. With this in mind, it adopts conservative policies as concerns guarantee structure and concentration of operations. A thorough analysis of each borrower and the structure of the guarantees offered for each operation is prepared by the analysis department and submitted to the Credit Committee at its weekly meeting. Customer risk ratings are made based on a mathematical model to assess financial performance, guarantee liquidity and volume and exposure time frame, in keeping with BACEN’s Resolution 2,682.
08
2008
29
| Markets and Products |
Credit Portfolio Breakdown at the end of 2008
By Currency . %
By Maturity . %
Loans in Reais Loans in foreign currency
By Economic Activity . %
Up to 90 days From 91 to 180 days From 181 to 360 days Over 360 days
Industry Commerce Services Individuals
7%
16%
27% 39% 29%
52% 18%
84%
12%
16%
By Customer Concentration . %
10 largest 11 to 60 61 to 160 Other
25%
By Collateral . %
By Risk Rating . %
Receivables Securities and Time Deposits Monitored Pledge Pledge and Trust Sale Property Vehicles Aval on Promissory Notes
AA A B C D-H
5% 2%
16%
22%
47%
6%
34%
30%
5% 7% 23%
30%
11% 8%
30
29%
05
06
1.4
1.2
2.5
2.7
Loans overdue above 60 days . % of Portfolio
07
08
Loans and Financing in Local Currency . In Reais million
05
06
| Annual Report
07
The situation that the global crisis brought about, mainly in the last quarter of the year, affected default/delinquency levels due to lower credit supply in the financial system, higher interest rates and decreased economic activity, with an impact on employment rates and income generation. Higher default/ delinquency rates, observed in the first half of the 1990’s and similar to that the Bank faced in 2005, naturally tend to decline when economic activity becomes stable and market liquidity rises. Before these conditions materialize, BIM is working with its customers to solve the default/delinquency problem. Therefore, it has made an Allowance for Loan losses higher than that required by the Central Bank. It increased that allowance from R$28.7 million on December 31, 2007 to R$70.3 million on December 31, 2008, a 144.9% change, up from 2.3% to 4.1% of the credit portfolio. Given this situation, BIM took even more conservative measures in the last quarter of the year to protect liquidity levels and better manage risks. Therefore, with a slow down in credit portfolio expansion, reduction in maturities and volumes for new operations, dispersal credit risk by decreasing concentration by customer and reinforcing collaterals, focusing on more liquid guarantees, such as receivables. Additionally, it made allowances for loan losses to increase protection over the new market situation. The Bank’s credit portfolio consists of loan and financing operations in both local and foreign currency. Local currency operations are mainly addressed to the financing of their customers working capital needs, resulting from their domestic market activities. In contrast, the foreign currency portfolio is totally connected to trade finance. The increase in the credit portfolio brought by BIM’s customer relationship teams is mainly due to credit operations in Reais, which amounted to R$1,453.5 million on December 31, 2008, a 43.3% rise in relation to the end of the previous year. In the same period, the trade finance portfolio increased by 12.0%, closing the year at R$269.6 million.
481.3
315.5
1.014.6
1.453.5
CAGR = 66.4%
BIM's experience in credit operations for medium-sized corporations, coupled with the analysis process, ongoing monitoring of customer performance and the tools for assessment and guarantee control have been proving effective over the years. This enabled BIM to keep default/delinquency ratios in its portfolio at low levels, even in less favorable market conditions.
08
2008
31
| Markets and Products |
Loans and Financing in Local Currency Following the evolution of the credit market and the expansion of BIM's branch network, the loan portfolio in Reais has grown significantly in the last few years. Banco Indusval Multistock’s professionals’ experience in the segment of medium-sized enterprises ensures a prompt and safe customer service. The Bank offers the best financing solutions through close and constant monitoring of customers’ activities. This credit portfolio consists mainly of working capital operations, discount of receivables and overdraft accounts, including several instruments such as "compror", for inventory purchase financing, and "vendor", sales financing. BIM also issues Bank Credit Notes (CCB), Rural Product Certificates (CPR), Agribusiness Credit Rights Certificates (CDCA) and Cattle and Farming Warrants (CDWA) to make agribusiness financing feasible. Additionally, to provide support to its customers’ commercial and expansion operations, the Bank is able to rapidly grant Letters of Guarantee and offers financing lines for development, growth and upgrading projects with onlending BNDES funds.
BNDES lines In 2008, BIM started the disbursements in onlending operations of the Brazilian Social and Economic Development Bank (BNDES) financing lines, thus complementing its product line to meet its customers’ needs. It operates FINAME, BNDES EXIM and the Special Credit Program (PEC) to boost companies’ competitiveness in the industry, trading and services sectors by means of working capital financing. Onlending of BNDES funds came to R$ 159.9 million on December 31, 2008, accounting for 11% of the total credit portfolio.
Letícia Muniz de Souza, 17 years old
Banco Indusval Multistock’s competitive edge in this new product line is its supplementary role and, above all, quick decision making and services, key factors in an investment process.
Credit to Production Chains Banco Indusval Multistock is prepared to structure credit operations that benefit the production chain of its customers. The purpose is to offer financing options that help not only the corporate customer, but also its suppliers and customers, thus increasing sales.
32
Consumer Finance – Vehicles Introduced in April 2008, the used car financing lines for individuals were discontinued in the same year in view of the new economic situation. This business was created based on the Bank’s management’s long experience in retail lending and as a future expansion strategy. This product was expected to contribute to maintaining BIM’s growth rates in the second half of 2009. The first phase was intended to build the statistical foundation needed for credit analysis in this market niche. Nonetheless, the expansion of this business would mainly depend on the continuation of credit expansion within the context of the Brazilian economy. Since the credit situation has changed with the deepening global crisis, this project was reviewed. As a result, it was concluded that prospects for the segment were not very positive, especially because this activity was still in an early development stage. Therefore, this business was discontinued in October 2008. A R$53.9 million portfolio balance was recorded at the close of 2008, corresponding to 3.1% of the total credit portfolio. This balance will drop as installments fall due.
Foreign Trade Financing Operations
Foreign Trade Financing Operations Trade Finance . In Reais million
Banco Indusval Multistock has been offering its customers trade finance lines since 2003. One of the most distinct features of BIM in its market is its ability to offer its customers advisory services and monitoring of international operations. Its International Department has a specialized team that combines experience, technology and a partnership with customers and Brazilian and foreign banks. These partnerships provide increasing customer trust and loyalty, with an ensuing expansion of the trade finance portfolio.
269.6
162.7
240.6
CAGR = 57.4%
The main products related to trade finance for BIM's customers are the pre-and post-shipment Export Financing (ACC and ACE), Import Financing and International Guarantees as Import or Stand-by Letters of Credit.
69.2 05
In addition to the “spot FX” operations, focused on the purchase and sale of foreign currencies, BIM’s International Department conducts quick and accurate international collection operations, both in imports and exports. It also offers both individuals and legal entities fund remittance abroad for cash reserves or investments.
06
| Annual Report
07
08
2008
33
| Markets and Products |
The Trade Finance portfolio had a compound annual growth rate (CAGR) of 57% p.a. between 2005 and 2008, considering the balance sheet figures, in Reais. An analysis of the balance of this portfolio in US dollar terms reveals that this growth rate (CAGR) is 73%, with a portfolio of U$155 million in 2008 versus R$30 million at the end of 2005. In line with the Brazilian economy trends, the Trade Finance portfolio is primarily composed of export financing operations, which account for about 90% of it. Most are exports to Europe and the USA. The global situation had the same impact on Trade Finance operations as it did on the Brazilian economy. In other words, operations in Brazil, as well as the economy, had the same growth rates as in the previous year in spite of uncertainty abroad. The only difference, when compared with local currency credit operations, is that the costs of correspondent bank’s foreign lines started rising early in the year. By mid-year, these operations were already very scarce. Therefore, with the difficulties for obtaining foreign funding and increasing costs the trade finance portfolio expansion was not advisable. Furthermore, some exporters made losses with derivatives, affecting their short-term liquidity. In addition, a lower foreign demand affected shipments and payments, leading to higher default/delinquency rates.
In 2008, BIM was granted the Recognition Award for Best Utilization of the Global Trade Finance Program by IFC. Relationship with Correspondent Banks, IFC and IDB It was essential to start partnerships with multilateral bodies and Correspondent Banks to develop Banco Indusval Multistock Trade Finance portfolio.
34
BIM’s International Department’s relationship with the International Finance Corporation (IFC) since 2006 has allowed the Bank to offer foreign trade finance to small and medium-sized enterprises, within the Global Trade Finance Program (GTFP), and greatly benefited the relationship with correspondent banks. In 2008, BIM received the Award of Recognition for the Best Utilization of the Global Trade Finance Program Lines at the 2nd Annual Bank Partners’ Meeting, held by IFC in October. Since that was a successful partnership, BIM started its operations with the Interamerican Development Bank (IDB) in 2007, within the Trade Finance Facilitation Program (TFFP). Launched by IDB in 2005, TFFP is a support tool for economic growth by means of the expansion of international trade finance, available for Latin American and Caribbean companies. BIM’s partnerships with IFC and IDB, in addition to providing funds at maturities and rates appropriate for operations with the Bank's customers, allowed the establishment of relationships with other international private financial institutions, thus increasing the foreign correspondent bank network in all continents. These partnerships often start with the support of IFC guarantees, but later evolve to independent relationships as the foreign bank gains greater knowledge of BIM’s operations and business. Moreover, the due diligence processes and the commitment to maintaining the liquidity, risk and debt levels agreed on in the covenants with IFC and IDB lead the Bank to enhance its management tools and improve its strategic partners’ risk perception.
| Structured Operations Following the development of the Brazilian economy, the financial operations market for medium-sized companies in the country has been undergoing changes in the last years. Some of Banco Indusval Multistock’s traditional customers have grown dramatically due to increased activity in their business areas and/or mergers and acquisitions. Alert to business opportunities, BIM noticed a demand for more sophisticated products at better rates and larger financing volumes for its customers’ activities. Since 2004, the Bank has been developing structured operations and tapping into its expertise in the market so as to meet this demand, both in trade finance and in operations with local currency. Among the banks of its size, Banco Indusval Multistock was a pioneer in structuring and offering these operations. The direct and close contact with the customer, a distinct feature of BIM’s work, is crucial to create structures that meet customers’ needs and investors’ demands.
| Annual Report
2008
35
| Markets and Products |
When it conducts structured operations backed by export or local currency receivables, Banco Indusval Multistock always keeps a part of the operation in its own portfolio and sells the remainder to local or foreign investors. As it is responsible for structuring operations and controlling credit guarantees, BIM continuously monitors the liquidity of the guarantees and the economic and financial performance of the borrower. It regularly produces and distributes monitoring reports to deal holders. Furthermore, BIM provides structuring, control and management services for escrow accounts.
As a structuring bank, BIM controls the deals collaterals and continuously monitors borrowers performance. Export Prepayment Operations In 2008, BIM structured export prepayment operations to finance customers’ activities in the medium and long term, with the participation of foreign creditors, despite the unfavorable environment in the foreign market from early in the year.
Export Credit Note (ECN) In 2008, BIM started to offer this financing alternative to exporters. This is a local currency credit instrument based on future exports. The issue of this credit instrument represents a commitment by the borrower to pay local currency but based on the budgeted future exports of goods or services.
Bank Credit Note (BCN) Bank Credit Notes are credit securities issued by individuals or legal entities to a financial institution. They represent a payment commitment resulting from a credit operation.
36
Banco Indusval Multistock uses these instruments to improve its relationship with certain customers or meet the demand for certain volumes, rates or maturities not in line with the profile of its routine operations. They are made possible by the sale of those securities in private offering. Although sold in private offerings, this type of structured operation goes through BIM’s credit analysis process.
Operations involving Export Credit Agencies (ECAs) Banco Indusval Multistock structures financing operations for equipment and machinery imports from several countries. Therefore, it collaborates with Export Credit Agencies from some major countries, such as: Eximbank (USA), Hermes (Germany), Coface (France) and Sace (Italy), among others.
NĂĄdia Nunes Silva, 16 years old
| Treasury Banco Indusval Multistock's Treasury's main role is to control the Bank's liquidity and to mitigate the risks of interest rate, currency and maturity mismatches. It also seeks appropriate solutions to meet customers’ needs for exchange and interest rate hedging operations among other financial assets.
Total Funding
Funding Breakdown . %
R$ million
1,600
CAGR = 58,2%
Time Deposits Agribusiness Letters of Credit Demand Deposits Interbank Deposits Foreign Currency Borrowings Local Onlending Local Currency Borrowings
1,040
8.0% 10.0%
404
691
37.4%
30.5% 05
| Annual Report
2008
06
07
08
9.9%
1.4% 2.8%
37
| Markets and Products |
Free Cash: Liquid assets (Cash + short term interbank cash investments + Marketable Securities + Derivative Financial Instruments) less Funding in the Open Market and Derivative Financial Instruments.
2
Concerning liquidity management, the Bank adopts a conservative policy, and maintains at least 20% of total deposits as free cash2, to ensure greater safety for investors. In 2008, despite the liquidity drop in the domestic and international markets, the funding volume remained in line with the rise in assets and the fund investment rates, by means of the funding sources diversification. Total funding amounted to R$1.6 billion on December 31, 2008, a 53.8% rise in comparison to the December 2007 figure, 69.5% of that amount was in Reais and 30.5% in foreign currency. Funding source diversification allowed reducing the dependence on Time Deposits, mainly those with Bank Certificates of Deposits (CDBs) and Agribusiness Letters of Credit (LCA), owing to a larger share of Interbank Deposits and the introduction of BNDES onlending funds, Local Currency Borrowings through Credit Assigment, in addition to a larger share of Foreign Currency Borrowings, as described below:
Share of Total Funding
Change 2005
2006
2007
2008
2008/2007
Total Deposits
82.1%
76.2%
77.9%
51.5%
-26.4 p.p.
Time Deposits (CDB + LCA) Interbank Deposits Demand Deposits and other Local Onlending Local Currency Borrowings Foreign Currency Borrowings Trade Finance Lines IFC Total
72.4%
63.6%
63.6%
38.8%
-24.8 p.p.
5.0%
7.7%
6.6%
9.9%
3.3 p.p.
4.7%
4.9%
7.7%
2.8%
-4.9 p.p.
0%
0%
0%
10.0%
10.0 p.p.
0%
0%
0%
8.0%
8.0 p.p.
17.9%
23.8%
22.1%
30.5%
8.4 p.p.
17.9%
23.8%
22.1%
22.1%
0.0 p.p.
-
-
-
8.4%
8.4 p.p.
100.0%
100.0%
100.0%
100.0%
-
Time deposits are still a major funding source. Nevertheless, the market panic by mid-September 2008 heavily affected this source. In a “fly to quality� move, a good portion of these deposits migrated to the larger institutions and, mainly, to Government bonds, especially those deposits coming from institutional investors. In the last weeks of the year, the market mood improved and investors started renewing their maturing operations, and deposit balances leveled off.
38
To balance this situation, there is a larger share of Interbank Deposits, Local Currency Loans, Onlending and Foreign Currency Loans. External funds accounted for 30.5% of total funding, 22.1% directly connected to Trade Finance operations and 8.4% channeled to working capital finance operations in local currency. Those funds in foreign currency, allocated to financing medium-sized companies in local currency, were raised by means of a syndicated loan coordinated by IFC. This loan was disbursed in October 2008, amid the global financial crisis. This operation is divided into three tranches: an “A Loan” totaling US$15 million, disbursed by IFC with 3-year maturity; a “B1 Loan” totaling US$32 million and a “B2 Loan” totaling 7 million, both disbursed by the seven foreign-bank syndicate with 2-year maturity. This loan has semiannual interest and bullet principal payments. Besides playing a key role in funding operations, the Treasury is responsible for carrying out hedging operations for the funds raised to ensure an effective risk and liquidity management. The funds raised in foreign currency and allocated to loans and financing in Reais were hedged to mitigate currencies and interest rates mismatches, among these liabilities and the assets brought in with those funds.
The strict control of rates, currency and tenor mismatches is the basis for BIM’s treasury conservative strategy.
| Annual Report
2008
39
| Markets and Products |
In addition to currency and interest rate exposure control, there is also strict control on tenor mismatches, based on daily monitoring of the flow of assets and liabilities to ensure a sound liquidity position.
Assets and Liabilities Management . in R$ million
90 days
180 days
574.5
222.5
291.1
197.2
268.3
466.8
Sheila Rosa dos Santos, 17 years old
704.6
819.5
Assets Liabilities
360 days
Over de 360 days
| Operations in the Stock, Mercantile & Futures Exchanges Operations in the capital market are conducted by Indusval Corretora de Títulos e Valores Mobiliários (Indusval CTVM, BIM’s brokerage house), which operates in all the markets of the Securities, Commodities and Futures Exchange (BM&FBOVESPA). The Brokerage house activities generated financial intermediation income of R$3.8 million and services fees of R$14.2 million in spite of the challenging situation for the derivative and capital markets, mainly in the last quarter of the year. Indusval CTVM volumes came to R$6.4 billion in stocks, 493,000 derivative and commodity contracts and US$233 million in foreign exchange brokerage. The Brokerage firm focuses mainly on individuals, with monthly operations of about R$200,000 in the stock market. It offers customized services both to these individuals and to companies seeking experienced and quick advisory services for share buy-back and participation in auctions for the concession of public services. It also acts as an agent in the distribution of Public Offers of shares and has participated in eight out of the nine operations conducted in the market in 2008: four IPOs and five Follow-ons. Moreover, Indusval Multistock Corretora manages nine investment clubs of its customers, with a net asset value of about R$130 million. .
40
Nimbler and safer capital market and derivative operations. The expansion plans for this activity projected for 2008, which included being present and operative in the regions where the Bank's branches are located, were temporarily suspended until favorable market conditions are observed again. During 2008, investments in information technology were maintained to ensure agile, efficient and safe customer service and back-office operation processing. The quality gain in processes and controls, including the introduction of a new risk management system, adequately fulfills the requirements of BM&FBOVESPA’s Operating Qualification Program (PQO). The fact that Indusval CTVM maintained the Agro Broker Seal attests to the top quality of its services in the agribusiness sector. Also in 2008, Indusval CTVM invested in and developed a new negotiation platform for assets listed on public exchanges. That adds agility and safety to the Bank's operations through homebrokers, used in asset negotiation by the Broker and operation management. That platform, including the homebroker, is still in the test stage. Operations are scheduled to start in April 2009. Information about Indusval CTVM can be found on its website: www.indusvaltrade.com.br.
Welbert David Mendes, 18 years old
| Annual Report
2008
41
| Economic Environment and Performance |
Experience translated into figures The Brazilian economy showed very positive aspects in the first months of 2008, in spite of the signals coming from the main financial markets worldwide from the second half of 2007. The solid macroeconomic foundations, the healthy public accounts and a strong domestic demand were the main drivers of the Brazilian economy and the industrial production. Those factors also made it possible for Brazil to achieve the long-expected "investment grade" by international rating agencies. That scenario led to a favorable environment for business growth and the financial industry expansion. Brazil worked hard and paid its foreign debt during the positive economic situation, thus turning from an international debtor to an international creditor. Since Brazil achieved the “investment grade�, the public finances were in order and international trade rose throughout almost the whole year, foreign exchange reserves closed 2008 at US$206.8 billion. As for the trade balance, a US$ 24.5 billion surplus was recorded, the lowest since 2002, but for a positive reason: the sharp rise in domestic demand, which led to a 43.9% increase in imports, while exports rose by 23.1%. The positive scenario prevailed until the subprime crisis worsened in the USA and started spreading worldwide. One of its first effects on Brazil was a change in the foreign exchange situation. The trend observed since 2003 was reversed. Insecurity arising from the global financial crisis led to a sharp depreciation of the local currency against the US dollar. By late 2008, the US currency stood at R$ 2.33, with a 31.9% accumulated appreciation, the third largest in the history of Real (Brazilian local currency since 1994) and the first since 2002.
42
Transparency
43
Vilma Santa dos Santos, 22 anos
| Economic Environment and Performance |
The capital market was also affected by the international crisis. 2008 was the worst year in BM&FBOVESPA’s history, and Ibovespa (the stock market index) fell by 41.2% in the period. There was a high outflow of foreign capital from the market, especially in the last quarter of the year. That was a key factor in the devaluation of Brazilian stocks, since foreign investors account for about 40% of the overall trading. The investment funds industry also closed 2008 with a reduction of R$67.6 billion in assets.
Analysts expect BRICs to take the lead in the global economic recovery. In the last quarter of the year, credit became more selective and expensive. The reduced foreign demand due to the global crisis put pressure on exports, a contributing factor to the economic downturn. As a cautionary measure, companies resorted to mechanisms like temporary shutdowns and production cuts, which reinforced the slackening economic activity. Layoffs were also carried out by financial institutions, especially small and medium-sized ones, whose funding operations, both in the domestic and foreign market, were affected. Therefore, reflecting in their credit operations nevertheless, data from the Inter Trade Union Department of Statistics and Socio-Economic Studies (DIEESE) show that the unemployment rate in the six largest metropolitan areas in Brazil closed 2008 at 14.1%, after peaking at 15.5% in 2007, not yet reflecting the new economic scenario. The inflation rate also rose in 2008, a trend that was first observed in 2007, mainly as a result of the pressure from the heated domestic demand. The appreciation of the US dollar against the Real from September on, which increased prices of imported raw materials, also affected indices. 2008 price indices were the worst in four years. The trend started reversing late in the year, and inflation ceased to be a concern. A contributing factor was lower commodity prices, especially oil and farming products, in addition to the end of the demand pressure.
44
The global crisis led to a 3.6% drop in the Brazilian GDP (Gross Domestic Product) in the fourth quarter in comparison to the third quarter. That is the sharpest fall in the GDP historical series, which the Brazilian Institute for Geography and Statistics (IBGE) started in 1996. However, there was a 1.3% rise in comparison to the fourth quarter of 2007. The total annual 2008 GDP growth came to 5.1% year-over-year, driven by the good performance in previous quarters. The industry grew by 4.3%, crop/ livestock farming by 5.8% and services by 4.8% in 2008.
Economic Indicators Selic
1
Exchange rate (R$ vs. US$)1 Variation of the Real against the US dollar IPCA – inflation rate measured by IBGE2 IGP-M – inflation rate measured by FGV2
2005
2006
2007
2008
18.05%
13.25%
11.25%
13.75%
2.34
2.14
1.77
2.33
+ 11.8%
+ 8.6%
+ 17.2%
- 31.9%
5.69%
3.14%
4.46%
5.90%
1.20%
3.85%
7.75%
9.81%
1. End of year; 2. Accumulated over the year
Despite the uncertainties, the worsening international financial crisis resulted in the prospect of a Brazilian economic growth rate almost null in 2009. Many analysts believe that it will take at least 18 months for the financial crisis to come to an end on a global level since it will take several months for the tax incentives and bailout plans, such as those in the USA, China and the European Union, to come to fruition. This crisis deepened and spread worldwide so fast that it is definitely unprecedented. That is precisely why it is not possible to safely forecast which economic industry sectors and countries will be the most affected or when the first signs of a recovery will be observed. Most analyses indicate that the so-called BRICs (Brazil, Russia, India and China) should take the lead in the global economic recovery. The growth potential of those countries stands out worldwide due to their large populations, well-structured economies and high demand.
Felipe Costa Soares, 15 years old
In view of the more solid foundations of the Brazilian economy, with tax accounts in order, large foreign exchange reserves and recent growth based on an increasing domestic demand, Brazil is better prepared to face the turmoil and uncertainties resulting from the world crisis. Despite the deteriorated international situation and the credit crisis, these factors should suffice to protect Brazilian assets from extreme volatility. In any case, falling domestic activity, with lower growth rates than the country has had in recent years, is forecast for the coming quarters.
| Annual Report
2008
45
| Economic Environment and Performance |
Credit in Brazil BACEN data show a rise in credit volumes in the financial system in 2008. Credit operations totaled R$1,227.0 billion in December 2008, a 31.1% rise in twelve months. Operations with free funds account for 71.0% of that amount and rose by 32.0%. As a result of the credit expansion, the ratio between that figure and GDP hit a record high, 41.3% in December 2008 versus 34.2% in December 2007.
%
02
04
05
06
34.2
30.2
03
28.1
24.5
01
24.0
00
22.0
99
24.7
26.4
98
24.9
27.9
41.3
Credit volume as a GDP share .
07
08
Source: Bacen
Legal entities absorbed 56.7% of total credit in the financial system while 43.3% was channeled to individuals. Corporate credit increased by 37.1% in twelve months according to the Central Bank, and the operation balance came to R$ 696.3 billion. Working Capital is still the most widely granted credit type. Loans between R$100 thousand and R$10 million are those that best characterize middle market operations. In 2008, this range accounted for 40% of loans to legal entities (R$280.4 billion), with a 25% rise in relation to 2007. Therefore, that was lower increase than that recorded in total credit. Contracts over R$10 million, more often with large corporations, recorded the sharpest rise in the 12-month period.
Messias Emanoel de Moura, 16 years old
46
That range accounted for 43% of corporate credit at the close of 2008, versus 38% in 2007, with an operation volume of R$300.4 billion. The volume of those contracts shot up by 56% in the last 12 months, against a 37% average increase in corporate credit. It is worth noting that credit for individuals rose by 24% in the same period.
Corporate Loans . in R$ billion
696
686
665
639
608
591
582
567
552
539
517
508
402
339
292
508
Over R$10 million From R$100,000 to R$ 10 million Up to R$100,000
dez 04 dez 05 dez 06 dez 07 jan 08
fev 08 mar 08 abr 08 mai 08 jun 08
jul 08
ago 08 set 08
out 08 nov 08 dez 08
Source: Bacen
According to BACEN, corporate default rates fell throughout the year and closed 2008 at 1.8%, with a 0.2 p.p. drop in comparison to the same period of the previous year. However, it is worth noting that this rate corresponds to both middle market and large companies, the latter of which gained a larger share of total credit with free funds, mainly in the second half of the year. Brazilian banks started 2008 fully alert to the international market uncertainties, mainly to delinquency in the subprime credit portfolio in the USA and the ensuing developments. In Brazil, the clearest effect in the quarter was the banks’ concern about building a free cash reserve considered large enough for the short-term scenario, to preferably allocate it to increasing their credit portfolios. No credit crunch was observed at first. Once the liquidity level considered appropriate was achieved, the usual practice of taking every opportunity to extend credit in the domestic market was resumed. The demand for corporate loans remained strong.
| Annual Report
2008
47
| Economic Environment and Performance |
In the second quarter, concerns about the subprime did not have a great impact even though they did not disappear completely. Consequently, credit activity kept pace with demand, which was heavy in the period. The increase in loan spreads, started early in the year, had mild decline in the second quarter. From mid-third quarter onwards, the uncertainties coming from the international scenario became certainties. Growth was recorded until August. By mid-September, the US bank Lehman Brothers collapsed. Panic took place in global markets. Liquidity plummeted in Brazil, held back in large institutions and, mainly, government bonds. The sudden trend reversal led to a drop in financial liquidity due to systemic risk aversion. In October, the Central Bank of Brazil (BACEN) started taking action to protect the financial market from a possible systemic credit risk. Measures included adopting new rules for the reserve requirement to diminish the lack of liquidity in the system. As a result of the new situation, medium-sized banks, for the most part, started putting off their expansion plans until the market and risk conditions are stable. Furthermore, there was a fall in credit portfolio volumes, since banks were forced to adopt stricter policies for volumes and guarantees to tackle possibly higher default/delinquency rates. Thus, banks reinforced their cost control actions and diversified their funding sources even more to protect operations and ensure safety for investors.
| Economic and Financial Performance
641.0
Income from Financial Intermediation . In Reais million
05
48
06
289.0
187.8
155.5
CAGR = 60,3%
07
08
For Banco Indusval S/A’s and its subsidiaries, Indusval Corretora de TĂtulos e Valores MobiliĂĄrios and BIM Promotora de Vendas, 2008 results reflect their economic fundamentals and experience in relationship management with middle market companies. Those results show a growth in spite of the new economic situation, mainly in the second half of the year, resulting from the developments in foreign economies.
Income from Financial Intermediation Income from Financial Intermediation totaled R$641.0 million in 2008, a 121.8% rise in comparison to that of the previous year (R$289.0 million). That increase resulted from both credit expansion and the maintenance of spreads in line with the lower fund availability and higher credit risk. Nevertheless, it is worth noting that the depreciation of the Real, as a consequence of the economic slowdown and market turmoil, had a major impact on this figure.
Credit operations accounted for 54.6% of the total Income from Financial Intermediation, while income from trade finance accounted for 26.0% and securities operations, combined with the result from derivative financial instruments, for 19.4%.
Income from Financial Intermediation . R$ million Credit Operations Exchange/Trade Finance Securities Result Derivative Financial Instruments TOTAL
Change 2005
2006
2007
2008
2008/2007
94.3
110.7
181.2
350.2
93.3%
9.0
25.0
33.1
166.9
403.9%
52.2
52.1
74.6
108.2
45.0%
-4.0
-3.2
0.0
15.7
-
151.5
184.6
289.0
641.0
121.8%
Income from credit operations BIM’s main line of business, credit operations in local currency, accounted for R$350.2 million, 93.3% more in the same period of 2007. That income was in line with the rising credit portfolio in Reais and higher interest rates. The average monthly balance of credit operations in Reais throughout the year stood at R$1.4 billion versus an average of R$0.7 billion in 2007. The lowest balance, R$1.0 billion, was recorded on December 31, 2007, with a peak of R$1.6 billion in September. It fell to R$1.4 billion at the close of the period. That drop was due to the need for greater caution and prudence in managing the Bank’s credit and liquidity risk. That result was due to BIM’s expansion strategy, with the business development of the new branches, which contributed to a customer base increase and the positive situation until mid-September. With the deepening crisis from then on, the Bank became more conservative and reduced its leverage.
Income from Foreign Exchange Operations BIM’s income from foreign exchange operations came to R$166.9 million, a 403.9% rise in comparison to R$33.1 million recorded in 2007. That impressive rise is due to the increase in the trade finance portfolio, despite a slower pace of growth than in 2007, and mainly to appreciation of foreign currencies against the Real. It is worth noting that the trade finance portfolio increased slightly by 12.0% during the year. That modest rise was due to higher interest rates and a drop in the correspondent banks’ lines, which started in the second quarter and worsened in the second half. That situation resulted from the decrease in liquidity and risk aversion in the international market. Leila Rosa, 15 years old
| Annual Report
2008
49
| Economic Environment and Performance |
Exchange variation in the trade finance portfolio and foreign currency cash and cash equivalents totaled R$125.8 million in the year, 75.4% of the Income from Exchange Operations. For comparison purposes, the US Dollar appreciated by 31.9% in 2008, and 22.7% in the fourth quarter alone. In contrast, the US currency depreciated by 16.8% in 2007. It is essential to note that income from exchange variation has a balancing item in Expenses on Financial Intermediation and Income from Derivative Instruments.
Income from Operations with Marketable Securities
Felipe Costa Soares, 15 years old
Income from Operations with Marketable Securities came to R$108.2 million in the year, a 45.0% rise in relation to 2007, due to the higher average balance of federal government securities and open market funding maintained during the period. Nevertheless, in the last quarter, the Bank reduced its financed position of federal government securities, and lowered open market funding, due to the new liquidity and risk situation. The decrease in the asset and liability positions in federal government securities was intended to lower risk exposure in all markets. Operations with Marketable Securities fell from R$648.2 million in 2007 to R$314.5 million in 2008, a 51.5% drop.
Result From Derivative Financial Instruments Those instruments are used for protection against currency, index and arbitration mismatches, with a balancing item in the commercial portfolio, funding or to meet a specific demand for a product. Due to its conservative market and liquidity risk management, the Bank had a positive R$15.7 million result in this account in view of the considerable market variations in the fourth quarter of 2008. Reasons for this result include: a) revenues from hedging operations to cover rate and currency risks, including those related to the financing operation (A/B Loan) with the International Finance Corporation (IFC), disbursed in October; and b) changes in asset prices, related to funding operations by means of stock rental with cash sale, as described below. During the year, Banco Indusval Multistock’s portfolio included no exotic derivative operations. The operations in which the Bank acts as a counterpart for companies, to protect its cash flow from exchange fluctuations, are based on two indices without leverage. The mark-to-market of customers’ positions, that is, the amount required for prompt settlement of these operations, was R$1.2 million on December 31, 2008, which represents a credit exposure of less than 0.1% of the total portfolio. The Bank’s operations and the operations conducted with customers were locked in by means of over-the-counter operations with other parties through CETIP, thus eliminating the market risk.
50
As a result, all effects arising from any asset price variations are offset by an equal variation in obligations, but with the opposite sign, which neutralizes any impacts on the result.
Expenses on Financial Intermediation Financial Intermediation Expenses increased from R$159.7 million to R$440.9 million, a 176.1% change. In line with the credit portfolio features, money market funding accounted for 45.9%, while expenses on loans, assignments and onlending accounted for 42.1% of the total, followed by allowances for loan losses, 12.0%.
Expenses on Financial Intermediation . R$ million Money Market Funding Loans, Assignments and Onlending Result Derivative Financial Instruments Allowance for Loan Losses TOTAL
Variation 2005
2006
2007
2008
2008/2007
76.3
82.9
115.9
202.2
74.5%
7.4
19.4
23.3
185.5
696.1%
0
0
2.8
0
-100.0%
10.1
13.1
17.7
53.2
200.6%
93.8
115.4
159.7
440.9
176.1%
Expenses on Money Market Funding Operations Those expenses rose from R$115.9 million to R$202.2 million in 2008, with a 74.5% change in the period. They correspond to credit portfolio financing sources in local currency and the marketable securities position. Time Deposits accounted for 48.4% of those expenses, followed by Repurchase Operations, which accounted for 43.2%, and Interbank Deposits, for 8.4%. A large portion of this rise is explained by higher funding volumes needed for business expansion and the maintenance of an average securities balance higher than that in 2007. Another contributing factor in this increase was higher funding costs for time deposits, repurchase operations and interbank deposits as a response to higher liquidity risk and risk perception. However, it is important to note that the higher funding costs were offset by loan operations, as seen in the higher income from financial intermediation.
| Annual Report
2008
51
| Economic Environment and Performance |
BIM’s 2008 results reflect its soundness and experience in the middle market segment. Expenses on Loans, Assignments and Onlending Those expenses include costs in funding by means of loans in local or foreign currencies, assignments of receivables and BNDES onlending funds. Expenses on Loans, Assignments and Onlending amounted to R$185.5 million, versus R$23.3 million in 2007.
| Expenses on Loans in Foreign Currency, which totaled R$183.6 million in the year, include interest and foreign exchange variation on all funding operations for the trade finance portfolio with a R$353.0 million funding balance on December 31 and, as of the fourth quarter of 2008, the funding operation with IFC (A/B Loan), totaling R$134.3 million. Expenses on the trade finance lines include both imports and exports operations. R$16.4 million Income from Imports Financing in the year is recorded under Credit Operations, pursuant to BACEN’s regulation. Despite the higher funding volumes and costs, most of the impact on these expenses arose from adverse foreign exchange variation in the year. However, it is worth noting that its balancing item is in income from financial intermediation, as mentioned in that item.
| Expenses on Loans, Assignments and Onlending in Local Currency totaled R$1.9 million in the year, consisting of R$8.9 million expenses on BNDES Automatic Onlending and FINAME, R$1.1 million expenses on credit portfolio assignment operations under co-obligation and an R$8.1 million income from funding operations structured by means of stock rental with cash sale, conducted in the third quarter. Income from the funding operation by means of stock rental corresponds to contract adjustment to market value, with a drop in the price of the underlying asset. The exposure to price fluctuations of the underlying rental asset was covered by forward purchase contract of stock, signed at BM&FBOVESPA, which led to an adjustment expense in the same amount, recorded under Result from Derivative Financial Instruments. Therefore, the price variation of the assets used to structure that operation had no impact on the year's result.
52
69.2
57.7
129.2
CAGR = 51.4%
200.1
Gross Result from Financial Intermediation . In Reais million
Expenses on Allowance for Loan Losses Expenses on Allowance for Loan Losses increased by 200.6% in the year, from R$17.7 million to R$53.2 million. R$50.7 million allowances were made, pursuant to BACEN’s Resolution 2682 to keep pace with the sharp portfolio expansion. In addition, supplementary allowances totaling R$19.6 million were voluntarily made, with a view to the possible rise in default/delinquency rates as a result of the liquidity shortage and the slackening economic activity. As a result, the balance of Allowances for Loan Losses increased from R$28.7 million on December 31, 2007 to R$70.3 million on December 31, 2008, a 144.9% rise, from 2.3% to 4.1% of the total credit portfolio.
Gross Result from Financial Intermediation Gross Income from Financial Operations totaled R$200.1 million in 2008, 54.9% more than in the previous year. Net Interest Margin3 came to 9.5% in the year. 05
06
07
08
Operating Income (Expenses)
3 Net Interest Margin (NIM) = Gross Financial Intermediation Result (Allowance for Loan losses excluded) / average interest earning assets.
Net Operating Expenses totaled R$89.1 million, a 30.5% rise in comparison to the R$68.3 million recorded in 2007. If the R$14.5 million IPO expenses had not been considered in 2007, the rise in Net Operating Expenses would have been 65.6%.
Operating Income (Expenses) . R$ million Income from Services Personnel Expenses Other Administrative Expenses Tax Expenses Other Operating Income (Expenses) TOTAL
| Annual Report
2008
Change 2005
2006
2007
2008
2008/2007
9.3
11.6
18.9
24.5
29.6%
(25.0)
(28.2)
(40.6)
(57.1)
40.6%
(16.5)
(18.9)
(41.0)
(40.9)
-0.2%
(4.6)
(5.7)
(9.9)
(15.3)
54.5%
2.1
1.6
4.3
(0.3)
-107.0%
(34.7)
(39.6)
(68.3)
(89.1)
30.5%
53
| Economic Environment and Performance |
The main changes were observed in:
| Income from Services Rendered and Bank Fees, which result from fees customers pay mainly for brokerage in stock and mercantile & futures exchange operations (54.5%), collection operations (14.2%), bank fees (6.1%) and bank guarantees (4.6%), among others.
| Personnel Expenses, which include remuneration, benefits, social charges and employee and intern training, totaled R$57.1 million, 40.6% more than the R$40.6 million recorded in 2007, even though the Bank closed the year with 329 employees in the three operating companies, versus 331 employees in December 2007. Throughout the year, many employees were hired due to the branch network expansion and the new used car financing business, through BIM Promotora de Vendas. In October 2008, the Bank was forced to adapt its structure to the new environment resulting from the worsening global crisis and the business prospects for the coming months. 48 BIM Promotora de Vendas employees were laid off because the used car financing business was discontinued. 51 Bank employees were laid off to adapt the support and control structure to the projections of lower growth in coming months. 9 Broker employees were also laid off. Those layoffs resulted in non-recurring expenses of R$2.5 million in the last quarter.
| Other Administrative Expenses totaled R$40.9 million in the year, a 0.2% drop in relation to 2007 or, if the 2007 IPO expenses are deducted, a 54.3% rise. These expenses correspond to third-party services, specialized technical services connected to legal matters, auditing, consulting, financial system services, IT system acquisition, utilities and costs related to everyday activities, such as rents, supplies, among others.
| Tax Expenses, mainly PIS and COFINS, which rose by 54.5% in comparison to 2007, as a result of the increase in operations and totaled R$15.3 million.
Messias Emanoel de Moura, 16 years old
54
Operating Income As a result of the aspects described so far, Operating Income amounted to R$110.9 million in the year, with an 81.8% increase when compared with 2007, R$61.0 million. If the R$14.5 million 2007 IPO had not been included, the operating income in that year would have been R$75.5 million. If this figure is used as a basis for comparison, there was a 46.9% rise in 2008 in relation to 2007.
Income Tax and Social Contribution Due to the rise in operations, expenses on Income Tax came to R$29.9 million and expenses on Social Contribution stood at R$15.9 million. The latter figure includes the 6% increase in the rate of Social Contribution on Net Income as of May 2008. Those expenses, with a R$20.5 million deduction from the deferred tax asset, mainly due to the effect of temporary additions and exclusions for R$18.1 million expenses on the allowance for loan losses, led to a R$25.4 million drop in results.
Contributions and Profit Sharing The amounts provisioned for employees' and managers’ profit sharing programs, which are paid on a semi-annual basis, totaled R$14.4 million versus R$14.2 million in 2007. 68.5% of that amount was paid to employees and 31.5% to managers.
Efficiency Ratio . R$ million Personnel Expenses Contributions and Profit Sharing Other Administrative Expenses Tax Expenses Other Operating Expenses A – Total Operating Expenses
2005
2006
2007
2008
25.0
27.3
40.6
57.1
0
0.9
14.2
14.4
16.5
18.9
41.0
40.9
4.6
5.7
9.9
15.3
1.1
2.1
4.1
2.7
47.2
54.9
110.0
130.5
67.8
82.3
147.0
253.4
Income from Services & Bank Fees
9.3
11.6
18.9
24.5
Other Operating Income B – Total Operating Income
3.2
3.7
8.4
2.4
Gross Income from Financial Intermediation (not incl. Allowance for Loan losses)
Efficiency Ratio (A/B)
| Annual Report
2008
80.3
97.6
174.3
280.3
58.8%
56.3%
63.0%
46.6%
55
| Economic Environment and Performance |
The drop in the percentage of this ratio shows improved performance since it is calculated by dividing Operating Expenses by Operating Income, as described above. Therefore, the lower the expenses over the equivalent income, the more efficient the financial institution is considered. BIM’s Efficiency Ratio had a good performance due to the higher business volumes and margins, combined with a consistent management of expenses. This index fell by 16.4 percentage points in comparison to the previous year. Once more, if the 2007 administrative expenses had not included the IPO expenses, that drop would have been 8.1 p.p., based on a 54.6% adjusted efficiency ratio in 2007.
Net Profit for the Year In 2008, net profit increased by 58.1%, closing the year at R$71.8 million, after the recording of R$19.6 million expense on the allowance for loan losses made voluntarily and the non-recurring R$2.5 million personnel expenses resulting from the fourth quarter layoffs. If the 2007 IPO expenses are once more excluded, net profit in that period would have been R$ 55.1 million. If this figure is used for comparison, there would be a 30.3% rise in net profit in 2008. The net result recorded produced a 16.8% Return on Average Equity (ROAE) and a 3.2% Return on Average Asset (ROAA), a 0.5 p.p. increase in both cases in 12 months.
| Added Value Statement With these results, added value to society generated by BIM totaled R$ 185.0 million in 2008. This shows an added value index of 92.4% of the gross income from financial operations. In other words, R$ 0.92 out of every R$ 1.00 of the income from its operations was distributed among the government (taxes and contributions), employees (wages, salaries and social charges) and shareholders (reinvestment and dividends).
Added Value Statement . %
Employees Government Third Parties Shareholder Remuneration Retained Earnings
25%
33%
14% 1%
56
Pursuant to the Brazilian Corporate Law, as amended by Law 11,638 of 2007, and CVM Resolution 557/08, of November 12, 2008, in approval of Technical Note CPC 09 of the Accounting Standards Committee (CPC), the Added Value Statement is an integral part of Publicly Quoted Companies’ Financial Statements as of the close of 2008. The Added Value Statement can be found on page 89 of this report.
27%
Banco Indusval Multistock started voluntarily posting this statement in an explanatory note during its preparation to go public in 2007.
| Cash Flow Pursuant to CVM Resolution 547/08 of August 13, 2008 and the National Monetary Council’s Resolution 3,604 of August 29, 2008, both in approval of Technical Note CPC 03 of the Accounting Standards Committee (CPC), the Cash Flow Statement is an integral part of the Financial Statements of Publicly Quoted Companies and Institutions authorized to operate by the Central Bank of Brazil as of the close of 2008. Banco Indusval Multistock has posted its Cash Flow Statement since its preparation to go public in 2007. The Cash Flow Statement can be found on page 88 of this Report. Josivelton Nascimento Nunes, 16 years old
| Ratings Banco Indusval Multistock is currently rated by three ratings agencies: Standard & Poor’s and Fitch – two of the most important international agencies – and the Brazilian agency Riskbank. Ratings reflect the sound quality of the Bank's assets.
| Standard & Poor’s – the Brazil national scale and global scale long- and short-term ratings, ‘brBBB+/br-A-3’ and ‘B+/B’ respectively, were reaffirmed in October. However, the positive outlook, assigned in July, was changed to stable due to the global scenario. | Fitch Ratings – the national short- and long-term ratings, respectively ‘BBB+(bra)’ and ‘F2(bra)’, assigned in October 2007, were reaffirmed in December. Fitch also maintained the stable outlook. | Riskbank – maintained Banco Indusval Multistock ‘low short-term risk’ in January 2009, based on the stability of BIM's indicators.
Agency
| Annual Report
2008
Rating
Observations
Latest Report
B+ / Stable / B B+ / Stable / B brBBB+/Stable/brA-3
Foreign Currency Local Currency Brazil National Scale
October 2008
BBB+/ Stable / F2
Brazil National Scale
December 2008
10.04 Ranking: 60
Riskbank Index: September 2008
January 2009
57
| Capital Market |
Commitment to the market Banco Indusval Multistock’s shares started being traded on BM&FBOVESPA S/A – Securities, Commodities and Futures Exchange – under ticker symbol IDVL4 in July 2007. BIM adhered to Level 1 of special Corporate Governance practices and voluntarily fulfilled further Novo Mercado requirements, as described in Chapter “Corporate Governance” of this Report.
| Capital Breakdown Banco Indusval Multistock’s Capital Stock consists of 43,000,001 shares, 27,000,000 of which are common shares and 16,000,001 preferred shares. At the close of the year, outstanding preferred shares (IDVL4), not including shares belonging to controllers and other management members, totaled 21.7 million, or 50.6% of the Company's total capital. 7.3 million of those outstanding shares are common shares belonging to members of Masagão Ribeiro and Ciampolini families not participating in the controlling group. If those common shares and the treasury shares are deducted from the total number of outstanding shares, the number of shares traded on BM&FBOVESPA is 14.4 million, which corresponds to 33.5% of the total capital and 90.1% of preferred shares.
58
Leila Rosa, 15 years old
Paved Way
59
| Capital Market |
In 2008, BIM distributed 31.8% of the adjusted net income to remunerate its shareholders. | Treasury Shares On December 31, 2008, the Company had 510,500 shares held in treasury acquired throughout the year, corresponding to 1.2% of total capital and 3.2% of preferred shares. Those shares were acquired under the Own Share Buy-Back Plans and will be kept in treasury to meet the Stock Options programs exercise. The remaining balance may be sold or canceled. The Share Buy-Back Plan approved by the Board of Directors on October 03, 2008 for up to 1,350,175 preferred shares is effective until October 2009. On December 31, 2008, there were still 1,001,675 shares for repurchase under this plan.
Issued
% Total
Control Group and Mgmt.
% Class
Treasury
% Class
Outstanding
% Class
ON
27,000,000
62.8%
19,690,542
72.9%
-
0%
7,309,458*
27.1%
PN
16,000,001
37.2%
1,066,986
6.7%
510,700
3.2%
14,422,515
90.1%
Total
43,000,001
100%
20,757,528
48.3%
510,700
1.2%
21,731,973
50.5%
NÂş of Shares
* These common shares belong to the members of the families not participating in the Shareholders’ Agreement.
60
| Stock Options Plan The March 26, 2008 Special Shareholders’ Meeting approved the Stock Options Plan for executives of Banco Indusval S/A and its controlled companies, in order to foster motivation and commitment in the long term. The distribution of call options is made each semester, based on the Bank’s consolidated results and the individual performance of these executives. The first Stock Options Program distributed to the Executive Board call options for 161,869 shares in the year, corresponding to the first half of 2008 results. The second Program distributed 229,067 stock options corresponding to the second half of 2008 results in February 2009, as approved by the Board of Directors. The exercise of the options given can be made as of July 2009 for the first program and as of February 2010 for the second program, in consecutive annual installments of up 33.33%, with a 5-year deadline for the exercise option. Therefore, no option has been canceled or exercised so far. As mentioned above, the Bank already has the treasury shares needed for this exercise.
| Stock Performance In spite of BIM’s performance and its sound economic and financial fundamentals, its shares fell by 79.5% in 2008, versus a 41.2% drop in Ibovespa. The market capitalization of banks listed on BM&FBOVESPA from 2007 on had an average drop of 70.3% during 2008. The decline in the market value of companies listed on BM&FBOVESPA partly reflects higher risk aversion due to the global crisis. Overall, it shows the drop in foreign investors’ position, which accounted for about 40% of BM&FBOVESPA trading, to cover losses in other markets. That trend led to losses in stock exchanges worldwide, mainly in less liquid assets. .
Débora Maria Ferreira de Oliveira, 15 years old
| Annual Report
2008
61
| Capital Market |
Foreign investors held 88.0% of BIM’s preferred shares and 32.7% of its total capital in late 2007, in contrast to 77.5% and 28.9% respectively at the close of 2008. As crisis bring opportunities, the bright side of this situation was a dispersal of the shareholding base, with a larger share of Brazilian investors, not connected to the Bank’s management, from 3.5% to 9.6% of preferred shares, thus increasing their interest in the Bank’s total capital from 1.3% to 3.6%.
Share Performance – IDVL4 vs. Ibovespa IDVL4 IBOVESPA R$24.00 R$21.00 R$18.00 R$15.00 R$12.00 R$9.00 R$6.00 R$3.00
Closing price 12.28.2007 price 12.30.2008 price Change in the period Highest price (on 01.22.2008) Lowest price (on 11.21.2008)
62
dec 16
nov 28
nov 11
oct 24
oct 8
sep 22
sep 4
aug 1
aug 19
jul 16
jun 27
jun 11
may 26
may 7
apr 17
apr 1
mar 13
feb 26
feb 8
jan 18
jan 2
R$0.00
IDVL4
Ibovespa (pts)
R$19.50
63,886
R$ 3.99
37,550
-79.5%
-41.2%
R$ 20.90
56,097
R$ 3.20
31,250
| Shareholding Base The breakdown of BIM’s shares on December 31, 2008 was as follows:
Amount
Type of Shareholder
4
Shareholders’ Agreement
10
Management
4
Board of Directors
6
Executive Board
13
Families
19
Brazilian Institutional
Common
%
Pref.
%
Total
%
17,116,173
63.4%
923,349
5.8%
18,039,522
42.0%
2,574,369
9.5%
133,837
0.8%
2,708,206
6.3%
2,319,807
8.6%
110,659
0.7%
2,430,466
5.7%
254,562
0.9%
23,178
0.1%
277,740
0.6%
7,309,458
27.1%
492,811
3.1%
7,802,269
18.1%
0
0.0%
1,151,961
7.2%
1,151,961
2.7%
17
Foreign Institutional
0
0.0%
12,407,108
77.5%
12,407,108
28.9%
4
Legal Entities
0
0.0%
35,365
0.2%
35,365
0.1%
114
Individuals
0
0.0%
345,070
2.2%
345,070
0.8%
-
Treasury
0
0.0%
510,500
3.2%
510,500
1.2%
181
Total
27,000,000
100.0%
16,000,001 100.0%
43,000,001 100.0%
| Shareholder Remuneration
Interest on Equity Paid in R$ million
1Q 2Q 3Q 4Q
04
05
15.858
Banco Indusval Multistock‘s shareholder remuneration policy provides for the minimum distribution of 25% of the adjusted net income of each year, according to the Brazilian Corporate Law. In line with its soundness and conservativeness, earnings distribution will remain close to its minimum required levels. Payments to shareholders are traditionally made as Interest on Equity at the close of each quarter. In 2008, BIM paid to its shareholders a gross amount of R$25.5 million, or R$21.6 million net of Income Tax, which corresponded to 31.8% of the adjusted net income in the year and net remuneration per share of R$0.51543.
10.167
11.446
7.181
25.470
06
| Annual Report
07
2008
08
63
| Intangible Assets |
Attributes that make a difference Banco Indusval Multistock’s intangible assets are reflected in the figures shown in this report. Nevertheless, they are not easily measurable. A Bank’s most important intangible asset is the people that manage it and conduct their operations with their knowledge, experience, uprightness, idealism, motivation, effort, dedication, ethics, professionalism, sense of citizenship and many other typical attributes of the human beings that handle relationships at a financial institution. Those attributes translate into credibility, risk mitigation, results, but they can seldom be isolated and described in figures. BIM’s organizational culture is based on three pillars: ethics, transparency and a positive and healthy work environment. Those assumptions allowed the Bank to grow in a sustainable manner in over 40 years and ensure its perpetuity.
64
Experience
| Annual Report
2008
65
Karoline Mendes MaurĂcio, 20 years old
| Intangible Assets |
In line with that culture, Banco Indusval Multistock pursues the goal to become a reference in financial services for medium-sized companies, with its experience, agility and partnership with its strategic stakeholders. BIM’s purpose is to always offer its clients customized solutions and to be an agent of change in the business community by means of its responsible business attitude.
Jessica Mário Martins, 19 years old
The Bank believes that its growth depends on its professionals’ skill, experience and sense of self-fulfillment. In order to align personal goals with the Company's strategic goals, BIM has pursued a policy focused on employee motivation and training in the last few years. The Bank’s high-level executives have a long professional experience and great expertise in their fields. The Bank invests in continued education for the whole of its staff on all levels to enhance those qualities. Investments are channeled both to academic studies and training programs to better prepare employees for service diversification and excellence. Coupled with that, BIM adopts a modern remuneration and benefit policy based on fair and motivating principles.
Experience, agility, partnership and responsible attitude servicing the market and the surrounding communities.
66
Cherishing that culture is a daily effort that requires more than just financial resources. It requires being constantly alert to maintaining and disseminating the values that make up the Bank’s intangible assets:
| efficient operations; | high-quality customer service; | ethical attitude at work; | transparent relationship with all stakeholders; | professionalism, expertise and experience; | high corporate governance standards; | firm commitment to risk management; | management geared to social and environmental responsibility; | business citizenship fostering. All actions conducted under the brand Indusval Multistock are guided not only by technical, commercial and legal aspects, but also by the Bank's key beliefs: People and Sustainability.
Jussara de Oliveira InĂĄcio, 16 years old
| Annual Report
2008
67
| People Management |
Quality, competence and motivation perfectly aligned Banco Indusval Multistock believes that one of the major assets of a financial institution is the people that with their skills, ethical attitude, experience and dedication detect business opportunities, assess risks, manage them and conduct the operations to achieve the planned results. Therefore, Human Resources management works in line with the Bank’s strategy. It adopts modern techniques for staff management, recruitment, training and development, remuneration policy and internal communication. In addition, it undertakes occupational health and safety and social and environmental responsibility initiatives. BIM hires professionals from different organizational cultures to combine different backgrounds and points of views. Nonetheless, all professionals must be in line with the Bank’s culture, which greatly values an ethical and transparent relationship with its partners. It also seeks individuals with a cooperative profile who, therefore, value team work, are flexible and committed. Those values aim at creating a positive, healthy and safe work environment in which professionals remain motivated.
68
Relationship
69
DĂŠbora Maria Ferreira de Oliveira, 15 years old
| People Management |
In late 2008, Indusval Multistock companies had 329 employees, distributed in headquarters, the 10 Bank branches, Indusval Corretora and BIM Promotora de Vendas. BIM’s human resources management searches for professionals who have an educational background and experience in line with the duties to be performed and with the Company's culture. It imposes absolutely no restrictions upon gender, ethnicity, religion, social background, age, sexual orientation or disabilities, thus contributing to a greater awareness of diversity and social/environmental responsibility issues, as well as to the improvement in its employees work quality and formal education.
PaixĂŁo Leonardo da Silva, 18 years old
Besides continuously investing in employee training and undertaking initiatives to foster social and environmental issues awareness and motivation, Banco Indusval Multistock has taken measures to promote inclusion and opportunities. In 2008, BIM expanded its Apprentice Program by hiring 6 young high school students for their first labor experience and developed, jointly with the Brazilian Federation of Bank Associations (FEBRABAN), the Disabled People Training Program to absorb professionals with several types of disabilities, by offering them formal and specific education for the financial market, after they are hired. Four hearing and physically impaired people participate in this program at BIM. They started their education and training process in February 2009. Those employees will be trained for at least three months before starting their activities at the Bank.
| Training
Vilma Santa dos Santos, 22 years old
70
BIM promoted 3,784 hours of professional training during 2008, including the integration process for new employees, trainees and interns, totaling 27,620 man hours (training hours times number of participants). These hours were invested in internal and external professional training and staff motivation.
| Indusval Multistock’s employees’ profile By Educational Background
Support and Control Business
Grade School Certificate High School Certificate College Degree MBA or Graduate Studies
2%
38%
51%
54%
50%
4%
44%
49%
46%
06
07
06
5%
08
6%
26%
27%
26%
26%
22%
22%
25%
21%
25%
25%
27%
26%
17%
19%
15%
20%
05
By gender
Up to 1 year From 1 to 5 years From 5 to 10 years From 10 to 20 years Over 20 years
7%
30%
9%
07
7%
06
07
08
Women at BIM
Male Female
Other Levels Managers Executive Officers
111
21%
10%
59%
26%
05
By length of service
6%
59%
50%
08
Up to 25 years From 26 to 35 years From 36 to 45 years From 46 to 55 years Over 55 years
29%
27%
05
6%
46%
28% 62%
By Age
22%
1% 15%
1% 14%
13%
10%
16%
1
1% 11%
21%
26%
34%
31%
10%
25% 32%
42
32% 79%
74%
66%
69%
1 5
52%
30%
05
26%
06
| Annual Report
19
1 12
52%
40%
1
24
66
1%
104
By Business Area
07
08
2008
36
05
06
07
08
05
53
06
86
07
84
08
71
| People Management |
The Bank stimulates continued education. Through its Education and Development policies, it covers up to 50% of monthly tuitions for undergraduate, graduate and MBA programs and up to 80% of language courses, with systematic monitoring of beneficiaries' performance. Employees with good professional performance are eligible to take courses related to their activities. In late 2008, BIM sponsored undergraduate and graduate studies for 44 employees and language courses for 32, with an investment of R$ 203,000 in the year, 24.5% above the R$ 163,000 in 2007. Employee technical and behavioral development and improvement investment totaled R$ 434,000 in the year, 50.2% more than the R$ 289,000 invested in 2007.
Leandro Souza Melo, 17 years old
The Internship Program benefits 20 college students who cooperate in the exchange of experiences between the academic and corporate environments. Therefore, there is a balance between theory and practice in several Bank and Broker areas. The second Trainee Program group started activities in August 2008. After 6 months of job rotation training in different Bank areas, they started working in their specific areas in project development in January 2009. There were 3,645 applicants for eight openings.
| Remuneration and Benefits Indusval Multistock companies’ Career and Remuneration Plan determines that employees receive a fixed salary, based on market surveys and company’s internal equality, and a variable portion – Profit Sharing, directly connected to their professional performance. Employees are assessed individually and in teams, and the achievement of preestablished qualitative and quantitative targets is observed. This model is extensible to all employees.
72
Motivating professional training, remuneration and benefits. These semiannual assessments are also a management tool to guide training, promotions and education assistance. In addition, they make it possible to improve the performance of under-performing employees. Additionally to the benefits in the banking employees collective labor agreement, BIM grants health and dental plans, discounts for medicine purchase, education assistance and credit lines at lower interest rates. In 2008, Banco Indusval Multistock also introduced the Private Pension Fund. The Bank provides 50% of the amounts contributed to the Fund, within certain limits set by the current Policy. These benefits aim at meeting the basic needs of any human being, such as food, health care and education. The introduction of the Pension Plan intends to support and motivate the employees to plan their retirement.
Kaio Bastos, 17 years old
| Annual Report
2008
73
| Sustainability |
Responsibility fulfilled with pride Banco Indusval Multistock believes that sustainability means acting in an ethical manner on all levels and contributing to the communities’ economic and social development through its business. In line with that belief, BIM has been improving its initiatives in the following areas:
| Of Business The Social/Environmental Responsibility Policy implemented by the Bank in December 2008 is directly connected to its core business, credit granting. This action confirms BIM’s commitment to sustainable development and effectively contributes to promoting new business ethics that cares and respects the environment and social development. Combining its activities with the formal adoption of requirements that foster awareness of the need to act responsibly toward the environment and society is also a way to better manage credit and image risks, thus ensuring lasting relationships. To turn policy into practice, BIM introduced its Social/Environmental Management System to ensure that all loan and financing operations comply with the Social/ Environmental Legislation and observe the exclusion list of the International Finance Corporation (IFC) part of the World Bank Group. The participation of all departments is fundamental for the system to be operative. However, the following areas play distinct roles: the commercial department, which gathers information from customers and prospects; the credit department, which checks the Internet and government and non-governmental organizations to complete borrower risk assessment; and, the Compliance department, which is responsible for enforcing that policy. Following its principles, BIM does not grant loans to companies that use child or
74
Jessica Silvestre de Oliveira, 16 years old
Equilibrium
75
| Sustainability |
slave labor (or the like), whose activities directly or indirectly promote gambling or prostitution, and those that produce substances that may threaten the health and safety of people, animals or plant.
| Of Internal Stakeholders Besides continuously investing in employee training and undertaking initiatives to foster awareness and motivation toward social and environmental issues, Banco Indusval Multistock has taken measures to promote inclusion and create opportunities under the Apprentice, Intern, Trainee and Professional Training for People with Disabilities programs. Bruna Oliveira de Araújo, 16 years old
Additionally, BIM’ contributes to its employees’ and collaborators’ quality of life by paying fair remuneration and grating food, health care and education benefits. Those benefits, added to remuneration, totaled R$62.8 million in 2008, 33% of total value added by BIM’s business to the society.
The economic and financial performance has to be followed by social development and environmental care.
76
| Of Communities Banco Indusval Multistock invests in education, culture and basic development to promote the development of communities. Emphasis is given to education of children, youth and adults by supporting organizations that prepare them for full-fledged citizenship and provide them with the tools they need to improve their social-economic status. With this in mind, BIM sought tools and partnerships to consolidate this concept by means of the Indusval Multistock Sustainability Institute in 2008. Social investment amounted to R$ 1.5 million in 2008, allocated to initiatives focused on:
| Education – student counseling, reading skills and education improvement for children and youth.
| Culture – bringing youth and educators in contact with different forms of art and artists’ professional lives, coupled with encouraging artistic expression.
| Entrepreneurship – vocational education for youth in the field of gastronomy.
Type of Investment . In R$ thousand
| Sports – support for different types of amateur athletes.
Social Projects FUMCAD Cultural Incentive Law Sports Incentive Law
| Environment – environmental education for children and youth living in damaged areas.
| Health Care – illness prevention and support for people with burn injuries.
160 360
259
690
| Annual Report
2008
77
| Sustainability |
BIM-supported projects directly benefited 5,623 children, youth and adults in 2008, a 41% increase in relation to 2007. Indirect beneficiaries totaled 23,320 people in the communities connected to those projects. During 2007, investments in expanding and improving the facilities of the supported organizations allowed the expansion in the number of people attended. The higher number of beneficiaries also allowed expanding educators training courses, thus improving the number of beneficiaries and the quality of the support given by the projects. During 2008, there were several activities to prepare for 2009, such as:
| Creating a partnership between Indusval Sustainability Institute and Inter American Foundation, a US governmental organization for social investment in Latin America, through Rede AmĂŠrica, to invest in local development and income generation projects;
| Developing Indusval Multistock’s first Greenhouse Gas Emission Inventory, the basis for future environmental initiatives to offset and reduce emissions;
Direct and Indirect Beneficiaries
23,320
5,623
3,983
3,910
15,000
24,100
2006 2007 2008
Direct beneficiaries
78
Indirect beneficiaries
| Mapping volunteering activities and opportunities in the communities served to design a Corporate Volunteering Program that can better meet their needs;
| Searching for projects, communities and initiatives that can be develop in other locations in the country. Those are but some of the steps that Banco Indusval Multistock has taken in the last few years, driven by the belief that economic and financial performance must be accompanied by social development and environmental preservation to ensure business perpetuity. Consequently, BIM seeks to post, at the end of each year, a Triple Bottom Line that adequately fulfills its shareholders', investors’, employees’, legislators’ and regulators’ expectations, in addition to contributing to society with the least possible environmental impact.
Supported Organizations:
Institutional Partners:
| Annual Report
2008
79
| Sustainability |
Annual Social Report 2008 1 – Calculation Basis
2008 Amount (Thousand Reais)
2007 Amount (Thousand Reais)
200,140
129,205
110,926
60,981
71,773
45,374
54,313
42,372
Gross Financial Intermediation Result (GFIR) Operating Income (OI) Net Profit (NP) Gross Payroll (GP)
2 – Internal Social Indicators Food Compulsory social charges Private pension fund Health care Occupational health and safety Education Culture Professional Training and Development Day-care or day-care allowance Profit sharing Others Total – Internal social indicators
3 – External Social Indicators Education Culture Health and sanitation Sports Fight against hunger and food safety Others Total contribution to society Taxes (not including social charges) Total – External social indicators
4 – Environmental Indicators Investments in company production/operation Investments in external programs and/or projects Total environmental investments Concerning the establishment of “annual targets” to minimize waste and overall consumption in production/operation, and boost efficiency in the use of natural resource, the company
5 – Staff Indicators Nbr of employees at the close of the period Nbr of hirings in the year Nbr of collaborators
80
Amount (thousand) 3,177
% GP 5.85%
% GFIR 1.59%
Amount (thousand) 2,357
% GP 5.56%
% GFIR 1.82%
27,503
50.64%
13.74%
13,486
31.83%
10.44%
180
0.33%
0.09%
0
0.00%
0.00%
3,517
6.48%
1.76%
3,030
7.15%
2.35%
33
0.06%
0.02%
21
0.05%
0.02%
254
0.47%
0.13%
161
0.38%
0.12%
114
0.21%
0.06%
333
0.79%
0.26%
234
0.43%
0.12%
222
0.52%
0.17%
92
0.17%
0.05%
53
0.13%
0.04%
9,876
18.18%
4.93%
9,735
22.98%
7.53%
432
0.80%
0.22%
379
0.89%
0.29%
45,412
83.61%
22.69%
29,777
70.28%
23.05%
Amount (thousand) 355
% GP 0.32%
% GFIR 0.18%
Amount (thousand) 493
% GP 0.81%
% GFIR 0.38%
527
0.48%
0.26%
736
1.21%
0.57%
20
0.02%
0.01%
0
0.00%
0.00%
160
0.14%
0.08%
0
0.00%
0.00%
0
0.00%
0.00%
0
0.00%
0.00%
504
0.45%
0.25%
130
0.21%
0.10%
1,566
1.41%
0.78%
1,359
2.23%
1.05%
37,614
33.91%
18.79%
23,706
38.87%
18.35%
39,180
35.32%
19.58%
25,065
41.10%
19.40%
Amount (thousand)
% GP
% GFIR
Amount (thousand)
% GP
% GFIR
481
0.43%
0.24%
105
0.17%
0.08%
114
0.10%
0.06%
0
0.00%
0.00%
595
0.54%
0.30%
105
0.17%
0.08%
( ) has no targets
( ) has no targets
( x ) reaches 51 to 75%
( x ) reaches 51 to 75%
( ) reaches 0 to 50%
( ) reaches 0 to 50%
( ) reaches 76 to 100%
( ) reaches 76 to 100%
2008
2007
329
331
175
129
36
28
2008
2007
20
28
117
120
103
94
15.87%
17.39%
Nbr of interns Nbr of employees over age 45 Nbr of women employees % of management positions occupied by women Nbr of employees of African descent % of management positions occupied by people of African descent Nbr of people with disabilities or special needs
6 – Relevant information concerning corporate citizenship Ratio between the highest and lowest remuneration Total number of occupational accidents The social and environmental projects ( ) officers developed by the company were conceived by: The occupational health and safety standards were set by:
( x ) officers and managers
14
17
0.00%
0.00%
3
3
2008
2009 targets
35.16 0
35.16 0
( ) all employees
( ) officers
( x ) all + Internal ( ) officers and Accident Prevention managers Committee
( x ) officers and managers
( ) all employees
( ) all employees
( x ) all + Internal Accident Prevention Committee
( ) will follow ILO rules
(x ) will encourage and follow ILO
( ) officers and managers
( ) all employees
( ) does not become involved
( x ) follows ILO rules
The private pension fund is extended to:
( ) officers
( ) officers and managers
( x ) all employees
( ) officers
( ) officers and managers
( x ) all employees
Profit sharing is extended to:
( ) officers
( ) officers and managers
( x ) all employees
( ) officers
( ) officers and managers
( x ) all employees
In selecting suppliers, the company’s ethical, environmental and social responsibility standards:
( ) are not taken into consideration
( x ) are suggested
( ) are required
( ) will not be taken into consideration
( x) will be suggested
( ) will be required
Concerning employee participation in volunteering programs, the company:
( ) does not become involved
( x ) supports
( ) will support
(x ) will organize and encourage
Total number of consumer complaints and criticisms:
at the Consumer Protection Agency at the company (PROCON) 50 6
Concerning the freedom to join trade unions and right to collective bargaining and employee representation, the company:
% of complaints and criticisms dealt with or solved: Added value to distribute (in thousand R$): Added Value Distribution:
( ) encourages ( ) will not and follows ILO become involved
( ) organizes and ( ) will not encourages become involved
at the Consumer Protection Agency at the company (PROCON) 96% 100%
at courts 1
at the Consumer Protection Agency at the company (PROCON) 40 4
at courts 0
at courts 100%
at the Consumer Protection Agency at the company (PROCON) 100% 100%
at courts 100%
in 2008: R$ 185,010
in 2007: R$ 126,317
government 26.7% employees 34.0% shareholders 13.8% third parties 0.5 % retained 25.0%
government 25.2% employees 38.3% shareholders 12.6% third parties 0.5 % retained 23.4%
7 – Further Information As a matter of principle and as stated in its social/environmental policy, Banco Indusval S.A. does not grant loans to companies using child or slave labor or the like; whose activity directly or indirectly encourages gambling or sexual exploitation; or are in asbestos extraction or asbestos product manufacturing.
| Annual Report
2008
81
| Index |
Financial Statements 2008 83 Report of Independent Auditors 84 Balance Sheet at December 86 Statement of Income 87 Statement of Changes in Shareholders’ Equity 88 Statement of Cash Flows 89 Statement of Added Value 90 Notes to the Financial Statements
82 82
| Report of Independent Auditors |
To the Board of Directors and Stockholders Banco Indusval S.A.
1. W e have audited the accompanying balance sheets of Banco Indusval S.A. (Indusval Multistock) and the consolidated balance sheets of Banco Indusval S.A. and its subsidiaries (Indusval Multistock Consolidated) as of December 31, 2008 and 2007 and the related statements of income, of changes in stockholders’ equity, of cash flows and of added value of Banco Indusval S.A. (Indusval Multistock) for the years then ended and for the second six-month period of 2008, as well as the consolidated statements of income, of cash flows and of added value for the years then ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements. 2. W e conducted our audits in accordance with approved Brazilian auditing standards, which require that we perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented in all material respects. Accordingly, our work included, among other procedures: (a) planning our audit taking into consideration the significance of balances, the volume of transactions and the accounting and internal control systems of the Bank, (b) examining, on a test basis, evidence and records supporting the amounts and disclosures in the financial statements, and (c) assessing the accounting practices used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 3. In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position of Banco Indusval S.A. (Indusval Multistock) and of Banco Indusval S.A. and its subsidiaries (Indusval Multistock Consolidated) at December 31, 2008 and 2007, and the results of operations, the changes in stockholders’ equity, the cash flows and the added values of Banco Indusval S.A. (Indusval Multistock) for the years then ended and for the second six-month period of 2008, well as the consolidated results of operations, the cash flows and the consolidated statement of added values for the years then ended, in accordance with the accounting practices adopted in Brazil.
São Paulo, February 9, 2009.
Auditores Independentes CRC 2SP000160/O-5 Ricardo Baldin Accountant CRC 1SP110374/O-0
| Financial Statements
2008
83
| Balance Sheet at December 31 | In thousands of reais (A free translation of the original in Portuguese) Assets
Current assets
Cash Short-term interbank investments (Note 4) Open market investments Interbank deposits
Marketable securities and derivative financial instruments (Note 5) Own portfolio Subject to repurchase agreements Linked to guarantees Derivative financial instruments
Interbank accounts Restricted credits Deposits with the Brazilian Central Bank
Loans (Note 6) Loans – private sector Loans – public sector Allowance for loan losses
Other receivables Foreign exchange portfolio (Note 7) Income receivable Negotiation and intermediation of securities Sundry (Note 8) Allowance for loan losses (Note 6)
Other assets Assets not for own use Provision for loss Prepaid expenses
Long-term receivables
Marketable securities and derivative financial instruments (Note 5) Linked to guarantees Derivative financial instruments
Loans (Note 6) Loans – private sector Loans – public sector Allowance for loan losses
Other receivables Sundry (Note 8) Allowance for losses (Note 6)
Other assets Prepaid expenses
Permanent assets
Investments (Note 9) Subsidiary and associated companies in Brazil Other investments
Property and equipment Properties in use Revaluation of properties in use Other Accumulated depreciation
Total assets The accompanying notes are an integral part of these financial statements.
84
Indusval Multistock 2008
2007
Indusval Multistock Consolidated 2008 2007
1,721,048 40,101 70,763 19,802 50,961
1,864,256 3,800 260,210 212,941 47,269
1,734,867 40,111 70,763 19,802 50,961
1,897,130 3,809 260,210 212,941 47,269
337,331 294,251 2,743 26,760 13,577
622,370 164,850 452,184 4,714 622
328,020 273,796 2,743 37,888 13,593
648,651 180,772 452,184 15,073 622
7,027
10,438
7,027
10,438
7,027
10,438
7,027
10,438
893,401 903,709 23,656 (33,964)
722,616 719,567 16,134 (13,085)
907,287 917,595 23,656 (33,964)
722,616 719,567 16,134 (13,085)
351,569 346,504 14,320 (9,255)
241,664 235,980 480 7,858 (2,654)
360,803 346,504 18 8,152 15,384 (9,255)
248,248 235,980 3 5,811 9,108 (2,654)
20,856 20,066 (493) 1,283
3,158 3,591 (433) -
20,856 20,066 (493) 1,283
3,158 3,591 (433) -
382,213 3,455 3,455
299,607 287 287
476,189 3,524 69 3,455
300,312 419 132 287
335,043 334,054 27,975 (26,986)
280,483 280,602 12,852 (12,971)
427,383 426,394 27,975 (26,986)
280,483 280,602 12,852 (12,971)
41,069 41,182 (113)
18,837 18,842 (5)
42,636 42,749 (113)
19,410 19,415 (5)
2,646 2,646
-
2,646 2,646
-
41,476 30,221
36,734 26,097
14,341 2,946
13,777 3,007
28,513 1,708
24,400 1,697
2,946
3,007
11,255 1,591 3,538 11,527 (5,401)
10,637 1,585 3,538 9,470 (3,956)
11,395 1,591 3,538 11,836 (5,570)
10,770 1,585 3,538 9,793 (4,146)
2,144,737
2,200,597
2,225,397
2,211,219
Liabilities and shareholders’ equity
Indusval Multistock 2008
Current liabilities
Deposits (Note 10 (a); (b)) Demand deposits Interbank deposits Time deposits Other
Funds obtained in the open market (Note 10 (c)) Own portfolio Third party portfolio
Funds from acceptance and issue of securities (Note 10(a)) Funds from housing bonds
Interbank accounts Receipts and payments pending settlement
Interdepartmental accounts Third party funds in transit
Borrowings (Note 10(a)) Local borrowings Foreign borrowings
Local onlendings (Note 10(a)) National Bank for Economic and Social Development (BNDES) Government Agency for Machinery & Equipm. Financing (FINAME)
Other liabilities Collection and payment of taxes and similar charges Foreign exchange portfolio (Note 7) Taxes and social security contributions (Note 12(c)) Social and statutory Negotiation and intermediation of securities (Note 12(a)) Derivative financial instruments (Note 5) Sundry
Long-term liabilities
Deposits (Note 10(a); (b)) Time deposits
Funds from acceptance and issue of securities (Note 10(a)) Funds from housing bonds
Borrowings (Note 10(a)) Foreign borrowings
Local onlendings (Note 10(a)) BNDES FINAME
Other liabilities Taxes and social security contributions (Note 12(c)) Derivative financial instruments (Note 5) Sundry
Deferred income Shareholders’ equity (Note 13) Capital Brazilian residents Capital reserve Revaluation reserve Revenue reserve Asset valuation adjustment Treasury shares
Total liabilities and shareholders’ equity
2007
Indusval Multistock Consolidated 2008 2007
1,220,980 557,496 44,707 183,143 329,218 428
1,575,724 613,875 78,527 81,713 452,370 1,265
1,300,920 533,372 44,187 158,727 329,218 1,240
1,585,880 601,344 78,021 68,608 452,370 2,345
2,742 2,742 -
656,612 451,526 205,086
2,742 2,742 -
656,612 451,526 205,086
19,255 19,255
-
19,255 19,255
-
-
38 38
-
38 38
3,889 3,889
10,885 10,885
3,889 3,889
10,885 10,885
397,285 42,483 354,802
229,730
229,730
229,730
482,963 128,161 354,802
102,059 76,960 25,099
-
102,059 76,960 25,099
-
138,254 1,004 19,288 48,365 6,818 38,073 15,822 8,884
64,584 813 22,708 17,756 8,171 29 9,488 5,619
156,640 1,004 19,288 50,957 6,854 50,338 19,045 9,154
87,271 813 22,708 24,200 8,293 15,992 9,488 5,777
475,076 269,316 269,316
217,928 209,545 209,545
475,796 269,042 269,042
218,394 209,050 209,050
3,266 3,266
-
3,266 3,266
-
132,551 132,551
-
132,551 132,551
-
57,564 4,383 53,181
-
57,564 4,383 53,181
-
12,379 11,067 1,307 5
8,383 8,375 3 5
13,373 12,061 1,307 5
9,344 9,336 3 5
157
197
157
197
448,524
406,748
448,524
406,748
370,983 175 2,062 79,870 (1,163) (3,403)
370,983 2,268 33,497 -
370,983 175 2,062 79,870 (1,163) (3,403)
370,983 2,268 33,497 -
2,144,737
2,200,597
2,225,397
2,211,219
229,730
The accompanying notes are an integral part of these financial statements.
| Financial Statements
2008
85
| Statement of Income | In thousands of reais Indusval Multistock
Indusval Multistock Consolidated
Years ended December 31
Years ended December 31
Six-month period ended December 31 2008 Income from financial intermediation (Note 15(a)) Loans Marketable securities
2008
2007
2008
2007
419,463
640,068
288,197
641,028
288,960
209,949
350,249
181,226
350,249
181,226
50,929
106,846
73,853
108,167
74,616
141,673
166,876
33,118
166,876
33,118
16,912
16,097
-
15,736
-
(316,869)
(443,816)
(161,197)
(440,888)
(159,755)
Money market funding
(112,414)
(205,114)
(117,472)
(202,186)
(115,926)
Loans, assignments and onlendings
(165,351)
(185,466)
(23,331)
(185,466)
(23,331)
Foreign exchange Derivative financial instruments
Expenses from financial intermediation (Note 15(b))
Derivative financial instruments
-
-
(2,672)
-
(2,776)
(39,104)
(53,236)
(17,722)
(53,236)
(17,722)
Gross profit from financial intermediation
102,594
196,252
127,000
200,140
129,205
Other operating income (expenses)
(50,419)
(86,850)
(57,253)
(89,214)
(68,224)
Allowance for loan losses (Note 6)
Income from services rendered (Note 15(c))
4,069
7,591
5,723
22,950
18,910
Income from bank fees (Note 15(c))
900
1,489
-
1,489
-
Equity in the results of subsidiary and associated companies (Note 9(a))
897
4,113
14,154
-
-
Personnel expenses (Note 15(d))
(27,827)
(52,072)
(37,887)
(57,121)
(40,567)
Other administrative expenses (Note 15(e))
(20,566)
(34,099)
(34,213)
(40,937)
(41,013)
(7,612)
(13,372)
(8,418)
(15,306)
(9,867)
401
2,092
5,876
2,448
8,448
(681)
(2,592)
(2,488)
(2,737)
(4,135)
52,175
109,402
69,747
110,926
60,981
(55)
(425)
(1,055)
625
14,226
52,120
108,977
68,692
111,551
75,207
(12,579)
(22,937)
(9,438)
(25,366)
(15,667)
Income tax (Note 11(a))
(16,461)
(28,352)
(10,940)
(29,949)
(15,487)
Social contribution (Note 11(a))
(10,198)
(15,054)
(3,639)
(15,886)
(5,321)
14,080
20,469
5,141
20,469
5,141
(6,713)
(14,267)
(13,880)
(14,412)
(14,166)
Employees
(5,270)
(9,796)
(9,558)
(9,876)
(9,735)
Managers
(1,443)
(4,471)
(4,322)
(4,536)
(4,431)
32,828
71,773
45,374
71,773
45,374
42,489,501
42,489,501
43,000,001
-
-
0.77
1.69
1.05
-
-
Taxes (Note 15(f)) Other operating income Other operating expenses
Operating profit Non-operating income (expenses) (Note 9(a)) Profit before taxation Income tax and social contribution
Deferred tax asset
Profit sharing and contributions (Note 19(g))
Net income for the six-month period/year Number of outstanding shares (units) Net income per share – R$ The accompanying notes are an integral part of these financial statements.
86
| Statement of Changes in Shareholders’ Equity | In thousands of reais
Revenue reserves Capital Revaluation Capital reserves reserves
At December 31, 2006
106,611
Realization of revaluation reserve
Legal
2,343
3,907
Statutory
Other
Asset Retained valuation earnings adjustment
40,681
2
Treasury shares
Total
(3,835) 149,709
-
-
(75)
-
-
-
75
-
-
Capital increase
281,146
-
-
-
- (36,846)
-
-
- 244,300
Capital decrease
(16,774)
-
-
-
-
-
-
-
- (16,774)
Asset valuation adjustment
-
-
-
-
-
-
-
(2)
-
(2)
Net income for the year
-
-
-
-
-
-
45,374
-
-
45,374
Appropriation to legal reserve
-
-
-
2,269
-
-
(2,269)
-
-
-
Appropriation to statutory reserve
-
-
-
-
27,321
-
(27,321)
-
-
-
Interest on own capital (R$0.37 per share)
-
-
-
-
-
-
(15,859)
-
- (15,859)
Cancellation of treasury shares
-
-
-
-
-
(3,835)
-
-
2,268
6,176
27,321
-
-
-
- 406,748
3,835
-
-
At December 31, 2007
370,983
Changes for the year
264,372
-
(75)
2,269
27,321 (40,681)
-
(2)
3,835 257,039
At December 31, 2007
370,983
-
2,268
6,176
27,321
-
-
-
- 406,748
Realization of revaluation reserve
-
-
(69)
-
-
-
69
-
-
-
Asset valuation adjustment
-
-
-
-
-
-
-
(1,163)
-
(1,163)
Net income for the year
-
-
-
-
-
-
71,773
-
-
71,773
Appropriation to legal reserve
-
-
-
3,589
-
-
(3,589)
-
-
-
-
-
-
-
42,784
-
(42,784)
-
-
-
-
-
-
-
-
-
(25,469)
-
Deferred taxes on revaluation
-
-
(137)
-
-
-
-
-
-
(137)
Appropriation of benefits – stock options (Note 14(b))
-
175
-
-
-
-
-
-
-
175
Purchase of own shares
-
-
-
-
-
-
-
-
(3,403)
(3,403)
370,983
175
2,062
9,765
70,105
-
-
(1,163)
(3,403) 448,524
-
175
(206)
3,589
42,784
-
-
(1,163)
(3,403)
370,983
-
2,096
8,123
51,765
-
-
-
- 432,967
Realization of revaluation reserve
-
-
(34)
-
-
-
34
-
-
-
Appropriation to legal reserve
-
-
-
1,642
-
-
(1,642)
-
-
-
-
-
-
18,340
-
(18,340)
-
-
-
-
-
-
-
-
-
-
(1,163)
-
(1,163)
-
-
-
-
-
-
32,828
-
-
32,828
-
175
-
-
-
-
-
-
-
175
Purchase of own shares
-
-
-
-
-
-
-
-
(3,403)
(3,403)
Interest on own capital (R$0.30 per share)
-
-
-
-
-
-
(12,880)
-
- (12,880)
At December 31, 2008
370,983
175
2,062
9,765
70,105
-
-
(1,163)
(3,403) 448,524
-
175
(34)
1,642
18,340
-
-
(1,163)
(3,403)
Appropriation to statutory reserve Interest on own capital (R$0.59 per share)
At December 31, 2008 Changes for the year
At June 30, 2008
Appropriation to statutory reserve Asset valuation adjustment Net income for the six-month period Appropriation of benefits – stock options
Changes for the six-month period
(25,469)
41,776
15,557
The accompanying notes are an integral part of these financial statements..
| Financial Statements
2008
87
| Statement of Cash Flows | In thousands of reais
Six-month period ended December 31 2008 Adjusted net income Net income Depreciation and amortization Equity in the results
2008
Indusval Multistock
Indusval Consolidated
Years ended December 31
Years ended December 31
2007
2008
31,772
68,272
32,400
72,436
45,762
32,828
71,773
45,374
71,773
45,374
829
1,600
1,182
1,651
1,236
(897)
(4,113)
(14,154)
-
Restatement of membership certificates Restatement of stock options Asset valuation adjustment
Variation of assets and liabilities (Increase) decrease in short-term interbank investments
2007
(846)
175
175
-
175
-
(1,163)
(1,163)
(2)
(1,163)
(2)
657,314
147,613
(1,189,217)
69,130
(1,198,674)
717,824
202,951
(112,026)
202,951
(112,026)
(179,317)
231,892
(461,948)
267,547
(487,830)
(Increase) decrease in Marketable Securities and Derivative Financial Instruments (Increase) in Interbank and Interdepartmental Accounts
(881)
(3,623)
(26,636)
(3,623)
(26,636)
(Increase) decrease in Credit Operations
107,107
(225,345)
(525,185)
(331,571)
(525,185)
(Increase) in other credits and assets
(27,092)
(135,928)
(83,008)
(139,572)
(79,448)
39,673
77,666
19,586
73,398
32,451
689,086
215,885
(1,156,817)
141,566
(1,152,912)
Decrease in other liabilities
Operating activities – net cash from (applied) Sale of equity investments
-
-
17,364
-
-
115
170
233
214
290
1,508
4,005
3,199
4,005
3,199
(10)
(10)
(500)
(10)
(1,455)
Sale of investments
-
-
613
72
18,559
Other investments
-
-
(130)
-
(130)
(15,280)
(20,558)
(2,794)
(20,558)
(2,794)
(894)
(2,389)
(3,197)
(2,491)
(3,234)
(14,561)
(18,782)
14,788
(18,768)
14,435
Increase (decrease) in deposits
(274,078)
3,392
287,605
(7,980)
283,998
Increase (decrease) in open market funding
(886,106)
(653,870)
467,943
(653,870)
467,943
22,521
22,521
-
22,521
-
275,300
459,729
65,586
545,407
65,586
(3,403)
(3,403)
-
(3,403)
-
-
-
(16,774)
-
(16,774)
-
-
244,300
-
244,300
(112)
(40)
197
(40)
197
Sale of properties in use Sale of assets not for own use Purchase of investments
Acquisition of assets not for own use Purchase of properties in use
Investing activities – net cash from (applied)
Increase in funds from acceptance and issue of securities Increase (decrease) in borrowings and onlendings Purchase of own shares Capital decrease Capital increase Changes in deferred income Adjustment deferred taxes
-
(137)
-
(137)
-
(12,880)
(25,469)
(15,859)
(25,469)
(15,859)
Financing activities – net cash from (applied)
(878,758)
(197,277)
1,032,998
(122,971)
1,029,391
Net decrease in cash and equivalents
(204,233)
(174)
(109,031)
(173)
(109,086)
296,141
92,082
201,114
92,091
201,178
91,908
91,908
92,083
91,918
92,092
(204,233)
(174)
(109,031)
(173)
(109,086)
Interest on own capital paid and/or provided
Cash and equivalents at the beginning of the period Cash and equivalents at the end of the period Net decrease in cash and equivalents (Notes 3 (m) and 19(d)) The accompanying notes are an integral part of these financial statements.
88
| Statement of Added Value | In thousands of reais
Six-month period ended December 31 2008 Revenues
2008
Indusval Multistock
Indusval Multistock Consolidated
Years ended December 31
Years ended December 31
2007
2008
2007
385,600
597,498
281,008
614,995
312,714
419,463
640,068
288,197
641,028
288,960
4,969
9,080
5,723
24,439
18,910
(39,104)
(53,236)
(17,722)
(53,236)
(17,722)
272
1,586
4,810
2,764
22,566
Financial intermediation expenses
(277,765)
(390,580)
(143,475)
(387,652)
(142,033)
Inputs acquired from third parties
(19,832)
(34,007)
(34,841)
(41,989)
(43,235)
(7,771)
(14,267)
(11,990)
(16,735)
(13,545)
(11,404)
(17,223)
(20,402)
(21,538)
(25,598)
(657)
(2,517)
(2,449)
(2,716)
(4,092)
88,003
172,911
102,692
186,354
127,446
(829)
(1,600)
(1,184)
(1,651)
(1,238)
87,174
171,311
101,508
184,703
126,208
971
4,192
14,165
307
109
897
4,113
14,154
-
-
74
79
11
307
109
Total added value distributable
88,145
175,503
115,673
185,010
126,317
Distribution of the added value
88,145
175,503
115,673
185,010
126,317
30,345
58,336
45,823
62,824
48,432
24,828
48,166
38,648
51,405
40,508
4,090
7,573
5,432
8,511
6,060
1,427
2,597
1,743
2,908
1,864
24,410
44,384
23,838
49,400
31,871
23,987
43,591
23,363
47,836
30,767
Financial intermediation Services rendered and bank fees Allowance for loan losses Other
Materials, electricity and other Third-party services Other
Gross added value Depreciation Net added value produced by the entity Added value received in transfer Equity in the results Other
Payroll Direct remuneration Benefits Government Severance Indemnity Fund for Employees (FGTS)
Taxes, charges and contributions Federal State Municipal
Interest on third parties' capital Rents
Return on net equity
10
17
23
17
23
413
776
452
1,547
1,081
562
1,010
638
1,013
640
562
1,010
638
1,013
640
32,828
71,773
45,374
71,773
45,374
Interest on own capital
12,880
25,469
15,859
25,469
15,859
Retained earnings/loss for the year
19,948
46,304
29,515
46,304
29,515
The accompanying notes are an integral part of these financial statements.
| Financial Statements
2008
89
| Banco Indusval S.A. (Indusval Multistock) and Banco Indusval S.A. and Subsidiaries (Indusval Multistock Consolidated) | In thousands of reais, unless otherwise indicated Notes to the Financial Statements At December 31, 2008 and 2007
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.
2 Presentation of the Financial Statements The financial statements of Banco Indusval S.A. (Indusval Multistock) and the consolidated financial statements of Banco Indusval S.A. and its subsidiaries (Indusval Multistock Consolidated) have been prepared in accordance with the Brazilian Corporation Law, and the regulations of the Brazilian Central Bank (BACEN) and of the Brazilian Securities Commission (CVM). The preparation of the financial statements require management to use estimates and assumptions in the determination of certain assets, liabilities, income and expenses in accordance with the accounting practices adopted in Brazil. These estimates and assumptions were considered in the measurement of provisions for losses with credit operations and for contingencies, in the determination of the market value of financial instruments and in the selection of useful life of certain assets. Actual results may differ from the estimates and assumptions adopted. The consolidated financial statements comprise the financial statements of Banco Indusval S.A. (Banco Indusval Multistock) and its subsidiaries: Indusval S.A. Corretora de Títulos e Valores Mobiliários (Indusval Multistock Corretora), BIM Promotora de Vendas Ltda. and Fundo de Investimentos em Direitos Creditórios (FIDC) Multisegmentos e Credrealiza Promotora de Vendas Ltda. (in 2007), according to Note 9. 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.
Changes to the Brazilian Corporation Law Law nº 11,638 was enacted on December 28, 2007, amended by the Provisional Measure (MP) nº 449 as of December 4, 2008, amending and introducing new provisions to Brazilian Corporation Law. The main objective of this Law and MP was to update the Brazilian corporate legislation to make possible the process of convergence of the accounting practices adopted in Brazil with those included in the international accounting standards issued by the International Accounting Standards Board – IASB. The application of the Law and MP is mandatory for the annual financial statements for the years beginning on or after January 1, 2008. The changes arising from the Brazilian Corporation Law did not modify the Company’s financial statements. We point out below the accounting practices modified by the new Law: • Permanent assets start to include the subgroup “Intangibles” and formally include the rights referred to assets without physical substance, used for the Company’s maintenance or exercised for that purpose, including the goodwill acquired in connection with consolidated/merged companies. • In property, plant and equipment, the new law includes assets arising from transactions which transfer to the company the benefits, control and risk, regardless of whether there is a transfer of ownership. • Deferred charges are now restricted to pre-operating expenses and incremental restructuring costs.
90
• Changes the parameter for recording associated companies on the equity method of accounting, extending it to all associated companies over which the investor has significant influence, and it is presumed that this occurs when the investment is 20% or more of the voting capital (instead of the total capital). According to BACEN, this alteration will become effective for financial institutions only as from January 1, 2009. • Creates, in shareholders’ equity, the subgroup “Asset Valuation Adjustment”, whose purpose will be to record the contra-entry to the translation adjustments relating to foreign exchange rates changes on corporate investments abroad when the functional currency of the investee is different from the one of the parent company, and the contra-entry of increases or decreases of the amount attributed to asset and liability items, as a result of their evaluation to market value. • Introduces the concept of Adjustment to Present Value for long-term asset and liability transactions and for significant short-term ones. As determined by the explanatory note to CVM Instruction nº 469, the objective of this alteration is not the elimination of the presence of an expectation of earnings or future charges embedded in the monetary assets and liabilities, but the necessity of obtaining the amounts that were representative on the time of the transaction. • Obligation of periodical analysis to check the degree of recovery of the amounts recorded in property, plant and equipment, intangible and deferred charges. Management analyzed it and the amounts recorded at December 31, 2008 in these accounts did not present significant adjustments. • The initial recording of funds obtained from third parties, classifiable as liabilities, must evidence the net amounts received, available for use, and the incremental costs incurred for obtaining them must be recorded as adjustment of the liabilities account. All the financial charges, such as interest, monetary and foreign exchange variations and the incremental funding costs, must be appropriated to the results based on the terms of the transaction, considering the concept of the internal rate of return.
3 Summary of Significant Accounting Practices (a) Determination of the results of operations Income and expenses are recorded on the accrual basis of accounting.
(b) Short-term interbank investments Short-term interbank investments are recorded at cost plus income accrued up to the balance sheet date, net of a provision for losses, when applicable.
(c) Marketable securities and derivative financial instruments Marketable securities are classified 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 shareholders’ equity account, net of tax effects. • Securities held to maturity – securities which management acquires with the intention and financial capacity to hold up to maturity, recorded at acquisition cost plus accrued income with contra entry to results for the period. Derivative financial instruments are classified at the inception of the transaction, taking into consideration the intention of management to use them as hedge instruments or not. The derivative financial instruments used for protection against risk exposure or for modifying the characteristics of financial assets and liabilities, and which are: (i) highly correlated, concerning the changes in their market value with relation to the market value of the item being protected, both at the beginning and throughout the contract duration; and (ii) considered effective in reducing the risk associated to the exposure in question, are classified as hedge according to their nature:
| Financial Statements
2008
91
• Market risk hedge – the financial assets and liabilities subject to hedge and their respective derivative financial instruments are recorded at market value, with the corresponding valuations or devaluations recognized in the statement of income. • Cash flow hedge – the financial assets and liabilities subject to hedge and their respective derivative financial instruments are recorded at market value, with the corresponding valuations or devaluations, net of tax effects, recognized in a specific net equity account called “Adjustment to market value – marketable securities and derivatives”. The non-effective hedge portion is recognized directly in the statement of income. Derivative financial 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.
(d) Loans The loans, in their different categories, are recorded at present value, including income accrued up to the balance sheet date when post fixed, and net of unearned income, calculated based on the terms of the transactions, when prefixed. 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 classified as level “H” are held in this classification for six months, after which they are written off against the existing allowance and controlled, for up to five 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 classified. Renegotiations of loans that had already been written off against the allowance and which were recorded in memorandum accounts, are classified as level “H” and any gains on renegotiation are only recognized when actually received. The 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 specific and overall risks of the portfolios, as well as the rules established by Resolution nº 2,682/99, of December 21, 1999, and in accordance with Circular nº 2,974/00, of March 24, 2000, both of the Brazilian Central Bank. The customer risk ratings are established based on a “credit score” model, with no possibility that the credit committee interferes to improve the rating attributed.
(e) Prepaid expenses Consider the investment of resources, the benefits of which will occur in the following periods.
(f) Investments The investments in subsidiaries are evaluated based on the equity method of accounting. The other investments are stated at cost.
(g) Property and equipment Property and equipment are stated at cost plus price-level restatements up to December 31, 1995 and revaluation of properties for own use (Note 13(d)). Depreciation is computed on the straight-line method at the annual rates of 4% for buildings, 20% for vehicles and data processing systems and 10% for other items.
(h) Interbank and time deposits and funds obtained in the open market These 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.
(i) Borrowings and onlendings Borrowings and onlendings are stated at present value, including the charges incurred up to the balance sheet date and restated at the official exchange rates ruling on the balance sheet date.
92
(j) Share loan contract liabilities Share 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).
(k) Income tax and social contribution (assets and liabilities) Deferred income tax and social contribution on net income, calculated on 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 provision for income tax was calculated at the rate of 15% on taxable income plus an additional 10%. The provision for social contributions was calculated at the rate of 9% up to April 2008 and 15% as from May 2008 of adjusted accounting profit, according to effective legislation. According to the Provisional Measure nº 449/08, the modification in the criterion for recognition of revenue, costs and expenses computed in the calculation of the net income for the year, introduced by Law nº 11,638/07 and articles 36 and 37 of this Provisional Measure, will not have effects for purposes of calculating the taxable income of the corporate entity opting for the Transition Tax Regime (RTT). In this case, for tax purposes, it is necessary to follow the accounting methods and criteria in force at December 31, 2007. For accounting purposes, the tax effects of adopting the Law nº 11,638/07 are recorded in the corresponding deferred assets and liabilities.
(l) Contingent assets and liabilities and legal obligations – taxes and social security contributions The estimation, recognition and disclosure of contingent assets and liabilities and legal obligations are carried out in accordance with the criteria established by Deliberation nº 489 dated October 3, 2005 of the Brazilian Securities Commission (CVM).
(i) Contingent assets and liabilities Refer to potential rights and obligations arising from past events the occurrence of which depends on future events. • Contingent assets – are not recognized except when there are evidences which assure a high degree of confidence on the realization, normally a final and unappealable court decision and the confirmation of recovery capacity through receipt or offset against another liability. • Contingent liabilities – arise basically from civil, labor, and tax lawsuits, which are inherent to the normal course of business, filed at the judicial and administrative levels by third parties, former employees and public bodies and other risks. The evaluation of these contingencies is carried out by legal advisors in a way which is consistent with the conservative practices adopted and takes into consideration the probability that financial resources are required to settle the liabilities and that their amount may be estimated with sufficient safety. Contingencies are classified as probable, for which provisions are recorded; possible, which are disclosed but no provisions are recorded for them; and remote, which do not require provisions or disclosure. The amounts related to these contingencies are measured with the use of adequate models and criteria, despite the inherent uncertainty regarding terms and values.
(ii) Legal liabilities – tax and social security These liabilities are represented by tax liabilities, whose legality or constitutionality is being discussed in court, and which are recorded at the full amount under discussion.
(m) Cash and cash equivalents Cash and cash equivalents are represented by cash in local currency, foreign currency, investments in the open market (except for financed position) and investments in interbank deposits (except for rural Interbank Deposit Certificates (CDI)), whose operations’ maturity at the date of the effective investment was equal to or lower than 90 days, and present an insignificant risk concerning fair value change, which are used by the Bank for managing its short-term commitments (See Note 19(d)).
| Financial Statements
2008
93
Indusval Multistock 2008
Indusval Multistock and Consolidated
2007
2008
2007
Cash
40,101
3,800
40,111
3,809
Short-term interbank investments (cash equivalents)
51,807
38,303
51,807
38,303
-
49,979
-
49,979
91,908
92,082
91,918
92,091
Marketable securities (cash equivalents)
4. Short-term Interbank Investments Indusval Multistock and Consolidated 2008 Investments in the open market
2007
19,802
212,941
-
-
LFT
17,802
6,499
LTN
2,000
1,220
Call position
Financed position
-
-
LTN
-
205,222
48,792
45,840
Unrelated CDI
29,837
29,155
Rural CDI
18,955
16,685
Investments in interbank deposits
Investments in foreign currency
2,169
1,429
70,763
260,210
The maturity term of short-term interbank investments is less than 90 days (except for rural CDI).
5 Marketable Securities and Derivative Financial Instruments (a) Valuation, classification and risk management The valuations of fixed income securities, as well as of derivative financial 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. The portfolio of share loan contracts (Note 3(j)) 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 prefixed rates, whose results are recognized over the term of the transaction.
(b) Marketable securities (i) Indusval Multistock 2008
Cost value
Market/ book value
Maturity (days)
Financial Treasury Bills (LFTs)
20,830
20,830
Up to 360
-
12,158
Financial Treasury Bills (LFTs)
96,117
96,106
Over 360
(11)
215,613
National Treasury Bills (LTNs)
184,062
184,086
Up to 360
24
393,877
109
109
At sight
-
100
1,002
1,002
At sight
-
-
21,620
21,620
At sight
-
-
2
1
At sight
(1)
-
323,742
323,754
-
12
621,748
Trading securities
Quotas in investment funds Funcine Quotas in investment funds (FIDC) (senior quotas) Quotas in investment funds (FIDC) (subordinated quotas) Variable income securities
94
Adjustment to market
2007 Market/ book value
(ii) Indusval Multistock Consolidated 2008
Cost value
Trading securities
Market/ book value
Maturity (days)
Adjustment to market
2007 Market/ book value
Financial Treasury Bills (LFTs)
26,802
26,804
Up to 360
2
12,158
Financial Treasury Bills (LFTs)
101,234
101,223
Over 360
(11)
227,995
National Treasury Bills (LTNs)
184,062
184,086
Up to 360
24
393,877
109
109
At sight
-
105
Senior quotas FIDC
1,002
1,002
At sight
-
-
Quotas in investment funds
1,165
1,165
At sight
-
-
Bank Credit Notes (CCBs)
-
-
Up to 360
-
2,758
Bank Credit Notes (CCBs)
-
Over 360
-
11,136
Variable income securities
2
1
At sight
(1)
-
37
37
Up to 360
-
-
69
69
Over 360
-
132
314,482
314,496
-
14
648,161
Quotas in investment funds – Funcine
Securities held to maturity Agricultural Debt Securities (TDAs) Agricultural Debt Securities (TDAs)
(c) Derivative financial instruments Banco Indusval operates with derivative financial instruments, according to its risk management policy, with the objective of hedging the market risks and cash flow risks, mitigating the risks mainly resulting from the fluctuation of interest and foreign exchange rates. The used derivative instruments seek to meet its needs for managing its global exposure and to meet its clients’ needs, to hedge their exposure. Treasury adopts an essentially passive attitude and normally does not enter into speculative transactions. The transactions with derivatives include – interest rate swaps, currency swaps, cash flow swaps, futures, forward and options. Derivative financial instruments are presented in the consolidated balance sheet at market value, usually based on price quotations or market price quotations for assets or liabilities with similar characteristics. In case they are not available, the market values are based on pricing models, discounted cash flow and market operators’ quotations. The contracts of derivative financial instruments traded are registered at the Stock Exchange, Commodities and Futures (BM&F BOVESPA) or at the Central System for Custody and Financial Settlement of Securities (CETIP). The determination of these transactions is carried out with the use of available information disclosed by BM&FBOVESPA or by external providers (brokerage firms, banks and other). The Risk Management Area treats the pricing of all derivative financial instruments, using both the mark-to-market (MtM) parameters and the operation (curve value) parameters. The market parameters are daily updated in the process of pricing the instruments to market value, as well as the forward structures of interest rates for all the Brazilian indexes. The mark-to-market models determine the values of the derivative instruments according to the current market conditions for all the indexes, as well as for all the sovereign debt securities and Eurobonds of Brazilian companies, duration (average term) of the portfolio and of the groups of analysis.
| Financial Statements
2008
95
(i) Position 2008 Indusval Multistock and Consolidated Asset position
Liability position
Maturity (days)
Interest rate
1,977
136,058
Up to 360
Interest rate
1,301
47,574
Over 360
11,011
8,832
Up to 360
1,967
9,748
Up to 360
Futures market
Forward market Shares
Option market Shares
Swap Currencies
615
465
Up to 360
Currencies
3,455
1,307
Over de 360
2007 Indusval Multistock and Consolidated Asset position
Liability position
Maturity (days)
42,991
223,299
Up to 360
490
7,829
Up to 360
3,759
-
Up to 360
370
9,412
Up to 360
43
-
Up to 360
Currencies
14,723
-
Up to 360
Currencies
287
3
Over de 360
Futures market Interest rate Currencies
Forward market Currencies
Option market Shares Currencies
Swap
(ii) Position of contracts 2008 Indusval Multistock and Consolidated Swap U.S. dollar x DI
Assets
Liabilities
Value of contracts recorded
Result
4,070
1,772
149,951
5,211
1,256
-
3,500
-
DI x US dollar
-
894
3,636
-
IPCA x DI
6
-
1,000
-
46
10
50,920
-
2,762
-
17,631
-
DI pre x DI post Euro x DI
-
868
73,264
-
Forward
Swap – cash flow (*)
11,011
8,832
11,011
2,352
Shares
11,011
8,832
11,011
-
Futures
-
-
186,910
13,245
-
-
186,910
-
1,967
9,748
66,265
(5,072)
Interest rate
Options Shares (*) U.S. dollar (+) LIBOR x DI. National Consumer Price Index (IPCA). Interbank Deposits (DI).
96
1,967
9,748
66,265
-
17,048
20,352
414,137
15,736
2007 Indusval Multistock and Consolidated Assets
Liabilities
Value of contracts recorded
Result
429
21
15,010
402
U.S. dollar x DI
267
18
7,249
-
DI x US dollar
162
3
7,761
-
Forward
67
58
3,759
739
NDF
67
58
Swap
3,759
Futures
274,609
(1,524)
Interest rate
-
-
266,291
-
U.S. dollar
-
-
3,579
-
Mini – U.S. dollar
-
-
340
-
Euro
-
-
4,399
-
Options
413
9,412
92,900
(2,289)
Shares
370
9,412
92,400
-
Currencies
43
-
500
-
909
9,491
386,278
(2,672)
(iii) Guarantees 2008 Indusval Multistock and Consolidated Clearing of derivatives Marketable securities Sureties
Clearing of equities
Total
-
6,795
6,795
7,000
14,000
21,000
7,000
20,795
27,795
(iv) Sensitivity analysis Below we present the “sensitivity analysis chart”, which shows the derivative financial instruments, the selected risks and the defined contexts. We used the definition of three contexts: • Probable situation – referenced by an independent external source (ex.: prices of futures contracts negotiated on stock exchanges and/or commodities and futures exchanges). • Situation with impairment of at least 25% (twenty-five percent) in the risk variable considered. • Situation with impairment of at least 50% (fifty percent) in the risk variable considered. Risk Probable situation
Impairment of 25%
Impairment of 50%
Future (i) DI Sold
Low of CDI
(727)
(2,474)
(5,164)
Low of CDI
2
(131)
(260)
Swap DI x US$ (ii) US$ x DI (ii)
Low of US$
382
(1,318)
(2,635)
Euro x DI (iii)
Low of Euro
2,460
(5,289)
(10,578)
Low of US$ and LIBOR
(1,643)
(1,838)
(2,034)
-
(1,103)
(1,220)
Cash flow hedge (iv) Derivative Effect on stockholds' equity
| Financial Statements
2008
97
(i) DI – futures – all the transactions with interbank deposits (DI) – futures are used for mitigating the interest rate variations in asset and liability transactions of Banco Indusval (economic hedge). The sensitivity analysis considered the forward structure defined by the BM&F BOVESPA at December 31, 2008. The DIs of one day were used for the “pre-fixed yield” curve. The contexts used for the sensitivity analysis consider this curve with a decrease and increase by 25% and a curve with a decrease and increase by 50%. In addition, for the probable situation context we defined rates of 12% for the contracts DI1 which mature between January 2009 and January 2010. For the DI1 contracts which mature between April 2010 and January 2012, a rate of 11.00% was used. Finally, the impact analysis considers the difference between the value of the contracts at December 31, 2008 and the present value of the DI1 with curves modified according to the stipulated stress context. (ii) Swap DI x US$ and US$ x DI – all the transactions of this type are matched with opposed operations related to clients of Banco Indusval; the net effects of these swaps will have inverse results, and only the spreads of transactions will remain. The sensitivity analysis considers the curves with decrease and increase by 25% and curves with decrease and increase by 50% with relation to the curve DI x U.S. dollar disclosed by the BM&F BOVESPA at December 31, 2008. The sensitivity analysis considers the BM&F BOVESPA’s quotations of the U.S. dollar at the maturity date of each contract at December 31, 2008. The remaining contexts considered the variations of decrease and increase by 25%, as well as decrease and increase by 50% with relation to the U.S. dollar at December 31, 2008. (iii) Swap Euro x DI – this aims to neutralize the exposure in euros in foreign borrowing transactions. The sensitivity analysis considers the BM&F BOVESPA’s quotations of the euro at the maturity date of the contract. The remaining contexts considered the variations of decrease and increase by 25%, as well as decrease and increase by 50% with relation to the euro at December 31, 2008. (iv) Cash flow swap – at December 31, 2008, a derivative financial instrument was used as cash flow hedge, adjusted to market value and associated with the variation of the U.S. dollar (+) LIBOR x DI, represented by a swap transaction of R$73,264 (notional). At December 31, 2008, this contract presented a loss, net of tax effects, in the amount of R$1,163 recorded in the account “Adjustment to market value – marketable securities and derivatives”. The effectiveness computed for the hedge portfolio at December 31, 2008, was in conformity with the standard established by the Brazilian Central Bank, and no ineffective portion to be accounted for during the year was identified. The sensitivity analysis of LIBOR swap considers the curves with decrease by 25% and 50% with relation to the LIBOR curve disclosed by the BM&F at December 31, 2008 for the installments falling due. Besides the aforesaid instruments, Banco Indusval operates with options and forward. These derivative financial instruments are used in transactions structured with prefixed rates, for funding purposes.
6 Loans – Indusval Multistock and Indusval Multistock Consolidated (a) Analysis of the loan portfolio by type of operation and allowance for loan losses 2008 AA
A
B
C
D
E
F
G
H
Levels Total
Loans and discounted bills
-
295,474
298,404
400,890
18,443
19,752
3,885
3,359
11,429
1,051,636
Foreign currency financing
-
5,100
17,927
201
-
-
-
-
-
23,228
42,265
50,640
52,378
14,639
-
-
-
-
-
159,922
CDC – vehicles
-
37,629
4,288
5,219
3,024
1,822
1,025
642
220
53,869
Other financing
-
739
-
-
-
-
-
-
-
739
42,265 389,582 372,997 420,949 - 88,174 101,888 42,897 74 42,265 477,830 474,885 463,846 - 12,892 13,118 54,892 - 84,340 17,224 4,060
21,467 3,128 24,595 602
21,574 9,098 30,672 -
4,910 4,910 -
4,001 464 4,465 -
11,649 677 112 12,438 -
1,289,394 246,326 186 1,535,906 80,902 106,226
42,265 575,062 505,227 522,798
25,197
30,672
4,910
4,465
12,438
1,723,034
53,467 8,065 9,170 42,265 628,529 513,292 531,968
4 25,201
30,672
4,910
4,465
12,438
70,706 1,793,740
Operations
BNDES/FINAME
Total loan operations Advances on foreign exchange contracts Other credits – sundry (Note 8) Total credits Assignments with co-obligations FIDC Total credits including assignments with co-obligations Guarantees provided (Note 19(a)) Total portfolio Allowance for loan losses
-
2,389
4,749
13,915
2,460
9,203
2,455
3,125
12,438
50,734
Provision for credits assigned with co-obligation
-
485
303
1,769
61
-
-
-
-
2,618
-
2,874
5,052
15,684
2,521
9,203
2,455
3,125
12,438
275 16,691 70,318
Supplementary provision (vehicles) Supplementary provision (other) Total provision
98
2007 Levels A
B
C
D
E
F
G
H
Total
452,258
232,564
284,845
24,916
4,952
1,757
1,021
7,219
1,009,532
Foreign currency financing
8,589
6,116
225
-
-
-
-
-
14,930
Other financing
4,693
-
-
-
-
-
-
-
4,693
465,540 238,680 285,070
Operations
AA
Loans and discounted bills
Total loan operations
24,916
4,952
1,757
1,021
7,219
1,029,155
69,433
133,182
19,056
3,987
-
-
-
-
225,658
288
35
-
-
15
-
5
-
343
535,261 371,897 304,126
Advances on foreign exchange contracts Other credits – sundry (Note 8) Total credits
28,903
4,967
1,757
1,026
7,219
1,255,156
10,557
-
-
-
-
-
73,875
592,413 378,063 314,683
28,903
4,967
1,757
1,026
7,219
1,329,021
2,890
1,490
879
718
7,219
28,715
Guarantees provided (Note 19(a))
57,152
Total portfolio
2,676
Allowance for loan losses
6,166
3,719
9,124
During the year, the charge for the allowance for loan losses amounted to R$53,236 (R$17,722 in 2007). The amount of loans written off against the allowance for loan losses was R$11,497 (R$5,359 in 2007), and the amount of loans recovered was R$2,692 (R$1,454 in 2007). At December 31, 2008, the portfolio of renegotiated loans amounted to R$9,013 (R$11,790 in 2007). The results obtained from loans assigned with substantial retention of risks are recorded in the statement of income under “Income from financial intermediation – loans”. At December 31, 2008, the balance of contracts assigned with substantial retention of risks was R$80,902. For these loans an allowance for loan losses was recorded in the amount of R$1,842. During the year ended December 31, 2008, loans subject to loan transactions were assigned to FIDC Multisegmentos, in the amount of R$106,226. The loans were assigned at their book value, not having any effect on the statement of income. For these loans an allowance for loan losses was recorded in the amount of R$776. The income computed in these transactions for the year ended December 31, 2008 was R$7,072.
(b) Analysis of loan operations by business sector 2008
2007
Industry
900,161
661,132
Commerce
209,318
142,149
4,908
3,600
Other services
490,918
384,435
Individuals
117,729
63,840
1,723,034
1,255,156
Financial intermediaries
(c) Analysis of loan operations by index 2008 Prefixed rate Post-fixed rate (Interbank Deposit Certificate (CDI) Referential rate (TR)/Basic Financial Rate (TBF) Other
| Financial Statements
2008
2007
355,361
338,132
1,213,310
916,624
110
146
154,253
254
1,723,034
1,255,156
99
(d) Analysis of loan operations by maturity 2008
2007
Overdue From 15 to 60 days
81,476
16,554
From 61 to 180 days
19,314
8,505
4,875
2,097
105,665
27,156
Up to 90 days
631,689
547,681
From 91 to 180 days
257,768
205,242
From 181 to 360 days
292,220
195,635
Over 360 days
435,692
279,442
1,617,369
1,228,000
1,723,034
1,255,156
Over 180 days
Not yet due
(e) Concentration of loans 2008 Percentage
Accumulated percentage
Clients
Amount
10 largest clients
375,575
21,8
21,8
11 to 60 largest clients
529,526
30,73
52,53
61 to 160 largest clients
393,209
22,82
75,35
Other
424,724
24,65
100,00
1,723,034
-
-
2007 Clients
Amount
Percentage
Accumulated percentage
10 largest clients
295,142
23,52
23,52
11 to 60 largest clients
363,166
28,93
52,45
61 to 160 largest clients
294,870
23,49
75,94
Other
301,978
24,06
100,00
1,255,156
-
-
(f) Analysis of loans classified as “D to H” Among the transactions classified as “D to H”, only a portion would also be classified as abnormal course credit (overdue for over 60 days). The other transactions received these classifications 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. 2008 Level Normal course Abnormal course
D
E
F
G
H
Total
16,254
11,687
8,943
18,985
-
108
2,472
30,521
4,910
4,357
9,966
47,161
25,197
30,672
4,910
4,465
12,438
77,682
D
E
F
G
H
Total
20,103
4,461
8,800
506
48
45
1,807
26,464
1,709
981
5,412
17,408
28,903
4,967
1,757
1,026
7,219
43,872
2007 Level Normal course Abnormal course
100
(g) Loans operations by segment Indusval Multistock and Consolidated Percentage of portfolio
2008 Middle Market In reais – loans and discounts
2007
Percentage of portfolio
1,642,090
9,530
1,233,197
98,25
1,212,614
70,38
992,609
79,08
In reais – BNDES/FINAME
159,922
9,28
-
-
In foreign currency
269,554
15,64
240,588
19,17
Retail
53,868
3,13
-
-
Credits acquired
26,890
1,56
21,959
1,75
186
0,01
-
-
1,723,034
-
1,255,156
-
Other
(h) Loans – balances and term – average 2008
Middle Market
Average Average balance balance per client per contract
Total amount
Number of clients
Number of contracts
Average term (*)
59,541
226
243
263
245
138
1,135,101
666
1,211
1,686
927
412
Loans and discounted bills Secured account Loans Discounted bills BNDES/FINAME ACC/ACE/FINIMP
17,972
66
332
272
54
103
159,922
43
168
3,719
952
607
269,554
112
342
2,407
788
199
1,642,090
-
-
-
-
-
53,869
5,433
5,433
10
10
620
Retail CDC – Vehicles
2007 Average Average balance balance per client per contract
Total amount
Number of clients
Number of contracts
Secured account
229,292
440
519
521
442
141
Loans
709,251
463
746
1,532
951
516
54,066
90
709
601
76
71
240,588
133
467
1,809
515
161
1,233,197
-
-
-
-
-
Middle Market
Average term (*)
Loans and discounted bills
Discounted bills ACC/ACE/FINIMP
. Advances against exchange contracts (ACC), Advances against export contracts (ACE), Import Financing (FINIMP). (*) Considers the contracted term of the transactions.
(i) Middle market transactions – guarantees 2008
Transactions Secured account Loans Discounts BNDES/FINAME ACC/ACE/FINIMP
Guaranteed Total by transactions receivables
Monitored lien/ warrants and CPRS
Other types of lien
Lien on properties
Lien on Securities/ vehicles shares/CDBs
Total guarantees
59,541
29,372
8,254
2,403
610
2,446
602
43,687
1,135,101
624,314
109,167
51,434
83,982
25,126
104,111
998,134
17,972
17,972
-
159,922
34,365
-
54,128
-
-
17,972
66,263
-
154,756
269,554
68,045
61,692
-
-
-
33,464
163,201
1,642,090
774,068
179,113
107,965
84,592
93,835
138,177
1,377,750
-
47.14
10.91
6.57
5.15
5.71
8.41
83.9
Percentage
| Financial Statements
2008
101
2007
Transactions
Guaranteed Total by transactions receivables
Monitored lien/ warrants and CPRS
Other types Lien on of lien properties
Lien on vehicles
Securities/ shares/ CDBs
Total Other guarantees
Current accounts
229,292
157,957
48,470
-
1,000
-
1,693
-
209,120
Loans
709,251
560,462
57,834
2,700
41,827
15,601
2,190
350
680,964
54,066
54,066
-
-
-
-
-
-
54,066
240,588
67,622
133,384
-
-
-
30,722
-
231,728
1,233,197
840,107
239,688
2,700
42,827
15,601
34,605
350
1,175,878
-
68.12
19.44
0.22
3.47
1.27
2.81
0.03
95.36
Discounts ACC/ACE/FINIMP Percentage
7 Foreign Exchange Portfolio Indusval Multistock and Consolidated 2008
2007
Assets Exchange purchases pending settlement Rights on sales of exchange Advances in local currency Other
331,616
226,425
2,370
6,478
(2,000)
(2,481)
14,518
5,558
346,504
235,980
2,309
6,490
Liabilities Exchange sales pending settlement Liabilities for purchases of exchange Advances on foreign exchange contracts Other
248,688
236,203
(232,127)
(220,100)
418
115
19,288
22,708
8 Other Receivables – Sundry Indusval Multistock 2008 Tax credits (Note 11(c)) Debtors for purchase of assets
31,878
2007 11,731
Indusval Multistock and Consolidated 2008 31,878
2007 11,731
186
343
186
343
9,158
6,915
10,724
7,487
Taxes and contributions for offset
12,887
7,012
13,947
8,249
Sundry debtors - local and other
1,393
699
1,398
713
Debtors for deposits in guarantee (*)
55,502
26,700
58,133
28,523
Current
14,320
7,858
15,384
9,108
Long-term
41,182
18,842
42,749
19,415
(*) Refer to judicial deposits in guarantee to several suits, the most significant amount of which is related to Claim on Equality of the Social Contribution - R$ 6,811.
102
9 Permanent Assets (a) Investments in subsidiaries – Indusval Multistock 2008
Indusval Multistock Corretora
BIM Promotora de Vendas
Total
Capital
22,103
500
-
Shares/quotas owned (units)
832
500
-
28,232
281
-
782
115
-
Year 2008
4,330
(217)
-
Year 2007
13,310
(2)
-
Interest at December 31, 2008 – %
100
100
-
Interest at December 31, 2007 – %
100
100
-
782
115
897
Year 2008
4,330
(217)
4,113
Year 2007
14,156
(2)
14,154
Shareholders' equity Net income Second six-month period 2008
Equity in the earnings (loss) Second six-month period 2008
Investment December 31, 2008
28,232
281
28,513
December 31, 2007
23,902
498
24,400
In 2007, the difference between net income and equity in the result refers to the restatement of membership certificates of the Brokerage in the amount of R$846. On January 31, 2007, the Bank sold 100% of the quotas that comprise the capital of CredRealiza Promotora de Vendas Ltda. for R$ 988, obtaining a gain of R$400. On October 26, 2007, Indusval S.A. C.T.V.M. sold a part of its equity holding at BOVESPA Holding S.A., computing income of R$9,095, which was recorded as other non-operating income in the Consolidated. On December 11, 2007, the Bank paid up the Capital of BIM Promotora de Vendas Ltda., in the amount of R$500.
(b) Other investments – Indusval Multistock Consolidated 2008
2007
Other investments Shares of Brazilian Commodities, Futures and Stocks Exchange – BM&F BOVESPA S.A.
1,410
1,109
Other (*)
1,536
1,898
2,946
3,007
(*) Refer substantially to works of art and sundry securities.
| Financial Statements
2008
103
10 Deposits, Funds Raised and Onlendings (a) Opening of deposits, funds raised and onlendings by maturity – Indusval Multistock Consolidated 2008 Terms (days) At sight
Up to 90
From 91 to 180
From 181 to 360
Over 360
Total
Demand
44,187
-
-
-
-
44,187
Interbank
-
95,545
9,592
53,590
-
158,727
Time
-
224,606
45,846
58,766
269,042
598,260
Deposits and funds raised
1,240
-
-
-
-
1,240
45,427
320,151
55,438
112,356
269,042
802,414
Funds from acceptance and issue of securities (agribusiness credit notes – LCA)
-
8,047
9,738
1,470
3,266
22,521
Local borrowings
-
85,678
42,483
-
-
128,161
Foreign borrowings
-
301,403
43,731
9,668
132,551
487,353
Other Total deposits
Local onlendings
-
9,710
22,459
69,890
57,564
159,623
45,427
724,989
173,849
193,384
462,423
1,600,072
2007 Terms (days) Deposits and funds raised
At sight
Up to 90
From 91 to 180
From 181 to 360
Over 360
Total
Demand
78,021
-
-
-
-
78,021
Interbank
-
45,159
12,954
10,495
-
68,608
Time Other Total deposits
-
310,502
66,415
75,453
209,050
661,420
2,345
-
-
-
-
2,345
80,366
355,661
79,369
85,948
209,050
810,394
117,361
84,057
28,312
-
229,730
473,022
163,426
114,260
209,050
1,040,124
Foreign borrowings 80,366
(b) Analysis by major term clients – time deposits
Clients
Amount
Percentage
10 largest clients
266,316
44,52
2008 Accumulated percentage 44,52
11 to 60 largest clients
194,449
32,5
77,02
61 to 160 largest clients
100,742
16,84
93,86
Other
36,753
6,14
100,00
Total operations
598,260
-
-
Clients
Amount
Percentage
2007 Accumulated percentage
10 largest clients
185,474
28,04
28,04
11 to 60 largest clients
252,859
38,23
66,27
61 to 160 largest clients
142,554
21,55
87,82
80,533
12,18
100,00
661,420
-
-
Other Total operations
104
(c) Funds raised in the open market Indusval Multistock and Consolidated Own portfolio
2008
2007
Financial Treasury Bills (LFTs)
2,742
161,932
National Treasury Bills (LTNs)
-
289,594
-
205,086
2,742
656,612
Third party portfolio National Treasury Bills (LTNs)
11 Income Tax and Social Contribution – Indusval Multistock (a) Calculation of the expense for the period 2008 Profit before income tax and social contribution and after profit sharing Income tax and social contribution at the current rates – 40%
94,710
54,816
(37,884)
(18,636)
-
-
Effect of additions and deductions in the calculation of the taxes Equity in the results of subsidiaries Interest on own capital paid Effect of temporary additions and deductions (*) Effect of the increase of 6% of the social contribution rate as from May 2008 Other amounts Income tax and social contribution expense for the year
2007
1,645
4,812
10,188
5,392
(18,133)
(5,141)
1,849
-
(1,071)
(1,006)
(43,406)
(14,579)
(*) This basically refers to temporary additions of expenses with provision for loan losses.
(b) Changes in tax credit 2008 Opening balance
11,731
2007 7,170
Appropriation/(write-off)
20,147
4,561
Total tax credits
31,878
11,731
Deferred tax liabilities (Note 12(c)) Tax credits net of deferred tax liabilities
Percentage of shareholders' equity
(883)
(789)
30,995
10,942
6.91
2.69
2010
2012
(c) Estimate for the realization of tax credits Balance at December 31, 2008 Allowance for loan losses Provision for contingencies Other
| Financial Statements
2008
2009
28,075
28,075
-
-
2,811
-
1,743
1,068
992
992
-
-
31,878
29,067
1,743
1,068
105
(d) Estimates of realization The Bank’s management, based on a technical study which considers the maintenance of the historic profitability 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$31,251.
12 Other Liabilities (a) Negotiation and intermediation of securities Indusval Multistock
Creditors - pending settlement account Clearing houses for the custody and settlement of securities
2008
2007
154
29
Indusval Multistock and Consolidated 2008
2007
8,055
9,015
-
-
147
6,520
37,919
-
37,919
-
Transactions with financial assets to be settled
-
-
3,519
457
Other
-
-
698
-
38,073
29
50,338
15,155
Creditors for share loans
(b) Provision for contingent liabilities In the normal course of its activities, the Bank is involved in the following contingencies: (i) Contingent assets – no contingent assets were recognized and there are no relevant lawsuits classified as of probable realization. (ii) Contingent liabilities: • Contingencies classified as probable – there were no relevant contingencies classified as probable at December 31, 2008. • Contingencies classified as possible – management maintains a monitoring system for all judicial and administrative lawsuits in which the Bank is a party as “plaintiff” or “defendant” and, supported by the opinion of its legal advisors, classifies the lawsuits in accordance with loss estimates. Therefore, the contingent lawsuits classified as of possible risk of loss are not recognized in the books and comprise, mainly, the following matters: • Statement of Corporate Income Tax (IRPJ) credit compensation in the amount of R$3,262, arising from overpayments resulting from the effects of the recalculation of the waiver of action on Law no. 8200. • Services Tax (ISS) levied on income from the trading of marketable securities in the Commodity Exchange, in the amount of R$ 2,843 (action distributed in 1988). • Voluntary disclosure involving interest on arrears of IRPJ, Social Contribution on Net Income (CSLL), Social Integration Program (PIS) and Social Contribution on Revenues (COFINS), in the amount of R$1,705.
106
(c) Tax and social security – legal liabilities 2008 Indusval Consolidated Multistock
2007 Indusval Consolidated Multistock
Taxes and contrib. on profits
43,449
45,879
14,617
20,847
Taxes and contrib. payable
4,916
5,078
3,139
3,353
883
883
788
788
10,184
11,178
7,587
8,548
Deferred taxes and contributions Legal liabilities (*)
59,432
63,018
26,131
33,536
Current
48,365
50,957
17,756
24,200
Long-term receivables
11,067
12,061
8,375
9,336
The change in legal liabilities for the year may be summarized as follows: 2008 Indusval Multistock and Consolidated Opening balance at December 31, 2007 Change in the period reflected in the result Restatement/charges
8,548 2,076
Increase
554
Closing balance at December 31, 2008
11,178
The main matters are as follows: • CSLL – R$6,811: questioning of CSLL required from financial institutions in the base years from 1995 to 1998 at rates above those applied to corporate entities in general, in violation of the constitutional principle of equality, a portion of the amounts involved is deposited in courts. • Plano Verão (Summer Plan) – R$3,506: questioning of the index applied for the Balance Sheet Monetary Restatement related to the Consumer Price Index of 1989. • ISS – Complementary Law no. 116/03 – R$861: questioning of the incidence of the mentioned tax on the means, instruments and stages of financial transactions carried out by the Bank.
13 Shareholders’ Equity (a) Capital Fully subscribed and paid-up capital comprises 43,000,001 shares of which 27,000,000 are common shares and 16,000,001 preferred shares with no par value. On March 30, 2007, Banco Indusval increased the capital of Indusval Corretora by R$11,093 through the capitalization of reserves (membership certificate restatement reserve and tax incentive reserve). Still on the same date, the Bank decreased the capital of Indusval Corretora with the reversal of membership certificates, in the amount of R$16,774, to its only shareholder, the Bank, which also had its capital decreased by the same amount, with reversal of membership certificates of BOVESPA and BM&F (received due to the decrease in capital of Indusval Corretora) to its individual shareholders. Considering that the possession of membership certificates is necessary for the continuity of the business and operations of Indusval Corretora, the individuals who received such certificates due to the Bank’s decrease in capital, delivered the mentioned certificates to the Corretora through an installment purchase and sale transaction of the same amount of the capital decrease, with a resolutive clause, i.e., in case of demutualization of the exchanges, the transaction would be terminated and, consequently, the membership certificates would be returned to the individuals. These changes were approved by the Brazilian Central Bank on July 5, 2007.
| Financial Statements
2008
107
Due to the demutualization of the São Paulo Stock Exchange (BOVESPA) on August 28, 2007 and of the Futures and Commodities Exchange (BM&F) on September 20, 2007, the operation of purchase and sale of membership certificates carried out on March 30, 2007, in the amount of R$16,774 was terminated, with the consequent return of the membership certificates to the individuals. Such fact generated the reversal of the membership certificates restatement, allocated to capital reserves, as well as the restatement expense of the Liabilities for acquisition of assets and rights, in the amount of R$1,025 in Indusval Corretora. The Extraordinary General Meeting (AGE), held on April 30, 2007, approved: (i) the cancellation of 1,591,779 preferred shares held in treasury (total shares held in treasury); (ii) the company capital increase with no issue of new shares through the capitalization of the special revenue reserve in the amount of R$36,846, with the company capital increased to R$143,483. The Extraordinary General Meeting (AGE) held on May 3, 2007, approved: (i) the conversion of 12,306,517 preferred shares of the company into common shares, in the proportion of a new common share to each preferred share existent; (ii) the split of total common shares, in the proportion of 1,0468423936 new shares for each common share presently existent, so that the capital is divided into 30,000,000 common nominative shares, with no par value; (iii) convert 3,000,000 common shares into preferred shares, so that the capital is divided into 27,000,000 common shares and 3,000,000 preferred, nominative shares, with no par value. The Extraordinary General Meeting (AGE), held on June 22, 2007, approved: (i) a public offer of primary and secondary distribution of preferred shares of the Bank; (ii) the Bank capital increase, through the issue of nominative preferred book shares, in the context of the public offer; (iii) the listing of the Bank and negotiation of preferred shares issued in level 1 of differentiated practices of Corporate Governance of the São Paulo Stock Exchange (BOVESPA). The Board of Directors Meeting held on July 10, 2007, approved: (i) the Bank issue of 13,000,001 nominative preferred shares with no par value, in the capital increase within the context of the Public offer; (ii) the issue price of the shares at R$17,50, per preferred share, and the capital increase in the amount of R$227,500. On July 16, 2007, all the 13,000,001 nominative preferred shares issued in the Bank capital increase were fully subscribed and paid-up in local currency, in the scope of the Public Offer of primary distribution of shares. This capital increase was approved by the Brazilian Central Bank (BACEN) on July 20, 2007. Due to this capital increase, the Bank capital is R$370,983, divided into 27,000,000 common shares and 16,000,001 preferred shares.
(b) Dividends and interest on own capital The by-laws provide for the distribution of a minimum annual dividend of 25% of net income adjusted in accordance with article 202 of Law nº 6404/76. During the year 2008, a distribution of interest on own capital of R$25,469 (R$15,859 in 2007) 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 financial expense. The tax benefit arising from this distribution was R$10,188 (R$5,392 in 2007).
108
(c) Revenue reserves At the Extraordinary General meeting held on September 12, 2007, the shareholders approved the new writing of the Institution ByLaws, permitting the destination of part of annual Net Income for the following reserves: Reserve for Working Capital Reinforcement and Reserve for Equalization of Dividends. The Reserve for Equalization of Dividends will be limited to 40% of the capital amount with the purpose of guaranteeing resources for the payment of dividends, including as interest on own capital or its anticipation, aiming at maintaining the flow of remuneration to the shareholders, with resources: (i) equivalent to up to 50% of net income for the year, adjusted as set forth in article 202 of Corporate Law; (ii) equivalent to up to 100% of the realized portion of Revaluation Reserve, recorded as retained earnings; (iii) equivalent to up to 100% of prior year adjustments, recorded as retained earnings; (iv) arising from the credit corresponding to anticipation of dividends. The Reserve for Working Capital Reinforce will be limited to 30% of the capital with the purpose of guaranteeing the financial means for the company operation, formed with resources equivalent to up to 20% of net income for the year, adjusted as set forth article 202 of Corporate Law.
(d) Revaluation reserve The Bank carried out a revaluation of properties in use in the first half of 2005 (properties in use), based on an appraisal report issued by qualified experts, approved by the shareholders in an Extraordinary General Meeting. The revaluation reserve, own and of associated companies, based on depreciation and disposal or sale of the respective revalued assets, is transferred to retained earnings, also taking into consideration the tax effects of the provisions constituted. The realized reserve for 2008 was R$69,00. Reserve balance is R$2,062.
(e) Retained revenue reserve The Extraordinary General Meeting of June 12, 2007 approved the rectification of the prior deliberation of the Ordinary General Meeting of April 30, 2007 which approved the appropriation of the results for the year 2006, of which R$12,356 were transferred to the profit reserve. This balance should have been transferred to the retained revenue reserve. This appropriation was approved by BACEN on July 5, 2007 (Note 13(a)).
14 Benefits to Employees (a) Private Pension Plan Banco Indusval S.A. and its subsidiaries offer their employees a supplementary pension plan with defined contribution, managed by a closed entity. The program started in September 2008, and it is sponsored by the Bank and its subsidiaries and employees. During the year ended December 31, 2008, the contributions totaled R$165,00 in Banco Indusval and R$169,00 in the Consolidated.
(b) Stock Option Plan The Extraordinary General Meeting held on March 26, 2008, approved the Regulation of the Stock Option Plan to managers and manager level employees of the company. The Stock Option Plan of Banco Indusval S.A. aims to align the commitment of the executives with long-term results and reward the high performance, besides being an instrument to attract, retain and motivate talents, through the granting of stock options (“Simple options”). This plan is managed by the Committee of Compensation and Benefits, observing the Plan’s terms and conditions, as well as the guidelines stipulated by the Company’s Board of Directors. The Committee will create, on a semiannual basis, a Stock Option Program, which must be submitted to the Board of Directors’ approval. The Plan will be limited to a maximum number of options resulting in a dilution of up to 1.25% of the Bank’s capital at each anniversary of the Plan, considering a limit of 5% of the capital at any time. The options may be exercised by the Participant within the term fixed by the Committee for each Program, the maximum total term of exercise will be five years, from the date of grant of the options of each Program (“Option term”).
| Financial Statements
2008
109
On July 22, 2008, the Stock Option Program for the Second Half of 2008 was established, distributing 161,896 options for the purchase of shares issued by Banco Indusval S.A., and the grant was ratified by the Board of Directors in a meeting held on August 12, 2008. This Program may represent a dilution of up to 0.3765% of the Company’s capital. The right to exercise the option will be acquired at the following proportions: up to 33.33% as from July 22, 2009, up to 66.66% as from July 22, 2010 and up to 100% as from July 22, 2011. For payment purposes, 162,000 shares were acquired according to the Share Repurchase Plan discussed by the Company’s Board of Directors in a meeting held on May 13, 2008, and a Significant Event Notice in this regard was disclosed to the market on May 14, 2008. The shares acquired are accounted for as “Treasury shares”. No option was canceled or exercised for the year ended December 31, 2008. During the year ended December 31, 2008, the amount of R$175,00 was recorded as expenses with benefits in respect of the Stock Option program. This referred to the appropriation of benefits related to the Plan of Payment Based on Shares.
Number Date of grant
Grace period
Term of year
Price of year – R$
Granted
Not exercised
7.22.2008
Three years
Five years
10,07
161,869
161,869
15 Analysis of the Statement of Income Accounts (a) Income from financial intermediation Six-month periods ended December 31 2008 Indusval Multistock
Years ended December 31
2007
Indusval Consolidated Multistock Consolidated
2008 Indusval Multistock Consolidated
2007 Indusval Multistock Consolidated
Operações de crédito Advance to depositors Loans
1,541
1,541
829
829
2,231
2,231
1,203
1,203
170,656
170,656
95,308
95,308
298,253
298,253
160,394
160,394
Discounts
6,843
6,843
7,156
7,156
13,101
13,101
13,431
13,431
Financing
29,478
29,478
2,786
2,786
33,971
33,971
4,744
4,744
1,431
1,431
259
259
2,693
2,693
1,454
1,454
209,949
209,949
106,338
106,338
350,249
350,249
181,226
181,226
Recovery of credits
Loans Short-term interbank investments
33,454
33,454
23,989
23,989
60,914
60,914
32,539
32,539
Fixed income securities
16,889
17,433
21,093
21,943
45,157
46,328
41,382
42,268
Variable income securities Investment funds Adjustment to market value – securities Foreign investments
-
7
-
11
-
9
-
16
404
404
-
-
405
405
-
-
45
41
(274)
(413)
186
327
(231)
(370)
137
137
69
69
184
184
163
163
50,929
51,476
44,877
45,599
106,846
108,167
73,853
74,616
21,512
21,512
9,051
9,051
33,607
33,607
16,648
16,648
Marketable securities Export Import
401
401
115
115
461
461
440
440
Financial
712
712
(16)
(16)
594
594
(85)
(85)
114,878
114,878
10,777
10,777
125,773
125,773
11,657
11,657
Rates variation Funds available in foreign currency
4,170
4,170
2,788
2,788
6,441
6,441
4,458
4,458
141,673
141,673
22,715
22,715
166,876
166,876
33,118
33,118
Foreign exchange Swap
4,955
4,955
-
-
5,211
5,211
-
-
Futures
12,838
12,805
-
-
13,367
13,245
-
-
Options
(3,345)
(3,562)
-
-
(4,833)
(5,072)
-
-
Forward
2,464
2,464
-
-
2,352
2,352
-
-
16,912
16,662
-
-
16,097
15,736
-
-
419,463
419,760
173,930
174,652
640,068
641,028
288,197
288,960
Derivative financial instruments
110
(b) Expenses from financial intermediation Semestres findos em 31 de dezembro 2008 2007 Indusval Multistock Consolidated
Exercícios findos em 31 de dezembro 2008 2007
Indusval Multistock
Consolidated
Indusval Multistock Consolidated
Indusval Multistock Consolidated
Interbank deposits
(13,500)
(11,865)
(3,989)
(3,239)
(19,769)
(16,920)
(7,772)
(6,226)
Time deposits
(53,018)
(52,962)
(32,259)
(32,259)
(96,476)
(96,397)
(62,124)
(62,124)
Repurchase agreements
(44,365)
(44,365)
(31,906)
(31,906)
(87,338)
(87,338)
(47,576)
(47,576)
Captação no mercado
Funds from acceptance and issue of securities (LCA)
(1,531)
(1,531)
-
-
(1,531)
(1,531)
-
-
(112,414)
(110,723)
(68,154)
(67,404)
(205,114)
(202,186)
(117,472)
(115,926)
Money market funding Local borrowings
(284)
(284)
(116)
(116)
(1,082)
(1,082)
(270)
(270)
8,121
8,121
-
-
8,121
8,121
-
-
Local onlendings – BNDES
(5,618)
(5,618)
-
-
(6,215)
(6,215)
-
-
Local onlendings – FINAME
(2,234)
(2,234)
-
-
(2,714)
(2,714)
-
-
Borrowings – shares
Foreign borrowings
(165,336)
(165,336)
(17,635)
(17,635)
(183,576)
(183,576)
(23,061)
(23,061)
(165,351)
(165,351)
(17,751)
(17,751)
(185,466)
(185,466)
(23,331)
(23,331)
Swap
-
-
393
393
-
-
402
402
Futures
-
-
371
295
-
-
(1,524)
(1,620)
Options
-
-
(1,172)
(1,179)
-
-
(2,290)
(2,300)
Forward
-
-
218
218
-
-
740
740
-
-
(190)
(273)
-
-
(2,672)
(2,776)
(33,100)
(33,100)
(11,634)
(11,634)
(44,740)
(44,740)
(16,703)
(16,703)
(6,004)
(6,004)
(488)
(488)
(8,496)
(8,496)
(1,061)
(1,061)
Loans, assignments and onlendings
Derivative financial instruments Credit operations Other credits Reversal of provision Allowance for loan losses
-
-
42
42
-
-
42
42
(39,104)
(39,104)
(12,080)
(12,080)
(53,236)
(53,236)
(17,722)
(17,722)
(316,869)
(315,178)
(98,175)
(97,508)
(443,816)
(440,888)
(161,197)
(159,755)
(c) Revenue from services rendered and bank fees Six-month periods ended December 31 2008 Indusval Multistock Consolidated Management of funds Collection Transfer of funds Guarantees provided Custody services Stock exchange brokerage services Foreign exchange brokerage services Other services Bank fees
| Financial Statements
Years ended December 31
2007 Indusval Multistock Consolidated
2008 Indusval Multistock Consolidated
2007 Indusval Multistock Consolidated
37
248
22
259
78
519
37
461
1,493
1,493
1,540
1,540
3,459
3,459
2,722
2,722
18
18
275
275
34
34
519
519
495
495
223
223
1,121
1,121
595
595
22
31
10
15
46
64
10
21
-
3,982
-
7,528
-
13,326
-
12,171
-
18
-
14
-
30
-
108
2,004
3,174
1,692
2,043
2,853
4,397
1,840
2,313
4,069
9,459
3,762
11,897
7,591
22,950
5,723
18,910
900
900
1,489
1,489
4,969
10,359
9,080
24,439
5,723
18,910
2008
3,762
11,897
111
(d) Personnel expenses Six-month periods ended December 31 2008 Indusval Multistock Consolidated Payroll
Years ended December 31
2007
2008
Indusval Multistock Consolidated
2007
Indusval Multistock Consolidated
Indusval Multistock Consolidated
(14,402)
(16,105)
(12,646)
(13,223)
(26,595)
(29,183)
(20,239)
(21,321)
Fees
(3,479)
(3,758)
(2,229)
(2,417)
(6,885)
(7,392)
(4,279)
(4,771)
Benefits
(3,628)
(4,187)
(2,708)
(2,985)
(6,865)
(7,787)
(5,121)
(5,736)
Social charges
(5,788)
(6,431)
(4,613)
(4,841)
(10,766)
(11,786)
(7,687)
(8,165)
(296)
(304)
(209)
(213)
(543)
(555)
(311)
(324)
Training Interns
(234)
(234)
(145)
(145)
(418)
(418)
(250)
(250)
(27,827)
(31,019)
(22,550)
(23,824)
(52,072)
(57,121)
(37,887)
(40,567)
(e) Other administrative expenses Six-month periods ended December 31 2008
Years ended December 31
2007
Indusval Indusval Multistock Consolidated Multistock Consolidated
2007
2008 Indusval Multistock Consolidated
Indusval Multistock Consolidated
Water, electricity and gas
(156)
(157)
(146)
(146)
(299)
(300)
(318)
(318)
Rent
(562)
(565)
(456)
(456)
(1,010)
(1,013)
(637)
(641)
Communications
(1,387)
(1,662)
(997)
(1,255)
(2,638)
(3,187)
(1,634)
(2,052)
Philanthropic contributions
(892)
(956)
(882)
(1,032)
(1,120)
(1,187)
(1,058)
(1,212)
Maintenance and conservation of assets
(161)
(303)
(426)
(486)
(521)
(726)
(548)
(710)
Materials
(126)
(142)
(154)
(187)
(270)
(328)
(281)
(347)
Data processing
(807)
(1,079)
(412)
(499)
(1,355)
(1,767)
(789)
(940)
Promotions and public relations
(310)
(318)
(674)
(693)
(466)
(482)
(855)
(880)
Advertising and publicity
(159)
(164)
(2)
(2)
(159)
(168)
(6)
(6)
Publications
(203)
(223)
(610)
(636)
(549)
(618)
(1,098)
(1,157)
Insurance
(110)
(110)
(59)
(59)
(141)
(141)
(115)
(115)
Services of the financial system
(1,384)
(1,746)
(995)
(1,204)
(2,676)
(3,429)
(1,781)
(2,109)
Third party services
(7,814)
(8,115)
(2,184)
(5,357)
(11,563)
(15,659)
(14,122)
(19,092) (*)
Surveillance and security
(39)
(39)
(35)
(35)
(74)
(74)
(72)
(72)
(3,551)
(3,727)
(2,080)
(2,196)
(5,584)
(5,805)
(6,208)
(6,424) (*)
Transport
(248)
(263)
(118)
(125)
(440)
(494)
(339)
(367)
Travel
(845)
(873)
(726)
(742)
(1,696)
(1,740)
(1,841)
(1,909)
Specialized tech. services
Other administrative expenses
(1,812)
(1,973)
(1,423)
(1,500)
(3,538)
(3,819)
(2,511)
(2,662)
(20,566)
(22,415)
(12,379)
(16,610)
(34,099)
(40,937)
(34,213)
(41,013)
(*) Refer mainly to non recurring expenses incurred, related to the placement of shares in the market via Initial Public Offer – IPO (in 2007).
(f) Tax expenses Six-month periods ended December 31 2008 Indusval Multistock Consolidated
Years ended December 31
2007 Indusval Multistock Consolidated
2008 Indusval Multistock Consolidated
2007 Indusval Multistock Consolidated
Service tax (ISS)
(255)
(577)
(208)
(596)
(483)
(1,296)
(305)
(934)
Social Integration Program (PIS)
(960)
(1,042)
(626)
(691)
(1,688)
(1,853)
(1,001)
(1,106)
(5,911)
(6,349)
(3,850)
(4,253)
(10,389)
(11,326)
(6,162)
(6,807)
(486)
(497)
(401)
(438)
(812)
(831)
(950)
(1,020)
(7,612)
(8,465)
(5,085)
(5,978)
(13,372)
(15,306)
(8,418)
(9,867)
Social Contribution on Revenues (COFINS) Other
112
16 Operating Limits – Indusval Multistock Consolidated In compliance with Resolution no. 2099/94 of BACEN, a minimum shareholders’ 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, 2008, the Bank’s index was 23.95% (33.16% in 2007), calculated based on the consolidated financial statements.
17 Related Parties (a) Subsidiaries The transactions between the Parent Company and its subsidiaries were carried out at normal market amounts, terms and payment conditions, and are represented by:
2008
2007
Assets (liabilities)
Income (expenses)
Assets (liabilities)
Income (expenses)
Demand deposits
(520)
-
(506)
-
Time deposits
(274)
-
(495)
-
(24,416)
(2,905)
(13,105)
(751)
(154)
(1,376)
(30)
-
Interbank deposits Other
(b) Compensation of key management personnel During the year ended December 31, 2008, Banco Indusval incurred the amount of R$12,284 on short-term benefits for key management personnel. In addition, the amount of R$175 was charged as benefit expense for share-based payments (Note 14(b)).
(c) Other transactions with related parties At December 31, 2008, certain transactions concerning demand deposits, time deposits, investment, funds from acceptance and issue of securities, rent of shares and transactions in foreign currency were conducted with related parties in the amount of R$159,233. These transactions were conducted at usual market rates and terms.
18 Management of Investment Funds 2008 Valeu Fundo de Investimento Multimercado, Crédito Privado, Investimento no Exterior e Longo Prazo Multi Fundo de Investimento Renda Fixa Indusval Crédito Privado
2007
32,003
43,273
1,605
2,494
Agri-Sus FIA Investimentos no Exterior
4,806
207
GSS Fundo de Investimento Multimercado, Crédito Privado, Investimento no Exterior e Longo Prazo
3,803
3,088
19. Supplementary Information (a) Guarantees and sureties 2008
2007
Sureties – financial institutions
35,001
Sureties – individuals and corporate entities – non-financial
28,055
25,625
7,650
26,735
70,706
73,875
Loans for import
| Financial Statements
2008
21,515
113
(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$325,245 in 2008 (R$831,012 in 2007). It is also responsible for the custody of clients’ securities totaling R$ 565,007 in 2008 (R$788,530 in 2007), deposited with the Brazilian Custody and Settlement Company (CBLC).
(c) Personnel
2008 Employees – number
Banco Indusval Multistock
Indusval Multistock Corretora
BIM Promotora de Vendas 9
Support and control
139
15
Operational
155
11
294
26
Total 163 166
9
329
2007 Employees – number
Banco Indusval Multistock
Indusval Multistock Corretora
BIM Promotora de Vendas
Total
124
28
-
152
Support and control Operational
167
12
-
179
291
40
-
331
(d) Free cash – Indusval Multistock Consolidated 2008
2007
Cash
40,111
3,809
Short-term interbank investments
70,763
260,210
Marketable securities and derivative financial instruments
331,544
649,070
(2,742)
(656,612)
(-) Derivative financial instruments
(17,048)
(909)
Net cash
422,628
255,568
(-) Funds obtained in the open market
(e) Financial instruments – Indusval Multistock Consolidated 2008 Assets Investment in interbank deposits Investments in foreign currency
2007
Book value
Market value
Book value
Market value
48,792
48,792
45,840
45,840
2,169
2,169
1,429
1,429
314,496
314,496
648,161
648,161
1,183,907
1,173,154
992,610
989,519
269,554
347,615
240,588
239,193
Purchased credits
26,890
27,169
21,614
22,285
CDC vehicles
53,868
61,615
-
-
Quotas – FIDC
21,193
21,193
-
-
3,278
3,278
42,991
42,991
4,292
1,739
4,070
2,601
15,010
15,521
11,011
10,775
-
-
Marketable securities
Credit operations Credits Trade finance
Derivatives Pre Currencies Swap Share Forward
114
2008
2007
Book value
Market value
Book value
Market value
Interbank deposits
158,727
158,840
68,608
68,615
Time deposits
Liabilities
598,260
598,281
661,420
660,787
Agribusiness credit notes
22,521
22,521
-
-
Funds obtained via options
32,080
31,196
9,043
9,039
Liabilities related to forward transactions
11,011
10,775
-
-
Onlendings
159,623
159,623
-
-
Local borrowings (includes FIDC senior quotas)
128,161
128,161
-
-
Foreign liabilities
487,353
531,552
229,730
230,924
183,632
183,632
223,299
223,299
-
-
7,829
9,576
1,772
3,984
15,021
15,112
Derivatives Pre Currencies Swap
The amount of interbank deposits was calculated in accordance with the investment curve. The amount of marketable securities was established through the prices disclosed by ANDIMA for the date established. The amount of loans, interbank deposits, time deposits, foreign liabilities was calculated by the monthly average rate of the last month of the year for each type of transaction. The market value of derivatives, purchased credit, funds obtained via options, was calculated in accordance with internal pricing model the parameter of which are data supplied by BM&F BOVESPA.
(f) Service agreement – CVM Instruction nº 381 The policy of the Bank, subsidiaries and parent company, for contracting services not related to the external audit of independent auditors, is based on the regulations applicable and on internationally accepted principles which safeguard the independence of the auditor. These principles are: (i) the auditor should not audit his own work; (ii) the auditor should not perform managerial functions for his client; and (iii) the auditor should not promote the interest of his client. During the years ended December 31, 2008 and 2007, the independent auditors and related parties did not render services unrelated to the external audit in a level higher than 5% of total fees related to external audit services.
(g) Contributions and profit sharing As from 2006, the Bank adopted its own model for the payment of Profit Sharing using criteria and parameters established in accordance with the agreement approved by the Ministry of Labor. It has also been established the payment of profit sharing to the directors.
(h) Insurance coverage Banco Indusval has insurance contracts to cover risks related to property and equipment. Management considers this amount sufficient to cover eventual losses.
| Financial Statements
2008
115
Corporate Information | Board of Directors
Banco Indusval Multistock Headquarters
Chairman
Rua Boa Vista, 356 – 7º andar CEP: 01014-000 São Paulo SP – Brazil Phone number: (55 11) 3315-6777 Email: banco@indusval.com.br Website www.indusval.com.br Corporate Taxpayer Number: 61,024,352/0001-71
Luiz Masagão Ribeiro
Vice Chairman Manoel Felix Cintra Neto
Directors Maria Cecilia Cavalcante Ciampolini Carlos Ciampolini Antonio Geraldo da Rocha Júlio dos Santos Oliveira Júnior Mário Fukumitsu Adroaldo Moura da Silva Wladimir Antonio Puggina Odilson Lírio Moré | Executive Board Manoel Felix Cintra Neto President Luiz Masagão Ribeiro Superintendent Officer Carlos Ciampolini Executive Officer Ziro Murata Junior CFO and Investor Relations Officer Gilberto L. dos Santos Lima Filho Treasury Officer – SPB Roberto Carlos de C. Almeida Commercial Officer Gilmar Melo de Azevedo Commercial Officer – Branches Katia Aparecida Rocha Moroni International Department Officer Eliezer Lizardo Ribeiro da Silva Credit Officer
116
Customer Service and Ombudsman: 0800 7040418
Indusval Multistock Corretora de Títulos e Valores Mobiliários Rua Boa Vista, 356 – 8º andar CEP: 01014-000, São Paulo SP – Brazil Phone number: (55 11) 3315-6777 Website www.indusvaltrade.com.br Email: induscor@indusval.com.br Corporate Taxpayer Number: 65,913,436/0001-17
Investor Relations IRO - Ziro Murata Junior Manager – Maria Angela Valente Rua Boa Vista, 356 – 7° andar CEP: 01014-000, São Paulo SP – Brazil Phone number: (55 11) 3315-6821 Fax: (55 11) 3315-6655 Website www.indusval.com.br/ir
Stocks Trading Markets BM&FBOVESPA S/A - Securities, Commodities and Futures Exchange Ticker: IDVL4
Information Sources Diário Oficial do Estado de São Paulo (São Paulo State Register) Folha de São Paulo www.indusval.com.br/ir
Independent Auditors PricewaterhouseCoopers Auditores Independentes
Indusval Units São Paulo
Belo Horizonte
Rio de Janeiro
Rua Boa Vista, 356 – 11º andar CEP: 01014-000 São Paulo SP – Brazil Corporate Taxpayer Number: 61,024,352/0001-71 Phone number: (55 11) 3315-6777 Customer Service and Ombudsman: 0800 7040418
Av. Olegário Maciel, 2.144 – 11º andar – salas 1101 a 1102 CEP: 30.180-112 - Belo Horizonte – MG Corporate Taxpayer Number: 61.024.352/0006-86 Phone number: (55 31) 2111-0888 Fax: (55 31) 2111-0861 Telefone: (0xx31) 2111-0888 Fax: (0xx31) 2111-0861
Rua Lauro Muller, 116 – Sala 3403 CEP: 22.290-160 Rio de Janeiro – RJ Corporate Taxpayer Number: 61.024.352/0007-67 Phone number: (55 21)3578-3200 Fax: (55 21)3578-3220
Campinas Av. José Bonifácio Coutinho Nogueira, 150 - 6º andar – sala 603 CEP: 13091-611 – Campinas/SP. Corporate Taxpayer Number: 61,024,352/0004-14 Phone number: (55 19) 3206-0788 Fax: (55 19) 3207-3654
Goiânia Av. Republica do Líbano, 1551- 7º and - sl 702 CEP: 74,115-030 – Goiânia /GO Corporate Taxpayer Number 61,024,352/0005-03 Phone number: (55 62) 3878-0888 Fax: (55 62) 3878-0860
Curitiba Rua Marechal Deodoro 950 – 9º andar CEP: 80.060Brazil (-010 ) Corporate Taxpayer Number: 61,024,352/0003-33 Phone number: (55 41) 3303-6700 Fax: (55 41)3303 6716
| Financial Statements
2008
Maringá Av. Duque de Caxias, 882 Sala 303 CEP: 87020-025 Maringá – PR CNPJ: 61.024.352/0009-29 Telefone: (0xx44) 3302-4000 Fax: (0xx44) 3303-4016
Campo Grande Rua Alberto Néder, 328 – Sala 91 CEP: 79.002-160 Campo Grande – MS Corporate Taxpayer Number: 61.024.352/0008-48 Phone number: (0xx67) 2106-3950 Fax: (55 67) 2106-3966
Porto Alegre Rua Furriel Luiz Antonio Vargas, 250 Sala 802 CEP: 90.470-130 Porto Alegre – RS Corporate Taxpayer Number: 61.024.352/0011-43 Phone number: (55 51) 3406-9100 Fax: (55 51) 3406-9116
Uberlândia Avenida Jaime Ribeiro da Luz, 971 – Sala 32 CEP: 38408-188 - Uberlândia - MG Corporate Taxpayer Number 61.024.352/0010-62 Phone number: (55 34) 2102-8300 Fax: (55 34) 2102-8320
Recife Av. Engenheiro Domingos Ferreira, 2589, sala 204 CEP: 51020-031 - Recife- PE Corporate Taxpayer Number: 61.024.352/0012-24 Phone number: (55 81) 3092-2150 Fax: (55 81) 3092-2166
Indusval S/A Corretora de Títulos e Valores Mobiliários Rua Boa Vista, 356 – 8º andar CEP: 01014-000 São Paulo SP – Brazil Corporate Taxpayer Number: 65.913.436/0001-17 Phone number: (55 11) 3315-6777 Email: induscor@indusval.com.br
117
Credits | Content and translation Banco Indusval Investor Relations Department Global RI Consultoria de Relações com Investidores | Graphic Design The Media Group | Printing Braspor Gráfica e Editora Ltda. | Pictures Cover: Dayana Bruna Gomes Ribeiro, Image Capturing Project Management (Page 3): Daniel Rosa, professional photographer Inner pictures: all pictures are part of the “Image Capturing Project” as described in the beginning of this Report. Each picture is followed by the name of its respective author. | Publication Date April 30, 2009