We are pleased to present the Management Report and financial statements of ITAÚSA - Investimentos ITAÚ S.A. and its subsidiaries for the first half of 2004, which have been prepared in accordance with Corporate Legislation and the regulations of the Brazilian Securities Commission (CVM). They also have the favorable opinion of the Fiscal Council.

This half year, the economy maintained its recovery trend. The growth recorded is a result of several factors, such as the decrease in interest rates and the continued expansion of the foreign market. At the end of June, the US Federal Reserve increased its interbank rate by 0.25%, pointing to a gradual increase in interest rates and better prospects for the second half.

The decrease in Brazils base rate (SELIC) to 16% at the end of June from 26.5% p.a. in June last year is due to a drop in inflation to roughly 6% in June 2004 against 17.2% for the twelve-month period ended May 2003, measured by the Broad Consumer Price Index (IPCA) issued by the Brazilian Statistics Institute (IBGE). Both sales and industrial output indicators showed a growth trend in the first half as compared to the same period in 2003. Industrial output grew 6.5% in the first five-month period of 2004 and retail sales 8.5%.

During this half year, the foreign market sector continued its excellent performance of 2003. By June, foreign sales had accumulated US$ 43.3 billion, 31% over the amount posted in the same period in 2003. The trade balance totaled US$ 15.0 billion, an increase of almost 46% as compared to 2003. This performance arises from maintaining the exchange rate at a competitive level in the agribusiness sector in Brazil, the increase on the world GDP, which according to the IMF should reach 4.6% in 2004, higher than the 4% estimated for December 2003.

Investment is also recovering, as shown by the output of capital goods and the sales of civil construction industry inputs. This shall result in a greater investment in machinery, equipment and civil construction which in 2003, was only 18% of GDP. The consolidation of the economic upturn will require an increase in investment levels in 2004.

This half, the manufacturing sector maintained the recovery trend started in the second half of 2003. From January to May, the manufacturing sector grew 6.5% as compared to the same period in 2003. The expansion in this sector is mainly due to the drop in interest rates and increasingly dynamic exports.

The two sectors that led industrial recovery in the first five months are capital goods and durables, with growth rates as high as 22.5% and 21.5%, respectively, as compared to the same period last year. Growth in different manufacturing segments was as follows; wood industry 9.2%; electronic components, devices, and communications equipment 33.8%; and vehicle industry 22.4%.

A recuperao da indstria deve manter-se nos prximos meses, consolidando um crescimento significativo no ano de 2004. Ainda que a recuperao da renda no tenha mostrado consistncia, alguns segmentos da indstria de bens de consumo semi e no durveis comeam a recuperar-se. Alm disso, os bons resultados do balano comercial devem permanecer como importante fonte de demanda na indstria durante o ano.

ITAÚSA, a publicly listed holding company, centralizes the financial and strategic decisions of its subsidiaries even though it preserves the operating autonomy of each company. Investments are diversified but each company has its own strategic business focus.

Banco Ita Holding Financeira S.A. (Ita) is the organization responsible for controlling all activities of the ITAÚSA conglomerate related to the financial services area. The organization maintained its performance of the last financial years, evidencing the sustainability of its results. Net income for the six-month period was R$ 1,825 million. Annualized income was 30.6%, reflecting revenue diversification and cost management efficiency. The efficiency rate expense/revenue ratio was below 50% for the seventh consecutive quarter.

Ita still holds the highest stock market value amongst all Latin-American banks, totaling R$ 30,485 million, at June 30, 2004.

Itas consolidated assets reached R$ 122,760 million, a 14.9% increase over the first half of 2003. The loan portfolio reached R$ 48,713 million, including sureties and collateral. In the last quarter there was an increase of 8.8%, which was noted in virtually all segments. The highlight was the 10.6% increase in personal loans, and the 12.6% increase in the balance of the small businesses and middle market loan portfolio.

Total resources increased 23.2% in comparison to June 2003, totaling R$ 194,750 million. It should be highlighted the increase of managed funds by 31.5% in the same period, totaling R$ 89,565 million.

Amongst the number of acknowledgements received during this half, we highlight that the Ita brand was once again considered the most valuable in Brazil. This year, it was valued at US$ 1,204 million, 10% higher than in 2003 (US$ 1,093 million).

The April 28, 2004 E&AGM approved the creation of a single Audit Committee for the entire Ita Financial Conglomerate, by transforming the current Internal Control Committee and enlarging its goals and purposes, in accordance with the provisions of Resolution no. 3198 of the National Monetary Council, the Sarbanes-Oxley Act of the United States Congress and the SEC, in view of the trading of Ita shares in NYSE. Three outside members were appointed from Committee: director Carlos da Cmara Pestana, as Committee Chairman, and directors Alcides Lopes Tpias and Tereza Cristina Grossi Togni. The latter will be the Committees expert director because of her proven knowledge in the accounting and audit areas.

A highlight at Banco Ita was the Tai operation which was started in May on a test pilot basis of 8 units. (Tai is the tupi-guarani word for seed.) The credit company will offer large-scale personal credit to the low-income population. The first results confirm transaction volume forecasts, proving that the model adopted is appropriate for market penetration.

In the first half of 2004, Ita-BBA kept focused on the completion of its main strategies, such as maximizing the synergies identified in the association of Ita with the former BBA, the increase in the offer of structured products and derivatives, and the increase in capital market operations. As regards the synergies, we should highlight the large income generation capacity resulting from the increase in the range of products and services offered. Currently, this product and service range goes from payroll processing to M&A consulting.

Ita and Companhia Brasileira de Distribuio (CBD) announced on July 27, 2004 the signing of a Memorandum of Understanding aimed at establishing a relationship by forming a new financial institution that will operate exclusively in structuring and selling financial and related products and services to CBD customers. Business startup is scheduled for the second half.

This association of two leading domestic groups of acknowledged management excellence and high value brands, will strengthen the credit market offered to Brazilian consumers.

Ita Seguros and its subsidiaries (including Health) generated, in the six-month period, R$ 1,028 million in premiums, presenting an increase of 13.2% in relation to the same period in 2003. The residential insurance portfolio increased 47.7% in relation to the first half of 2003, maintaining Ita Seguros as leader in the market with a market share of 24%.

During this half, Ita Previdncia e Seguros S.A. reached R$ 1,381 million in revenues from life insurance and VGBL premiums issued, which represents a 71.6% increase as compared to the first half of 2003.

Technical provisions for pension funds, VGBL, and life insurance totaled R$ 7,254 million. This amount comprises R$ 6,540 million of Ita Previdncia e Seguros reserves, an 81.5% increase as compared to 2003, and R$ 714 million from the acquisition of AGF Vida e Previdncia, already merged.

In the period, the insurance Itauvida Mulher was launched and approximately 61,000 policies were sold in the six-month period, which together with the insurance Viva Mulher Ita, launched in 2003, becomes another option of woman-focused products.

The provisions for capitalization totaled R$ 976 million in the period, of which more than R$ 17 million in cash was distributed during this half, as prizes to the winning customers.

The holding company ITAÚSA Portugal, SGPS, S.A., concentrates the conglomerates financial activities in the European Union. At the end of the quarter, its consolidated assets totaled 2.3 billion, an increase of 5% as compared to the same period in 2003. Net income reached 14 million, with an annualized return of 9.3% on consolidated stockholders equity of 305 million.

This half, Banco Ita Europa posted consolidated net income of 15 million, 5% higher than the amount obtained in the same period in 2003. These results reflect the diversification that had a major role in the performance of the capital market, treasury, and international private banking operations, and the interest held in BPI - Banco Portugus de Investimentos of 16.1%, the results of which are accounted for by the equity method in the results. BPI Bank obtained a net income of 87 million in the six-month period, 8% higher than the same period in 2003. Ita interest in BPI Bank is concentrated in IPI - ITAÚSA Portugal Investimentos, Lda., in whose capital Banco Ita Europa holds a quota of 51% and Banco Ita holds indirectly the remaining 49%.

Ita Europa continued to post a high capitalization rate, with stockholders equity of 309 million. Solvency and liquidity indices at the end of the period reached 24% and 57%, respectively, confirming a high financial soundness. The Banks consolidated assets reached 2.3 billion, a 12% growth as compared to the same period in 2003. This increase is due to the important contribution of the different Bank loan portfolios, in particular foreign trade transactions, which totaled approximately US$ 477 million. Most portfolios consist of structured financing to Brazilian exports and European companies with investments in Brazil.

Ita Europa, through its wholly-owned subsidiary, Banco Ita Europa Luxembourg S.A., which activity is concentrated on private banking transactions, has succeeded in increasing its clients portfolio and products offer. The assets reached US$ 1.7 billion at the end of the six-month period.

At the beginning of the first half, investment grade status was raised to BBB+/F2 from BBB+/F3 by Fitch Ratings, and to Baa1/P-2 from Baa2/P-2 by Moody's, which provides the Bank a competitive position to diversify its funding sources by issuing medium- and long-term Eurobonds in the international capital market.

Duratex posted consolidated billings of R$728.1 million, a 28.4% increase as compared to the same period in 2003. Exports grew 42.6%, totaling US$ 28.1 million.

Operating results of Duratex posted an increase of 52.4%, totaling R$ 104.1 million, and EBITDA of R$ 141.4 million, increasing 44.0%.

Net income reached R$ 49.1 million, a 74% increase over the same period in 2003. Operating cash generation was R$ 55.4 million.

This half, the financial volume of Duratex preferred shares traded in the spot market was R$ 162.2 million, an increase of 123.7% as compared to the same period in 2003.

The Wood Division posted a sales volume 30% higher than in the same period in 2003. This growth derives from the increase in shipments from the new capacities installed by the end of 2003 (eucalyptus MDF/HDF and particleboard panels).

The Deca Division endured the effects of the steep drop in the civil construction industry operations, and despite charging higher prices than in the first half of 2003, Decas sales volume was 5% higher than in the first half of 2003, concentrating basically in the sanitaryware segment.

The Resource Investment Plan totaled R$ 84.4 million. The main investments made in fixed assets reached R$ 62.1 million, of which we highlight the startup of the new low pressure laminate line (LPL) in Botucatu; the continuity of the expansion of the Sanitary Ceramics II plant in Jundia (SP), with the start of the installation of the new furnace that will increase current capacity by 28%; and the purchase of land and forest in the Botucatu and Itapetininga regions to supply the new installed capacity.

This half, gross sales and services revenues of Itautec Philco reached R$ 850.0 million, 33% higher than in the same period in 2003. Net income reached R$ 14.1 million, eight times higher than in the same period in 2003. Accumulated operating cash generation was R$ 61.0 million and EBITDA R$ 60.9 million, equivalent to 8.4% of net revenue.

In June, Itautec presented important launchings at CIAB 2004 (International Bank Automation Congress), such as ATMs incorporating new Multidepositor, Facial Biometric Identification, and Smart Lock technologies, which confer high efficiency and security to banking transactions.

The highlight of the Commercial Automation and Self-service Business Unit (BU) was the participation in the So Paulo Supermarket Association (APAS) trade fair, where new products incorporating cutting-edge technology, such as RFID (Radio Frequency Identification), were presented. Additionally, So Paulo State Finance Department approved the new tax form printer using thermal printing technology.

Billings of the Itec BU were 98% higher than in the same period in 2003 for the Brazilian operations, and 23% higher for the Argentine operations. The subsidiary in Ecuador was inaugurated in June as a continuation of the expansion project in Latin America.

The highlight of the e-Business Solutions BU was the winning of ten contracts for the Webway Legal product, which is intended for law firms and legal departments of large companies. Additionally, a portable scanner was included in the product line. This scanner can be used in courthouses.

In the Information Technology area, 61.7 thousand equipment were shipped, 42% more than in 2003. The highlight in this half was the world performance record obtained by an Itautec server, under the rules of the international organization Transaction Processing Council (TPC), in the single-processor serves category.

The highlight at Philco was the shipment of 60,000 High-End TVs, accounting for 12% of total sets sold. In March, the launching of a new DVD model (DV-P4500), with modern design and advanced features, was another positive factor for the 107% increase in volume shipped, as compared to the same period in 2003.

Gross revenues of the Semiconductors BU reached R$ 51.1 million for the six-month period, 50% higher than in the first half of 2003.

Itautec Philco foreign market revenues were R$ 40 million, 29% higher than in the same period of 2003. There are great growth prospects in this market through the operations of subsidiaries established in Argentina, Ecuador, Mexico, United States, Portugal, and Spain.

Total shipments of Elekeiroz were 9% lower than in first half of 2003, reaching 225,400 tonnes. Inorganic product shipments reached 107,600 tonnes, a 20% drop due to a decrease of 20,000 tonnes in sulfuric acid production because of the biannual maintenance shutdown. Organic product production was 117,800 tonnes, increasing by 3%. Exports, of 26,100 tonnes remained stable. Average product contribution margin per unit sold 20% high than in the same period in2003.

A special tank was installed in Taubat to receive and store liquid phthalic anhydride, allowing higher operating flexibility, cutting costs, and resulting in lower efforts from and risks for the plasticizer production operators.

The first stage of the sulfuric acid plan automation in Vrzea Paulista was completed during the biannual scheduled maintenance shutdown. This automation increases a more regular daily output and increase the products end quality, as confirmed in the first month of operation.

We present below the changes in the main indicators of Elekeiroz's consolidated results:

This half, there was a significant increase in residential real estate sales, despite the low number of new apartments launched. These results carry a hint of optimism to the industry, which usually concentrates a large deal of its launchings in the coming months.

The office market points to the start of the increase in demand for new space.

The high standard Condominium, Ville Belle poque, located in the Alto de Pinheiros district, developed together with Construtora Lder, had 67% of its units sold and construction continues at fast pace.

The Jardins do Portal development had 78% of its units sold.

Construction at Place Saint Germain will start in the next quarter. The high standard house condominium in the Alto da Boa Vista district is being developed together with AK Realty.

The office condominium Panamrica Park is fully rented.

The company started studies to modernize the facilities and faades of the Raposo Shopping mall to increase the visibility to this venture. As compared to the same period in 2003, sales increased 9.45%.

Staff compensation plus charges and benefits totaled R$ 1,717 million. The social benefits given to the employees and their dependents totaled R$ 259 million and encompass supplementary retirement, meals, health and dental care, social assistance services, scholarships, leisure, sports and cultural activities, loans at subsidized interest rates, insurance, transportation voucher, donations special grants, and others.

People management is a permanent focus of attention at the Groups companies. This half, R$ 23 million were invested in employee education, training, and development programs.

The highlight for this half-year was Banco Itas involvement in the Young Citizen Program, coordinated by the So Paulo State Government. The Bank hired 185 office boys and trainees for the branches administrative and self-service areas. The Young Apprentice Program, aimed at expanding opportunities and offering professional experience to poor young students, resulted in the hiring of 30 teenagers during this half year.

Group companies are committed to the development of society, both in the social and in the cultural areas, and are aligned with environmental management best practices set forth by specialized organizations, focused on sustainable development. Additionally, they adopt education-related actions to build the communitys awareness on the importance of preserving the environment. We present below some of the highlights of the first half year.

In the social and cultural areas, the highlights are the performance of the Ita Social Foundation and Instituto Ita Cultural.

In the first half of 2004, Fundao Ita Social continued its investments in the development of own programs and sponsoring initiatives mainly focused on elementary education.

Highlights for the period include the launching of the 2nd edition of the "Prmio Escrevendo o Futuro" ("Writing the Future Award"), aimed at improving the quality of public elementary education. This edition of the Program involved over 10,000 schools.

The "Programa Melhoria da Educao do Municpio" ("Improvement of Municipal Education Program") was extended to 116 municipalities in the interior of So Paulo. The projects objective was to advise and strengthen municipal teams comprising governmental organizations and non-governments organizations related to elementary education. Since inception in 1999, the program has already benefited 886 cities.

The Programa Jovens Urbanos (Urban Youth Program), focused on young people from 16 to 24 years old living in the suburbs of large cities, started in May. This program fosters better education levels, the development of skills and competences, the increase in cultural and social backgrounds, and access to the professional world. The program is supported by sound partnerships including the So Paulo State Government, the So Paulo City Government, third sector entities specialized in education, and local NGOs, and has benefited since inception 480 youngsters living in the districts of Campo Limpo and Brasilndia in Greater So Paulo.

The Programa Ita Voluntrio (Ita Voluntary Program), the objective of which is to motivate the participation of employees in community actions, is being implemented in all areas.

Reaffirming its commitment to artistic production in Brazil, the Ita Cultural Institute launched its seventh Rumos program. Initiated in 1997, Rumos is divided into eight segments: Visual Arts, Cinema and Video, Dance, Cultural Journalism, Literature Audiobooks, Music, Academic Research, and Transmedia. The program comprises wide-ranging surveys, selection of artists, exhibition of works (in expositions, shows, sound recordings and printed and electronic media), and seminars to discuss themes of general interest for the purpose of integrating artists and cultural leaders and participants.

The areas of Music, Literature-Audiobooks, and Cultural Journalism were the focus for this year, and the program's launch reached a new and previously unseen level. A cultural caravan, made up of artists, writers, journalists, cultural sponsors, and researchers of Brazilian culture, was also sent to all the states. This group discusses and examines with its peers and the general public of each region matters of interest related to Rumos. Approximately 50 partner institutions, including cultural and professional associations, TV and radio networks, state and municipal governments, amongst others, are involved in this effort.

As part of our ongoing partnership process, which intensifies and reinforces the Institute's permanent presence in other states, three important partnerships were entered into in March in Minas Gerais: the Clvis Salgado Foundation - Palace of Arts, the State Secretariat for Education, and the Minas TV Network (Rede Minas de Televiso).

Amongst the social responsibility projects sponsored by Itautec Philco, the highlight is the support to the Meninos dos Olhos project, which involves the voluntary work of company employees. The project brought leisure and entertainment to poor children in the Lar Srio home. The agenda comprises several activities, wrapped up by the children visiting Ita Cultural, where they watched the play Histrias com Desperdcios (Waste Stories).

Banco Ita Holding Financeira, through Banco Ita-BBA, has an environmental policy regarding loans to client businesses, structured based on the compliance to the environmental guidelines set forth by organizations dedicated to encourage sustainable development.

Confirming Itas strategic focus to favor economic sustainability aspects, the environmental responsibility guidelines are being deepened, both to grant loans and in the Banks relationship with the environment and the surrounding communities.

At Itautec Philco, the highlight is the awareness-building work on energy saving with actions such as the installation of timers, switches, and equipment upgrading. The program resulted in a reduction of 12.2% in energy consumption as compared to the same period in 2003. Other highlights include the Projeto gua (Water Project) actions, implemented in Jundia. The water reuse systems that are being designed will allow reusing water and saving approximately 9,600 m a year.

The improvement of the selective waste collection program and the development of new recycling processes resulted in the increase of recycled waste generation. In the Tatuap unit and in Jundia 350 tonnes and 80 tonnes of scrap were recycled, respectively.

Continued equipment renewal, technology upgrading, and the increase of operating safety at Elekeirozs units in Camaari, Taubat, and Vrzea Paulista resulted in consecutive record-breaking production outputs and number of days operating without environmental accidents or employee accident-leaves (Vrzea Paulista 1,403 days, Taubat 678 days, and Camaari 509 days).

It should also be highlighted, at Elekeiroz, the effective start of the operations of the own liquid effluents outfall from the Vrzea Paulista industrial complex to the CSJ Companhia de Saneamento de Jundia water treatment station. This is the way Elekeiroz is contributing to the improvement of water quality in the Jundia river basin.

The policy of ITAÚSA Investimentos ITAÚ S.A., its subsidiary companies or companies belonging to the same group for the engagement of non-audit services from our current independent auditors is based on the principles internationally accepted to preserve the independence of the auditor. These principles consist of: (a) the auditor should not audit his own work, (b) the auditor should not perform managerial roles for his client, and (c) the auditor should not promote the interests of its client.

During this period, PricewaterhouseCoopers Auditores Independentes and related parties did not provide to ITAÚSA Investimentos ITAÚ S.A. or its subsidiary companies any services unrelated to the external audit which had fees that exceeded 5% of total external audit costs.

We wish to thank our stockholders for their support and trust, crucial to the continuous development reached by ITAÚSA. We are also grateful to our customers for their trust and allegiance which we try to repay with quality, innovative, convenient products and services. To our employees and associates, we also wish to express our appreciation for their dedication to the organization that has resulted in the continuous improvement of our products and services.

(Approved at the Meeting of the Board of Directors on August 9, 2004)