Banco Indusval & Partners S.A.Banco Indusval & Partners S.A. 5 BIND18MEL-PAR.DOCX Operational limit, capitalization and issue of convertible subordinated debt instrument (Notes 16(e),

www.pwc.com.br (A free translation of the original in Portuguese)

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Banco Indusval & Partners S.A. Parent company and consolidated financial statements at December 31, 2018 and independent auditor's report

(A free translation of the original in Portuguese)

2 BIND18MEL-PAR.DOCX

Independent auditor’s report To the Board of Directors and Stockholders Banco Indusval & Partners S.A. Opinion

We have audited the accompanying parent company financial statements of Banco Indusval S.A. (Indusval & Partners) - ("Bank"), which comprise the balance sheet as at December 31, 2018 and the statements of operations, changes in equity and cash flows for the six-month period and year then ended, as well as the accompanying consolidated financial statements of Banco Indusval S.A. and its subsidiaries ("Indusval & Partners - Consolidated"), which comprise the consolidated balance sheet as at December 31, 2018 and the consolidated statements of operations, changes in equity and cash flows for the six-month period and year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Banco Indusval S.A. and of Banco Indusval S.A. and its subsidiaries as at December 31, 2018, and the Bank's financial performance and cash flows, as well as the consolidated financial performance and cash flows, for the six-month period and year then ended, in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN). Basis for opinion We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the parent company and consolidated financial statements" section of our report. We are independent of the Bank and its subsidiaries in accordance with the ethical requirements established in the Code of Professional Ethics and Professional Standards issued by the Brazilian Federal Accounting Council, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Banco Indusval & Partners S.A.


Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the parent company and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We planned and performed our audit for 2018 taking into consideration that the operations of the Bank and its subsidiaries remain substantially the same in relation to the prior year. In this respect, the Key Audit Matters, as well as our audit approach, have remained substantially in line with those in the prior year. Why it is a key audit matter How the matter was addressed in the audit Allowance for loan losses (Notes 2c(v), 3(e) and 6(a))

The amount of the allowance for loan losses is determined through a process that requires judgment and use of different criteria to have the credit risk determined by management. It is based on the individual analysis of the transactions, taking into consideration the economic conditions, past experience and the specific and global risks of the portfolios, as well as the guidelines established by Resolution 2,682/99 of the National Monetary Council (“CMN”). The classifications related to client risk are attributed by management’s internal template. Considering the significance of the amounts involved, as well as what was described above, we decided to focus on this critical accounting estimate area in our audit.

Our procedures considered, among others, obtaining an updated understanding of the significant controls related to the calculation of the allowance for loan losses that include: (i) the process of credit assignment and the related analysis of the debtor's risk; (ii) the totality of the credit portfolio database; and (iii) the record of provisions and the disclosures in the notes to the financial statements. We also tested the procedures that the Bank established to comply with the standard established by the National Monetary Council (CMN). We recalculated the provisions based on the credit risk attributions that management defined and on the delays in payments. Additionally, we compared the accounting balances with the analytical reports that present the balances of the provisions of each operation, and we also analyzed the criteria that management used to determine the credit risk of the operations.

We consider that the assumptions and criteria that management adopted to determine and account for the provision for allowance for loan losses are reasonable and consistent with the information disclosed in the financial statements.

Matters

Why it is

a key audit

matter

How the matter was addressed



Assets not in use (Notes 3(f) and 8(c)) The Bank recorded assets not in use in its balance sheet, corresponding to real estate, vehicles, machinery and equipment, which were taken back or received in lieu of payment of defaulting credit operations. These assets are adjusted to their recoverable value through a provision that is recorded considering the characteristics of each class of assets. We decided to focus on this area in our audit due to its subjectivity and the different assumptions that management used in the measurement which may significantly affect the determination of the recoverable amount of those assets.

Our procedures considered, among others, obtaining an understanding of the calculation methodologies and analysis of the assumptions that management used in the definition of the recoverable amount of the assets. We also tested whether these assumptions were consistent with those adopted in prior years. We recalculated, on a sample basis, the recoverable amount of certain items selected taking into consideration management’s assumptions. Additionally, we analyzed the consistency of the amounts calculated in effective sales of items with their estimated recoverable amounts.

We consider that the assumptions and methodologies that management adopted are reasonable and consistent with the information disclosed in the financial statements.

Tax credits (Notes 2c(iv) and 11(b), 11(c), 11(d), 11(e))

Indusval & Partners - Consolidated has tax credits arising from temporary additions to the Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) calculation basis and tax losses, recorded up to December 31, 2018, based on the study of projected taxable income for the realization of those tax credits. As disclosed in Note 11(e), as from 2017 the Bank no longer accounts for new tax credits from income tax and social contribution losses due to the lack of compliance with the requirements established by Resolution 3,059/02 of the Brazilian Central Bank. This projection, approved by the Board of Directors, involves subjective judgments and assumptions that management used based on the study of the current and future scenarios. We decided to focus on this critical estimation area in our audit after considering that the use of different assumptions in the taxable profit projection could significantly modify the terms expected for the realization of the tax credits, with consequent accounting impact.

We obtained an understanding of the calculation and recording, under the terms of the tax and accounting standards related to the tax credits, including the specific requirements of the National Monetary Council and of the Brazilian Central Bank. We also obtained an understanding of the relevant assumptions established by management to estimate the future taxable profit for the realization of tax credits. In addition, we analyzed the reasonableness of these assumptions with the macroeconomic projections disclosed in the market, when applicable. We also analyzed the consistency of these assumptions with those adopted in prior periods. Finally, we compared the information disclosed in the notes to the financial statements with the audited information We consider that the assumptions and criteria that management adopted are reasonable and consistent with the disclosures made in the notes to the financial statements.



Operational limit, capitalization and issue of convertible subordinated debt instrument (Notes 16(e), 20(a) and 20(b))

At December 31, 2018, Indusval & Partners - Consolidated had a minimum operational limit below the limit established by Resolution 4,193/13 of the Brazilian Central Bank. The Bank is preparing an action plant to meet the minimum limits mentioned above. As part of this plan, we highlight that: (i) according to Note 2(b), in November 2018, the sale of a portion of its shares in Guide Investimentos S.A. Corretora de Valores was concluded; (ii) according to Note 20(a), the General Meeting of Stockholders has approved the proposed capital increase of R$ 245 million; and (iii) according to Note 20(b), convertible subordinated debts in the amount of R$ 55 million will be issued, which should be able to be part of the Regulatory Capital of the Bank. The operations mentioned in items (ii) and (iii) above are subject to approval by the Brazilian Central Bank. We continued to focus on this area in our audit because of the significance of the matter.

Our procedures considered, among others, the analysis of the assumptions for the calculation of operational limits and the comparison between the statement of operational limit that management made and the one disclosed in the financial statements. In relation to the sale of a portion of the shares in Guide Investimentos S.A. Corretora de Valores, we checked the financial settlement of the operation as established in the contract. For capital increase, we read the significant event notice and the minute of the General Meeting of Stockholders that has approved the capital increase issued by Indusval & Partners and had meetings with the Bank’s management to understand the effects of such capital increase on the Bank’s operations. We consider that the information disclosed in the financial statements is consistent with the information obtained in our audit.



Other matters

Statements of value added The parent company and consolidated statements of value added for the year ended December 31, 2018, prepared under the responsibility of the Bank's management and presented as supplementary information for purposes of the Brazilian Central Bank, were submitted to audit procedures performed in conjunction with the audit of the Bank's financial statements. The presentation of this statement is required by the Brazilian corporate legislation for listed companies. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in Technical Pronouncement CPC 09 - "Statement of Value Added". In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria established in the Technical Pronouncement and are consistent with the parent company and consolidated financial statements taken as a whole. Other information accompanying the parent company and consolidated financial statements and the auditor's report

The Bank's management is responsible for the other information that comprises the Management Report. Our opinion on the parent company and consolidated financial statements does not cover the Management Report, and we do not express any form of audit conclusion thereon. In connection with the audit of the parent company and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management Report, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the parent company and consolidated financial statements

Management is responsible for the preparation and fair presentation of these parent company and consolidated financial statements in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Brazilian Central Bank, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the parent company and consolidated financial statements, management is responsible for assessing the ability of the Bank and its subsidiaries to continue as a going concern, disclosing, as applicable, matters related to operational continuity and using the going concern basis of accounting, unless management either intends to liquidate the Bank and its subsidiaries or to cease its operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of the Bank and its subsidiaries.



Auditor's responsibilities for the audit of the parent company and consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the parent company and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the parent company and consolidated

financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud could involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Bank and its subsidiaries.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and,

based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Bank and its subsidiaries to continue as going concerns. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Bank and its subsidiaries to cease to continue as going concerns.

• Evaluate the overall presentation, structure and content of the parent company and consolidated

financial statements, including the disclosures, and whether these parent company and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit.



We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. São Paulo, March 29, 2019 PricewaterhouseCoopers Carlos Augusto da Silva Auditores Independentes Contador CRC 1SP197007/O-2 CRC 2SP000160/O-5

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Banco Indusval S.A.

Publicly-Held Company Corporate Taxpayer Registry (CNPJ/MF) No. 61.024.352/0001-71

MANAGEMENT REPORT

2018 Accounting Period

In 2018, Banco Indusval launched a series of important measures to restructure its operations,

improve its capital structure and reposition its market strategy.

The recent events announced by the bank led the institution into a new growth phase,

highlighting the following:

i) At a general shareholders’ meeting held on 03/27/2018, the shareholders resolved

to increase capital by a minimum amount of BRL 245,000,000.00 (two hundred and forty-five million Brazilian reais) via the issuance of 70,000,000 (seventy million) new common shares and a maximum amount of BRL 325,500,000.00 (three hundred and twenty-five million five hundred thousand Brazilian reais) via the issuance of up to 93,000,000 (ninety-three million) new common shares, at an issue price of BRL 3.50 (three Brazilian reais and fifty cents) per share (“Capital Increase”), for private subscription, without any change to the Company’s control group and with a commitment by the current controlling shareholders of BI&P to subscribe and pay in the minimum Capital Increase amount. The capitalization aims to strengthen the balance sheet of BI&P and its subsidiaries, in order to meet the requirements of Basileia and, as a result, to resume the capacity to generate new business and develop operations of Indusval itself, as well as its subsidiary Banco SmartBank S.A. (new name for Intercap). In addition, BI&P studies subordinated debt in the amount of BRL 55 million to further strengthen its capital base and resume the capacity to generate new business and develop operations.

ii) Also on March 29, the Board of Directors deliberated on the election of Fernando Fegyveres, Alexandre Teixeira and Guilherme Gonzalez Cronemberger Parente which will assume, after Central Bank’s authorization the positions of CEO, Director of Products and New Business, and Director of Risks and Operations, respectively. As soon as their nominations are approved by the Board of Directors and by the Central Bank, co-CEOs Luiz Masagão Ribeiro and Jair Ribeiro da Silva Neto will become members of the Board of Directors, alongside Roberto de Rezende Barbosa, Manoel Feliz Cintra, Afonso Hennel, Walter Iorio and Pedro Weill.

iii) The Company clarifies that, following agreements between the shareholders of the

bank’s Control Block (composed of Roberto de Rezende Barbosa, Manoel Félix Cintra Neto, Luiz Masagão Ribeiro, Jair Ribeiro da Silva Neto and Affonso Hennel), Roberto de Rezende Barbosa will be responsible to pay in approximately 80% of the firm commitment of BRL 245 Million (the balance being guaranteed by the other shareholders of the aforementioned control block), and, once the capital increase is

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approved, will become majority shareholder in the control block, which remains unchanged.

iv) In light of the new reality, the Company will have a new shareholders’ agreement

that will take effect after said capital increase is paid in and approved by the Central Bank of Brazil.

With the capital increase and new officers, Banco BI&P closes another chapter in its history.

Guide Investimentos

On November 5, 2018, a Material Fact was published confirming the closing of the share

purchase transaction for Guide shares to the Fosun Group, signed on February 26, 2018.

Banco Indusval transferred 195,115 common shares and 39,404 preferred shares issued by

Guide to Fosun, which represent 69.14% of the share capital for the brokerage house, for an

amount of up to BRL 287.9 million. The amount of BRL 155.9 million was paid to the bank on

the day the material fact was published. An amount of BRL 12 million was deposited in an escrow

account to ensure any indemnity payment to be owed by BI&P to Fosun. Depending on Guide’s

financial results in 2018 and 2019, Indusval will receive an amount of up to BRL 120 million.

Banco Indusval sold a total of 2,933 preferred shares for the amount of BRL 2.1 million to certain

Guide executives, and will therefore hold a minority interest of 67,841 PN shares, representing

20% of Guide’s share capital.

Guide gains a strong partner that joins capital and technology to further strengthen the

company’s growth.

Guide will maintain its goal of maximizing growth across all activities currently performed in the

segments of wealth management, digital platform, investment brokerage for individuals and

institutional clients, financial planning and insurance sales through its subsidiary Guide Life.

Banco Digital

The group’s new digital platform, the subsidiary Banco Smartbank S.A., (new name for Banco Intercap) is already in the pre-operational phase. The purpose of this platform is precisely to position the group in this new disruptive trend of the banking sector throughout the world, and our focus in this case is on the sector of small and medium-sized companies, which we believe is not being adequately serviced by the major retail banks.

SmartBank is a 100% digital banking platform whose DNA contains technologies such as Big

Data and Artificial Intelligence so that it can co-create financial services with intelligence and

transparency. Its “Grow Together” motto aims to provide a complete portfolio of secure, inclusive

and transformative financial solutions, enabling a win-win partnership with its customers, who

gain more flexibility to manage and leverage business growth.

A capital increase is planned (ranging from BRL 2 to 10 million), as well as other acts defined in

the Investment Agreement. These actions are subject to approval of the Central Bank of Brazil,

in addition to the fulfilment of certain foregoing conditions set forth in the Investment

Agreement, as well as corporate, business and regulatory approvals typical to this type of

transaction.

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Credit, Deposits and Free Cash Activities

Banking activity is cyclical and directly linked to the performance of the local economy. We

believe that the country is entering a new economic growth phase that could positively impact

the sector. Recovery highlights include: a new government taking office (thus reducing political

risk), expectations on passing important reforms, thus ensuring an improvement in fiscal

discipline, coupled with a set of measures to make investments more attractive in Brazil. The

process of monetary easing will also favor both banking activity and the economy as a whole.

In early 2018, we expected the macroeconomic environment to remain challenging, so we

maintained our conservative policy of the previous year. In this sense, we continued with a

more rigorous credit policy (while maintaining existing NIM objectives), increased

provision levels. We also increased our liquidity ratio in this period, maintaining a significant

excess of cash reserves.

The consolidated activities of the BI&P Conglomerate as of December 31, 2018 totaled BRL 2.5

billion in assets, a drop of 5.7% year-over-year, generated with business conducted mainly

through the six Banco BI&P branches in Brazil, one abroad and Guide Investimentos S.A.

Corretora de Títulos e Valores Mobiliários (with the conclusion of the sale of Guide’s control on

11/05/2018, the amounts calculated consider the accumulated period of 10 months – January

to October 2018).

The expanded credit portfolio totaled BRL 704.3 million at the close of 2018, compared to BRL

1.2 billion in 2017, an intentional reduction of 43.1% in twelve months, reflecting our

aforementioned strategy. Throughout the year, BRL 194.2 million were written off to losses in

credit operations that had already been provisioned in previous years. Loan recoveries totaled

BRL 29.6 million, compared to BRL 15.6 million in 2017. In addition, the allowance for doubtful

accounts (PDD) reached BRL 209.2 million due to the conservative stance of the bank’s

management and the impact of the economic recession on our portfolio, a provision that includes

an additional provision of BRL 100 million recorded in the last quarter of 2018. Concerning the

equity restructuring process, the Bank's strategic repositioning and the related management

structure, the new major shareholder of the controlling block recommended an extraordinary

additional provision for doubtful accounts of BRL100 million. Considering the restructuring

process started with the capital increase, management accepted this provision in the current

context. It is also important to highlight the high liquidity of the bank’s expanded portfolio, since

its average duration ended the year at only 11.5 months.

Regarding our agribusiness franchise, this loan portfolio closed the year at a total of BRL 332

million (47.1% of the total portfolio), of which approximately 95% of its loans were classified as

AA and C ratings.

The funding volume closed the year at BRL 2.0 billion, dropping 4.2% with respect to December

2017. Time deposits via CDB issuance are the most significant, accounting for 85.1% (68.8% in

December 2017) of the funding stock, followed by agro notes (LCA), which accounted for 11.1%

(22.2% in December 2017) of the funding balance. Funding through real estate notes (LCI)

reached 2.6% (2.8% in December 2017) of the funding stock. Loans for onlending in the country

represent 0.4% (0.6% in December 2017) of the funds raised balance. We do not currently have

loans abroad.

Free cash flow amounted to BRL 928.2 million at the end of the year, growth of 18.1% when

compared to December 2017, thus representing 46.5% of the total deposits, compared to 37.8%

at the end of the previous period. We secured a comfortable cash position due to our strategy

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of maintaining a high level of liquidity and liquidating acquisitions made in recent years. At the

end of 2018, we distributed our fundraising products directly and through Guide and partnerships

with 64 distributors, including brokerage firms, independent agent offices, and private

distributors. We held a base of more than 39,983 depositors in this period, compared to 30,500

at the end of 4Q17 – an increase of 31%.

Results

Some extraordinary events positively impacted the bank’s results in 2018, the bank’s low capital

structure, with the consequent impact on the Basileia indexes, led to an intentional reduction in

the loan portfolio volume and a consequent drop in the revenues from these operations. In

addition, the conservative position of maintaining a high free cash level, the cost of loading

assets that do not have financial income, as well as the additional provision of BRL100 million,

as explained above, also had a negative impact on the bank’s results. On the positive side, the

sale of Guide to Fosun Group on 11/05 and the significant recoveries of provisioned loans in the

amount of BRL 20 million, recorded in the last 3 months of the period, contributed to a positive

result, but were not enough to end the year with a favorable balance.

The Financial Intermediation Result before management expenses with PDD amounted to BRL

817,000 in 2018, compared to BRL 10.2 million in 2017, the result of (i) the intentional reduction

to the credit portfolio in the period and (ii) the cost of loading the cash and assets without

financial income.

The Management Revenues from Services Rendered and Tariffs¹, consolidated by the bank and

Guide, amounted to BRL 87.0 million in 2018 – an increase of 13.4% year-over-year – especially

due to the increase in revenue by Guide Investimentos. It is important to note that with the

conclusion of the sale of control on 11/05/2018, the amounts calculated consider the

accumulated period of 10 months (January to October 2018).

With regard to the managerial expenses of the Bank without Guide, personnel expenses

increased by 1.4% in relation to 2017, while the BI&P staff decreased by 14.8% when

compared to the end of 2017. This increase in personnel expenses is justified by the increase

in labor contingencies during 2018. Excluding this effect, personnel expenses for 2018

compared to 2017 would have fallen 6.96%. BI&P’s administrative expenses increased by

12.57% over the previous year, mainly attributable to expenses with Smartbank’s development

and Guide selling expenses. Excluding these effects, the bank’s administrative expenses in 2018

would have decreased by 15.08% when compared to 2017. With regard to Guide

Investimentos, personnel expenses dropped 6.7% compared to the previous year, while

administrative expenses increased by 6.3%, with the conclusion of the sale of the control on

11/01/2018, calculated for the accumulated period of 10 months (January to October 2018).

Despite a positive result of BRL 54.7 million in 4Q18, the accumulated Result for 2018 was (BRL

125.1) million, as explained above.

¹ Revenue from services rendered, gross of commissions paid to independent agents, classified in administrative expenses.

Macroeconomic Environment

The year 2018 was marked by intense volatility in asset prices, due to local political events

and external economic factors. The first and last quarter of 2018 were quite positive, while

the second and third quarters were mostly negative.

On the domestic front, Q1 2018 optimism derived from political events, such as the conviction

of former President Lula, which the market interpreted as a sharp drop in the likelihood that a

politician with a non-liberal economic agenda and non-reformist stance would perform well in

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elections. On the international front, the quarter was marked by the prospect of continued

global growth, synchronized between the USA, Europe and Asia (an expectation that prevailed

among investors at that time). At the end of Q1 2018 the dollar hit a low of BRL 3.15, the

BOVESPA index rebounded to a high of 89,000 points and the 5-year interest rate reached a

low of 9.0%, with the target SELIC rate already at 6.50%.

The second quarter was the most volatile and negative of 2018, on the international front a

tougher stance from the FED, in relation to monetary tightening in the United States,

generated foreign exchange crises in Russia, Turkey and Argentina. Over that period the

Russian ruble lost 10%, the Turkish lira lost 15%, the Argentine peso lost an unbelievable

45% and the Brazilian real fell 20% against the dollar. This significant devaluation of the real

was accompanied by a steep increase in the price of oil, which rose 30% over Q1 and Q2

2018. The joint impact of the devaluation of the real and the high price of oil led to a nearly

50% increase in the price of diesel in Brazilian refineries in just under 6 months. With the

Brazilian economy still experiencing low levels of growth and domestic unemployment around

13%, there was no room for freight prices to rise alongside the cost of diesel, leading to the

truck drivers’ strike in May 2018. The strike paralyzed the country for 11 days, culminating in

supply shocks for fuel, food, animal feed and other basic supplies. The inflationary pressure

lasted only a few months, the government negotiated with the leaders of the strike, established

minimum freight prices, and opened the roads. Furthermore the Central Bank announced a

major foreign exchange swap, equivalent to the future sale of dollars, and interrupted the

downward trend in the Selic rate. At the end of Q2 2018 the dollar rose to BRL 3.90, the

BOVESPA index fell to 73,000 points and the 5-year interest rate rose to 11.0% with the target

SELIC rate steady at 6.50%.

The third quarter was again pessimistic. Primary elections took place in early October, and the

viability of the PSDB’s candidate, who until then had been the market favorite, turned out to

be nonexistent. Geraldo Alckmin received only 5% of the votes, whereas the right-wing

candidate from the then-diminutive PSL party received 46% of the votes and went on to the

runoff election against the PT’s left-wing candidate, who had received 29% of the votes. While

Brazilian investors were worrying about the left-right polarization of the runoff elections, the

currency crises in Argentina and Turkey intensified, and the Turkish lira and the Argentine

peso lost 30% and 40% respectively against the dollar, adding to the already heavy losses

sustained in Q2 2018. The Brazilian real partly followed the fall of the emerging currencies,

reaching a high of BRL 4.20 a few weeks before the primary elections. At the end of Q3 2018,

the dollar fell slightly to 4.00, BOVESPA reacted positively and climbed to 80,000 points and

the 5-year interest rate rose to 11.25%, with the target SELIC rate still steady at 6.50%.

Finally, the fourth quarter was quite positive, the PSL's candidate won the election with 55%

of the votes against 45% for the left-wing candidate. The President-elect maintained a liberal

and reformist position throughout Q4 2018, assembling a team of Ministers with a solid

technical base and quite aligned with liberal thinking. The market reacted positively: the real

appreciated against the dollar, the stock market went up, and the 5-year interest rate dropped

substantially. On the international front, the American central bank eased its monetary

tightening stance in December following the fourth rate hike of 2018, bringing the rate from

1.50% in January 2018 to 2.50% in January 2019. Still on the international front, earnings

from U.S. technology firms came up short of expectations, leading to a brisk sell-off of shares

and provoking discussions about an impending U.S. recession. At the end of Q4 2018 the dollar

appreciated to BRL 3.80, the BOVESPA index rose to 90,000 points and the 5-year interest

rate fell dramatically to 8.50%, with the target SELIC rate still steady at 6.50%. In the

international market, the American Stock Exchange fell 15% in Q4 2018, the European stock

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index fell 10% and the Japanese stock market dropped 17%, strong negative trends that

reflect the concerns cited above regarding the proximity of a recession in the United States.

In general terms, the Brazilian economy has been showing a recovery in both production and

employment levels, as well as in the management of government debt. The primary deficit

closed at BRL 108 billion in 2018, nicely below the target of BRL 160 billion, and below the

2017 deficit of BRL 124 billion.

GDP growth should reach approximately 1.30% in 2018, above the 1.0% registered in 2017.

Projections for 2019 anticipate 2.30% growth. Unemployment has been dropping slowly, but

remains at high levels. According to the PNAD household survey conducted at the end of 2018

the unemployment rate is 11.6%, down from 12.0% recorded at the end of 2017, the peak

having occurred in mid-2017 when unemployment reached 13.30%.

The slight increase in economic activity, with unemployment still high, greatly reduces the

potential inflationary impact. The IPCA consumer price index closed at 3.75% in 2018, well

below the target of 4.50%. The Central Bank’s monetary policy committee (COPOM) has

maintained the target SELIC rate at 6.50% since March, down from 7.0% at the end of 2017.

The total volume of credit operations grew 5.5% in 2018, up from the 0.50% drop observed

in 2017, to reach BRL 3.260 trillion. The average loan term increased to 122 months in 2018,

compared with 119 in 2017. Credit as a percentage of GDP was 47.40% at the end of 2018,

up from 47.20% at the end of 2017. In free credit operations, individuals defaulting for more

than 90 days fell to 4.8% in 2018, compared to 5.2% in 2017. Corporate default fell even

more to 2.7%, compared to 4.5% percent on the same basis of comparison.

For 2019, we believe in the continuing recovery of economic activity, employment and credit

in Brazil. The intensity of that recovery still depends on the approval of reforms and

stabilization of the debt/GDP ratio. In the balance of risks for Brazil’s economic recovery,

positive factors include: continued low inflation and SELIC rates, as well as higher exchange

rates, which stimulate exports. Negative factors include: unstable financial markets in

developed countries, growth slowdowns in the U.S., Europe and China and the intensity of

monetary restrictions applied by the Federal Reserve. Therefore, we believe that Brazil's

continued economic recovery throughout 2019 is nearly certain, the only unknown being the

intensity with which it will happen. According to the Central Bank’s FOCUS survey, the GDP

should grow 2.30% in 2019 and 2.5% in 2020, with projected inflation of 4.0% in both years.

Risk Management

Efficient risk management is essential for the sustainability of any financial institution.

Integrated risk management is strategic for BI&P and involves business continuity in adverse

operating conditions, compliance, money laundering prevention, information security, control

and mitigation of market risks and liquidity, besides the main risk to which it is exposed, credit

risk. Constant improvement of risk management is fundamental to generate stable financial

results and improve capital allocation.

BI&P have tools to identify and map the risks to which they are exposed, quantify this

exposure, take steps to mitigate it, and definitively manage any deviations and scenarios that

could interfere with their business and results. BI&P adopts positions that are consistent with

the guidelines and limits defined by the Management in its Risk Management Policies. Risk

management is present across all activities, especially in the committees that support the

Management in developing procedures, both in policies and internal rules as well as the

15

monitoring and mitigation of these risks. More details on risk management can be found on

our website (www.bip.b.br/ri).

Corporate Governance

Shares of Banco Indusval S.A. (IDVL3 and IDVL4) are traded at level 2 of Corporate

Governance in B3 S.A. since March 01, 2012 and grant voting rights restricted to preferred

shareholders in annual stockholder meetings regarding issues that are vital to the conduct of

the company's business, as detailed in this listing regulation. Additionally, the company has

voluntarily adopted required practices for companies listed on Brazil's Novo Mercado, among

them: (a) 100% tag along; (b) a minimum of 20% of independent members on the Board of

Directors; (c) membership in the arbitration chamber as a forum to resolve any issues with

shareholders; and, (d) free float of at least 25%.

The Board of Directors, chaired by Manoel Felix Cintra Neto, has two independent and highly

qualified directors, in addition to the controllers. The internal audit reports directly to the Board

of Directors. The Remuneration Committee, installed as a statutory body in accordance with

Resolution CMN No. 3.921/2010 in Assembly on May 07, 2015, is formed by four members of

the Board of Directors and a non-admin member. The Executive Board, in turn, elected for the

biennium 2017/2019, has three experienced market professionals captained by Jair Ribeiro

and Luiz Masagão, who share the Executive Presidency. The Executive Board participates in

and has the support of committees for discussion and deliberation on key issues, such as

credit, asset and liability management, products, internal audit issues, compliance, information

technology and information security, legal,treasury/proprietary position and human resources.

Capital Markets

Capital and Shares Outstanding: The share capital of Banco Indusval S.A. on December

31, 2018 was distributed in 152,527,251 shares of which 115,033,148 are common shares

(IDVL3) and 37,494,103 are preferred shares (IDVL4), with 543,396 shares held in Treasury.

After deducting the Treasury shares, the 80,745,877 shares belonging to the holding group,

and the 9,220,540 shares belonging to the Management, there is a total of 62,017,420 shares

in free circulation on the market (37,212,471 ON and 24,804,949 PN), equivalent to 40.7% of

total capital.

Consolidation of Shares: The Central Bank of Brazil approved the extraordinary general

meeting held on September 17, 2018 which decided on the consolidation of shares comprising

the share capital of Banco Indusval in the proportion of 10 (ten) shares of Banco Indusval to

1 (one) share of Banco Indusval. The consolidated shares were first traded on January 07,

2019, with the equity position of January 04, 2019. The main objectives of consolidating the

company’s shares were: (i) decrease stock volatility and (ii) confer better levels for the

quotation of shares issued by the company in order to avoid meaningless oscillations, in cents,

that represent high percentages in line with the guidelines and registration rules of B3 issuers

according to the Relevant Fact published on May 30, 2018.

Therefore, the share capital of Banco Indusval S.A., taking into consideration the consolidation

of shares, shall be distributed in 15,252,725 shares, of which 11,503,315 are common shares

(IDVL3) and 3,749,410 are preferred shares (IDVL4), with 54,340 held in Treasury. After

deducting the Treasury shares, the 8,074,571 shares belonging to the holding group and the

886,380 shares belonging to the Management, there is a total of 6,237,434 shares (3,718,024

ON and 2,519,410 PN) in free circulation on the market, equivalent to 40.9% of the total

capital .

16

Share Repurchase Program: There was no share repurchase program in effect throughout

the year.

Shareholder Remuneration: During 2018 there was no accrual or advance payment of

interest on own capital, calculated on the basis of the long-term interest Rate - TJLP on account

of the minimum dividend for the 2018 tax year.

Investor Relations: The investor relations area offers quality information with clarity and objectivity, in a timely manner. Seeking to expand and facilitate stakeholder access, our website (www.bip.b.br/ri) can also be viewed on tablets and smartphones. These resources complement the broad dissemination of information to the public through the Brazilian Securities Commission (CVM), B3 S.A., newspapers and distribution of electronic messages to applicants registered in our website.

Human Resources

BI&P and subsidiaries ended 2018 with 206 employees, whose salaries, fees, benefits and social

security contributions totaled BRL 83,9 million (including bank subsidiaries and Guide, the latter

until October 2018).

This year our focus has been on recruitment & selection, due to natural turnover and

restructuring of some areas.

Sustainability

The Partners do Bem program ended the year with 114 participating employees and BRL

54,800 in donations to beneficiary organizations.

Waste sorting and paper recycling is performed by a company hired by the Spazio Faria Lima

building and internal campaigns continue to promote natural resource consumption awareness

and reduction. Invoices were also collected for donation to Projeto Arrastão.

Communication & Marketing

The bank’s Marketing and Communications department worked on developing projects

together with IT and Acquisitions, focusing on customer service platforms and Online Accounts.

The department also developed materials for promoting BI&P’s foreign exchange service, and

fixed income products such as CDBest and LCA Plus, using social networks, a new Youtube

channel, our Web site and e-mail marketing campaigns.

Our events area is still focused on the agribusiness segment, and we held five meetings in the

cities of Araguari, Monte Carmelo, Carmo do Paranaíba, Varginha and São Roque de Minas, in

addition to attending the Expert XP fair, organized by the Catchment area.

Relationship with Independent Auditors

In accordance with CVM Instruction 381, of January 14, 2003, please be advised that the

company hired to audit the financial statements for the year ended December 31, 2018 has

not delivered, and is not contracted for the provision of other services to the Bank and its

subsidiaries and affiliates other than those related to external audit.

Statement by the Board of Directors

In compliance with Art. 25, § 1, sections V and VI of CVM Instruction No. 480, of December

07, 2009, the Board of Executive Directors of Banco Indusval S.A. declares that it has reviewed,

discussed and agreed with the financial statements of the year ended December 31 2018,

disclosed here, and with the views expressed in the independent auditors ' report.

17

Thanks

We appreciate the trust and support of our shareholders, customers, business partners and,

in particular, our employees, our most valuable asset, always aligned with our values and

helping us build, atop a solid foundation, a stronger, more dynamic and innovative bank.

São Paulo, March 29, 2019.

Management

Banco Indusval S.A.

Banco Indusval S.A. (Indusval & Partners) and Banco Indusval S.A. and Subsidiaries (Indusval & Partners Consolidated)

Balance sheet at December 31, In thousands of reais

18

Indusval & PartnersIndusval & Partners

Consolidated Indusval & PartnersIndusval & Partners

Consolidated

Assets 2018 2017 2018 2017 Liabilities and equity 2018 2017 2018 2017

Current assets 1,432,871 1,303,963 1.470,176 1,516,308 Current liabilities 1,199,153 1,151,148 1,121,669 1,255,421

Cash (Note 4) 6,455 8,557 6,767 9,198 Deposits (Note 10(a)) 670,336 624,885 641,812 598,547 Demand deposits 23,036 23,346 15,045 16,677 Short-term interbank investments (Note 4(b)) 770,529 328,671 770,529 322,126 Interbank deposits 20,533 48,443 28,537 Open market investments 755,996 250,576 755,996 244,031 Time deposits 626,767 553,096 626,767 553,333 Interbank deposits 14,533 78,095 14,533 78,095 Funds obtained in the open market (Note 10(b)) 243,192 69,983 192,392 46,373 Marketable securities and derivative Own portfolio 102,592 37,372 102,592 37,372 financial instruments (Note 5) 489,638 647,283 502,903 740,696 Third-party portfolios 140,600 32,611 89,800 9,001 Own portfolio 328,029 540,024 335,044 581,899 Subject to repurchase agreements 69,680 11,586 69,680 11,586 Funds from acceptance and issuance of securities (Note 10(a)) 263,890 413,783 263,890 414,196 Subject to guarantees 91,929 95,642 98,179 147,180 Agribusiness, Real estate and Financial credit bills 263,890 413,783 263,890 414,196 Derivative financial instruments (Note 5(c)) 31 31 Interdepartmental accounts 4,912 6,095 4,912 6,095 Interdepartmental accounts 367 541 367 541 Third-party funds in transit 4,912 6,095 4,912 6,095 Restricted deposits – Brazilian Central Bank 360 540 360 540 Restricted deposits – Agreements 7 1 7 1 Local Onlendings (Note 10(a)) 1,271 5,229 1,271 5,229 BNDES 1,375 1,375 Loan operations (Note 6) 82,768 226,738 95,739 268,035 FINAME 1,271 3,854 1,271 3,854 Loan operations – private sector 165,733 237,405 178,835 279,367 Allowance for loan losses (Note 6(a)) (82,965) (10,667) (83,096) (11,332) Derivative financial instruments (Note 5(c)) 30 2,721 30 2,721 Other receivables 82,671 92,059 85,916 167,078 Other liabilities 15,522 28,452 17,362 182,260 Foreign exchange portfolio (Note 7) 56,177 52,675 56,177 52,675 Foreign exchange portfolio (Note 7) 7,842 397 7,842 397 Income receivable 799 720 955 2,247 Negotiation and intermediation of securities (Note 12(a)) 356 210 356 137,970 Negotiation and intermediation of securities (Note 8(b)) 6,173 17,900 7,225 83,509 Taxes and social security contributions 1,773 1,883 3,204 6,660 Sundry (Note 8(a)) 20,199 24,198 22,244 32,081 Social and statutory payables 770 900 770 8,853 Allowance for loan losses (Note 6(a)) (677) (3,434) (685) (3,434) Collection and payment of taxes and similar 84 58 84 71 Sundry 4,697 25,004 5,106 28,309 Other assets (Note 8(c)) 443 114 7,955 8,634 Non-operating assets 7,336 7,745 Prepaid expenses 443 114 619 889


Balance sheet at December 31, In thousands of reais (continuation)

The accompanying notes are an integral part of these consolidated financial statements. 19

Indusval & PartnersIndusval & Partners

Consolidated Indusval & PartnersIndusval & Partners

Consolidated

Assets 2018 2017 2018 2017 Liabilities and equity 2018 2017 2018 2017

Long-term receivables 874,782 990,641 942,635 1,077,733 Long-term liabilities 1,145,205 1,092,279 1,175,885 1,123,700

Marketable securities and derivative Deposits (Note 10(a)) 1,081,304 960,931 1,081,090 959,686 financial instruments (Note 5) 33,010 34,475 33,010 34,475 Time deposits 1,081,304 960,931 1,081,090 959,686 Own portfolio 457 8,231 457 8,231 Subject to repurchase agreements 32,553 26,244 32,553 26,244 Funds from acceptance and issuance of securities (Note 10(a)) 10,657 107,869 10,657 107,869 Agribusiness, Real estate and Financial credit bills 10,657 107,869 10,657 107,869 Interdepartmental accounts 2,841 2,669 2,841 2,669 Restricted deposits – Agreements 2,841 2,669 2,841 2,669 Local Onlendings (Note 10(a)) 7,142 8,303 7,142 8,303 National Treasury 4,236 3,868 4,236 3,868 Loan operations (Note 6) 39,951 215,427 41,113 218,433 FINAME 2,716 4,245 2,716 4,245 Loan operations – private sector 102,091 248,281 103,265 251,342 Other institutions 190 190 190 190 Allowance for loan losses (62,140) (32,854) (62,152) (32,909) Other liabilities 46,102 15,176 76,996 47,842 Other receivables 588,029 502,189 654,720 584,067 Taxes and social security contributions 3,537 3,537 69 Credits for guarantees honored (Note 6(a)) 4,456 4,456 Sundry 42,565 15,176 73,459 47,773 Negotiation and intermediation of securities (Note 8(b)) 1,052 510 Foreign exchange portfolio (Note 7) 6,404 6,404 Deferred income 1,908 4,112 1,908 4,112 Income receivable 1,264 2,936 1,264 2,936 Sundry (Note 8(a)) 606,281 604,955 634,024 686,624 Minority interest 1,124 Allowance for loan losses (Note 6(a)) (26,972) (110,158) (26,972) (110,459) Equity (Note 13) 145,520 270,860 145,520 270,860 Other assets (Note 8(c)) 210,951 235,881 210,951 238,089 Capital Non-operating assets 244,359 251,941 244,359 251,941 Local capital 849,843 849,843 849,843 849,843 Prepaid expenses 481 610 481 2,818 Capital reserves 35,960 35,960 35,960 35,960 Provision for losses (33,889) (16,670) (33,889) (16,670) Carrying value adjustments (474) (198) (474) (198) Accumulated deficit (735,526) (610,462) (735,526) (610,462) Permanent assets 184,133 223,795 32,171 61,176 Treasury shares (4,283) (4,283) (4,283) (4,283)

Investments 178,429 216,721 25,962 17,986 Subsidiary and associated companies (Note9(a)) 176,743 215,035 24,269 16,265 Other investments 1,686 1,686 1,693 1,721 Property and equipment in use (Note 9(b)) 1,787 2,817 2,286 4,466 Other – Property and equipment in use 21,092 21,409 21,657 25,555 Accumulated depreciation (19,305) (18,592) (19,371) (21,089) Intangible assets (Note 9(c)) 3,917 4,257 3,923 38,724 Goodwill 28,702 Other intangible assets 14,240 13,100 14,246 37,647 Accumulated amortization (10,323) (8,843) (10,323) (27,625) Total assets 2,491.786 2,518,399 2,444,982 2,655,217 Total liabilities and equity 2,491,786 2,518,399 2,444,982 2,655,217


Statement of operations In thousands of reais, unless otherwise stated


Indusval & Partners Indusval & Partners Consolidated

Six months ended

December 31 Year ended December 31 Year ended December 31

2018 2018 2017 2018 2017

Income from financial intermediation (Note 15(a)) 114,335 186,236 293,371 208,309 319,487

Loan operations 34,854 61,357 101,553 65,454 116,824 Marketable securities 30,249 64,698 150,446 84,888 161,199 Derivative financial instruments 35,431 32,007 23,204 29,793 23,296 Foreign exchange 13,801 28,174 18,168 28,174 18,168 Expenses for financial intermediation (Note 15(b)) (218,600) (399,386) (439,768) (394,269) (435,779)

Funds obtained in the open market (88,274) (176,427) (298,496) (171,880) (295,167) Loans and onlendings (10,000) (13,159) (10,207) (13,159) (10,210) Sales/transfers of financial assets (Note 6(g)) (8,106) (8,106) Allowance for loan losses (Note 6(a)) (120,326) (209,800) (122,959) (209,230) (122,296) Net profit/(loss) from financial intermediation (104,265) (213,150) (146,397) (185,960) (116,292)

Other operating income/(expense) (69,080) (113,123) (103,482) (124,499) (115,631)

Income from services rendered (Note 15(c)) 992 3,332 9,220 106,239 91,793 Income from bank fees (Note 15(c)) 218 410 391 414 392 Personnel expenses (Note 15(d)) (22,040) (45,853) (45,228) (83,940) (85,447) Other administrative expenses (Note 15(e)) (25,168) (48,969) (43,718) (116,123) (98,650) Taxes (Note 15(f)) (1,057) (2,021) (2,340) (13,438) (11,799) Equity in the earnings of subsidiaries and associated companies (Note 9(a)) (3,219) (805) (13,108) 1,728 951 Other operating income (Note 15(g)) 3,927 11,508 8,506 67,011 196,706 Other operating expenses (Note 15(h)) (22,733) (30,725) (17,205) (86,390) (209,577) Operating profit/(loss) (173,345) (326,273) (249,879) (310,459) (231,923)

Non-operating income/(expenses) (Note 15(i)) 142,604 131,970 (7,087) 131,943 (7,916)

Profit/(loss) before taxation (30,741) (194,303) (256,966) (178,516) (239,839)

Income tax and social contribution (Note 11(a)) 27,323 70,926 36,507 69,981 32,314

Income tax (2,211) (2,211) 1,100 (2,877) (244) Social contribution (1,326) (1,326) 660 (1,702) (278) Deferred tax assets 30,860 74,463 34,747 74,560 32,836 Profit sharing and statutory contributions (Note 14(b)) (714) (1,687) (2,437) (16,537) (15,989)

Employees (714) (1,687) (2,437) (16,537) (15,989) Profit/(loss) for the period (4,132) (125,064) (222,896) (125,072) (223,514)

Attributable to controlling interest (125,064) (222,896) Attributable to minority interest (8) (618) Number of outstanding shares 151,983,855 151,983,855 151,983,855

Profit/(loss) per share (0,02719) (0,82288) (1.46658)


Statement of changes in equity In thousands of reais


Retained Carrying earnings/ Equity of the Capital value accumulated Treasury controlling Minority Capital reserves adjustments (deficit) shares interest interest Total

At January 1, 2017 849,843 35,960 (126) (387,566) (4,283) 493,828 1,396 495,224

Carrying value adjustments (Note 5(b)) (72) (72) (72) Loss for the year (222,896) (222,896) (618) (223,514) Increase/(decrease) - Minority interest 346 346 At December 31, 2017 849,843 35,960 (198) (610,462) (4,283) 270,860 1,124 271,984

Changes for the year (72) (222,896) (222,968) (272) (223,240)

At January 1, 2018 849,843 35,960 (198) (610,462) (4,283) 270,860 1,124 271,984

Carrying value adjustments (Note 5(b)) (276) (276) (276) Loss for the year (125,064) (125,064) (8) (125,072) Increase/(decrease) - Minority interest (1,116) (1,116) At December 31, 2018 849,843 35,960 (474) (735,526) (4,283) 145,520 145,520

Changes for the year (276) (125,064) (125,340) (1,124) (126,464)

At July 1, 2018 849,843 35,960 (105) (731,394) (4,283) 150,021 1,129 151,150

Carrying value adjustments (Note 5(b)) (369) (369) (369) Loss for the six-month period (4,132) (4,132) (4,132) Increase/(decrease) - Minority interest (1,129) (1,129) At December 31, 2018 849,843 35,960 (474) (735,526) (4,283) 145,520 145,520

Changes for six-month period (369) (4,132) (4,501) (1,129) (5,630)


Statement of cash flows In thousands of reais, unless otherwise stated



Six months ended

December 31 Year ended December 31 Year ended December 31

2018 2018 2017 2018 2017

Adjusted net income/(loss) (11,404) (15,747) (80,120) (11,336) (87,338)

Net income/(loss) (4,132) (125,064) (222,896) (125,072) (223,514) Depreciation and amortization 17,741 21,009 8,384 27,223 13,264 Equity in the earnings of subsidiaries and associated companies 3,219 805 13,108 (1,728) (951) Allowance for loan losses 120,326 209,800 122,959 209,230 122,296 Provision for loss on non-operating assets 5,133 17,219 3,776 17,219 3,043 Provision for contingencies 5,614 13,064 10,533 14,356 13,080 Gain on sale of tangible assets (11,934) (13,385) 4,863 (13,385) 6,425 Gain/(loss) on sale of investments (142,542) (142,543) (1,484) (142,543) (1,484) Market to market adjustment – Marketable securities and derivatives (4,829) 3,348 (19,363) 3,364 (19,497) Changes in assets and liabilities 162,788 194,356 (350,874) 238,396 (331,887)

(Increase)/decrease in short-term interbank investments 53,215 (79,586) 169,146 (52,394) 183,638 (Increase)/decrease in marketable securities and derivative financial instruments 35,798 152,593 435,937 232,724 410,522 (Increase)/decrease in interbank and interdepartmental accounts 2,989 (1,182) (3,198) (1,182) (3,198) (Increase)/decrease in loan operations 57,605 165,212 411,205 195,958 452,391 (Increase)/decrease in other receivables and other assets (56,578) (132,219) (105,561) (42,458) (130,793) Increase/(decrease) in deposits 119,244 165,823 (483,127) 164,672 (482,999) Increase/(decrease) in repo operations 30,549 173,210 (171,945) 146,019 (186,432) Increase/(decrease) in agribusiness, real estate and financial credit bills (84,765) (247,105) (564,844) (247,518) (573,735) Increase/(decrease) in borrowings and onlendings (1,132) (5,119) (17,958) (5,119) (19,156) Increase/(decrease) in deferred income 313 (2,204) (2,311) (2,204) (2,311) Increase/(decrease) in other liabilities 5,550 4,933 (18,218) (150,102) 20,186 Net cash provided by (used in) operating activities 151,384 178,609 (430,994) 227,060 (419,225)

Disposal of tangible assets 31,714 45,437 98,753 52,852 111,699 Purchases of tangible assets (7,357) (24,437) (121,524) (30,714) (126,909) Disposal of intangible assets 20,497 Purchases of intangible assets (1,140) (9,952) (2,966) Disposal of investments 170,219 170,260 5,315 134,821 5,315 Purchases of investments (8,694) (8,701) (30,054) (13) Dividends received 143 566 143 566 Net cash provided by (used in) investing activities 185,882 181,562 (46,944) 167,634 (12,295)

Increase/(decrease) in minority interest (1,116) 346 Net cash provided by (used in) financing activities (1,116) 346 Increase/(decrease) in cash and cash equivalents 337,266 360,171 (477,938) 393,578 (431,174)

Opening balance of cash and cash equivalents 299,118 276,213 754,151 293,919 725,093 Closing balance of cash and cash equivalents 636,384 636,384 276,213 687,497 293,919 Increase/(decrease) in cash and cash equivalents (Note 4(a)) 337,266 360,171 (477,938) 393,578 (431,174)


Statement of value added In thousands of reais



Year ended December 31 Year ended December 31

2018 2017 2018 2017

Income 123,700 181,468 304,693 478,125

Financial intermediation 186,236 293,371 208,309 319,487 Services rendered and bank fees 3,742 9,611 106,653 92,185 Allowance for loan losses (209,800) (122,959) (209,230) (122,296) Others 143,522 1,445 198,961 188,749 Expenses for financial intermediation (189,586) (316,809) (185,039) (313,483)

Goods and services acquired from third parties (53,540) (47,093) (168,086) (286,979)

Materials, electricity and others (17,743) (17,714) (41,183) (41,776) Third-party services (23,635) (17,770) (59,319) (41,524) Others (12,162) (11,609) (67,584) (203,679) Gross value added (119,426) (182,434) (48,432) (122,337)

Depreciation and amortization (21,009) (8,384) (26,886) (13,264)

Net value added produced by the Institution (140,435) (190,818) (75,318) (135,601)

Value added transferred from others (805) (13,067) 1,728 992

Equity in the earnings of subsidiaries and associated companies (805) (13,108) 1,728 951 Others 41 41 Total value added to be distributed (141,240) (203,885) (73,590) (134,609)

Distribution of value added (141,240) (203,885) (73,590) (134,609)

Personnel 41,369 40,547 88,934 88,172

Direct remuneration 31,852 31,826 70,998 71,618 Benefits 7,080 6,718 13,962 13,079 Employee severance indemnity fund (FGTS) 2,437 2,003 3,974 3,475 Taxes, charges and contributions (62,699) (27,008) (44,964) (7,210)

Federal (63,840) (28,484) (51,071) (12,667) State 4 8 11 29 Municipal 1,137 1,468 6,096 5,428 Remuneration of third-party capital 5,154 5,472 7,512 7,943

Rents 5,154 5,472 7,512 7,943 Remuneration of own capital (125,064) (222,896) (125,072) (223,514)

Loss for the year (125,064) (222,896) (125,064) (222,896) Minority interest (8) (618)

Banco Indusval S.A. (Indusval & Partners) and Banco Indusval S.A. and Subsidiaries (Indusval & Partners Consolidated) Notes to the Financial Statements At December 31, 2018 and 2017 In thousands of reais, unless otherwise stated

24

1 Operations The Banco Indusval S.A., “Bank or Institution”, (a multiple bank) and its subsidiaries operate mainly with commercial, investment and foreign exchange portfolios and other transactions related to securities brokerage and distribution. On May 14, 2014, the Central Bank of Brazil approved the change in the corporate object of Banco Indusval S.A. to a multiple bank, with commercial and investment portfolios. The Institution, a corporation headquartered at Rua Iguatemi, 151, 6.th floor, São Paulo – SP, Brazil, has been listed on the São Paulo Stock Exchange (IDVL 3 and IDVL 4) since July 2007 and has seven regional branches, six of which are located in Brazil's most important commercial centers and one in the Cayman Islands (the Branch). The consolidated financial statements of Banco Indusval S.A. (Indusval & Partners) and its subsidiaries (Indusval & Partners Consolidated) were approved by the Board of Directors on March 29, 2019.

2 Financial Statement Presentation

(a) Basis of presentation The financial statements of the Institution (Indusval & Partners) and the consolidated financial statements of Banco Indusval S.A. and its subsidiaries (Indusval & Partners Consolidated) were prepared in accordance with Brazilian Corporation Law, together with the regulations of the Brazilian Central Bank (BACEN) and the Brazilian Securities Commission (CVM). The consolidated financial statements includes the financial statements of the Banco Indusval S.A., its branch abroad and the other subsidiaries: Company Relation Activities % Ownership

2018 2017

Guide Investimentos S.A. Corretora de Valores (*) Associated

company (From 2018 and Subsidiary in 2017)

Brokerage of securities.

20.000 96.307

BI&P Comércio de Cereais Ltda. Subsidiary Agricultural securities and operations.

100.000 100.000

BI&P Assessoria e Participações Ltda. (**) Subsidiary Financial advisory and corporate finance.

100.000 100.000

Banco Intercap S.A. Subsidiary Financial institution.

100.000 100.000

Distribuidora Intercap de Títulos e Valores Mobiliários S.A. (***)

Subsidiary Distribution of securities. 100.000 100.000

Guide Consultoria de Negócios Ltda. (****) Subsidiary (In 2017)

Provision of advisory and consulting services related to the mediation/intermediation of businesses and securities.

99.950

Simplific Pavarini Gestão de Patrimônio Ltda. (****)

Subsidiary (In 2017)

Management of security portfolios. 99.995

Sertrading S.A. Associated company

Logistics and foreign trade. 13.730 13.730

Gran Partners Negócios Imobiliários S.A.(*****) Jointly controlled investment (In 2017)

Acquisition, sale and provision of services relating to receivables from real estate contracts and enterprises and housing finance in general.

50.000

(*) The Guide Investments S.A was controlled by Banco Indusval S.A until October 2018. Since the sale (Note 2 (b)), the Institution has been holding 20% of the Guide Investimentos’s equity. (**) New company name for Voga Empreendimentos e Participações Ltda. (***)In October 2017, Distribuidora Intercap de Títulos e Valores Mobiliários S.A., which was controlled by Banco Intercap S.A., became directly controlled by Banco Indusval SA. (****)Companies acquired by Banco Indusval S.A. in August 2017, which in 2018 were controlled by Guide Investimentos S.A. and, with Guide's sale, are not Banco Indusval S.A associated companies anymore. (*****) Company closed in 2018.

For further details on these investments, see note 9(a).


25

(b) Sale of the Guide Investimentos S.A and its subsidiaries

Banco Indusval executed, on February 26, 2018, with Fosun Investimentos (Brasil) Ltda., an integral subsidiary of Fosun Group, one of the world’s leading multinational companies, the Share Purchase and Sale Agreement, which establishes the binding terms and conditions for the selling to Fosun of common shares and preferred shares held by Banco Indusval, which will represent, on the closing date of the Transaction, 69.14% of the total capital of Guide Investimentos S.A. Corretora de Valores, for the amount of up to R$ 287,900. On August 08, 2018 the Brazilian Central Bank approved the sale of Guide Investimentos S.A. The aforementioned sale was approved by the Central Bank of Brazil on August 8, 2018. Thus, Guide Investimentos S.A. became an affiliate of Banco Indusval & Partners since it holds 20% of the capital of that company. At the close of the transaction, which occurred in November 2018, a total of R $ 167,900 was received in connection with the sale to Fosun, R$ 2,100 for the sale of 2,933 preferred shares to certain Guide executives and was paid by the Bank to the shareholders the amount of R$ 23,358, related to the acquisition of subscription bonus and other price adjustments. Therefore, was registered a profit on disposal of investments of R$ 135,941, accounted for under Non-Operating Income in the Statement of Income. Below, the consolidated balance sheet of Banco Indusval S.A as of December 31, 2017, without the effects of the Guide for comparison purposes:

Indusval & Partners Consolidated

- Without Guide


- Without Guide

Assets 2017 Liabilities and equity 2017

Current assets 1,368,713

Current liabilities 1,103,335

Cash 8,956 Deposits 599,289

Short-term interbank investments 328,671 Funds obtained in the open market 46,373

Marketable securities and derivative financial instruments 661,746 Funds from acceptance and issuance of securities 414,196

Interdepartmental accounts 541 Interdepartmental accounts 6,095

Loan operations 268,035 Local Onlendings 5,229

Other receivables 92,905 Derivative financial instruments 2,721

Other assets 7,859 Other liabilities 29,432

Long-term receivables 1,059,943 Long-term liabilities 1,121,247

Marketable securities and derivative financial instruments 34,475 Deposits 959,686

Interdepartmental accounts 2,669 Funds from acceptance and issuance of securities 107,869

Loan operations 218,433 Local Onlendings 8,303

Other receivables 568,485 Other liabilities 45,389

Other assets 235,881

Permanent assets 70,898 Deferred income 4,112

Investments 46,816

Property and equipment in use 2,838 Equity 270,860

Intangible assets 21,244 Local capital 849,843

Capital reserves 35,960

Carrying value adjustments (198)

Accumulated deficit (610,462)

Treasury shares (4,283)

Total assets 2,499,554 Total liabilities and equity 2,499,554

Not audited information


26

(c) Critical judgments and estimates When preparing the consolidated financial statements, estimates and assumptions were used to determine the amounts of certain assets, liabilities, income and expenses in accordance with accounting practices adopted in Brazil. These estimates and assumptions were considered in the measurement of the allowance for loan losses, and provisions for non-operating assets and contingencies, in the determination of the market value of financial instruments, deferred income and social contribution taxes and in the selection of the economic useful lives of certain assets. Actual results may differ from estimates and assumptions adopted.

(i) Determination of the market value of certain financial instruments The market value of financial instruments without an active market or whose prices are not available are calculated through pricing techniques. In these cases, the fair values are estimated through the data of similar instruments or through models. When observable market data is not available, they are estimated based on appropriate assumptions. When pricing techniques are used, they are periodically validated and reviewed in order to maintain their reliability. (ii) Financial assets held to maturity The Institution classifies certain non-derivative financial assets with fixed or determinable payments and fixed maturity as financial assets "held to maturity". This classification requires significant judgment, taking into account the intention and capacity to maintain these investments until maturity. (iii) Impairment of non-financial assets According to CPC (Brazilian Accounting Pronouncements Committee) Pronouncement 01, non-financial assets must also be tested for impairment annually in certain situations. The Bank uses cash flow estimates (amount and term), as well as the appropriate discount rates, to calculate the recoverable value (value in use). (iv) Deferred income tax and social contribution on net income Tax credits are recognized only in relation to temporary differences and tax losses to the extent that it is considered probable that the Bank will generate future taxable income for their offset. The expected realization of tax credits of the Institution is based on the projection of future taxable income and other technical studies. (v) Allowance for loan losses The allowance for loan losses is calculated at an amount sufficient to cover probable losses and considers the rules and instructions of the National Monetary Council (CMN) and the Brazilian Central Bank, associated with assessments made by management in determining the credit risks. The amounts of the allowances are mainly determined taking into account the arrears and the credit risk of each loan transaction. These amounts may differ from the present values of the estimated receipts, as well as from the amounts actually received.


27

(vi) Contingent assets and liabilities and legal obligations (tax and social security) The recognition, measurement and disclosure of contingent assets and liabilities and legal obligations (tax and social security) are made in accordance with the criteria set out in Resolution CMN 3823/09, which approved CPC 25 - Provisions, Contingent Assets and Contingent Liabilities and Circular Letter 3429/10 of the Brazilian Central Bank. The amounts recorded or disclosed in the notes are based on the best estimates, including the probability of occurrence of the matter at issue. These facts and amounts may differ from the actual future events.

(d) Process of Convergence with International Financial Reporting Standards (IFRS)

Law 11638 was enacted on December 28, 2007 for the purpose of adjusting Brazilian corporate legislation to enable the convergence of the accounting practices adopted in Brazil with those issued by the International Accounting Standards Board (IASB). As part of the process of convergence with international accounting standards, certain rules and interpretations were issued by the Brazilian Accounting Pronouncements Committee (CPC), which will be applicable to financial institutions only after approval by the Brazilian Central Bank. The accounting standards which have already been approved are the following:

• Resolution 3566/08 – Impairment of Assets (CPC 01(R1));

• Resolution 3604/08 – Statement of Cash Flows (CPC 03(R2));

• Resolution 3750/09 – Related-Party Disclosures (CPC 05(R1));

• Resolution 3823/09 – Provisions, Contingent Liabilities and Contingent Assets (CPC 25);

• Resolution 3973/11 – Subsequent Events (CPC 24);

• Resolution 3989/11 – Share-Based Compensation (CPC 10(R1));

• Resolution 4007/11 – Accounting Policies, Change in Estimates and Correction of Errors (CPC 23)

• Resolution 4144/12 – Conceptual Framework for the Preparation and Presentation of the Accounting-Financial Report (Basic Conceptual Standard (R1)), except in matters that do not conflict with the provisions of BACEN;

• Resolution 4424/15 – Employee benefits (CPC 33 (R1)). Required for fiscal years beginning after January 1, 2016;

• Resolution 4524/16 – The Effects of Changes in Foreign Exchange Rates (CPC 02(R2));

• Resolution 4534/16 – Intangible Assets (CPC 04(R1)); and

• Resolution 4535/16 – Property and equipment (CPC 27). At present, it is not practicable to estimate when Brazilian Central Bank will approve the other CPC accounting standards or whether their application to the financial statements will be retrospective or solely effective for future periods. Consequently, it is not yet possible to estimate the accounting effects of these standards on the financial statements of Institution.

(e) Consolidated financial statements The consolidated financial statements comprises the financial statements of Banco Indusval S.A., its foreign branch and the subsidiaries: Banco Intercap S.A. (Intercap), Distribuidora Intercap de Títulos e Valores Mobiliários S.A. (Intercap DTVM), BI&P Comércio de Cereais Ltda. (BI&P Cereais), BI&P Assessoria e Participações Ltda. (BI&P Assessoria).


28

The Bank's investments in the subsidiaries, as well as the assets and liabilities, income and expenses and the unrealized profit or loss of intercompany transactions, were eliminated on consolidation. The Cayman Branch was authorized to operate by the Brazilian Central Bank on March 5, 2008 and, at December 31, 2018, its total assets amounted to R$ 83,672 (December 31, 2017, R$ 118,390), the equity was R$26,069 (December 31, 2017, R$ 72,116) and the profit was R$(614) accumulated for the year 2018 (accumulated for the year 2017, R$ 3,609).

3 Significant Accounting Practices The main accounting practices applied in the preparation of the quarterly financial information are defined bellow. These practices were applied consistently in the periods presented, unless stated otherwise.

(a) Results of operations The results of operations are recorded on the accrual basis of accounting, which establishes that income and expenses must be recorded in the period in which they occurred, always simultaneously when correlated, independent of their receipt or payment.

(b) Cash and cash equivalents

Cash and cash equivalents comprise cash in local and foreign currency, investments in the open market (except for financed positions) and investments in interbank deposits (except for rural Interbank Deposit Certificates (CDI)), with maturities at the original investment date equal to or less than 90 days and which present an immaterial risk of change in fair value. These are used by the Bank to manage its short-term commitments.

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

(d) Marketable securities and derivative financial instruments Marketable securities are valued and classified as follows:

• Trading securities - securities acquired to be traded on a frequent and active basis, adjusted to market value with contra-entry to income for the period.

• Securities available for sale - securities which are neither trading securities nor securities held to maturity, adjusted to market value with contra-entry to a specific equity account, net of tax effects.

• Securities held to maturity - securities which management acquires with the intention and financial ability to hold up to maturity, recorded at acquisition cost plus related income with contra-entry to income for the period.

As established by BACEN Circular 3068/01, securities classified for trading purposes are presented in the balance sheet in current assets regardless of their maturity date.


29

Derivative financial instruments are classified by management at the inception of the transaction, according to their intended use. The derivative financial instruments designated for hedging purposes are used to protect exposures to risk or to modify the characteristics of financial assets and liabilities and are recorded at market value, with the corresponding valuations or devaluations recognized directly in income for the period.

(e) Loan operations and other receivables (operations with loan characteristics) Loan operations, in their various types, are recorded at present value, including income accrued up to the balance sheet date when at floating interest rates, and net of unearned income based on the terms of the transactions, when at fixed interest rates. The restatement of overdue loans is recorded as income from loans up to the 59th day, and as unearned income as from the 60st 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 for loan losses and controlled, for up to five years, in memorandum accounts and no longer presented in the balance sheet. Renegotiated loans are held at the same level at which they were previously classified, Renegotiations of loans that had already been written off against the allowance for loan losses 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 calculated on a case by case basis, based on management's analysis of the loans in order to determine the amount required and takes into consideration the economic environment, past experience and the specific and overall portfolio risks, as well as the rules established by National Monetary Council Resolution (“CMN”) 2682/99. The customer risk ratings are established based on a credit score model, without any possibility that the Credit Committee may change the rating. For transaction with terms of more than 36 months, the Bank opted for double counting the past-due periods, as permitted by CMN Resolution 2682/99, to determine the risk level for the transaction. In accordance with CMN Resolution 3533/08, the information on each of the categories used to classify financial asset sales must be disclosed in the notes to the financial statements (Note 6(g)). These categories are:

• Transactions with substantial transfer of risks and rewards: the asset must be derecognized and the results recognized in the statement of operations at the time of transfer;

• Transactions with substantial retention of risks and rewards: the asset must not be derecognized, but a liability must be recognized. The result is computed over the period of the transaction; and

• Transactions with neither substantial transfer nor retention of risks and rewards must be evaluated by the institution which controls the asset.


30

(f) Other assets Comprised mainly of non-operating assets, corresponding to own or unused property, or property received as payment in kind, adjusted to market value through the recording of a provision, in accordance with the rules in force. Non-operating assets with low liquidity may be subject to an independent valuation, and if that is less than the carrying amount, an additional provision is recorded in order to adjust the book value to the realizable value of the asset. Prepaid expenses include the investment of resources whose benefits will occur in future periods.

(g) Investments The investments in subsidiary and associated companies are stated on the equity method of accounting. The other investments are stated at cost.

(h) Property and equipment and intangible assets Property and equipment are stated at cost. Depreciation is computed on the straight-line basis at the annual rates of 20% for vehicles and data processing systems and at 10% for other items. The Bank's intangible assets comprise goodwill on the acquisition of investments in corporate entities and also other intangible assets. The goodwill is amortized based on the expected future profitability of the investees.

(i) Interbank and time deposits, funds obtained in the open market and from financial, agribusiness and real estate letters of credit These deposits and the funds obtained in the open market and from financial, agribusiness and real estate letters of credit are stated at their corresponding contractual amounts plus accrued charges, in proportion to the time elapsed from the day on which they were contracted.

(j) 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 rates in effect on the reporting dates.

(k) Income tax and social contribution (assets and liabilities) Deferred income tax and social contribution, calculated on temporary differences, are recorded in "Other receivables - Sundry". Deferred tax assets on temporary differences are realized upon the use and/or reversal of the corresponding provisions on which they were recorded. The provision for income tax is recorded at the rate of 15% of taxable income, plus an additional 10%. The social contribution on profit is calculated at the rate of 20% (increase of the rate from 15% to 20% based on Law 13169 of 2015, for the period from 09/01/2015 to 12/31/2018).


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(l) Contingent assets and liabilities and legal obligations - taxes and social security contributions These are measured, recognized and disclosed in accordance with the criteria established by Circular Letter 3429/10, CVM Decision 594/09 and ratified by BACEN Resolution 3823/09, (CPC 25 - Provisions, Contingent Liabilities and Contingent Assets).

(i) Contingent assets and liabilities These comprise potential rights and obligations arising from past events, the occurrence of which depends on future events.

• Contingent assets: are not recorded other than when there is evidence which assures a high degree of confidence that they will be realized, normally through a final and unappealable court decision, and the confirmation of recoverability through receipt or offset against another liability.

• Contingent liabilities: arise mainly 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, as well as from other risks. The evaluation of these contingencies is carried out by legal advisors on a conservative basis and considers the probability that financial resources will be required to settle the obligations and that their amounts can be reliably estimated. The contingencies are classified as probable, for which provisions are recorded; as possible, which are disclosed but for which no provisions are recorded; and as remote, which require neither provisions nor disclosure. The contingency amounts are calculated using models and criteria which permit adequate estimates; despite the inherent uncertainty regarding terms and amounts.

(ii) Legal obligations - tax and social security These are tax liabilities, the legality or constitutionality of which is being contested in court, and which are recorded at the full amount in dispute.

(m) Impairment of non-financial assets

According to CPC 01, the Banco Indusval S.A. and its subsidiaries review the values of non-financial assets annually, except other assets and deferred tax assets to determine whether there is any indication of impairment loss. This is recognized in the statement of operations for the period if the carrying amount of the asset exceeds its recoverable amount. The balances of goodwill arising from the acquisition of businesses and the intangible assets with indefinite useful life are tested for impairment at least annually, regardless of whether there is any indication of impairment. Property and equipment, investments in subsidiaries, associates and joint ventures and other intangible assets are tested only if there is objective evidence of impairment.


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(n) Share-based remuneration The Bank provides share-based remuneration plans, under which it awards stock options as consideration for employee services. The fair value of the employee services received is recognized as an expense and the corresponding grant of shares in a specific equity account, based on the fair value of the options granted, excluding the effects of any vesting conditions based on the service and performance which are not market variables. These are included in the assumptions regarding the number of options expected to vest. The total amount of the expense is recognized during the vesting period (the period over which the specific vesting conditions should be met). At the reporting date, the Institution reviews the estimated number of options expected to vest based on the vesting conditions which are not market variables.

(o) Deferred income This consists of commissions for sureties issued, which were received in cash and which will be appropriated on the straight-line basis to income up to the due date, in the event the specified debtor fulfills its corresponding contractual obligation (i.e. does not default). If the debtor defaults, the Bank immediately recognizes the balance accumulated in deferred income as income for the period.

4 Cash and Cash Equivalents and Short-Term Interbank Investments

(a) Cash and cash equivalents Indusval & Partners Indusval & Partners Consolidated

2018 2017 2018 2017

Cash 6,455 8,557 6,767 9,198Short-term interbank investments (cash equivalents) 629,919 267,656 680,730 284,721 Cash and cash equivalents 636,384 276,213 687,497 293,919

(b) Short-term interbank investments


2018 2017

Open Market Investments 755,996 244,031

Own portfolio position 666,196 235,029

Treasury Bills (Prefixed) 212,199 137,517 Treasury Bills (IPCA) 453,997 97,512 Third Party Portfolio position 89,800 9,002

Treasury Bills (Prefixed) 89,800 2,501 Treasury Bills (IPCA) 6,501 Interbank Deposits 14,533 78,095

Interbank deposits 28,404

Rural CDI 28,404 Foreign currency 14,533 49,691 770,529 322,126

Current 770,529 322,126


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5 Marketable Securities and Derivative Financial Instruments

(a) Valuation, classification and risk management The valuations of fixed income securities and derivative financial instruments are obtained from the markets with greatest liquidity or, in their absence, from correlated markets, including through the interpolation and extrapolation of the terms. The risk management structure, as well as the methodology adopted for calculating capital, are available for consultation on the Bank's website at the following address: http://www.bip.b.br/ir/corporate-governance/risk-management

(b) Marketable securities Indusval & Partners Consolidated

2018 2017

Amortized cost

Market adjustment

Market/ book value

No maturity

Up to 90 days

91 to 180 days

181 to 360 days

361 to 1080 days

1081 to 1800 days

Over to 1800 days

Market/ book value

Trading Securities 510,676 (8,481) 502,195 133,181 130,220 643 6,969 204,692 840 25,650 731,620

Treasury Bills (Selic) 288,175 (22) 288,153 56,971 204,692 840 25,650 459,189

Treasury Bills (Prefixed) 426

Treasury Bills (IPCA) 641 2 643 643 618

Debentures 184

Bank deposit certificates - CDBs 281

Agricultural Product Bonds - CPRs 26,142 (323) 25,819 18,850 6,969 128,471Agribusiness Receivables Certificates -

CRA 16,890

Warrants 57,260 (2,861) 54,399 54,399 8,549

Equity securities 6,968 (5,277) 1,691 1,691 18

Investment fund shares (*) 131,490 131,490 131,490 116,927

Bills of exchange 67

Available-for-sale securities 34,297 (579) 33,718 708 33,010 41,504

Treasury Bills (IPCA) 710 (2) 708 708 7,029

Debentures 33,587 (577) 33,010 33,010 34,475

Securities held to maturity 2,016

Agrarian debt bonds - TDAs

Debentures 2,016 Total 544,973 (9,060) 535,913 133,181 130,220 1,351 6,969 237,702 840 25,650 775,140

Total – 2017 780,305 (5,165) 775,140 116,945 150,251 19,873 116,033 107,912 259,341 4,785

(*) The Bank has 105.111.079 senior shares of the Investment Fund in Credit Rights Agribusiness Funding I, amounting to R$ 118,164 (December 31, 2017 - R$ 112,802).

(c) Derivative financial instruments

The Bank uses derivative financial instruments, according to its risk management policy, with the objective of hedging risks and mitigating exposure mainly resulting from fluctuations in interest and foreign exchange rates. The derivative instruments used are designed to meet the Banks's needs for managing its overall exposure and to meet its customers' needs for hedging their exposures. The financial derivative transactions are as follows: interest rate swaps, currency swaps, products swaps, index swaps, futures, forwards and options.


34

The derivative financial instruments are presented in the balance sheet at market value, usually based on price quotations or market price quotations for assets or liabilities with similar characteristics. When these are not available, the market values are based on pricing models, discounted cash flow and market operators' quotations. The contracts of traded derivatives are registered at the B3 S.A. - Brasil, Bolsa, Balcão or at the Central System for Custody and Financial Settlement of Securities (CETIP). The transaction amounts are determined based on available information disclosed by B3 S.A. - Brasil, Bolsa, Balcão or by external providers (brokerage firms, banks and others). The Risk Management Area is responsible for the pricing of all derivative financial instruments, using both the mark-to-market (MtM) parameters and the original (curve value) parameters. The market parameters are updated daily in the process of marking the instruments to market value, including the forward structures of interest rates for all the Brazilian indices. The mark-to-market models determine the values of the derivative instruments based on the current market conditions for all the indices, as well as for the sovereign debt securities and Eurobonds of Brazilian companies, and the duration (average term) of the portfolio.

(i) Position by Index Indusval & Partners Consolidated

Assets Liabilities Amounts of contracts recorded

2018 2017 2018 2017 2018 2017

Swap 31 30 2,067 14,681 74,873

DI x US$ US$ x DI 30 1,760 14,681 53,018Fixed rate x DI 307 19,855Fixed rate x US$ 31 2,000

Forward 654 25,936

Currencies 654 25,936 Futures 643,724 298,747

Interest rates 503,956 159,306Currencies 108,352 98,081Financial assets and commodities 31,416 41,360

31 30 2,721 658,405 399,556


35

(ii) Position by terms Indusval & Partners Consolidated

2018 2017

Up to 90

days 91 to

180 days 181 to

360 days361 to

1080 days1081 to

1800 daysOver

1800 days Total Total

Reference amount 180,644 50,701 15,042 396,358 12,713 2,947 658,405 399,556

Swap 14,681 14,681 74,873Forward 25,936Futures 165,963 50,701 15,042 396,358 12,713 2,947 643,724 298,747

Assets 31

Swap 31 Liabilities 30 30 2,721

Swap 30 30 2,067Forwards 654

Reference amount – 2017 218,899 24,974 105,946 38,886 10,229 622 399,556

Assets – 2017 31 31

Liabilities – 2017 2,608 92 21 2,721

(iii) Guarantees Indusval & Partners Consolidated

2018

2017

Clearing of Clearing of

derivatives shares Others Total

Total

Marketable securities 47,332 3,448 41,149 91,929 96,528Sureties 1,695

Total 47,332 3,448 41,149 91,929 98,223

Total – 2017 52,741 14,691 30,791 98,223

(d) Custody of portfolio securities The corporate securities comprising the Bank's portfolio are registered at the Central System for Custody and Financial Settlement of Securities (CETIP) under the responsibility of Banco Indusval S.A. The equity securities and derivatives are registered and held under custody in the Bank's own account at B3 S.A. - Brasil, Bolsa, Balcão. Government securities are registered at the Brazilian Central Bank's Special Clearance and Custody System (SELIC).


36

6 Loan Operations - Indusval & Partners Consolidated

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

2018 2017

Levels

Operation AA A B C D E F G H Total Total

Loans, discounted bills and financing 9,299 29,417 101,502 64,381 21,995 5,912 24,871 20,732 278,109 521,219

BNDES/FINAME 95 3,896 3,991 9,490

Assignment credit operations

Total loan operations 9,299 29,512 105,398 64,381 21,995 5,912 24,871 20,732 282,100 530,709

Advances on foreign exchange contracts 48,119 5,678 53,797 50,470

Purchase of receivables (Note 8(a)) 1,691 20,138 1,653 744 1,236 1,108 478 458 27,506 25,486

Financing of sales of non-operating assets (Note 8(a)) 6,682 9,563 16,245 31,554

Guarantees honored 4,456Other credit instruments (Note 8(a)) 22,545 22,545 131,082

Total credit 57,418 60,430 135,099 66,034 22,739 7,148 1,108 25,349 26,868 402,193 773,757

Guarantees provided (Note 19(a)) 70,716 161,892

Total portfolio 57,418 60,430 135,099 66,034 22,739 7,148 1,108 25,349 26,868 472,909 935,649

Allowance for losses 302 1,351 1,981 2,274 2,144 554 17,744 26,868 53,218 151,487

Total allowance losses required 302 1,351 1,981 2,274 2,144 554 17,744 26,868 53,218 151,487

Allowance for losses - additional 100.000

Provision for financial guarantees provided 332 775

Total allowance for losses (*) 302 1,351 1,981 2,274 2,144 554 17,744 26,868 153,550 152,262

Total portfolio – 2017 49,509 129,122 229,019 126,674 104,911 168 287 134,067 935,649

Total allowance – 2017 646 2,290 3,800 10,491 50 143 134,067 152,262

(*) The allowance for loan losses in the consolidated balance sheet is R$172,905 (December 31, 2017 - R$158,134), as it includes R$19,687 (December 31, 2017 - R$6,647) that refers to provision for non-loan credit operations, and R$332 (December 31, 2017 - R$775) that refers to a provision for surety contracts which is recorded in liabilities.

In 2018, there was a provision for doubtful accounts in the amount of R$ 209,230 (R$ 122,296 in 2017) and a reversal of a liability provision for financial guarantees provided in the amount of R$ 443 (constitution of R$ 625 in 2017). Part of this amount refers to the additional provision of R$ 100,000 (complementary to the minimum percentages required by Resolution No. 2682, of December 21, 1999, of the CMN), which was mainly based on the expected realization of the credit portfolio. The amount of credits written off against the allowance for loan losses was R$ 194,159 in 2018 (2017 - R$ 59,663) and the amount of loans recovered was R$29,643 in 2018 (2017 - R$ 15,606). At December 31, 2018, the portfolio of renegotiated loans amounted to R$113,296 (December 31, 2017 - R$ 111,483). These credits have a provision of R$39,894 (December 31, 2017 - R$ 22,751). The volume of renegotiations in 2018 was R$ 55,678 (2017 - R$ 140,622).


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(b) Analysis of loan operations by business sector 2018 2017

Industry 207,943 388,344 Commerce 115,613 153,114 Financial intermediaries 10,030 Other services 35,071 103,040 Individuals 43,566 119,229 402,193 773,757

(c) Analysis of loan operations by index

2018 2017

Fixed rate 120,857 241,753 Floating rate (Interbank Deposit Certificate (CDI)) 239,466 472,007 Reference rate (TR)/Basic financial rate (TBF) 62 74 Others 41,808 59,923 402,193 773,757

(d) Analysis of loan operations by installment maturity

2018 2017

Overdue From 15 to 60 days 999 2,181 From 61 to 180 days 5,265 32,834 Over 180 days 2,728 86,945 8,992 121,960

Maturing Up to 90 days 114,711 110,210 From 91 to 180 days 57,972 110,270 From 181 to 360 days 85,810 146,233 Over 360 days 134,708 285,084 393,201 651,797

402,193 773,757

(e) Concentration of loans

2018 2017 Customers Amount % %Accumulate Amount % %Accumulate 10 largest costumers 240,593 59.83 59.83 307,709 39.77 39.77 11th to 60th largest customer 137,515 34.19 94.02 415,655 53.72 93.49 61st to 160th largest customer 13,765 3.42 97.44 36,069 4.66 98.15 Others 10,320 2.56 100.00 14,324 1.85 100.00 402,193 773,757


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(f) Analysis of loans classified from "C to H"

Only a part of the transactions rated from C to H in the following table is past due for more than 60 days and, accordingly, classified as non-performing. The other transactions are performing normally but remain classified at these levels as a result of the criteria used for credit analysis.

2018 2017

Level

C D E F G H Total

Total

Performing

64,577 4,076 24 157 24,817 11,376 105,027 189,111Non-performing loans

1,457 18,663 7,124 951 532 15,492 44,219 176,996

Total

66,034 22,739 7,148 1,108 25,349 26,868 149,246 366,107

NPL 60 – 2017

1,632 60,875 137 287 114,065 176,996

Total – 2017

126,674 104,911 168 287 134,067 366,107

(g) Analysis of the loans assigned by type of loan and nature of risk

There was no result with credit assignment operations with a substantial transfer of risks and benefits in the year of 2018 (R $ (7,950) in 2017), recorded under "Expenses with sales of financial assets" and not there was a result of credit assignment operations with substantial retention of the risks and benefits accumulated in 2018 (R $ (156) in 2017).

7 Foreign Exchange Portfolio Indusval & Partners Consolidated

2018 2017

Assets Exchange purchases pending settlement 59,009 51,277 Rights on exchange sales 3,086 402 Advances in local currency (1,149) (402) Others 1,635 1,398 62,581 52,675

Liabilities Exchange sales pending settlement 3,069 397 Liabilities for purchases of exchange 56,934 49,072 Advances on foreign exchange contracts (52,161) (49,072) Others 7,842 397


39

8 Other receivables and other assets

(a) Other receivables - Sundry


2018 2017 2018 2017

Deferred tax assets (Note 11(b)) 448,741 374,277 480,775 420,978 Debtors for purchase of assets (Note 6(a)) 16,235 31,417 16,245 31,554 Credit instruments receivable (Note 6(a)) 48,360 156,568 50,051 156,568 Credit instruments receivable without characteristics of loans 24,046 34,586 24,046 34,586 Deposits in guarantee ((Note 12(b)) 58,374 23,706 93,760 58,497 Taxes and contributions for offset 166 165 808 1,147 Sundry debtors - Local and others 30,558 8,434 30,582 15,375 626,480 629,153 696,268 718,705

Current assets 20,199 24,198 22,244 32,081 Long-term receivables 606,281 604,955 674,024 686,624

(b) Other receivables - Negotiation and intermediation of securities


2018 2017 2018 2017

Deposits in guarantee - Stock exchange 6,173 6,787 6,173 7,331 Clearing house account 38,673 Debtors - Pending settlement account 1,052 1,052 15,271 Guarantee fund for settlement of operations 11,113 22,226 Financial asset operations - Pending settlement Swap intermediation 518 7,225 17,900 7,225 84,019

Current assets 6,173 17,900 6,173 83,509 Long-term receivables 1,052 1,052 510

(c) Other assets - Indusval & Partners Consolidated

2018 2017

Non-operating assets Properties 241,111 248,692 Vehicles 3,198 3,198 Machinery and equipment 50 50 Others 7,336 7,746 Provision for loss (33,889) (16,670) 217,806 243,016

Prepaid expenses 1,100 3,707 218,906 246,723

Current assets 7,955 8,634 Long-term receivables 210,951 238,089


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9 Permanent Assets

(a) Investments in subsidiaries, affiliates and joint ventures - Indusval & Partners

Equity in the earnings/

(loss)

Companies

At December

31, 2017Acquisition/

Sale

Amortizationgoodwill/

OthersDividends

received

Preferred share

warrants

Carrying value

adjustments 2018 2017

At December

31, 2018

Guide Investimentos 28,864 (18,901) (1,784) (15,220) 8,179

Banco Intercap 110,931 (1,184) 2,243 109,747

Intercap DTVM 19,944 611 138 20,555

BI&P Comércio de Cereais 21,214 734 373 21,948BI&P Assessoria 17,780 (16,980) (577) (1,579) 223

Guide Consultoria 17 (14) (3) (8)

Simplific Pavarini 19 (19) (6)

Sertrading (*) 16,186 (1,551) (143) 204 1,395 943 16,091

Gran Partners 80 (83) 3 8

Total 215,035 (19,017) (18,531) (143) 204 (805) (13,108) 176,743

(*) The amount of R$ 204 in the Carrying value adjustments column refers to exchange loss on the equity of an associated company abroad.

Information on the subsidiaries, associated companies and joint ventures: Equity Net income/(loss)

Companies Capital 12/31/2018 12/31/2017 2018 2017

Number of shares/quotas

held Holding %

Guide Investimentos 72,079 40,891 29,971 (742) (15,804) 67,841 20,00%

Banco Intercap 116,260 109,746 110,931 (1,184) 2,243 358,375 100%

Intercap DTVM 15,493 20,555 19,944 610 138 2,936,690 100%

BI&P Comércio de Cereais 17,788 21,948 21,214 734 373 17,788,073 100%

BI&P Assessoria 2,954 222 800 (576) (1,579) 2,953,771 100%Guide Consultoria 16 (8)

Simplific Pavarini 19 (6)

Sertrading (*) 41,351 94,887 85,145 9,295 5,079 392,291 13,73%

Gran Partners 50 164 159 16 (*) The financial statements used for equity accounting purposes were those of November 30, 2018, representing the profit between December 2017 to November 2018, while the unrealized profits between the companies of R$ 865 for the year 2018 was excluded (R$ 865 in 2017).

(1) Guide Investimentos On February 26, 2018, the share purchase agreement was signed, which establishes the binding terms for a sale to Fosun. The transaction was completed on November 5, 2018, as mentioned in note 2 (b). (2) Guide Investimentos In the first half of 2011, the Bank invested R$ 25,000 through the subscription of common shares as a capital increase in Sertrading, one of the largest foreign trade logistics and services companies in Brazil. The value of the net assets at the acquisition date was R$ 7,616, and goodwill relating to future profitability of R$ 17,384 was recorded as part of the acquisition. The goodwill paid is being amortized based on a technical study and recorded in "Other operating expenses" in the statement of operations, totaling R$1,551 in 2018 (2017 – R$ 3,333 ). At December 31, 2018, the balance of the goodwill was R$3,340 (R$ 4,891 at December 31, 2017). In August 2017, 114,284 shares of Sertrading S.A. were disposal, representing 4.00% of the capital, for R$ 4,840. Consequently, the goodwill on acquisition was reduced by R$ 1,569. The Banco Indusval still holds 392,291 common shares, which corresponds to a 13.73% holding.


41

(3) BI&P Assessoria e Participações Ltda. Following the approval by the Central Bank of Brazil, on April 17, 2013, the Bank completed the acquisition of BI&P Assessoria e Participações Ltda. (previously Voga Empreendimentos e Participações Ltda.). The purpose was to expand the Bank's role in the merger and acquisitions business, corporate debt issuance and other fixed income products, IPO processes, corporate governance and financial appraisals, introducing innovative solutions which contribute to enabling customer development. During 2017, the total amount of R$ 2,221 was amortized as goodwill. In 2018, the remaining goodwill balance was written off in the amount of R$ 16,980, due to the non-expectation of generating cash flows in the operation.

(b) Property and equipment


31/12/2017 Acquisitions Transfers Depreciation Amount written off

Written off - alienation

Guide 31/12/2018

Purchases in progress 36 (36)

Cost 36 (36)

Equipment and facilities 2,039 201 36 (556) (2) (688) 1,030

Cost 11,130 201 36 (2) (1,832) 9,533

Accumulated depreciation (9,091) (556) 1,144 (8,503)

Others 2,391

548 (861) (164) (658) 1,256

Cost 14,389 548 (576) (2,237) 12,124

Accumulated depreciation (11,998) (861) 412 1,579 (10,868)

Total property and equipment in use 4,466 749 (1,417) (166) (1,346) 2,286

Cost 25,555 749 (578) (4,069) 21,657

Accumulated depreciation (21,089) (1,417) 412 2,723 (19,371)


42

(c) Intangible assets

(i) Goodwill on the acquisition of subsidiary and associated companies Indusval & Partners Consolidated

Goodwill acquisition 31/12/2017 Acquisitions Amortization

Amount written

off

Amount written off- alienation

Guide 31/12/2018

BI&P Assessoria 16,980 (2,464) (14,516) Cost 25,675 (25,675) Accumulated amortization (8,695) (2,464) 11,159

Simplific II 2,294 (241) (2,053) Cost 2,898 (2,898) Accumulated amortization (604) (241) 845

Guide Life 116 (10) (106) Cost 129 (129) Accumulated amortization (13) (10) 23 Total 19,390 (2,715) (14,516) (2,159) Cost 28,702 (25,675) (3,027) Accumulated amortization (9,312) (2,715) 11,159 868

(a) Simplific On November 6, 2015, the Brazilian Central Bank approved the acquisition of Simplific II Participações Ltda, an asset management operation (wealth management) by Guide Investimentos. As a result of Guide Investimentos sale, the amount of R$ 2,053 was written off due to the investments and goodwill of the Simplific Pavarini’s acquisition. (b) Guide Life On November 14, 2016, the Brazilian Central Bank approved the acquisition of DXS Corretora de Seguros e Previdência Ltda., a consulting company of financial planning, by Guide Investimentos. The name of the company was changed to Guide Life Consultoria e Corretora de Seguros Ltda. This acquisition was part of the expansion plan of Guide Investimentos and created a new business based on an innovative concept, targeted to a specific profile of clients that seek long-term customized financial planning. Guide Investimentos acquired 494,900 shares, 98% of Guide Life's capital. As a result of Guide Investimentos sale, the amount of R$ 106 was written off due to the investments and goodwill of the Guide Life’s acquisition.


43

(ii) Other intangible assets


12/31/2017 Acquisitions Amortization

Amount written off-

alienation Guide

12/31/2018

Business with food grains 4,258 (1,311) 2,947

Cost 13,100 13,100

Accumulated amortization (8,842) (1,311) (10,153)

Omar Camargo 1,261 (811)

Cost 3,243 (3,243) Accumulated amortization (1,982) (450) 2,432

Geraldo Correa 1,239 1,315 (1,260) (1,294)

Cost 1,802 1,315 (3,117) Accumulated amortization (563) (1,260) 1,823

Platform for the distribution of financial products 7,519 (1,921) (5,598)

Cost 12,603 (12,603) Accumulated amortization (5,084) (1,921) 7,005

Simplific - Client relations 1,967 (207) (1,760)

Cost 2,485 (2,485) Accumulated amortization (518) (207) 725

Simplific - Non-compete clause 308 (66) (242)

Cost 472 (472) Accumulated amortization (164) (66) 230

SLW 501 118 (156) (463)

Cost 699 118 (817) Accumulated amortization (198) (156) 354

Picchioni 2,275 (583) (1,692)

Cost 3,237 (3,237) Accumulated amortization (962) (583) 1,545

Table project BM&F 7,100 (895) (6,205)

Custo 7,100 (7,100) Amortização acumulada (895) 895

Project Cedro 1,140 (170) 970

Custo 1,140 1,140

Amortização acumulada (170) (170)

Others (BI&P Assessoria) 6 27 (27) 6

Cost 6 27 (27) 6

Other intangible assets 19,334 9,700 (7,019) (18,092) 3,923

Cost 37,647 9,700 (33,101) 14,246

Accumulated amortization (18,313) (7,019) 15,009 (10,323)


44

(a) Development of a platform for the distribution and trading of securities – Guide

Investimentos Guide Investimentos recorded R$ 12,603 relating to the development of an electronic platform for the distribution and trading of securities and other financial assets. This intangible asset started operation in January 2014, and is being amortized over a period of 7 years based on its expected revenue. As a result of Guide Investimentos disposal, the amount of R$ 5,598 was written off. (b) Association of Guide Investimentos with Omar Camargo Corretora de Valores S.A. Guide Investimentos recorded R$ 3,243 relating to the strategic partnership with Omar Camargo to further promote the expansion of Guide Investimentos' businesses in the southern region of the country, most notebly in the State of Paraná. As a result of this transaction, Guide Investimentos will have access to a wide customer base and provide differentiated products and services. This intangible asset is being amortized on a straight-line basis over 6 years. As a result of Guide Investimentos disposal, the amount of R$ 811 was written off. (c) Transfer of the H. H. Picchioni Client Portfolio to Guide Investimentos Guide Investimentos recorded R$ 1,750 relating to the transfer of the H. H. Picchioni client portfolio of brokerage and intermediation activities of fixed and variable income securities, to implement its operations in Belo Horizonte and São Paulo. This intangible asset will be amortized on the straight-line basis over 5 years. In January 2017, an additional payment of R$ 1,487 was made, as provided in the client portfolio transfer agreement. As a result of Guide Investimentos disposal, the amount of R$ 1,692 was written off. (d) Mesa BMF project - Guide Investimentos Guide Investimentos recorded R$ 7,100 relating to the development of products, services and systems intended to serve institutional clients. As a result of Guide Investimentos disposal, the amount of R$ 6,205 was written off.


45

10 Deposits, funds obtained and onlendings

(a) Analysis of deposits, funds obtained abroad and onlendings by maturity - Indusval &

Partners Consolidated 2018 2017

Term

Deposits, funds obtained and onlendings

No maturity

Up to 90 days

From 91 to 180 days

From 181 to 360 days

From 361 to 1080

days

From 1081 to 1800

days Over

1800 days Total Total

Demand deposits 15,045 15,045 16,677Interbank deposits 28,537Time deposits (*) 195,968 140,524 290,275 1,045,540 35,479 71 1,707,857 1,513,019

Total deposits 15,045 195,968 140,524 290,275 1,045,540 35,479 71 1,722,902 1,558,233

Real estate letters of credit 18,739 17,445 13,532 2,767 52,483 52,703Agribusiness letters of credit 130,976 35,163 48,035 7,890 222,064 464,061

Financial letters 5,301

Total resources from letter issuance 149,715 52,608 61,567 10,657 274,547 522,065

Local onlendings 353 316 602 6,728 414 8,413 13,532

Total 15,045 346,036 193,448 352,444 1,062,925 35,893 71 2,005,862 2,093,830

Total – 2017 16,677 215,278 377,375 408,642 1,047,157 28,604 97 2,093,830

(*) At December 31, 2018, has not CDBs with special guarantees (DPGE) (December 31, 2017 - R$72,936).

(b) Funds obtained in the open market Indusval & Partners Consolidated

2018 2017

Own Portfolio 102,592 37,372

Treasury Bills (Selic) 69,580 11,586 Debentures 33,012 25,786 Third Party Portfolio 89,800 9,001

Treasury Bills (Prefixed) 89,800 2,501 Treasury Bills (IPCA) 6,500 192,392 46,373

Current 192,392 46,373


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11 Income Tax (IRPJ) and Social Contribution (CSLL) - Indusval & Partners

(a) Calculation of tax

2018

2017

Loss before tax and after profit sharing (195,990) (259,403)

Effects of permanent differences 18,496 15,917

Investments in subsidiary and associated companies 806 13,108Investment abroad (Branch) (2,006) (4,622)Profit abroad (Branch) 3,609Amortization of goodwill 18,532 2,821Others - CSLL and IRPJ 695 595Others - IRPJ (exclusive) 469 406

Effects of temporary diferences 177,316 91,268Allowance for loan losses 165,328 101,947Provision for contingencies 8,844 5,052Adjustment to market value - Marketable securities and derivatives (14,075) (19,507)Others 17,219 3,776

Tax basis (loss) before offset of tax losses – CSLL (648) (152,624)Tax basis (loss) before offset of tax losses – IRPJ (179) (152,218)

Recording of tax credit due to tax losses (Note 11(e))

CSLL IRPJ Deferred tax credits recorded on temporary differences (40%) (Note 11(e)) 70,926 36,507

Effect of the rate increase of social contribution from 15% to 20% Income tax and social contribution 70,926 36,507

(b) Changes in deferred tax assets

2018 2017

Opening balance on January 1 374,277 339,530 Changes (Note 11(e)) Allowance for loan losses 65,821 41,029 Provision for contingencies 4,293 2,097 Adjustment to market value - Marketable securities and derivatives (2,093) (9,563) Tax loss Others 6,443 1,184 Total deferred tax assets (Note 8(a)) 448,741 374,277

Deferred tax liabilities (3,537)

Deferred tax assets, net of deferred tax liabilities 405,204 374,277

Percentage of equity 305,94% 138.18%


47

(c) Expected realization of deferred tax assets and tax liabilities

2018 2017

Up to 1

yearFrom 1 to

2 yearsFrom 2 to

3 yearsFrom 3 to

4 yearsFrom 4 to

5 yearsOver 5

years Total Total

Allowance for loan losses 16,000 24,000 104,000 119,055 263,055 197,234Tax losses (IRPJ and CSLL) 917 837 1,581 67,809 87,669 158,814 158,814Adjustment to market value 2,093Others 26,872 26,872 16,136 Total 16,917 24,837 105,581 186,864 114,541 448,741 374,277

Total – 2017 14,999 32,274 34,261 25,904 266,839 374,277

The technical study on the realization of deferred taxes was prepared by the Bank's management, based on the current and future scenarios. The main assumptions used in the projections considered macroeconomic, production and cost of funding indicators, the inflow of funds through strengthening capital and the realization of assets. This study, including the assumptions adopted, was approved by the Bank's Board of Directors on March 29, 2019. The deferred income tax and social contribution will be realized as temporary differences are reversed or fulfill the parameters for tax deductibility or when the tax losses are offset. This technical study was prepared in accordance with Art.6 of CMN Resolution 3059/02 and is reassessed on a semiannual basis.

(d) Present value of deferred tax assets The Bank's Board of Directors, based on a technical study which forecasts future profitability and the generation of future tax liabilities, estimates the realization of the deferred tax assets within a maximum period of 10 years. The present value of the deferred tax assets, based on the Bank's historical average funding rates, would be R$ 263,931 (R$ 224,731 at December 31, 2017).

(e) Request to the Brazilian Central Bank for the recording of deferred tax assets - Temporary differences and tax losses Due to the non-compliance to item I of article 1 of the Brazilian Central Bank Resolution 3059/02, and based on Resolution 4441/15 and Circular 3776/15, the Bank requested the Central Bank authorize the registration of deferred tax assets based on the technical study prepared by the Bank. The Central Bank instructed Banco Indusval to only record tax credits arising from temporary differences. Thus, in 2018, the amount of R$70,926 (R$36,507 at December 31, 2017) arising from temporary differences was recorded. The Bank did not record deferred tax assets of R$142 arising from tax losses during 2018 (R$ 60,960 at December 31, 2017).


48

12 Other liabilities

(a) Negotiation and intermediation of securities Indusval & Partners Indusval & Partners Consolidated

2018 2017 2018 2017

Creditors - Pending settlement account 3 18 3 134,283 Clearing house account 19 Commissions and brokerage 3,476 Others 353 192 353 192 356 210 356 137,970

(b) Contingent assets and liabilities - Indusval & Partners Consolidated

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 significant lawsuits classified as having a probable realization. (ii) Contingent liabilities Probable contingencies - Labor and civil The provision for contingent liabilities comprises contingencies classified as a probable risk and are recorded in "Other liabilities - Sundry". The changes in the probable contingencies for the period may be summarized as follows: Indusval & Partners Consolidated

2018 2017

Labor Civil Total Total At January 1 17,467 1,629 19,096 15,308 New provisions (222) (222) Indexation/charges 12,059 171 12,230 10,109 Reversals (229) Payments (2,351) (2,351) (6,092) At December 31 19,096

26,953 1,800 28,753 Deposits in guarantee of appeals at December 31, 2018

12,228 32,275 44,503 Deposits in guarantee of appeals at December 31, 2017

10,150 1,424 11,574


49

Possible contingencies - Labor and civil Contingencies classified as possible loss are monitored by the Bank, based on the reports of the legal advisors regarding each of the legal measures and administrative processes and, pursuant to generally accepted accounting principles, require no provision. The Bank and its subsidiaries are parties to the following lawsuits presenting risk of possible loss:

• Labor claims: The Bank has labor claims classified as possible losses totaling R$ 4,526 (R$ 4,702 at December 31, 2017). On a consolidated basis, they total R$5,380 (R$ 8,261 at December 31, 2017).

• Civil suits: The majority of these suits refer to compensation for pain and suffering, disputes regarding protested discounted trade bills endorsed to the Bank by third parties, contract legitimacy and contractual review. The amounts attributed to the suits classified as possible amount to R$43,708 (R$ 63,703 at December 31, 2017). On a consolidated basis these amount to R$ 46,092 (R$ 66,181 at December 31, 2017).

Contingencies taxes Indusval & Partners Indusval & Partners Consolidated 2018 2017 2018 2017

Taxes contested in court 7,681 7,189 37,454 36,076 Other tax related contingencies 6,770 6,316 6,972 6,500 14,451 13,505 44,426 42,576

Long-term liabilities 14,451 13,505 44,426 42,576

The changes in the period may be summarized as follows: Indusval & Partners Consolidated

2018 2017

At January 1 42,576 39,376 New provisions 617 1,516 Reversals (276) (186) Indexation/charges 1,509 1,870 At December 31 44,426 42,576

Deposits in guarantee of the appeals 49,257 46,924

The balance comprises the following main issues:

• ISS - Complementary Law 116/03 - R$ 4,069 (December 31, 2017 - R$ 3,688 ): Challenging the levying of this tax on the means, instruments and stages of the financial transactions carried out by the Bank;

• PIS - R$3,612 (December 31, 2017 - R$ 3,501 ): Declaration of the non-existence of a legal-tax relationship between the parties, regarding the application of Constitutional Amendment 1/94 and Provisional Measure 636/94 (and successive republications), permitting the Bank to pay PIS contributions in accordance with the provisions of Complementary Law 7/70;

• INSS - SAT/FAP - R$6,770 (December 31, 2017 - R$ 6,316: Challenging the increase in the Work Accident Insurance (SAT) rate and the accident prevention factor (FAP).


50

• Social contribution (CSLL) - R$29,773 (December 31, 2017 - R$ 28,878): Lawsuit filed by Banco Intercap S.A. questioning the social contribution. Since 1996, because of a favorable ruling in a lawsuit filed by Banco Intercap S.A. questioning the provisions of Law 7689, of December 15, 1988, and also the prescription of time during which the Federal Government could enter with a rescission action, Banco Intercap S.A. was not required to pay this social contribution. Despite the fact that the matter has been the subject of a favorable and unappealable ruling, on September 23, 1999 the Federal Revenue Service filed a tax assessment to collect the contribution. Banco Intercap S.A. challenged the assessment by specific action and, based on the opinion of its legal counsel, the final decision has possible chances to be favorable.

Possible contingencies – Taxes The main tax related contingencies with only possible risk of loss are not recognized in the balance sheet and total R$85,451 (December 31, 2017 - R$117,664), described as follows: • Challenging the levying of the calculation base of IRPJ and CSLL on the demutualization of

BM&FBOVESPA equity securities in the amount of R$34,240 (December 31, 2017 - R$ 33,123) and PIS and COFINS of R$ 11,100 (December 31, 2017 - R$ 10,746) in Banco Intercap S.A.; and

• Challenging the levying of social security contributions on the amounts paid as PLR - Profit sharing and PLA - Profit sharing of management, for the period of 2009 to 2011, in the amount of R$15,251 (December 31, 2017 - R$ 20,613).

13 Equity

(a) Capital

(i) Subscribed and paid-up capital Fully subscribed and paid-up capital comprises 152,527,251 shares, of which 115,033,148 are common and 37,494,103 are preferred shares with no par value (December 31, 2017 - 152,527,251 shares, of which 115,033,148 are common and 37,494,103 are preferred shares with no par value). (ii) Treasury shares At December 31, 2018, there were 543,396 preferred shares in treasury (R$ 543,396 at December 31, 2017). No shares were repurchased in 2018 or in the year of 2017. (iii) Reverse Split On December 28, 2018, the Extraordinary General Meeting held on September 17, 2018, was approved by the Central Bank of Brazil, which deliberated on the reverse split of shares that make up the capital stock of Banco Indusval in the proportion of 10 (ten) shares of issued by Banco Indusval for one (1) share issued by Banco Indusval. Therefore, it was established that the grouped shares will be traded in the trading session on January 7, 2019, so the shareholding position to be considered for the reverse split of the shares issued by the Company will be based on the position of January 4 of 2019. After the reverse split, the total shares will be 15,252,725, of which 11,503,315 are common and 3,749,410 are preferred shares.


51

(b) Capital reserves

(i) Subscription bonus

They were issued during the year 2011 and are expired. During the period from the issue until the expiration, there was no exercise of rights. (ii) Share-based compensation The following Stock Option Plans were approved for the Institution's Directors and management-level employees, as well as individuals who provide services to the Bank or the companies under its control:

• Stock Option Plan I approved at the Extraordinary General Meeting (EGM) held on March 26, 2008; (expired)

• Stock Option Plan II approved at the EGM of April 29, 2011 and amended at the EGM of December 22, 2011; (expired)

• Stock Option Plan III approved at the EGM of April 29, 2011 and amended at the EGM of December 22, 2011; (expired)

• Stock Option Plan IV approved at the EGM on April 24, 2012. (in the exercise period).

The Board of Directors, on the recommendation of the Remuneration Committee, lays down the guidelines of the Stock Options Plan and approves the half-yearly option programs. Of these, only Plan IV is still in the exercise period until February 28, 2019, with a total of 206.426 open options, whose fair value on the date of grant was R$2.92. In the fiscal years 2018 and 2017 no benefit expenses were recorded against the capital reserve under the incentive plan based on stock options.

(c) Revenue reserves and accumulated deficit

The Bank's by-laws provide for the appropriation of the annual profit to the following reserves: (a) reserve for equalization of dividends for the purpose of ensuring the regular payment of dividends to stockholders, and (b) the reserve for working capital reinforcement to ensure that the Bank has the financial resources for its continued operation.

(d) Dividends and interest on own capital

The Bank's by-laws provide for the distribution of a minimum annual dividend of 25% of profit adjusted in accordance with Article 202 of Law 6404/76 and subsequent amendments .In the years 2018 and 2017, no dividends and interest on shareholders' equity were distributed.

14 Employee benefits

(a) Private pension plan Banco Indusval S.A. and its subsidiaries offer their employees a supplementary defined contribution pension plan, managed by a private entity. The plan was started in September 2008 and is sponsored by the Bank and its subsidiaries and employees. The Bank's contributions totaled R$402 in 2018 (2017 - R$ 380). The Consolidated contributions totaled R$ 586 in 2018 (2017 - R$ 559).


52

(b) Contributions and profit sharing

Since 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.

15 Analysis of the accounts in the Statement of Operations

(a) Income from financial intermediation Period ended December 31

2018 2017

Indusval &

Partners ConsolidatedIndusval &

Partners Consolidated

Loan operations 61,357 65,454 101,553 116,824

Advance to depositors 3 3 4 4

Loans 15,832 19,329 48,577 61,413

Discounted bills 99 99 178 178

Financing 16,380 16,380 38,962 39,623

Recovery of receivables 29,043 29,643 13,832 15,606 Marketable securities 64,698 84,888 150,446 161,199

Short-term interbank investments 34,303 46,956 74,612 69,859 Fixed income securities 28,432 35,370 59,229 74,753 Variable income securities (1,052) (1,052) (5,936) (6,085) Mark-to-market adjustment - Marketable securities (3,342) (3,330) 17,111 17,242 Foreign investments 4 4 102 102 Investment funds 6,353 6,940 5,328 5,328

Derivative Financial Instruments 32,007 29,793 23,204 23,296

Swaps (211) (175) 2,883 2,949

Futures 34,528 32,278 18,956 19,023

Options (41)

Forwards (2,310) (2,310) 1,365 1,365 Foreign Exchange 28,174 28,174 18,168 18,168

Export 3,594 3,594 4,369 4,369

Financial (582) (582) (483) (483)

Rate variations 21,793 21,793 9,920 9,920

Funds in foreign currency 3,369 3,369 4,362 4,362 186,236 208,309 293,371 319,487


53

(b) Financial intermediation expenses Period ended December 31

2018 2017

Indusval &



Funds obtained in the open market (176,427) (171,880) (298,496) (295,167)

Interbank deposits (2,209) (964) (11,493) (9,674)

Time deposits (137,431) (137,401) (197,931) (197,966)

Repo operations (13,712) (10,433) (14,989) (12,977)

Agribusiness letters of credit (LCA) (19,733) (19,733) (66,734) (66,913)

Financial bills (LF) (159) (159) (1,387) (1,387)

Real estate letters of credit (LCI) (3,183) (3,190) (5,962) (6,250) Loans and onlendings (13,159) (13,159) (10,207) (10,210)

Foreign borrowings (12,538) (12,538) (9,123) (9,123) Local onlendings - PSH (386) (386) (396) (396) Local onlendings - BNDES (63) (63) (280) (280) Local onlendings - FINAME (172) (172) (408) (411)

Sales/transfers of financial assets (8,106) (8,106)

Assignment of loan operations (Note 6(g)) (8,106) (8,106) Allowance for loan losses (109,800) (109,230) (122,959) (122,296)

Loan operations and other receivables (109,800) (109,230) (122,959) (122,296) (299,386) (294,269) (439,768) (435,779)

(c) Income from services rendered and bank charges

Period ended December 31

2018 2017

Indusval &

Partners Consolidated Indusval &


Management of funds 654 524

Collection fees 227 227 403 403

Transfer of funds 72 72 84 84

Guarantees provided 2,791 2,791 4,754 4,754

Custody services 30 215

Stock exchange brokerage services 69,393 49,713

Income from commissioning and security placement 205 16,607

Other(*) 37 16,465 3,979 36,100

3,332 106,239 9,220 91,793

Bank charges 410 414 391 392

3,742 106,653 9,611 92,185

(*) Refers mainly to commissions on structured transactions.


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(d) Personnel expenses Period ended December 31

2018 2017

Indusval &



Salaries (24,958) (43,558) (23,407) (41,947) Fees (5,045) (10,388) (5,727) (13,047) Benefits (6,547) (13,168) (6,090) (12,081) Social charges (8,931) (16,017) (9,501) (17,308) Training (209) (330) (249) (438) Interns (163) (479) (254) (626)

(45,853) (83,940) (45,228) (85,447)

(e) Other administrative expenses


2018 2017

Indusval &



Water, electricity and gas (527) (752) (503) (731)

Rents (5,154) (7,512) (5,472) (7,943)

Communications (1,034) (2,331) (1,167) (2,553)

Social responsibility (282) (282) (278) (278)

Maintenance and repair of assets (249) (508) (279) (663)

Materials (100) (188) (151) (268)

Data processing (6,516) (15,489) (3,757) (14,240)

Promotions and public relations (628) (1,459) (468) (875)

Advertising and publicity (243) (4,698) (200) (5,419)

Publications (353) (540) (346) (606)

Insurance (350) (574) (348) (364)

Financial system services (2,855) (8,551) (2,991) (7,313)

Third-party services (9,309) (35,422) (8,166) (27,366)

Surveillance and security (753) (773) (824) (856)

Specialized technical services (13,572) (23,123) (8,779) (13,303)

Transportation (283) (371) (520) (602)

Travel (703) (1,340) (1,193) (1,842)

Other (6,058) (12,210) (8,276) (13,428)

(48,969) (116,123) (43,718) (98,650)

(f) Tax expenses


2018 2017

Indusval &



ISS (38) (4,861) (158) (3,931)

PIS (22) (940) (39) (858)

COFINS (132) (5,336) (241) (4,679)

Others (1,829) (2,301) (1,902) (2,331)

(2,021) (13,438) (2,340) (11,799)


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(g) Other operating income Period ended December 31

2018 2017

Indusval &



Recovery of charges and expenses 1,359 1,447 896 987 Income from insurance guarantees - PSH 172 172 241 241 Income from debtors of assets 2,865 2,869 1,682 1,706 Overseas transactions 589 248 Product sales - BI&P Cereais (*) 49,457 166,932 Discounts obtained - BI&P Cereais 55 7 Coffee price variations - BI&P Cereais 3,054 17,031 Monetary variations 1,112 2,189 846 2,759 Exchange variation (branch) 2,131 2,131 Interest on overseas marketable securities 44 Guarantee fund for settlement of operations 113 226 Others (**) 3,869 5,048 4,728 6,525

11,508 67,011 8,506 196,706

(*) Comprises product sales revenues of BI&P Comércio de Cereais (Subsidiary). Note 15 (h) shows the cost of merchandise sold. (**) It, basically, refers to the monetary restatement of miscellaneous assets and the reversal of provisions for contingencies.

(h) Other operating expenses


2018 2017

Indusval &



Provision for contingencies (11,166) (12,455) (11,261) (13,336) Withholding tax (IRRF) on indirect remuneration (32) (32) (41) (41) Amortization of goodwill - Sertrading (1,552) (1,552) (3,333) (3,333) Amortization of goodwill - BI&P Assessoria (16,981) (16,981) (2,221) (2,221) Amortization of goodwill - Simplific (231) (290) Amortization of goodwill - Guide Life (10) (12) Coffee price variations - BI&P Cereais (1,973) (9,974) Losses with customers (245) Cost of products and services - BI&P Cereais (50,584) (174,587) Losses on foreign operations (3) Exchange variations of foreign deposits in guarantee (39) (39) Sundry (955) (2,288) (349) (5,780)

(30,725) (86,390) (17,205) (209,577)


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(i) Non-operating income (expenses) Period ended December 31

2018 2017

Indusval &



Gains (losses) on sale of property and equipment and non-operating assets 13,385 13,385 (4,863) (6,425) Gains (losses) on sale of investments 135,942 135,942 1,484 1,484 Depreciation of property and equipment not in use (18,035) (18,035) (3,998) (4,195) Reversal of same provision 816 816 222 1,152 Capital gain/(loss) in subsidiary/associated companies (138) (165) 26 26 Other 42 42

131,970 131,943 (7,087) (7,916)

16 Risk and Capital Management - Indusval & Partners Consolidated The activities of Banco Indusval & Partners and its subsidiaries involve the assumption of risks in line with specific orientation and the professional management of these risks. The core functions of the Risk Management Department are the identification of all significant risks to the Institution and group companies, the measurement of these risks, the management of their positions and to establish the allocation of capital. The Bank and its subsidiaries regularly review their risk and systems management policies to reflect changes in markets, products and best market practices and to ensure an adequate balance between risks and rewards, as well as minimizing potential adverse effects on the Bank's financial performance. The Bank defines risks as the possibility of losses which could be due to either internal or external factors. The risk management policies ensure that the control structure is compatible with the Bank's transactions, products and services, as well as enabling the measurement of the exposure to risks and guaranteeing that these risks are properly managed, identified, assessed, controlled and reported with efficiency and efficacy. In addition, the internal audit area is responsible for conducting an independent review of the risk management and control environment. The risks arising from financial activities to which the Bank and the group companies are exposed are:

• Credit risk

• Market risk

• Liquidity risk

• Operational risk

(a) Credit risk In its widest sense, credit risk is the probability that losses may occur as a result of the non-fulfillment of contractually agreed obligations, by either the borrower or the counterparty, and also the devaluation of the contract assumed, due to increased exposure to risk by the borrower, a reduction in income or remuneration, advantages ceded during renegotiation and the costs of recovery.


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Credit risks include the following, among others:

• Counterparty risk: the possibility of non-fulfillment of obligations related to the settlement of transactions which involve the negotiation of financial assets;

• Country risk: the possibility of losses arising from borrowers located outside the country, as a result of measures taken by the government of the country in which these borrowers reside;

• The possibility of disbursements to honor sureties, guarantees, co-obligations, credit commitments, or other similar transactions;

• The possibility of losses as a result of the non-fulfillment of financial obligations under the terms and conditions agreed upon by an intermediary or contracting party of loan operations.

The Credit Risk Management framework enables the Bank to: identify, measure, control and mitigate risks, as well as to define consistent procedures and routines that allow for full management of the credit risk involved in all phases of the business. The following four business stages define the credit cycle: (a) Credit analysis: credit analysis has clearly defined criteria and procedures for all those involved in the credit granting process, as regards the input necessary for a complete understanding of the credit risk involved in customer risk level rating, the analysis of new business proposals, the renewal of limits and the risk classification of loan operations. The main objective of the credit analysis is to provide a technical basis for decision making by the Credit Committee through the economic and financial analyses of the customers. (b) Credit granting: the main objective of credit granting is to analyze and decide on the granting of limits and loan operations proposed by the Commercial Area, based on information obtained by the latter and the analyses carried out by the Credit Department. (c) Credit management: as soon as a loan is granted, Credit Management becomes responsible for the following: (i) formalizing the transactions, as well as the collateral involved, ensuring compliance with the form and content of the constituent instruments of approval and contracting and associated collateral; (ii) monitoring the loan operations, identifying critical points, to ensure the quality of the loans, as well as the actual receipt of the amounts lent to the counterparties; (iii) analyzing and monitoring the collateral involved in the operations, verifying its sufficiency and liquidity, as well as detecting indications of and preventing deterioration in the quality of the operations, based on credit risk. (d) Credit recovery: when a credit transaction becomes overdue, administrative, renegotiation or legal measures are taken. All these measures are designed to recover the past-due receivable at the lowest possible cost and within the shortest period of time. The main focus of the Credit Risk department is to identify and measure the exposure to credit risk, providing Senior Management with studies concerning the Bank's loan portfolio, providing support for decision-making processes and enabling the control and mitigation of the risks involved in the operations. The studies take into consideration the performance of the portfolio, providing data which can be compared to macroeconomic perspectives, through stress tests, as well as default probability rates. The credit risk management framework is subject to an effective and comprehensive review by the Internal Audit, which operates independently from the Credit Risk department. This area is responsible for


58

checking whether the credit risk management practices are being carried out in accordance with Institutional Policy. Accordingly, the Internal Audit area has autonomy to advise, support, or even challenge the decisions related to credit risk management. Regular reviews are carried out by the related areas to assess the control environment, test the efficacy of the models implemented, and, as described above, ensure that the activities of the Credit Risk department comply with Institutional Policy.

(b) Market risk The Bank and its subsidiaries are exposed to market risks, which are the risk of fluctuations in the fair value or future cash flows of financial instruments, as a result of changes in market rates and prices. These risks arise from outstanding positions in interest rates, currencies and shares. The exposure to market risk is divided between the trading and banking portfolios. The trading portfolio includes the positions in market-making transactions, where the Bank acts as the principal with customers or the market. The banking portfolio corresponds to the Bank's commercial transactions. The main tools and means used to manage market risk are as follows: Value at Risk (VaR) a statistical measurement which estimates the maximum potential loss in value of the Bank's portfolio under normal market conditions in a specific circumstance (time horizon); the calculation of losses in a stress scenario (Stress test), which determines the effects of extreme market conditions (both positive and negative) on the value of the Bank's portfolio; and the Sensitivity Analysis. The sensitivity analysis, as defined by instruction CVM 475, is shown below:

Factors Risk Probable situation

Deterioration of 25%

Deterioration of 50%

Trading portfolio Fixed rate Fixed interest rates in reais (26) (369) (746) Exchange coupons Foreign currency coupon rates (135) (270) (541)

Price indexes Price index coupon rates (2) (4) Variable income Share prices (168) (420) (839)

Trading and banking portfolio Fixed rate Fixed interest rates in reais (178) (3,317) (6,407) Exchange coupons Foreign currency coupon rates (335) (1,095) (2,178) Foreign currency Exchange variations (8) (883) (1,767) Price indexes Price index coupon rates (11) (1,572) (3,123) TR and TJLP TR and TJLP rates (4) (8) Variable income Share prices (168) (420) (839)

In compliance with the classification criteria of transactions addressed in BACEN Resolution 3464/07 and Circular 3354, and in the Basel II Accord, the financial instruments of the Bank are segregated between the Trading Portfolio (for trade) and the Banking Portfolio (structural). The sensitivity analysis considered the risk factor stress scenarios in all of the Bank's transactions. The high stress reference curve scenarios are generally used when the Bank has a net debt exposure in a particular risk factor. On the other hand, the low risk reference curve scenarios are used when there is a net credit exposure in each risk factor considered for this analysis.


59

Scenario I considers the variations expected by the Bank in relation to the market reference curves used for marking these products to market. Senior management attributes to Scenario I the variations expected for each risk factor, either above or below the reference factors. Scenarios II and III are defined in accordance with CVM Instruction 475, which establishes that the high scenarios should consider variations of +25% and +50% and the low scenarios variations of -25% and -50%. As a result, scenario II is defined by the variation of +/- 25% in relation to the market value of the products comprising each risk factor and scenario III by the variation of +/- 50% in relation to the market value of the products of each risk factor. The variations in the scenarios are based on the expectation of an immediate settlement of all of the Bank's assets and liabilities, and may not necessarily represent a loss or gain since it is a hypothetical situation.

(c) Liquidity risk This is the risk of the possible mismatching of payments and receipts which could affect the Bank's ability to meet one or more of its obligations. It also arises when the funds obtained are insufficient to meet the short, medium and long-term commitments in a position affecting, accordingly, their value. The Bank has a Liquidity Risk Management Policy approved by the Board of Directors and subject to annual review, which establishes the principles, guidelines and responsibilities adopted in the Bank's liquidity risk management, in conformity with the liquidity risk control practices as addressed in Resolution 4090/12. These criteria and procedures establish the liquidity reserve to be maintained in cash in a normal market scenario, as well as the measures to be taken in the event of a liquidity contingency. The Risk Management area is responsible for independently monitoring the Treasury area. The cash flow positions and projections are reported on a daily basis to management. In cases of non-compliance with the established limits, management is immediately informed and must report to the Cash Committee and use the mechanisms necessary for recoupment.

(d) Operational Risk In compliance with legal requirements and in line with best market practices, the Indusval & Partners Group implemented a framework for managing operational risk, consisting of a series of policies, procedures and actions based on their philosophy of ongoing improvement. As defined in BACEN Resolution 3380/06, operational risk is the possibility of the occurrence of financial losses resulting from the failure, deficiency or inadequacy of internal processes, systems or people and/or extend events to the Bank. The Bank adopted the ASA 2 - Alternative Simplified Approach to calculate the capital allocation of the operational risk portion, in line with BACEN Circular 3640/13.


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(e) Capital management Capital management is one of the Bank's most important activities and the ongoing enhancement of the management and control of credit, market, liquidity and operational risks is essential in achieving stability in financial results and improving capital allocation. In accordance with BACEN Resolution 3988/11, capital management is a permanent process for:

• Capital monitoring and control carried out by the Bank;

• Assessing the need for capital to face the risks to which the Bank is subjected;

• Planning targets and capital requirements, based on the Bank's strategic objectives. The Capital Management Framework will also comprise the Policies related to Risk Management, Credit Risk Management, Market and Liquidity Risk Management, Operational Risk Management and the Disclosure of Risk Information. An efficient capital management process considers the optimization of capital utilization and alignment with the Bank's business strategy and risk appetite. The Capital Management Framework should assist the Executive Board and Board of Directors in managing the Bank based on appropriate and consistent information. The management reports should provide a detailed view of the Bank's risk profile compared to the capital requirements for each type of risk, show how the Capital Plan relates to the results achieved, present action plans to mitigate deviations and disseminate any new rules related to this subject matter. The capital management policies and strategies, in accordance with legislation in force, will be reviewed at least annually by the Bank's Executive Board and Board of Directors, for the purpose of revising their content and ensuring that the Bank's strategic planning is in line with market conditions. Pursuant to CMN Resolution 4192/13, Reference Equity (RE) mainly comprises the sum of Tier I capital and Tier II capital. Tier I RE consists of the sum of amounts of equity, income accounts and deposits in linked accounts meant to make up for capital deficiencies. Tier II RE consists of the sum of amounts corresponding to revaluation reserves, contingency reserves and special profit reserves related to non-distributed mandatory dividends, plus the amounts corresponding to hybrid capital and debt instruments, subordinated debt instruments, preferred shares issued with repayment clause and preferred shares with cumulative dividends issued by financial institutions and other institutions authorized to function by the Brazilian Central Bank; non-realized gains and losses due to market value adjustments in securities classified as available for sale.


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The calculation of the Bank's regulatory capital for risk coverage is based on BACEN Resolution 4193/13, which addresses the criteria used to determine minimum Reference Equity (RE) requirements, of Tier I and Principal Capital and establishes the Principal Capital Additional. The Risk Weighed Assets (RWA) comprise the portions of credit risk, market risk - comprised by the risks of the exposure to gold, foreign currencies and transactions subject to exchange rate variations, transactions subject to interest rate variations, transactions subject to commodity price variations and transactions subject to variations in the price of shares, and operational risk. Compliance with the regulatory capital limits is strictly followed by management and monitored daily by the Risk area. At December 31, 2018, the Bank's Basel ratio was -10.42% (2.34% on December 31, 2017), calculated based on the consolidated financial information. 2018 2017 Reference equity (RE) (122,188) 40,749

Reference equity - Level I (122,188) 40,749

Main capital (122,188) 40,749

Equity 145,520 270,860 Mark-to-market adjustments 228,702 230,111Complementary capital 39,006 Risk weighted assets (RWA) 1,172,593 1,738,626 RWA credit risk (RWA cpad) 900,572 1,530,805 RWA Market risk (RWA mpad) 78,192 47,461 RWA operational risk (RWA opad) 193,829 160,360 Capital - Main - % -10.42% 2.34%Capital - Tier I - % -10.42% 2.34%Basel ratio - % -10.42% 2.34%

On December 31, 2018, the Bank's Minimum Reference Equity Requirement was lower than that established by Resolution 4193/13. Banco Indusval S.A. is executing an action plan whose purpose is to adjust the capped limit. In this sense, the main point of note is the sale of part of its stake in Guide Investimentos SA (Note 2 (b)), the capital increase (Note 20 (a)) and the issuance of convertible subordinated debt instruments (Note 20)).


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(f) Market value of financial instruments

In accordance with CMN Resolution 4277/13, the Bank has established procedures to assess the need for adjustments in the valuation of financial instruments at market value, verifying the criteria of prudence, relevance and reliability. The financial instruments mentioned in this resolution are:

• Securities classified as "trading securities" and "available for sale", according to BACEN Circular 3068/01;

• Derivative financial instruments mentioned in BACEN Circular 3082/02; and

• Other financial instruments measured at fair value, irrespective of their classification in the trading portfolio, established in Resolution 3464/07.

2018 2017

Book value Market value Book value Market value Assets

Interbank deposits 28,404 28,404 Investments in foreign currency 14,533 14,533 49,691 49,691 Marketable securities 535,913 535,913 775,139 775,139 Loan operations

Originated loans 224,269 212,916 517,881 506,846 Trade finance 150,418 156,583 230,390 233,682 Acquired credits 27,506 32,734 25,486 27,360

Liabilities

Interbank deposits 28,537 28,537 Time deposits 1,707,857 1,689,465 1,513,019 1,511,422 Funds from real estate letters of credit, mortgage notes and similar 274,547 274,231 522,065 518,632 Onlendings 8,412 8,412 13,532 13,532 Equity securities (short sales) 3 3 18 18


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17 Related Parties

(a) Subsidiaries and Joint ventures

The transactions between the parent company and its subsidiaries and joint ventures were carried out at normal market rates and terms on a commutative basis, and comprise the following: 2018 2017 Assets Income Assets Income Linked with Institution Contract objective and characteristics (liabilities) (expenses) (liabilities) (expenses)

Banco Indusval S.A. and subsidiaries

Demand deposits

(7,991) (6,669)

Interbank deposits: 100% to 109% of CDI at maturity

(20,533) (1.245) (19,907) 2.874

Time deposits: from 100% of CDI after grace period (217) (13) (1,246) (27) Repo operations: Treasury SELIC and Treasury

IPCA from 6.40%p.a.

(50,800) (3.541) (17,065) (1.891) Other receivables/payables 192 (351) 416 (584)

Joint ventures Demand deposits (1) Time deposits: 100% of CDI after grace period (2) (83) (12)

(b) Other transactions with related parties - intergroup contract balances

Link with Institution Contract objective and characteristics 2018 2017

Management Demand deposits 162 Time deposits: from 108% to 120% of the CDI after grace period 2,636 5,833 LCA: from 96% to 100% of the CDI at maturity 203 1,704 LCI: from 95% a 102% of the CDI at maturity 139 70 Repo operations: Debentures 85% of the CDI 5,397 Companies linked to management Demand deposits 343 809 Time deposits: from 107% to 121% of the CDI after grace period 7,701 30,526 Repo operations: Treasury SELIC Prefixed from 5.70% to 12.95%p.a. 11,769 11,586 People linked to management Demand deposits 153 493 Time deposits: from 100% to 121% of the CDI after grace period 10,363 17,523 LCA: from 93% to 102% of the CDI at maturity 922 4,624 LCI: from 96% to 102% of the CDI at maturity 507 291 Repo operations: Debentures Prefixed from 3,5 p.a. + 85% from the CDI 8,079 Associated companies Demand Deposits 448 Time deposits: from 105% to 115% of the CDI after grace period 508 Intangible assets: CPR Business exclusivity agreement 2,947 4,257 38,801 91,192


64

(c) Remuneration of key management personnel

2018 2017

Short-term benefits 5,580 6,216 Long-term benefits 67 75 5,647 6,291

In accordance with CMN Resolution 3921/10, the financial institutions that operate as listed companies or that are required to establish an Audit Committee should establish a Remuneration Committee responsible for carrying out and verifying compliance with the requirements of this resolution in preparing their management remuneration policies (Executive Board and Board of Directors). This committee must prepare the Bank's annual "Remuneration Committee Report" containing a series of information on management remuneration.

18 Management of Investment Funds Balance - Equity 2018 2017

Duna FICFI Multimercado Crédito Privado 13,835

13,835

19 Supplementary Information

(a) Guarantees and sureties - Indusval & Partners Consolidated

2018 2017 Sureties - financial institutions 12,571 4,987 Sureties - individuals and non-financial companies 58,145 156,905 70,716 161,892

(b) Strategic partnership between Banco Indusval S.A. and The Hive BR Holding, LLC: Banco Intercap S.A. On December 04, 2017, Banco Indusval announced an association with The Hive, a company based in Palo Alto with offices in India and Brazil and company focused on implementing disruptive technologies in several sectors, for the creation of a digital platform, with an initial focus to provide banking products, including credit, to Small and Medium-sized Companies (“SMCs”). The project is being developed within Banco Intercap S.A..

(c) Service agreement - CVM Instruction 381 The policy of the Bank and its subsidiaries for contracting services unrelated to the external audit is based on the applicable regulations and on internationally accepted principles which safeguard the independence of the auditors. These principles establish that the auditors: (i) should not audit their own


65

work; (ii) should not perform management functions for their clients; and (iii) should not promote the interests of their clients. In 2018 and the prior year the independent auditors and their related parties rendered no services that were not related to the external audit.

(d) Insurance cover The Bank has insurance contracts to cover risks related to property and equipment. Management considers the amount sufficient to cover potential losses.

20 Subsequent Events

(a) Capitalization On March 27, 2019, the Shareholders' Meeting approved a capital increase in the minimum amount of R$ 245,000 through the issue of 70,000,000 new common shares and in the maximum amount of R$ 325,500, through issuance of up to 93,000,000 new common shares at the issuance price of R$ 3.50 per share for private subscription, without alteration of the Company's control group and with commitment of subscription and payment of the minimum amount of the capital increase by the current controlling shareholders of BI&P. Partial homologation of the capital increase will be allowed, provided that the amount subscribed reaches a minimum of R$ 245,000. The capitalization aims to strengthen the balance sheet of BI&P and its subsidiaries, in order to meet the requirements of Basel and, with this, to resume the capacity to generate new business and develop activities. The Company further clarifies that, following agreements between the shareholders of the controlling block of the bank (composed of Manoel Félix Cintra Neto, Luiz Masagão Ribeiro, Jair Ribeiro, Roberto Rezende Barbosa and Affonso Hennel), Mr. Roberto de Rezende Barbosa will be responsible for the payment of approximately 80% of the firm commitment of R$ 245,000, thus becoming a majority shareholder. To obtain this subscription, Mr. Roberto de Barbosa will count, free of charge, on the assignment of preferential rights of the current members of the controlling block and related persons. Given the new reality, the company will have a new shareholders agreement, which will take effect after the payment of the capital increase and its approval by the Central Bank of Brazil.

(b) Issuance of convertible subordinated debt instruments In order to strengthen the Company's capital base, BI&P will issue Convertible Subordinated Debt Instruments, which will be able to integrate, after authorization to be obtained from the Central Bank of Brazil, the Reference Equity - Level II of the Company, in the amount of R$ 55,000, convertible into shares, at the conversion price of R $ 3.50 per share. Such issue will have the commitment of subscription and payment by the controlling shareholders, observing the exercise of the preemptive right of the other shareholders.


66

(c) New command structure On March 29, 2019, at a meeting of the Board of Directors, a new Executive Board was appointed, composed of a team of renowned professionals of great expression in the financial sector. Fernando Fegyveres was appointed as the new Chief Executive Officer and Alexandre Teixeira as Executive Officer. In the structure of the direction, the current executives André Jacintho Mesquita, Jair da Costa Balma and Cláudio Roberto Cusin will remain. These statements, which were made following the resolution on the capital increase, held at the Extraordinary General Meeting held on 03/27/2019, were resolved by the Company's Board of Directors and, if approved, will be submitted to the approval of the Central Bank of Brazil , and will be an important part of the process of repositioning the institution and resuming its growth.

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EXECUTIVE BOARD STATEMENT

The undersigned members of the Executive Board of Banco Indusval S.A., under

the terms of Article 25 paragraph 1 item VI of CVM Instruction 480 dated

December 7, 2009, STATE that they have reviewed the Financial Statements of

Banco Indusval S.A. for exercise ended December 31, 2018, and based on the

discussions held, they agree that the Financial Statements adequately reflect the

relevant aspects and the financial position of the Bank for the period reported.


JAIR RIBEIRO DA SILVA NETO CPF/MF 022.718-058-56

LUIZ MASAGÃO RIBEIRO CPF/MF 525.253.688-00

ANDRE JACINTHO MESQUITA CPF/MF 071.767.968-31

CLAUDIO ROBERTO CUSIN CPF/MF 051.156.318-30

JAIR DA COSTA BALMA CPF/MF 783.929.188-00

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EXECUTIVE BOARD STATEMENT

The undersigned members of the Executive Board of Banco Indusval S.A., under

the terms of Article 25 paragraph 1 item V of CVM Instruction 480 dated

December 7, 2009, STATE that to the best of their knowledge and based on the

work plan presented by the independent auditors and the discussions held on the

results of the auditing process, they agree with the opinion issued by

PricewaterhouseCoopers Auditores Independentes, and that there are no

disagreements.


JAIR RIBEIRO DA SILVA NETO CPF/MF 022.718-058-56

LUIZ MASAGÃO RIBEIRO CPF/MF 525.253.688-00

ANDRE JACINTHO MESQUITA CPF/MF 071.767.968-31

CLAUDIO ROBERTO CUSIN CPF/MF 051.156.318-30

JAIR DA COSTA BALMA CPF/MF 783.929.188-00

Documents

Banco Indusval & Partners S.A.Banco Indusval & Partners S.A. 5 BIND18MEL-PAR.DOCX Operational limit, capitalization and issue of convertible subordinated debt instrument (Notes 16(e),