BANIF BANCO INTERNACIONAL DO FUNCHAL, S.A.web3.cmvm.pt/sdi2004/emitentes/docs/fsd16081.pdf ·...

BASE PROSPECTUS

BANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A. (incorporated with limited liability in Portugal)

as Issuer

BANIF FINANCE, LTD. (incorporated with limited liability in the Cayman Islands)

as Issuer

BANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A.,

ACTING THROUGH ITS SUCURSAL FINANCEIRA EXTERIOR (EXTERNAL FINANCIAL BRANCH)

(incorporated with limited liability in Portugal) as Issuer and as Guarantor of Notes issued by Banif Finance, Ltd.

Euro 2,500,000,000

Euro Medium Term Note Programme

This Base Prospectus has been approved by the Luxembourg Commission de Surveillance du Secteur Financier (the "CSSF"), which is the

Luxembourg competent authority for the purpose of Directive 2003/71/EC (the "Prospectus Directive") and relevant implementing

measures in Luxembourg, as a base prospectus issued in compliance with the Prospectus Directive and relevant implementing measures in Luxembourg for the purpose of giving information with regard to the issue of notes ("Notes") issued under the Euro Medium Term Note

Programme (the "Programme") described in this Base Prospectus during the period of twelve months after the date hereof. Applications

have been made for such Notes to be admitted during the period of twelve months after the date hereof to listing on the official list and to trading on the regulated market of the Luxembourg Stock Exchange (a regulated market for the purpose of Directive 2004/39/EC (the

Markets in Financial Instruments Directive)) (the "Regulated Market"). Pursuant to Article 245-A of the Codigo dos Valores Mobiliários

(the Portuguese Securities Code) and Regulation 1/2007 of the Comissão do Mercado de Valores Mobiliários (the Portuguese Securities Market Commission), as amended from time to time (the "Corporate Governance Regulation"), only companies which have their shares

admitted to trading in a regulated market must issue certain information regarding compliance with the corporate governance regime set out

in the Corporate Governance Regulation. Given the fact that Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) ("Banif Madeira") is a full branch of Banif – Banco Internacional do Funchal, S.A.

("Banif") and Banif is not a company with shares admitted to trading in a regulated market, there is no such requirement for Banif and Banif

Madeira to comply with such corporate governance regime. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or to be admitted to listing,

trading and/or quotation by such other or further competent authorities, stock exchange and/or quotation systems as may be agreed with the

Issuer.

The Notes of each Tranche will either be in dematerialised book-entry form (forma escritural) and are registered notes (nominativas) (in the

case of Notes integrated in and held through Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários S.A. ("Interbolsa"), hereinafter the Interbolsa Notes, as defined herein) or in bearer form. Bearer Notes will (unless

otherwise specified in the applicable Final Terms) initially be represented by a temporary global Note which will be exchangeable either for interests in a permanent global Note or for definitive Notes, as indicated in the applicable Final Terms, all as further described in "Form of

the Notes" below.

Notes will be issued in such denominations as may be specified in the relevant Final Terms, subject to compliance with all applicable legal

and/or regulatory requirements. Tranches of Notes may be rated or unrated. A rating is not a recommendation to buy, sell or hold securities

and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

This Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of the Prospectus Directive and for the purpose of giving

information with regard to the Issuer and the Notes, which, according to the particular nature of the Issuer and the Notes, is necessary to enable investors to make an informed assessment of the liabilities, financial position, profit and losses and prospects of the Issuer.

See "Risk Factors" below for a discussion of certain factors to be considered in connection with any investment in the Notes.

Arrangers

BANIF – BANCO DE INVESTIMENTO, S.A.

CAIXA – BANCO DE INVESTIMENTO, S.A.

CITI

Dealers

BANIF – BANCO DE INVESTIMENTO, S.A. BARCLAYS CAPITAL

BNP PARIBAS BofA MERRILL LYNCH

CAIXA – BANCO DE INVESTIMENTO, S.A. CITI

CREDIT SUISSE DEUTSCHE BANK

16 December 2009

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TABLE OF CONTENTS

Page

SUMMARY OF THE PROGRAMME ........................................................................................................ 1

RISK FACTORS .......................................................................................................................................... 6

IMPORTANT NOTICES ........................................................................................................................... 14

INFORMATION INCORPORATED BY REFERENCE .......................................................................... 16

GENERAL DESCRIPTION OF THE PROGRAMME ............................................................................. 19

SUPPLEMENT TO THE BASE PROSPECTUS ...................................................................................... 20

FORMS OF THE NOTES .......................................................................................................................... 21

TERMS AND CONDITIONS OF THE NOTES ....................................................................................... 25

FORM OF FINAL TERMS ........................................................................................................................ 61

SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM ............... 76

DESCRIPTION OF THE ISSUERS AND THE GUARANTOR .............................................................. 79

TAXATION ............................................................................................................................................. 121

SUBSCRIPTION AND SALE ................................................................................................................. 135

GENERAL INFORMATION .................................................................................................................. 139

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SUMMARY OF THE PROGRAMME

This summary must be read as an introduction to this Base Prospectus and any decision to invest in the

Notes should be based on a consideration of the Base Prospectus as a whole, including any information

incorporated by reference. Following the implementation of the Prospectus Directive (Directive

2003/71/EC) in each Member State of the European Economic Area, no civil liability will attach to the

Issuers or the Guarantor (the "Responsible Persons") in any such Member State solely on the basis of

this summary, including any translation thereof, unless it is misleading, inaccurate or inconsistent

when read together with the other parts of this Base Prospectus, including any information

incorporated by reference. Where a claim relating to the information contained in this Base Prospectus

is brought before a court in a Member State of the European Economic Area, the plaintiff may, under

the national legislation of the Member States, be required to bear the costs of translating the Base

Prospectus before the legal proceedings are initiated.

The following summary does not purport to be complete and is qualified in its entirety by the remainder

of this Base Prospectus. Words and expressions defined in "Forms of the Notes" or "Terms and

Conditions of the Notes" below shall have the same meanings in this summary.

Issuers: Banif – Banco Internacional do Funchal, S.A., Banif Finance, Ltd.

and Banif – Banco Internacional do Funchal, S.A., acting through

its Sucursal Financeira Exterior (External Financial Branch)

Guarantor: Banif – Banco Internacional do Funchal, S.A., acting through its

Sucursal Financeira Exterior (External Financial Branch), as

Guarantor of Notes issued by Banif Finance

Substitute Guarantor: Banif – Banco Internacional do Funchal, S.A., acting through its

Sucursal Financeira Exterior (External Financial Branch) may be

substituted in its capacity as Guarantor by Banif-Banco

Internacional do Funchal, S.A.

Arrangers: Banif – Banco de Investimento, S.A., Caixa – Banco de

Investimento, S.A. and Citigroup Global Markets Limited

Dealers: Banif – Banco de Investimento, S.A., Barclays Bank PLC, BNP

Paribas, Caixa – Banco de Investimento, S.A., Citigroup Global

Markets Limited, Credit Suisse Securities (Europe) Limited,

Deutsche Bank AG, London Branch, Merrill Lynch International

and any other Dealer appointed from time to time by the Issuers and

the Guarantor either generally in respect of the Programme or in

relation to a particular Tranche of Notes.

Trustee: Citicorp Trustee Company Limited pursuant to a trust deed dated 28

October 2003 as supplemented by a supplemental trust deed dated

13 December 2004, a supplemental trust deed dated 5 July 2006, a

supplemental trust deed dated 31 July 2007, a supplemental trust

deed dated 8 August 2008 and a supplemental trust deed dated 16

December 2009 (the "Trust Deed") a copy of which will be

available for inspection (during normal office hours) at the specified

office of the Principal Paying Agent and at the registered office of

the Trustee.

Principal Paying Agent: Citibank, N.A. or, in the case of Interbolsa Notes, the Portuguese

Paying Agent.

Portuguese Paying Agent Citibank International plc, Sucursal em Portugal

Luxembourg Listing Agent: Dexia Banque Internationale à Luxembourg

Risk Factors: There are certain factors that may affect the Issuer's ability to fulfil

its obligations under Notes issued under the Programme. These are

set out under "Risk Factors" below and include risks relating to

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competition and other general banking risks, including credit risk

and exchange rate risk. In addition, there are certain factors which

are material for the purpose of assessing the market risks associated

with Notes issued under the Programme.

Holders of the Notes issued under the Programme are exposed to

several risks in relation to the Notes, for example risks of change in

currency exchange rates, liquidity risks, risk of early redemption,

risks of change in market interest rates, and risks of volatile market

price or indexes or underlying assets in the case of Index Linked

Notes and risks of deferral of interest payments having an adverse

effect on market price in the case of Subordinated Notes.

Admission to Listing and

Trading:

Applications have been made for Notes to be admitted during the

period of twelve months after the date hereof to listing on the

official list and to trading on the regulated market of the

Luxembourg Stock Exchange. The Programme also permits Notes

to be issued on the basis that they will not be admitted to listing,

trading and/or quotation by any competent authority, stock

exchange and/or quotation system or to be admitted to listing,

trading and/or quotation by such other or further competent

authorities, stock exchanges and/or quotation systems as may be

agreed with the Issuer.

Clearing Systems: The clearing systems operated by Euroclear and/or Clearstream

and/or (in the case of Interbolsa Notes only) Interbolsa, as specified

in the applicable Final Terms.

Initial Programme Amount: Up to Euro 2,500,000,000 (or its equivalent in other currencies)

aggregate principal amount of Notes outstanding and guaranteed at

any one time.

Issuance in Series: Notes will be issued in Series. Each Series may comprise one or

more Tranches issued on different issue dates. The Notes of each

Series will all be subject to identical terms, except that the issue

date and the amount of the first payment of interest may be different

in respect of different Tranches. The Notes of each Tranche will all

be subject to identical terms in all respects save that a Tranche may

comprise Notes of different denominations.

Final Terms or Drawdown

Prospectus:

Notes issued under the Programme may be issued either (1)

pursuant to this Base Prospectus and associated Final Terms or (2)

pursuant to a drawdown prospectus (each a "Drawdown

Prospectus") prepared in connection with a particular Tranche of

Notes.

For a Tranche of Notes which is the subject of Final Terms, those

Final Terms will, for the purposes of that Tranche only, supplement

the Terms and Conditions of the Notes and this Base Prospectus and

must be read in conjunction with this Base Prospectus. The terms

and conditions applicable to any particular Tranche of Notes which

is the subject of Final Terms are the Terms and Conditions of the

Notes as supplemented, amended and/or replaced to the extent

described in the relevant Final Terms.

The terms and conditions applicable to any particular Tranche of

Notes which is the subject of a Drawdown Prospectus will be the

Terms and Conditions of the Notes as supplemented, amended

and/or replaced to the extent described in the relevant Drawdown

Prospectus. In the case of a Tranche of Notes which is the subject of

a Drawdown Prospectus, each reference in this Base Prospectus to

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information being specified or identified in the relevant Final Terms

shall be read and construed as a reference to such information being

specified or identified in the relevant Drawdown Prospectus.

Forms of Notes: The Notes (except for Interbolsa Notes) may only be issued in

bearer form. Each Tranche of Notes will initially be in the form of

either a Temporary Global Note or a Permanent Global Note, in

each case as specified in the relevant Final Terms. Each Global

Note which is not intended to be issued in new global note form (a

"Classic Global Note" or "CGN"), as specified in the relevant Final

Terms, will be deposited on or around the relevant issue date with a

depositary or a common depositary for Euroclear and/or

Clearstream, Luxembourg and/or any other relevant clearing system

and each Global Note which is intended to be issued in new global

note form (a "New Global Note" or "NGN"), as specified in the

relevant Final Terms, will be deposited on or around the relevant

issue date with a common safekeeper for Euroclear and/or

Clearstream, Luxembourg. Each Temporary Global Note will be

exchangeable for a Permanent Global Note or, if so specified in the

relevant Final Terms, for Definitive Notes. If the TEFRA D Rules

are specified in the relevant Final Terms as applicable, certification

as to non-U.S. beneficial ownership will be a condition precedent to

any exchange of an interest in a Temporary Global Note or receipt

of any payment of interest in respect of a Temporary Global Note.

Each Permanent Global Note will be exchangeable for Definitive

Notes in accordance with its terms. Definitive Notes will, if interest-

bearing, have Coupons attached and, if appropriate, a Talon for

further Coupons.

Interbolsa Notes will be issued in dematerialised book-entry form

(forma escritural) and are registered notes (nominativas), as further

described under "Form of the Notes". Interbolsa Notes may only be

transferred in accordance with the applicable procedures set out in

the Portuguese Securities Code and the regulations issued by the

Comissão do Mercado de Valores Mobiliários (the Portuguese

Securities Commission) and Interbolsa. No physical document of

title will be issued in respect of Interbolsa Notes, which are held

through Interbolsa.

Currencies: Notes may be denominated in any currency or currencies, subject to

compliance with all applicable legal and/or regulatory and/or central

bank requirements. Payments in respect of Notes may, subject to

such compliance, be made in and/or linked to, any currency or

currencies other than the currency in which such Notes are

denominated.

Dual Currency Notes: Payments (whether in respect of principal or interest and whether at

maturity or otherwise) in respect of Dual Currency Notes will be

made in such currencies, and based on such rates of exchange, as

the relevant Issuer and the relevant Dealer may agree (as indicated

in the applicable Final Terms). No Interbolsa Note will be a Dual

Currency Note.

Status of the Notes: Notes may be issued on a subordinated or unsubordinated basis, as

specified in the relevant Final Terms.

Status of the Guarantee: Notes issued by Banif Finance will be unconditionally and

irrevocably guaranteed by the Guarantor, on an unsubordinated or a

subordinated basis, as specified in the relevant Final Terms.

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Issue Price: Notes may be issued at any price which is at par or at a discount to,

or premium over, par and either on a fully or partly paid basis, as

specified in the relevant Final Terms. The price and amount of

Notes to be issued under the Programme will be determined by the

Issuer, the Guarantor and the relevant Dealer(s) at the time of issue

in accordance with prevailing market conditions.

Maturities: Any maturity, subject, in relation to specific currencies, to

compliance with all applicable legal and/or regulatory and/or central

bank requirements.

Where Notes have a maturity of less than one year and either (a) the

issue proceeds are received by the relevant Issuer in the United

Kingdom or (b) the activity of issuing the Notes is carried on from

an establishment maintained by the relevant Issuer in the United

Kingdom, such Notes must: (i) have a minimum redemption value

of £100,000 (or its equivalent in other currencies) and be issued

only to persons whose ordinary activities involve them in acquiring,

holding, managing or disposing of investments (as principal or

agent) for the purposes of their businesses or who it is reasonable to

expect will acquire, hold, manage or dispose of investments (as

principal or agent) for the purposes of their businesses; or (ii) be

issued in other circumstances which do not constitute a

contravention of section 19 of the FSMA by the relevant Issuer.

Redemption: Notes may be redeemable at par or at such other Redemption

Amount (detailed in a formula, index or otherwise) as may be

specified in the relevant Final Terms. Notes may also be

redeemable in two or more instalments on such dates and in such

manner as may be specified in the relevant Final Terms.

Optional Redemption: Notes may be redeemed before their stated maturity at the option of

the relevant Issuer (either in whole or in part) and/or the

Noteholders to the extent (if at all) specified in the relevant Final

Terms.

Tax Redemption: Early redemption will be permitted for tax reasons as described in

Condition 10(b) (Redemption and Purchase – Redemption for tax

reasons).

Redemption due to Own Funds

Non-Qualification Event:

Early redemption will be permitted upon the occurrence of an Own

Funds Non-Qualification Event as described in Condition 10(f)

(Redemption due to Own Funds Non-Qualification Event).

Interest: Notes may be interest-bearing or non-interest bearing. Interest (if

any) may accrue at a fixed rate or a floating rate or other variable

rate or be index-linked and the method of calculating interest may

vary between the issue date and the maturity date of the relevant

Series.

Denominations: Notes issued by Banif Finance which are to be admitted to trading

on the regulated market of the Luxembourg Stock Exchange and/or

admitted to listing, trading and/or quotation by any other listing

authority, stock exchange and/or quotation system situated or

operating in a member state of the European Union, in each case in

circumstances which require the publication of a prospectus under

the Prospectus Directive and the implementing measures in the

relevant member state, may not (a) have a minimum denomination

of less than EUR 1,000 (or nearly equivalent in another currency),

or (b) carry the right to acquire shares (or transferable securities

equivalent to shares) issued by Banif Finance or by any entity to

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whose group Banif Finance belongs. Notes which have a maturity

of less than one year will have a minimum redemption value of

£100,000 (or its equivalent in other currencies). Subject thereto,

Notes will be issued in such denominations as may be specified in

the relevant Final Terms, subject to compliance with all applicable

legal and/or regulatory and/or central bank requirements.

Negative Pledge: The Notes will have the benefit of a negative pledge as described in

Condition 5 (Negative Pledge).

Cross Default: The Notes will have the benefit of a cross default as described in

Condition 13 (Events of Default).

Taxation: All payments in respect of Notes will be made free and clear of

withholding taxes of the country of incorporation of the relevant

Issuer, or if applicable, the Guarantor, or if different, the country of

tax residence of the Issuer, or if applicable, the Guarantor, as the

case may be, unless the withholding is required by law. In that

event, the Issuer or the Guarantor, as the case may be, will (subject

as provided in Condition 12 (Taxation)) pay such additional

amounts as will result in the Noteholders receiving such amounts as

they would have received in respect of such Notes had no such

withholding been required.

For a description of the requirements to qualify for the withholding

tax exemption in relation to any payments of interest to the

Noteholders by Banif-Banco Internacional do Funchal, S.A., as

Issuer and Banif-Banco Internacional do Funchal, S.A., acting

through its Sucursal Financeira Exterior (External Financial

Branch) as Issuer or Guarantor, see "Taxation – Notes issued by

Banif" and "Taxation – Notes issued or guaranteed by Banif

Madeira" below.

Governing Law: The Notes (other than Interbolsa Notes) will be governed by, and

construed in accordance with English law except for the

subordination provisions set out in Conditions 4(c) and 4(d), which

will be governed by, and construed in accordance with, Portuguese

law. Interbolsa Notes will be governed by and construed in

accordance with Portuguese law.

Enforcement of Notes in Global

Form:

In the case of Global Notes, individual investors' rights against the

relevant Issuer will be governed by the Trust Deed, a copy of which

will be available for inspection (during normal office hours) at the

specified office of the Principal Paying Agent and at the registered

office of the Trustee.

Ratings: Notes issued pursuant to the Programme may be rated or unrated.

Where an issue of Notes is rated, its rating will not necessarily be

the same as the rating applicable to the Programme. A security

rating is not a recommendation to buy, sell or hold securities and

may be subject to suspension, reduction or withdrawal at any time

by the assigning rating agency.

Selling Restrictions: For a description of certain restrictions on offers, sales and

deliveries of Notes and on the distribution of offering material in

the United States of America, the United Kingdom, Portugal, the

European Economic Arena, the Cayman Islands and Japan, see

"Subscription and Sale" below.

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RISK FACTORS

Prospective investors in the Notes should consider carefully, among other things and in light of their

financial circumstances and investment objectives, all of the information in this Base Prospectus

(including the information that has been incorporated by reference herein) and, in particular, the risk

factors set forth below which each Issuer and the Guarantor believes represent, or may represent, the

factors known to it which may affect its ability to fulfil its obligations under the Notes. Words and

expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Base

Prospectus have the same meanings in this section. Investing in the Notes involves certain risks.

Prospective investors should consider, among other things, the following:

Each Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its

obligations under Notes issued under the Programme. All of these factors are contingencies which may or

may not occur and neither each Issuer nor the Guarantor is in a position to express a view on the

likelihood of any such contingency occurring.

Factors which each Issuer and the Guarantor believe may be material for the purpose of assessing the

market risks associated with Notes issued under the Programme are also described below.

Each Issuer and the Guarantor believes that the factors described below represent the principal risks

inherent in investing in Notes issued under the Programme, each Issuer may be unable to pay interest,

principal or other amounts on or in connection with any Notes for other reasons and the Issuer does not

represent that the statements below regarding the risks of holding any Notes are exhaustive. Prospective

investors should also read the detailed information set out elsewhere in this Base Prospectus (including

any documents deemed to be incorporated by reference herein) and reach their own views prior to

making any investment decision.

Factors that may affect the Issuer's ability to fulfil its obligations under Notes issued under the

Programme

Risk Factors relating to Banif

As a result of its business activities, Banif is exposed to a variety of risks, the most significant of which

are credit risk, market risk, operational risk and liquidity risk. Failure to control these risks may result in a

material adverse effect on Banif's financial condition and results of operations.

Economic Activity

As a bank whose core business is in Portugal, Banif's performance is influenced by the level and cyclical

nature of business activity in this country, which is in turn affected by both domestic and international

economic and political events. To a lesser extent, Banif's performance, results of operations and financial

condition are also affected by the economic conditions and levels of economic activity in other countries

where the bank operates, such as Brazil and the United States of America. Structural changes in the

economy of any of these countries, particularly Portugal, may have a material effect on Banif's financial

condition and results of operations.

Credit Risk

Risks arising from changes in credit quality and the recoverability of loans and amounts due from

borrowers and counterparties are inherent to a wide range of Banif's business. Adverse changes in the

credit quality of Banif's borrowers and counterparties or a general deterioration in Portuguese or global

economic conditions, or arising from system skills in financial systems, could affect the recoverability

and value of its assets and require an increase in Banif's provision for bad and doubtful debts and other

provisions, and accordingly would have a material adverse effect on Banif's financial condition and

results of operations, including the value of its debt securities in issue.

Market Risk

Market risk is inherent to adverse changes in the overall valuation of the trading assets, and arises

primarily from movements of trading and non-trading market parameters. The major market risks to

which Banif is exposed are interest rate, foreign exchange, bond and equity price risks. Movements in

interest rate levels, yield curves and spreads may affect the value of assets and liabilities denominated in

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foreign currencies and may affect income from foreign exchange trading. The performance of financial

markets may decrease the value of Banif's investment and trading portfolios. Banif has implemented risk

assessment and management methods to mitigate and control these and other market risks which may

affect Banif and exposures are constantly assessed and monitored. In any case, it is difficult to predict

with accuracy changes in economic or market conditions and to anticipate the effects that such changes

could have on Banif's financial condition and results of operations.

Liquidity Risk

Liquidity is a component of market risk. A lack of liquidity can arise due to a lack of volume, legal

restrictions or a one-way market. Liquidity risk, which is also referred to as funding risk, is the inability

of a bank such as Banif to anticipate and provide for unforeseen events, decreases or changes in funding

sources with consequences on Banif's ability to meet its obligations when they fall due.

Operational Risk

Operational risk corresponds to the risk of losses due to inadequate or failed internal process, or due to a

fraud, errors by employees, failure to document transactions properly or to obtain proper internal

authorisation, failure to comply with regulatory requirements and conduct of business rules, equipment

failures, natural disasters or the failure of external systems, for example, those of Banif's suppliers or

counterparties. Banif's businesses are dependent on its ability to process a very large number of

transactions efficiently and accurately. Banif cannot provide assurances that such failures or interruptions

will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures

or interruptions could have a material adverse effect on Banif's financial condition and results of

operations.

Regulatory Compliance Risk

Banif is subject to extensive supervisory and regulatory regimes by the European Central Bank and the

Bank of Portugal, mainly relating to liquidity levels, solvency and provisioning. Regulatory compliance

risk arises from a failure or inability to comply fully with the laws, regulations or codes applicable

specifically to the financial services industry. Non-compliance could lead to fines, public reprimand,

damage to reputation, enforced suspension of operations or, in extreme cases, withdrawal of authorisation

to operate. Changes in regulation and supervision are not predictable and are beyond Banif's control and

could materially affect its business, the products and services offered or the value of its assets.

International Financial Reporting Standards

According to Regulation nr. 1606/2002 of the European Council and Parliament, companies having

securities admitted to trading on a regulated market of any Member State should adopt the International

Financial Reporting Standards ("IFRS") as from 1st January, 2005. This obligation must be observed in

the preparation and presentation of the consolidated Banif's future financial statements.

Banif has adopted IFRS for reporting periods beginning 1 January 2005 and thereafter. These standards

are, in a number of ways, different from existing generally accepted accounting principles in Portugal and

their implementation may have a significant effect on the presentation of Banif's future financial

statements.

Unforeseen events

Unforeseen events like severe natural catastrophes, terrorist attacks or other states of emergency can lead

to an abrupt interruption of the Banif's operations, which can cause substantial losses. Such losses can

relate to property, financial assets, trading positions and to key employees. Such unforeseen events can

also lead to additional costs (such as relocation of employees affected) and increase Banif's costs (such as

insurance premiums). Such events may also make insurance coverage for certain risks unavailable and

thus increase Banif's risk.

Risk Factors Relating to Banif Madeira

Banif Madeira is a full branch of Banif. As such its risk factors are the same as stated above for Banif.

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Risk Factors Relating to Banif Finance

Banif Finance is a funding vehicle of Banif. As such it raises funds to Banif by way of intra-group loans.

In the event that Banif fails to make a payment under an intra-group loan, Banif Finance may not be able

to meet its payment obligations under the issued Notes.

Factors which are material for the purpose of assessing the market risks associated with Notes

issued under the Programme

Notes may not be a suitable investment for all investors

Each potential investor in any Notes must determine the suitability of that investment in light of its own

circumstances. In particular, each potential investor should:

• have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes,

the merits and risks of investing in the relevant Notes and the information contained or

incorporated by reference in this Base Prospectus or any applicable supplement or any applicable

Final Terms;

• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its

particular financial situation, an investment in the relevant Notes and the impact such investment

will have on its overall investment portfolio;

• have sufficient financial resources and liquidity to bear all of the risks of an investment in the

relevant Notes, including where principal or interest is payable in one or more currencies, or

where the currency for principal or interest payments is different from the potential investor's

currency;

• understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any

relevant indices and financial markets; and

• be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for

economic, interest rate and other factors that may affect its investment and its ability to bear the

applicable risks.

Some Notes are complex financial instruments and such instruments may be purchased as a way to reduce

risk or enhance yield with an understood, measured, appropriate addition of risk to their overall

portfolios. A potential investor should not invest in Notes which are complex financial instruments unless

it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will

perform under changing conditions, the resulting effects on the value of such Notes and the impact this

investment will have on the potential investor's overall investment portfolio.

No reliance

A prospective purchaser may not rely on the Issuers, the Dealers, the Trustee, the Agents or any of their

affiliates in connection with its determination as to the legality of an acquisition of the Notes by such

prospective purchaser or as to other matters referred to above except to the extent otherwise imposed by

law, regulations, guidelines or codes issued by regulatory authority.

Risks related to the structure of a particular issue of Notes

A wide range of Notes may be issued under the Programme. A number of these Notes may have features

which contain particular risks for potential investors. Set out below is a description of certain such

features:

Notes subject to optional redemption by the Issuer

An optional redemption feature is likely to limit the market value of Notes. During any period when each

Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially

above the price at which they can be redeemed. This also may be true prior to any redemption period.

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Each Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on

the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at

an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to

do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other

investments available at that time.

Partly-paid Notes

Each Issuer may issue Notes where the issue price is payable in more than one instalment. Failure to pay

any subsequent instalment could result in an investor losing all of its investment.

Variable Rate Notes with a multiplier or other leverage factor

Notes with variable interest rates can be volatile investments. If they are structured to include multipliers

or other leverage factors, or caps or floors, or any combination of those features or other similar related

features, their market values may be even more volatile than those for securities that do not include those

features.

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes may bear interest at a rate that each Issuer may elect to convert from a fixed

rate to a floating rate, or from a floating rate to a fixed rate. Each Issuer's ability to convert the interest

rate will affect the secondary market and the market value of such Notes since each Issuer may be

expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If each Issuer

converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less

favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference

rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If each

Issuer converts from a floating rate to a fixed rate, the fixed rate may be lower than the prevailing rates on

its Notes.

Index Linked Notes and Dual Currency Notes

Each Issuer may issue Notes with principal or interest determined by reference to an index or formula, to

changes in the prices of securities or commodities (or a basket of securities or commodities, as the case

may be), to movements in currency exchange rates or other factors (each, a "Relevant Factor"). In

addition, each Issuer may issue Notes with principal or interest payable in one or more currencies, which

may be different from the currency in which the Notes are denominated or the currency in which any

potential investor conducts its business or activities or resides. Potential investors should be aware that:

• the market price of such Notes may be volatile;

• they may receive little or no interest;

• payment of principal or interest may occur at a different time or in a different currency than

expected;

• the amount of principal payable at redemption may be less than the nominal amount of such

Notes or even zero;

• a Relevant Factor may be subject to significant fluctuations that may not correlate with changes

in interest rates, currencies or other indices;

• if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or

contains some other leverage factor, the effect of changes in the Relevant Factor on principal or

interest payable likely will be magnified; and

• the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the

average level is consistent with their expectations. In general, the earlier the change in the

Relevant Factor, the greater the effect on yield.

The historical performance of an index should not be viewed as an indication of the future performance of

such Index Linked Notes. Accordingly, any potential investor should consult its own financial and legal

- 10 -

advisers about the risks entailed by an investment in Index Linked Notes and the suitability of such Notes

in light of the particular circumstances.

Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium to their nominal amount tend

to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-

bearing securities. Generally, the longer the remaining term of the securities, the greater the price

volatility as compared to conventional interest-bearing securities with comparable maturities.

Each Issuer's obligations under Subordinated Notes are subordinated

Each Issuer's obligations under Dated and Undated Subordinated Notes will be unsecured and

subordinated and will rank junior in priority to the claims of Senior Creditors and Prior Creditors,

respectively (as defined in "Terms and Conditions of the Notes" herein). Although Dated and Undated

Subordinated Notes may pay a higher rate of interest than the comparable Notes which are not

subordinated, there is a real risk that an investor in Dated and Undated Subordinated Notes will lose all or

some of its investment should any Issuer become insolvent.

Upon certain conditions, interest may not be due on Undated Subordinated Notes with Conditional

Interest

The holders of Undated Subordinated Notes with Conditional Interest shall only have the right to receive

interest if it is freely resolved upon by the board of directors of Banif and subject to the Limitations on

Payment of Interest.

Accordingly, pursuant to the Conditions of the Undated Subordinated Notes with Conditional Interest, if

the board of directors of Banif does not approve the payment of interest on an Interest Payment Date or if

the requirements specified in Condition 4(c)(iii) below in relation to the amount of Distributable Funds

(which may be affected by legal and statutory changes) and the compliance by Banif with own funds

requirements are not met, interest on the Undated Subordinated Notes with Conditional Interest shall not

be due and the holders of Undated Subordinated Notes with Conditional Interest will not have any right to

receive interest on such Interest Payment Date in respect of the relevant Interest Period.

The possibility of interest not being due on Undated Subordinated Notes with Conditional Interest is

likely to have an adverse effect on the market value of the Undated Subordinated Notes with Conditional

Interest. Additionally, and as a result thereof, the market value of the Undated Subordinated Notes with

Conditional Interest may be subject to greater volatility than the market value of other debt securities

issued at discount or with non conditional interest and may be generally more sensitive to adverse

changes in the financial condition of Banif.

Risks related to Notes generally

Set out below is a brief description of certain risks relating to the Notes generally:

Modification and Waivers

The Terms and Conditions of the Notes contain provisions for calling meetings of Noteholders to

consider matters affecting their interests generally. These provisions permit defined majorities to bind all

Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders

who voted in a manner contrary to the majority.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is

required to provide to the tax authorities of another Member State details of payments of interest (or other

similar income) paid by a person within its jurisdiction to, or collected by such a person for, an individual

resident or certain limited types of entity established in that other Member State. However, for a

transitional period, Belgium, Luxembourg and Austria may instead apply a withholding system in relation

to such payments, deducting tax at rates rising over time to 35 per cent.. Belgium will replace this

withholding tax with a regime of exchange of information to the Member State of residence as from 1

- 11 -

January 2010. A number of non-EU countries and territories including Switzerland have adopted similar

measures (a withholding system in the case of Switzerland).

If a payment were to be made by or collected through a Member State which has opted for a withholding

system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the

Directive, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay

additional amounts with respect to any Note as a result of the imposition of such withholding tax. The

Issuer is, however, required to maintain a Paying Agent in a Member State that will not be obliged to

withhold or deduct tax pursuant to the Directive.

Change of law

The Terms and Conditions of the Notes (other than Conditions 4(c) and 4(d) and the Interbolsa Notes) are

based on English law in effect as at the date of issue of the relevant Notes. No assurance can be given as

to the impact of any possible judicial decision or change to English law or administrative practice after

the date of issue of the relevant Notes.

Risks relating to Interbolsa Notes

Reliance upon Interbolsa procedures and Portuguese law

Investments in Interbolsa Notes will be subject to Interbolsa procedures and Portuguese law in respect of

the following:

(a) Form and Transfer of Interbolsa Notes

Notes held through accounts of Affiliate Members of Interbolsa will be represented in

dematerialised book-entry form (forma escritural) and will be registered notes (nominativas).

Interbolsa Notes shall not be issued in bearer form (ao portador), whether in definitive form or

otherwise. Interbolsa Notes will be registered in the relevant issue account opened by the Issuer

with Interbolsa and will be held in control accounts held by the Affiliate Members of Interbolsa

on behalf of the relevant Noteholders. Such control accounts will reflect at all times the

aggregate number of Interbolsa Notes held in the individual securities accounts opened by the

clients of the Affiliate Members of Interbolsa (which may include Euroclear and Clearstream,

Luxembourg). The transfer of Interbolsa Notes and their beneficial interests will be made

through Interbolsa.

(b) Payments on Interbolsa Notes

All payments on Interbolsa Notes (including without limitation the payment of accrued interest

and principal) will be made by the Issuer to the Portuguese Paying Agent and (i) if made in euro

will be (a) credited, according to the procedures and regulations of Interbolsa, by the Portuguese

Paying Agent to the payment current-accounts held in the payment system of the Bank of

Portugal by the Affiliate Members of Interbolsa whose control accounts with Interbolsa are

credited with such Notes and thereafter (b) credited by such Affiliate Members of Interbolsa

from the aforementioned payment current-accounts to the accounts of the Noteholders or

through Euroclear and Clearstream, Luxembourg of the beneficial owners of those Notes in

accordance with the rules and procedures of Interbolsa, Euroclear or Clearstream, Luxembourg,

as the case may be; (ii) if made in currencies other than euro will be (a) transferred, on the

payment date and according to the procedures and regulations applicable by Interbolsa, from the

account held by the Portuguese Paying Agent in the Sistema de Liquidação de Moeda

Estrangeira (Foreign Currency Settlement System) managed by Caixa Geral de Depósitos, S.A.

to the relevant accounts of the relevant Affiliate Members of Interbolsa and thereafter (b)

transferred by such Affiliate Members of Interbolsa from such relevant accounts to the accounts

of the Noteholders or through Euroclear and Clearstream, Luxembourg to the accounts with

Euroclear and Clearstream, Luxembourg of the beneficial owners of those Notes in accordance

with the rules and procedures of Interbolsa, Euroclear or Clearstream, Luxembourg, as the case

may be.

The Noteholders must rely on the procedures of Interbolsa to receive payment under the

Interbolsa Notes. The records relating to payments made in respect of beneficial interests in the

Interbolsa Notes are maintained by the Affiliate Members of Interbolsa and the Issuer accepts no

responsibility for, and will not be liable in respect of, maintenance of such records.

- 12 -

(c) Notice to the Noteholders

Notices to the Noteholders may be given by publication in a leading newspaper having general

circulation in Portugal (which is expected to be Diário de Notícias) or by any other way which

complies with the Portuguese Securities Code and Interbolsa's rules on notices to investors,

notably the disclosure of information through the CMVM official website (www.cmvm.pt).

(d) Meetings of the Noteholders

Mandatory provisions of Portuguese law apply to meetings of Noteholders. Meetings of

Noteholders may be convened by a Common Representative. If the Noteholders have not

appointed a Common Representative or if the same refuses to convene a Noteholders meeting,

Noteholders holding not less than 5 per cent. in principal amount of the Notes for the time being

outstanding may request the chairman of the general meeting of shareholders of the Issuer to

convene a Noteholders meeting.

The quorum required for a meeting convened to pass a resolution will be any person or persons

holding or representing any Notes then outstanding, regardless of the principal amount thereof

outstanding; the number of votes required to pass a resolution is the majority of the votes cast at

the relevant meeting. However, extraordinary resolutions (including, without limitation, those

relating to the amendment of the Terms and Conditions of the Notes) will require the attendance

of a person or persons holding or representing at least 50 per cent. of the Notes then outstanding

or, at any adjourned meeting, any person or persons holding or representing any of the Notes

then outstanding, regardless of the principal amount thereof; the number of votes required to pass

an extraordinary resolution is at least 50 per cent. of the principal amount of the Notes then

outstanding or, at any adjourned meeting, two-thirds of the votes cast at the relevant meeting.

Resolutions passed at any meeting of the Noteholders will be binding on all Noteholders,

whether or not they are present at the meeting or have voted against the approved resolutions.

(e) Portuguese Tax Rules

Pursuant to Decree Law 193/2005 of 7 November (as amended from time to time), investment

income paid to holders of Interbolsa Notes, and capital gains resulting from a sale or other

disposal of such Notes, will be exempt from Portuguese income tax only if certain documentation

requirements are duly complied with.

If the Interbolsa Notes are held in an account with an international clearing system (such as

Euroclear or Clearstream, Luxembourg), the management entity of such clearing system may not

provide the necessary registration services in respect of the Interbolsa Notes and therefore, in

order to be eligible for the exemption, the holders of the Interbolsa Notes are required to submit

to the management entity of the relevant clearing system, by courier, hand delivery or mail (there

is no procedure for electronic filing), on an annual basis:

(i) a certificate with the name of each beneficial owner, address, tax payer number (if

applicable), identification of the securities, amount of securities held and reference to the

relevant legislation supporting the exemption or waiver from Portuguese withholding tax;

or

(ii) a declaration that the beneficial owners are exempt from, or not subject to, Portuguese

withholding tax.

The forms of certificate and declaration are set out in "Taxation in Portugal (including Madeira)" below.

The Issuer will not gross up payments in respect of any such withholding tax in any cases indicated in

Condition 12 of the Interbolsa Notes, including failure to deliver or incorrect filing of the certificate or

declaration referred to above. Accordingly, holders of Interbolsa Notes must seek their own advice to

ensure that they comply with all procedures to ensure correct tax treatment of their Interbolsa Notes.

http://www.cmvm.pt/

- 13 -

Risks related to the market generally

Set out below is a brief description of certain market risks, including liquidity risk, exchange rate risk,

interest rate risk and credit risk:

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If a market does

develop, it may not be liquid. Therefore, investors may not be able to sell their Notes easily or at prices

that will provide them with a yield comparable to similar investments that have a developed secondary

market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or

market risks, are designed for specific investment objectives or strategies or have been structured to meet

the investment requirements of limited categories of investors. These types of Notes generally would have

a more limited secondary market and more price volatility than conventional debt securities. Illiquidity

may have a severely adverse effect on the market value of Notes.

Exchange rate risks and exchange controls

Each Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain

risks relating to currency conversions if an investor's financial activities are denominated principally in a

currency or currency unit (the "Investor's Currency") other than the Specified Currency. These include

the risk that exchange rates may significantly change (including changes due to devaluation of the

Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction

over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of

the Investor's Currency relative to the Specified Currency would decrease (1) the Investor's Currency-

equivalent yield on the Notes, (2) the Investor's Currency-equivalent value of the principal payable on the

Notes and (3) the Investor's Currency-equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that

could adversely affect an applicable exchange rate. As a result, investors may receive less interest or

principal than expected, or no interest or principal.

Interest rate risks

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may

adversely affect the value of Fixed Rate Notes.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to an issue of Notes. The ratings

may not reflect the potential impact of all risks related to structure, market, additional factors discussed

above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to

buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.

A credit rating reduction may result in a reduction in the trading value of the Notes

The value of the Notes is expected to be affected, in part, by investors' general appraisal of the

creditworthiness of the Issuer. Such perceptions are generally influenced by the ratings accorded to the

outstanding Notes of the Issuer by standard statistical rating services. A reduction in, or a placing on

credit watch of the rating, if any, accorded to outstanding Notes of the Issuer by a rating agency could

result in a reduction in the trading value of the Notes.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or

review or regulation by certain authorities. Each potential investor should consult its legal advisers to

determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as

collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any

Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine

the appropriate treatment of Notes under any applicable risk-based capital or similar rules.

- 14 -

IMPORTANT NOTICES

Each of Banif – Banco Internacional do Funchal, S.A. ("Banif"), Banif Finance, Ltd. ("Banif Finance")

and Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior

(External Financial Branch) ("Banif Madeira") (each an "Issuer" and together the "Issuers") and Banif –

Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External

Financial Branch) in its capacity as guarantor of Notes issued by Banif Finance (the "Guarantor")

accepts responsibility for the information contained in this Base Prospectus. Each of the Issuers and the

Guarantor declares that, having taken all reasonable care to ensure that such is the case, the information

contained in this Base Prospectus is, to the best of its knowledge, in accordance with the facts and

contains no omission likely to affect its import.

Certain information and data contained in this Base Prospectus relating to the competitive position of the

Issuer was derived from publicly available information. The Issuer accepts responsibility that such

publicly available information has been accurately reproduced and, as far as the Issuer is aware and is

able to ascertain, no facts have been omitted which would render such information inaccurate or

misleading. Where applicable, the source of such information is indicated in footnotes in this Base

Prospectus.

This Base Prospectus should be read and construed together with any supplements hereto and with any

other documents incorporated by reference herein and, in relation to any Tranche (as defined herein) of

Notes which is the subject of Final Terms (as defined herein), should be read and construed together with

the relevant Final Terms.

The Issuers and the Guarantor have confirmed to the Dealers named under "Subscription and Sale"

below that this Base Prospectus (including for this purpose, each relevant Final Terms) contains all

information regarding the Issuers, the Guarantor and the Notes which is (in the context of the Programme,

the issue, offering and sale of the Notes, where applicable, and the guarantee of the Notes thereunder)

material; that such information is true and accurate in all material respects and is not misleading in any

material respect; that any opinions, predictions or intentions expressed herein are honestly held or made

and are not misleading in any material respect; that this Base Prospectus does not omit to state any

material fact necessary to make such information, opinions, predictions or intentions (in such context) not

misleading in any material respect; and that all proper enquiries have been made to ascertain and to verify

the foregoing.

No person has been authorised to give any information or to make any representation not contained in or

not consistent with this Base Prospectus or any other document entered into in relation to the Programme

or any information supplied by the Issuers or the Guarantor or such other information as is in the public

domain and, if given or made, such information or representation should not be relied upon as having

been authorised by the Issuers, the Guarantor, the Trustee or any Dealer.

No representation or warranty is made or implied by any of the Dealers or the Trustee or any of their

respective affiliates, and none of the Dealers, the Trustee nor any of their respective affiliates makes any

representation or warranty or accepts any responsibility as to the accuracy or completeness of the

information contained in this Base Prospectus. Neither the delivery of this Base Prospectus or any Final

Terms nor the offering, sale or delivery of any Note shall, in any circumstances, create any implication

that the information contained in this Base Prospectus is true subsequent to the date hereof or the date

upon which this Base Prospectus has been most recently supplemented or that there has been no adverse

change, or any event reasonably likely to involve any adverse change, in the condition (financial or

otherwise) of the Issuers or the Guarantor since the date thereof or, if later, the date upon which this Base

Prospectus has been most recently supplemented or that any other information supplied in connection

with the Programme is correct at any time subsequent to the date on which it is supplied or, if different,

the date indicated in the document containing the same.

The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery of the

Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Base

Prospectus or any Final Terms comes are required by the Issuers, the Guarantor, the Trustee and the

Dealers to inform themselves about and to observe any such restrictions. For a description of certain

restrictions on offers, sales and deliveries of Notes and on the distribution of this Base Prospectus or any

Final Terms and other offering material relating to the Notes, see "Subscription and Sale". In particular,

Notes have not been and will not be registered under the United States Securities Act of 1933 (as

- 15 -

amended) (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain

exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons.

Neither this Base Prospectus nor any Final Terms constitutes an offer or an invitation to subscribe for or

purchase any Notes and should not be considered as a recommendation by the Issuers, the Guarantor, the

Trustee, or any of the Dealers that any recipient of this Base Prospectus or any Final Terms should

subscribe for or purchase any Notes. The content of this document should not be construed as providing

legal, business, accounting or tax advice and each recipient of this Base Prospectus or any Final Terms

shall be taken to have made its own investigation and appraisal of the condition (financial or otherwise) of

the Issuers and the Guarantor.

The maximum aggregate principal amount of Notes outstanding and guaranteed at any one time under the

Programme will not exceed Euro 2,500,000,000 (and for this purpose, any Notes denominated in another

currency shall be translated into euro at the date of the agreement to issue such Notes (calculated in

accordance with the provisions of the Dealer Agreement). The maximum aggregate principal amount of

Notes which may be outstanding and guaranteed at any one time under the Programme may be increased

from time to time, subject to compliance with the relevant provisions of the Dealer Agreement as defined

under "Subscription and Sale".

In this Base Prospectus, unless otherwise specified, references to "U.S.$", " U.S. dollars" or " dollars"

are to United States dollars and references to "EUR" or " euro" are to the single currency introduced at

the start of the third stage of European Economic and Monetary Union pursuant to the Treaty establishing

the European Community, as amended.

Certain figures included in this Base Prospectus have been subject to rounding adjustments; accordingly,

figures shown for the same category presented in different tables may vary slightly and figures shown as

totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the

Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable

Final Terms may over allot Notes or effect transactions with a view to supporting the market price

of the Notes at a level higher than that which might otherwise prevail. However, there is no

assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager)

will undertake stabilisation action. Any stabilisation action may begin on or after the date on which

adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if

begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue

date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant

Tranche of Notes. Any stabilisation action or over-allotment shall be conducted in accordance with

all applicable laws and rules.

- 16 -

INFORMATION INCORPORATED BY REFERENCE

The following documents shall be deemed to be incorporated in, and to form part of, this Base Prospectus:

1. Unaudited consolidated financial statements of the Banif Financial Group in respect of the 9

months ended 30 September 2009, including:

(a) Balance Sheet (page 2)

(b) Income Statement (page 3)

(c) Statements of changes in shareholders' funds (page 4)

(d) Cash flow statement (page 5)

(e) Accounting policies and selected explanatory notes (page 7 to 54)

2. Audited consolidated financial statements and auditors' report of the Banif Financial Group in

respect of the financial year ended 31 December 2008, including:




(d) Cash flow statement as at 31 December 2008 and 2007 (page 5 to 6)


(f) Auditors' Report (page 92 to 95)

3. Audited consolidated financial statements and auditors' reports of the Banif Financial Group in

respect of the financial year ended 31 December 2007, including:




(d) Cash flow statement as at 31 December 2007 and 2006 (page 5)


(f) Auditors' Report (page 84 to 87)

4. Unaudited unconsolidated financial statements and auditors' report of Banif in respect of the 9

months ended 30 September 2009, including:


(b) Income statement (page 3)



5. Audited unconsolidated financial statements and auditors' report of Banif in respect of the year

ended 31 December 2008, including:



- 17 -



(e) Accounting policies and explanatory notes (page 6 to 54)

(f) Auditors' report (page 55 to 57)

6. Audited unconsolidated financial statements and auditors' report of Banif in respect of the year

ended 31 December 2007, including:







7. Unaudited unconsolidated financial statements of Banif Finance in respect of the 9 months ended

30 September 2009, including:





8. Audited unconsolidated financial statements and auditors' report of Banif Finance in respect of

the year ended 31 December 2008, including:







9. Audited unconsolidated financial statements and auditors' report of Banif Finance in respect of

the year ended 31 December 2007, including:






(f) Auditors' report (page 12)

- 18 -

10. Unaudited unconsolidated financial statements of Banif Madeira in respect of the 9 months ended

30 September 2009, including:





11. Unaudited unconsolidated financial statements of Banif Madeira in respect of the year ended 31

December 2008, including:





12. Unaudited unconsolidated financial statements of Banif Madeira in respect of the year ended 31

December 2007, including:





13. The terms and conditions set out on pages 25 to 60 of the base prospectus dated 8 August 2008

relating to the Programme under the heading "Terms and Conditions of the Notes" (the "2008

Conditions")

provided, however, that any statement contained in this Base Prospectus or in any of the

documents incorporated by reference in, and forming part of, this Base Prospectus shall be

deemed to be modified or superseded for the purpose of this Base Prospectus to the extent that a

statement contained in any document subsequently incorporated by reference modifies or

supersedes such statement.

The Issuers will, at the specified offices of the Paying Agents, provide, free of charge, upon oral or

written request, a copy of this Base Prospectus (or any document incorporated by reference in this Base

Prospectus unless such documents have been modified or superseded). Written or telephone requests for

such documents should be directed to the specified office of any Paying Agent or the specified office of

the Listing Agent in Luxembourg.

This Base Prospectus and the documents incorporated by reference are available for viewing at

www.bourse.lu.

Any information not listed in the cross-reference list but included in the documents incorporated by

reference is given for information purposes only.

- 19 -

GENERAL DESCRIPTION OF THE PROGRAMME

Under the Programme, Banif, Banif Finance, Ltd. and Banif Madeira may from time to time issue Notes

to one or more of the Dealers. The maximum aggregate principal amount of all Notes any time

outstanding under the Programme will not exceed €2,500,000,000 (or its equivalent in any other

currency). The Issuers may increase the amount of the Programme in accordance with the terms of the

Dealer Agreement (as defined below) from time to time.

Notes issued by Banif Finance, Ltd. will have the benefit of a Guarantee given by Banif Madeira. The

Guarantee constitutes an unconditional, unsecured and unsubordinated obligation of Banif-Banco

Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial

Branch) and ranks pari passu with all other unsecured and unsubordinated obligations of Banif-Banco

Internacional do Funchal S.A., Sucursal Financeira Exterior (External Financial Branch).

The Notes may be issued on a continuing basis to one or more of the Dealers and any additional Dealer

appointed under the Programme from time to time by the Issuer(s), which appointment may be for a

specific issue or on an ongoing basis. Notes may be distributed by way of public offer or private

placements and, in each case, on a syndicated or non-syndicated basis. The method of distribution of each

tranche of Notes will be stated in the Final Terms.

The Notes will be issued in series (each, a "Series"). Each Series may comprise one or more tranches

issued on different dates. The specific terms of each tranche of Notes will be set forth in the Final Terms.

Notes will be issued in such denominations as may be agreed between the relevant Issuer and the relevant

Dealer(s) and as indicated in the Final Terms save that the minimum denomination of the Notes will be, if

in euro, €1,000, or, if in any currency other than euro, an amount in such other currency equal to or

exceeding the equivalent of €1,000 at the time of the issue of Notes.

Notes may be issued at an issue price which is at par or at a discount to, or premium over, par, as stated in

the Final Terms.

Application has been made to list Notes on the official list of the Luxembourg Stock Exchange and to

trade Notes on the Luxembourg Stock Exchange's regulated market ("Bourse de Luxembourg"). The

Programme provides that Notes may be listed on other or further stock exchanges, as may be agreed

between the relevant Issuer and the relevant Dealer(s) in relation to each issue. Notes may further be

issued under the Programme which will not be listed on any stock exchange.

Notes will be accepted for clearing through one or more Clearing Systems as specified in the Final Terms.

These systems will include those operated by Clearstream Banking, société anonyme and Euroclear Bank

S. A./N.V and, for Interbolsa Notes, Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de

Sistemas Centralizados de Valores Mobiliários, S.A. ("Interbolsa").

Dexia Banque Internationale à Luxembourg will act as paying agent.

Citibank International plc, Sucursal em Portugal will act as Portuguese paying agent in respect of

Interbolsa Notes.

- 20 -

SUPPLEMENT TO THE BASE PROSPECTUS

The Issuer has undertaken, in connection with the listing of the Notes on the official list of the

Luxembourg Stock Exchange, that if at any time during the duration of the Programme there is a

significant new factor, mistake or material inaccuracy relating to information contained in this Base

Prospectus whose inclusion would reasonably be required by investors and their professional advisers,

and would reasonably be expected by them to be found in this Base Prospectus for the purpose of making

an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of

the Issuer or any change in the information set out under "Terms and Conditions of the Notes", the Issuer

will prepare or procure the preparation of a supplement to this Base Prospectus or, as the case may be,

publish a new Base Prospectus, for use in connection with any subsequent issue by the Issuer of Notes to

be listed on the Official List of the Luxembourg Stock Exchange and to be admitted to trading on the

Luxembourg Stock Exchange's regulated market.

- 21 -

FORMS OF THE NOTES

1. Bearer Notes

Each Tranche of Notes (except Interbolsa Notes) will initially be in the form of either a

temporary global note (the "Temporary Global Note"), without interest coupons, or a

permanent global note (the "Permanent Global Note"), without interest coupons, in each case as

specified in the relevant Final Terms or Drawdown Prospectus. Each Temporary Global Note or,

as the case may be, Permanent Global Note (each a "Global Note") which is not intended to be

issued in new global note ("NGN") form, as specified in the relevant Final Terms, will be

deposited on or around the issue date of the relevant Tranche of the Notes with a depositary or a

common depositary for Euroclear Bank S.A./N.V. ("Euroclear") and/or Clearstream Banking,

société anonyme, Luxembourg ("Clearstream, Luxembourg") and/or any other relevant

clearing system and each Global Note which is intended to be issued in NGN form, as specified

in the relevant Final Terms, will be deposited on or around the issue date of the relevant Tranche

of the Notes with a common safekeeper for Euroclear and/or Clearstream, Luxembourg.

On 13 June 2006 the European Central Bank (the "ECB") announced that Notes in NGN form

are in compliance with the "Standards for the use of EU securities settlement systems in ESCB

credit operations" of the central banking system for the euro (the "Eurosystem"), provided that

certain other criteria are fulfilled. At the same time the ECB also announced that arrangements

for Notes in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June

2006 and that debt securities in global bearer form issued through Euroclear and Clearstream,

Luxembourg after 31 December 2006 will only be eligible as collateral for Eurosystem

operations if the NGN form is used.

The relevant Final Terms will also specify whether United States Treasury Regulation §1.163-

5(c)(2)(i)(C) (the "TEFRA C Rules") or United States Treasury Regulation §1.163-5(c)(2)(i)(D)

(the "TEFRA D Rules") are applicable in relation to the Notes or, if the Notes do not have a

maturity of more than 365 days, that neither the TEFRA C Rules nor the TEFRA D Rules are

applicable.

Temporary Global Note exchangeable for Permanent Global Note

If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note

exchangeable for a Permanent Global Note", then the Notes will initially be in the form of a

Temporary Global Note which will be exchangeable, in whole or in part, for interests in a

Permanent Global Note, without interest coupons, not earlier than 40 days after the issue date of

the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership. No

payments will be made under the Temporary Global Note unless exchange for interests in the

Permanent Global Note is improperly withheld or refused. In addition, interest payments in

respect of the Notes cannot be collected without such certification of non-U.S. beneficial

ownership.

Whenever any interest in the Temporary Global Note is to be exchanged for an interest in a

Permanent Global Note, the relevant Issuer shall procure (in the case of first exchange) the

prompt delivery (free of charge to the bearer) of such Permanent Global Note to the bearer of the

Temporary Global Note or (in the case of any subsequent exchange) an increase in the principal

amount of the Permanent Global Note in accordance with its terms against:

(i) presentation and (in the case of final exchange) surrender of the Temporary Global Note

to or to the order of the Principal Paying Agent; and

(ii) receipt by the Principal Paying Agent of a certificate or certificates of non-U.S.

beneficial ownership,

within 7 days of the bearer requesting such exchange.

The principal amount of the Permanent Global Note shall be equal to the aggregate of the

principal amounts specified in the certificates of non-U.S. beneficial ownership; provided,

however, that in no circumstances shall the principal amount of the Permanent Global Note

exceed the initial principal amount of the Temporary Global Note.

- 22 -

The Permanent Global Note will be exchangeable in whole, but not in part, for Notes in

definitive form ("Definitive Notes"):

(i) on the expiry of such period of notice as may be specified in the relevant Final Terms; or

(ii) at any time, if so specified in the relevant Final Terms;

(iii) or if the relevant Final Terms specifies "in the limited circumstances described in the

Permanent Global Note", then if (a) Euroclear or Clearstream, Luxembourg or any other

relevant clearing system is closed for business for a continuous period of 14 days (other

than by reason of legal holidays) or announces an intention permanently to cease

business and has in fact done so and no successor clearing system satisfactory to the

Trustee is available or (b) any of the circumstances described in Condition 13 (Events of

Default) occurs.

Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer

shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly

authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms),

in an aggregate principal amount equal to the principal amount of the Permanent Global Note to

the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to

or to the order of the Principal Paying Agent within 30 days of the bearer requesting such

exchange.

Temporary Global Note exchangeable for Definitive Notes


exchangeable for Definitive Notes" and also specifies that the TEFRA C Rules are applicable or

that neither the TEFRA C Rules or the TEFRA D Rules are applicable, then the Notes will

initially be in the form of a Temporary Global Note which will be exchangeable, in whole but not

in part, for Definitive Notes not earlier than 40 days after the issue date of the relevant Tranche

of the Notes.


exchangeable for Definitive Notes" and also specifies that the TEFRA D Rules are applicable,

then the Notes will initially be in the form of a Temporary Global Note which will be

exchangeable, in whole or in part, for Definitive Notes not earlier than 40 days after the issue

date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership.

Interest payments in respect of the Notes cannot be collected without such certification of non-

U.S. beneficial ownership.

Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the relevant

Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes,

duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final

Terms), in an aggregate principal amount equal to the principal amount of the Temporary Global

Note to the bearer of the Temporary Global Note against the surrender of the Temporary Global

Note to or to the order of the Principal Paying Agent within 30 days of the bearer requesting such

exchange.

Permanent Global Note exchangeable for Definitive Notes

If the relevant Final Terms specifies the form of Notes as being "Permanent Global Note

exchangeable for Definitive Notes", then the Notes will initially be in the form of a Permanent

Global Note which will be exchangeable in whole, but not in part, for Definitive Notes:

(i) on the expiry of such period of notice as may be specified in the relevant Final Terms; or

(ii) at any time, if so specified in the relevant Final Terms; or

(iii) if the relevant Final Terms specifies "in the limited circumstances described in the

Permanent Global Note", then if (a) Euroclear or Clearstream, Luxembourg or any other

relevant clearing system is closed for business for a continuous period of 14 days (other

than by reason of legal holidays) or announces an intention permanently to cease

- 23 -

business or (b) any of the circumstances described in Condition 13 (Events of Default)

occurs.

Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer

shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly

authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms),

in an aggregate principal amount equal to the principal amount of the Permanent Global Note to

the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to

or to the order of the Principal Paying Agent within 30 days of the bearer requesting such

exchange.

Terms and Conditions applicable to the Notes

The terms and conditions applicable to any Definitive Note will be endorsed on that Note and

will consist of the terms and conditions set out under "Terms and Conditions of the Notes" below

and the provisions of the relevant Final Terms which supplement, amend and/or replace those

terms and conditions.

The terms and conditions applicable to any Note in global form will differ from those terms and

conditions which would apply to the Note were it in definitive form to the extent described under

"Summary of Provisions Relating to the Notes while in Global Form" below.

Legend concerning United States persons

In the case of any Tranche of Notes having a maturity of more than 365 days, the Notes in global

form, the Notes in definitive form and any Coupons and Talons appertaining thereto will bear a

legend to the following effect:

"Any United States person who holds this obligation will be subject to limitations under the

United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a)

of the Internal Revenue Code."

The sections referred to in such legend provide that a United States person who holds a Note,

Coupon or Talon will generally not be allowed to deduct any loss realised on the sale, exchange

or redemption of such Note, Coupon or Talon and any gain (which might otherwise be

characterised as capital gain) recognised on such sale, exchange or redemption will be treated as

ordinary income.

2. Interbolsa Notes

Notes held through Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas

Centralizados de Valores Mobiliários, S.A. ("Interbolsa") (each an "Interbolsa Note") will be

represented in dematerialised book-entry (escriturais) registered (nominativas) form.

Title to Interbolsa Notes will be evidenced by book-entries in accordance with the Portuguese

Securities Code and the regulations issued by Comissão do Mercado de Valores Mobiliários (the

Portuguese Securities Commission, the "CMVM"), by Interbolsa or otherwise applicable thereto.

Each person shown in the book-entry records of a financial institution which is licensed to act as

a financial intermediary and which is entitled to hold control accounts with Interbolsa on behalf

of their customers and which includes any depositary banks appointed by Euroclear and

Clearstream, Luxembourg for the purpose of holding accounts on behalf of Euroclear and

Clearstream, Luxembourg (each such institution an "Affiliate Member of Interbolsa") as having

an interest in the Interbolsa Notes shall be the holder of the principal amount of Interbolsa Notes

recorded.

Title to the Interbolsa Notes is subject to compliance with all rules, restrictions and requirements

applicable to the activities of Interbolsa and to Portuguese law.

One or more certificates in relation to the Interbolsa Notes (each a "Certificate") will be

delivered by the relevant Affiliate Member of Interbolsa in respect of a registered holding of

Interbolsa Notes upon the request by the relevant Noteholder and in accordance with that

- 24 -

Affiliate Member of Interbolsa's procedures pursuant to Article 78 of the Portuguese Securities

Code.

The Interbolsa Notes will be registered in the relevant control issue account of the Issuer with

Interbolsa and will be held in control accounts held by each Affiliate Member of Interbolsa on

behalf of the Noteholders. Such control accounts will reflect at all times the aggregate number of

Interbolsa Notes held in individual securities accounts opened with the Affiliate Members of

Interbolsa by Noteholders, which are clients of the Affiliate Members of Interbolsa and include

Euroclear and Clearstream, Luxembourg.

The person or entity registered in the relevant individual securities accounts of an Affiliate

Member of Interbolsa (the "Book-Entry Registry" and each such entry a "Book Entry") as the

holder of any Interbolsa Note shall (except as otherwise required by law) be treated as its

absolute owner for all purposes (whether or not it is overdue and regardless of any notice of

ownership, trust or any other interest therein).

The Issuer and the Paying Agents may (to the fullest extent permitted by applicable law) deem

and treat the person or entity registered in the Book-Entry Registry as the holder of any

Interbolsa Note and the absolute owner for all purposes. Proof of such registration is made by

means of a Certificate issued by the relevant Affiliate Member of Interbolsa pursuant to Article

78 of the Portuguese Securities Code.

No Noteholder will be able to transfer Interbolsa Notes, or any interest therein, except in

accordance with Portuguese law and regulations. Interbolsa Notes may only be transferred in

accordance with the applicable procedures established by the Portuguese Securities Code and the

regulations issued by the CMVM and Interbolsa.

- 25 -

TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions which, as supplemented, amended and/or replaced by

the relevant Final Terms, will be incorporated by reference into each Note settled by LCH Clearnet, S.A.,

the clearing system operated by Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas

Centralizados de Valores Mobiliários, S.A., each Global Note (as defined below) and endorsed on each

Note in definitive form issued under the Programme. The terms and conditions applicable to any Note in

global form will differ from those terms and conditions which would apply to the Note were it in definitive

form to the extent described under "Summary of Provisions Relating to the Notes while in Global Form"

below.

1. Introduction

(a) Programme: Banif – Banco Internacional do Funchal, S.A. ("Banif"), Banif – Banco

Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External

Financial Branch) ("Banif Madeira") and Banif Finance, Ltd. ("Banif Finance") (each an

"Issuer" and together, the "Issuers") have established a Euro Medium Term Note Programme

(the "Programme") for the issuance of up to Euro 2,500,000,000 in aggregate principal amount

of notes (the "Notes"), with Notes issued by Banif Finance being guaranteed by Banif Madeira

(the "Guarantor").

(b) Final Terms: Notes issued under the Programme are issued in series (each a "Series") and each

Series may comprise one or more tranches (each a "Tranche") of Notes. The final terms of each

Tranche of Notes will be set out in a final terms document (the "Final Terms") which

supplements these terms and conditions (the "Conditions"). The terms and conditions applicable

to any particular Tranche of Notes are these Conditions as supplemented, amended and/or

replaced by the relevant Final Terms. In the event of any inconsistency between these Conditions

and/or, for Notes other than Interbolsa Notes, the Trust Deed and/or the relevant Final Terms, the

relevant Final Terms shall prevail.

Copies of the relevant Final Terms are available for inspection and may be obtained during

normal business hours at the Specified Office of the Trustee, the Specified Office of the Principal

Paying Agent, the Specified Office of the Paying Agent in Luxembourg and on the website of the

Luxembourg Stock Exchange at www.bourse.lu, and for Interbolsa Notes, the Specified Office of

the Portuguese Paying Agent, the initial Specified Offices of which are set out below.

(c) Trust Deed: The Notes (except for Interbolsa Notes) are constituted by, are subject to, and have

the benefit of, an amended and restated trust deed dated 16 December 2009 (the "Trust Deed")

made between the Issuers, the Guarantor and Citicorp Trustee Company Limited as trustee (the

"Trustee" which expression shall include all persons for the time being the trustee or trustees

appointed under the Trust Deed). Interbolsa Notes are constituted by entries in individual

securities accounts opened by Noteholders with the Affiliate Members of Interbolsa (as defined

below).

(d) Agency Agreement: The Notes are the subject of an amended and restated issue and paying

agency agreement dated 16 December 2009 (the "Agency Agreement") between the Issuers, the

Guarantor, the Trustee, Citibank, N.A. as principal paying agent (the "Principal Paying Agent",

which expression includes any successor principal paying agent appointed from time to time in

connection with the Notes) and the paying agents named therein (together with the Principal

Paying Agent, the "Paying Agents", which expression includes any successor or additional

paying agents appointed from time to time in connection with the Notes). The Interbolsa Notes

have the benefit of the Agency Agreement as amended by an amendment agreement (the

"Interbolsa Notes Agency Agreement") dated 16 December 2009 and made between the

Issuers, the Guarantor, the Trustee, the Agent, Citibank International plc, Sucursal em Portugal

acting as paying agent in Portugal (the "Portuguese Paying Agent" which expression shall

include any successor Portuguese Paying Agent) and the other paying agents named therein

(together with the Agent, the Portuguese Paying Agent and the other paying agents named in the

Agency Agreement, the "Paying Agents", which expression shall include any additional or

successor paying agents).

http://www.bourse.lu/

- 26 -

(e) The Notes: All subsequent references in these Conditions to "Notes" shall mean:

(i) in relation to any Notes represented by a global Note (a "Global Note"), units of the

lowest Specified Denomination in the Specified Currency;

(ii) definitive Notes issued in exchange for a Global Note (the "Definitive Notes");

(iii) any Global Note; and

(iv) Notes held through Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de

Sistemas Centralizados de Valores Mobiliários, S.A. ("Interbolsa") (each an

"Interbolsa Note"). Interbolsa Notes will only be issued by Banif acting through its

head office and will not be issued by Banif Finance.

All subsequent references in these Conditions to the "Issuer" are to the Issuer of the relevant

Notes. Copies of the relevant Final Terms are available for inspection and may be obtained by

holders of the Notes (the "Noteholders") during normal business hours at the registered office of

the Trustee and the Specified Office of the Principal Paying Agent, the initial Specified Office of

which is set out below.

(f) Noteholders: Any reference to "Noteholders" or "holders" in relation to any Notes shall mean (i)

in the case of bearer Notes, the holders of the Global Notes and Definitive Notes and shall, in

relation any Notes represented by a Global Note, be construed as provided below, or (ii) in the

case of Interbolsa Notes, each person shown in the book-entry records of a financial institution

which is licensed to act as a financial intermediary under the Portuguese Securities Code (Código

dos Valores Mobiliários, the "Portuguese Securities Code") and which is entitled to hold

control accounts with Interbolsa on behalf of their customers (and includes any depositary banks

appointed by Euroclear and/or Clearstream, Luxembourg) (each such institution an "Affiliate

Member of Interbolsa") as having an interest in the principal amount of the Interbolsa Notes.

Any reference herein to "Receiptholders" shall mean the holders of the Receipts and any

reference herein to "Couponholders" shall mean the holders of the Coupons and shall, unless the

context otherwise requires, include the holders of the Talons.

(g) Common Representative: The holders of Interbolsa Notes shall at all times be entitled, by means

of an Extraordinary Resolution, to appoint and dismiss a Common Representative to act as their

common representative, as further described in Condition 23.

(h) Summaries: Certain provisions of these Conditions are summaries of the Trust Deed, the Agency

Agreement and the Interbolsa Notes Agency Agreement are subject to their detailed provisions.

The holders of the Notes (the "Noteholders") and the holders of the related interest coupons, if

any, (the "Couponholders" and the "Coupons", respectively) are bound by, and are deemed to

have notice of, all the provisions of the Trust Deed, the Agency Agreement and the Interbolsa

Notes Agency Agreement applicable to them. Copies of the Trust Deed, Agency Agreement and

the Interbolsa Notes Agency Agreement are available for inspection by Noteholders during

normal business hours at the registered office of the Trustee and the Specified Offices of each of

the Paying Agents.

2. Interpretation

(a) Definitions: In these Conditions the following expressions have the following meanings:

"Accrual Yield" has the meaning given in the relevant Final Terms;

"Additional Business Centre(s)" means the city or cities specified as such in the relevant Final

Terms;

"Additional Financial Centre(s)" means the city or cities specified as such in the relevant Final

Terms;

"Affiliate Member of Interbolsa" means any authorised financial intermediary institution

entitled to hold control accounts with Interbolsa on behalf of their customers and which includes

- 27 -

any depository banks appointed by Euroclear and Clearstream Luxembourg for the purpose of

holding accounts on behalf of Euroclear and Clearstream Luxembourg, respectively;

"Book Entry Registry" means the book entry securities registry system applicable to the

Interbolsa Notes, which is subject to the rules, regulations and procedures under which Interbolsa

operates in respect of book entry securities;

"Business Day" means:

(i) in relation to any sum payable in euro, a TARGET Settlement Day and a day on which

commercial banks and foreign exchange markets settle payments generally in each (if

any) Additional Business Centre; and

(ii) in relation to any sum payable in a currency other than euro, a day on which commercial

banks and foreign exchange markets settle payments generally in London, in the

Principal Financial Centre of the relevant currency and in each (if any) Additional

Business Centre;

"Business Day Convention", in relation to any particular date, has the meaning given in the

relevant Final Terms and, if so specified in the relevant Final Terms, may have different

meanings in relation to different dates and, in this context, the following expressions shall have

the following meanings:

(i) "Following Business Day Convention" means that the relevant date shall be postponed

to the first following day that is a Business Day;

(ii) "Modified Following Business Day Convention" or "Modified Business Day

Convention" means that the relevant date shall be postponed to the first following day

that is a Business Day unless that day falls in the next calendar month in which case that

date will be the first preceding day that is a Business Day;

(iii) "Preceding Business Day Convention" means that the relevant date shall be brought

forward to the first preceding day that is a Business Day;

(iv) "FRN Convention", "Floating Rate Convention" or "Eurodollar Convention" means

that each relevant date shall be the date which numerically corresponds to the preceding

such date in the calendar month which is the number of months specified in the relevant

Final Terms as the Specified Period after the calendar month in which the preceding

such date occurred provided, however, that:

(A) if there is no such numerically corresponding day in the calendar month in

which any such date should occur, then such date will be the last day which is a

Business Day in that calendar month;

(B) if any such date would otherwise fall on a day which is not a Business Day, then

such date will be the first following day which is a Business Day unless that day

falls in the next calendar month, in which case it will be the first preceding day

which is a Business Day; and

(C) if the preceding such date occurred on the last day in a calendar month which

was a Business Day, then all subsequent such dates will be the last day which is

a Business Day in the calendar month which is the specified number of months

after the calendar month in which the preceding such date occurred; and

(v) "No Adjustment" means that the relevant date shall not be adjusted in accordance with

any Business Day Convention;

"Calculation Agent" means the Principal Paying Agent or such other Person specified in the

relevant Final Terms as the party responsible for calculating the Rate(s) of Interest and Interest

Amount(s) and/or such other amount(s) as may be specified in the relevant Final Terms;

"Calculation Amount" has the meaning given in the relevant Final Terms;

- 28 -

"CMVM" means the Portuguese Securities Market Commission (Comissão do Mercado de

Valores Mobiliários);

"Common Representative" means a law firm, an accountant's firm or an individual person

(which is not a Noteholder), which may be appointed by the Noteholders under Article 358 of the

Portuguese Companies Code and pursuant to Condition 23 (Common Representatives);

"CVM" means the Portuguese centralised system of registration of securities (Central de Valores

Mobiliários) composed of interconnected securities accounts, through which securities (and

inherent rights) are created, held and transferred, and which allows Interbolsa to control the

amount of securities so created, held and transferred;

"Coupon Sheet" means, in respect of a Note in definitive form, a coupon sheet relating to the

Note;

"Dated Subordinated Notes" means Notes which are specified in the Final Terms as being dated

subordinated Notes;

"Day Count Fraction" means, in respect of the calculation of an amount for any period of time

(the "Calculation Period"), such day count fraction as may be specified in these Conditions or

the relevant Final Terms and:

(i) if "Actual/Actual (ICMA)" is so specified, means:

(A) where the Calculation Period is equal to or shorter than the Regular Period

during which it falls, the actual number of days in the Calculation Period

divided by the product of (1) the actual number of days in such Regular Period

and (2) the number of Regular Periods in any year; and

(B) where the Calculation Period is longer than one Regular Period, the sum of:

(1) the actual number of days in such Calculation Period falling in the

Regular Period in which it begins divided by the product of (1) the

actual number of days in such Regular Period and (2) the number of

Regular Periods in any year; and

(2) the actual number of days in such Calculation Period falling in the next

Regular Period divided by the product of (1) the actual number of days

in such Regular Period and (2) the number of Regular Periods in any

year;

(ii) if "Actual/365" or "Actual/Actual (ISDA)" is so specified, means the actual number of

days in the Calculation Period divided by 365 (or, if any portion of the Calculation

Period falls in a leap year, the sum of (A) the actual number of days in that portion of the

Calculation Period falling in a leap year divided by 366 and (B) the actual number of

days in that portion of the Calculation Period falling in a non-leap year divided by 365);

(iii) if "Actual/365 (Fixed)" is so specified, means the actual number of days in the

Calculation Period divided by 365;

(iv) if "Actual/360" is so specified, means the actual number of days in the Calculation

Period divided by 360;

(v) if "30/360" is so specified, means the number of days in the Calculation Period divided

by 360 (the number of days to be calculated on the basis of a year of 360 days with 12

30-day months (unless (i) the last day of the Calculation Period is the 31st day of a

month but the first day of the Calculation Period is a day other than the 30th or 31st day

of a month, in which case the month that includes that last day shall not be considered to

be shortened to a 30-day month, or (ii) the last day of the Calculation Period is the last

day of the month of February, in which case the month of February shall not be

considered to be lengthened to a 30-day month)); and

- 29 -

(vi) if "30E/360" or "Eurobond Basis" is so specified means, the number of days in the

Calculation Period divided by 360 (the number of days to be calculated on the basis of a

year of 360 days with 12 30-day months, without regard to the date of the first day or

last day of the Calculation Period unless, in the case of the final Calculation Period, the

date of final maturity is the last day of the month of February, in which case the month

of February shall not be considered to be lengthened to a 30-day month);

"Early Redemption Amount (Tax)" means, in respect of any Note, its principal amount or such

other amount as may be specified in, or determined in accordance with, the relevant Final Terms;

"Early Termination Amount" means, in respect of any Note, its principal amount or such other

amount as may be specified in, or determined in accordance with, these Conditions or the

relevant Final Terms;

"Extraordinary Resolution" has the meaning given in the Trust Deed;

"Final Redemption Amount" means, in respect of any Note, its principal amount or such other

amount as may be specified in, or determined in accordance with, the relevant Final Terms;

"Fixed Coupon Amount" has the meaning given in the relevant Final Terms;

"Guarantee" means, in relation to any Indebtedness of any Person, any obligation of another

Person to pay such Indebtedness including (without limitation):

(i) any obligation to purchase such Indebtedness;

(ii) any obligation to lend money, to purchase or subscribe shares or other securities or to

purchase assets or services in order to provide funds for the payment of such

Indebtedness;

(iii) any indemnity against the consequences of a default in the payment of such Indebtedness;

and

(iv) any other agreement to be responsible for such Indebtedness;

"Guarantee of the Notes" means the guarantee of the Notes issued by Banif Finance given by

the Guarantor in the Trust Deed;

"Indebtedness" means any indebtedness of any Person for money borrowed or raised including

(without limitation) any indebtedness for or in respect of:

(i) amounts raised by acceptance under any acceptance credit facility;

(ii) amounts raised under any note purchase facility;

(iii) the amount of any liability in respect of leases or hire purchase contracts which would,

in accordance with applicable law and generally accepted accounting principles, be

treated as finance or capital leases;

(iv) the amount of any liability in respect of any purchase price for assets or services the

payment of which is deferred for a period in excess of 60 days; and

(v) amounts raised under any other transaction (including, without limitation, any forward

sale or purchase agreement) having the commercial effect of a borrowing;

"Interbolsa" means Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas

Centralizados de Valores Mobiliários, S.A., as management entity of the CVM;

"Interest Amount" means, in relation to a Note and an Interest Period, the amount of interest

payable in respect of that Note for that Interest Period;

"Interest Commencement Date" means the Issue Date of the Notes or such other date as may be

specified as the Interest Commencement Date in the relevant Final Terms;

- 30 -

"Interest Determination Date" has the meaning given in the relevant Final Terms;

"Interest Payment Date" means the date or dates specified as such in, or determined in

accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is

specified in the relevant Final Terms:

(i) as the same may be adjusted in accordance with the relevant Business Day Convention;

or

(ii) if the Business Day Convention is the FRN Convention, Floating Rate Convention or

Eurodollar Convention and an interval of a number of calendar months is specified in the

relevant Final Terms as being the Specified Period, each of such dates as may occur in

accordance with the FRN Convention, Floating Rate Convention or Eurodollar

Convention at such Specified Period of calendar months following the Interest

Commencement Date (in the case of the first Interest Payment Date) or the previous

Interest Payment Date (in any other case);

"Interest Period" means each period beginning on (and including) the Interest Commencement

Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment Date;

"ISDA Definitions" means the 2000 ISDA Definitions (as amended and updated as at the date of

issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final

Terms) as published by the International Swaps and Derivatives Association, Inc.) or, if so

specified in the relevant Final Terms, the 2006 ISDA Definitions (as amended and updated as at

the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the

relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.);

"Issue Date" has the meaning given in the relevant Final Terms;

"Margin" has the meaning given in the relevant Final Terms;

"Maturity Date" has the meaning given in the relevant Final Terms;

"Maximum Redemption Amount" has the meaning given in the relevant Final Terms;

"Minimum Redemption Amount" has the meaning given in the relevant Final Terms;

"Optional Redemption Amount (Call)" means, in respect of any Note, its principal amount or

such other amount as may be specified in, or determined in accordance with, the relevant Final

Terms;

"Optional Redemption Amount (Put)" means, in respect of any Note, its principal amount or

such other amount as may be specified in, or determined in accordance with, the relevant Final

Terms;

"Optional Redemption Date (Call)" has the meaning given in the relevant Final Terms;

"Optional Redemption Date (Put)" has the meaning given in the relevant Final Terms;

"Participating Member State" means a Member State of the European Communities which

adopts the euro as its lawful currency in accordance with the Treaty;

"Payment Business Day" means:

(i) if the currency of payment is euro, any day which is:

(A) a day on which banks in the relevant place of presentation are open for

presentation and payment of bearer debt securities and for dealings in foreign

currencies; and

(B) in the case of payment by transfer to an account, a TARGET Settlement Day

and a day on which dealings in foreign currencies may be carried on in each (if

any) Additional Financial Centre; or

- 31 -

(ii) if the currency of payment is not euro, any day which is:

(A) a day on which banks in the relevant place of presentation are open for

presentation and payment of bearer debt securities and for dealings in foreign

currencies; and

(B) in the case of payment by transfer to an account, a day on which dealings in

foreign currencies may be carried on in the Principal Financial Centre of the

currency of payment and in each (if any) Additional Financial Centre;

"Permitted Indebtedness" means any Indebtedness which does not exceed, in aggregate, 20 per

cent. of Banif's consolidated total assets calculated at the time of creation of the relevant Security

Interest by reference to Banif's most recently published financial statements.

"Person" means any individual, company, corporation, firm, partnership, joint venture,

association, organisation, state or agency of a state or other entity, whether or not having separate

legal personality;

"Portuguese Companies Code" means the Portuguese Código das Sociedades Comerciais,

approved by Decree-Law 262/86, dated 2 September, as amended from time to time;

"Portuguese Paying Agent" means Citibank International plc, Sucursal em Portugal;

"Portuguese Securities Code" means the Portuguese Código dos Valores Mobiliários, approved

by Decree-Law 486/99, dated 13 November, as amended from time to time;

"Principal Financial Centre" means, in relation to any currency, the principal financial centre

for that currency provided, however, that:

(i) in relation to euro, it means the principal financial centre of such Member State of the

European Communities as is selected (in the case of a payment) by the payee or (in the

case of a calculation) by the Calculation Agent; and

(ii) in relation to Australian dollars, it means either Sydney or Melbourne and, in relation to

New Zealand dollars, it means either Wellington or Auckland; in each case as is selected

(in the case of a payment) by the payee or (in the case of a calculation) by the

Calculation Agent;

"Put Option Notice" means a notice which must be delivered to a Paying Agent by any

Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder;

"Put Option Receipt" means a receipt issued by a Paying Agent to a depositing Noteholder upon

deposit of a Note with such Paying Agent by any Noteholder wanting to exercise a right to

redeem a Note at the option of the Noteholder;

"Rate of Interest" means the rate or rates (expressed as a percentage per annum) of interest

payable in respect of the Notes specified in the relevant Final Terms or calculated or determined

in accordance with the provisions of these Conditions and/or the relevant Final Terms;

"Redemption Amount" means, as appropriate, the Final Redemption Amount, the Early

Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption

Amount (Put), the Early Termination Amount or such other amount in the nature of a redemption

amount as may be specified in, or determined in accordance with the provisions of, the relevant

Final Terms;

"Reference Banks" has the meaning given in the relevant Final Terms or, if none, four major

banks selected by the Calculation Agent in the market that is most closely connected with the

Reference Rate;

"Reference Price" has the meaning given in the relevant Final Terms;

"Reference Rate" has the meaning given in the relevant Final Terms;

- 32 -

"Regular Period" means:

(i) in the case of Notes where interest is scheduled to be paid only by means of regular

payments, each period from and including the Interest Commencement Date to but

excluding the first Interest Payment Date and each successive period from and including

one Interest Payment Date to but excluding the next Interest Payment Date;

(ii) in the case of Notes where, apart from the first Interest Period, interest is scheduled to be

paid only by means of regular payments, each period from and including a Regular Date

falling in any year to but excluding the next Regular Date, where "Regular Date" means

the day and month (but not the year) on which any Interest Payment Date falls; and

(iii) in the case of Notes where, apart from one Interest Period other than the first Interest

Period, interest is scheduled to be paid only by means of regular payments, each period

from and including a Regular Date falling in any year to but excluding the next Regular

Date, where "Regular Date" means the day and month (but not the year) on which any

Interest Payment Date falls other than the Interest Payment Date falling at the end of the

irregular Interest Period;

"Relevant Date" means, in relation to any payment, whichever is the later of (a) the date on

which the payment in question first becomes due and (b) if the full amount payable has not been

received in the Principal Financial Centre of the currency of payment by the Principal Paying

Agent on or prior to such due date, the date on which (the full amount having been so received)

notice to that effect has been given to the Noteholders;

"Relevant Financial Centre" has the meaning given in the relevant Final Terms;

"Relevant Screen Page" means the page, section or other part of a particular information service

(including, without limitation, Reuters) specified as the Relevant Screen Page in the relevant

Final Terms, or such other page, section or other part as may replace it on that information

service or such other information service, in each case, as may be nominated by the Person

providing or sponsoring the information appearing there for the purpose of displaying rates or

prices comparable to the Reference Rate;

"Relevant Time" has the meaning given in the relevant Final Terms;

"Reserved Matter" has the meaning given in Schedule 3 of the Trust Deed;

"Security Interest" means any mortgage, charge, pledge, lien or other security interest including,

without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction;

"Senior Notes" means Notes which are specified in the Final Terms as being unsubordinated

Notes;

"Specified Currency" has the meaning given in the relevant Final Terms;

"Specified Denomination(s)" has the meaning given in the relevant Final Terms;

"Specified Office" has the meaning given in the Agency Agreement;

"Specified Period" has the meaning given in the relevant Final Terms;

"Subsidiary" means, in relation to any Person (the "first Person") at any particular time, any

other Person (the "second Person"):

(i) whose affairs and policies the first Person controls or has the power to control, whether

by ownership of share capital, contract, the power to appoint or remove members of the

governing body of the second Person or otherwise; or

(ii) whose financial statements are, in accordance with applicable law and generally

accepted accounting principles, consolidated with those of the first Person;

"Talon" means a talon for further Coupons;

- 33 -

"TARGET2" means the Trans European Automated Real-Time Gross Settlement Express

Transfer payment system which utilises a single shared platform and which was launched on 19

November 2007;

"TARGET Settlement Day" means any day on which TARGET2 is open for the settlement of

payment in euro;

"Treaty" means the Treaty establishing the European Communities, as amended;

"Undated Subordinated Notes" means Notes which are specified in the applicable Final Terms

as being undated subordinated Notes;

"Undated Subordinated Notes with Conditional Interest" means Notes which are specified in

the applicable Final Terms as being undated subordinated Notes with conditional interest;

"Zero Coupon Note" means a Note specified as such in the relevant Final Terms.

(b) Interpretation: In these Conditions:

(i) if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are not

applicable;

(ii) if Talons are specified in the relevant Final Terms as being attached to the Notes at the

time of issue, references to Coupons shall be deemed to include references to Talons;

(iii) if Talons are not specified in the relevant Final Terms as being attached to the Notes at

the time of issue, references to Talons are not applicable;

(iv) any reference to principal shall be deemed to include the Redemption Amount, any

additional amounts in respect of principal which may be payable under Condition 12

(Taxation) or any undertakings given in addition to or in substitution for that Condition,

any premium payable in respect of a Note and any other amount in the nature of

principal payable pursuant to these Conditions;

(v) any reference to interest shall be deemed to include any additional amounts in respect of

interest which may be payable under Condition 12 (Taxation) or any undertakings given

in addition to or in substitution for that Condition and any other amount in the nature of

interest payable pursuant to these Conditions;

(vi) references to Notes being "outstanding" shall be construed in accordance with the Trust

Deed;

(vii) if an expression is stated in Condition 2(a) to have the meaning given in the relevant

Final Terms, but the relevant Final Terms gives no such meaning or specifies that such

expression is "not applicable" then such expression is not applicable to the Notes;

(viii) any reference to the Agency Agreement or the Trust Deed shall be construed as a

reference to the Agency Agreement or the Trust Deed as the case may be, as amended

and or supplemented up to and including the Issue Date of the Notes; and

(ix) any reference to a person includes a reference to that persons successors and permitted

assigns.

3. Form Denomination and Title

The Notes are in bearer form, in the Specified Denomination(s) with Coupons and, if specified in

the relevant Final Terms, Talons attached at the time of issue or, in the case of Interbolsa Notes,

represented by dematerialised book-entry ("escriturais") registered ("nominativas") form as

specified in the applicable Final Terms.

In the case of a Series of Notes with more than one Specified Denomination, Notes of one

Specified Denomination will not be exchangeable for Notes of another Specified Denomination.

The Notes are Senior Notes or Subordinated Notes, as indicated in the applicable Final Terms.

- 34 -

Title to the Notes (other than Interbolsa Notes) and the Coupons will pass by delivery. The

holder of any Note or Coupon shall (except as otherwise required by law) be treated as its

absolute owner for all purposes (whether or not it is overdue and regardless of any notice of

ownership, trust or any other interest therein, any writing thereon or any notice of any previous

loss or theft thereof) and no Person shall be liable for so treating such holder. No person shall

have any right to enforce any term or condition of any Note (other than Interbolsa Notes) or the

Trust Deed under the Contracts (Rights of Third Parties) Act 1999.

Title to the Interbolsa Notes will be evidenced by book-entries in accordance with the Portuguese

Securities Code and the regulations issued by the CMVM, by Interbolsa or otherwise applicable

thereto. Each person shown in the book-entry records of a financial institution which is licensed

to act as a financial intermediary and which is an Affiliate Member of Interbolsa as having an

interest in the Interbolsa Notes shall be the holder of the principal amount of the Interbolsa Notes

recorded.

Title to the Interbolsa Notes is subject to compliance with all rules, restrictions and requirements

applicable to the activities of Interbolsa.

One or more certificates in relation to the Interbolsa Notes (each a "Certificate") will be

delivered by the relevant Affiliate Member of Interbolsa in respect of a registered holding of

Interbolsa Notes upon the request by the relevant Noteholder and in accordance with such

Affiliate Member of Interbolsa's procedures pursuant to Article 78 of the Portuguese Securities

Code.

The Interbolsa Notes will be registered in the relevant control issue account of the Issuer with

Interbolsa and will be held in control accounts held by each Affiliate Member of Interbolsa on

behalf of the Noteholders. Such control accounts will reflect at all times the aggregate number of

Interbolsa Notes held in individual securities accounts opened with the Affiliate Members of

Interbolsa by Noteholders which are clients of the Affiliate Members of Interbolsa and include


The person or entity registered in the relevant individual securities accounts of an Affiliate

Member of Interbolsa book-entry registry of the Central de Valores Mobiliários (the "Book-

Entry Registry" and each such entry therein a "Book Entry") as the holder of any Interbolsa

Note shall (except as otherwise required by law) be treated as its absolute owner for all purposes

(whether or not it is overdue and regardless of any notice of ownership, trust or any other interest

therein).

The Issuer and the Paying Agents may (to the fullest extent permitted by applicable law) deem

and treat the person or entity registered in the Book-Entry Registry as the holder of any

Interbolsa Note and the absolute owner for all purposes. Proof of such registration is made by

means of Certificate issued by the relevant Affiliate Member of Interbolsa pursuant to Article 78

of the Portuguese Securities Code.

No Noteholder will be able to transfer Interbolsa Notes, or any interest therein, except in

accordance with Portuguese law and regulations. Interbolsa Notes may only be transferred in

accordance with the applicable procedures established by the Portuguese Securities Code and the

regulations issued by the CMVM and Interbolsa.

4. Status and Guarantee

(a) Status of the Senior Notes: If the Notes are specified as Senior Notes in the applicable Final

Terms, the Notes constitute direct, general, unsubordinated and unconditional obligations of the

Issuer which will at all times rank pari passu among themselves and at least pari passu with all

other present and future unsecured obligations of the Issuer, save for such obligations as may be

preferred by provisions of law that are both mandatory and of general application.

(b) Guarantee of the Senior Notes: Where the relevant Issuer is Banif Finance and the Notes are

specified as Senior Notes in the applicable Final Terms, the Guarantor has in the Trust Deed

unconditionally and irrevocably guaranteed the due and punctual payment of all principal and

interest and other sums from time to time payable by the Issuer in respect of the Notes. This

Guarantee of the Notes constitutes direct, general, unsubordinated and unconditional obligations

- 35 -

of the Guarantor which will at all times rank at least pari passu with all other present and future

unsecured obligations of the Guarantor, save for such obligations as may be preferred by

provisions of law that are both mandatory and of general application.

(c) Status of the Subordinated Notes

(i) Dated Subordinated Notes

Dated Subordinated Notes will constitute direct, unsecured, subordinated and

unconditional obligations of the Issuer and will rank pari passu among themselves and at

least pari passu with all other present and future dated subordinated obligations of the

Issuer, save for those that have been accorded by law preferential rights.

In the event of the liquidation, bankruptcy or analogous proceedings of the Issuer, the

claims of the holders of the Dated Subordinated Notes against the Issuer will be

subordinated in right of payment to the claims of all other creditors (other than holders

of Subordinated Indebtedness, if any) of the Issuer in the manner provided in the Trust

Deed.

"Subordinated Indebtedness" means all the indebtedness of the Issuer under the terms

of which the right to payment of the person(s) entitled thereto is, or is expressed to be,

subordinated, in the event of the winding up of the Issuer, to the right to payment of the

holder of Dated Subordinated Notes and so that for the purpose of this definition

indebtedness shall include all liabilities, whether actual or contingent, under guarantees

or indemnities.

(ii) Undated Subordinated Notes

Undated Subordinated Notes will constitute direct, unsecured, subordinated and

unconditional obligations of the Issuer which are subordinated to the claims of Senior

Creditors of the Issuer and to the claims of the holders of the Dated Subordinated Notes

in that payments are conditional upon the Issuer and the Guarantor being solvent at the

time of payment and no such payment shall be made except to the extent that such

payment could be made and the Issuer and the Guarantor would still be solvent

immediately thereafter. For this purpose, each of the Issuer and the Guarantor shall be

considered to be solvent if both (i) it is able to pay its debts to Senior Creditors as they

fall due and (ii) its Assets exceed its Liabilities to its Senior Creditors.

Furthermore, in order to allow Banif and Banif Madeira as Issuers and the Guarantor to

continue its business activities (in accordance with the Bank of Portugal Regulation

12/92 as amended), any amounts which would be payable as principal or interest under

the Undated Subordinated Notes, will be available to meet the losses of the Issuer or of

the Guarantor provided: (a) that there has occurred (i) consumption of the whole of the

reserves and retained earnings; (ii) writing down of the ordinary share capital of the

Issuer and the Guarantor and (iii) writing down of the Issuer's and the Guarantor's

preference shares (including any preference share capital guaranteed by the Guarantor);

and (b) that therefore, the Issuer's and the Guarantor's total shareholders' equity and the

preference shares have been reduced to zero.

In the above circumstances where unpaid principal and interest may be used to meet the

losses of the Issuer or of the Guarantor, the unpaid amounts of interest first and then

principal will be cancelled and utilised to the extent that may be necessary to meet the

losses of the Issuer or of the Guarantor. The cancelled amounts will only be reinstated as

subordinated credits of the corresponding holders as if such amounts had never been

written down or cancelled in the event of (i) the winding-up, liquidation or bankruptcy of

the Issuer or of the Guarantor, in which event such reinstatement will be deemed to take

effect at the moment which immediately precedes the commencement of the winding-up,

liquidation or bankruptcy proceedings; or of (ii) a decision being taken by the

shareholders of the Issuer or of the Guarantor to allow a dividend to be paid or to

reinstate the cancelled or written down amounts, in each case subject to the approval of

the Bank of Portugal. In both the above cases and at all times, cancelled or written down

- 36 -

amounts will revert to being treated as subordinated credits of the corresponding holders,

without prejudice to the subordination regime applying thereto.

During any period of cancellation or writing down such cancelled or written amounts

shall not bear interest.

In the event of liquidation, bankruptcy or analogous proceedings of the Issuer, no

Noteholder (having a debt or a liability towards the Issuer) may exercise any set–off,

compensation or retention or other similar rights against any amounts held by the Issuer.

Without prejudice to the foregoing, the Undated Subordinated Notes will, in the event of

a distribution of the assets in the dissolution or liquidation of the Issuer, rank senior to

the share capital of the Issuer.

A report as to the solvency of the Issuer or the Guarantor as the case may be, by (a) two

directors of the Issuer or the Guarantor as the case may be, or, if the directors have not

reported to the Issuer or the Guarantor as the case may be, within 14 days before any

payment needs to made pursuant to Condition 6, the auditors of the Issuer or the

Guarantor as the case may be, or (b) if the Issuer or the Guarantor as the case may be, is

being wound up, its liquidator shall, in each case in the absence of manifest error, be

treated and accepted by the Issuer, the Guarantor, the Trustee and the holders of Undated

Subordinated Notes as correct and sufficient evidence thereof.

For the purposes of this Condition 4(c)(ii):

(A) "Assets" means, in the case of Banif Finance, the total gross assets of Banif

Finance and, in the case of Banif or the Guarantor, the total consolidated gross

assets of Banif and "Liabilities" means, in the case of Banif Finance, the total

gross liabilities of Banif Finance and, in the case of Banif or the Guarantor, the

total consolidated gross liabilities of Banif, all as shown by, in the case of Banif

Finance, the latest published audited balance sheet of Banif Finance and, in the

case of Banif or the Guarantor, the last published audited consolidated balance

sheet of Banif, but in each case adjusted for contingencies and for subsequent

events in such manner and to such extent as such directors, auditors or liquidator,

as the case may be, may determine to be appropriate; and

(B) "Senior Creditors" means creditors of the Issuer or, as the case may be, the

Guarantor who (x) are depositors or other unsubordinated creditors of the Issuer

or, as the case may be, the Guarantor or (y) are subordinated creditors of the

Issuer or, as the case may be, the Guarantor other than those whose claims rank

pari passu with or junior to the claims of the holders of Undated Subordinated

Notes or (in respect of the Guarantor) persons entitled to claim under the

Guarantee in respect of such Notes.

(iii) Undated Subordinated Notes with Conditional Interest

Undated Subordinated Notes with Conditional Interest will constitute direct, unsecured,

subordinated and unconditional obligations of the Issuer which are subordinated to the

claims of Senior Creditors of the Issuer and to the claims of the holders of the Dated

Subordinated Notes.

Furthermore, in order to allow Banif or Banif Madeira as Issuers and the Guarantor to

continue its business activities, any amounts which would be payable as principal or

interest under the Undated Subordinated Notes with Conditional Interest will be

available to meet the losses of the Issuer or of the Guarantor in the same proportion in

which the share capital of the Issuer or of the Guarantor is reduced so as to absorb losses

of the Issuer or of the Guarantor, as determined by the board of directors of the Issuer or

of the Guarantor.


losses of the Issuer or of the Guarantor, the unpaid amounts of interest first and then

principal will be cancelled and utilised to the extent that may be necessary to meet the

- 37 -

losses of the Issuer or of the Guarantor and the nominal value of each Undated

Subordinated Note with Conditional Interest may be reduced in the same proportion in

which the share capital of the Issuer or the Guarantor is reduced, to a minimum of €0.01

if the own capital of the Issuer or of the Guarantor becomes lower than its share capital.

The cancelled or reduced amounts will only be reinstated as subordinated credits of the

corresponding holders as if such amounts had never been written down or cancelled (i)

to the extent of a positive variation of the own capital of the Issuer or of the Guarantor

resulting from profits or positive reserves (in accordance with the individual accounting

rules applicable to the financial statements of the Issuer or of the Guarantor on an

individual basis) in a proportionate amount relatively to the increase in the share capital

of the Issuer or of the Guarantor; or (ii) in the event of the winding-up, liquidation or

bankruptcy of the Issuer or of the Guarantor, in which event such reinstatement will be

deemed to take effect at the moment which immediately precedes the commencement of

the winding-up, liquidation or bankruptcy proceedings; or (iii) in the event of a

distribution of assets to shareholders of the Issuer or of the Guarantor, including the

payment of a dividend or, regardless of any such distribution or payment, a decision

being taken by the shareholders of the Issuer or of the Guarantor in terms which allow a

distribution of assets to shareholders of the Issuer or of the Guarantor, including the

payment of a dividend; or (iv) in the event of early redemption of the Undated

Subordinated Notes with Conditional Interest pursuant to Condition 10(c) or Condition

10(f), in each case subject to the approval of the Bank of Portugal. In the above cases

and at all times, cancelled or written down amounts will revert to being treated as

subordinated credits of the corresponding holders, without prejudice to the subordination

regime applying thereto. During any period of cancellation or writing down such

cancelled or written amounts shall not bear interest.

In determining the amount which the Undated Subordinated Notes with Conditional

Interest are affected in a proportionate amount relatively to the share capital of the Issuer

or of the Guarantor, the losses or the positive variation of the own capital (as the case

may be) of the Issuer or of the Guarantor shall be multiplied by the number resulting

from: (i) the division of the nominal amount of the Undated Subordinated Notes with

Conditional Interest; and (ii) the sum of such nominal amount and the share capital of

the Issuer or of the Guarantor.

In the event of liquidation, bankruptcy or any other analogous event or proceeding in

respect of the Issuer, claims of Noteholders against the Issuer or the Guarantor will be

limited to principal and interest due up to the Interest Payment Date which would fall

immediately after any such event or proceeding, such claims ranking:

(A) junior to all claims against the Issuer or the Guarantor (irrespectively of such

obligations being subordinated or unsubordinated), including claims in respect

of Dated Subordinated Notes and Undated Subordinated Notes in relation to

which a higher ranking has been granted;

(B) pari passu with other claims against the Issuer or the Guarantor ranking equally

with the claims under the Undated Subordinated Notes with Conditional Interest

(if any);

(C) senior to claims against the Issuer or the Guarantor arising out of or in

connection with preference or ordinary shares of the Issuer or the Guarantor and

other securities with lower ranking (if any).

In addition no Noteholder (having a debt or a liability towards the Issuer or the

Guarantor) may exercise any set–off, compensation or retention or other similar rights

against any amounts held by the Issuer or the Guarantor.

If so specified in the Final Terms, the payment of interest under Undated Subordinated

Notes with Conditional Interest shall be conditional and subject to the discretion of the

Issuer or the Guarantor. Accordingly, in the absence of any Limitation on Payment of

Interest, any payment of interest thereunder will be dependent upon the approval of a

- 38 -

resolution of the board of directors of the Issuer or the Guarantor and subject to the terms

and conditions set out in the applicable Final Terms.

The Issuer or the Guarantor will, in any case and regardless of any resolution of the

board of directors of the Issuer or the Guarantor, be prevented from paying interest on

Undated Subordinated Notes with Conditional Interest, and such interest shall not be due

and payable, in any of the following situations (each a "Limitation on Payment of

Interest"):

(A) if so specified in the final terms, to the extent that, and up to the amount in

which, the sum of the eventual interest payment with (i) the amount of any

dividends paid, or approved and pending payment, and guaranteed payments

made by the Issuer or the Guarantor, in respect of preference shares issued by a

subsidiary, and (ii) the amount of any dividends in respect of preference shares

issued by the Issuer or the Guarantor or its subsidiaries and guaranteed

payments which rank equally as to participation in profits, in all cases if

liquidated in the financial year in course or due in the same financial year,

exceeds the Distributable Funds of the Issuer or the Guarantor; or

(B) if the Issuer or the Guarantor fails to comply with the Own Funds Requirements

Regulation or the payment of such interest would result for the Issuer or the

Guarantor in a failure to comply with the Own Funds Requirements Regulation;

or

(C) if, in the opinion of (i) the board of directors of the Issuer or the Guarantor or (ii)

the Bank of Portugal, such payment would put at risk the compliance by the

Issuer or the Guarantor with the Own Funds Requirements Regulation taking

into consideration the past and expected evolution of the financial situation of

the Issuer or the Guarantor.

In the event that interest on Undated Subordinated Notes with Conditional Interest may

not become integrally due on an Interest Payment Date and, consequently, the respective

payment may not be integrally effected on an Interest Payment Date due to any

Limitation on Payment of Interest, such interest shall become due and the respective

payment shall be effected to the extent permitted by the relevant Limitation on Payment

of Interest.

For the purposes of this Condition 4(c)(iii):

"Distributable Funds" means, in relation to any financial year of the Issuer or, as the

case may be, the Guarantor the amount calculated by reference to the end of the previous

financial year corresponding to the sum of accumulated retained results with any other

reserves and amounts which may be distributable to shareholders of the Issuer or, as the

case may be, the Guarantor pursuant to Portuguese law, plus or less, respectively, the

amount of any profits or losses of such financial year, net of the amounts to be used for

(i) creation or increase of mandatory, legal and statutory reserves and (ii) distribution to

employees and directors of the Issuer or, as the case may be, the Guarantor, in

accordance with the articles of association of the Issuer or, as the case may be, the

Guarantor, but prior to deduction of the amount of any dividends or other payments in

respect of the ordinary shares of the Issuer or, as the case may be, the Guarantor or any

other subordinated securities ranking junior to the Undated Subordinated Notes with

Conditional Interest.

"Senior Creditors" means creditors of the Issuer or, as the case may be, the Guarantor

that (x) are depositors or other unsubordinated creditors of the Issuer or, as the case may

be, the Guarantor or (y) are subordinated creditors of the Issuer or, as the case may be,

the Guarantor other than those whose claims rank pari passu with or junior to the claims

of the holders of Undated Subordinated Notes with Conditional Interest.

"Own Funds Requirements Regulation" means the legislation, regulations,

requirements, guidelines and policies in force from time to time in relation to own funds

- 39 -

requirements, including those issued by the Bank of Portugal or applicable to credit

institutions in Portugal as well as those which may be specifically applied to the Issuer

or, as the case may be, the Guarantor.

(d) Status of the Subordinated Guarantee

(i) If the Notes are Dated Subordinated Notes issued by Banif Finance, the obligation of the

Guarantor, acting under the Guarantee constitutes direct, unsecured, subordinated and

unconditional obligations of the Guarantor but, in the event of the dissolution,

bankruptcy or liquidation or analogous proceedings of the Guarantor, subordinated in

right of the payment to the claims of the depositors and other unsecured creditors of the

Guarantor (other than creditors in respect of indebtedness of the Guarantor which is

subordinated to at least the same extent as the obligations of the Guarantor under its

guarantee in respect of such Dated Subordinated Notes); and

(ii) If the Notes are Undated Subordinated Notes issued by Banif Finance, the obligation of

the Guarantor, under the Guarantee constitutes direct, unsecured, subordinated and

unconditional obligations of the Guarantor which, to the extent permitted by Portuguese

law, are subordinated to the claims of Senior Creditors of the Guarantor, and to the

claims of the holders of the Dated Subordinated Notes in that payment under the

guarantee is conditional upon the Guarantor being solvent at the time of payment and

that no such payment shall be made except to the extent that the Guarantor could make

such payment and still be solvent immediately thereafter. For this purpose, the Guarantor

shall be considered to be solvent if both (a) it is able to pay its debts to the Senior

Creditors of the Guarantor as they fall due and (b) its Assets exceed its Liabilities to

Senior Creditors of the Guarantor.

Without prejudice to the foregoing, the obligations of the Guarantor, under the

Guarantee in respect of Undated Subordinated Notes issued by Banif Finance will, in the

event of a distribution of the assets in the dissolution or liquidation of the Guarantor,

rank senior to the share capital of the Guarantor.

A report as to the solvency of the Guarantor by (a) two directors of the Guarantor or, if

the directors have not reported to the Guarantor within 14 days before any payment

needs to be made pursuant to this Condition 4(d)(ii), the auditors of the Guarantor or (b)

if the Guarantor is being wound up, its liquidator shall, in each case in the absence of

manifest error, be treated and accepted by Banif Finance, the Guarantor, the Trustee and

the holders of Undated Subordinated Notes issued by Banif Finance as correct and

sufficient evidence thereof.

For the purposes of this Condition 4(d)(ii):

(A) "Assets" means the total consolidated gross assets of the Guarantor and

"Liabilities" means the total consolidated gross liabilities of the Guarantor, all

as shown by the latest published audited consolidated balance sheet of the

Guarantor but adjusted for contingencies and for subsequent events in such

manner and to such extent as such directors, auditors or liquidator, as the case

may be, may determine to be appropriate; and

(B) "Senior Creditors of the Guarantor" means creditors of the Guarantor who (x)

are depositors or other unsubordinated creditors of the Guarantor or (y) are

subordinated creditors of the Guarantor other than those whose claims rank pari

passu with or junior to the claims of the holders of Undated Subordinated Notes

and persons entitled to claim under the Guarantee in respect of such Notes.

The obligations of the Guarantor under the Guarantee in respect of Undated

Subordinated Notes issued by Banif Finance are conditional upon the Guarantor being

solvent immediately before and after payment by the Guarantor. Any amount, which

might otherwise have been allocated in or towards payment by Banif Finance of

principal or interest in respect of the Undated Subordinated Notes, will be available to

meet the losses of the Guarantor.

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Furthermore, in order to allow the Guarantor to continue its business activities (in

accordance with the Bank of Portugal Regulation 12/92), any amounts which, under the

Conditions, would be payable as principal or interest under the Guarantee in respect of

Undated Subordinated Notes issued by Banif Finance, will be available to meet the

losses of the Guarantor, provided: (a) that there has occurred (i) utilisation of the whole

of the reserves and retained earnings; (ii) writing down of the ordinary share capital of

the Guarantor and (iii) writing down of the Guarantor's preference shares (including any

preference share capital guaranteed by the Guarantor); and (b) that therefore the

Guarantor's total shareholders' equity and the preference share interests of Banif have

been reduced to zero.


losses of the Guarantor, the unpaid amounts of interest first and then principal will be

cancelled and utilised to the extent that may be necessary to meet the losses of the

Guarantor. The cancelled amounts will only be reinstated as subordinated credits to the

corresponding holders as if such amounts had never been written down or cancelled in

the event of (i) the winding-up, liquidation or bankruptcy of the Guarantor, in which

event such reinstatement will be deemed to take effect at the moment which immediately

precedes the commencement of the winding-up, liquidation or bankruptcy proceedings;

or of (ii) a decision being taken by the shareholders of the Issuer or of the Guarantor to

allow a dividend to be paid or to reinstate the cancelled or written down amounts, in

each case subject to the approval of the Bank of Portugal in both the above cases and at

all times, cancelled or written down amounts will revert to being treated as subordinated

credits of the corresponding holders, without prejudice to the subordination regime

applying thereto.

During any period of cancellation or writing down such cancelled or written down

amounts shall not bear interest.

In the event of liquidation, bankruptcy or analogous proceedings of the Guarantor, no

Noteholder (having a debt or a liability towards the Guarantor) may exercise any set-off,

compensation or retention or other similar rights against any amounts held by the

Guarantor.

(iii) If the Notes are Undated Subordinated Notes with Conditional Interest issued by Banif

Finance, the obligation of the Guarantor, under the Guarantee, constitutes direct,

unsecured, subordinated and unconditional obligations of the Guarantor which, to the

extent permitted by Portuguese law, are subordinated to the claims of Senior Creditors of

the Guarantor, and to the claims of the holders of the Dated Subordinated Notes.

Furthermore, in order to allow the Guarantor to continue its business activities, any

amounts which would be payable as principal or interest under the Undated

Subordinated Notes with Conditional Interest will be available to meet the losses of the

Guarantor in the same proportion in which the share capital of the Guarantor is reduced

so as to absorb losses of the Guarantor, as determined by the board of directors of the

Guarantor.


losses of the Guarantor, the unpaid amounts of interest first and then principal will be

cancelled and utilised to the extent that may be necessary to meet the losses of the

Guarantor and the nominal value of each Undated Subordinated Note with Conditional

Interest may be reduced in the same proportion in which the share capital of the

Guarantor is reduced to a minimum of €0.01 if the own capital of the Guarantor becomes

lower than its share capital. The cancelled or reduced amounts will only be reinstated as

subordinated credits of the corresponding holders as if such amounts had never been

written down or cancelled (i) to the extent of a positive variation of the own capital of

the Guarantor resulting from profits or positive reserves (in accordance with the

individual accounting rules applicable to the financial statements of the Guarantor on an

individual basis) in a proportionate amount relatively to the increase in the share capital

of the Guarantor; or (ii) in the event of the winding-up, liquidation or bankruptcy of the

Guarantor, in which event such reinstatement will be deemed to take effect at the

- 41 -

moment which immediately precedes the commencement of the winding-up, liquidation

or bankruptcy proceedings; or (iii) in the event of a distribution of assets to shareholders

of the Guarantor, including the payment of a dividend or, regardless of any such

distribution or payment, a decision being taken by the shareholders of the Guarantor in

terms which allow a distribution of assets to shareholders of the Guarantor, including the

payment of a dividend; or (iv) in the event of early redemption of the Undated

Subordinated Notes with Conditional Interest pursuant to Condition 10(c) or Condition

10(f), in each case subject to the approval of the Bank of Portugal. In the above cases

and at all times, cancelled or written down amounts will revert to being treated as

subordinated credits of the corresponding holders, without prejudice to the subordination

regime applying thereto. During any period of cancellation or writing down such

cancelled or written amounts shall not bear interest.

In determining the amount in which the Undated Subordinated Notes with Conditional

Interest are affected in a proportionate amount relatively to the share capital of the

Guarantor, the losses or the positive variation of the own capital (as the case may be) of

the Guarantor shall be multiplied by the number resulting from the division of: (i) the

nominal amount of the Undated Subordinated Notes with Conditional Interest; and (ii)

the sum of such nominal amount and the share capital of the Guarantor.

In the event of liquidation, bankruptcy or any other analogous event or proceeding in

respect of the Guarantor, claims of Noteholders against the Guarantor will be limited to

principal and interest due up to the Interest Payment Date which would fall immediately

after any such event or proceeding, such claims ranking:

(A) junior to all claims against the Guarantor (irrespectively of such obligations

being subordinated or unsubordinated), including claims in respect of Dated

Subordinated Notes and Undated Subordinated Notes in relation to which a

higher ranking has been granted;

(B) pari passu with other claims against the Guarantor ranking equally with the

claims under the Undated Subordinated Notes with Conditional Interest (if any);

(C) senior to claims against the Guarantor arising out of or in connection with

preference or ordinary shares of the Guarantor and other securities with lower

ranking (if any).

5. Negative Pledge

This Condition 5 shall apply only to Senior Notes and references to "Notes" and "Noteholders"

shall be construed accordingly.

So long as any Note remains outstanding (as defined in the Trust Deed or, in respect of Interbolsa

Notes, as defined in the Agency Agreement as amended by the Interbolsa Notes Agency

Agreement), neither the Issuer nor, if applicable, the Guarantor shall, and the Issuer and, if

applicable, the Guarantor shall procure that none of their respective Subsidiaries will, create or

permit to subsist any Security Interest upon the whole or any part of its present or future

undertaking, assets or revenues (including uncalled capital) to secure any Indebtedness (except

where this is Permitted Indebtedness) or Guarantee of Indebtedness (except where this is

Permitted Indebtedness) without (a) (except in the case of Interbolsa Notes) at the same time or

prior thereto securing the Notes equally and rateably therewith to the satisfaction of the Trustee,

(b) (except in the case of Interbolsa Notes) providing such other security for the Notes as the

Trustee may in its absolute discretion consider to be not materially less beneficial to the interests

of the Noteholders or (c) (in the case of any Notes, including Interbolsa Notes) as may be

approved by an Extraordinary Resolution of Noteholders (as described in Condition 17 and in the

Trust Deed or, in respect of Interbolsa Notes, in the Agency Agreement as amended by the

Interbolsa Notes Agency Agreement), save that the Issuer or, if applicable, the Guarantor, may

create or permit to subsist a Security Interest to secure Indebtedness and/or any Guarantee of

Indebtedness, (but without the obligation to accord or provide to the Noteholders, an equal and

rateable interest in the same or such other security as aforesaid) where such security interest:

- 42 -

(a) is only over such part of the undertaking or assets, present or future, of the Issuer or of

the Guarantor, if applicable, that belonged to a company whose assets or undertaking

have become part of the assets or undertakings of the Issuer or of the Guarantor, if

applicable, pursuant to an amalgamation or merger of such company with the Issuer or

the Guarantor, if applicable, which Security Interest exists at the time of such

amalgamation or merger and was not created in contemplation thereof or in connection

therewith and the principal, nominal or capital amount secured at the time of such

amalgamation or merger is not thereafter increased; or

(b) is created over an asset or assets specifically to secure Indebtedness that was granted to

the Issuer or Guarantor for the specific purposes of the Issuer or Guarantor to acquire the

asset or assets that are the subject of the Security Interest in question; or

(c) is created pursuant to any securitisation, asset-backed financing or like arrangement in

accordance with normal market practice and whereby the amount of Indebtedness

secured by such Security Interest or in respect of which any guarantee or indemnity is

secured by such Security Interest is limited to the value of the assets secured; or

(d) is granted in relation to mortgage-backed bonds ("Obrigações hipotecárias") and/or

covered bonds issued by Banif under Portuguese law.

6. Fixed Rate Note Provisions

(a) Application: This Condition 6 (Fixed Rate Note Provisions) is applicable to the Notes only if the

Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable.

(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of

Interest payable in arrear on each Interest Payment Date, subject as provided in Condition 11

(Payments). Each Note will cease to bear interest from the due date for final redemption unless,

upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in

which case it will continue to bear interest in accordance with this Condition 6 (as well after as

before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of

such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day

which is seven days after the Principal Paying Agent or as the case may be the Trustee has

notified the Noteholders that it has received all sums due in respect of the Notes up to such

seventh day (except to the extent that there is any subsequent default in payment).

(c) Fixed Coupon Amount: The amount of interest payable in respect of each Note for any Interest

Period shall be the relevant Fixed Coupon Amount and, if the Notes are in more than one

Specified Denomination, shall be the relevant Fixed Coupon Amount in respect of the relevant

Specified Denomination.

(d) Calculation of interest amount: The amount of interest payable in respect of each Note for any

period for which a Fixed Coupon Amount is not specified shall be calculated by applying the

Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count

Fraction and rounding the resulting figure to the nearest sub-unit of the Specified Currency (half

a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the

Specified Denomination of such Note divided by the Calculation Amount. For this purpose a

"sub-unit" means, in the case of any currency other than euro, the lowest amount of such

currency that is available as legal tender in the country of such currency and, in the case of euro,

means one cent. Interest on Interbolsa Notes will be calculated on the full nominal amount

outstanding of the Fixed Rate Notes (or, if they are Partly Paid Notes, the full amount paid up)

and will be paid to the Affiliate Members of Interbolsa for distribution by them to the accounts of

entitled Noteholders in accordance with Interbolsa's usual rules and operating procedures.

7. Floating Rate Note and Index-Linked Interest Note Provisions

(a) Application: This Condition 7 (Floating Rate Note and Index-Linked Interest Note Provisions) is

applicable to the Notes only if the Floating Rate Note Provisions or the Index-Linked Interest

Note Provisions are specified in the relevant Final Terms as being applicable.

- 43 -

(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of

Interest payable in arrear on each Interest Payment Date, subject as provided in Condition 11

(Payments). Each Note will cease to bear interest from the due date for final redemption unless,

upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in

which case it will continue to bear interest in accordance with this Condition (as well after as

before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of

such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day

which is seven days after the Principal Paying Agent or as the case may be the Trustee has

notified the Noteholders that it has received all sums due in respect of the Notes up to such

seventh day (except to the extent that there is any subsequent default in payment).

(c) Screen Rate Determination: If Screen Rate Determination is specified in the relevant Final Terms

as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest

applicable to the Notes for each Interest Period will be determined by the Calculation Agent on

the following basis:

(i) if the Reference Rate is a composite quotation or customarily supplied by one entity, the

Calculation Agent will determine the Reference Rate which appears on the Relevant

Screen Page as of the Relevant Time on the relevant Interest Determination Date;

(ii) in any other case, the Calculation Agent will determine the arithmetic mean of the

Reference Rates which appear on the Relevant Screen Page as of the Relevant Time on

the relevant Interest Determination Date;

(iii) if, in the case of (i) above, such rate does not appear on that page or, in the case of (ii)

above, fewer than two such rates appear on that page or if, in either case, the Relevant

Screen Page is unavailable, the Calculation Agent will:

(A) request the principal Relevant Financial Centre office of each of the Reference

Banks to provide a quotation of the Reference Rate at approximately the

Relevant Time on the Interest Determination Date to prime banks in the

Relevant Financial Centre interbank market in an amount that is representative

for a single transaction in that market at that time; and

(B) determine the arithmetic mean of such quotations; and

(iv) if fewer than two such quotations are provided as requested, the Calculation Agent will

determine the arithmetic mean of the rates (being the nearest to the Reference Rate, as

determined by the Calculation Agent) quoted by major banks in the Principal Financial

Centre of the Specified Currency, selected by the Calculation Agent, at approximately

11.00 a.m. (local time in the Principal Financial Centre of the Specified Currency) on the

first day of the relevant Interest Period for loans in the Specified Currency to leading

European banks for a period equal to the relevant Interest Period and in an amount that is

representative for a single transaction in that market at that time,

and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as

the case may be) the arithmetic mean so determined; provided, however, that if the Calculation

Agent is unable to determine a rate or (as the case may be) an arithmetic mean in accordance

with the above provisions in relation to any Interest Period, the Rate of Interest applicable to the

Notes during such Interest Period will be the sum of the Margin and the rate or (as the case may

be) the arithmetic mean last determined in relation to the Notes in respect of a preceding Interest

Period.

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(d) ISDA Determination: If ISDA Determination is specified in the relevant Final Terms as the

manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to

the Notes for each Interest Period will be the sum of the Margin and the relevant ISDA Rate

where "ISDA Rate" in relation to any Interest Period means a rate equal to the Floating Rate (as

defined in the ISDA Definitions) that would be determined by the Calculation Agent under an

interest rate swap transaction if the Calculation Agent were acting as Calculation Agent for that

interest rate swap transaction under the terms of an agreement incorporating the ISDA

Definitions and under which:

(i) the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the

relevant Final Terms;

(ii) the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the

relevant Final Terms; and

(iii) the relevant Reset Date (as defined in the ISDA Definitions) is either (A) if the relevant

Floating Rate Option is based on the London inter-bank offered rate (LIBOR) for a

currency, the first day of that Interest Period or (B) in any other case, as specified in the

relevant Final Terms.

(e) Index-Linked Interest: If the Index-Linked Interest Note Provisions are specified in the relevant

Final Terms as being applicable, the Rate(s) of Interest applicable to the Notes for each Interest

Period will be determined in the manner specified in the relevant Final Terms.

(f) Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of

Interest is specified in the relevant Final Terms, then the Rate of Interest shall in no event be

greater than the maximum or be less than the minimum so specified.

(g) Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time

at which the Rate of Interest is to be determined in relation to each Interest Period, calculate the

Interest Amount payable in respect of each Note for such Interest Period. The Interest Amount

will be calculated by applying the Rate of Interest for such Interest Period to the Calculation

Amount during such Interest Period, multiplying the product by the relevant Day Count Fraction

rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit

being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified

Denomination of the relevant Note divided by the Calculation Amount. For this purpose a "sub-

unit" means, in the case of any currency other than euro, the lowest amount of such currency that

is available as legal tender in the country of such currency and, in the case of euro, means one

cent. Interest on Interbolsa Notes will be calculated on the full nominal amount outstanding of

the relevant Notes (or, if they are Partly Paid Notes, the full amount paid up) and will be paid to

the Affiliate Members of Interbolsa for distribution by them to the accounts of entitled

Noteholders in accordance with Interbolsa's usual rules and operating procedures.

(h) Calculation of other amounts: If the relevant Final Terms specifies that any other amount is to be

calculated by the Calculation Agent, the Calculation Agent will, as soon as practicable after the

time or times at which any such amount is to be determined, calculate the relevant amount. The

relevant amount will be calculated by the Calculation Agent in the manner specified in the

relevant Final Terms.

(i) Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount

determined by it, together with the relevant Interest Payment Date, and any other amount(s)

required to be determined by it together with any relevant payment date(s) to be notified to the

Paying Agents and each listing authority, stock exchange and/or quotation system (if any) by

which the Notes have then been admitted to listing, trading and/or quotation as soon as

practicable after such determination but (in the case of each Rate of Interest, Interest Amount and

Interest Payment Date) in any event not later than the first day of the relevant Interest Period.

Notice thereof shall also promptly be given to the Noteholders. The Calculation Agent will be

entitled to recalculate any Interest Amount (on the basis of the foregoing provisions) without

notice in the event of an extension or shortening of the relevant Interest Period. If the Calculation

Amount is less than the minimum Specified Denomination the Calculation Agent shall not be

- 45 -

obliged to publish each Interest Amount but instead may publish only the Calculation Amount

and the Interest Amount in respect of a Note having the minimum Specified Denomination.

(j) Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations

and decisions given, expressed, made or obtained for the purposes of this Condition by the

Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the Guarantor

(if the Notes are guaranteed), the Trustee, the Common Representative, the Paying Agents, the

Noteholders and the Couponholders and (subject as aforesaid) no liability to any such Person will

attach to the Calculation Agent or the Trustee in connection with the exercise or non-exercise by

it of its powers, duties and discretions for such purposes.

(k) Determination or Calculation by Trustee: If the Calculation Agent fails at any time to determine

a Rate of Interest or to calculate an Interest Amount or Additional Interest Amount, the Trustee

(except for Interbolsa Notes) or (in respect of Interbolsa Notes), any bank designated by the

Common Representative for such purpose or, if no such bank is designated, a meeting of the

Noteholders by Extraordinary Resolution will determine such Rate of Interest and make such

determination or calculation which shall be deemed to have been made by the Calculation Agent.

In doing so, the Trustee or the designated bank on the meeting of Noteholders (as the case may

be) shall apply all of the provisions of these conditions with any necessary consequential

amendments to the extent that, in its sole opinion and with absolute discretion, it can do so and in

all other respects it shall do so in such manner as it shall deem fair and reasonable in all the

circumstances and will not be liable for any loss, liability, cost, charge or expense which may

arise as a result thereof. Any such determination or calculation made by the Trustee or the

designated bank on the meeting of Noteholders (as the case may be) shall be binding on the

Issuer, the Guarantor (if the Notes are guaranteed), the Paying Agents, the Noteholders and the

Couponholders.

8. Zero Coupon Note Provisions

(a) Application: This Condition 8 is applicable to the Notes only if the Zero Coupon Note Provisions

are specified in the relevant Final Terms as being applicable.

(b) Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero

Coupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be an

amount equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference

Price on the basis of the relevant Day Count Fraction from (and including) the Issue

Date to (but excluding) whichever is the earlier of (i) the day on which all sums due in

respect of such Note up to that day are received by or on behalf of the relevant

Noteholder and (ii) the day which is seven days after the Principal Paying Agent, or as

the case may be, the Trustee, has notified the Noteholders that it has received all sums

due in respect of the Notes up to such seventh day (except to the extent that there is any

subsequent default in payment).

9. Dual Currency Note Provisions

This Condition 9 does not apply to Interbolsa Notes.

(a) Application: This Condition 9 is applicable to the Notes only if the Dual Currency Note

Provisions are specified in the relevant Final Terms as being applicable.

(b) Rate of Interest: If the rate or amount of interest falls to be determined by reference to an

exchange rate, the rate or amount of interest payable shall be determined in the manner specified

in the relevant Final Terms.

10. Redemption and Purchase

(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will

be redeemed at their Final Redemption Amount on the Maturity Date, subject as provided in

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Condition 11 (Payments). If the Note is an Undated Subordinated Note, it has no final maturity

and is only redeemable in accordance with the following provisions of this Condition 10 or

Condition 13(B) (Events of Default relating to Subordinated Notes).

(b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but

not in part (after obtaining the consent of the Bank of Portugal whenever it is required in the case

of Subordinated Notes):

(i) at any time (if neither the Floating Rate Note Provisions or the Index-Linked Interest

Note Provisions are specified in the relevant Final Terms as being applicable); or

(ii) on any Interest Payment Date (if the Floating Rate Note Provisions or the Index-Linked

Interest Note Provisions are specified in the relevant Final Terms as being applicable),

on giving not less than 30 nor more than 60 days' notice to the Noteholders (which

notice shall be irrevocable), at their Early Redemption Amount (Tax), together with

interest accrued (if any) to the date fixed for redemption, if:

(A) the Issuer has or will become obliged to pay additional amounts as provided or

referred to in Condition 12 (Taxation) as a result of any change in, or

amendment to, the laws or regulations of the country of incorporation of the

Issuer, or if different, the country of tax residence of the Issuer, or any political

subdivision or any authority thereof or therein having power to tax, or any

change in the application or official interpretation of such laws or regulations

(including a holding by a court of competent jurisdiction), which change or

amendment becomes effective on or after the date of issue of the first Tranche

of the Notes; and

(B) such obligation cannot be avoided by the Issuer taking reasonable measures

available to it,

provided, however, that no such notice of redemption shall be given earlier than:

(1) where the Notes may be redeemed at any time, 90 days prior to the

earliest date on which the Issuer would be obliged to pay such

additional amounts if a payment in respect of the Notes were then due;

or

(2) where the Notes may be redeemed only on an Interest Payment Date, 60

days prior to the Interest Payment Date occurring immediately before

the earliest date on which the Issuer would be obliged to pay such

additional amounts if a payment in respect of the Notes were then due.

Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall

deliver to the Agent and the Common Representative (in respect of Interbolsa Notes) or to the

Trustee (in respect of Notes other than Interbolsa Notes) (A) a certificate satisfactory to the

Agent and the Common Representative (in case of Interbolsa Notes) or the Trustee (in case of

Notes other than Interbolsa Notes) signed by two directors of the Issuer stating that the Issuer is

entitled to effect such redemption and setting forth a statement of facts showing that the

conditions precedent to the right of the Issuer so to redeem have occurred of and (B) an opinion

of independent legal advisers of recognised standing to the effect that the Issuer has or will

become obliged to pay such additional amounts as a result of such change or amendment (and the

Trustee or, as the case may be, the Agent and the Common Representative, shall be entitled to

accept the certificate as sufficient evidence of the satisfaction of the conditions precedent set out

above in which event it shall be conclusive and binding on the Noteholders and the

Couponholders). Upon the expiry of any such notice as is referred to in this Condition 10(b), the

Issuer shall be bound to redeem the Notes in accordance with this Condition 10(b).

(c) Redemption at the option of the Issuer: If the Call Option is specified in the relevant Final Terms

as being applicable, the Notes may be redeemed at the option of the Issuer in whole or, if so

specified in the relevant Final Terms, in part (after obtaining the consent of the Bank of Portugal

whenever it is required in the case of Subordinated Notes) on any Optional Redemption Date

(Call) at the relevant Optional Redemption Amount (Call) on the Issuer's giving not less than 30

- 47 -

nor more than 60 days' notice to the Noteholders and having notified the Agent and the Common

Representative (in respect of Interbolsa Notes) or the Trustee (in respect of Notes other than

Interbolsa Notes) prior to the provision of such notice (which notice shall be irrevocable and

shall oblige the Issuer to redeem the Notes or, as the case may be, the Notes specified in such

notice on the relevant Optional Redemption Date (Call) at the Optional Redemption Amount

(Call) plus accrued interest (if any) to such date).

(d) Partial redemption: If the Notes are to be redeemed in part only on any date in accordance with

Condition 10(c) (Redemption at the option of the Issuer), the Notes to be redeemed shall be

selected by the drawing of lots in such place as the Trustee (in respect of Notes other than

Interbolsa Notes), or, as the case may be, the Common Representative (in respect of Interbolsa

Notes), approves and in such manner as the Trustee or, as the case may be, the Common

Representative considers appropriate, subject to compliance with applicable law and the rules of

each listing authority, stock exchange and/or quotation system (if any) by which the Notes have

then been admitted to listing, trading and/or quotation and in accordance with the rules of

Interbolsa, in the case of Redeemed Notes that are Interbolsa Notes, and the notice to

Noteholders referred to in Condition 10(c) (Redemption at the option of the Issuer) shall specify

the serial numbers of the Notes so to be redeemed. If any Maximum Redemption Amount or

Minimum Redemption Amount is specified in the relevant Final Terms, then the Optional

Redemption Amount (Call) shall in no event be greater than the maximum or be less than the

minimum so specified.

(e) Redemption at the option of Noteholders: If the Put Option is specified in the relevant Final

Terms (provided that a Put Option may not be specified if this is a Subordinated Note) as being

applicable, the Issuer shall, at the option of the holder of any Note redeem such Note on the

Optional Redemption Date (Put) specified in the relevant Put Option Notice at the relevant

Optional Redemption Amount (Put) together with interest (if any) accrued to such date. In order

to exercise the option contained in this Condition 10(e), the holder of a Note must, not less than

30 nor more than 60 days before the relevant Optional Redemption Date (Put), deposit with any

Paying Agent such Note together with all unmatured Coupons relating thereto and a duly

completed Put Option Notice in the form obtainable from any Paying Agent. The Paying Agent

with which a Note is so deposited shall deliver a duly completed Put Option Receipt to the

depositing Noteholder. No Note, once deposited with a duly completed Put Option Notice in

accordance with this Condition 10(e), may be withdrawn; provided, however, that if, prior to the

relevant Optional Redemption Date (Put), any such Note becomes immediately due and payable

or, upon due presentation of any such Note on the relevant Optional Redemption Date (Put),

payment of the redemption moneys is improperly withheld or refused, the relevant Paying Agent

shall mail notification thereof to the depositing Noteholder at such address as may have been

given by such Noteholder in the relevant Put Option Notice and shall hold such Note at its

Specified Office for collection by the depositing Noteholder against surrender of the relevant Put

Option Receipt. For so long as any outstanding Note is held by a Paying Agent in accordance

with this Condition 10(e), the depositor of such Note and not such Paying Agent shall be deemed

to be the holder of such Note for all purposes. If the Note is an Interbolsa Note, in order to

exercise the right to require redemption of this Note the holder of this Note must, during normal

business hours on a day falling within the notice period, deliver to the Portuguese Paying Agent a

Certificate and a duly completed and signed notice of exercise in the form obtainable from the

specified office of the Portuguese Paying Agent (an "Interbolsa Notes Put Option Notice", each

Interbolsa Notes Put Notice or Put Option Notice being a "Put Notice") and in which the holder

of the Notes must specify a bank account or, if payment is required to be made by cheque, an

address to which payment is to be made under this Condition.

(f) Redemption due to Own Funds Non-Qualification Event

In the event of occurrence of an Own Funds Non-Qualification Event in respect of the Dated

Subordinated Notes, the Undated Subordinated Notes or the Undated Subordinated Notes with

Conditional Interest, such Notes may be redeemed at any time by the Issuer in whole, but not in

part (subject to the prior consent of the Bank of Portugal in the situations described in (b) below

only), on giving no less than 15 nor more than 30 days’ notice to the Noteholders (which notice

shall be irrevocable), at their Early Redemption Amount, together with interest accrued (if any)

to the date fixed for redemption.

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For the purposes of this Condition 10(f):

"Own Funds Non-Qualification Event" means:

(a) the non-acceptance by the Bank of Portugal of the qualification of:

(i) the Dated Subordinated Notes as lower tier two capital (fundos próprios

complementares); or

(ii) the Undated Subordinated Notes as upper tier two capital (fundos próprios

complementares); or

(iii) the Undated Subordinated Notes with Conditional Interest as tier one capital

(fundos próprios de base),

of the Issuer;or

(b) any change in, or amendment to, any applicable law or regulation of the Republic of

Portugal, or any political subdivision or any authority thereof or therein, or any change

in the application or official interpretation of such laws or regulations (including a

decision by a court of competent jurisdiction or a competent regulatory authority), as a

result of which and for the purpose of the Own Funds Requirements Regulation, the

board of directors of the Issuer or the Guarantor (as the case may be) decides, or the

Bank of Portugal makes public or notifies the Issuer or the Guarantor (as the case may

be), that the qualification referred to in (a) above in respect of each of the Dated

Subordinated Notes, the Undated Subordinated Notes and the Undated Subordinated

Notes with Conditional Interest ceases to be applicable.

(g) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as

provided in paragraphs (a) to (f) above.

(h) Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant Final Terms,

the Redemption Amount payable on redemption of a Zero Coupon Note at any time before the

Maturity Date shall be an amount equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference

Price from (and including) the Issue Date to (but excluding) the date fixed for

redemption or (as the case may be) the date upon which the Note becomes due and

payable.

Where such calculation is to be made for a period which is not a whole number of years, the

calculation in respect of the period of less than a full year shall be made on the basis of such Day

Count Fraction as may be specified in the Final Terms for the purposes of this Condition 10(h)

or, if none is so specified, a Day Count Fraction of 30E/360.

(i) Purchase: The Issuers, the Guarantor or any of their respective Subsidiaries may (after obtaining

the consent of the Bank of Portugal whenever it is required in the case of Subordinated Notes) at

any time purchase Notes in the open market or otherwise and at any price, provided that all

unmatured Coupons are purchased therewith.

(j) Cancellation: All Notes so redeemed or purchased by an Issuer, the Guarantor or any of their

respective Subsidiaries and any unmatured Coupons attached to or surrendered with them shall

be cancelled and may not be reissued or resold. All Interbolsa Notes which are redeemed or

purchased by or on behalf of the Issuer or the Guarantor or any of its Subsidiaries will forthwith

be cancelled by Interbolsa following receipt by Interbolsa of notice thereof by the Portuguese

Paying Agent, and accordingly such Interbolsa Notes may not be held, reissued or resold and

shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to

be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the

purposes of Condition 17 or the Agency Agreement, as amended by the Interbolsa Notes Agency

Agreement.

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11. Payments

(a) Principal: Payments of principal shall be made only against presentation and (provided that

payment is made in full) surrender of Notes at the Specified Office of any Paying Agent outside

the United States by cheque drawn in the currency in which the payment is due on, or by transfer

to an account denominated in that currency (or, if that currency is euro, any other account to

which euro may be credited or transferred) and maintained by the payee with, a bank in the

Principal Financial Centre of that currency (in the case of a sterling cheque, a town clearing

branch of a bank in the City of London).

(b) Interest: Payments of interest shall, subject to paragraph (h) below, be made only against

presentation and (provided that payment is made in full) surrender of the appropriate Coupons at

the Specified Office of any Paying Agent outside the United States in the manner described in

paragraph (a) above.

(c) Payments in New York City: Payments of principal or interest may be made at the Specified

Office of a Paying Agent in New York City if (i) the Issuer has appointed Paying Agents outside

the United States with the reasonable expectation that such Paying Agents will be able to make

payment of the full amount of the interest on the Notes in the currency in which the payment is

due when due, (ii) payment of the full amount of such interest at the offices of all such Paying

Agents is illegal or effectively precluded by exchange controls or other similar restrictions and

(iii) payment is permitted by applicable United States law.

(d) Payments in respect of Interbolsa Notes: Payment of principal and interest in respect of

Interbolsa Notes will be (i) credited by the Issuer in the payment current account held by the

Portuguese Paying Agent with the Bank of Portugal, (ii) transferred, on the payment date and

according to the applicable procedures and regulations of Interbolsa, from the payment current

account held by the Portuguese Paying Agent with the Bank of Portugal to the payment current

accounts held by the Affiliate Members of Interbolsa with the Bank of Portugal, and thereafter

(iii) transferred by such Affiliate Members of Interbolsa from the respective payment current

accounts held with the Bank of Portugal to the accounts of the Noteholders or of Euroclear or

Clearstream, Luxembourg with such Affiliate Members of Interbolsa, as the case may be.

(e) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to

any applicable fiscal or other laws and regulations in the place of payment, but without prejudice

to the provisions of Condition 12 (Taxation). No commissions or expenses shall be charged to the

Noteholders or Couponholders in respect of such payments.

(f) Deductions for unmatured Coupons: If the relevant Final Terms specifies that the Fixed Rate

Note Provisions are applicable and a Note is presented without all unmatured Coupons relating

thereto:

(i) if the aggregate amount of the missing Coupons is less than or equal to the amount of

principal due for payment, a sum equal to the aggregate amount of the missing Coupons

will be deducted from the amount of principal due for payment; provided, however, that

if the gross amount available for payment is less than the amount of principal due for

payment, the sum deducted will be that proportion of the aggregate amount of such

missing Coupons which the gross amount actually available for payment bears to the

amount of principal due for payment;

(ii) if the aggregate amount of the missing Coupons is greater than the amount of principal

due for payment:

(A) so many of such missing Coupons shall become void (in inverse order of

maturity) as will result in the aggregate amount of the remainder of such

missing Coupons (the "Relevant Coupons") being equal to the amount of

principal due for payment; provided, however, that where this sub-paragraph

would otherwise require a fraction of a missing Coupon to become void, such

missing Coupon shall become void in its entirety; and

(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the

amount of principal due for payment) will be deducted from the amount of

- 50 -

principal due for payment; provided, however, that, if the gross amount

available for payment is less than the amount of principal due for payment, the

sum deducted will be that proportion of the aggregate amount of the Relevant

Coupons (or, as the case may be, the amount of principal due for payment)

which the gross amount actually available for payment bears to the amount of

principal due for payment.

Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) above

against presentation and (provided that payment is made in full) surrender of the relevant missing

Coupons.

(g) Unmatured Coupons void: If the relevant Final Terms specifies that this Condition 11(f) is

applicable or that the Floating Rate Note Provisions or the Index-Linked Interest Note Provisions

are applicable, on the due date for final redemption of any Note or early redemption of such Note

pursuant to Condition 10(b) (Redemption for tax reasons), Condition 10(e) (Redemption at the

option of Noteholders), Condition 10(c) (Redemption at the option of the Issuer) or Condition 13

(Events of Default), all unmatured Coupons relating thereto (whether or not still attached) shall

become void and no payment will be made in respect thereof.

(h) Payments on business days: If the due date for payment of any amount in respect of any Note or

Coupon is not a Payment Business Day in the place of presentation, the holder shall not be

entitled to payment in such place of the amount due until the next succeeding Payment Business

Day in such place and shall not be entitled to any further interest or other payment in respect of

any such delay.

(i) Payments other than in respect of matured Coupons: Payments of interest other than in respect of

matured Coupons shall be made only against presentation of the relevant Notes at the Specified

Office of any Paying Agent outside the United States (or in New York City if permitted by

paragraph (c) above).

(j) Partial payments: If a Paying Agent makes a partial payment in respect of any Note or Coupon

presented to it for payment, such Paying Agent will endorse thereon a statement indicating the

amount and date of such payment.

(k) Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the

time of issue) part of a Coupon Sheet relating to the Notes, the Talon forming part of such

Coupon Sheet may be exchanged at the Specified Office of the Principal Paying Agent for a

further Coupon Sheet (including, if appropriate, a further Talon but excluding any Coupons in

respect of which claims have already become void pursuant to Condition 14 (Prescription)).

Upon the due date for redemption of any Note, any unexchanged Talon relating to such Note

shall become void and no Coupon will be delivered in respect of such Talon.

12. Taxation

(a) Gross up: All payments of principal and interest in respect of the Notes and the Coupons by or on

behalf of the Issuer or, if applicable, the Guarantor shall be made free and clear of, and without

withholding or deduction for or on account of, any present or future taxes, duties, assessments or

governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or

on behalf of the country of incorporation of the Issuer, or, if applicable, the Guarantor, or if

different, the country of tax residence of the Issuer, or, if applicable, the Guarantor (in the case of

the Issuer, the "Issuer Taxing Jurisdiction" and, in the case of the Guarantor, the "Guarantor

Taxing Jurisdiction") or any political subdivision therein or any authority therein or thereof

having power to tax, unless the withholding or deduction of such taxes, duties, assessments, or

governmental charges is required by law. In that event, the Issuer or (as the case may be) the

Guarantor shall pay such additional amounts as will result in receipt by the Noteholders and the

Couponholders after such withholding or deduction of such amounts as would have been

received by them had no such withholding or deduction been required, except that no such

additional amounts shall be payable in respect of any Note or Coupon presented for payment:

(i) in the Republic of Portugal; or

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(ii) by or on behalf of a holder which is liable to such taxes, duties, assessments or

governmental charges in respect of such Note or Coupon by reason of its having some

connection with the jurisdiction by which such taxes, duties, assessments or charges

have been imposed, levied, collected, withheld or assessed other than the mere holding

of the Note or Coupon; or

(iii) by or on behalf of a holder which is able to avoid such withholding or deduction by

making a declaration of non-residence or other claim for exemption to the relevant tax

authority; or

(iv) in case of Interbolsa Notes, where such withholding or deduction is required to be made

due to the fact that the holders of such Notes are:

individuals residing for tax purposes in the Republic of Portugal who do not benefit

from any other applicable withholding tax exemption; or

entities or individuals (i) whose residence, registered office or effective management

is located in the Republic of Portugal or (ii) which have a permanent establishment

located in the Republic of Portugal to which income is attributable, or (iii) which are

resident in any of the countries or territories included in the list of jurisdictions with

a more favourable tax regime approved by Portaria 150/2004 of 13 February

(Portaria do Ministro das Finanças e da Administração Pública nº 150/2004) as

amended from time to time, issued by the Portuguese Minister of Finance and

Public Administration, with the exception of central banks and governmental

agencies of those blacklisted jurisdictions, or (iv) which are held, directly or

indirectly, as to more than 20 per cent. by entities which are resident in the Republic

of Portugal; or

entities established in the Madeira International Business Centre which are credit

institutions or financial companies or financial branches: (a) that carry out

transactions related to their activities with residents, for tax purposes, in the

Republic of Portugal; or (b) that carry out such transactions with any permanent

establishments located in the Republic of Portugal of entities considered as non-

resident in such jurisdiction for tax purposes; or

(v) where such withholding or deduction is imposed on a payment to an individual and is

required to be made pursuant to European Council Directive 2003/48/EC or any other

Directive implementing the conclusions of the ECOFIN Council meeting of 26-27

November 2000 on the taxation of savings income or any law implementing or

complying with, or introduced in order to conform to, such Directive; or

(vi) in case of bearer Notes, by or on behalf of a holder who would have been able to avoid

such withholding or deduction by presenting the relevant Note or Coupon to another

Paying Agent in a Member State of the EU; or

(vii) in case of bearer Notes, more than 30 days after the Relevant Date except to the extent

that the holder of such Note or Coupon would have been entitled to such additional

amounts on presenting such Note or Coupon for payment on the last day of such period

of 30 days; or

(viii) in the case of Interbolsa Notes, to, or to a third party on behalf of, a Noteholder,

Receiptholder or Couponholder in respect of whom the information and documentation

(which may include certificates) required in order to comply with Decree Law 193/2005

of 7 November (as amended), and any implementing legislation, is not received before

the income payment date; and/or

(ix) in case of Interbolsa Notes, to, or to a third party on behalf of, a Noteholder in respect of

which the relevant information required to comply with Decree Law 193/2005 of 7

November (as amended from time to time) is not received prior to the income payment

date and which is otherwise eligible for the withholding tax exemption set out in such

legislation by claiming a refund of the relevant amounts withheld on such payment date

- 52 -

using models 22 or 23 (Relações Fiscais Internacionais (RFI)), or, having been eligible

to claim such refund, does not do so within the applicable time period established by

Portuguese law.

(b) Taxing jurisdiction: If the Issuer or, if applicable, the Guarantor becomes subject at any time to

any taxing jurisdiction other than the Issuer Taxing Jurisdiction or the Guarantor Taxing

Jurisdiction respectively, references in these Conditions to the Issuer Taxing Jurisdiction or the

Guarantor Taxing Jurisdiction shall be construed as references to the Issuer Taxing Jurisdiction

or (as the case may be) the Guarantor Taxing Jurisdiction and/or such other jurisdiction.

13. Events of Default

(A) Events of Default relating to Senior Notes

If any of the following events occurs and is continuing (i) in respect of Notes (other than

Interbolsa Notes), the Trustee at its discretion may and, if so requested in writing by holders of at

least one quarter in principal amount of the outstanding Notes or, if so directed by an

Extraordinary Resolution of the holders, shall (subject, in the case of the happening of any of the

events mentioned in sub paragraph (ii), below and, in relation only to a Subsidiary of the Issuer

or, if applicable, a Subsidiary of the Guarantor, sub paragraphs (iii), (iv), (v), (vi), (vii), or (viii)

below, to the Trustee having certified in writing that the happening of such events is in its

opinion materially prejudicial to the interests of the Noteholders and, in all cases to the Trustee

having been indemnified and/or provided with security to its satisfaction) give written notice to

the Issuer declaring the Notes to be immediately due and payable, whereupon they shall become

immediately due and payable at their principal amount together with accrued interest without

further action or formality; or (ii) in respect of Interbolsa Notes, the Common Representative

shall, if so requested in writing by means of a request addressed to it and to Banif by the holders

of not less than 20 per cent. of the nominal amount of the Interbolsa Notes then outstanding, or if

so directed by an Extraordinary Resolution of the Noteholders, give notice to the Issuer (the

"Acceleration Notice") and the Portuguese Paying Agent at the respective specified office,

effective upon the date of receipt thereof by the Portuguese Paying Agent, that the Interbolsa

Notes are, and they shall accordingly thereby forthwith become, immediately due and repayable

at their Early Redemption Amount together with accrued interest (if any) to the date of

repayment, without demand, protest or other notice of any kind:

(a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes on

the due date for payment thereof or fails to pay any amount of interest in respect of the

Notes within ten days of the due date for payment thereof; or

(b) Breach of other obligations: the Issuer or, if applicable, the Guarantor defaults in the

performance or observance of any of its other obligations under or in respect of the

Notes of such Series in respect of Notes other than Interbolsa Notes, the Trust Deed or

the Guarantee of the Notes and (except where, (i) for Notes other than Interbolsa Notes,

in the opinion of the Trustee, or (ii) for Interbolsa Notes, in the opinion of the Common

Representative, such default is incapable of remedy where no such continuation or notice

as is hereinafter mentioned will be required) such default remains unremedied for 30

days after the Trustee or, as the case may be, the Common Representative, has given

written notice thereof to the Issuer and, if applicable, the Guarantor; or

(c) Cross-default of Issuer, Guarantor or Subsidiary:

(i) any Indebtedness of the Issuer, if applicable, the Guarantor, or any of its or their

respective Subsidiaries is not paid when due or (as the case may be) within any

originally applicable grace period;

(ii) any such Indebtedness becomes (or becomes capable of being declared) due and

payable prior to its stated maturity otherwise than at the option of the Issuer, if

applicable, the Guarantor or the relevant Subsidiary, as the case may be, or

(provided that no event of default, howsoever described, has occurred) any

Person entitled to such Indebtedness; or

- 53 -

(iii) the Issuer, if applicable, the Guarantor or any of its or their respective

Subsidiaries fails to pay when due any amount payable by it under any

Guarantee of any Indebtedness;

provided that no such event referred to above shall constitute an Event of

Default unless the indebtedness, whether alone or when aggregated with other

indebtedness relating to all (if any) other such events which shall have occurred,

shall exceed Euro 15,000,000 (or its equivalent in any other currency);

(iv) Unsatisfied judgment: one or more judgment(s) or order(s) for the payment is

rendered against the Issuer or if applicable, the Guarantor or any of its or their

respective Subsidiaries and continue(s) unsatisfied and unstayed for a period of

30 days after the date(s) thereof or, if later, the date therein specified for

payment; or

(v) Security enforced: a secured party takes possession, or a receiver, manager or

other similar officer is appointed, of the whole or a substantial (in respect of

Notes other than Interbolsa Notes, in the sole opinion of the Trustee or, in

respect of Interbolsa Notes, in the opinion of the Common Representative) part

of the assets of the Issuer or, if applicable, the Guarantor or any of its or their

respective Subsidiaries and in any of the foregoing cases it or he is not

discharged within 60 days; or

(vi) Insolvency etc: (i) the Issuer, if applicable, the Guarantor or any of its or their

respective Subsidiaries becomes insolvent or is unable to pay its debts as they

fall due, (ii) an administrator or liquidator of the Issuer, if applicable, the

Guarantor or any of its or their respective Subsidiaries or the whole or a

substantial (in respect of Notes other than Interbolsa Notes, in the sole opinion

of the Trustee or, in respect of Interbolsa Notes, in the opinion of the Common

Representative) part of the assets of the Issuer, if applicable, the Guarantor or

any of its or their respective Subsidiaries is appointed (or application for any

such appointment is made), (iii) the Issuer, if applicable, the Guarantor or any of

its or their respective Subsidiaries takes any action for a readjustment or

deferment of any of its obligations or makes a general assignment or an

arrangement or composition with or for the benefit of its creditors or declares a

moratorium in respect of any of its Indebtedness or any Guarantee of any

Indebtedness given by it or (iv) the Issuer, if applicable, the Guarantor or any of

its or their respective Subsidiaries ceases or threatens to cease to carry on all or

any substantial part of its business; or

(vii) Winding up etc: an order is made or an effective resolution is passed for the

winding up, liquidation or dissolution of the Issuer or if applicable, the

Guarantor or any of its or their respective Subsidiaries (other than for the

purpose of an amalgamation, merger or reconstruction approved by (i) the

Trustee or an Extraordinary Resolution in the case of Notes other than

Interbolsa Notes or (ii) an Extraordinary Resolution of the Noteholders (as

described in Condition 17) in the case of Interbolsa Notes); or

(viii) Analogous event: any event occurs which under the laws of the country of

incorporation of the Issuer, or if applicable, the country of incorporation of the

Guarantor, has an analogous effect to any of the events referred to in sub

paragraphs (iv) to (vii) above; or

(ix) Failure to take action etc: any action, condition or thing at any time required to

be taken, fulfilled or done in order (i) to enable the Issuer and the Guarantor

lawfully to enter into, exercise their respective rights and perform and comply

with their respective obligations under and in respect of the Notes and, in

respect of Notes other than Interbolsa Notes, the Trust Deed, (ii) to ensure that

those obligations are legal, valid, binding and enforceable and (iii) to make the

Notes, the Coupons and, in respect of Notes other than Interbolsa Notes, the

Trust Deed admissible in evidence in the courts of the country of incorporation

- 54 -

of the Issuer, or if applicable, the country of incorporation of the Guarantor, is

not taken, fulfilled or done; or

(x) Unlawfulness: it is or will become unlawful for the Issuer or, if applicable, the

Guarantor to perform or comply with any of its obligations under or in respect

of the Notes, the Guarantee of the Notes, in respect of Notes other than

Interbolsa Notes, or the Trust Deed; or

(xi) Guarantee not in force: the Guarantee of the Notes, if applicable, is not (or is

claimed by the Guarantor not to be) in full force and effect; or

(xii) Change of control: the Issuer (where the Issuer is Banif Finance) ceases to be a

subsidiary wholly owned and controlled, directly or indirectly, by Banif.

(B) Events of Default relating to Subordinated Notes

If any one or more of the following events (each an "Event of Default") occurs with respect to

any Subordinated Note (any reference to "Note", "Notes" and "Noteholders" shall be construed

accordingly):

(i) the Issuer fails to pay for a period of 7 days or more any amount of principal in respect

of the Notes on the due date for payment thereof; or

(ii) the Issuer fails to pay for a period of 14 days or more any amount of interest in respect of

the Notes on the due date for payment thereof; or

(iii) any order shall be made by any competent court or resolution passed for the winding-up

or dissolution of the Issuer or the Guarantor (where the Issuer is Banif Finance) (other

than for the purpose of an amalgamation, merger or reconstruction approved by (i) the

Trustee or an Extraordinary Resolution, in the case of Notes other than Interbolsa Notes,

or (ii) an Extraordinary Resolution of the Noteholders (as described in Condition 17), in

the case of Interbolsa Notes),

then:

(i) in respect of Notes other than Interbolsa Notes, the Trustee at its discretion may, and if

so requested in writing by the holders of not less than 20 per cent. in principal amount of

the Notes then outstanding or if so directed by an Extraordinary Resolution of the

holders shall (subject in each case to the Trustee having been indemnified and/or secured

to its satisfaction), give written notice to the Issuer declaring the Notes to be, whereupon

they shall accordingly immediately become, immediately due and repayable at their

Early Termination Amount together, with any accrued interest (as provided in the Trust

Deed) without any further action or formality.

(ii) in respect of Interbolsa Notes, the Common Representative shall, if so requested in

writing by means of a request addressed to it and to Banif by the holders of not less than

20 per cent. of the nominal amount of the Interbolsa Notes then outstanding, or if so

directed by an Extraordinary Resolution of the Noteholders, give an Acceleration Notice

to the Issuer and the Portuguese Paying Agent at the respective specified office, effective

upon the date of receipt thereof by the Portuguese Paying Agent, that the Interbolsa

Notes are, and they shall accordingly thereby forthwith become, immediately due and

repayable at their Early Redemption Amount together with accrued interest (if any) to

the date of repayment, without demand, protest or other notice of any kind.

Notwithstanding the Trustee having given notice that the Notes are immediately due and

repayable, the Issuer may only redeem such Notes with the prior approval of the Bank of

Portugal.

There can be no assurance that the Bank of Portugal will give its approval to any such

early redemption. Noteholders should be aware of the fact that the Bank of Portugal's

approval will depend on the capital adequacy of Banif.

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14. Prescription

Claims for principal shall become void unless the relevant Notes are presented for payment

within ten years of the appropriate Relevant Date. Claims for interest shall become void unless

the relevant Coupons are presented for payment within five years of the appropriate Relevant

Date.

Claims for principal and interest in respect of Interbolsa Notes shall become void unless the

relevant Certificates are surrendered within 20 years and 5 years respectively after the Relevant

Date.

15. Replacement of Notes and Coupons

If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the

Specified Office of the Principal Paying Agent (and, if the Notes are then admitted to listing,

trading and/or quotation by any listing authority, stock exchange and/or quotation system which

requires the appointment of a Paying Agent in any particular place, the Paying Agent having its

Specified Office in the place required by such listing authority, stock exchange and/or quotation

system), subject to all applicable laws and listing authority, stock exchange and/or quotation

system requirements, upon payment by the claimant of the costs and expenses incurred in

connection with such replacement and on such terms as to evidence, security, indemnity and

otherwise as the Issuer may reasonably require. Mutilated or defaced Notes or Coupons must be

surrendered before replacements will be issued.

16. Trustee and Agents

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from

responsibility, including provisions relieving it from taking proceedings to enforce payment

unless indemnified and/or secured to its satisfaction, and to be paid its costs and expenses in

priority to the claims of Noteholders and Couponholders. The Trustee is entitled to enter into

business transactions with any Issuer, the Guarantor and any entity related to any Issuer or the

Guarantor without accounting for any profit.

In the exercise of its powers and discretions under these Conditions and the Trust Deed, the

Trustee will have regard to the interests of the Noteholders as a class and will not be responsible

for any consequences for individual holders of Notes, Coupons or Talons as a result of such

holders being connected in any way with a particular territory or taxing jurisdiction.

In acting under the Agency Agreement and in connection with the Notes and the Coupons, the

Paying Agents and the Calculation Agent act solely as agents of the Issuer and, if applicable the

Guarantor, or following the occurrence of an Event of Default, the Trustee and do not assume

any obligations towards or relationship of agency or trust for or with any of the Noteholders or

Couponholders.

The initial Paying Agents and their initial Specified Offices are listed below. The initial

Calculation Agent (if any) is specified in the relevant Final Terms. The Issuer and, if applicable

the Guarantor, reserves the right (with the prior written approval of the Trustee and save that

such prior written approval will not be required in respect of the Portuguese Paying Agent) at any

time to vary or terminate the appointment of any Paying Agent or the Calculation Agent and to

appoint a successor principal paying agent or calculation agent and additional or successor

paying agents; provided, however, that:

(a) the Issuer and, if applicable, the Guarantor shall at all times maintain a Principal Paying

Agent; and

(b) the Issuers undertake that they will ensure that they maintain a Paying Agent in an EU

member state that will not be obliged to withhold or deduct tax pursuant to European

Council Directive 2003/48/EC or any other Directive implementing the conclusions of

the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or

complying with, or introduced in order to conform to such Directive; and

- 56 -

(c) if a Calculation Agent is specified in the relevant Final Terms, the Issuer and, if

applicable the Guarantor, shall at all times maintain a Calculation Agent;

(d) if and for so long as the Notes are admitted to listing, trading and/or quotation by any

listing authority, stock exchange and/or quotation system which requires the

appointment of a Paying Agent in any particular place, the Issuer and, if applicable the

Guarantor, shall maintain a Paying Agent having its Specified Office in the place

required by such listing authority, stock exchange and/or quotation system;

(e) in the circumstances described in Condition 11(c) (Payments in New York City), a

Paying Agent with a specified office in New York City; and

(f) there will at all times be a Paying Agent in Portugal capable of making payments in

respect of the Interbolsa Notes as contemplated by these Conditions, the Agency

Agreement as amended by the Interbolsa Notes Agency Agreement and applicable

Portuguese law and regulations.

Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be

given by the Issuer to the Noteholders.

17. Meetings of Noteholders; Modification and Waiver

17.1 Notes other than Interbolsa Notes

This Condition 17.1 does not apply to Interbolsa Notes.

(a) Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of

Noteholders to consider matters relating to the Notes, including the modification of any provision

of these Conditions or the provisions of the Trust Deed. Any such modification may be made if

sanctioned by an Extraordinary Resolution. Any modification to the Conditions in respect of

Subordinated Notes is, however, conditional upon the approval of the Bank of Portugal and,

notwithstanding its sanctioning by Extraordinary Resolution, such modification will only take

effect upon the Bank of Portugal granting the Issuer such approval. Such a meeting may be

convened by the Issuer or the Trustee and shall be convened by them upon the request in writing

of Noteholders holding not less than one-tenth of the aggregate principal amount of the

outstanding Notes. The quorum at any meeting convened to vote on an Extraordinary Resolution

will be two or more Persons holding or representing one more than half of the aggregate principal

amount of the outstanding Notes or, at any adjourned meeting, two or more Persons being or

representing Noteholders whatever the principal amount of the Notes held or represented;

provided, however, that Reserved Matters may only be sanctioned by an Extraordinary

Resolution passed at a meeting of Noteholders at which two or more Persons holding or

representing not less than three-quarters or, at any adjourned meeting, one quarter of the

aggregate principal amount of the outstanding Notes form a quorum. Any Extraordinary

Resolution duly passed at any such meeting shall be binding on all the Noteholders and

Couponholders, whether present or not.

In addition, a resolution in writing signed by or on behalf of all Noteholders who for the time

being are entitled to receive notice of a meeting of Noteholders will take effect as if it were an

Extraordinary Resolution. Such a resolution in writing may be contained in one document or

several documents in the same form, each signed by or on behalf of one or more Noteholders.

(b) Modification and Waiver: The Trustee may agree without the consent of the Noteholders or the

Couponholders to (i) any modification of any provision of these Conditions or the Trust Deed

which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any

other modification (other than in respect of a Reserved Matter) and any waiver or authorisation

of any breach or proposed breach of any provision of these Conditions or the Trust Deed which is

in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. In

addition, the parties to the Agency Agreement may agree to modify any provision thereof, save

the Trustee shall only agree, without the consent of the Noteholders, to such modification if, in

the opinion of the Trustee, such modification is not materially prejudicial to the interests of the

Noteholders. Any such modification, authorisation or waiver shall be binding on the Noteholders

and Couponholders.

- 57 -

(c) Substitution: The Trustee may agree without the consent of the Noteholders or the

Couponholders to the substitution of a Subsidiary of the Issuer in place of the Issuer as principal

debtor under the Trust Deed, the Notes and the Coupons provided that certain conditions

specified in the Trust Deed are fulfilled, including, in the case of a substitution of Banif Finance

by a company other than the Guarantor, a requirement that the Guarantee of the Notes is fully

effective in relation to the obligations of the new principal debtor under the Trust Deed and the

Notes.

(d) No Noteholder or Couponholder shall, in connection with any substitution, be entitled to claim

any indemnification or payment in respect of any tax consequence thereof for such Noteholder or

(as the case may be) Couponholder except to the extent provided for in Condition 12 (Taxation)

(or any undertaking given in addition to or substitution for such Condition).

17.2 Interbolsa Notes

This Condition 17.2 applies only to Interbolsa Notes.

(a) Meetings

Meetings of the holders of Interbolsa Notes may be convened to consider any matter affecting

their interests, including the sanctioning by Extraordinary Resolution of a modification of the

terms and conditions of the Notes and the appointment or dismissal of the Common

Representative and are governed by the Portuguese Companies Code.

Such meetings may be convened by the Common Representative (if any) or, if no Common

Representative has been appointed, or an appointed Common Representative fails to convene a

meeting, by the chairman of the general meeting of shareholders of the Issuer, and shall be

convened if requested by Noteholders holding not less than 5 per cent. of the principal amount of

the Notes for the time being outstanding.

The quorum required for a meeting convened to pass a resolution other than an Extraordinary

Resolution will be any person or persons holding or representing Notes then outstanding

regardless of the principal amount thereof. The quorum required for a meeting convened to pass

an Extraordinary Resolution will be a person or persons holding or representing at least 50 per

cent. of the principal amount of the Notes then outstanding or, at any adjourned meeting, any

person or persons holding or representing any of the Notes then outstanding, regardless of the

principal amount thereof.

The number of votes required to pass a resolution other than an Extraordinary Resolution is a

majority of the votes cast at the relevant meeting. The majority required to pass an Extraordinary

Resolution is at least 50 per cent. of the principal amount of the Notes then outstanding or, at any

adjourned meeting, two-thirds of the votes cast at the relevant meeting.

Resolutions passed at any meeting of the Noteholders will be binding on all the Noteholders,

whether or not they are present at the meeting or have voted against the approved resolutions.

(b) Dismissal and substitution of the Common Representative

The Noteholders may dismiss and substitute the Common Representative (if any) by means of an

Extraordinary Resolution passed for such purpose.

(c) Notification

Any modification, abrogation, waiver or authorisation in accordance with this Condition 17.2

shall be binding on the Noteholders and shall be notified by the Issuer to the Noteholders as soon

as practicable thereafter in accordance with Condition 20.

(d) Matters required to be approved by Extraordinary Resolution

- 58 -

An Extraordinary Resolution will be required to effect any of the following:

(i) to change any date fixed for payment of principal or interest in respect of the Notes,

reduction of the amount of principal or interest due on any date in respect of the Notes or

variation of the method for calculating the amount of any payment in respect of the

Notes on redemption or maturity;

(ii) to approve the modification or abrogation of any of the provisions of these Conditions;

(iii) to approve any amendment to this definition;

(iv) to waive or authorise any breach or proposed beach of any of these Conditions; and

(v) to approve any other matter in respect of which these Conditions require an

Extraordinary Resolution to be passed.

(e) Matters in the discretion of the Agent and the Issuer

Except for those matters required to be approved by Extraordinary Resolution, the Agent, the

Common Representative and the Issuer may agree, without the consent of the Noteholders, to:

(i) any modification of the Notes which is not materially prejudicial to the interests of the

Noteholders; or

(ii) any modification of the Notes which is of a formal, minor or technical nature or is made

to correct a manifest error or to comply with mandatory provisions of the law of the

jurisdiction in which the Issuer is incorporated.

Any such modification shall be binding on the Noteholders and shall be notified to the

Noteholders in accordance with Condition 20 as soon as practicable thereafter.

18. Enforcement

In the case of Notes other than Interbolsa Notes, the Trustee may at any time, at its discretion and

without notice, institute such proceedings as it thinks fit to enforce its rights under the Trust Deed

in respect of the Notes, but it shall not be bound to do so unless:

(a) it has been so requested in writing by the holders of at least one quarter in principal

amount of the outstanding Notes or has been so directed by an Extraordinary Resolution;

and

(b) it has been indemnified and/or provided with security to its satisfaction.

No Noteholder may proceed directly against the Issuer or, if applicable, the Guarantor.

In the case of Interbolsa Notes, the Common Representative may at any time, or, if so directed by

an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at

least 20 per cent. of the nominal amount of the Notes then outstanding, shall, take such

proceedings against the Issuer as it may think fit to enforce the provisions of the Notes.

19. Further Issues

The Issuer may (after obtaining the consent of the Bank of Portugal whenever it is required in the

case of Subordinated Notes) from time to time, without the consent of the Noteholders or the

Couponholders, and in accordance with the Trust Deed create and issue further notes having the

same terms and conditions as the Notes in all respects (or in all respects except for the date of the

first payment of interest) so that the same shall be consolidated and form a single series with the

Notes.

20. Notices

Notices to the Noteholders shall be valid if published in a leading English language daily

newspaper published in London (which is expected to be the Financial Times), (i) if the Notes

- 59 -

are admitted to trading on the regulated market of the Luxembourg Stock Exchange and the rules

of that exchange so require, a leading newspaper having general circulation in Luxembourg

(which is expected to be the Luxemburger Wort) or published on the website of the Luxembourg

Stock Exchange (www.bourse.lu) or in either case, if such publication is not practicable, in a

leading English language daily newspaper having general circulation in Europe, or (ii) if the

Notes are Interbolsa Notes, by registered mail, by publication in a leading newspaper having

general circulation in Portugal (which is expected to be Diário de Notícias) or by any other way

which complies with the Portuguese Securities Code and Interbolsa's rules on notices to

investors, including the disclosure of information through the official website of the CMVM

(www.cmvm.pt). Any such notice shall be deemed to have been given on the date of first

publication (or if required to be published in more than one newspaper, on the first date on which

publication shall have been made in all the required newspapers). Couponholders shall be

deemed for all purposes to have notice of the contents of any notice given to the Noteholders.

21. Rounding

For the purposes of any calculations referred to in these Conditions (unless otherwise specified in

these Conditions or the relevant Final Terms), (a) all percentages resulting from such calculations

will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with

0.000005 per cent. being rounded up to 0.00001 per cent.), (b) all United States dollar amounts

used in or resulting from such calculations will be rounded to the nearest cent (with one half cent

being rounded up), (c) all Japanese Yen amounts used in or resulting from such calculations will

be rounded downwards to the next lower whole Japanese Yen amount, and (d) all amounts

denominated in any other currency used in or resulting from such calculations will be rounded to

the nearest two decimal places in such currency, with 0.005 being rounded upwards.

22. Governing Law and Jurisdiction

(a) Governing law: The Notes (other than Interbolsa Notes) (except Conditions 4(c) and 4(d)) and

the Trust Deed (except for Clause 5 insofar as it relates to Subordinated Notes) and any non-

contractual obligations arising out of or in connection with them are governed by English law.

The Interbolsa Notes, Clause 5 of the Trust Deed (insofar as it relates to Dated Subordinated

Notes, Undated Subordinated Notes and Undated Subordinated Notes with Conditional Interest),

the Agency Agreement, in respect of Interbolsa Notes, to the extent amended by the Interbolsa

Notes Agency Agreement, and Conditions 4(c) and 4(d) are governed by, and shall be construed

in accordance with Portuguese law. In each case, the application of such governing law shall be

without prejudice to the applicability, under the conflict rules applicable in the relevant forum, in

the light of such submission, of Cayman Islands law (in relation to matters concerning Banif

Finance) or Portuguese law (in relation to matters concerning Banif or Banif Madeira as an Issuer

or as Guarantor, as the case may be).

(b) Jurisdiction: In respect of Notes other than Interbolsa Notes, the Issuer has in the Trust Deed: (i)

agreed for the exclusive benefit of the Trustee and the Noteholders that the courts of England

have exclusive jurisdiction to settle any dispute (a "Dispute"), arising out of or in connection

with the Notes (including a dispute relating to the existence, validity or termination of the Notes

or any non-contractual obligation arising out of or in connection with the Notes) or the

consequences of its nullity; (ii) agreed that those courts are the most appropriate and convenient

courts to settle any Dispute and, accordingly, that it will not argue that any other courts are more

appropriate or convenient; (iii) designated a person in England to accept service of any process

on its behalf; and (iv) consented to the enforcement of any judgment. The Trust Deed also states

that nothing contained in the Trust Deed prevents the Trustee or any of the Noteholders from

taking proceedings relating to a Dispute ("Proceedings") in any other courts with jurisdiction and

that, to the extent allowed by law, the Trustee or any of the Noteholders may take concurrent

Proceedings in any number of jurisdictions. In respect of Interbolsa Notes, the Issuer has (i)

agreed for the exclusive benefit of Noteholders that the courts of Portugal shall have exclusive

jurisdiction to settle any Dispute arising from or connected with the Interbolsa Notes; (ii) agreed

that those courts are the most appropriate and convenient courts to settle any Dispute and,

accordingly, that it will not argue that any other courts are more appropriate or convenient; and

(iii) consented to the enforcement of any judgment.

http://www.cmvm.pt/

- 60 -

23. Common Representatives

In the case of Interbolsa Notes, the holders of the Notes shall at all times be entitled to appoint

and dismiss a Common Representative by means of an Extraordinary Resolution. Upon the

appointment of a new Common Representative by the holders of the Notes pursuant to this

Condition, any previously appointed and dismissed Common Representative will immediately

cease its engagement and will be under the obligation to immediately transfer to the new

Common Representative all documents and information then held by such Common

Representative in relation to the Notes.

For these purposes, "Common Representative" means a law firm, an accountants' firm or an

individual person (who is not a holder of Notes), which may be appointed by the holders of Notes

in accordance with Article 358 of the Portuguese Companies Code.

- 61 -

FORM OF FINAL TERMS

The Final Terms in respect of each Tranche of Notes will be substantially in the following form, duly

supplemented (if necessary), amended (if necessary) and completed to reflect the particular terms of the

relevant Notes and their issue. Text in this section appearing in italics does not form part of the form of

the Final Terms but denotes directions for completing the Final Terms.

Final Terms dated •

[Banif-Banco Internacional do Funchal, S.A./Banif Finance, Ltd./Banif-Banco Internacional do Funchal

S.A., acting through its Sucursal Financeira Exterior (External Financial Branch)]

Issue of [Aggregate Nominal Amount of Tranche [Title of Notes]

[Guaranteed by

Banif Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior

(External Financial Branch)]

under the Euro 2,500,000,000

Euro Medium Term Note Programme

PART A – CONTRACTUAL TERMS

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in

the Base Prospectus dated 16 December 2009 [and the Base Prospectus Supplement dated [•]] which

[together] constitute[s] a base prospectus (the "Base Prospectus") for the purposes of the Prospectus

Directive (Directive 2003/71/EC) (the "Prospectus Directive"). This document constitutes the Final

Terms relating to the issue of Notes described herein for the purposes of Article 5.4 of the Prospectus

Directive. These Final Terms contain the final terms of the Notes and must be read in conjunction with

the Base Prospectus [as so supplemented].

Full information on the Issuer, the Guarantor and the Notes described herein is only available on the basis

of a combination of these Final Terms and the Base Prospectus [as so supplemented]. The Base

Prospectus [and the Base Prospectus Supplement] [is] [are] available for viewing at [•] and on the website

of the Luxembourg Stock Exchange at www.bourse.lu and copies may be obtained from the Specified

Office of the Principal Paying Agent.

The following alternative language applies if the first tranche of an issue which is being increased was

issued under a base prospectus with an earlier date and the relevant terms and conditions from that base

prospectus with an earlier date were incorporated by reference in this Base Prospectus.

Terms used herein shall be deemed to be defined as such for the purposes of the [date] Conditions (the

"Conditions") incorporated by reference in the Base Prospectus dated [original date][and the Base

Prospectus Supplement dated [•]]. These Final Terms contain the final terms of the Notes and must be

read in conjunction with the Base Prospectus dated 16 December 2009 [and the Base Prospectus

Supplement dated [date]] which [together] constitute[s] a base prospectus (the "Base Prospectus") for the

purposes of the Prospectus Directive (Directive 2003/71/EC) (the "Prospectus Directive"), save in

respect of the Conditions which are set forth in the base prospectus dated [original date] and are

incorporated by reference in the Base Prospectus. This document constitutes the Final Terms relating to

the issue of Notes described herein for the purposes of Article 5.4 of the Prospectus Directive.

Full information on the Issuer, the Guarantor and the Notes described herein is only available on the basis

of a combination of these Final Terms and the Base Prospectus [as so supplemented]. The Base

Prospectus [and the Base Prospectus Supplement] [is] [are] available for viewing at [•] and on the website

of the Luxembourg Stock Exchange at www.bourse.lu and copies may be obtained from the Specified

Office of the Principal Paying Agent.

[Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering

should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or sub-

paragraphs. Italics denote directions for completing the Final Terms.]

[When completing any final terms, or adding any other final terms or information, consideration should

be given as to whether such terms or information constitute "significant new factors" and consequently

trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.]



- 62 -

1. (i) Issuer: [Banif-Banco Internacional do Funchal, S.A./Banif

Finance, Ltd./Banif Banco Internacional do Funchal,

S.A., acting through its Sucursal Financeira Exterior

(External Financial Branch)]

[(ii) Guarantor: [Banif-Banco Internacional do Funchal, S.A., acting

through its Sucursal Financeira Exterior (External

Financial Branch)]

2. [(i) [Series Number:] [ ]

[ii) [Tranche Number:

(If fungible with an existing

Series, details of that Series,

including the date on which

the Notes become fungible).]

[ ]

3. Specified Currency or Currencies: [ ]

4. Aggregate Nominal Amount:

[(i)] [Series:] [ ]

[(ii) [Tranche: [ ]]

5. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus

accrued interest from [insert date] (in the case of

fungible issues only, if applicable)]

6. (i) Specified Denominations [ ]

No Notes may be issued which have a minimum

denomination of less than EUR 1,000 (or nearly

equivalent in another currency).

(N.B. If a Global Note is exchangeable for Definitive

Notes at the option of noteholders, the Notes may only

be issued in other denominations equal to, or greater

than, EUR 50,000 (or equivalent) and multiples

thereof).

(N.B. The following wording should be followed where

multiple denominations above EUR 50,000 (or

equivalent) are being used and Global Notes are not

exchangeable for Definitive Notes at the option of

Noteholders):

- 63 -

So long as the Notes are represented by a Temporary

Global Note or a Permanent Global Note and the

relevant clearing system so permits, the Notes will be

tradeable only in the minimum authorised denomination

of [EUR 50,000] and higher integral multiples of [EUR

1,000] notwithstanding that no definitive notes will be

issued with a denomination above [EUR 99,000].

(ii) Calculation Amount: [The applicable Calculation Amount (which is used for

the calculation of interest and redemption amounts) will

be (i) if there is only one Specified Denomination, the

Specified Denomination of the relevant Notes or (ii) if

there are several Specified Denomination or the

circumstances referred to in Note 3 above apply, the

highest common factor of those Specified

Denominations (note: there must be a common factor in

the case of two or more Specified Denominations).]

7. [(i)] Issue Date: [ ]

[(ii) Interest Commencement

Date: [ ]]

8. Maturity Date: [specify date or (for Floating Rate Notes) Interest

Payment Date falling in or nearest to the relevant month

and year]

[If the Maturity Date is less than one year from the Issue

Date and either (a) the issue proceeds are received by

the Issuer in the United Kingdom or (b) the activity of

issuing the Notes is carried on from an establishment

maintained by the Issuer in the United Kingdom, (i) the

Notes must have a minimum redemption value of

£100,000 (or its equivalent in other currencies) and be

sold only to "professional investors" or (ii) another

applicable exemption from section 19 of the FSMA must

be available. ]

9. Interest Basis: [• per cent. Fixed Rate]

[[specify reference rate] +/- • per cent. Floating Rate]

[Zero Coupon]

[Index-Linked Interest]

[Other (specify)]

(further particulars specified below)

- 64 -

10. Redemption/Payment Basis: [Redemption at par]

[Index-Linked Redemption]

[Dual Currency]

[Partly Paid]

[Instalment]

[Other (specify)]

11. Change of Interest or

Redemption/Payment Basis:

[Specify details of any provision for convertibility of

Notes into another interest or redemption/ payment

basis]

12. Put/Call Options: [Investor Put]

[Issuer Call]

[(further particulars specified below)]

13. (i) Status of the Notes: [Senior/[Dated/Undated]Subordinated][with Conditional

Interest]

(ii) Status of the Guarantee: [Senior/[Dated/Undated]Subordinated]

[(iii)] [Date [Board] approval for

issuance of Notes [and

Guarantee] obtained:

[ ] and [ ], respectively]]

(N.B Only relevant where Board (or similar)

authorisation is required for the particular tranche of

Notes or related Guarantee)]

14. Method of distribution: [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

15. Fixed Rate Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs

of this paragraph)

(i) Rate[(s)] of Interest: [ ] per cent. per annum [payable [annually/semi-

annually/quarterly/monthly] in arrear]

(ii) Interest Payment Date(s): [ ] in each year

(iii) Fixed Coupon Amount[(s)]: [ ] [per Calculation Amount]

(iv) Broken Amount(s): [ ] per Calculation Amount, payable on the Interest

Payment Date falling [in/on] [ ]

[Insert particulars of any initial or final broken

interest amounts which do not correspond with the

Fixed Coupon Amount[(s)]]

- 65 -

(v) Day Count Fraction: [30/360 / Actual/Actual (ICMA/ISDA) / other]

(vi) Other terms relating to the

method of calculating interest

for Fixed Rate Notes:

[Not Applicable/give details]

16. Floating Rate Note Provisions [Applicable/Not Applicable]


of this paragraph.)

(i) Specified Period: [ ]

(Specified Period and Specified Interest Payment

Dates are alternatives. A Specified Period, rather than

Specified Interest Payment Dates, will only be relevant

if the Business Day Convention is the FRN

Convention, Floating Rate Convention or Eurodollar

Convention. Otherwise, insert "Not Applicable")

(ii) Specified Interest Payment

Dates:

[ ]


Dates are alternatives. If the Business Day

Convention is the FRN Convention, Floating Rate

Convention or Eurodollar Convention, insert "Not

Applicable)

(iii) Business Day Convention: [Floating Rate Convention/ Following Business Day

Convention/ Modified Following Business Day

Convention/ Preceding Business Day Convention/

other (give details)]

(iv) Additional Business Centre(s): [Not Applicable/give details]

(v) Manner in which the Rate(s) of

Interest is/are to be

determined:

[Screen Rate Determination/ISDA

Determination/other (give details)]

(vi) Party responsible for

calculating the Rate(s) of

Interest and Interest Amount(s)

(if not the [Fiscal Agent]):

[[Name] shall be the Calculation Agent (no need to

specify if the Fiscal Agent is to perform this function)]

(vii) Screen Rate Determination:

- Reference Rate: [For example, LIBOR or EURIBOR]

- Interest Determination

Date(s):

[ ]

- Relevant Screen Page: [For example, Reuters LIBOR 01/EURIBOR 01]

- Relevant Time: [For example, 11.00 a.m. London time/Brussels time]

- 66 -

- Relevant Financial

Centre:

[For example, London/Euro-zone (where Eurozone

means the region comprised of the countries whose

lawful currency is the euro)]

(viii) ISDA Determination:

- Floating Rate Option: [ ]

- Designated Maturity: [ ]

- Reset Date: [ ]

(ix) Margin(s): [+/-][ ] per cent. per annum

(x) Minimum Rate of Interest: [ ] per cent. per annum

(xi) Maximum Rate of Interest: [ ] per cent. per annum

(xii) Day Count Fraction: [ ]

(xiii) Fall back provisions, rounding

provisions, denominator and

any other terms relating to the

method of calculating interest

on Floating Rate Notes, if

different from those set out in

the Conditions:

17. Zero Coupon Note Provisions [Applicable/Not Applicable]


of this paragraph)

(i) [Amortisation/Accrual] Yield: [ ] per cent. per annum

(ii) Reference Price: [ ]

(iii) Any other formula/basis of

determining amount payable:

[Consider whether it is necessary to specify a Day

Count Fraction for the purposes of Condition [10(g)]]

18. Index-Linked Interest Note

Provisions

[Applicable/Not Applicable]


of this paragraph)

(i) Index/Formula: [Give or annex details]

(ii) Calculation Agent responsible

for calculating the interest due:

[ ]

(iii) Provisions for determining

Coupon where calculation by

reference to Index and/or

Formula is impossible or

impracticable:

[ ]

- 67 -

(iv) Specified Period: [ ]


Dates are alternatives. A Specified Period, rather than

Specified Interest Payment Dates, will only be relevant

if the Business Day Convention is the FRN

Convention, Floating Rate Convention or Eurodollar

Convention. Otherwise, insert "Not Applicable".)

(v) Specified Interest Payment

Dates:

[ ]


Dates are alternatives. If the Business Day

Convention is the FRN Convention, Floating Rate

Convention or Eurodollar Convention, insert "Not

Applicable".)

(vi) Business Day Convention: [Floating Rate Convention/ Following Business Day

Convention/Modified Following Business Day

Convention/Preceding Business Day Convention/other

(give details)]

(vii) Additional Business Centre(s): [ ]

(viii) Minimum Rate of Interest: [ ] per cent. per annum

(ix) Maximum Rate of Interest: [ ] per cent. per annum

(x) Day Count Fraction: [ ]

19. Dual Currency Note Provisions [Applicable/Not Applicable]


of this paragraph)

(i) Rate of Exchange/method of

calculating Rate of Exchange:

[Give details]

(ii) Calculation Agent, if any,

responsible for calculating the

principal and/or interest due:

[ ]

(iii) Provisions applicable where

calculation by reference to

Rate of Exchange impossible

or impracticable:

[ ]

(iv) Person at whose option

Specified Currency(ies) is/are

payable:

[ ]

- 68 -

PROVISIONS RELATING TO REDEMPTION

20. Call Option [Applicable/Not Applicable]


of this paragraph)

(i) Optional Redemption Date(s): [ ]

(ii) Optional Redemption

Amount(s) of each Note and

method, if any, of calculation

of such amount(s):

[ ] per Calculation Amount

(iii) If redeemable in part:

(a) Minimum Redemption

Amount:


(b) Maximum Redemption

Amount:


(iv) Notice period: [ ]

21. Put Option [Applicable/Not Applicable]


of this paragraph)

(i) Optional Redemption Date(s): [ ]

(ii) Optional Redemption

Amount(s) and method, if any,

of calculation of such

amount(s):


(iii) Notice period: [ ]

22. Final Redemption Amount of each

Note


In cases where the Final Redemption

Amount is Index-Linked or other

variable-linked:

[give or annex details]

(i) Index/Formula/variable: [ ]

(ii) Calculation Agent responsible

for calculating the Final

Redemption Amount:

[ ]

(iii) Provisions for determining

Final Redemption Amount

where calculated by reference

to Index and/or Formula and/or

other variable:

[ ]

- 69 -

(iv) Determination Date(s): [ ]

(v) Provisions for determining

Final Redemption Amount

where calculation by reference

to Index and/or Formula and/or

other variable is impossible or

impracticable or otherwise

disrupted:

[ ]

(vi) Payment Date: [ ]

(vii) Minimum Final Redemption

Amount:


(viii) Maximum Final Redemption

Amount:


23. Early Redemption Amount

Early Redemption Amount(s) per

Calculation Amount payable on

redemption for taxation reasons or on

event of default and/or the method of

calculating the same (if required or if

different from that set out in the

Conditions):

[Not Applicable (if both the Early Redemption Amount

(Tax) and the Early Termination Amount are the

principal amount of the Notes/specify the Early

Redemption Amount (Tax) and/or the Early

Termination Amount if different from the principal

amount of the Notes)]

GENERAL PROVISIONS APPLICABLE TO THE NOTES

24. Form of Notes: [Temporary Global Note exchangeable for a

Permanent Global Note which is exchangeable for

Definitive Notes on [ ] days' notice/at any time/in the

limited circumstances specified in the Permanent

Global Note.]

[Temporary Global Note exchangeable for Definitive

Notes on [ ] days' notice.]

[Permanent Global Note exchangeable for Definitive

Notes on [ ] days' notice/at any time/in the limited

circumstances specified in the Permanent Global

Note].

[Dematerialised book-entry registered form (Interbolsa

Notes)]

25. New Global Note Form: [Applicable/Not Applicable]

26. Additional Financial Centre(s) or other

special provisions relating to Payment

Dates:

[Not Applicable/give details. Note that this item

relates to the date and place of payment, and not

interest period end dates, to which items 16(ii), 17(iv)

and 19(vii) relate]

- 70 -

27. Talons for future Coupons or Receipts

to be attached to Definitive Notes (and

dates on which such Talons mature):

[Yes/No. If yes, give details]

28. Details relating to Partly Paid Notes:

amount of each payment comprising

the Issue Price and date on which each

payment is to be made and

consequences (if any) of failure to pay,

including any right of the Issuer to

forfeit the Notes and interest due on

late payment:


29. Details relating to Instalment Notes:

amount of each instalment, date on

which each payment is to be made:


30. [Consolidation provisions: [Not Applicable/The provisions [in Condition 18

(Further Issues)] [annexed to this Final Terms]

apply]]

31. Other terms or special conditions: [Not Applicable/give details]

(When adding any other final terms consideration

should be given as to whether such terms constitute

"significant new factors" and consequently trigger the

need for a supplement to the Prospectus under Article

16 of the Prospectus Directive.)

DISTRIBUTION

32. (i) If syndicated, names and

addresses and underwriting

commitments of Managers:

[Not Applicable/give names]

(Include names and addresses of entities agreeing to

underwrite the issue on a firm commitment basis and

names and addresses of the entities agreeing to place

the issue without a firm commitment or on a "best

efforts" basis if such entities are not the same as the

Managers.)

(ii) Date of [Subscription

Agreement]

[ ]

(iii) Stabilising Manager (if any): [Not Applicable/give name]

33. If non-syndicated, name and

address of Dealer:

[Not Applicable/give name and address]

34. TEFRA: [Not Applicable/The [C/D] Rules are applicable

35. Total commission and

concession:

[•] per cent. of the Aggregate nominal amount

36. Additional selling restrictions: [Not Applicable/give details]

- 71 -

LISTING AND ADMISSION TO TRADING

These Final Terms comprise the final terms required for the Notes described herein to be admitted to listing

on the Official List of the Luxembourg Stock Exchange and to trading on the regulated market of the

Luxembourg Stock Exchange pursuant to the Euro 2,500,000,000 Euro Medium Term Note Programme of

Banif-Banco Internacional do Funchal, S.A./Banif Finance, Ltd./Banif-Internacional do Funchal, S.A.,

acting through its Sucursal Financeira Exterior (External Financial Branch) [Guaranteed by Banif-Banco

Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial

Branch).]

RESPONSIBILITY

The Issuer and the Guarantor accept responsibility for the information contained in this Final Terms [[•] has

been extracted from [•]. [Each of the] [The] Issuer [and the Guarantor] confirms that such information has

been accurately reproduced and that, so far as it is aware, and is able to ascertain from information

published by [•], no facts have been omitted which would render the reproduced inaccurate or misleading.].

Signed on behalf of the Issuer:

By: ....................................................

Duly authorised

[Signed on behalf of the Guarantor:

By: ................................................

Duly authorised]

- 72 -

PART B – OTHER INFORMATION

1. LISTING AND ADMISSION

TO TRADING

(i) Listing: [Luxembourg/other (specify)/None]

(ii) Admission to trading: [Application has been made for the Notes to be admitted to

trading on the regulated market of the Luxembourg Stock

Exchange]/[other] with effect from [ ].] [Not Applicable.]

(Where documenting a fungible issue need to indicate that

original securities are already admitted to trading.)

2. RATINGS

Ratings: The Notes to be issued have been rated:

[S & P: [ ]]

[Moody's: [ ]]]

[[Other]: [ ]]]

[Need to include a brief explanation of the meaning of the

ratings if this has previously been published by the rating

provider.]

(The above disclosure should reflect the rating allocated to

Notes of the type being issued under the Programme

generally or, where the issue has been specifically rated, that

rating.)

3. [NOTIFICATION

The Commission de Surveillance du Secteur Financier [has been requested to provide/has

provided – include first alternative for an issue which is contemporaneous with the establishment

or update of the Programme and the second alternative for subsequent issues] the [include names

of competent authorities of host Member States] with a certificate of approval attesting that the

Prospectus has been drawn up in accordance with the Prospectus Directive.]

4. [INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE

[ISSUE/OFFER]

Need to include a description of any interest, including conflicting ones, that is material to the

issue/offer, detailing the persons involved and the nature of the interest. May be satisfied by the

inclusion of the following statement:

"Save as discussed in ["Subscription and Sale"], so far as the Issuer is aware, no person involved in

the offer of the Notes has an interest material to the offer."]

5. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES

(i) Reasons for the offer [ ]

(See ["Use of Proceeds"] wording in Prospectus – if reasons

for offer different from making profit and/or hedging certain

risks will need to include those reasons here.)]

- 73 -

([(ii)] Estimated net proceeds: [ ]

(If proceeds are intended for more than one use will need to

split out and present in order of priority. If proceeds

insufficient to fund all proposed uses state amount and

sources of other funding.)

[(iii)] Estimated total expenses: [ ]. [Include breakdown of expenses.]

(Only necessary to include disclosure of net proceeds and

total expenses at (ii) and (iii) above where disclosure is

included at (i) above.)]

6. [Fixed Rate Notes Only -YIELD

Indication of yield: [ ].

The yield is calculated at the Issue Date on the basis of the

Issue Price. It is not an indication of future yield.]

7. [Floating Rate Notes Only – HISTORIC INTEREST RATES

Details of historic [LIBOR/EURIBOR/other] rates can be obtained from [Reuters].]

8. [Index-Linked Or Other Variable-Linked Notes Only – PERFORMANCE OF

INDEX/FORMULA/OTHER VARIABLE AND OTHER INFORMATION

CONCERNING THE UNDERLYING

Need to include details of where past and future performance and volatility of the

index/formula/other variable can be obtained and a clear and comprehensive explanation of how

the value of the investment is affected by the underlying and the circumstances when the risks are

most evident. Need to include a description of any market disruption or settlement disruption

events that affect the underlying and any adjustment rules in relation to events concerning the

underlying (if applicable).

Where underlying is an index need to include the name of the index and a description if composed

by the Issuer and if the index is not composed by the Issuer need to include details of where the

information about the index can be obtained. Where the underlying is not an index need to include

equivalent information. Where the underlying is a security need to include the name of the issuer

of the security and the International Securities Identification Number (ISIN) or equivalent

identification number. Where the underlying is a basket of underlyings, need to include the

relevant weightings of each underlying in the basket.

9. [Dual Currency Notes Only – PERFORMANCE OF RATE[S] OF EXCHANGE

Need to include details of where past and future performance and volatility of the relevant rate[s]

can be obtained.]

10. OPERATIONAL

INFORMATION

ISIN Code: [ ]

Common Code: [ ]

- 74 -

New Global Note intended to be

held in a manner which would

allow Eurosystem eligibility:

[Not Applicable/Yes/No].

Note that the designation "Yes" simply means that the Notes

are intended upon issue to be deposited with Euroclear or

Clearstream, Luxembourg as common safekeeper and does

not necessarily mean that the Notes will be recognised as

eligible collateral for Eurosystem monetary policy and intra-

day credit operations by the Eurosystem either upon issue or

at any or all times during their life. Such recognition will

depend upon satisfaction of the Eurosystem eligibility

criteria.][Include this text if "Yes" selected in which case the

Notes must be issued in NGN form]

Any clearing system(s) other than

Euroclear Bank S.A./N.V. and

Clearstream Banking société

anonyme and the relevant

identification number(s):

[Not Applicable/give name(s) and number(s)/LCH Clearnet,

S.A., identification number [•]*]

Delivery: Delivery [against/free of] payment

Names and addresses of additional

Paying Agent(s) (if any):

[ ]

11. TERMS AND CONDITIONS OF THE OFFER

Offer Price: [Issuer Price][Specify]

Conditions to which the offer is

subject:


Description of the application

process:


Description of possibility to

reduce subscriptions and manner

for refunding excess amount paid

by applicants:


Details of the minimum and/or

maximum amount of application:


Details of the method and time

limits for paying up and delivering

the Notes:


Manner in and date on which

results of the offer are to be made

public:


Procedure for exercise of any right [Not Applicable/give details]

* For Interbolsa Notes only.

- 75 -

of pre-emption, negotiability of

subscription rights and treatment

of subscription rights not

exercised:

Categories of potential investors

to which the Notes are offered and

whether tranche(s) have been

reserved for certain countries:


Process for notification to

applicants of the amount allotted

and the indication whether dealing

may begin before notification is

made:


Amount of any expenses and taxes

specifically charged to the

subscriber or purchaser:


Name(s) and address(es), to the

extent known to the Issuer, of the

placers in the various countries

where the offer takes place.

[None/give details]

- 76 -

SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM

This summary and the provisions contained therein apply only to Notes other than Interbolsa Notes.

Clearing System Accountholders

Each Global Note will be in bearer form. Consequently, in relation to any Tranche of Notes represented by

a Global Note, references in the Terms and Conditions of the Notes to "Noteholder" are references to the

bearer of the relevant Global Note which, for so long as the Global Note is held by a depositary or a

common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing

system, will be that depositary or common depositary, in the case of a CGN, or a common safekeeper, in

the case of an NGN for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing

system, will be that depositary or common depositary or, as the case may be, common safekeeper.

Each of the persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/or any other

relevant clearing system as being entitled to an interest in a Global Note (each an "Accountholder") must

look solely to Euroclear and/or Clearstream, Luxembourg and/or such other relevant clearing system (as the

case may be) for such Accountholder's share of each payment made by the Issuer or, if applicable, the

Guarantor to the bearer of such Global Note and in relation to all other rights arising under the Global Note.

The extent to which, and the manner in which, Accountholders may exercise any rights arising under the

Global Note will be determined by the respective rules and procedures of Euroclear and Clearstream,

Luxembourg and any other relevant clearing system from time to time. For so long as the relevant Notes

are represented by the Global Note, Accountholders shall have no claim directly against the relevant Issuer

or, if applicable, the Guarantor in respect of payments due under the Notes and such obligations of the

relevant Issuer and, if applicable, the Guarantor will be discharged by payment to the bearer of the Global

Note.

Exchange of Temporary Global Notes

Whenever any interest in a Temporary Global Note is to be exchanged for an interest in a Permanent

Global Note, the Issuer shall procure:

(a) in the case of first exchange, the prompt delivery (free of charge to the bearer) of such Permanent

Global Note, duly authenticated, and, in the case of an NGN, effectuated to the bearer of the

Temporary Global Note; or

(b) in the case of any subsequent exchange, an increase in the principal amount of such Permanent

Global Note in accordance with its terms,

in each case in an aggregate principal amount equal to the aggregate of the principal amounts specified in

the certificates issued by Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing

system and received by the Principal Paying Agent against presentation and (in the case of final exchange)

surrender of the Temporary Global Note to or to the order of the Principal Paying Agent within 7 days of

the bearer requesting such exchange.

Whenever a Temporary Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall

procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and

with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal

amount equal to the principal amount of the Temporary Global Note to the bearer of the Temporary Global

Note against the surrender of the Temporary Global Note to or to the order of the Principal Paying Agent


- 77 -

If:

(a) a Permanent Global Note has not been delivered or the principal amount thereof increased by 5.00

p.m. (London time) on the seventh day after the bearer of a Temporary Global Note has requested

exchange of an interest in the Temporary Global Note for an interest in a Permanent Global Note;

or

(b) Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the

bearer of a Temporary Global Note has requested exchange of the Temporary Global Note for

Definitive Notes; or

(c) a Temporary Global Note (or any part thereof) has become due and payable in accordance with the

Terms and Conditions of the Notes or the date for final redemption of a Temporary Global Note

has occurred and, in either case, payment in full of the amount of principal falling due with all

accrued interest thereon has not been made to the bearer of the Temporary Global Note in

accordance with the terms of the Temporary Global Note on the due date for payment,

then the Temporary Global Note (including the obligation to deliver a Permanent Global Note or increase

the principal amount thereof or deliver Definitive Notes, as the case may be) will become void at 5.00 p.m.

(London time) on such seventh day (in the case of (a) above) or at 5.00 p.m. (London time) on such

thirtieth day (in the case of (b) above) or at 5.00 p.m. (London time) on such due date (in the case of (c)

above) and the bearer of the Temporary Global Note will have no further rights thereunder.

Exchange of Permanent Global Notes

Whenever a Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall

procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and

with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal

amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global

Note against the surrender of the Permanent Global Note to or to the order of the Principal Paying Agent


If:

(a) Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the

bearer of a Permanent Global Note has duly requested exchange of the Permanent Global Note for

Definitive Notes; or

(b) a Permanent Global Note (or any part of it) has become due and payable in accordance with the

Terms and Conditions of the Notes or the date for final redemption of the Notes has occurred and,

in either case, payment in full of the amount of principal falling due with all accrued interest

thereon has not been made to the bearer of the Permanent Global Note in accordance with the

terms of the Permanent Global Note on the due date for payment,

then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at

5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on

such due date (in the case of (b) above) and the bearer of the Permanent Global Note will have no further

rights thereunder.

- 78 -

Conditions applicable to Global Notes

Each Global Note will contain provisions which modify the Terms and Conditions of the Notes as they

apply to the Global Note. The following is a summary of certain of those provisions:

Payments: All payments in respect of the Global Note will be made against presentation and (in the case of

payment of principal in full with all interest accrued thereon) surrender of the Global Note to or to the order

of any Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the

relevant Issuer in respect of the Notes. On each occasion on which a payment of principal or interest is

made in respect of the Global Note, the relevant Issuer shall procure that in respect of a CGN the payment

is noted in a schedule thereto and in respect of an NGN the payment is entered pro rata in the records of


Exercise of put option: In order to exercise the option contained in Condition 10(e) (Redemption at the

option of Noteholders) the bearer of the Permanent Global Note must, within the period specified in the

Conditions for the deposit of the relevant Note and put notice, give written notice of such exercise to the

Principal Paying Agent specifying the principal amount of Notes in respect of which such option is being

exercised. Any such notice will be irrevocable and may not be withdrawn.

Partial exercise of call option: In connection with an exercise of the option contained in Condition 10(c)

(Redemption at the option of the Issuer) in relation to some only of the Notes, the Permanent Global Note

may be redeemed in part in the principal amount specified by the relevant Issuer in accordance with the

Conditions and the Notes to be redeemed will not be selected as provided in the Conditions but in

accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg (to be reflected in the

records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in principal

amount, at their discretion).

Notices: Notwithstanding Condition 20 (Notices), while all the Notes are represented by a Permanent

Global Note (or by a Permanent Global Note and/or a Temporary Global Note) and the Permanent Global

Note is (or the Permanent Global Note and/or the Temporary Global Note are) deposited with a depositary

or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing

system or a Common Safekeeper, notices to Noteholders may be given by delivery of the relevant notice to

Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and, in any case, such

notices shall be deemed to have been given to the Noteholders in accordance with Condition 20 (Notices)

on the date of delivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing

system, except that, for so long as such Notes are admitted to trading on the Luxembourg Stock Exchange

and it is a requirement of applicable law or regulations, such notices shall be published in a leading

newspaper having general circulation in Luxembourg (which is expected to be Luxemburger Wort) or

published on the website of the Luxembourg Stock Exchange (www.bourse.lu)].


- 79 -

DESCRIPTION OF THE ISSUERS AND THE GUARANTOR

Banif — Banco Internacional do Funchal, S.A.

Banif – Banco Internacional do Funchal, S.A. ("Banif") was incorporated for an unlimited duration as a

public company with limited liability (Sociedade Anónima) on 1 April 2002 in Funchal, Madeira Island,

Portugal (registration number: 8945) and is organised under that country's laws. Its registered office is at

Rua João Tavira, no.30, 9004-509 Funchal, Portugal and its telephone number is +351 291 222 162.

Banif emerged from the restructuring of the Banif Financial Group (the "Group"), which was carried out in

order to concentrade the Group companies according to their business activity.

The impact of the restructuring process was merely organisational, since the business activities of the

Group remained unchanged.

Banif Financial Group changed its financial structure, as Banif - SGPS, S.A. became the holding company

of the Group with its business interests distributed between two sub-holdings, Banif Comercial SGPS, S.A.

and Banif Investimentos SGPS, S.A., while maintaining a direct interest in Companhia de Seguros

Açoreana, S.A., which is responsible for all of the Banif Financial Group's insurance business.

Banif Comercial SGPS, S.A. controls companies geared to commercial banking business, including Banif -

Banco Internacional do Funchal, S.A., Banif - Banco Internacional do Funchal (Brasil), S.A., operating in

Brazil, and others engaged in specialist lending activities - Banif Go, Instituição Financeira de Crédito,

S.A., and Banif Rent - Aluguer Gestão e Comércio de Veículos Automóveis, S.A..

Banif Investimentos SGPS, S.A. controls these companies which operate in investment banking activity,

including Banif - Banco de Investimento, S.A., which positions itself as a specialist operator in private

banking, asset management, brokerage, capital markets, private equity, corporate finance and project

finance activities and Banif – Banco de Investimento (Brasil), S.A..

On 1 January 2009, Banco Banif e Comercial dos Açores, S.A., a commercial bank also controlled by Banif

Comercial SGPS, was merged and incorporated within Banif.

In July 2009, Banif - SGPS, S.A. entered into an agreement with the controlling shareholders of

Tecnicrédito - SGPS, S.A., which is the holding company of the financial group that comprises, among

other entities, Banco Mais, S.A., (which specialises in the automobile finance) through the acquisition by

Banif - SGPS, S.A. of shares representing a minimum of 90.01 per cent. and a maximum of 100 per cent. of

the share capital of Tecnicrédito – SGPS, S.A.

Following integration on 30 September 2009, Rentipar Financeira - SGPS, S.A. (which is controlled by

Comendador Horácio Roque), continues to hold a majority participation and controlling interest in Banif –

SGPS, S.A.. Banif - SGPS, S.A. acquired 100 per cent. of the share capital of Tecnicrédito – SGPS, S.A..

The organisational structure of Banif Financial Group is set out below (as at 30 September 2009):

- 80 -

- 81 -

History and Ownership

The company formally known as Banif - Banco Internacional do Funchal, S.A. was transformed into

Banif - SGPS, S.A., (the holding company of Banif Financial Group), and a new bank with the same

name, "Banif - Banco Internacional do Funchal, S.A." was created by the transfer of the whole banking

activity of the former company and of the holding company of the Group to Banif. As a result, Banif now

acts only as a commercial bank and no longer as a holding company of the Banif Financial Group.

On 1 January 2009, Banco Banif e Comercial dos Açores, S.A. (a commercial bank acting in Portugal,

mainly in the Azores Region), was merged and incorporated within Banif.

Banif is 100 per cent., indirectly owned by the holding company of the Group, Banif - SPGS, S.A., which

has its shares listed on the regulated market of Euronext Lisbon — Sociedade Gestora de Mercados

Regulamentados, S.A. ("Euronext Lisbon").

Regulatory Status

Banif qualifies as a credit institution within the meaning of EU Directive 2000/12/EC. Banif is authorised

by the Portuguese Central Bank (Banco de Portugal) to pursue the business of a credit institution in

Portugal. Pursuant to Article 3 of the Articles of Association of Banif, its corporate objective is the

exercise of banking activity, which may be pursued by carrying out all acts and transactions permitted by

law to retail banks.

Main Activities and Recent Developments

Banif operates in mainland Portugal, in Madeira and in Azores.

In Madeira, Banif operates in the commercial and retail banking markets, concentrating on relationship

banking through the following business units:

(a) Retail banking, comprising a distribution network of 37 branches (as at 30 September 2009),

which offer a wide range of banking products and services (such as mortgage and consumer

loans, credit and debit cards, deposit and investment products, commercial lending and

bancassurance);

(b) Private banking to high net worth individuals and institutional clients, offering tailor-made

products and services; and

(c) Corporate banking, which provides services to medium and large sized corporations in Madeira.

Banif benefits from a close relationship with these regional government and the local administrations as it

is the main financial institution which not only manages the public office accounts (from which most of

the public servants' wages are paid), but also in the finances the main projects and public works that take

place in Madeira.

In September 2009, the loan portfolio of Banif in Madeira was approximately Euro 1,596.7 million and

the total deposits from customers amounted to approximately Euro 1,694.7 million.

In Azores, Banif operates in the same banking segments as in Madeira. In Azores, the retail banking

network comprised of 46 branches as of September 2009, which offer a wide range of products and

services as well as private banking and corporate banking services to high net worth individuals and to

medium sized and large corporations. In 2009, the bank tightened its relationship with local government

through a number of protocols and cooperation agreements. In September 2009, the loan portfolio of

Banif in Azores was approximately Euro 1,519.8 million and the total deposits from customers amounted

to Euro 969.6 million.

In mainland Portugal Banif operates in two main market segments:

(a) Corporate and Medium / High Segment Business, providing services to medium sized and large

companies, institutional clients and medium-to-high income private customers; and

- 82 -

(b) Retail Segment Business, offering a wide range of banking products (home loans, personal loans,

cash management accounts, credit and debit cards) and services to personal customers, small

businesses and independent professionals.

The Corporate and Private Banking Division is responsible for coordinating and developing business with

medium and large companies, institutional clients and medium-to-high income private customers. In

addition, it also comprises a unit focused on factoring and confirming business.

Since late 2008, following the stabilisation of the organizational restructuring of this division, every

business center has a private manager in order to provide a comprehensive corporate client service and at

the same time respond to the specific needs of private medium-to-high income customers and high net

worth individuals.

The network of business centers has increased in order to provide wider geographical coverage and at the

end of September 2009 the Corporate Banking Division had a total of 25 Business Centers and 48

Account Managers.

The corporate loan portfolio, managed by the Corporate Banking Division amounts to approximately

Euro 3,535.5 million, while total deposits taken by this unit amount to approximately Euro 601.2 million,

as at September 2009.

The loan portfolio, managed by the Private Banking Division amounts to approximately Euro 269.2

million, while total deposits taken by this unit amount to approximately Euro 841.2 million, as at

September 2009.

The Branch Network Division, "Direcção de Rede de Agências", has 262 branches in mainland Portugal

and is primarily focused on bringing in deposits and placing products and services in its target segment:

personal customers, small businesses and independent professionals. In view of its size, the Branch

Network Division has prime responsibility for marketing Banif's strategic products: home loans, personal

loans, cash management accounts, credit and debit cards. It also assumes a leading role in attracting

deposits and in the development of cross-selling, placing the Banif Financial Group's products including

leasing products, investment funds and insurance.

To support the branch network, to increase sales and to capture new business without increasing fixed

costs, a network of agents ("Agency Channel Division") was established in 2001. In the 4th

quarter of

2008, a new project was developed in partnership with Companhia de Seguros Açoreana, the insurance

company of Banif Financial Group, named ―Assurfinance‖, which intends to develop a new network of

agents of the insurance company that will sell financial products offered by Banif. This project, in

September 2009, integrated 224 agents and the objective is to reach 400 agents in 2010.

In September 2009, this network had 1,108 commercial agents, 416 real estate agents and 224

assurfinance agents). These agents limit their activity to introducing the client and identifying the closest

branch to such client, which is, then, responsible for approving and concluding the operations.

The total loan portfolio managed by the Branch Network Division, "Direcção de Rede de Agências" as of

September 2009, was approximately Euro 2,802.7 million, total customer deposits amounted to

approximately Euro 2,589.8 million.

The development of technology, the growing demand for alternative distribution channels and Banif's

concern to continually satisfy the needs and expectations of its clients led Banif to launch an internet

banking service, "Banif@st", in 2001. Banif's clients can access Banif@st through four channels: (i)

Internet (from any computer with an internet connection); (ii) Telephone ("Banifone"); (iii) SMS (from

any mobile phone enabled for text messages); and (iv) WAP (from any mobile phone with WAP

configuration).

By the end of September 2009, 70 per cent. of Banif's clients had access to Banif@st and 17 per cent. of

Banif's clients used the service frequently.

- 83 -

Boards and Officers of Banif

(a) Management Team

All members of the Management Team of Banif have their business address at the registered

office of Banif.

(i) Board of Directors

Chairman Comendador Horácio da Silva Roque

Vice Chairmen Joaquim Filipe Marques dos Santos

Carlos David Duarte de Almeida

Full Members António Manuel Rocha Moreira

Manuel Isidoro Martins Vaz

José Marques de Almeida

João Manuel da Silva Machado dos Santos

José António Machado de Andrade

Diogo António Rodrigues da Silveira

João Paulo Pereira Marques de Almeida

Vitor Manuel Farinha Nunes

(ii) Executive Board

Chairman Joaquim Filipe Marques dos Santos

Members Carlos David Duarte de Almeida

António Manuel Rocha Moreira





(b) Audit Board

Chairman Fernando Mário Teixeira de Almeida

Effective Full Members António Ernesto Neto da Silva

José Lino Tranquada Gomes

Alternate Full Member José Pedro Lopes Trindade

(c) Official Auditors

Ernst & Young & Associados – S.R.O.C., S.A., represented by João Carlos Miguel Alves (ROC

nr. 896)

Below we give a list of the offices held in other companies by members of the Board of Directors and of

the Supervision Board of Banif as above mentioned:

Board of Directors

Comendador Horácio da Silva Roque

(a) Companies in the Rentipar Financeira SGPS, S.A. Group

(i) Chairman of the Board of Directors

• Rentipar Financeira SGPS, S.A.

- 84 -

• Banif Comercial SGPS, SA

• Banif - SGPS, S.A.

• Banif - Banco Internacional do Funchal (Brasil), S.A.

• Banif - Banco de Investimento (Brasil), S.A.

• Banif Corretora de Valores e Câmbio, S.A.

• Banif (Açores) - SGPS, S.A.

• Banif Investimentos SGPS, S.A.

• Banif - Banco de Investimento, S.A.

• Banif International Holdings, Ltd.

• Companhia de Seguros Açoreana, S.A.

• Renticapital - Investimentos Financeiros, S.A.

(ii) Chairman of the General Meeting

• Banif Go – Instituição Financeira de Crédito, S.A. (representing Rentipar

Financeira, SGPS, S.A.)

• Banif Rent - Aluguer, Gestão e Comércio de Veículos Automóveis, S.A.

(representing Rentipar Financeira, SGPS, S.A.)

• Banif - Banco Internacional do Funchal (Brasil), S.A.


• Banif Corretora de Valores e Câmbio, S.A.

• Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento

Mobiliário, S.A. (representing Rentipar Financeira, SGPS, S.A.)

• Banif Capital - Sociedade de Capital de Risco, S.A. (representing Rentipar

Financeira, SGPS, S.A.)

• Banif Imobiliária, S.A. (representing Rentipar Financeira, SGPS, S.A.)

• SIP - Sociedade Imobiliária Piedade, S.A. (representing Rentipar Financeira

SGPS, S.A.)

• Gamma - Sociedade de Titularização de Créditos, S.A.

(b) Other Entities

(i) Member of the Board of Directors or Management Board

• Rentipar Indústria SGPS, S.A. (Chairman)

• Rentipar Investimentos SGPS, S.A. (Chairman)

• Rentiglobo SGPS, S.A. (Chairman)

• SIET – Sociedade Imobiliária de Empreendimentos Turísticos Savoi, S.A.

(Chairman)

• Soil SGPS, S.A. (Chairman)

- 85 -

• Rentimundi – Investimentos Imobiliários, S.A. (Chairman)

• Investaçor Hóteis, S.A. (Chairman)

• EMT – Empresa Madeirense de Tabacos, S.A. (Vice Chairman)

• VITECAF – Fábrica de Rações da Madeira, S.A. (Vice Chairman)

• RAMA – Rações para Animais, S.A. (Vice Chairman)

• AVIATLÂNTICO – Avicultura, S.A. (Vice Chairman)

• Fomentinvest SGPS, S.A. (Member)

• Ronardo – Gestão de Empresas, Lda. (Manager)

(ii) Officer of the General Meeting

• Genius - Mediação de Seguros, S.A. (Chairman)

• Rentimedis - Mediação de Seguros, S.A. (Chairman)

• Mundiglobo - Habitação e Investimentos, S.A. (Chairman)

• Habiprede - Sociedade de Construções, S.A. (Chairman)

• MS Mundi - Serviços Técnicos de Gestão e Consultoria, S.A. (Chairman)

• EMT - Empresa Madeirense de Tabacos, S.A. (Chairman)

• VITECAF - Fábrica de Rações da Madeira, S.A. (Chairman)

• RAMA - Rações para Animais, S.A. (Chairman)

• Investaçor SGPS, S.A. (Chairman)

• SIET - Sociedade Imobiliária de Empreendimentos Turísticos Savoi, S.A. (Vice

Chairman)

• Rentipar Seguros SGPS, S.A. (Chairman)

Joaquim Filipe Marques dos Santos



• Banif Go – Instituição Financeira de Crédito, S.A.


• Banif - Banco Internacional do Funchal (Cayman), Ltd.

• BanifServ - Empresa de Serviços e Tecnologias de Informação, ACE

• Banif Finance, Ltd.

• Banif International Bank, Ltd.

(ii) Vice-Chairman of the Board of Directors


• Banif – Banco Internacional do Funchal (Brasil), S.A.

- 86 -


• Banif - Corretora de Valores e Câmbio, S.A.


(iii) Member of the Board of Directors


• Banif (Açores) - SGPS, S.A.

• Banif Comercial SGPS, S.A.

(iv) Chairman of the General Meeting

• Vestiban – Gestão de Investimentos, S.A.

(v) Chairman of the General Meeting and Member of the Remuneration Committee

• BCN – Banco Caboverdiano de Negócios, S.A.

Carlos David Duarte de Almeida



• Banif Forfaiting Company, Ltd.

• Banif Finance (USA) Corp.

• Banif Financial Services Inc.

• Banif Holding (Malta), Ltd.

• Banif Trading, Inc.

(ii) Vice-Chairman of the Board of Directors


• Banif - Banco de Investimento, S.A.


(iii) Member of the Board of Directors



• Banif – Banco de Investimento (Brasil), S.A.

• Banif - Corretora de Valores e Câmbio, S.A.


• Banif (Açores) SGPS, S.A.


• Banif – Banco Internacional do Funchal (Cayman), Ltd.

- 87 -



• Banif Bank (Malta) Plc.

António Manuel Rocha Moreira


(i) Vice-Chairman of the Board of Directors

• BCN – Banco Caboverdiano de Negócios, S.A.

(ii) Member of the Board of Directors




• Banif Go – Instituição Financeira de Crédito, S.A. (ex-Banif Leasing, S.A.)

• Banif (Açores) SGPS, S.A.



(b) Other entities

(i) Chairman of the Audit Board

• Zon TV Cabo Madeirense, S.A., representing Banif – Banco Internacional do

Funchal, S.A.




• Banco Imobiliária, S.A.

• Sociedade Imobiliária Piedade, S.A.

• BANIEUROPA HOLDING, S.L.


• Banif Go – Instituição Financeira de Crédito, S.A.


• Banca Pueyo, S.A.

José Marques de Almeida


(i) Member of the Board of Directors


- 88 -

• Rentipar Financeira SGPS, S.A.

(ii) Chairman of the Board of Directors

• Vestiban – Gestão e Investimentos, S.A.

(iii) Chairman of the General Meeting


(b) Other entities

(i) Chairman of the General Meeting

• Rentipar Investimentos SGPS, S.A.




• Banco Banif e Comercial dos Açores, S.A. (former Banco Comercial dos

Açores, S.A.)

(ii) Chairman of the Executive Board

• BanifServ – Empresa de Serviços e Tecnologias de Informação, ACE

(iii) Chairman of the General Meeting

• Banif (Açores) SGPS, S.A., representing Banif – Banco Internacional do

Funchal, S.A.

(b) Other entities


• SIBS – Sociedade Interbancária de Serviços, S.A., representing Banif – Banco

Internacional do Funchal, S.A.


(a) Other entities


• Zon TV Cabo Madeirense, S.A., representing Banif – Banco Internacional do

Funchal, S.A.

(ii) Chairman

• Conselho Económico e Social da RAM

Diogo António Rodrigues da Silveira


(i) Chairman of the Executive Committee



- 89 -

• Banif Imobiliária, S.A.


• BanifServ – Empresa de Serviços e Tecnologias de Informação, ACE




• Vestiban - Gestão de Investimentos, S.A.

Vitor Manuel Farinha Nunes



• Tecnicrédito SGPS, S.A.

• Banco Mais, S.A.

• Bank Plus Bank Zartkoruen Mukodo Reszvenytarsasag

• Banco Pecúnia (Brasil)

• Tecnicrédito ALD, Aluguer de Automóveis, S.A.

• TCC Investments Luxembourg, SARL

• FN Participações, SGPS, S.A.

(b) Other entities

(i) Manager

• Core Investimentos, Consultoria e Serviços, Lda.

• Margem – Mediação de Seguros, Lda.

Audit Board

Fernando Mário Teixeira de Almeida


(i) Chairman of the Audit Board



• Banif – Banco de Investimento, S.A.


(b) Other entities

(i) Chairman of the General Meeting

• Advancer – Soluções de Gestão, S.A.

- 90 -

António Ernesto Neto da Silva


(i) Member of the Audit Board



(b) Other entities


• Deimos Engenharia, S.A.

(ii) Managing Director

• Financetar – Sociedade de Serviços Financeiros, Empresariais e Imobiliários,

S.A.

José Lino Tranquada Gomes

(a) Companies on the Rentipar Financeira SGPS, S.A. Group

(i) Member of the Audit Board


• Banif Comercial SGPS. S.A.

(b) Other entities

(i) Manager

• Tranquada Gomes & Coito Pita – Sociedade de Advogados

• Imolapeira – Imobiliária da Madeira, Lda

• Freitas, Sales & Gomes – Empreendimentos Imobiliários, Lda

• Netanarium – Consultadoria e Gestão, Unipessoal, Lda

(ii) Chairman of the General Meeting

• Edifícios Park – Empreendimentos Imobiliários e Turísticos, S.A.

Conflicts of Interest

To the knowledge of Banif the members of the administrative, management or supervisory bodies of

Banif do not have any potential conflicts of interest between any duties of Banif and their private

interests.

Audit Committee

Banif does not have an internal Audit Committee. Audit responsibilities are exercised within Banif by the

Audit and Inspection Department, which plays an important role in assessing and validating the internal

control instituted within Banif.

As an integral part of the permanent monitoring system for internal control of the Bank, the Department is

responsible for independently verifying compliance with the regulations in force by:

• striving to ensure compliance with internal rules and legal provisions, reporting facts and

situations which represent deviation from these rules;

- 91 -

• checking the quality of controls and security levels established in systems and information

technology, focussing in particular on the e-banking service (Banif@st), with regard to both

quality and security of services rendered; and

• regular audits of operations involving business risks.

The evolving perspective of the Bank of Portugal on the effectiveness and adequacy of internal control

systems and requirements recognized and accepted internationally, as reflected in the publication of

notice 5/2008, has led to the development of new routines for the prevention of internal fraud, with new

specialised analysis.

Work on harmonising operational audit processes between the Inspection and Audit Office (IAO) at

Banco Banif e Comercial dos Açores, S.A. and the Operational Audit and Inspection Office (OAIO),

which had started in 2007, resulted in 2008 in full and effective convergence, making it possible to carry

out joint operational audits in mainland Portugal, Madeira and Azores. The offices now share working

methodologies, allowing for complete integration of auditors from Banco Banif e Comercial dos Açores,

S.A. into the Banif structure during the merger process.

A set of audits are planned for 2009 central divisions and information systems, which will enable an

assessment of risk in accordance with the Bank of Portugal’s Risk Assessment Model, and a review of the

level of internal control.

Ernst & Young Audit & Associados – SROC, S.A. are the external auditors of Banif.

Control of Operating Risks

The Banif Financial Group has long recognized the importance of risk management in its operations,

assuring that its business activities are supported by a risk culture which is internalised throughout the

operation, constituting an important pillar for the implementation of the strategies and policies defined by

the Board of Directors, aligned with the guidelines issued by the supervisory authorities.

Over recent years the Group has undertaken a number of projects with a view to the progressive

improvement of risk management and monitoring practices. These improvements seek to address the

complexity and speed of change and evolution in the risks to which the Group is exposed and the

priorities for implementation.

At the same time, work has proceeded on the development of a complete and up-to-date risk information

system, supported by specific information technologies for management of the different risks in the

Group’s business activities. The Group has gradually but consistently invested in integrated technology

for risk information and management, in order to comply with the toughest standards in this field.

In 2008, as part of the new governance model, the Group instituted a corporate risk division, which takes

central responsibility for risk management. The division continued many projects already undertaken,

such as those related to the implementation of measures in accordance with Basel II requirements.

Each group entity has its own organisational structure for risk management, with resources to match its

respective business activities and associated risks, to implement the policies defined by the directors of

Banif – SGPS, S.A.

The Group manages risk and develops policy in this area through a cross-group development structure.

The Board of Directors is responsible for designing risk policies supported by assessment and monitoring

of risks throughout the corporate structure. They monitor the most significant risks – credit, market,

liquidity and operating risks, amongst others – and whenever necessary propose new policies and

corrective measures to assure risk prevention and mitigation.

Self-assessment exercises were conducted for the risk management system and for the risk control

system, in keeping with the guidelines contained in the Bank of Portugal Notice 5/2008.

These assessments pinpointed the main shortcomings in each Group entity and at corporate level and

resulted in a listing and classification of risks by category and degree. This exercise has generated

mitigation and remediation measures identified and scheduled in keeping with the scale, severity and

frequency of the risks identified.

- 92 -

The Group also conducted stress tests in accordance with Bank of Portugal Instruction 18/2007, selecting

tests in line with its size, products marketed, customer characteristics, the main balance sheet items, its

strategic plan and the tools available for risk management. The tests were applied to the main risks to

which the Group is exposed. The test results therefore provide an additional management tool, helping the

Group to plan corrective measures.

Banking business is exposed to extremely varied risks. Operating risks area managed and controlled on

the basis of identification and analysis of Banif's exposure to various risks (lending, market, structural and

operational risk) deriving from its business operation, and definition of strategies and policies to prevent

and mitigate these risks.

Risks are controlled and managed at Banif by the entire organisational structure, led by strategies and

policies mapped out by the Executive Board and with central responsibility for this work being taken by

the Risk Management Division.

Risk management is based on identification and analysis of Banif's exposure to various risks (lending,

market, structural, operational risk and other risks) and definition of policies to prevent and mitigate these

risks.

Banif seeks to raise collective awareness of the nature and scale of the risks involved in each type of

activity, whilst at the same time adopting strategies to maximize profits permitted by the risks and

exposure limits established.

Risk control activities are carried out, and the respective responsibility is exercised, independently of

other Bank divisions and departments.

Banif assures continuous monitoring of risk through systematic measurement of the performance of its

different business areas, by measuring the results achieved in view of the risks and the limits set.. Risks

are continuously monitored, making it possible to take preventive action whenever necessary.

The policies adopted for each of the main risks identified are reviewed whenever appropriate, allowing

for development of preventive measures.

Also with regard to risk control, Banif worked in 2008 on developing stress tests which will initially be

used internally, and then extended throughout the Group. These tests contribute to more effective and

efficient management of the risks to which Banif is exposed. The main impacts were assessed, both on

equity and on profits, of variations in the main business indicators and of exposure to the most relevant

risks.

Risk control tasks and activities are carried on independently from other management bodies.

Credit Risk

Credit Risk is the probability of occurrence of negative impacts on results or capital, due to the inability

of a counterparty to honour its financial commitments to the Group, including possible restrictions on the

transfer of payments from abroad.

The Group’s credit risk strategy is based on a set of policies which guide the granting and monitoring of

credit. Whenever necessary, these policies are adjusted in line with the evolution of business and market

conditions.

Credit risk is managed and responsibilities are delegated in line with the principles and rules for granting

and maintaining credit to customers, these are set out in rules and procedures which are reviewed and

adjusted when and as necessary.

These rules apply across the Group, as they include regulations on each business area and marketing

network, as well as rules on the preparation, analysis and follow-up of customer credit.

Credit risk is managed and monitored in keeping with the principles and rules for granting and

maintaining credit set out in Banif's Credit Manual, which sets out a series of general rules,

complemented by specific procedures and regulations for each specific business area and the related sales

networks, together with rules on the preparation, analysis and follow-up of lending to customers.

- 93 -

In 2008, in line with the quality and efficiency policy which defines standards in all areas of the Banif’s

activities, all credit rules and regulations for sales areas were reviewed.

Credit risk management

Credit risk management at Banif is based on permanent monitoring of lending portfolios and on

compliance with the quality targets set each year. In this context, management assures that risk indicators

are kept at levels consistent with the lending strategy defined.

Objectives are set for risk management in terms of: (i) defining targets for the risk scoring of the

portfolio; (ii) concentration of exposure, geographically and in terms of sectors and major risks; (iii)

setting of targets for increasing the security of operations, by obtaining guarantees. This also assures that

these factors are maintained as consistent with lending policies.

Banif has implemented a set of initiatives designed to achieve improvements in analysis and monitoring

of credit risk management and worked in 2008 on creating an IT platform for the management process for

credit applications from corporate customers, and approval and renewal of credit limits, contributing to

more effective management, shared between all the participants in the process.

At the same time, the Bank has continued to develop projects for modelling internal risk scoring systems,

which have proved to have sufficient capacity in relation to identification and prediction of credit risks.

The development of the internal models have allowed the Bank to assess its home loans, personal loans

and small business portfolios. Banif also uses external models and then compares the findings.

Internal Risk Scoring Systems

Considering the particular features of Banif’s portfolios, the internal risk scoring systems look at specific

customer characteristics, historical and relationship variables and the qualitative and quantitative

characteristics of the operations.

The internal risk scoring systems subdivide into the following categories:

Internal scoring models – Acceptance and Behavioural. These scoring models allow each credit

application to be assigned a probability of default, and these models are used when credit is

granted. These models also make it possible to classify an operation, in terms of exposure to risk,

until the operation is one year old. The behavioural scoring models are used to measure the risk on

lending operations over their lifetime, in view of the irregular behaviour or otherwise of the

counterparty in operations more than one year old.

Internal rating models for corporate lending. The rating model assigns to each (corporate)

customer a risk classification in line with the probability of default, thereby measuring the risk of

default by the counterparty. Banif has a statistical rating model for portfolios of small and medium

sized business, which combines financial information with qualitative data, including relationship

variables.

Credit risk assessment process

The risk of non-standard credit is assessed by Risk Analysis Units belonging to the organisational

structure of the Risk Management Division.

Non-standard operations and the respective customers are assessed by experienced teams using methods

and procedures established by Banif and designed to provide adequate security in acceptance, monitoring

and control of portfolio risk. These procedures involve strict criteria, comprising analysis of:

• quality of the financial information provided by customers;

• assessment of the experience of the customer as manager, in the business sector in question,

repayment capacity and their relationship with the financial market;

quality of the proposed operation, namely purpose, duration, guarantees, exchange rate risk, etc;

- 94 -

assessment of the results obtained, namely through use of the rating model and the yield for the

business banking sector.

Standardised lending, such as home loans, personal loans, small business credit, is assessed regularly on a

collective basis, and each portfolio is monitored with regards to credit risk and quality.

In assessing the risk of corporate groups, the following criteria are also considered for risk assessment

purposes:

• external risk ratings;

• the credit risk of the various group companies;

• the regulatory limitations on major risks, the scale of these in relation to equity and weighting of

these risks for Banif's solvency ratio.

The risk assessment units also participate on a daily basis, through their managers, and up to the limits

established in the credit rules, in decision making processes in conjunction with the different business

areas.

Also with regards to credit risk, once operations have been contracted, there is regular and periodic

follow-up, in particular with regards to the renewal of credit lines and the particular terms involved.

Monitoring of credit risk

Credit risk is monitored by following through and controlling the evolution of exposure to credit risk on

the portfolios and in implementing mitigation measures designed to preserve the credit quality and the

pre-defined risk limits.

In 2008, Banif started working on a project to update the existing alert signals. This initiative is based on

a Group project for recovery of overdue credit, and has involved developing a set of tools in order to

achieve improvements in the preventive management of default and respective recovery.

Credit risk is monitored through regular preparation of indicators for credit quality and for the quality of

the respective segmented portfolios, with assessment of the effectiveness of the policies in place, risk-

adjusted returns and application of corrective measures where necessary.

Market Risk

Market risk is understood as the probability of the occurrence of negative impacts on results or capital,

due to unfavourable movements in the market price of instruments in the trading book, caused by

fluctuations in interest rates, exchange rates, listed share prices or commodity prices.

Management of Banif’s market risk is considered as prudent and is monitored on an ongoing basis. The

limits for involvement in markets are systematically reviewed by management and adjusted when

necessary. Decisions are taken on the basis of procedural and internal control rules and of the standards

issued by the regulatory authority.

Management of market risk

Banif’s market risk management policy consists of hedging risk on more volatile assets, in particular on

fixed rate products and on the exchange rate operations contracted with customers. Positions recorded in

Banif’s trading book include foreign exchange, fixed rate and floating rate risks where the respective

fluctuations are entered in the accounts at market prices.

Interest rate sensitivity analysis are conducted periodically, using scenarios to measure the impact of rate

variations on interest rate margins and capital, in keeping with the recommendations of the supervisory

authority.

Interest rate sensitivity analysis

The purposes of interest rate sensitivity analysis is to assess Banif's exposure to this risk and infer its

capacity to absorb adverse variations in the rates to which it is exposed.

- 95 -

Interest rate risk is systematically analysed in accordance with the repricing periods for assets and

liabities; in 2008, this risk was kept within the limits approved by the authorities.

The Bank conducts sensitivity analyses of interest rates, at regular intervals, measuring their impact, in

various scenarios, on the margin and on equity, in accordance with the recommendations of the regulatory

bodies.

Exchange rate sensitivity analysis

Foreign exchange rate risk represents the risk that the value of financial instruments expressed in a

foreign currency may present fluctuations due to changes in the exchange rate. Banif monitors its

exposure to exchange rate risk through daily control of overall exposure through positions in different

currencies, and adopts overall hedging strategies to assure that these positions are kept within limits

defined by the regulatory authorities.

Price risk sensitivity analysis

Price risk is not very relevant in the context of Banif's overall activities, so sensitivity analysis is not

conducted. In view of the relative unimportance, Banif makes use of the Bank of Portugal regulations (cf.

Decree-Law 103/2007) which allow capital requirements relating to the trading book to be calculated in

accordance with capital requirements for credit risk, if all the following conditions are met: (i) trading

book activity normally accounts for no more than 5 per cent. of total operations; (ii) total exposure on the

trading book is normally less than 15 million euros; and (iii) trading book activities account for no more

than 6 per cent. of total trading and a sum of no more than 20 million euros.

Liquidity Risk

Liquidity risk is defined as the probability of the occurrence of negative impacts on results or capital

resulting from the institution’s inability, especially in the short term, to dispose of liquid funds to honour

its financial obligations, as and when they mature. This risk is managed centrally for the Banif Financial

Group as a whole.

Management of liquidity risk

Current and structural liquidity are managed in line with the value and timing of commitments accepted

and funds obtained, by identifying liquidity gaps. The policies for obtaining funding from customers, on

the one hand, and from the financial market and the European Central bank, on the other, have assured the

stability of funds, despite the widespread reduction in liquidity levels in the financial system, and both the

liquidity gap and the cumulative gap have stayed within acceptable limits defined for the different

periods.

The volatility of the markets in 2008 required closer monitoring of the current liquidity situation, not only

because of the indicators contained in the measures issued by the Bank of Portugal, but also because of

internal indicators geared to efficient day-to-day management.

Analysis of liquidity risk

Stress tests were conducted for liquidity risk. The magnitude of the impacts simulated allowed the Group

to conclude that exposure to this risk is acceptable in view of the current macro-economic environment.

As part of current liquidity management, Banif’s short-term funding plan has involved regular

quantitative and qualitative analyses and stress tests which have made it possible to identify weak points

and to plan measures to be taken, as set out in a contingency plan, with a view to restoring liquidity

whenever deemed necessary.

Considering Banif's interest in improving working methods for developing the measurement and

management of the various balance sheet risks, a project was launched in 2008 for development of an

ALM (Asset and Liability Management) Model, which will allow for an effective improvement in this

field at Banif.

- 96 -

Operating Risk

Operating risk is the risk of losses resulting from the inadequacy of shortcomings of procedures,

personnel or internal systems, or from external events, including legal risks.

Banif’s operating risk is managed and monitored by a special dedicated team for this purpose. This team

is equipped with the working resources needed for managing operating risks, namely a technological

solution for operating risk management, adapted to the structure of Banif, permitting the collection,

processing and management of events and losses of this type.

Information on operating risks and on how to mitigate them is provided throughout Banif's structure by

the Operating Risk Managers, placed in most of Banif's central and sales divisions, who take part

regularly in the reporting of critical events.

Other information sources were prepared to transmit information of relevance to operating risk, including

information from the Customers Complaints Office, the Audit, Accounts and Organizational (internal

processes) divisions.

Work continues on implementing the interface between the operating risk software and other software

with information of relevance to measuring operating risk, thereby extending the range of sources for risk

management.

Analysis of the main Financial Indicators

The financial statements of Banif for the financial years of 2008 and 2007 have been drawn up in

accordance with the Adjusted Accounting Standards (AAS), under the terms of Bank of Portugal Notice

no. 1/2005. The AAS are based on the International Financial Reporting Standards (IAS/IFRS), as

adopted from time to time by Regulation of the European Union, with the following exceptions:

• Valuation and provisions for lending, given that the Bank of Portugal has maintained the

requirement for the constitution of regulatory provisions under the terms of Notice 3/95;

• Employee benefits, where there is a period for deferral of the impacts of transition to IAS/IFRS;

• The fair value option for valuation of tangible assets is eliminated, and these assets are to be kept

at historical cost.

Income Statement

Despite the adverse market conditions, both in Portugal and internationally, due to the unprecedented

crisis which broke out in 2008, leading to widespread scarcity of funding, due to the extreme volatility of

the markets, Banif has recorded positive performance, as reflected by the increase in operating revenue.

Operating revenue, which is composed by the financial margin, profits on financial operations,

commissions and other net income, grew by 4.0 per cent., standing at 239.7 million euros, despite the

overall poor performance of financial operations.

The financial margin, which includes dividend income, grew by 10 per cent. over the previous year, at

172.8 million euros, reflecting the impact of significant growth in lending, despite the continuous

reduction in the total financial brokerage margin (margin on the lending portfolio plus the portfolio of no-

balance sheet customer deposits), which, from year-end 2007 to year-end 2008, decreased 0.28 per cent.

from 2.91 per cent. to 2.63 per cent..

Profits on financial operations decreased by 12.4 million euros when compared with 2007, with an overall

loss of 5.4 million euros in 2008. This was due to the difficult environment in the financial markets and to

the fact that significant gains were recorded in 2007 on the disposal by Banif – SGPS, S.A. of the holding

in Cabo TV Madeirense, which was recorded under ―Available for Sale Financial Assets‖.

Other net income, which includes commissions on services and reimbursement of expenses, increased by

9 per cent. in 2008 reaching 72.3 million euros, due to the efficient provision of services and the

expansion of the customer base, with improving levels of loyalty.

- 97 -

Reflecting the organisational growth of Banif, transformation costs (personnel expense, overheads and

depreciation) stood at 169.3 million euros, up by 17.7 per cent. when compared with 2007.

Personnel costs totalled 87.3 million euros, representing a growth of 16.1 per cent. over the previous year,

due to expansion of the workforce with 166 new employees, making a total of 2,162 employees at the end

of 2008, and to payment of an extra month’s salary to mark the Group’s 20th

anniversary.

Overheads also climbed by 20.7 per cent. when compared to 2007, to a total of 71.9 million euros,

particularly due to the costs incurred in expanding the branch network (51 new branches were opened in

2008), to the advertising costs relating essentially to the Group’s new image (at the start of the year) and

also a number of technological projects and other relating to control of business risks.

Depreciation grew by 11.6 per cent. during 2008, due to the investment in expanding the branch network.

As a result of the heavy capital expenditure in 2008, the cost to income ratio rose by 8.2 percentage points

when compared with 2007, up from 62.42 per cent. at year-end 2007 to 70.62 per cent. at the end of 2008.

Operating cash flow stood at 80.5 million euros at the end of 2008, down by 15.8 per cent. when

compared with the figure recorded in 2007.

Net provisions and impairment calculated on an IAS/IFRS basis, totalled 42.7 million euros in 2008, up

by 19.7 million euros, reflecting the impact of the worsening economic situation at Portugal and abroad,

requiring a policy of increased prudence in assessing certain coefficients in the collective analysis of

credit impairment.

As a result, the net profits after tax of Banif totalled 23.6 million euros, on an IAS/IFRS basis, down by

50.4 per cent. when compared with the figure of 47.6 million euros in 2007.

Balance Sheet

Reflecting the strategy implemented in recent years, Banif’s business operations in 2008 presented the

following indicators:

• Growth in Banif's assets of 22.7 per cent.;

• Increase of 20.7 per cent. in the lending portfolio, including the balance for securitisation

operations; and

• Growth in on-balance sheet customer deposits of 20.6 per cent.

The balance sheet shows growth in assets, which stood at 9,542.3 million euros at the end of 2008, up by

22.7 per cent. on 2007.

"Loans and advances to customers" stood at a gross figure of 7,836.6 million euros, representing a growth

of 20.7 per cent. when compared with that recorded in 2007. This was achieved thanks to growth of 22.9

per cent. in mortgage lending, which at year-end 2008 accounted for 71.2 per cent. of lending to private

customers, and expansion of 33.5 per cent. in lending to corporate customers, which represented 55.0 per

cent. of total lending in gross terms in 2008.

- 98 -

Comparative Analysis in accordance with Adjusted Accounting Standards (AAS) under the terms of Bank

of Portugal Notice no. 1/2005:

Period ended 31 December 2008

2008 2007 Variation

(Million euros) per cent.

Private Clients ....................................................................................................... 3,073.4 2,972.5 3.4

Home Loans ........................................................................................................ 2,189.0 1,781.6 22.9

of which securitized............................................................................................. 1,163.6 256.7 353.3

Other ................................................................................................................... 884.4 1,190.9 (25.7)

Corporate .............................................................................................................. 4,313.8 3,230.8 33.5

Lending ............................................................................................................... 1,620.0 1,183.1 37.0

Commercial Paper ............................................................................................... 1,940.0 1,468.7 32.1 Other ................................................................................................................... 753.0 579.0 30.1

Others .................................................................................................................... 449.5 289.7 55.2

Total Gross Loans and Advances ........................................................................ 7,836.8 6,493.8 20.7

Credit Impairment ................................................................................................... (198.5) (161.1) 23.2

Total Net Lending ................................................................................................. 7,638.3 6,332.7 20.6

Due to the difficult economic environment, Banif remained highly selective in lending to lower risk

customers and has carefully monitored credit risk in order to maintain its lending portfolio, as reflected in

a ratio of impairment to total lending of 2.53 per cent. (2.48 per cent. in December 2007) and a ratio of

defaulting credit to total lending of 1.80 per cent. (1.84 per cent. in December 2007).

The portfolio of financial assets at fair value through profit or loss grew by 116.8 million euros, due to

acquisition of resident issued securities with a value of 170.9 million euros, of which 141.6 million relates

to units in investment funds and 29.3 million euros to bonds.

Despite the current crisis conditions, which have hampered the normal workings of the market, Banif has

managed to maintain adequate liquidity levels.

2008 2007 Variation


Total ....................................................................................................................... 8,832 7,100 24.4

Deposits from Central Banks .................................................................................. 648 - -

Deposits from other banks ...................................................................................... 2,168 2,054 5.6

Customer deposits ................................................................................................... 5,707 4,733 20.6

Financial liabilities .................................................................................................. 40 76 (47.9)

Other subordinated liabilities .................................................................................. 270 238 13.5

The breakdown of funding shows an increase in deposits from central banks, which stood at 647.7 million

euros, due to refinancing operations through the Eurosystem (provision of liquidity by the European

Central Bank). Customer accounts and other loans (including liabilities represented by securities) stood at

5,706.5 million euros, up by 20.6 per cent. from the figure of 4,732.5 million euros recorded at year-end

2007. Customer deposits stood at 5,639.8 million euros, representing growth of 22.6 per cent. over the

end of 2007. This growth was due to an increase of 907.6 million euros in term deposits as a result of the

expanding network, expansion of the customer base and enhanced customer loyalty, as well as several

initiatives in 2008 geared towards bringing in funding through innovative products and competitive rates.

2008 2007 Variation


Customer Deposits ................................................................................................ 5,639.8 4,601.5 22.6

Sight .................................................................................................................... 1,269.3 1,016.0 24.9

Term .................................................................................................................... 4,272.0 3,364.4 27.0

Savings ................................................................................................................ 98.6 221.1 (55.4)

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In the course of 2008 Banif repaid three issues of medium term notes with a total value of 40.8 million,

each of which was repaid early at Banif’s option.

Also during 2008, Banif's contracted a subordinated loan totalling 15 million euros, provided by Banif

Finance, Ltd., issued subordinated bonds with a value of 25 million euros, and repaid bonds from the

2001/2011 issue of subordinated bonds, with a value of 8.6 million euros, resulting that the account for

other subordinated liabilities recorded an increase of 13.5 per cent., standing at 270.1 million euros.

Banif’s equity, on an IAS/IFRS basis, stood at 386.7 million euros at year-end 2008, up by 2.8 per cent.

on the figure recorded at the end of 2007, reflecting the increase in other reserves and retained earnings,

due to undistributed results from 2007.

The solvency ratio, in the IAS/IFRS accounts, and calculated using the Basel Core Criteria, stood at 9.65

per cent. at the end of 2008 (10.58 per cent. at year-end 2007), whilst the Tier 1 ratio stood at 5.78 per

cent. (6.36 per cent. in December 2007). For the same period, this ratio, calculated on a consolidated basis

for Banif and Banif Finance Ltd., a company controlled by Banif and for the purpose of issuing debt,

stood at 11.83 per cent. (13.29 per cent. in December 2007) on the basis of IAS/IFRS accounts, whilst the

Tier 1 ratio stood at 7.85 per cent. (7.70 per cent. in December 2007).

In 2008, and as a result of the net profit recorded by Banif on an IAS/IFRS basis, of 23.5 million euros,

and of the increase in the equity base, ROE stood at 6.18 per cent. (14.0 per cent. in 2007) and ROA at

0.27 per cent. (0.66 per cent. in 2007), both calculated using average values for equity and assets.

Interim period ended 30 September 2009

The following financial statements of Banif for the period ending 30 September 2009 have been drawn up

in accordance with the Adjusted Accounting Standards (AAS) under the terms of Bank of Portugal Notice

no. 1/2005:

Balance Sheet 30-09-2009 31-12-2008

Variation 31-12-2008

Pro Forma

Banif + BBCA

(Thousand euros) per cent. (Thousand euros)

Net Assets ........................................................................................................... 11,102,077 10,832,883 2.48 9,560,646

Loans and advances to customers ........................................................................ 9,547,351 9,220,566 3.54 7,641,224

Customers Deposits and other loans .................................................................... 6,517,090 6,656,429 (2.09) 5,639,799

Equity .................................................................................................................. 626,192 432,625 44.74 346,181

Income Statement 30-09-2009 30-09-2008 Variation 30-09-2008

Pro Forma

Banif + BBCA

(Thousand euros) per cent. (Thousand euros)

Financial Margin ................................................................................................. 142,683 150,763 (5.36) 120,795

Other Income ....................................................................................................... 78,735 62,620 25.73 54,571

Banking Revenue ................................................................................................ 221,418 213,383 3.77 175,366

Personnel Costs and Overheads (including depreciation) .......................................................................................................

(145,906) (146,170) (0.18) (121,169)

Provisions / Impairment ...................................................................................... (69,395) (56,380) 23.08 (49,197)

Pre-tax Profit ....................................................................................................... 6,117 10,833 (43.53) 5,000

Income Tax.......................................................................................................... (2,458) (1,724) 42.58 (573)

Net Profit ............................................................................................................. 3,659 9,109 (59.83) 4,427

Comparative Analysis, on an IAS/IFRS basis

For the purposes of analysing economic performance, for the sake of international comparability and also

to demonstrate the contribution that Banif makes to the Banif Financial Group, the Banif decided to use

accounting data in accordance with the International Financial Reporting Standards (IAS/IFRS), the rules

adopted by Banif – SGPS, S.A., the Group’s parent company, in preparing and presenting its consolidated

financial statements.

- 100 -

To this end, Banif has prepared pro-forma financial statements, on an IAS/IFRS basis, and the respective

indicators. These statements are directly comparable in the periods in question (2008 and 2007) and

adequately reflect Banif’s contribution to the consolidated accounts of the Banif Financial Group. For

clarification purposes, the figures are not a pro-forma including Banif and BBCA.

Accordingly, on a IAS/IFRS basis, please find bellow a few financial highlights for 2008:

• Net profits of 23.6 million euros at 31 December 2008, down by 50.4 per cent. on 2007;

• Shareholders’ equity stood at 386.7 million euros, up by 2.8 per cent. over 2007; and

consequently,

• Return on Equity (ROE) stood at 6.18 per cent. as compared with 14 per cent. in 2007.

Balance Sheet 31-12-2008 31-12-2007 Variation

(Thousand euros)

(Thousand

euros) per cent.

Net Assets ..................................................................................... 9,542,302 7,776,292 1,766,010 22.7

Loans and advances to customers (gross) ..................................... 7,836,573 6,493,937 1,342,636 20.7

Customer deposits (including liabilities rep. by securities) ........... 5,706,539 4,732,506 974,033 20.6

Equity ........................................................................................... 386,729 376,107 10,622 2.8

Income Statement 31-12-2008 31-12-2007 Variation

(Thousand euros)

(Thousand

euros) per cent.

Financial Margin ........................................................................... 172,796 157,070 15,726 10.0

Profits on Financial Operations ..................................................... (5,407) 6,956 (12,363) (177.7)

Other Income ................................................................................ 72,354 66,390 5,964 9.0

Banking Revenues ........................................................................ 239.743 230,416 9,327 4.0

Administrative Costs ..................................................................... (159.212) (134,777) (24,435) 18.1

Cash-Flow ..................................................................................... 80,531 95,639 (15,108) (15.8)

Depreciation for the period ........................................................... (10,089) (9,044) (1,045) 11.6

Provisions / Impairment ................................................................ (42,739) (23,030) (19,709) 85.6

Pre-tax Profits ............................................................................... 27,703 63,565 (35,862) (56.4)

Tax ................................................................................................ (4,127) (15,997) 11,870 (74.2)

Profits for the period ..................................................................... 23,576 47,568 (23,992) (50.4)

Other Indicators 31-12-2008 31-12-2007 Variation

(Thousand

euros) per cent.

Credit Impairment/Total lending ................................................... 2.53% 2.48%

Pre-tax profits/Average net assets ................................................. 0.32% 0.88%

Banking revenues/Average net assets ........................................... 2.77% 3.19%

Pre-tax profits/Average equity ...................................................... 7.26% 18.71%

Cost-to-income ............................................................................. 70.62% 62.42%

Personnel costs/Banking revenues ................................................ 36.42% 32.64%

ROE (Return on Equity) ............................................................... 6.18% 14.00%

ROA (Return on Assets) ............................................................... 0.27% 0.66%

Solvency Ratio (Basel Core Criteria) ............................................ 9.65% 10.58%

Tier 1 (Basel Core Criteria) .......................................................... 5.78% 6.36%

Workforce ..................................................................................... 2,162 1,996 166 8.3

No. of Bank branches .................................................................... 279 228 51 22.4

Other Indicators as per Instruction 16/2004 of the Bank of

Portugal 31-12-2008 31-12-2007 Variation

(Thousand

euros) per cent.

Outstanding Credit/Total lending ................................................ 1.80% 1.84%

Net Outstanding Credit/Total net lending ................................... 0.57% 0.55%

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Provisions for Lending/Outstanding Credit ................................. 218.77% 237.80%

Solvency Ratio ............................................................................ 9.25% 10.18%

Core Tier 1 .................................................................................. 4.83% 5.60%

Capital and Shares

Banif is a public company with limited liability under Portuguese law, 100 per cent. owned by Banif

Comercial SGPS, S.A. (Banif - SGPS, S.A. has a 84.8 per cent. stake in Banif Comercial SGPS, S.A. and

Banif Investimentos SGPS, S.A. has the remaining 15.2 per cent.).

Banif's share capital as at 31 December 2008 comprises 58,000,000 shares with a nominal value of 5

euros each and is fully paid up. By the end of December 2008, the merger of Banco Banif e Comercial

dos Açores, S.A. with Banif was concluded and as a result the share capital of Banif was increased by a

total amount of 76,000,000 euros, from 290,000,000 euros to 366,000,000 euros. By the end of March

2009, the share capital of Banif was increased from 366,000,000 euros to 416,000,000 euros and in the

end of September 2009 the share capital of Banif was once again increased from 416,000,000 euros to

566,000,000 euros.

Banif's share capital as at 30 September 2009 comprises 113,200,000 shares with a nominal value of 5

euros each and is fully paid up.

The following table shows the unaudited capitalisation of Banif as at 30 September 2009:

30-09-2009

(Thousand euros)

Total Liabilities .................................................................................................................................................. 10,475,885

Short-term Liabilities ....................................................................................................................................... 7,859,326

Long-term Liabilities ........................................................................................................................................ 2,616,559

Stockholders' Equity .......................................................................................................................................... 626,192

Share Capital .................................................................................................................................................... 566,000

Issue premiums ................................................................................................................................................. 451

Other equity instruments .................................................................................................................................. -

(Treasury shares) .............................................................................................................................................. -

Revaluation reserves ......................................................................................................................................... 26

Other reserves and retained earnings ................................................................................................................ 56,056

Profit for the period .......................................................................................................................................... 3,659

(Interim dividends) ...................................................................................................................................................... -

Total Capitalisation ................................................................................................................................................... 11,102,077

Corporate Governance

Pursuant to the Corporate Governance Regulation, only companies which have their shares admitted to

trading in a regulated market must issue a statement regarding compliance with the corporate governance

regime set out in the Corporate Governance Regulation. Given the fact that Banif is not a company with

shares admitted to trading in a regulated market, there is no such requirement for Banif to comply with

such corporate governance regime and Banif does not comply with the Corporate Governance Regulation.

Indebtedness

In the course of 2008, Banif repaid three issues of medium term notes with a total value of 40.8 million,

from which 2 of them amount to 35 million euros, all repaid early at Banif’s option. Also during this year,

the Bank contracted a subordinated loan totalling 15 million euros, provided by Banif Finance, issued

subordinated bonds with a value of 25 million euros, and repaid bonds from the 2001/2011 issue of

subordinated bonds, with a value of 8.6 million euros, with the result that the account for Other

Subordinated Liabilities recorded an increase of 13.5 per cent., standing at 270.1 million euros.

During the first half of 2009, Banif repaid one issue of Cash Bonds – Banif SFE 2006-2009, with a value

of 7.5 million euros. As a result, the account for financial liabilities at fair value through profit or loss was

down by 26.4 million euros, standing at 20.0 million euros at the end of June 2009.

- 102 -

In April 2009, Banif issued guaranteed unsubordinated notes with the value of 500 million euros,

guaranteed by the Republic of Portugal in the terms set forth in Law no. 60-A/2008, of 20 October 2008

and in the Ministerial Order no. 1219-A/2008, of 23 October 2008.

Also during the first half of 2009, Banif issued subordinated notes in the amount of 100 million euros and

reimbursed two subordinated loans in the amount of 23.3 million euros, which were granted by Banif

Finance, Ltd. As a result, the account for other subordinated liabilities was up by 32.3 per cent. at 409.6

million euros by the end of June 2009.

In September 2009, Banif issued perpetual subordinated bonds in the amount of 20 million euros. At the

end of the period, subordinated liabilities amounted to 408.74 million euros.

Banif Financial Group

History and Organisation

Banif Financial Group was established in Madeira in January 1988, by incorporating the assets and

liabilities of Caixa Económica do Funchal, which was founded in 1897.

In the first three years of its existence, the Group focused on consolidating its position in Madeira and on

improving its financial condition. On the other hand, it also extended its business portfolio by establishing

a pension fund management company (SGM – Sociedade Gestora de Fundos de Pensões Mundial, S.A.),

a leasing company (Mundileasing – Sociedade de Locação Financeira, S.A.) and a consumer credit

company (Mundicre - Sociedade Financeira para Aquisições a Crédito, S.A.). In addition, the Group

established two asset management subsidiaries (incorporation of Banifundos – Sociedade Gestora de

Fundos de Investimento Mobiliário, S.A. and acquisition of Invesfreiras – Investimentos Imobiliários,

S.A.) and acquired a brokerage company (Ascor Dealer – Sociedade Financeira de Corretagem, S.A.) in

1994.

In 1993, the Group took the first steps towards international expansion with the founding of Banif -

Banco Internacional do Funchal (Cayman), Ltd., a wholly owned subsidiary in the Cayman Islands.

Banif Financial Group became the largest financial group in the Autonomous Region of the Azores when,

in 1996, it acquired a controlling interest in Banco Comercial dos Açores, S.A., the largest commercial

bank in Azores, and a controlling interest in an insurance company, Companhia de Seguros Açoreana,

S.A. ("CSA"). In 1997, the insurance business of the Group was strengthened with the acquisition of

another insurance company, Oceânica – Companhia de Seguros, S.A.. In September 1999, Oceânica –

Companhia de Seguros, S.A. was merged with CSA and in the 1st quarter of 2000, CSA acquired another

insurance company, O Trabalho – Companhia de Seguros, S.A., which was then merged with CSA in

December 2002.

In December 2007, CSA's business volume reached 536 million euros, which compares with a business

volume of 537 million euros in December 2006. According to APS – Associação Portuguesa de

Seguradoras, CSA has a market share of 3.9 per cent., in both its life and non-life insurance businesses.

Banif is today a firmly established bank in the Portuguese financial sector, with a nationwide network of

branches. Banif offers a comprehensive range of products and services for both personal and corporate

clients and continues to be considered the market leader in Madeira, as well as being well established

with Portuguese residents in Venezuela, South Africa and Brazil.

In the Azores, Banco Comercial dos Açores, S.A. (since re-named Banco Banif e Comercial dos Açores,

S.A.) ("BBCA") has positioned itself as the "reference bank" for corporate and individuals, for domestic

and offshore investors and for the Regional Government of Azores. With a total of 52 branches and

corporate centers and 405 employees, BBCA was the second largest bank of the Banif Financial Group.

In order to strengthen its investment activity, the Banif Financial Group acquired, on 15 June 1999, a 51

per cent. stake in a Brazilian investment bank, Banco Primus, which has since been renamed Banco Banif

Primus. The Group became the sole shareholder of Banco Banif Primus on 13 February 2004. On 28

January 2005, Banco Banif Primus was renamed Banif – Banco Internacional do Funchal (Brasil), S.A.

and started acting as the Group's retail bank in Brazil. On 30 June 2005, the brokerage company Banif

Primus Corretora de Valores e Câmbio, S.A., 75 per cent. owned by Banco Banif Primus, was converted

- 103 -

into an investment bank named Banif Primus – Banco de Investimento, S.A. (75 per cent. owned by Banif

– Banco Internacional do Funchal (Brasil), S.A.).

In 2006, the above mentioned structure suffered significant changes. On 26 June 2006, Banif International

Holdings, Ltd increased the share capital of Banif – Banco Internacional do Funchal (Brasil), S.A.,

holding thereafter 10 per cent. of the bank. On 30 June 2006, aiming to separate investment banking

activities from retail banking activities, Banif Investimentos SGPS, S.A. acquired the participation of

Banif Comercial SGPS, S.A. in Banif Primus – Banco de Investimento, S.A.. On 2 October 2006, Banif

Primus – Banco de Investimento, S.A. was renamed Banif – Banco de Investimento (Brasil), S.A.. On

May 2008, Banif Investimentos SGPS, S.A., through its subsidiary company Banif Securities Holdings,

Ltd, acquired the remaining 25 per cent. stake in Banif – Banco de Investimento (Brasil), S.A. and

became its sole shareholder.

Today, Banif Financial Group has the control of a retail bank and an investment bank in Brazil (Banif –

Banco Internacional do Funchal (Brasil), S.A. and Banif – Banco de Investimento (Brasil), S.A.,

respectively), offering to its clients a full range of products and services.

In December 2000, the spin-off of the brokerage company of the Banif Financial Group (Ascor Dealer –

Sociedade Financeira de Corretagem, S.A.) led to the establishment of Banif – Banco de Investimento,

S.A.. The principal aim of Banif – Banco de Investimento, S.A. is to conduct the Group's investment

banking business, taking responsibility for corporate finance, capital markets, as well as asset

management and brokerage services, through its subsidiaries. This investment bank was incorporated

with a share capital of 20 million euros. Further to a share capital increase on November 2005, the current

share capital is 30 million euros. In December 2007, the net profit of 1.3 million euros, represented a

decrease of 79.5 per cent., when compared with December 2006.

In 2001, Banif Financial Group expanded its international presence by opening an office in Miami and

purchasing a securities broker dealer in New York.

In 2002, the company formally known as Banif – Banco Internacional do Funchal, S.A. was transformed

into Banif - SGPS, S.A. (the holding company of Banif Financial Group), and a new bank with the same

name "Banif – Banco Internacional do Funchal, S.A." was created by the transfer of the whole banking

activity of the former company.

In April 2003, the privatisation of the remaining 15 per cent. of Banco Comercial dos Açores, S.A.,

owned by the Regional Government of Azores, took place. As a result, Banif Financial Group took

control of 100 per cent. of the capital of Banco Comercial dos Açores, S.A.. On November 2007, Banco

Comercial dos Açores, S.A. was renamed Banco Banif e Comercial dos Açores, S.A.

With a view to extending the international business of the Banif Financial Group, a subsidiary bank,

Banif International Bank, Ltd, was opened in Nassau, Bahamas, on 21 June 2005, which enabled the

offering of the Group's banking products and services to its clients, mainly in America.

In May 2005, the Group reorganized its holdings by separating the banking and other financial service

activities of the Group from the insurance business. Banif - SGPS, S.A. sold its 100 per cent. stake in

Banif Seguros SGPS, S.A., the Group's insurance sub-holding group, and acquired 33.62 per cent. of the

capital of CSA. As a result, the Group now holds, directly and indirectly, 47.69 per cent. of the share

capital of CSA, down from the previous level of 66.38 per cent. The remaining 53.31 per cent. are

controlled by the largest shareholder of the Banif Financial Group, Mr. Horácio Roque, a Portuguese

businessman with diversified range of interests including hotels, tourism, real estate, tobacco, industry

and international trade through investments in Portugal, Brazil, Canada and South Africa.

The shares of Banif - SGPS, S.A. have been listed on the Stock Exchange since November 1992. Since

October 2007, the shares of Banif - SGPS, S.A. have been integrated on the NEXT 150 index of Euronext

Lisbon.

In the first quarter of 2007, Banif Financial Group increased its international presence, through

partnerships and acquisitions. In fact, Banif - SGPS, S.A. acquired 46 per cent. stake of Banco

Caboverdiano de Negócios, assuming the effective management control and established a retail bank in

Malta - Banif Bank (Malta), Plc., together with local partners.

- 104 -

Additionally, Banif Financial Group has entered the Spanish market, through the acquisition of significant

participation in two banks. With the acquisition of 33.32 per cent. of Banca Pueyo, the Group will be

entitled to participate in the management of Banco Puego through its Board of Directors. With the

acquisition of 27.5 per cent. of Bankpime, the Group has become its largest individual shareholder.

Through this acquisition, the Group will assure its presence in the asset management business in

Cataluña, where Bankpime manages a total of 443.9 million euros in investment funds.

In September 2007, a new company Banif Go, Instituição Financeira de Crédito, S.A. was created

resulting from the merger of Banif Crédito – Sociedade Financeira para Aquisições a Crédito, S.A. with

Banif Leasing, S.A.

In 2008, Banif Financial Group acquired a 25 per cent. stake of Banif – Banco de Investimento (Brasil),

S.A. and as a result, the Group now holds, directly and indirectly, 100 per cent. of its share capital.

Moreover, Banif - SGPS, S.A. also reinforced its presence in Banco Caboverdiano de Negócios’s share

capital, in which it reinforced its control percentage to 52 per cent.

Also in 2008, Banif Financial Group capitalised several companies of the Group, including Banif –

SGPS, S.A. which increased its share capital from 250 million euros to 350 million euros, Banif

Investimentos SGPS, S.A. from 8.75 million euros to 10 million euros, Banif – Banco de Investimento,

S.A. from 30 million euros to 40 million euros, Companhia de Seguros Açoreana, S.A., from 36.25

million euros to 57.25 million euros and Banif Bank (Malta) from 15 million euros to 25 million euros.

In December 2008, the merger of Banco Banif e Comercial dos Açores, S.A. with Banif was concluded,

with effect from 1 January 2009 onwards.

In September 2009, Banif – SGPS, S.A. acquired 100 per cent. of the share capital of Tecnicrédito SGPS,

S.A., a Portuguese group specialised in car and consumer finance and in October, Banif – SGPS, S.A.

increased its share capital from 350 million euros to 490 million euros.

Currently, the main business activities of Banif Financial Group are carried out through more than 40

companies in the following areas:

Banking

• Banif – Banco Internacional do Funchal, S.A.


• Banif - Banco Internacional do Funchal (Cayman), Ltd.

• Banca Pueyo, S.A.

• Banco Caboverdiano de Negócios, S.A.

• Banco de la Pequeña y Mediana Empresa, S.A. (Bankpime)

• Banif Bank (Malta), Ltd.


• Banif – Banco de Investimento, S.A.

• Banif – Banco de Investimento (Brasil), S.A.

Insurance


Leasing and Consumer Credit

• Banif Go, Instituição Financeira de Crédito, S.A.

• Banif Rent – Aluguer, Gestão e Comércio de Veículos Automóveis, S.A.

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Brokerage

• Banif Corretora de Valores e Câmbio, S.A. (brokerage in Brazil)

• Banif Securities, Inc. (brokerage in USA)

Asset Management

• Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliário, S.A.

(mutual fund management in Portugal)

• Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, S.A. (pension fund management

in Portugal)

• Banif International Asset Management, Ltd. (offshore wealth management)

• Banif Multifund, Ltd. (offshore mutual fund management)

• Banif Nitor Asset Management, S.A. (mutual fund management in Brazil)

Real Estate

• Banif Imobiliária, S.A.


Venture Capital

• Banif Capital - Sociedade de Capital de Risco, S.A.

• Centro Venture – Sociedade de Capital de Risco, S.A.

Trade Finance

• Banif Forfaiting Company, Ltd

• Banif Trading, Inc.

Other Activities

• Banifserv – Empresa de Serviços, Sistemas e Tecnologias de Informação, ACE (communication,

tecnhology and data processing)

• Inmobiliaria Vegas Altas (Spain)

• Banif Holding (Malta), Ltd.

• Numberone – SGPS, Lda.

• Banif Finance, Ltd. (issuer vehicle)

• Banif Financial Services, Inc. (personal services – Miami)

• Banif Finance (USA) Corp. (mortgage financing in USA)

• Finab – International Corporate Management Services, Ltd. (management services and company

formation)

• Banif (Brasil), Ltda (advisory services in Brazil)

• Econofinance, S.A. (financial portal in Brazil)

• Gamma – Sociedade de Titularização de Créditos, S.A. (securitisation vehicle)

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Banif Financial Group is strongly involved in "cross-selling" among its companies in order to better serve

clients' needs and take advantage of the relevant synergies.

The Group develops its activities in several countries including Portugal, Brazil, United Kingdom, United

States of America, Cayman, Bahamas, South Africa, Venezuela, Mexico, Argentina, Spain, Malta and

Cape Verde.

By September 2009, Banif Financial Group had approximately 4,727 employees and 576 "points of sale"

(including branches, business and corporate centers and representative offices abroad). The total of 576

points of sale includes 19 branches of Banco Caboverdiano de Negócios and 29 branches of Banco Mais.

This figure does not include 84 branches of Banca Pueyo and 23 branches of Bankpime.

In January 2003, ratings were assigned to Banif - Banco International do Funchal, S.A. by Moody's

(Baa1/P-2) and by Fitch Ratings (BBB+/F2). These ratings have been reconfirmed in December 2005

with a Stable outlook. In April 2007, with the implementation of the Joint Default Analysis Methodology,

recently developed by Moody's, Banif was upgraded by two notches, being assigned a A2/P-1 by

Moody's. In April 2009 Moody’s downgraded Banif’s rating to Baa1/P-2.

In 2008, Banif was included on The S&P Global Challengers List™. This list identifies 300 mid-size

companies that show the highest growth characteristics along dimensions encompassing intrinsic and

extrinsic growth. These companies are expected to emerge as challengers to the world's leading

companies.

Shareholder Structure of Banif - SGPS, S.A.

Shareholder Structure of Banif – SGPS, S.A. (as at 20 October 2009) % Share Capital No. of Shares

Comendador Horácio da Silva Roque ........................................................................ 56.924% 278,929,518

Auto Industrial SGPS, S.A. ........................................................................................ 12.123% 59,405,000

In June 2003, Rentipar SGPS, S.A., currently Rentipar Financeira SGPS, S.A. (―Rentipar‖), a holding

company controlled by Mr Horácio Roque, entered into an agreement with Fundação Horácio Roque, for

the purchase of 799,793 shares representing 1.99 per cent. of Banif - SGPS, S.A. share capital. With the

purchase of the above mentioned shares, Rentipar's participation in Banif - SGPS, S.A. exceeded half of

the total voting rights, which, according to the Portuguese Securities Code, required the launch of a public

offer of acquisition of the remaining 19,914,668 shares in the market. This offer which was concluded on

9 October 2003, confirmed Mr Horácio Roque as the controlling shareholder of the Group.

In May 2005, Banif - SGPS, S.A. announced that it was going to proceed with a reorganisation of its

holdings, by separating the banking and other financial service activities of the Group from the insurance

one. This reorganisation was dictated by the adoption of the IAS/IFRS new rules, given the different risks

associated to those activities, assuring that the participation in Companhia de Seguros Açoreana, S.A. will

not bound the normal developments of the core business of the Group, the banking and financial services

activities.

Based on the decision of separating the banking and insurance activities, Banif - SGPS, S.A. sold to Soil

SGPS, S.A. ("Soil"), a company under the control of Rentipar Indústria SGPS, S.A. (99.9 per cent. owned

by Mr Horácio Roque), 100 per cent. of the capital of Banif Seguros, SGPS, S.A., which controls 52.31

per cent. of Companhia de Seguros Açoreana, S.A., for an amount of 44.6 million euros. In turn, Banif -

SGPS, S.A. acquired from Soil 33.62 per cent. of the capital of Companhia de Seguros Açoreana, S.A.,

for 28.3 million euros.

After the conclusion of these transactions, Banif - SGPS, S.A. owns, directly and indirectly, 47.69 per

cent. of the capital of Companhia de Seguros Açoreana, S.A., including the participation of 14.07 per

cent. now owned by Banif. After 11 November 2009, these participations in Companhia de Seguros

Açoreana, S.A. are held through an ―holding company‖ called Rentipar Seguros, SGPS, S.A. that controls

100 per cent. of the share capital of Companhia de Seguros Açoreana, S.A. and where Banif – SGPS, S.A.

controls the same 47.69 per cent. of the share capital.

This change allows Mr Horácio Roque, majority shareholder of Banif - SGPS, S.A., to keep the

shareholding control of Companhia de Seguros Açoreana, S.A. within his controlling scope, in order to

assure continuity of the Group’s current strategy in terms of distribution of the insurance products through

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the banking branch networks of the Banif Financial Group and the distribution of banking and financial

products through the networks of Companhia de Seguros Açoreana, S.A..

These transactions were subject to the previous authorisation of the Portuguese Supervisory Board for the

Insurance sector, Instituto de Seguros de Portugal.

On 26 June 2006, Banif - SGPS, S.A. increased its share capital by 50 million euros, from 200 million

euros to 250 million euros. This involved capitalisation of reserves worth 25 million euros, and cash

subscription for a further 25 million euros (5,000,000 shares with a nominal value of five euros at a price

of 14.00 euros per share), generating an issue premium totalling 45 million euros.

Once the share capital had been increased, Banif - SGPS, S.A. proceeded to alter the nominal value of its

shares, and on 26 October it split each of the former shares with a nominal value of 5 euros into five new

shares. As a result, the share capital of Banif - SGPS, S.A. was represented by 250 million shares each

with a nominal value of 1 euro.

Rentipar Financeira SGPS, S.A., a holding company controlled by Mr Horácio Roque, sold on 14

February 2007 25,000,000 shares in Banif - SGPS, S.A., representing 10 per cent. of the share capital and

voting rights of the company. With this transaction, Mr Horácio Roque became the holder, directly and

indirectly, of 62.33 per cent. of the share capital of Banif - SGPS, S.A.

On 27 June 2008, Banif - SGPS, S.A. increased its share capital by 100 million euros, from 250 million

euros to 350 million euros. This involved capitalisation of reserves worth 50 million euros, and cash

subscription for a further 50 million euros (50,000,000 shares with a nominal value of 1 euro at a price of

2.00 euros per share), generating an issue premium totalling 50 million euros. As a result of this capital

increase, the share capital of Banif - SGPS, S.A. became 350 million euros, represented by 350 million

shares each with a nominal value of 1.00 euro.

On 30 September 2009, Banif - SGPS, S.A. increased its share capital by 140 million euros, from 350

million euros to 490 million euros. This transaction was comprised of two tranches, one of 70 million

euros in exchange for Tecnicrédito SGPS, S.A. shares and a cash subscription for a further 70 million

euros. Following the share capital increase, Mr. Horácio Roque now holds, directly and indirectly 56,924

per cent. and Auto-Industrial, Investimentos e Participações, SGPS, S.A. (former shareholder of

Tecnicrédito SGPS, S.A.) nows holds 12.123 per cent. of Banif - SGPS, S.A.’s share capital.

Stock Market Evolution

Banif - SGPS, S.A.'s market capitalisation in 30 September 2009 was approximately 479.5 million euros

(1.37 euros per share and 350 million shares outstanding), compared with a capitalisation of 381.5 million

euros as of December 2008 (1.09 euros per share and 350 million shares outstanding).

Since 2000, Banif - SGPS, S.A.'s shares have been included in the BVL 30 Index (Euronext Lisbon

Index). Due to the termination of this index at the end of June 2002, Banif - SGPS, S.A. shares became

included in the "PSI Geral" Index.

On September 2007, the shares of Banif - SGPS, S.A. were integrated on NEXT 150 index of Euronext

Lisbon.

Analysis of the main Financial Indicators – Banif Financial Group (Banif – SGPS, S.A., consolidated

accounts)

The 2008 consolidated accounts of Banif - SGPS, SA, the holding company of the Banif Financial Group,

were drawn up under the International Financial Reporting Standards (IAS/IFRS), as adopted, from time

to time, by European Union Regulation. The following leading indicators may be highlighted:

• Consolidated profits stood at 59.2 million euros, representing a decline of 41.4 per cent., when

compared with the result recorded in 2007.

• ROE (Return on Equity) stood at 10.1 per cent., as against 19.3 per cent. in 2007, whilst ROA

(Return on Assets) stood at 0.5 per cent., as compared with 1.02 per cent. a year earlier.

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• Net assets, at 31 December 2008, totalled 12,876 million euros, representing growth of 19.7 per

cent. over year-end 2007.

• Loans and advances to customers totalled 10,410 million euros, up by 18.1 per cent. on the close

of 2007 and the ratio for ―Impairment of lending/Total lending‖ edged up from 2.23 per cent. to

2.44 per cent..

• At the end of 2008 the Group’s core capital permitted a Tier 1 ratio of 6.84 per cent., as against

5.89 per cent. one year earlier. Considering total equity, the solvency ratio at year-end was 9.22

per cent. (9.93 per cent. at 31 December 2007).

The following table provides further detail on the financial statements at 31 December 2008, together

with 2007 comparative data.


(Thousand euros) per cent.

Net Assets ........................................................................................................... 12,876,616 10,760,960 19.7

Lending (gross) ................................................................................................... 10,409,701 8,816,168 18.1

Customer Deposits (Less debt securities recorded under loans and accounts receivable) ............. 6,605,429 5,488,159 20,4

Total Customer Deposits (Includes Customer accounts and other loans, Debt securities in issue

and Other subordinated liabilities) .................................................................................... 8,223,863 7,388,027 11.3

Equity .................................................................................................................. 583,369 615,065 -5.2



Financial Margin (includes income from equity instruments) ............................................. 272,171 241,864 12.5

Profits on Financial Operations ........................................................................... 67,143 68,327 -1.7

Commissions and Fees ........................................................................................ 102,812 94,768 8.5

Other Income ....................................................................................................... 27,917 38,809 -28.1

Banking Revenue ................................................................................................ 470,043 443,768 5.9

Personnel Costs ................................................................................................... 162,606 136,323 19.3

Overheads ............................................................................................................ 134,239 105,470 27.3

Cash Flow ........................................................................................................... 173,199 201,975 -14.2

Depreciation ........................................................................................................ 31,285 26,750 17.0

Provisions / Impairment ...................................................................................... 63,257 32,108 97.0

Negative Goodwill .............................................................................................. 0 510 -100.0

Pre-tax Profits ...................................................................................................... 81.938 155.075 -47.2

Taxes ................................................................................................................... 15.175 38.271 -60.3

Minority Interests ................................................................................................ 7,526 15,720 -52.1

Net Profit ............................................................................................................. 59,237 101,084 -41.4

Other Indicators 31-12-2008 31-12-2007 Variation

per cent.

Personnel Costs/Operating Revenue .................................................................... 34,5% 30.3%

No of Branches (Banking only) ........................................................................... 324 270 20.0

No of Employees (EoP) ....................................................................................... 4,626 4,412 4.85

Financial margin, which includes earnings from securities, increased by 12.5 per cent. to 272.2 million

euros. This item benefitted from strong growth in lending, but was negatively affected by the reduction in

the total brokerage margin (margin on the lending portfolio added to the margin on the portfolio of on-

balance sheet customer deposits), which declined continuously over the year, from 2.91 per cent. in

December 2007 to 2.63 per cent. in December 2008.

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Profits on financial operations fell by 1.7 per cent., totalling 67.1 million euros, benefitting from gains

realised on the disposal of financial holdings in Brazil, but brought down by losses associated with write-

downs on the Banif Financial Group’s trading and investment portfolios.

Fee and commission income rose was up by 8.5 per cent. at 102.8 million euros. Growth in this item was

also supported by expansion in the Group’s commercial operations, but in part hampered by the

continuing crisis in the main international financial markets, which led to a reduction in activity in

investment banking and asset management business.

Other income (net), fell from 28.1 per cent., to 27.9 million euros. This reduction can be explained in part

by gains realized on tangible assets in 2007 and a significant reduction in income in 2008 for the same

reasons as described above.

Despite the worsening economic situation, the Banif Financial Groups recording banking revenues of 470

million euros in 2008, corresponding to an increase of 5.9 per cent. over the previous period, when this

figure has stood at 443.8 million euros; this was achieved thanks to expansion in business and

development of customer relations.

Operating costs, which include overheads and personnel costs, stood at 296.8 million euros, up by 22.8

per cent. on the financial year of 2007, due to the following factors: (i) expansion of the distribution

networks in Portugal, Cape Verde, Brazil and Malta, (ii) the costs of the rebranding of the Banif Financial

Group, and associated publicity costs, (iii) the commemorations for the 20th anniversary of the Group,

including a special bonus for employees, (iv) the merger of Banco Banif e Comercial dos Açores, S.A.

into Banif, with preparations taking place for practically the entire length of the year, involving a team of

more than 200 employees and more than 110 sub-projects – legal, organisational and IT, and (v) the cost

of modernising the technological infrastructure, and also the control models for risk assessment. The

direct costs of rebranding and the Group’s 20th

anniversary were in excess of 13 million euros.

Banif Financial Group recorded consolidated operating cash flow of 173.2 million euros, down by 14.2

per cent. on the previous year.

In 2008, the Cost to Income ratio (Operating costs + Depreciation / Banking Revenues) increased from

57.5 per cent. in 2007, to 68.9 per cent., as a result of investment in expansion of branch networks and

other substantial costs relating to the situations described above.

Net provisions and impairment for the period were up by 97.0 per cent., at 63.3 million euros, due to the

worsening of the economic situation at Portugal and abroad, which also required a policy of increased

prudence in assessment of certain coefficients in the collective analysis of credit impairment.

Banif - SGPS, SA, the holding company of the Banif Financial Group recorded consolidated profits in

2008 of 59.2 million euros, representing a reduction, as explained above, of 41.4 per cent. in relation to

the previous year.

Considering only the recurrent results in the period in question, the reduction in net profits from 2007 to

2008 is 45.25 per cent., with consolidated net profits falling from 73.6 million euros in 2007 to 40.3

million euros in 2008. This decrease reflects lower profits from insurance business and from investment

banking, in terms of commissions and trading operations, and especially, as regards commercial banking,

the reduction in the financial brokerage margin, increased provisions for impairment of lending and the

costs involved in expanding sales networks and capital expenditure on technological infrastructures.

Recurrent results evolved as follows in each of the Group’s main business areas:

(a) Commercial banking, with net recurrent profits of 50.4 million euros in 2008, as against 66.3

million euros in 2007 (-24.0 per cent.);

(b) Investment banking, with net recurrent profits of 3.0 million euros in 2008, as against 12.7

million euros in 2007 (-76.3 per cent.);

(c) Insurance, with a contribution to recurrent consolidated profits of 1.5 million euros in 2008, as

against 7.7 million euros in 2007 (-80.8 per cent.);

- 110 -

(d) Impact of the consolidation of Group holdings, with a negative contribution of -14.6 million

euros in 2008, as against -13.3 million euros in 2007 (-10.5 per cent.).

Interim period ended 30 September 2009



Net Assets ........................................................................................................... 14,394,219 12,876,616 11.79

Loans and advances to customers ........................................................................ 11,374,572 10,336,949 10.04

Customer deposits and other loans 6,794,551 6,514,863 4.29

Total Equity ......................................................................................................... 1,168,816 862,770 11.79



Net interest income .............................................................................................. 196,564 195,968 0.30

Other Income ....................................................................................................... 160,536 158,043 1.58

Operating Revenue .............................................................................................. 357,100 354,011 0.87

Administrative costs (personnel and overheads) ................................................. (205,064) (210,440) (2.55)

Depreciation in the period ................................................................................... (25,487) (22,207) 14.77

Provisions / Impairment ...................................................................................... (98,460) (46,855) 110.14

Negative Cons. Differences & Income from associates and joint ventures

(equity method) ..................................................................................................

28,173 4,505 525.37

Profits before Tax ................................................................................................ 56,262 79,014 (28.79)

Income Tax.......................................................................................................... (7,046) (23,196) (69.62)

Profit before Tax and before Minority Interest .................................................... 49,216 55,818 (11.83)

Minority Interest .................................................................................................. (8,294) (5,738) 44.55

Consolidated Net Profit for the period ................................................................. 40,922 50,080 (18.29)

The following table shows the unaudited capitalisation of Banif - SGPS, S.A. as at 30 September 2009

30-09- 2009

(Thousand euros)

Total Liabilities 13,225,403

Short-term liabilities .................................................................................................................................... 8,777,656

Long-term liabilities..................................................................................................................................... 4,447,747

Total Stockholders' Equity 1,168,816

Share Capital ................................................................................................................................................ 490,000

Issue Premiums ............................................................................................................................................ 104,114

Other equity instruments .............................................................................................................................. 95,900

Revaluation reserves .................................................................................................................................... (12,759)

Other reserves and retained earnings ............................................................................................................ 186,361 (Treasury Shares) ........................................................................................................................................ (1,035)

Profit for the Period ..................................................................................................................................... 40,922 Interim dividends ......................................................................................................................................... -

Minority Interests ........................................................................................................................................ 265,313

Total Capitalisation .......................................................................................................................................... 14,394,219


Banif - SGPS, S.A., complies with the Corporate Governance rules as set forth in Regulation 1/2007 of

the Securities Market Commission ("CMVM") and article 245-A of the Securities Code. The Company is

not subject to any specific corporate governance codes or codes of conduct with which it has voluntarily

undertaken to comply.

- 111 -

Banif - SGPS, S.A. controls two other holding companies: Banif Comercial SGPS, S.A. and Banif

Investimentos SGPS, S.A., which operate essentially as sub-holdings for commercial banking and for

investment banking and international operations, respectively.

The Board of Directors of Banif - SGPS, S.A. includes members of the Board of Directors of the main

Group companies, from the two business areas referred to above; this assures coordination and centralised

management of the companies making up the Banif Financial Group.

In 2007, to adjust the Group’s governance model to enable it to respond to the new challenges of business

growth and development, the directors of Banif – SGPS, S.A. have reviewed and redesigned the

allocation of responsibilities and management procedures within the Group, with a view to effective and

efficient coordination of its business portfolio.

The process of restructuring the Banif Financial Group’s corporate governance model took place over

much of 2007 and was based on assessment of the performance of the existing model, analysis of best

practice in the governance and senior management of comparable financial institutions and on a set of six

key principles for the Group:

• Creation of ideal conditions for sustained development of the Group in line with the approved

strategic goals: strong growth and risk control;

• Maintenance of the autonomy and flexibility of the business units, and their capacity for

innovation, assigning them to the responsibility of professional managers;

• A stronger role for the executive chairman of the Group, supporting this role with the solutions

needed in the light of the growth and increasing complexity of the business portfolio;

• Equiping the holding company with its own structure with the skills and size needed to provide

essential support for the Group;

• Alignment of the model with the recommendations of the capital markets and codes of good

conduct, reinforcing a Group image of transparency, rigour and risk control; and

• Improved capacity to exploit revenue and cost synergies, through cross-sector procedures.

With a view to these desired aims, a Governance Model has been designed with the following features:

(i) The Board of Directors of Banif - SGPS, S.A. remains the Group’s sole executive body, with a

more hands-on model of business supervision, and more structured organisation and internal

procedure;

(ii) The Board of Directors of Banif – SGPS, S.A. will be supported by a corporate centre,

comprising ten areas of responsibility with a light structure but high standard of expertise, each

area reporting to a member of the Board of Directors.

(iii) The work of the corporate centres will also be coordinated by three cross-sector committees

responsible for key issues relating to the Group’s competitiveness and risk management;

(iv) Effective implementation of a new governance model will mean a new model for the relationship

between the holding company and the business units.

The committees constitute the means for promoting coordination between the Group’s business units (and

its component companies). The committees are more formally organised, working on the basis of rules of

procedure, activities plans and budgets approved by the Board of Directors of Banif, SGPS. Each

committee will be chaired by a member of the Board of Directors of Banif, SGPS. The committee

members will be directors and managers of the companies in the Group’s different business units, taking

part on the basis of consensus with the respective boards of directors and executive boards. The

committees will specifically produce proposals for initiatives and follow through their implementation;

they will also communicate the agreement adopted, to the boards of directors or executive boards of the

companies taking part, by circulating minutes. All initiatives are executed through the business units and

companies, and require internal hierarchical approval – in accordance with the applicable internal

decision-making models.

- 112 -

Regulations have been drawn up for the Board of Directors of Banif – SGPS, S.A., with a view to it

achieving maximum effectiveness as the executive body for the Group, covering all its responsibilities.

The main changes introduced by the regulations include:

• The Board’s responsibilities for managing the Group’s affairs are explicitly defined and are: (i) to

decide on the Group’s strategic options, in terms of business sectors and geographical expansion;

(ii) to establish the Group’s general policies (such as on compliance and human resources); (iii)

to define process which take place across the Group (such as planning, management control or

risk control); (iv) to establish the structure of the Group’s business units; (v) to assess the

business units’ strategic plans, operating plans and investment plans; (vi) to decide on the annual

and multi-annual objectives for the Group and the business units; (vii) to decide on measures

significantly affecting business units (for instance, extension or reduction of business, mergers,

acquisitions, strategic partnerships or share issues).

• Formal distribution of responsibilities between directors, facilitated by assignment of

responsibility for corporate functions cross sector committees.

• Formalisation of the procedural rules for the Board of Directors, requiring an annual plan of

activities, rules for notice of meetings, preparation and participation in meetings and also rules on

communication and implementation of resolutions.

At the same time, a substantial package of measures was launched with the aim of aligning different

aspects of the Group’s governance model with best practices and recommendations in Portugal and

internationally. These include measures for compliance with best practice and CMVM recommendations.

The aims of these measures are to increase the provision of information to the market, to encourage

participation in general meetings, to provide better conditions for the work of the Audit Board and to

adopt a policy for notification of irregularities. It were also adopted measure aiming to the clarification of

the responsibilities of the Company Secretary of Banif - SGPS, SA.

In terms of the corporate governance model, work continued on the process which started in 2007 for

implementation of a corporate centre, comprising corporate functions and corporate committees, which is

designed to equip Banif – SGPS, S.A., as the entity at the head of the Banif Financial Group, with a

structure with the expertise and size appropriate for conducting its corporate and commercial business in a

concerted manner across the entire group.

This led to implementation, in early 2008, of the Corporate Risk Function, whose main mission is to

advise the Board of Directors of Banif – SGPS, S.A. on integrated management of the risks involved in

the activities of the Banif Financial Group, in line with the requirements and recommendations of the

supervisory authorities, with a view to mitigating these risks and incorporating them into decision making

at all levels throughout the Group.

The essential purpose of this function is to monitor the various business risks to which the Group is

exposed, to design a risk policy blueprint for the entire Group and to promote and develop risk

management projects cutting across the Banif Financial Group.

In line with international recommendations from supervisory authorities and best practice in the industry,

the Group recognises the need to engage with Risk Management, both in terms of Processes and

Technologies, and at the level of People and Cultures. In the context of Banif Group Operations, this is a

relatively complex task, in view of the diversity of Group entities and the different geographical regions

in which the Group is established.

The Corporate Risk body has therefore been entrusted with the central thrust of implementing a risk

management framework in the Group. The first steps in this direction consisted of drawing up an

"Activities Plan" for implementing the function, including planning the material and human resources

required, as well as the activities and projects to be pursued in 2008, in order to achieve greater awareness

and improved control of risks within the Group.

Although only recently set up, the Corporate Risk unit has an experienced team, with the skills and

management tools needed to be able to achieve the goals set for them. Major steps were made on

structural projects such as those relating to Basle II Programme.

- 113 -

In terms of identification, assessment, monitoring and control of risks, the Group’s risk management

system operates in each of its entities, a similar work is conducted at corporate levels, aggregating risks

and essentially geared to control activities. In essence, this work is proportional to the scale, nature and

complexity of business activities, and is in line with the nature and magnitude of the risks which the

Group takes on or seeks to take on.

Special attention is paid to the following risks:

• Lending Risk

• Balance Sheet Structure Risk

• Liquidity Risk

• Operating Risk

• Market Risk

• Interest and Exchange Rate Risk

In keeping with best practice in corporate governance, the Board of Directors conducts regular

assessments of the company’s corporate governance model. In connection with this, as a result of the

structural evaluation conducted in 2007 with the help of an external consultant the governance model of

the Banif Financial Group was redesigned at the end of that period.

The governance model resulting from this process is based on five pillars:

• The Board of Directors of Banif – SGPS, S.A. remains the Group’s sole executive body, taking a

more hands-on approach to business supervision, and with more clearly structured organisational

support and procedures;

• The Banif Financial Group will take a number of steps to assure further alignment with best

practice and recommendations in the field of corporate governance;

• The Board of Directors of Banif – SGPS, S.A. will be supported by a corporate centre,

comprising nine areas of responsibility with a light structure but high standard of expertise, each

area reporting to a member of the Board of Directors;

• The work of the corporate centres will also be coordinated by four cross-sector committees

responsible for key issues relating to the Group’s competitiveness and risk management; and

• Effective implementation of a new governance model will mean a new model for the relationship

between the holding company and the business units.

The pillars of the new model are gradually have been implemented through initiatives taking in the

various aspects of Group governance.

With regard to the corporate centre, in addition to the gradual process of implementation of the corporate

functions, the Board of Directors identified the opportunity to carry the Group’s governance model

further and resolved, in July 2008, to include the corporate function of Health and Safety at Work.

Activities in the field of health and safety at work are geared to preventing occupational hazards and, as

such, reflect the Group’s concern with the well-being of its staff, their sense of motivation and

identification with the organisation’s values, and also with the physical safety of persons and property,

making it possible to assure adequate control of risks and continuous improvements in performance.

As part of the process of stepping up cross-group activities on key issues for competitiveness and risk

management, the Board of Directors also resolved to set up a Procurement Committee, whose mission is

to exploit cost synergies between the different companies in the Banif Financial Group, optimizing the

purchasing terms for goods and services and promoting standardisation and integration of procedures for

procurement activities, in line with best practice in this area.

In view of the current phase of implementation of the Group’s governance model and the developments

described above, the Board of Directors is confident that the framework in place for the governance of the

- 114 -

Banif Financial Group, whilst naturally subject to a process of evolution and continuing development, is

properly suited to the real circumstances of the Group.

Social Responsibility

Banif Financial Group is based on a model of corporate governance in which business is developed and

managed through personal advancement, the creation of wealth and reduction of environmental impacts.

Whilst it is undeniable that social, environmental and governance issues are critical to corporate

management affairs, contributing to business performance in the long term, the Group nonetheless

recognises the important role it can play in promoting the principles of sustainability, by incorporating

social and environmental aspects in the allocation of capital, in the different business sectors and markets

in which it operates.

The Group is aware of the distance which needs to be travelled in order to incorporate sustainability into

business management processes and into the services it offers to society at large, therefore it has taken its

social responsibilities seriously since the earliest days, regarding this as a key component of its mission

and strategy. This commitment is visible in various measures adopted, both internally and externally.

With the Workforce

At the internal level, the Group's employees are provided with a set of benefits and privileges designed to

promote a balance between personal and professional life. The Group's human resources policy also

recognises training as an important management tool for developing and furthering the skills of its

workforce, on an ongoing basis.

The combination of a youthful workforce with a policy of permanent contracts means that specific

ongoing training continues to be an effective management tool for upgrading human resources, through

training in new skills aligned with the Group's strategic values and guiding principles.

With the Community

The Group's social policy strategy has been reflected in its sponsorship of a range of social, arts and

sports events and organisations.

Each Group company has adopted measures to meet its social responsibilities in the communities in

which it operates, identifying priority stakeholders who have been the main focus of their activities over

recent years.

The challenge of new environmental responsibilities

In terms of internal environmental impact, deriving from the work carried out within the Group buildings,

investment has been made to minimise consumption of IT materials, such as toners and ink cartridges,

which are mostly disposed of through appropriate recycling processes. Improvements have also been

achieved in power and water consumption in certain Group companies. However, in order to establish

systematic measures for eco-efficient energy consumption, a joint methodology will be developed for

gathering environmental information from all Group companies.

Trends

Currently, Banif develops its activities in a growingly competitive environment, with tougher market

conditions, new supervision rules, increased funding costs and a deterioration of the loan portfolio credit

quality that results of the national and international economic crisis.

In the last three years, Banif has strongly focused on the broadening of its client base. In Portugal, Banif

has the objective of achieving a 5 per cent. market share, estimating that credit portfolio and deposits

from customers will grow at a stronger pace than the estimates for the market. Banif intends to continue

to expand its branches network, to increase the number of customers and the number of products sold to

each customer.

As to individual customers, Banif intends to increase the amount of funding obtained with this segment,

based on initiatives to enlarge and retain customers, including commercial initiatives, improvement of the

level and quality of services.

- 115 -

In the Corporate segment, Banif intends to reinforce its market share and results obtained in this segment.

Aiming to reduce operating costs, avoiding the duplication of functions and structures, in the end of 2008

the merger of Banif and Banco Banif e Comercial dos Açores, S.A. was concluded.

The current market conditions may bring risks to Banif, namely the compression of the financial margin

and a further deterioration of the loan portfolio credit quality. In order to overcome this situation, the

Bank is redefining its origination policies and pricing policies, reinforcing supervision mechanisms and

asset – liabilities management and diversification of funding sources.

In the future years, Banif intends to increase its client basis in order to reinforce its market share in

Portugal, also through an expansion of its branches.

The future development and the prospects of Banif – Banco Internacional do Funchal, S.A., Banif

Finance Ltd., Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira

Exterior (External Financial Branch) and Banif Financial Group substantially depend on Portuguese and

international economic development as well as the evolution of international capital markets.

Banif Finance Ltd. ("Banif Finance") Incorporation and Main Activities

Banif Finance is an exempted limited liability company registered and incorporated in the Cayman

Islands (acting under its laws) on 6 August 2003 for an unlimited duration and has its registered office at

the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-

1104, Cayman Islands (telephone number: + 1 345 949 8066). It is entered in the register maintained for

such purpose by the Registrar of Companies in the Cayman Islands under registration number 127987.

Main Activities

Banif Finance has unrestricted objects pursuant to Article 3 of its Amended and Restated Memorandum

and Articles of Association (as amended and restated on 30 June 2009). Banif Finance's sole business

activity is to participate in capital markets transactions to provide Group funding.

Capital and Shares

On 29 December 2008, Banif Finance issued 20,000 preference shares of Euro 0.01 par value each, at an

issue price of Euro 1,000 per share and an aggregate price of Euro 20,000,000 and 20,000 preference

shares of US$ (United States Dollars) 0.01 par value each, at an issue price of US$ 1,000 per share and an

aggregate price of Euro 20,000,000.

On 31 December 2008, Banif Finance issued 25,000 preference shares of Euro 0.01 par value each, at an

issue price of Euro 1,000 per share and an aggregate price of Euro 25,000,000.

On 30 June 2009, Banif Finance issued 10,000 preference shares of Euro 0.01 par value each, at an issue

price of Euro 1,000 per share and an aggregate price of Euro 10,000,000 and 15,000 preference shares of

US$ (United States Dollars) 0.01 par value each, at an issue price of US$ 1,000 per share and an

aggregate price of Euro 15,000,000.

The share capital of the Company is US$1,500 and €1,550 divided into 1,000 ordinary shares of a par

value of US$1.00 each, 155,000 preference shares of a par value of €0.01 each and 50,000 preference

shares of a par value of US$0.01 each. The issued ordinary share capital of Banif Finance is US$ 1,000.

Banif holds 100 per cent. of the issued ordinary shares of Banif Finance. Citivic Nominees Limited,

acting as registered holder for the issue of 130,000 Preference Shares, holds 63.41 per cent. of Banif

Finance Preference Shares and Citigroup Global Markets Deutschland AG & Co. KGaA, acting as

Registrar for the issue of 75,000 Preference Shares, holds 36.59 per cent. of Banif Finance Preference

Shares.

- 116 -

Main Financial Indicators



Net Assets ............................................................................................................... 1,183,293 1,354,054 (12.61)

Loan Portfolio ......................................................................................................... 1,137,343 1,147,997 (0.93)

Customer Funds ...................................................................................................... 816,784 1,031,023 (20.78)

Total Shareholders’ Equity ..................................................................................... 168,499 98,265 71.47



Financial Margin ..................................................................................................... 6,564 4,727 38.86 Dividend income ..................................................................................................... - - -

Other Income .......................................................................................................... 521 - -

Banking revenue ..................................................................................................... 7,085 4,727 49.88

Total Overheads (including depreciation) ............................................................... (194) (59) 228.81

Provisions / Impairment .......................................................................................... - - - Income Tax ............................................................................................................. - - -

Net Profit ................................................................................................................ 6,891 4,668 47.62



Net Assets ........................................................................................................... 908,006 1,183,293 (23.26)

Loan Portfolio ..................................................................................................... 799,965 1,137,343 (29.66)

Customer Funds................................................................................................... 552,722 816,784 (32.33)

Total Shareholders’ Equity .................................................................................. 208,755 168,499 23.89



Financial Margin ................................................................................................. 7,485 5,285 41.63

Dividend income ................................................................................................. - - -

Other Income ....................................................................................................... 21,360 - -

Banking revenue .................................................................................................. 28,845 5,285 445.79

Total Overheads (including depreciation) ........................................................... (54) (194) (72.16)

Provisions / Impairment ...................................................................................... - - -

Income Tax.......................................................................................................... - - -

Net Profit ............................................................................................................. 28,791 5,091 465.53

- 117 -

The following table shows the unaudited capitalisation of Banif Finance as at 30 September 2009:

30-09-2009

(Thousand euros)

Total Liabilities 699,251

Short Term Liabilities .................................................................................................................................... 1,054

Long Term Liabilities ..................................................................................................................................... 698,197

Total Stockholders' Equity .............................................................................................................................. 208,755

Share Capital .................................................................................................................................................. 3

Issue Premiums .............................................................................................................................................. 187,269

Reserves and Retained Earnings ..................................................................................................................... 99

Profit for the Period ........................................................................................................................................ 28,791

Interim Dividends ........................................................................................................................................... (7,407)

Total Capitalisation ......................................................................................................................................... 908,006

Investments

Banif Finance has not carried out any investments since the date of the last published financial statements.

Directors

The Directors of Banif Finance are:

• Joaquim Filipe Marques dos Santos (Chairman)

• Carlos David Duarte de Almeida (Managing Director)

• António Manuel Rocha Moreira (Managing Director)

The above Directors have their business address at the registered office of Banif.


To the knowledge of Banif Finance the above Directors and their private interests do not comprise any

potential conflicts of interest between any duties of Banif Finance.

Audit Committee

Banif Finance does not have an Internal Audit Committee.

Employees

Banif Finance has no employees.

Indebtedness

Banif Finance has issued five series of notes under the Programme, of which two are outstanding, in a

global amount of Euro 300,000,000 (November 2006) and Euro 300,000,000 (May 2007). Additionally,

Banif Finance has issued two series of Lower Tier II subordinated notes in a global amount of Euro

50,000,000 (December 2004) and Euro 50,000,000 (December 2006) and one series of Upper Tier II

subordinated notes in a global amount of Euro 125,000,000 (December 2006).

Financial Year

The financial year-end of Banif Finance is 31 December.

Accounts

Banif Finance prepares annual audited accounts. The first accounts were prepared in respect of the period

from 23 October 2003 to 31 December 2003.

- 118 -

No Material Adverse Change

Since the date of Banif Finance's incorporation (other than as set out above), there has been no material

adverse change, or any development reasonably likely to involve any material adverse change in the

condition, financial or otherwise, of Banif Finance.


There is no specific corporate governance regime in Cayman, save that the Directors of the Issuer are

required to observe their fiduciary duties of the Company, principally of good faith in the interests of the

Issuer, not acting for a collateral purpose and not to make a secret profit.

Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior

(External Financial Branch) ("Banif Madeira")

Establishment and Main Activities

Banif Madeira is a branch of Banif established in the Zona Franca da Madeira (the Madeira International

Business Centre) and as such benefits from a corporate tax exemption as experienced in the Taxation

Section, under the paragraph "Notes issued on guarantee by Banif Madeira" at page 125 of this

Prospectus. As a branch of Banif, Banif Madeira is not a separate legal entity from Banif and accordingly

Banif will be ultimately responsible for actions of Banif Madeira carried out by Banif Madeira's duly

authorized representatives.

Banif Madeira was established in Madeira on the 3 April 1989 (registered under number

00111/1990.09.21-CIPC-911005005) and acts under the laws of Portugal. Its registered office is at Rua

João Tavira, no. 30, 9004-509 Funchal, Madeira, Portugal and its registered telephone number is +351

291 222 162.

The object of Banif Madeira is the carrying out of international banking and finance operations with non-

residents of Portugal.

Representatives

The Representatives of Banif Madeira are:

• Horácio da Silva Roque

• Joaquim Filipe Marques dos Santos

• Carlos David Duarte de Almeida

• António Manuel Rocha Moreira

• José Marques de Almeida

• Joaquim Francisco Silva Pinto

• João Ramiro Arede Pereira Reis

• Vitorino Adriano de Sousa Gouveia

• Daniela Maria de Castro Fernandes Pereira Agostinho

The representatives are granted all powers for the management of Banif Madeira and Banif Madeira is

bound by the joint signature or joint act of two representatives.

Attorneys

The following are appointed as Attorneys of Banif Madeira:

• José António Machado de Andrade

- 119 -

• José Carlos de Oliveira Rôlo

• Marco António Figueira da Silva Noronha Jardim

• David Máximo Correia

• Daniela Maria de Castro Fernandes Pereira Agostinho

• João Ramiro Arede Pereira Reis

• Vitorino Adriano de Sousa Gouveia

The attorneys are authorised to manage and administer Banif Madeira upon specific powers granted by

the Representatives, and carrying out all acts necessary. Two attorneys signing jointly can bind Banif

Madeira.


To the knowledge of Banif Madeira the above Directors and their private interests do not comprise any

potential conflicts of interest between any duties of Banif Madeira.

Audit Committee

Banif Madeira does not have an internal Audit Committee.


Pursuant to the Corporate Governance Regulation, only companies which have its shares admitted to

trading in a regulated market must issue a statement regarding compliance with the corporate governance

regime set out in the Regulation. Given the fact that Banif Madeira is a full branch of Banif and Banif is

not a company with shares admitted to trading in a regulated market, there is no such requirement for

Banif Madeira to comply with such corporate governance regime.

Main Financial Indicators



Net Assets ........................................................................................................... 2,091,644 2,003,689 4.39

Loan Portfolio ..................................................................................................... 16,909 21,109 (19.90)

Customers' Funds ................................................................................................ 1,758,112 1,698,788 3.49





Net Profit on Financial Operations ...................................................................... (5) (882) (99.43)

Other Income ....................................................................................................... 597 541 (10.35)

Gross Margin ....................................................................................................... 7,142 2,275 (213.93)

Total Overheads (including depreciation)............................................................ (7) (2) (250.00)

Provisions / Impairment ...................................................................................... (1,347) (168) (701.79)

Income Tax.......................................................................................................... 0 0 -

Net Profit ............................................................................................................. 5,788 2,105 (174.96)



Net Assets ........................................................................................................... 1,957,930 2,091,644 (6.39)

- 120 -

Loan Portfolio ..................................................................................................... 13,565 16,909 (19.78)

Customers' Funds ................................................................................................ 1,400,694 1,758,112 (20.33)





Net Profit on Financial Operations ...................................................................... 165 (128) 228.9

Other Income ....................................................................................................... 479 300 (59.67)

Gross Margin ....................................................................................................... 13,905 3,432 305.16

Total Overheads (including depreciation)............................................................ (9) (5) 80.00

Provisions / Impairment ...................................................................................... (746) 65 (1,247.69)

Income Tax.......................................................................................................... 0 0 -

Net Profit ............................................................................................................. 11,468 2,070 454.00

The following table shows the unaudited capitalisation of Banif Madeira as at 30 September 2009:

30-09-2009

(Thousand euros)

Total Liabilities 1,917,569

Short Term Liabilities 1,193,564

Long Term Liabilities 724,005

Total Shareholders' Equity 40,361

Share Capital ................................................................................................................................................... 0

Issue Premiums ............................................................................................................................................... 0

Reserves and Retained Earnings ...................................................................................................................... 28,893

Profit for the Period ......................................................................................................................................... 11,468

Total Capitalisation .......................................................................................................................................... 1,957,930

- 121 -

TAXATION

The following is a general description of certain Cayman Islands, Portugal, Luxembourg and EU tax

considerations relating to the Notes. It does not purport to be a complete analysis of all tax considerations

relating to the Notes, whether in those countries or elsewhere. Prospective purchasers of Notes should

consult their own tax advisers as to which countries' tax laws could be relevant to acquiring, holding and

disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes

and the consequences of such actions under the tax laws of those countries. This summary is based upon

the law as in effect on the date of this Base Prospectus and is subject to any change in law that may take

effect after such date.

Cayman Islands

The following discussion of certain Cayman Islands tax consequences of an investment in the Notes is

based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a general summary

of present law, which is subject to prospective and retroactive change. It assumes that Banif Finance will

conduct its affairs in accordance with assumptions made by, and representations made to, counsel. It is

not intended as tax advice, does not consider any investor's particular circumstances, and does not

consider tax consequences other than those arising under Cayman Islands law.

Under existing Cayman Islands law:

(a) payments of principal and interest in respect of the Notes will not be subject to taxation in the

Cayman Islands and no withholding will be required on such payment to any Holder of a Note

and gains derived from the sale of Notes will not be subject to Cayman Islands income or

corporate tax. The Cayman Islands currently have no income, corporation or capital gains tax and

no estate duty, inheritance tax or gift tax; and

(b) the Holder of any Note (or the legal personal representative of such Holder) whose Note is

brought into the Cayman Islands may in certain circumstances be liable to pay stamp duty

imposed under the laws of the Cayman Islands in respect of such Note. In addition, an instrument

transferring title to a Note, if brought into or executed in the Cayman Islands, would be subject to

Cayman Islands stamp duty.

Banif Finance has been incorporated under the laws of the Cayman Islands as an exempted company and,

as such, has obtained an undertaking from the Governor In Cabinet of the Cayman Islands in the

following form:

The Tax Concessions Law

(1999 Revision)

Undertaking as to Tax Concessions

In accordance with Section 6 of the Tax Concessions Law (1999 Revision) the Governor In Cabinet

undertakes with Banif Finance Ltd. (the "Company"):

(a) that no law which is hereinafter enacted in the Islands imposing any tax to be levied on profits,

income, gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the

nature of estate duty or inheritance tax shall be payable

(i) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or in part of any relevant payment as defined in

Section 6(3) of the Tax Concessions Law (1999 Revision).

These concessions shall be for a period of twenty years from 19 August 2003.

- 122 -

Acting Governor in Cabinet.

Portugal

Notes issued by Banif

The following is a summary of the material Portuguese tax consequences with respect to the Notes. The

summary does not purport to be a comprehensive description of all the tax consequences that may be

relevant to any particular Noteholder, including tax considerations that arise from rules of general

application or that are generally assumed to be known to Noteholders. This discussion is based on

Portuguese law as it stands at the date of this Base Prospectus and is subject to any change in law that

may take effect after such date. Prospective investors in the Notes should consult their professional

advisers with respect to particular circumstances and the effects of state, local or foreign laws to which

they may be subject. Noteholders who are in doubt as to their tax position should consult their

professional advisers.

Economic benefits derived from interest, amortisation, reimbursement premiums and other types of

remuneration arising from the Notes are designated as investment income for Portuguese tax purposes.

Investment income on the Notes paid to a holder of Notes (who is the effective beneficiary thereof (the

"Beneficiary")) considered to be resident for tax purposes in the Portuguese territory or to a non-

Portuguese resident having a permanent establishment in the Portuguese territory to which the income is

imputable, is subject to withholding tax at a prima facie rate of 20 per cent. except where the Beneficiary

is either a Portuguese resident financial institution (or a non-resident financial institution having a

permanent establishment in the Portuguese territory to which the income is imputable) or benefits from a

reduction or a withholding tax exemption as specified by Portuguese tax law. In relation to Beneficiaries

that are corporate entities resident in the Portuguese territory (or non-residents having a permanent

establishment therein to which the income is imputable), withholding tax is treated as a payment in

advance and, therefore, such Beneficiaries are entitled to claim appropriate credit against their final

corporate income tax liability. In relation to Beneficiaries that are individuals resident in the Portuguese

territory, withholding tax shall be considered as final.

Investment income on the Notes paid to Beneficiaries considered as non-residents in the Portuguese

territory (and not having a permanent establishment therein to which the income is imputable) is also

subject to withholding tax at a flat rate of 20 per cent. This withholding tax rate may be reduced in

accordance with any applicable double taxation treaty entered into by the Republic of Portugal, subject to

compliance with certain procedures and certification requirements of the Portuguese tax authorities for

the purpose of verifying the non-resident status and eligibility for the respective tax treaty benefits.

Pursuant to Decree Law 193/2005 of 7 November (as amended from time to time) ("DL 193/2005"),

investment income paid to Noteholders in respect of debt securities registered with a centralised system

recognised by the Portuguese Securities Code, as well as capital gains resulting from a sale or other

disposal of such Notes, will be exempt from Portuguese income tax, provided that the following

requirements are met.

In order for the withholding tax exemption to apply in relation to the investment income derived on the

Notes, DL 193/2005 requires that the Noteholders are: (i) not resident in the Portuguese territory (nor

having any registered or deemed permanent establishment therein to which interest is imputable); (ii) not

resident in any of the territories included in the list of jurisdictions with a clearly more favourable tax

regime as set out in Portaria 150/2004 of 13 February, with the exception of central banks and

governmental agencies of those jurisdictions; and (iii) in the case of legal entities, provided that not more

than 20 per cent. of its share capital is held, directly or indirectly, by Portuguese resident entities.

In order for such tax exemption to apply in relation to capital gains in relation to the Notes, DL 193/2005

requires that: (i) such capital gains are realised by non-Portuguese resident entities having no permanent

establishment located in the Portuguese territory to which such capital gains are imputable; (ii) the non-

resident entities are not resident in any of the territories included in the list of jurisdictions with a clearly

more favourable tax regime as set out in Portaria 150/2004 of 13 February; and (iii) in the case of legal

entities, the share capital of any such non-resident entity is not held, directly or indirectly, in more than 20

per cent. by Portuguese residents, as required by Article 26 of the Portuguese Tax Benefits Statute.

- 123 -

For the purpose of application at source of this tax exemption regime, DL 193/2005 requires compliance

with certain procedures and certifications. Pursuant to these procedures (which are aimed at verifying the

non-resident status of the Noteholders), the Noteholder is required to hold the Notes through an account

with one of the following entities: (i) a direct register entity, which is an entity affiliated with the clearing

system recognised by the Portuguese Securities Code; (ii) an indirect register entity, which, although not

assuming the role of the direct register entities, is a client of the latter; or (iii) entities managing an

international clearing system, which are entities operating with the international market to clear and settle

securities transactions. For the purposes of this tax exemption, the Portuguese Government has

recognised each of Euroclear and Clearstream, Luxembourg as entities which manage an international

clearing system.

• Domestic Cleared Notes — held through a direct registering entity

For the purposes of DL 193/2005, direct registering entities are required to register the Noteholders in one

of two accounts: (i) an exempt account or (ii) a non-exempt account.

Registration of the Notes in an exempt account is crucial for the exemption to apply. For this purpose, the

registration of the non-resident Noteholder in an exempt account, allowing an upfront application of the

tax exemption, requires evidence of the non-resident status to be provided by the Noteholder to the direct

registering entity prior to or at the Income Payment Date (as defined below), as follows:

(a) if the Noteholder is a central bank, public institution, international body, credit or financial

institution, pension fund or insurance company, with its head office in any OECD country or in a

country with which the Republic of Portugal has entered into a double tax treaty, the Noteholder

will be required to prove its non-resident status by providing: (i) its tax identification; or (ii) a

certificate issued by the entity responsible for its supervision or registration, confirming the legal

existence of the Noteholder and its head office; or (iii) a declaration of tax residence issued by

the Noteholder itself, duly signed and authenticated, if the Noteholder is a central bank, a public

law entity taking part in the public administration (either central, regional or peripheral, indirect

or autonomous of the relevant country) or an international body; or (iv) evidence of non-

residency pursuant to the terms of paragraph (c) below;

(b) if the Noteholder is an investment fund or other collective investment scheme domiciled in any

OECD country or in a country with which the Republic of Portugal has entered into a double tax

treaty, it shall prove its non-resident status by providing any of the following documents: (i) a

declaration issued by the entity responsible for its supervision or registration or by the relevant

tax authority confirming its legal existence, domicile and law of incorporation; or (ii) evidence of

non-residency pursuant to the terms of paragraph (c) below;

(c) other investors will be required to provide evidence of their non-resident status by means of: (i) a

certificate of residency or equivalent document issued by the relevant tax authorities; (ii) a

document issued by the relevant Portuguese Consulate certifying its residency abroad; or (iii) a

document specifically issued by an official entity which forms part of the public administration

(either central, regional or peripheral, indirect or autonomous) of the relevant country. The

Noteholder must provide an original or a certified copy of such documents and, as a rule, if such

documents do not refer to a specific year and do not expire, they must have been issued within

the three years period prior to the relevant payment or maturity dates or, if issued after the

relevant payment or maturity dates, within the following three months.

"Income Payment Date" means any date on which the Noteholders are entitled to receive interest or

other investment income, either in the form of accrued interest or coupon.

• Internationally cleared Notes held through an entity managing an international clearing system

- 124 -

If the Notes are registered in an account with an international clearing system (either Euroclear or

Clearstream, Luxembourg) and the management entity of such international clearing system undertakes

not to provide registration services in respect of the Notes to (i) Portuguese tax residents that do not

benefit from either an exemption or waiver from Portuguese withholding tax, and (ii) non-resident entities

for tax purposes which do not benefit from the above Portuguese income tax exemption, the evidence

which is required in order for a Noteholder to benefit from the tax exemption will be made prior to or at

the Income Payment Date as follows:

(a) by means of the presentation of a certificate, on an annual basis, with the name of each beneficial

owner, address, tax payer number (if applicable), identification of the securities, amount of

securities held and the reference to the relevant legislation supporting the exemption or the

waiver from Portuguese withholding tax. The form of the certificate is set out in Annex 2 to this

"Taxation" section (which corresponds to the wording and contents of the form of certificate for

exemption from Portuguese withholding tax on income from debt securities which is set out in

Despacho (Order) 4980/2006 published in the Portuguese official diary, second series, no. 45, of

3 March 2006 and issued by the Portuguese Minister of Finance and Public Administration); or

(b) alternatively, by means of annual declaration stating that the beneficial owners are exempt or not

subject to withholding tax. This declaration must be complemented with a disclosure list, on each

coupon payment date, of each beneficial owner's identification setting out the name of each

beneficial owner, address, tax payer number (if applicable), identification of the securities,

amount of securities held and reference to the legislation supporting the exemption or the waiver

from Portuguese withholding tax. The form of the declaration is set out in Annex 3 to this

"Taxation" section (which corresponds to the wording and contents of the form of statement for

exemption from Portuguese withholding tax on income from debt securities which is set out in

Aviso (Regulatory Notice) 3714/2006 published in the Portuguese official diary, second series, no

59, of 23 March 2006 and issued by the Portuguese Secretary of State for Tax Affairs).

The two documents referred to in (i) or (ii) above, the forms of which are set out in Annexes 2 and 3,

must be provided by the participants (i.e. the entities that operate in the international clearing system) to

the direct registering entities through the international clearing system management entity and must take

into account the total accounts under their management relating to each Noteholder that is tax exempt or

benefits from the waiver from Portuguese withholding tax.

The delivery of the documents referred to in (i) or (ii) above, the forms of which are set out in Annexes 2

and 3, by the participants to the respective international clearing system management entities shall follow

the procedures that are from time to time applicable for this purpose by such international clearing system

management entities.

The international clearing system management entities shall inform the direct registering entity of the

income paid to each participant for each security payment.

No Portuguese withholding tax exemption shall be granted under DL 193/2005 if the requirements set

forth therein are not duly complied with and, consequently, the general Portuguese tax provisions shall

apply as described above. This will be the case whenever the Notes are not integrated in/cleared through

Interbolsa or in any other centralised depositary system for securities recognised under the Portuguese

Securities Code and complementary legislation.

Notes issued or guaranteed by Banif Madeira

The Madeira International Business Centre is a free trade zone, established as part of the taxation system

in the Republic of Portugal. Investment income paid by Banif Madeira benefits from a tax exemption

provided that Banif Madeira is financing its balance sheet liabilities and the Noteholders and

Couponholders, as beneficiaries of the income, are individuals or corporate entities resident, or with

registered offices, outside, and without permanent establishments located in, the Republic of Portugal

(with the exception of the Madeira International Business Centre). This exemption is not applicable when

the beneficiaries of the income are credit or financial institutions or financial branches located in the

Madeira International Business Centre, which carry out their activity with residents in the Republic of

Portugal's mainland or with permanent establishments of non-resident entities therein.

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Therefore, under current Portuguese law, investment income on the Notes paid by Banif Madeira is

exempt from taxation and consequently from withholding tax where the beneficiaries of the income are:

(a) individuals or entities operating within the Madeira International Business Centre which are not

credit institutions or financial companies or financial branches which carry out operations in the

scope of their activities with residents in the mainland of the Republic of Portugal or with

permanent establishments of non-resident entities in the mainland of the Republic of Portugal; or

(b) individuals not resident for tax purposes in the Republic of Portugal pursuant to section 16 of the

Portuguese Income Tax Code (Código do Imposto sobre o Rendimento de Pessoas Singulares) or

entities with registered offices outside the Republic of Portugal and without permanent

establishments located in the Republic of Portugal, or other entities whose registered office or

effective management is not located in the Republic of Portugal.

It should be noted that permanent establishments in the Republic of Portugal of entities with registered

offices outside the Republic of Portugal and companies and other entities with a registered office or

effective management located in the Republic of Portugal, are considered residents in the Republic of

Portugal and therefore do not benefit from the tax exemption set out in Article 33(6) of the Estatuto dos

Benefícios Fiscais (as amended from time to time) (the "Portuguese Tax Benefits Statute"). Under

Portuguese law, a permanent establishment is defined as a fixed installation through which an activity

(other than an activity of a preparatory or ancillary nature) of a commercial, industrial or agricultural

nature is carried on. A permanent establishment is also deemed to exist when a person other than an

independent agent acts within the territory of Portugal on behalf of a foreign enterprise and has, and

habitually exercises, the authority to negotiate and conclude contracts related to the activities of the

enterprise. In this situation a permanent establishment is not deemed to exist if a company operates in

Portugal through a commission agent, or any other type of independent agent, provided that such persons

are acting in the ordinary course of their business and bear the risk of the activity.

The aforementioned tax exemption, and the consequent withholding tax exemption, will apply to the

specified category of Noteholders and/or Couponholders, as the case may be, so long as they are able to

provide the Issuer with (i) the Residency Information (as defined below); and (ii) a statement of non-

Portuguese beneficial ownership substantially as set out in Annex 1 to this "Taxation" section (the

"Statement of non-Portuguese Beneficial Ownership") prior to the Income Payment Date.

"Residency Information" means appropriate evidence that the relevant Noteholder and/or Couponholder,

as the case may be, is not resident in the Republic of Portugal and does not have any registered or deemed

permanent establishment in the Republic of Portugal in accordance with the following provisions as set

out in Article 33(14) of the Portuguese Tax Benefits Statute in respect of the residency certification of

payees of interest that are exempt from Portuguese withholding tax:

(a) if the Noteholder or Couponholder, as the case may be, is a central bank, public institution,

international body, credit institution, financial company, property investment fund, collective

investment scheme, pension fund or insurance company with its head office in any OECD

country or in a country with which the Republic of Portugal has entered into a double taxation

treaty and is subject to a special supervision regime or administrative registration, certification

shall be made by means of the following: (i) its tax identification; or (ii) a certificate issued by

the entity responsible for such supervision or registration confirming the legal existence of the

Noteholder or Couponholder and its head office; or (iii) a declaration of tax residence issued by

the Noteholder or Couponholder itself, duly signed and authenticated, if a central bank, public

law entity taking part of the public administration (either central, regional or peripheral, indirect

or autonomous of the country of the relevant Noteholder or Couponholder) or an international

body; or (iv) evidence of non-residence pursuant to the terms of paragraph (c) below, so long as

the Noteholder or Couponholder provides a form of confirmation referred to in such paragraph

(c);

(b) if the Noteholder or Couponholder, as the case may be, is a working emigrant it must prove its

status by way of the applicable documents which are approved by decision (despacho) of the

Minister of Finance regulating the emigrant savings system;

(c) in any other case, information provided in accordance with the following rules: confirmation

must be made by the relevant Noteholder or Couponholder, as the case may be, by way of: (i) a

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certificate of residence or equivalent document issued by the relevant tax authorities; or (ii) a

document issued by the relevant Portuguese Consulate certifying its residence abroad; or (iii) a

document specifically issued by an official entity taking part in the public administration (either

central, regional or peripheral, indirect or autonomous) of the relevant country. For these

purposes, an identification document such as a passport or an identification card or document by

means of which it is indirectly possible to presume the relevant tax residence (such as a work or

permanent residency permit) are not acceptable.

There are specific rules relating to the originality and validity of the document, namely that the

Noteholder or Couponholder must provide an original or a certified copy of the residency certificate or

document and, as a rule, (i) if such document does not refer to a specific residency year and has not

expired, it must have been issued within the three years period prior to the relevant payment date or the

relevant Maturity Date; or (ii) such document must have been issued in the year of the relevant payment

date or the relevant Maturity Date and refer to the residency status in that year or in the previous one.

"Tax Identification" means a document provided by the relevant tax authority which evidences the status

of the Noteholder or Couponholder, as the case may be, as a tax payer in the applicable jurisdiction,

which may be a copy of a pre-existing tax identification or other document or similar effect.

Guarantee of Banif Madeira

Pursuant to Article 33 (11) of the Portuguese Tax Benefits Statute, documents, books, papers, contracts,

operations, acts and products, as set out in the Tabela Geral do Imposto de Selo (the general stamp tax

table), relating to entities licensed to operate in the Madeira International Business Centre are exempt

from Portuguese stamp tax. Although not specifically stated in Article 33 (11) of the Portuguese Tax

Benefits Statute, and in the absence of court decisions in relation to this matter, the Portuguese tax

authorities are of the view that this exemption of stamp tax is only applicable to the provision of a

guarantee by an entity licensed to operate in the Madeira International Business Centre in the event that

the guarantor directly benefits from the provision of the guarantee, or in situations in which the entity

having the benefit of the guarantee is licensed to operate in the Madeira International Business Centre.

If the Portuguese tax authorities take the view that in the case in question there is no direct benefit to

Banif Madeira, the guarantee given by Banif Madeira as guarantor of Notes issued by Banif Finance will

be subject to Portuguese stamp duty at the following rates: (i) 0.04 per cent. per month or fraction thereof

if the guarantee is given for a period of less than 1 year; (ii) 0.5 per cent. if the guarantee is given for a

period of 1 year or more and less than 5 years; and (iii) 0.6 per cent. if the guarantee is given for a period

of 5 years or more or without a fixed term. This stamp duty will only be payable upon enforcement of the

guarantee in Portugal. The stamp duty will be due from Banif Finance as beneficiary of the guarantee.

Pursuant to Article 280 of the Código de Processo Civil (the Civil Procedural Code) enforceability of the

guarantee will not be prejudiced by non-payment of Portuguese stamp duty in relation to the guarantee.

Luxembourg Taxation

The following is a general description of certain Luxembourg tax considerations relating to the Notes. It

specifically contains information on taxes on the income from the Notes withheld at source and provides

an indication as to whether the issuer assumes responsibility for the withholding of taxes at the source. It

does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in

Luxembourg or elsewhere. Prospective purchasers of the Notes should consult their own tax advisers as

to which countries' tax laws could be relevant to acquiring, holding and disposing of the Notes, payments

of interest, principal and/or other amounts under the Notes and the consequences of such actions under

the tax laws of Luxembourg. This summary is based upon the law as in effect on the date of this Base

Prospectus. The information contained within this section is limited to withholding taxation issues, and

prospective investors should not apply any information set out below to other areas, including (but not

limited to) the legality of transactions involving the Notes.

Withholding Tax

(i) Non-resident holders of Notes

Under Luxembourg general tax laws currently in force and subject to the laws of 21 June 2005 (the

"Laws") mentioned below, there is no withholding tax on payments of principal, premium or interest

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made to non-resident holders of Notes, nor on accrued but unpaid interest in respect of the Notes, nor is

any Luxembourg withholding tax payable upon redemption or repurchase of the Notes held by non-

resident holders of Notes. Under the Laws implementing the Council Directive 2003/48/EC of 3 June

2003 on taxation of savings income in the form of interest payments and ratifying the treaties entered into

by Luxembourg and certain dependent and associated territories of EU Member States (the

"Territories"), payments of interest or similar income made or ascribed by a paying agent established in

Luxembourg to or for the immediate benefit of an individual beneficial owner or a residual entity, as

defined by the Laws, which are resident of, or established in, an EU Member State (other than

Luxembourg) or one of the Territories will be subject to a withholding tax unless the relevant recipient

has adequately instructed the relevant paying agent to provide details of the relevant payments of interest

or similar income to the fiscal authorities of his/her/its country of residence or establishment, or, in the

case of an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of

his/her country of residence in the required format to the relevant paying agent. Where withholding tax is

applied, it will be levied at a rate of 15 per cent. during the first three-year period starting 1 July 2005, at a

rate of 20 per cent. for the subsequent three-year period and at a rate of 35 per cent. thereafter.

Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments

of interest under the Notes coming within the scope of the Laws would at present be subject to

withholding tax of 15 per cent. (unless the beneficiary has opted for the disclosure of information

described above).

(ii) Resident holders of Notes

Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005 (the

"Law") mentioned below, there is no withholding tax on payments of principal, premium or interest made

to Luxembourg resident holders of Notes, nor on accrued but unpaid interest in respect of Notes, nor is

any Luxembourg withholding tax payable upon redemption or repurchase of Notes held by Luxembourg

resident holders of Notes. Under the Law payments of interest or similar income made or ascribed by a

paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner

who is resident of Luxembourg will be subject to a withholding tax of 10 per cent. Such withholding tax

will be in full discharge of income tax if the beneficial owner is an individual acting in the course of the

management of his/her private wealth. The 10 per cent. withholding tax applies to interest accrued as

from 1 July 2005 and paid as from 1 January 2006. Responsibility for the withholding of the tax will be

assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope

of the Law would be subject to withholding tax of 10 per cent.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is

required to provide to the tax authorities of another Member State details of payments of interest (or other

similar income) paid by a person within its jurisdiction to, or collected by such a person for, an individual

resident or certain limited types of entity established in that other Member State. However, for a

transitional period, Belgium, Luxembourg and Austria may instead apply a withholding system in relation

to such payments, deducting tax at rates rising over time to 35 per cent. The transitional period is to

terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the

exchange of information relating to such payments. Belgium will replace this withholding tax with a

regime of exchange of information to the member state of residence as from 1 January 2010. A number of

non-EU countries, and certain dependent or associated territories of certain Member States, have adopted

similar measures (either provision of information or transitional withholding) in relation to payments

made by a person within its jurisdiction to, or collected by such a person for, an individual resident or

certain limited types of entity established in a Member State. In addition, the Member States have entered

into provision of information or transitional withholding arrangements with certain of those dependent or

associated territories in relation to payments made by a person in a Member State to, or collected by such

a person for, an individual resident or certain limited types of entity established in one of those territories.

On 13 November 2008 the European Commission published a proposal for amendments to the Directive

which included a number of suggested changes which if implemented, would broaden the scope of the

requirements described above. The European Parliament approved an amended version of this proposal

on 24 April 2009. Investors who are in any doubt as to their position should consult their professional

advisers.

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Annex 1

STATEMENT OF NON-PORTUGUESE BENEFICIAL OWNERSHIP

The undersigned beneficiary:

Name: []

Address: []

Tax identification number: []

holding via the following financial intermediary:

Name of the financial intermediary: []

Account number:

the following securities: []

Common/ISIN code: []

Security name: []

Payment date: []

Nominal amount: []

1. Hereby declares that he/she/it is the beneficial owner of the above-mentioned securities and

nominal amount at the payment date ...../...../......; and

2. Hereby declares that he/she/it is not subject to withholding tax, in accordance with the applicable

legislation, indicated hereinafter.

Article 33 of the Portuguese Tax Benefits Statute (Estatuto dos Benefícios Fiscais) — Zona Franca da

Madeira e Zona Franca da ilha de Santa Maria.

This document is to be provided to the Portuguese tax authorities, if requested by the latter, as foreseen in

section b), no. 2 and section b), no. 7, of Article 119 of CIRS.

Authorised signatory:

Name: []

Title []

Signature []

- 129 -

Annex 2

CERTIFICATE FOR EXEMPTION FROM PORTUGUESE WITHHOLDING TAX ON

INCOME ARISING FROM DEBT SECURITIES (PARAGRAPH 1 OF ARTICLE 17 OF THE

SPECIAL TAX REGIME APPROVED BY DECREE-LAW 193/2005 OF 7 NOVEMBER)

The undersigned Participant hereby declares that he holds debt securities covered by the special tax

regime approved by Decree-Law 193/2005 of 7 November (the "Securities"), in the following securities

account number .................. (the "Account") with ……............... (name and complete address of the

international clearing system management entity).

We will hold these Securities in our capacity as beneficial owner or in our capacity of intermediary,

holding Securities on behalf of one or more beneficial owners, including ourselves, if applicable, all of

whom are eligible for exemption at source from Portuguese withholding tax according to Portuguese

legislation.

1. We are:

Name:….......……………………………………………………………………………………….

Residence for tax purposes (full address):........………………………………...………………….

Tax ID Number: ..........................……………………………………………….…………………

2. We hereby certify that, from the date hereof until the expiry date of this certificate:

A. We are the Beneficial Owner of the following Securities:

Security ISIN or Common Code Security description Nominal position

____________________________ _______________________ ____________________

And we hereby declare that we are not liable to Portuguese withholding tax, in

accordance with the applicable legislation, indicated hereafter:

• Special Tax Regime approved by Decree Law 193/2005 of 7 November

• Art. 90 of CIRC (Corporate Income Tax Code) — Exemption from withholding

tax

B. We are intermediaries of the following Securities:

Security ISIN or Common Code Security description Nominal position

____________________________ __________________________ ____________________

3. We hereby undertake to provide the ................................... (name of the international clearing

system management entity) with a document proving the exemption of personal or corporate

income tax referred in the attached statement of beneficial ownership, whenever the beneficial

owner is not a central bank, public institution, international body, credit institution, financing

company, pension fund and insurance company resident in any OECD country or in a country

with which Portugal has concluded a Convention for the Avoidance of International Double

Taxation, on behalf of which we hold Portuguese debt securities in the Account.

4. We hereby undertake to notify the ................................... (name of the international clearing

system management entity) promptly in the event that any information contained in this

certificate becomes untrue or incomplete.

5. We acknowledge that certification is required in connection with Portuguese law and we

irrevocably authorise ................................... (name of the international clearing system

management entity) and its Depositary to collect and forward this certificate or a copy hereof,

any attachments and any information relating to it, to the Portuguese authorities, including tax

authorities.

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6. This certificate is valid for a period of twelve months as from the date of signature:

Place: __________________ Date: __________________

_______________________ _______________________ _______________________

Authorised Signatory Name Title/Position

_______________________ _______________________ _______________________


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APPENDIX

STATEMENT OF BENEFICIAL OWNERSHIP

The undersigned beneficiary:

Name:……………………………………………………………………………………………………..…

Address:…………………………………………………………………………………………………..…

……………………………………………………………………………………………………………....

Tax identification number:………………………………………………………………………………….

Holding via the following financial intermediary:

Name of the financial intermediary:………………………………………………………………………..

Account number:.............................................................................................................. ...............………..

The following securities:

Common/ISIN code:………………………………………………………………………………………..

Security name:………………………………………………………………………………………………

Payment date:……………………………………………………………………………………………….

Nominal position:……………………………………………………………………………………………

Hereby declares that he/she/it is the beneficial owner of the above-mentioned securities and nominal

position at the payment date ___________ / ___________ / ___________; and

Hereby declares that he/she/it is not liable to withholding tax, in accordance with the applicable

legislation, indicated hereinafter (tick where applicable):

• Special Tax Regime approved by Decree Law 193/2005 of 7 November

• Art. 90 of CIRC (Corporate Income Tax Code) — Exemption from withholding tax

• Art. 9 of CIRC — State, Autonomous Regions, local authorities, their associations governed by

public law and social security federations and institutions

• Art. 10 of CIRC — general public interest companies, charities and other non-governmental

social entities; exemption by the Ministerial Regulation no .............., published in Diário da

República..............

• Art. 16 of EBF (Tax Incentives Statute) — pension funds and assimilated funds

• Art. 21 of EBF — retirement savings funds (FPR), education savings funds (FPE), retirement and

education savings funds (FPR/E)

• Art. 23 of EBF — venture capital investment funds

• Art. 26 of EBF — stock savings funds (FPA) Other legislation (indicate which)

- 132 -

This document is to be provided to the Portuguese tax authorities, if requested by the latter, as foreseen in

the Article 17 of the Special Tax Regime approved by Decree Law 193/2005 of 7 November.

Authorised signatory:

Name: …………………………………………

Function: ………………………………………

Signature: ………………………………………

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Annex 3

STATEMENT FOR EXEMPTION FROM PORTUGUESE WITHHOLDING TAX ON INCOME

ARISING FROM DEBT SECURITIES (PARAGRAPH 2 OF ARTICLE 17 OF THE SPECIAL

TAX REGIME APPROVED BY DECREE LAW 193/2005 OF 7 NOVEMBER)

The undersigned Participant hereby declares that he holds or will hold debt securities covered by the

special tax regime approved by Decree Law 193/2005 of 7 November (the "Securities"), in the following

securities account number ................. (the "Account") with .............. (name and complete address of the

international clearing system management entity).

We hold or will hold these Securities in our capacity of beneficial owner or in our capacity of

intermediary, holding Securities on behalf of one or more beneficial owners, including ourselves, if

applicable, all of whom are eligible for exemption at source from Portuguese withholding tax according

to Portuguese legislation.

1. We are:

Name:……………………………………………………………………………………………….

Residence for tax purposes (full address):…………………………...……………………………..

Tax ID Number:……………………………………………………………………………………

2. We hereby undertake to provide the ................. (name of the international clearing system

management entity) with a list of Beneficial Owners at each relevant record date containing the

name, residence for tax purposes, tax identification number and nominal position of Portuguese

debt Securities for each Beneficial Owner, including ourselves if relevant, on behalf of which we

hold or will hold Portuguese debt securities in the Account.

3. We hereby undertake to notify the ................. (name of the international clearing system

management entity) promptly in the event that any information contained in this certificate

becomes untrue or incomplete.

4. We acknowledge that certification is required in connection with Portuguese law and we

irrevocably authorise ................. (name of the international clearing system management entity)

and its Depositary to collect and forward this certificate or a copy hereof, any attachments and

any information relating to it, to the Portuguese authorities, including tax authorities.

5. This certificate is valid for a period of twelve months as from the date of signature:

Place: __________________ Date: __________________

_______________________ _______________________ _______________________


_______________________ _______________________ _______________________


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APPENDIX

LIST OF BENEFICIAL OWNERS

For:

Interest due __/___/____

Security code (ISIN or Common Code): _______________

Security description: _____________________

Securities Clearance Account Number: __________________

We certify that the above Portuguese debt securities are held on behalf of the following Beneficial

Owners:

(*) Indicate the legal basis of the exemption from withholding tax in accordance with the following

table:

Code Legal basis of the exemption

1 Special tax Regime approved by Decree-Law 193/2005 of 7 November

2 Art. 90 of CIRC (Corporate Income Tax Code) — Exemption from withholding tax

3 Art. 9 of CIRC — State, Autonomous Regions, local authorities, their associations governed by

public law and social security federations and institutions

4 Art. 10 of CIRC — general public interest companies, charities and other non-governmental

social entities

5 Art. 16 of EBF (Tax Incentives Statute) — pension funds and assimilated funds

6 Art. 21 of EBF — retirement savings funds (FPR), education savings funds (FPE), retirement and

education savings funds (FPR/E)

7 Art. 23 of EBF — venture capital investments funds

8 Art. 26 of EBF — stock savings funds (FPA)

9 Other legislation

(**) The fulfilment of this column is mandatory when the code ''9'' is indicated in the previous

column.

Name

Tax Identification

Number

Residence for

Tax purposes

Amount of

Securities

Legal basis of the

exemption from

withholding tax

Code(*) Legislation (**)

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SUBSCRIPTION AND SALE

Notes may be issued from time to time by an Issuer to any one or more of Banif – Banco de Investimento,

S.A., Caixa – Banco de Investimento, S.A., Citigroup Global Markets Limited, Barclays Bank PLC, BNP

Paribas, Credit Suisse Securities (Europe) Limited, Deutsche Bank AG, London Branch and Merrill

Lynch International (the "Dealers"). The arrangements under which Notes may from time to time be

agreed to be issued by the Issuer to, and subscribed by, Dealers are set out in an Amended and Restated

Dealer Agreement dated 16 December 2009 (the "Dealer Agreement") and made between the Issuer, the

Guarantor and the Dealers. Any such agreement will, inter alia, make provision for the form and terms

and conditions of the relevant Notes, the price at which such Notes will be subscribed by the Dealers and

the commissions or other agreed deductibles (if any) payable or allowable by the Issuer in respect of such

subscription. The Dealer Agreement makes provision for the resignation or termination of appointment of

existing Dealers and for the appointment of additional or other Dealers either generally in respect of the

Programme or in relation to a particular Tranche of Notes.

United States of America: Regulation S Category 2; TEFRA D or TEFRA C as specified in the relevant

Final Terms or neither if TEFRA is specified as not applicable in the relevant Final Terms.

The Notes have not been and will not be registered under the Securities Act and may not be offered or

sold within the United States or to, or for the account or benefit of, U.S. persons except in certain

transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph

have the meanings given to them by Regulation S.

The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the

United States or its possessions or to a United States person, except in certain transactions permitted by

U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States

Internal Revenue Code and regulations thereunder.

Each Dealer has agreed that, except as permitted by the Dealer Agreement, it will not offer, sell or deliver

Notes, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the

distribution of the Notes comprising the relevant Tranche, as certified to the Fiscal Agent or the Issuer by

such Dealer (or, in the case of a sale of a Tranche of Notes to or through more than one Dealer, by each of

such Dealers as to the Notes of such Tranche purchased by or through it, in which case the Fiscal Agent

or the Issuer shall notify each such Dealer when all such Dealers have so certified) within the United

States or to, or for the account or benefit of, U.S. persons, and such Dealer will have sent to each dealer to

which it sells Notes during the distribution compliance period relating thereto a confirmation or other

notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for

the account or benefit of, U.S. persons.

In addition, until 40 days after the commencement of the offering of Notes comprising any Tranche, any

offer or sale of Notes within the United States by any dealer (whether or not participating in the offering)

may violate the registration requirements of the Securities Act.

Selling restrictions addressing additional United Kingdom Security Laws

Each Dealer represents and agrees that:

(a) No deposit-taking: in relation to any Notes having a maturity of less than one year:

(i) it is a person whose ordinary activities involve it in acquiring, holding, managing or

disposing of investments (as principal or agent) for the purposes of its business; and:

(ii) it has not offered or sold and will not offer or sell any Notes other than to persons:

whose ordinary activities involve them in acquiring, holding, managing or disposing of

investments (as principal or agent) for the purposes of their businesses; or

who it is reasonable to expect will acquire, hold, manage or dispose of investments (as

principal or agent) for the purposes of their businesses,

where the issue of the Notes would otherwise constitute a contravention of Section 19 of the

FSMA by the Issuer;

- 136 -

(b) Financial promotion: it has only communicated or caused to be communicated and will only

communicate or cause to be communicated any invitation or inducement to engage in investment

activity (within the meaning of section 21 of the FSMA) received by it in connection with the

issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to

the Issuer or the Guarantor; and

(c) General compliance: it has complied and will comply with all applicable provisions of the

FSMA with respect to anything done by it in relation to any Notes in, from or otherwise

involving the United Kingdom.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of

Japan (Law No. 25 of 1948, as amended) and, accordingly, each Dealer has undertaken and each further

Dealer appointed under the Programme will be required to undertake that it will not offer or sell any

Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under

Items, Paragraph 1, article 6 of the Foreign Exchange and Foreign Trade Control Law (Law No. 228 of

1949, as amended) or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the

benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of, and

otherwise in compliance with, the FIFA and any other applicable laws, regulations asnd ministerial

guidelines of Japan.

Cayman Islands

Each Dealer has agreed that it has not made and will not make any invitation to the public in the Cayman

Islands to subscribe for any of the Notes.

Portugal

Each Dealer has agreed that:

(i) no document, circular, advertisement or any offering material in relation to the Notes has

been or will be subject to approval by the Portuguese Securities Market Commission

(Comissão do Mercado de Valores Mobiliários, the "CMVM");

(ii) it has not, without the prior approval of the CMVM, directly or indirectly taken any

action or offered, advertised, submitted to an investment gathering procedure, sold or

delivered and will not, without the prior approval of the CMVM, directly or indirectly

offer, advertise, submit to an investment gathering procedure, sell, re-sell, re-offer or

deliver any Notes in circumstances which could qualify as a public offer (oferta pública)

of securities pursuant to the Portuguese Securities Code (Código dos Valores

Mobiliários, the "CVM");

(iii) it has not, directly or indirectly, distributed and will not, directly or indirectly, distribute

to the public in the Republic of Portugal the Base Prospectus or any document, circular,

advertisements or any offering material in relation to the Notes, without the prior

approval of the CMVM; and

(iv) it will comply with all applicable provisions of the CVM and any applicable CMVM

Regulations and all relevant Portuguese laws and regulations, in any such case that may

be applicable to it in respect of any offer or sales of Notes by it in the Republic of

Portugal.

Each Dealer has represented and agreed that it shall comply with all applicable laws and regulations in

force in the Republic of Portugal and with the Prospectus Directive regarding the placement of any Notes

in the Portuguese jurisdiction or to any entities which are resident in the Republic of Portugal, including

the publication of a Prospectus, when applicable, and that such placement shall only be authorised and

performed to the extent that there is full compliance with such laws and regulations.

For the avoidance of doubt, Madeira falls within the jurisdiction of the Republic of Portugal.

- 137 -

Public Offer Selling Restriction Under the Prospectus Directive

In relation to each Member State of the European Economic Area which has implemented the Prospectus

Directive (each, a "Relevant Member State"), each Dealer represents, warrants and agrees, and each

further Dealer appointed under the Programme will be required to represent, warrant and agree, that with

effect from and including the date on which the Prospectus Directive is implemented in that Relevant

Member State (the "Relevant Implementation Date") it has not made and will not make an offer of

Notes which are the subject of the offering contemplated by the Base Prospectus as completed by the

Final Terms in relation thereto (or are the subject of the offering contemplated by a Drawdown

Prospectus, as the case may be) to the public in that Relevant Member State except that it may, with

effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in

that Relevant Member State:

(a) Approved prospectus: if the Final Terms or Drawdown Prospectus in relation to the Notes

specify that an offer of those Notes may be made other than pursuant to Article 3(2) of the

Prospectus Directive in that Relevant Member State (a "Non-exempt Offer"), following the date

of publication of a prospectus in relation to such Notes which has been approved by the

competent authority in that Relevant Member State or, where appropriate, approved in another

Relevant Member State and notified to the competent authority in that Relevant Member State,

provided that any such prospectus which is not a Drawdown Prospectus has subsequently been

completed by the Final Terms contemplating such Non-exempt Offer, in accordance with the

Prospectus Directive, in the period beginning and ending on the dates specified in such

prospectus or final terms, as applicable;

(b) Authorised institutions: at any time to legal entities which are authorised or regulated to operate

in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to

invest in securities;

(c) Significant enterprises: at any time to any legal entity which has two or more of (1) an average of

at least 250 employees during the last financial year; (2) a total balance sheet of more than EUR

43,000,000 and (3) an annual net turnover of more than EUR 50,000,000, all as shown in its last

annual or consolidated accounts;

(d) Fewer than 100 offerees: at any time to fewer than 100 natural or legal persons (other than

qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent

of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or

(e) Other exempt offers: at any time in any other circumstances falling within Article 3(2) of the

Prospectus Directive.

provided that no such offer of Notes referred to in (b) to (e) above shall require the Issuer or any Dealer to

publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus

pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an "offer of Notes to the public" in relation to any

Notes in any Relevant Member State means the communication in any form and by any means of

sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to

decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any

measure implementing the Prospectus Directive in that Member State and the expression "Prospectus

Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each

Relevant Member State.

General

Other than with respect to the admission to listing, trading and/or quotation by such one or more listing

authorities, stock exchanges and/or quotation systems as may be specified in the Final Terms, no action

has been or will be taken in any country or jurisdiction by the relevant Issuer, if applicable, the Guarantor

or the Dealers that would permit a public offering of Notes, or possession or distribution of any offering

material in relation thereto, in any country or jurisdiction where action for that purpose is required.

Persons into whose hands the Base Prospectus or any Final Terms comes are required by the relevant

Issuer, if applicable, the Guarantor and the Dealers to comply with all applicable laws and regulations in

- 138 -

each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or have in their

possession or distribute such offering material, in all cases at their own expense.

The Dealer Agreement provides that the Dealers shall not be bound by any of the restrictions relating to

any specific jurisdiction (set out above) to the extent that such restrictions shall, as a result of change(s) or

change(s) in official interpretation, after the date hereof, of applicable laws and regulations, no longer be

applicable but without prejudice to the obligations of the Dealers described in the paragraph headed

"General" above.

Selling restrictions may be supplemented or modified with the agreement of the relevant Issuer. Any such

supplement or modification will be set out in the relevant Final Terms (in the case of a supplement or

modification relevant only to a particular Tranche of Notes) or (in any other case) in a supplement to this

document.

- 139 -

GENERAL INFORMATION

Listing and Admission to Trading

Application has been made for Notes issued under the Programme to be admitted to listing on the official

list of the Luxembourg Stock Exchange and to trading on the Regulated Market of the Luxembourg Stock

Exchange.

However, Notes may be issued pursuant to the Programme which will not be admitted to listing, trading

and/or quotation by the Luxembourg Stock Exchange or any other stock exchange or which will be listed

on such stock exchange as the relevant Issuer and the relevant Dealer(s) may agree.

Authorisations

The establishment and update of the Programme was authorised by board resolutions of Banif Finance

dated 23 October 2003 and 25 November 2009 and the establishment of the Programme and the giving of

the guarantee contained in the Trust Deed was authorised by board resolutions of Banif (in relation to

Banif as Issuer and Banif Madeira as Issuer and Guarantor) dated 29 September 2003 and 25 November

2009. Each Issuer and the Guarantor has obtained or will obtain from time to time all necessary consents,

approvals and authorisations in connection with the issue and performance of the Notes and the giving of

the guarantee relating to them.

Clearing of the Notes

The Notes (other than Interbolsa Notes) have been accepted for clearance through Euroclear and

Clearstream, Luxembourg. The appropriate common code and the International Securities Identification

Number in relation to the Notes of each Series will be specified in the Final Terms relating thereto. The

Interbolsa Notes will be cleared through LCH Clearnet, S.A., the clearing system operated by Interbolsa;

the appropriate identification reference for a Tranche of Interbolsa Notes will be specified in the

applicable Final Terms. At the date hereof Interbolsa only accepts to clear notes denominated in euros.

The relevant Final Terms shall specify any other clearing system as shall have accepted the relevant

Notes for clearance together with any further appropriate information.

Use of proceeds

The net proceeds of the issue of each Tranche of Notes will be applied by the relevant Issuer and/or the

Guarantor to meet part of their general financing requirements.

Litigation

Save as disclosed in this Base Prospectus, there are no governmental, legal or arbitration proceedings

(including any such proceedings which are pending or threatened of which the Issuers or the Guarantor

are aware), during a period covering at least the previous 12 months which may have, or have had in the

recent past, significant effects on the Issuers', the Group's or the Guarantor's financial position or

profitability.

No significant change

Save as disclosed in this Base Prospectus and since 30 September 2009, being the last day of the financial

period in respect of which the most recent consolidated and unconsolidated audited financial statements

of Banif and Banif SGPS, S.A. (holding company of the Banif Group) and the most recent unconsolidated

and unaudited financial statements of Banif Madeira (acting as both Issuer and Guarantor) have been

prepared, there has been no significant change in the financial or trading position of any Issuer or any of

its Subsidiaries or, as the case may be, the Guarantor or any of its Subsidiaries.

Material Information

Save as disclosed in this Base Prospectus there has been no material adverse change in the prospects of

each Issuer or any of its Subsidiaries since 31 December 2008, being the date of its last established

audited financial statements.

- 140 -

Change of Control

Each Issuer is not aware of any circumstance or event that would result in a change of control in that

Issuer.

Auditors

Ernst & Young Audit and Associados – SROC, S.A., Registered with the Stock Market Board under no.

9011, Associates, a member of Ordem dos Revisores Oficiais de Contas under nr. 178, have been

appointed as auditors of each Issuer and the Guarantor for the years ended 31 December 2008 and 31

December 2007. Their registered office is in Avenida de Republica 90-60, 1600-206 Lisbon, Portugal.

Ernst & Young Audit and Associados - SROC, S.A. audited the accounts of Banif-Banco Internacional do

Funchal, S.A. and Banif Finance, without qualification, in accordance with generally accepted accounting

standards in Portugal for the financial years ended on 31 December 2008 and 31 December 2007.

Post-issuance information

Each Issuer does not intend to provide post-issuance information, if not otherwise required by any

applicable laws and regulations.

Documents available for inspection

For so long as the Programme remains in effect or any Notes shall be outstanding, copies and, where

appropriate, English translations of the following documents may be inspected during normal business

hours at the specified office of the Principal Paying Agent and the Paying Agent in Luxembourg, namely:

(a) the Agency Agreement;

(b) the Trust Deed (which contains the forms of the Notes in global and definitive form and the form

of guarantee);

(c) the Programme Manual;

(d) the Interbolsa Notes Agency Agreement;

(e) any Final Terms relating to Notes which are admitted to listing, trading and/or quotation by any

listing authority, stock exchange and/or quotation system. (In the case of any Notes which are not

admitted to listing, trading and/or quotation by any listing authority, stock exchange and/or

quotation system, copies of the relevant Final Terms will only be available for inspection by the

relevant Noteholders); and

(f) the memorandum and articles of association of each Issuer.

Financial statements available

For so long as the Programme remains in effect or any Notes shall be outstanding, copies and, where

appropriate, English translations of the following documents may be obtained during normal business

hours at the specified office of the Principal Paying Agent and the Paying Agent in Luxembourg, namely

the most recent publicly available audited consolidated and unconsolidated financial statements of Banif

and Banif SGPS, SA (holding of Banif Group) beginning with such financial statements for the years

ended 2008 and 2007 and the most recent audited statutory financial statements of Banif Finance for the

years ended 2008 and 2007 and the most recent financial statements of Banif Madeira, for the years ended

2007 and 2007.

Banif, acting as Issuer, also produces semi-annual financial statements, besides the interim financial

statements as incorporated by referenece herein.

Banif Madeira, acting as Guarantor, do not publish interim financial statements, other than as

incorporated by reference herein.

- 141 -

Existing and future Dealer transactions

Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment

banking and/or commercial banking transactions and may perform services for the Issuer and its affiliates

in the ordinary course of business.

- 142 -

REGISTERED OFFICE OF THE ISSUERS

Banif – Banco Internacional do Funchal, S.A.

Rua de João Tavira, no. 30

9004-509 Funchal

Portugal

Banif Finance, Ltd.

Maples Corporate Services Limited

PO Box 309

Ugland House

Grand Cayman

KY1-1104

Cayman Islands


(External Financial Branch) Rua de João Tavira, no. 30

9004-509 Funchal

Portugal

REGISTERED OFFICE OF THE GUARANTOR


(External Financial Branch)

Rua de João Tavira, no. 30

9004-509 Funchal

Portugal

ARRANGERS

Banif – Banco de Investimento, S.A.

Rua Tierno Galvan, Torre 3-14 piso

1070-274 Lisboa

Portugal

Caixa – Banco de Investimento, S.A.

Rua Barata Salgueiro, no 33

1269-057 Lisboa

Portugal

Citigroup Global Markets Limited

Citigroup Centre

Canada Square

Canary Wharf

London E14 5LB

United Kingdom

DEALERS

Banif – Banco de Investimento, S.A.

Rua Tierno Galvan, Torre 3-14 piso

1070-274 Lisboa

Portugal

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

United Kingdom

BNP Paribas

10 Harewood Avenue

London NW1 6AA

United Kingdom

Caixa – Banco de Investimento, S.A.

Rua Barata Salgueiro, no 33

1269-057 Lisboa

Portugal

- 143 -

Citigroup Global Markets Limited

Citigroup Centre

Canada Square

Canary Wharf

London E14 4QJ

United Kingdom

Credit Suisse Securities (Europe) Limited

One Cabot Square

Canary Wharf

London E14 5LB

United Kingdom

Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester Street

London EC2N 2DB

United Kingdom

Merrill Lynch International

2 King Edward Street

London EC1A 1HQ

United Kingdom

PRINCIPAL PAYING AGENT

Citibank, N.A.

21st Floor,

Citigroup Centre.

Canary Wharf

London E14 5LB

United Kingdom

LUXEMBOURG PAYING AND LISTING

AGENT

Dexia Banque Internationale à Luxembourg 69, route d'Esch

L – 1470 Luxembourg

PORTUGUESE PAYING AGENT

Citibank International plc, Sucursal em

Portugal

Rua Barata Salgueiro, 30-4º

1269-056 Lisbon

Portugal

TRUSTEE

Citicorp Trustee Company Limited

Citigroup Centre

Canada Square

Canary Wharf

London E14 5LB

United Kingdom

LEGAL ADVISERS

To the Issuers and the Guarantor as to

Portuguese law

To the Issuers and the Guarantor as to

Cayman Islands law:

Sociedade Rebelo de Sousa & Advogados

Associados, RL

Rua D. Francisco Manuel de Melo, 21

1070 - 085 Lisboa

Portugal

Maples and Calder

PO Box 309

Ugland House

Grand Cayman

KY1-1104

Cayman Islands

- 144 -

To the Dealers and Trustee as to English law:

Clifford Chance LLP

10 Upper Bank Street

London E14 5JJ

United Kingdom

AUDITORS TO THE ISSUERS AND THE GUARANTOR

Ernst & Young Audit & Associados - SROC, S.A.

Av Da República, 90-60

1600-206 Lisboa

Portugal

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