019-052 Report 2005 - Montepio

TABLE OF CONTENTS 

1. GOVERNING AND INSTITUTIONAL BODIES 2004-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 

2. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 

3. CHAIRMAN’S ADDRESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 

4. OVERALL INDICATORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 

5. FRAMEWORK OF ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 

5.1. International Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 

5.2. Portuguese Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 

6. MONTEPIO GERAL GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 

7. MONTEPIO GERAL – ASSOCIAÇÃO MUTUALISTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 

7.1. Members and Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 

7.1.1. Mutual Benefit Movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 

7.1.2. Scheme Subscriptions and Membership Proceeds (Quotizations and Capitals) . . 30 

7.1.3. Benefits Due and Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

7.1.4. Improvements Allocated to Benefits under Formation and in Progress 

32 

for Actuary Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 

7.1.5. Return on Capitalization Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 

7.1.6. Life Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 

7.2. Net Return on Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 

7.2.1. Real Estate Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 

7.2.2. Loans to Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

7.2.3. Securities’ Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

7.2.4. Portfolio of Financial Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 

7.2.4.1. Institutional Financial Interest in Caixa Económica Montepio Geral . . . . 38 

7.2 5. Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 

7.3. Membership Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 

7.3.1. Complementary Benefits to Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 

7.3.2. Inauguration of Mutualist Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 

7.3.3. Tribute to Members with 50 or more years of membership . . . . . . . . . . . . . . . . . 39 

7.3.4. Institutional Commemorative Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 

7.4. Permanent Funds, Own Funds and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 

7.5. Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

7.6. Proposed Application of Results and Resources to Technical Surpluses and to 

41 

the General Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

7.6.1. Resource to Technical Surpluses of the Permanent Funds and to the 

43 

General Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 

7.6.1.1. Permanent Funds of the Respective Schemes . . . . . . . . . . . . . . . . . . . . . . 43 

7.6.1.2. General Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

7.6.2. Balance of Available Funds and Income from the General Reserve Fund 

43 

plus Resource to Technical Surpluses and to the General Reserve Fund . . . . . . . . 44 

7.6.2.1. To the General Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 

7.6.2.2. To the Permanent Funds of the Respective Schemes . . . . . . . . . . . . . . . . 45 

7.6.2.3. To the Own Funds of the Respective Schemes . . . . . . . . . . . . . . . . . . . . . 45 

7.7. Proposal for allocation of Improvements in Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 

7.8. Proposal for replacement in General Reserve Fund of the amounts used 

46 

to complete Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

7.9. Proposal for allocation of Return on Retirement Capitals, on Retirement Savings 

46 

and Collective Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 

7.10. Proposal for Application of Amount to be Transferred from Caixa Económica . . . . . . 47 

7.11. Proposal for Increase in Institutional Financial Interest in Caixa Económica . . . . . . . . 47 

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4 

7.12. Proposed Endowment to the Montepio Geral Foundation . . . . . . . . . . . . . . . . . . . . . 47 

7.13. Balance Sheet and Profit-and-Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 

7.14. Statement of Cash-Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 

7.15. Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 

7.16. Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

8. CAIXA ECONÓMICA MONTEPIO GERAL - INDIVIDUAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 

8.1. Trend in the Main Balance Sheet Aggregates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 

8.2. Commercial Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 

8.2.1. Distribution Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 

8.2.2. New Saving Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 

8.2.3. New Personal Credit Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 

8.2.4. Summary of Commercial Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 

8.2.4.1. Customer Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 

8.2 4.2. Customer Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 

8.2.5. International Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 

8.2.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 

8.3. Activity in Real Estate connected with Credit Recovery . . . . . . . . . . . . . . . . . . . . . . . . . 89 

8.4. Financial and Investment Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 

8.5. Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 

8.6. Promotional Campaigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 

8.7. Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 

8.8. Technological Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 

8.9. Results, Efficiency and Profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 

8.10. Transition to IFRS (International Financial Reporting Standards) . . . . . . . . . . . . . . . . . 107 

8.11. Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 

8.12. Capitalization and Prudential Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 

8.13. Proposal for the Application of Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 

8.14. Balance Sheet and Profit-and-Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 

8.14.1. Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 

8.14.2. Profit-and-Loss Account by Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 

8.14.3. Profit-and-Loss Account by Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 

8.15. Statement of Cash-Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 

8.16. Annex to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 

8.17. Statutory Audit Opinion and Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 

8.18. Institution Governance Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 

9. CAIXA ECONÓMICA MONTEPIO GERAL – CONSOLIDATED . . . . . . . . . . . . . . . . . . . . . . . . . . 185 

9.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 

9.2. Summary of Group Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 

9.3. Results, Efficiency and Profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 

9.4. Capitalization and Prudential Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 

9.5. Balance Sheet and Profit-and-Loss Account by Functions . . . . . . . . . . . . . . . . . . . . . . . 194 

9.6. Consolidated Statement of Cash-Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 

9.7. Annex to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 

9.8. Statutory Audit Opinion and Auditors’ Report of Consolidated Financial Statements . 271 

10. REPORT ON THE AUDIT WORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 

11. SOCIAL RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 

12. REPORT AND OPINION OF THE INTERNAL AUDIT BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . 277 

13. FINANCIAL INTERESTS HELD BY MONTEPIO GERAL GROUP . . . . . . . . . . . . . . . . . . . . . . . . 281 

14. ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

1. GOVERNING AND INSTITUTIONAL BODIES 2004-2006 

GENERAL MEETING BOARD 

Chairman Member no. 26 749 ANTÓNIO DE SEIXAS DA COSTA LEAL 

Economist 

1st Secretary Member no. 31 560 ANTÓNIO PEDRO DE SÁ ALVES SAMEIRO 

Lawyer 

2nd Secretary Member no. 45 139 ANTÓNIO DIAS SEQUEIRA 

Economist 

Alternates Member no. 32 990 JOSÉ ANTÓNIO DA CONCEIÇÃO NETO 

Economist 

BOARD OF DIRECTORS 

Member no. 45 233 ALFREDO GONZALEZ ESTEVES BELO 

Economist 

Chairman Member no. 29 416 JOSÉ DA SILVA LOPES 

Economist 

Board Member no. 44 630 ALBERTO JOSÉ DOS SANTOS RAMALHEIRA 

Members Economist 

Member no. 52 398 LUDOVICO MORGADO CÂNDIDO 

Economist 

Member no. 28 745 JOSÉ DE ALMEIDA SERRA 

Economist 

Member no. 38 670 ANTÓNIO TOMÁS CORREIA 

Jurist 

INTERNAL AUDIT BOARD 

Chairman Member no. 33 151 VÍTOR JOSÉ MELÍCIAS LOPES 

University Lecturer 

Permanent Member no. 29 464 LEONTINO RAIMUNDO ALEIXO 

Members Economist 

Member no. 31 807 JOSÉ JOAQUIM ROSA 

Graduate in Bank Management 

Alternate Member no. 95 534 ISILDA DE AIRES NUNES BRANQUINHO 

Economist 

GENERAL BOARD 

Permanent Member no. 26 952 MANUEL JACINTO NUNES 

Members University Lecturer 

Member no. 49 598 JOSÉ JOAQUIM FRAGOSO 

Engineer 

Member no. 31 000 ANTÓNIO FERNANDO MENEZES RODRIGUES 

Economist 

Member no. 29 973 MANUEL LOPES DA SILVA 

Economist 

Member no. 39 429 JOSÉ ALBERTO PEREIRA PITACAS 

Economist 

Member no. 32 309 VIRGÍLIO MANUEL BOAVISTA LIMA 

Economist 

Member no. 23 841 JORGE DA COSTA SILVEIRA 

Retired Bank Employee 

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6 

Member no. 39 934 CARLOS ALBERTO PEREIRA MARTINS 

Economist 

Member no. 37 711 NORBERTO CUNHA JUNQUEIRA F. FÉLIX PILAR 

Economist 

Member no. 50 387 JOSÉ BALTAZAR S. OSÓRIO ANDRADE GUERRA 

University Lecturer 

Member no. 42 804 MARIANA DE JESUS VALADAS REISINHO RETO 

Deputy Chairperson of the International Association of Mutual Benefit Societies 

Member no. 46 909 ALEXANDRE SANTOS CASTANHEIRA 

University Lecturer

Board of Directors 

Alberto José dos Santos Ramalheira, António Tomás Correia, José da Silva Lopes (Chairman), 

José de Almeida Serra, Ludovico Morgado Cândido 

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2. MANAGEMENT 

General Secretariat 

António Pedro de Sá Alves Sameiro 

General Secretary 

Human Resources Management 

Rui Sérgio Carvalho Santos Calheiros Gama 

Manager 

Associação Mutualista Management 

Pedro Maria Bleck Silva 

Manager 

José Alberto Pereira Pitacas 

Manager 

Studies and Planning Management 

Virgílio Manuel Boavista Lima 

Coordinating Manager 

José Jesus Martins 

Manager 

Risk Analysis and Management 

Jorge Humberto Cruz Barros Jesus Luís 

Manager 

Auditing and Inspection Management 

Virgílio Manuel Boavista Lima 


Management and Training Department 

Maria Isabel Marques Nunes 

Deputy Manager 

Processing Department 

Óscar Spínola Duarte Silva 


Mutualist Management Department 

Fernanda Gue Young 

Assistant Manager 

Mutualist Department 

Luís Artur Estevão Bravo 


Mutualist Development Department 

Rita Maria Machado Silva Pereira Costa 

Pimentel 


Strategy and Planning Department 

Maria Lúcia Ramos Bica 


Budget and Control Department 

Tomás Correia Cunha Góis Figueira 


Studies’ Department 

Miguel Alexandre Teixeira Coelho 


Operational Risk Department 

António José Alexandre 


Auditing Department 

Augusto Pinheiro Ferreira 

Manager 

Inspection Department 

Miguel Nunes Sales 

Manager 

9

10 

Financial and International Management 

António Augusto Almeida 


Marketing and New Channels Management 

Pedro Jorge Gouveia Alves 

Manager 

Computing and Organisation Management 

Mário José Esteves Rodrigues 


Legal and Credit Recovery Management 

Armando Augusto Pinto Silva 

Manager 

Financial Department 

Artur Jorge Correia Gama 

Manager 

International Department 

Luís Manuel Lourenço 

Manager 

Marketing, Image and Advertising 

Department 

Filomena Maria Cambraia Santos M. 

Macedo 


New Distribution Channels Department 

Fernando Jorge Lopes Centeno Amaro 


Cards and Means of Payment 

Department 

Vasco Francisco Coelho Almeida 


Computer Development Department 

José João Garção Cabeças 

Manager 

Operating, Systems and Distribution 

Channels Department 

Mário José Esteves Rodrigues 


Organisation and Quality Department 

Francisco José Gaveta Alhandra Duarte 

Manager 

Information Systems and Management 

Department 

José Manuel Simões Freitas 

Manager 

Legal Advice Department 

Carla Cristina Teixeira Morgado 


Litigation Department 

Maria Carmo Martins Ventura Calvão 


Management and Control Department 

Palmira Gue Gom 


Credit Recovery Department 

Vítor Guilherme Matos Filipe 

Assistant Manager

Real Estate and Premises Management 

Vítor Louro Branco 


Operations and Logistic Management 

José Agostinho Rodrigues Viveiros 


North Commercial Management 

António Guimarães Pimenta 

Manager 

Vítor Fernando Santos Cunha 


Greater Oporto Commercial Management 

António Santos Correia 

Manager 

Manuel Luís da Costa Leite 


Real Estate Department 

Vítor Louro Branco 


Premises Department 

Carlos Alberto Correia Braz 

Manager 

Operations Department 

José Manuel Rodrigues Simões 

Manager 

Braga Regional Department 

Isabel Cristina Pereira da Silva 

Area Manager 

Guimarães Regional Department 

Francisco Martins Marques Silva 


Vila Real Regional Department 

Agostinho José Vaz Afonso 

Area Manager 

Penafiel Regional Department 

Ernesto Jorge Monteiro Silva 

Area Manager 

Vila Nova de Famalicão Regional 

Department 

Pedro Miguel Furtado Figueiredo 

Area Manager 

Oporto-Aliados Regional Department 

Domingos Teixeira Cerqueira 


Gaia Regional Department 

Manuel Delfim Correia Sousa 

Area Manager 

Maia Regional Department 

Fernando Joaquim Dias Soares 


Oporto-Costa Cabral Regional 

Department 

Jorge Manuel Reis Lopes 

Area Manager 

Aveiro Regional Department 

Alberto Marques Crisóstomo 


S. João da Madeira Regional Department 

António Manuel Valério Batista 


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12 

Centre Commercial Management 

Manuel Duarte Cardoso Martins 

Manager 

António Manuel Monteiro Tarrafa 


Lisbon and the Autonomous Regions Commercial 

Management 

Manuel Quelhas Gomes 


António Mendes Almeida 


Greater Lisbon Commercial Management 

Horácio Marques Pissarra 


João Filipe Milhinhos Roque 


Coimbra Regional Department 

Sandra Paula Sousa Vindeirinho 

Area Manager 

Viseu Regional Department 

António José Tadeu Gonçalves Esteves 


Castelo Branco Regional Department 

Eduardo Alberto Godinho Calado 

Area Manager 

Leiria Regional Department 

Américo Mendes 


Santarém Regional Department 

Alfredo Luís Fernandes Caldeira 


Lisbon-Baixa Regional Department 

João Ribeiro Pisco Cruz 


Lisbon-Centre Regional Department 

Ernesto Assunção Louro Saraiva 


Lisbon-West Regional Department 

Pedro Miguel Rodrigues Crespo 

Area Manager 

Lisbon-North Regional Department 

João Pedro Ribeiro Velez Rodrigues 


Madeira Regional Department 

João Manuel Andrade Pereira 


Sérgio Paulo Aveiro Gouveia 


Azores’ Regional Department 

George Manuel Moniz Gaspar 


Parede Regional Department 

Armando Jorge Pereira Oliveira Lopes 

Area Manager 

Amadora Regional Department 

Maria Guilhermina Martins Trindade P. Melo 


Sintra Regional Department 

Paulo Jorge Cunha Rainho 

Deputy Manager

Greater Lisbon Commercial Management 

(continued) 

South Commercial Management 

José Plácido Mendonça Murtinha 


José Santos Nogueira Serra 


Companies Commercial Management 

Manuel Lopes da Silva 


Luís Miguel Reis Branco Pardal 


Odivelas/Vila Franca de Xira Regional 

Department 

Pedro Manuel Gaspar Vasconcelos Carrasco 

Area Manager 

Western Regional Department 

Carlos Alberto Encarnação Bento Marques 

Area Manager 

Almada Regional Department 

Duarte Manuel Rodrigues Teixeira 

Area Manager 

Barreiro Regional Department 

José Henrique Jesus Silva 

Area Manager 

Setúbal Regional Department 

Ramiro Almeida Figueiredo 


Évora Regional Department 

Pedro Jorge Ponte Araújo 

Area Manager 

Algarve Regional Department 

João Manuel Rocha Palma 


Daniel Batista Martins Silveira 

Area Manager 

Companies Regional Department – North 

José Magalhães Moreira 


Companies Regional Department – Centre 

Mário Jorge Costa Freitas Almeida 


Pedro Nuno Coelho Pires 

Area Manager 

Companies Regional Department – 

Lisbon 

Luís Miguel Reis Branco Pardal 


Companies Regional Department – South 

and the Autonomous Regions 

António João Silva Alves 

Area Manager 

Credit Risk Analysis Department 

Maria José Loureiro Ramires Ramos Tiroa 


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14 

Companies Commercial Management 

(continued) 

Accounts Department 

Armindo Marques Matias 

Manager 

Manuel José Valadas Gonçalves 

Advisor to the Manager 

Institutional Public Relations Office 

José Robalo Martins 


Advice 

José Silva Monteiro 

Legal Advisor 

Leasing and Factoring Department 

Manuel Lopes da Silva 

Coordinating Manager

3. CHAIRMAN’S ADDRESS

Against the backdrop of the highly competitive environment currently 

affecting the financial sector in 2005 and the unfavourable economic 

and social context, Montepio Geral managed to achieve its main strategic 

objective for the year and put into practice various measures which 

are to constitute the bases for its future development. 

The Results for the Financial Year of the various institutions who today 

use the Montepio Geral brand corresponded to the levels defined for 

2005 and allowed the improvements desired in the main economic and financial indicators to be 

obtained. 

The Associação Mutualista saw its assets rise by +21.5% and there was also a 14.3% increase in 

the number of Members which totalled 333,638 at year-end. The Caixa Económica achieved 

Results for the Financial Year which were 37% up on those of the previous year, attaining 45.3 million 

euros. It also improved its profitability, efficiency and risk indicators. 

The Guidelines set out in the Group’s Integrated Strategic Plan continued to be implemented. 

These Guidelines, reviewed and updated periodically, have proved suitable for the structural challenges 

faced by the development of Group institutions and will allow greater strategic cohesion 

and improved functional coordination between said institutions. 

The main goal set is a sustained improvement in profitability and the preservation and strengthening 

of the financial soundness of the institutions. To this end the main operating areas have been 

identified as: growth in activities, the diversification of revenue sources, the control in cost trends, 

an improvement in risk indicators and increased efficiency. 

2005 was a year of significant growth in activities, constituting a factor generating profitability 

both in terms of banking and mutualism as well as in investment, pension and insurance funds, 

particularly life assurance. 

However, the macro-economic conditions of the country, the retraction of activities in some of the 

sectors that have constituted specialisation markets of Montepio such as the construction and 

housing sector, the growing unemployment and the levels of indebtedness already attained by 

families would seem to advise the adoption of policies aimed at prudent growth and the safeguarding 

of risks. 

This is why it has been sought to develop the capacity of institutions to diversify their product ranges, 

to enter new fields of business and compensate the reduction in intermediation margins, with results 

having been achieved in revenue from commissions, improving risk indicators, strengthening technological 

and human skills and endeavouring to enhance quality in all Group institutions. 

In mutualist terms, alongside the growth in Members, there was an in-depth analysis and subsequent 

alterations to the characteristics of mutualist schemes so as to adapt them to the current 

profitability and risk conditions of the financial markets. The benefit distribution policy was also 

adapted to these conditions. 

Concurrently, it was sought to develop the response capacities of the MG Group in the field of 

social economy where there are major gaps in the range of products on offer, this being the case 

17

18 

of the management services for residential homes for the elderly and the provision of care at 

home; to this end the company «Residências Montepio – Serviços de Saúde, S.A» was created in 

partnership with a Spanish group specialised in this sector. 

A set of initiatives was put into effect at the banking entity (CEMG), with consulting support, to 

achieve the strategic objectives set, boosting the commercial area and optimising the branch network 

and the client portfolio. The aim was to promote the diversification of the product range and 

organisational development and marketing. In this way it was managed to achieve major growth 

in activity in 2005 and an increase in brand popularity. 

Credit evolved selectively in conjunction with an improvement in the effectiveness of risk management 

processes and in initiatives to recover credit in arrears which had a major impact on the 

improvement in results. 

The greater coordination between the companies forming part of the Montepio Group was clear 

from the increase in the commissions deriving from insurance and investment funds which allowed 

the Banking Product to be diversified. 

The management of the costs variable was worthy of considerable attention during the course of 

the year, seeking to maintain its progress within defined limits. Despite this, investments and other 

expenses in vital areas were increased to ensure the competitiveness of the institution. These areas 

relate to technological equipment, marketing and the reform of the incentives’ and performance 

appraisal system for human resources who constitute the main capital of the MG Group. 

The moderate growth policy is set to continue in 2006 based on prudential criteria which do not 

compromise the financial soundness of the institutions and enable sustained improvements in efficiency 

and profitability indicators. 

Although the Results achieved and the levels of progress obtained in 2005 are a source of satisfaction 

for all those who contributed to them, we are well aware that in such a competitive market 

and against a backdrop marked by the exacerbation of structural difficulties, we will have to 

lend added impetus to our drive to improve production effectiveness. Only very efficient, modern 

and financially sound institutions will be in a position to compete. 

I would like to end this letter on a note of thanks from me and on behalf of the other members of 

the Board of Directors to the members of the General Meeting Board, the General Board and the 

Internal Audit Board for their dedication and support to management at all times in the lifetime of 

the association. This thanks should also be extended to the authorities and to other entities with 

whom the Institution has dealt over the last year, to the employees and to the various employees 

of Montepio Geral for the work they have provided and for the dedication and professionalism 

with which they did so, particularly the Members and Clients of Montepio Geral for the trust they 

deposited in us. 

Lisbon: March 2006

4. OVERALL INDICATORS 

(Thousands of euros) 

INDICATORS 2005 2004 2003 

1. ASSOCIAÇÃO MUTUALISTA 

1.1. Size 

Net Assets 1 898 873 1 562 532 1 206 487 

Variation 21.53% 29.51% 26.94% 

Equity (Own Funds, Reserves and Results) 302 092 334 822 327 591 

Members (Units) 333 638 291 789 253 113 

Pensioners (Units) 6 065 5 791 5 613 

CEMG employees allocated to the AM (Units) 111 60 56 

1.2 Return 

Cash Flow for financial year 43 025 35 985 62 419 

Result for financial year 38 198 31 840 58 326 

Result for financial year / Average net assets 2.21% 2.30% 5.41% 

1.3. Coverage of Responsabilities 

Funds and Reserves / Provisions to Cover Liabilities and Improvements to Benefits 1.17 1.25 1.31 

2. CAIXA ECONÓMICA 

2.1. Size 

Net Assets 13 967 187 12 418 904 12 114 847 

Variation 12.47% 2.51% 6.39% 

Equity (Capital, Reserves and Results) 690 770 652 629 595 704 

Employees – Permanent Staff in Portugal (Units) 2 853 2 863 2 890 

Branches and other Forms of Representation (Units) 303 305 304 

Branches (Units) 295 297 296 

Representative Offices (Units) 6 6 6 

Financial Branches (Units) 2 2 2 

Active Current Accounts (Units) 1 174 187 1 141 383 1 122 456 

Automatic «Chave 24» Machines (Units) 259 257 256 

Automatic Cash Machines (Units) 588 505 467 

Automatic Payment Terminals (Units) 5 863 4 837 4 392 

2.2. Return 

Cash Flow for financial year 149 182 117 636 110 842 

Result for financial year 45 312 33 043 21 492 

Result for financial year / Average net assets (ROA) 0.35% 0.27% 0.19% 

Result for financial year / Average equity (ROE) 6.67% 5.33% 3.69% 

Banking Product / Average Net Assets 2.63% 2.50% 2.45% 

2.3. Credit Risk 

Ratio of Credit Maturing at over 90 days 2.57% 3.09% 4.12% 

Credit Ratio with non-compliance 3.36% 3.71% 4.60% 

Credit Ratio with non-compliance net of provisions 0.88% 1.29% 2.01% 

2.4. Prudential Ratios 

Solvency and Market Ratio 10.74% 11.44% 11.41% 

Adjustment of Basic Equity Ratio (Tier 1) 6.68% 7.54% 7.15% 

Net Fixed Assets Ratio (Fixed Assets / Equity) 13.68% 16.01% 15.60% 

Provisions for General Credit / Credit and Interest Due 113.03% 95.98% 77.01% 

Provisions for General Credit / Credit and Interest Due + 3 months 124.26% 102.02% 82.28% 

Value of Pension Funds / Past Commitments 70.01% 92.73% 91.65% 

2.5. Rating Scores (Short Term : Long Term) 

Fitch Ratings F2 : A- F2 : A- F2 : A- 

Moody’s P-1 : A3 P-1 : A3 P-1 : A3 

2.6. Efficiency 

Average Net Assets / Average No. of Workers 4 583 4 321 4 157 

Operating Costs / Average Net Assets 1.53% 1.54% 1.52% 

Operating Costs + Amortizations / Banking Product (cost to income) 61.44% 65.85% 67.22% 

Permanent Staff in Portugal / No. of Branches (Units) 9.67 9.64 9.76 

Staffing Costs / Banking Product 37.2% 40.9% 40.6% 

% Transactions Via Alternative Channels 56.03% 54.70% 52.77% 

% Automatic Transactions 85.99% 85.60% 84.49% 

19

5. FRAMEWORK OF ACTIVITIES 

5.1. INTERNATIONAL ECONOMY 

In 2005 world economic activity continued to make good strides with the achievement of estimated 

growth of 4.3%. This sound performance of the economy – which was not evenly spread in the various 

regions of the globe – can be put down to the favourable trend in financial markets, the low level in 

interest rates and the maintenance of appropriate economic policies in the main countries. 

However, this level of growth was slightly down on that achieved in 2004, mainly reflecting the impact 

of the rise in oil prices, the slowdown in world trade and the occurrence of natural disasters with a 

direct negative impact on the US economy. 

(r.g.r. – %) 

10 

8 

6 

4 

2 

0 

-2 

Sources: OCDE, CE, INE, BP 

REAL GDP GROWTH RATES 

9.5 9.3 

4.2 

2.1 

1.2 

3.6 

2.7 2.4 

2001 2002 2003 2004 2005 

1.3 

0.3 

China 

USA 

Japan 

Euro Zone 

Portugal 

By regions, worthy of special mention was the strong level of activity in China which achieved an estimated 

real variation in GDP of 9.3% based on the buoyancy of exports and investment and the high 

rate of growth in the USA of 3.6% which has benefited from major gains in productivity. Also worthy 

of note is the continued recovery of economic activity in Japan where an estimated growth in Product 

of 2.4% was achieved. 

The Eurozone economy again lost dynamism in terms of the main world economies and GDP is set to 

achieve real growth of only 1.3% in 2005. This poor expansion in activity is a reflection of the lack of 

dynamism in Internal Demand associated with a high rate of unemployment (8.4% in December 2005), 

a lack of confidence amongst economic agents and the difficulties containing budget deficits, to wit in 

Germany, France, Italy, Greece and Portugal. 

In the Eurozone 2005 was also marked by negotiating difficulties vis-à-vis the approval of the new Community 

Budget for 2007-2013 and the failure of France and Holland to ratify the Constitutional Treaty 

of the European Union, giving rise to the temporary suspension of the Constitution Community ratification 

process. 

On the whole 2005 was particularly marked by the strong volatility and high level of the price of oil. The 

price per barrel of brent attained 56.8 USD in December 2005, up 43.1% on the start of the year. This 

21

22 

increase continues to reflect the maintenance of strong demand, particularly by expanding Asian countries 

associated with the low production capacity available which includes refining. 

The upward trend in oil prices contributed to the exacerbation of global asymmetries in the world economy, 

with an increase in the balance of trade of producer countries, as opposed to a deterioration in 

the external accounts of oil importing countries. 

However, the impact of the rise in oil prices on inflation in the main economies has been partially mitigated 

by the fall in import prices of various types of consumer goods produced at low costs and by the 

moderation of wage rises. 

Financial markets continued to perform well benefiting from the high level of growth in world economic 

activity, the high liquidity of the shareholder market and the good performance of listed companies, 

notwithstanding the rise in base rates by Central Banks. 

% 

5 

4 

3 

2 

1 

TREND IN BASE RATES 

vs. EURIBOR 6 M 

Fed Funds 

Euribor 6 M 

Refi Rate 

0 

2001 2002 2003 2004 2005 

Sources: Bloomberg, Eurostat 

TREND IN RATES OF RETURN ON TEN-YEAR 

PUBLIC DEBT BONDS 

% 

6 

5 

4 

3 

EUA 

Euro Zone 

2 

2001 2002 2003 2004 2005 

During 2005 the US Federal Reserve (Fed) raised interest rates on fed funds by 200 base points (b.p.), with 

the rate standing at 4.25% at year-end. The tightening of monetary policy put in practice by the Fed was 

based on an increase in inflation and the need to contain economic growth in a state of equilibrium. 

In the Eurozone interest rates on the main refinancing operations (refi rate) of the European Central 

Bank (ECB) also rose at year-end by 25 b.p., standing at 2.25%. The lower rise in the main ECB base 

rate than in the US can be put down to the low level of inflationary pressure, demonstrated by the fall 

in the year-on-year HCPI variation rate in December 2004 from 2.4% to 2.2% in December 2005 and 

the difficulties in achieving a consistent recovery in the European economy. 

Money market interest rates in the Eurozone revealed opposing trends in the two halves of 2005. 

Whereas in the 1st half the Euribor at 6 months registered a downward trend, falling from 2.21% in 

December 2004 to 2.11% in June 2005, in the second half of the year, faced with the prospect of a 

base rate hike by the ECB (which took place in December), the downward trend was reversed and the 

Euribor at 6 months rose to 2.60% at year-end. 

Bond markets turned in a strange performance during 2005. With the buoyancy of global economic 

activity and the rise in base rates by the Fed, a rise in long-term interest rates was expected in the US.

However, Treasury rates of return at 10 years increased slightly from 4.23% to 4.46% between December 

2004 and the same month of 2005, remaining at very low levels. In the Eurozone the yields on 

public debt bonds at 10 years also remained at very low levels and there was even a reduction in mean 

monthly terms of 28 b.p., attaining 3.41% in December 2005. 

This trend in yields can be put down to the containment of inflationary pressures despite the rise in oil 

prices and the sharp increase in the demand for long-term bonds for the formation of reserves by Asian 

countries with major external surpluses. 

With the strong liquidity of the market against a backdrop of falling interest rates, international share 

markets performed very creditably, particularly in Japan and in the Eurozone, with the Nikkei 225 and 

Euro Stoxx 50 Indices having gained 41.3% and 21.3%, respectively. In the USA, though positive, the 

share market underwent more moderate growth with the Standard & Poor’s 500 index gaining a mere 

5.2% as a result of successive increases in reference interest rates. 

On the foreign exchange market there was a depreciation in the actual exchange rate of the Euro in 

mean monthly terms of 6% between December 2004 and the same month of 2005. This can largely be 

put down to the 11.6% depreciation in the European currency on the US dollar. However, the single 

European currency is expected to gain on the dollar during 2006 with the more than likely rise in European 

interest rates along with the greater growth in the Eurozone economy and the persistence of a 

growing external deficit in the US economy. 

5.2. PORTUGUESE ECONOMY 

According to the latest estimates of the Bank of Portugal, the Portuguese economy will turn in one of 

the lowest levels of growth in the Eurozone in 2005, achieving a mere 0.3%. this virtual stagnation in 

economic activity – compared to 1.2% growth in 2004 – reflects the impact of the rise in oil prices in 

view of the country’s dependence on energy from abroad, the low levels of confidence of economic 

agents, the budget adjustment measures taken and the imbalances to be found in the Portuguese economy, 

partly caused by the high level of indebtedness of Companies and Private Individuals. 

MAIN MACROECONOMIC INDICATORS – PORTUGAL 

Real growth rates (%), except where indicated 

2002 2003 2004 2005 

GDP 0.5 -1.2 1.2 0.3 

Private Consumption 1.2 -0.4 2.4 1.8 

Public Consumption 2.3 0.3 2.4 1.1 

Gross Formation of Fixed Capital -4.8 -9.9 1.5 -3.1 

Exports 1.5 4.5 4.6 1.8 

Imports -0.5 -0.7 6.7 2.4 

Inflation (HCPI) 3.7 3.3 2.5 2.1 

Budget Balance (% GDP) * -4.1 -5.4 -5.2 -6.0 

Rate Unemployment (end 4th Quart.) 6.2 6.5 7.1 8.0 

Balance Current and Capital Accounts (% GDP) -6.0 -3.3 -5.9 -8.2 

* Does not include temporary measures 

Sources: INE, BP 

23

24 

The deceleration in economic activity can mainly be put down to the poor progress made in Internal 

Demand – only 0.6% – particularly the -3.1% fall in Investment (equivalent to Gross Formation of Fixed 

Capital), which was widespread in all activity sectors, and the deceleration in Private and Public Consumption, 

the latter by dint of the budget consolidation measures taken. 

Private Consumption – with real growth of 1.8%, a deceleration compared to the 2.4%, achieved in 

2004 – still managed to attain relatively sustained growth bearing in mind the scenario of the stagnation 

in the economic activity and the fall in consumer confidence. This increase in family consumer expenses 

was driven by the maintenance of low interest rates and the extension of bank loan repayment periods. 

In 2005 the Rate of Saving of Private Individuals (as a % of available income) maintained the levels 

achieved in 2004 of around 10% in view of the fact that the projected increase in Private Consumption 

was similar to the estimated variation for available income. In turn, the indebtedness ratio of private 

individuals maintained a significant rate of growth and it is estimated to achieve 6 b.p. more than the 

amount observed in 2004, i.e. 118% of available income. The continued progress in family indebtedness 

can be put down to the buoyancy experienced by Housing Credit in 2005, reflecting the very low 

levels of interest rates and the strong competitiveness between the financial institutions. 

The contribution of Net External Demand to the growth in GDP was less negative than that which 

occurred in 2004 by dint of the sharp deceleration in the growth of the volume of imports from 6.7% 

to 2.4%, consistent with the lower growth in Internal Demand. Exports also decelerated significantly 

from 4.6% to 1.8%, at constant prices, though less than imports. There were thus losses in market 

share and the competitiveness of national exports by dint of the fact that the products exported maintained 

a low technological content and a high proportion of human capital, thus being more liable to 

strong competition from producer countries based on their low labour costs. 

The external financing needs of the Portuguese economy rose again owing to the fresh increase in the 

joint deficit of the balances of trade and capital, as had already happened in 2004, up to 8.2% of GDP. 

This unfavourable trend also reflects the effect of the increase in oil prices which have been rising since 

2003, bringing about an exacerbation of the trading terms between Portugal and the rest of the world. 

Against the backdrop of stagnation in economic activity, the rate of unemployment again rose from 

7.1% in 2004 to 8.0% at the end of the fourth quarter of 2005. 

The mean annual rate of inflation measured by the HCPI (Harmonised Consumer Price Index) fell to 

2.1% in 2005, down from 2.5% at the end of the previous year. This downward trend in the mean level 

of prices was largely based on the favourable performance of import prices (excluding fuel). In actual 

fact, and as occurred in other economies, the impact of the rise in oil prices was partially made up by 

the fall in the import prices of certain goods produced at low costs on the world market. On the other 

hand, the virtual stagnation of the GDP in terms of volume and the slowdown in growth of salaries in 

the private sector from 3.2% in 2004 to 2.8% in 2005 also contributed to the containment of inflationary 

pressures in Portugal. 

According to the State Budget for 2006 the public deficit is set to stand at 6% of GDP at the end of 

2005. This figure is part of the updating of the Stability and Growth Programme drawn up further to the 

disclosure of the Commission Report on the Analysis of the Budget Situation, which foresaw a gradual 

reduction in the public deficit by 2009, without the need for major extraordinary measures. 

As a result of this update, the European Commission brought excessive deficit proceedings against Portugal, 

advising the Portuguese State to adopt measures to correct the budget imbalance by 2008. 

For this reason various structural measures were taken in 2005 with a view to achieving a sustained 

reduction in the deficit. Measures worthy of special mention on the revenue side were the rise in the 

normal rate of VAT from 19% to 21% and the increases in taxes on oil products and tobacco; on the 

expenses side, this included a reform of the civil servant pension statute, an alteration to the rules go-

verning health subsystems for various professional categories of Public Administration and a reduction in 

medicine subsidies. 

In 2006 the Bank of Portugal is foreseeing a very moderate recovery in the economy with GDP rising by 

0.8%. This forecast is essentially based on the prospect of a positive contribution from Exports in view 

of the fact that Internal Demand is set to maintain the growth levels achieved in 2005 (0.6%). On the 

other hand, the rate of inflation is set to increase slightly to 2.5% as a result of the accumulated growth 

in energy good prices in the 2nd half of 2005, whilst the rate of unemployment is set to continue its 

upward trend. 

25

6. MONTEPIO GERAL GROUP 

FINANCIAL SECTOR 

INSURANCE AND PENSION FUNDS 

OTHERS 

MONTEPIO GERAL 

FOUNDATION 

NOVACÂMBIOS 

(Exchange Agency) 

SILVIP (Real Estate Invest. 

Fund Management) 

LEACOCK 

(Insurance Broker) 

19,0% 

ÍMPAR – Cape Verde 

Insurance Company 

15,6% 

CLÍNICA SANTA MARIA 

DE BELÉM – (Clinic) 

0,03% 

SAGIES – Analysis and 

Management of Inst. 

and Social Facilities 


ASSOCIAÇÃO MUTUALISTA 

30,0% 

26,4% 

81,0% 

26,3% 

14,8% 

27,0% 

11,0% 

17,6% 

2,8% 

34,9% 

9,1% 

7,5% 

99,9% 

87,0% 

65,7% 

39,2% 

61,7% 

18,0% 

91,0% 

51,0% 

CAIXA ECONÓMICA DE 

CABO VERDE (Savings Bank) 

BANCO DESENV. E 

COMÉRCIO (Bank) 

BANCO DA ÁFRICA 

OCIDENTAL (Bank) 

MG – Gestão de Activos 

Financeiros - SGFIM 

(Financial Asset Management) 

CREDINT – Finance and 

Credit Consultancy 

LUSITANIA 

(Insurance Company) 

13,2% 5,3% 

LUSITANIA – VIDA 


7,9% 

FUTURO 

(Pension Funds Management) 

MOÇAMBIQUE 


(ANNEXED) 

BOLSIMO – REAL ESTATE 

MANAGEMENT 

RESIDÊNCIAS MG – Health 

Services 

CAIXA ECONÓMICA 


MG - CABO VERDE 

(Bank) 

NORFIN (Real Estate Invest. 

Fund Management) 

UNICRE 

(Credit Card Management) 

SIBS 

(Interbanking Services) 

EURONEXT 

HTA – Azores Hotels, Tourism 

and Entertainment 

The Montepio Geral Group is a financial group of mutualist origin whose central entity is the Associação 

Mutualista and whose fundamental, strategic development support is the Caixa Económica Montepio 

Geral. The Group also acts in other fields such as insurance, pension funds, asset management, real 

estate and health. 

The companies of the Montepio Geral Group carry on their own activities, creating products and services 

and generating results that ensure appropriate benefits to Members, thereby strengthening the associative 

and mutualist identity of Montepio Geral. 

9,8% 

10,1% 

7,5% 

0,1% 

10,0% 

26,2% 

39,3% 

5,2% 

9,8% 

16,2% 

9,0% 

9,0% 

100,0% 

9,9% 

2,8% 

1,3% 

0,08% 

20,0% 

27

28 

In 2005 the Montepio Geral Group strengthened its presence in the health sector with the creation of 

the company «Residências Montepio, Serviços de Saúde, S.A.» and in the financial sector with «Banco 

Montepio Geral Cabo Verde, Sociedade Unipessoal, S.A.»

7. MONTEPIO GERAL – ASSOCIAÇÃO MUTUALISTA 

7.1. MEMBERS AND BENEFICIARIES 

7.1.1 Mutual Benefit Movement 

2005 registered notable buoyancy in membership. The number of Members grew by 41 800 compared 

with 38 700 in 2004. 

The forging of closer links with the Members and the growing interest in Mutualism as an activity in the 

public interest complementing the public social security system helped to take the total number of 

Members to 333 638. 

units 

350 000 

300 000 

250 000 

200 000 

150 000 

100 000 

50 000 

0 

TREND IN EXISTING PERMANENT MEMBERS 

253 113 

291 789 

2003 2004 2005 

333 638 

Caixa Económica Branches continued to play a vital role in the promotion, boosting and distribution of 

the mutualist schemes. The existing market potential in view of the number of personal CEMG clients (in 

December 2005, only 34.5% were Members) is a sign that there is still a lot to be done to attract new 

Members and to forge closer relations with Montepio Geral. 

TURNOVER OF PERMANENT MEMBERS 

Type 2005 2004 

Variation 

No. % 

Joining 

Admitted 57 596 51 763 +5 833 +11.3 

Readmitted 1 038 1 046 -8 -0.8 

Leaving 

Deceased and becoming eligible 427 343 +84 +24.5 

Lapse in eligibility, withdrawal and cancellations 16 358 13 790 +2 568 +18.6 

Existing members 333 638 291 789 +41 849 +14.3 

(Units) 

29

30 

In late 2005 the membership range of the Associação Mutualista was made up of around 39% of Members 

aged under 30, 43% aged between 30 and 50 and 18% over 50. The average age stood at 33 

(33 for men and 32 for women). 

The number of female Members has grown in recent years and can now be compared with that of the 

number of men. 

The «Tio Pelicas» club, made up of Members aged under 16, also saw a growth in members recording 

a year-on-year variation of 11%. On December 31st 2005 the total number of members stood at 

35 584, accounting for 10.7% of total Associação Mutualista Members. 

«Tio Pelicas» Club 

Year 2005 2004 2003 2002 

Members 35 584 32 100 27 041 21 973 

With a view to consolidating and forging closer links with younger members, every quarter the Associação 

Mutualista continues to produce and distribute the club magazine, amongst other activities. The 

proximity to this young segment of Members is evident from the number of members who have already 

joined the club (41 981 admissions) since its inception, with around 6 397 departures, 47.6% of which 

were due to the fact that the members concerned had reached the age limit allowed. 

7.1.2. Scheme Subscriptions and Membership Proceeds (Quotizations and Capitals) 

2005 ended with a total of 506 321 subscriptions, representing year-on-year growth of 21%. 

The number of enrolments per Member developed consistently during the course of the year, having 

attained 1 518 by the end of 2005 (1 434 in 2004). This performance can mainly be put down to the 

loyalty drive amongst current Members through the Actuarial Schemes offer which allows them to stay 

longer in the Associação Mutualista. 

Members’ preferences centred on the Retirement Capitals, the Payment of Expenses Guarantee Scheme 

(the latter being brought about by housing credit) and the Deferred Welfare Capitals with Option. These 

schemes account for around 91.2% of the current number of subscriptions and around 97% of the 

new enrolments registered during 2005. 

The Retirement Capitals Scheme continues to be the Members’ favourite, accounting for around 45.6% 

of total subscriptions; at year-end the Payment of Expenses Guarantee Scheme made up around 27.6% 

and Deferred Welfare Capitals with Option around 18%, followed by the Youth and Retirement Savings 

Schemes with around 2.3% and 2.1%, respectively. 

Total scheme subscriptions and membership proceeds submitted for management to the Associação 

Mutualista during 2005 stood at 361.6 million euros. Although this amount is slightly lower than last 

year’s figure, it made a decisive contribution to a 21.5% increase in the Net Assets of the Associação 

Mutualista.

TREND IN NET ASSETS OF THE MUTUAL BENEFIT ASSOCIATION 

Items 

Schemes 

2005 

Value % 

2004 

Value % 

TREND IN MEMBERSHIP PROCEEDS 

(Quotizations and Capitals by Scheme) 

2003 


Variation 

2005/2004 2004/2003 

Value % Value % Value % 

Real Estate 120 045 6.3 119 938 7.7 121 819 10.1 107 0.1 -1 881 -1.5 

Securities 635 446 33.5 434 881 27.8 288 280 23.9 200 565 46.1 146 601 50.9 

Institutional Financial Interest 485 000 25.5 445 000 28.5 405 000 33.6 40 000 9.0 40 000 9.9 

Other Financial Interests 41 779 2.2 41 243 2.6 41 423 3.4 536 1.3 -180 -0.4 

Available Funds 593 423 31.3 505 436 32.4 335 311 27.8 87 987 17.4 170 125 50.7 

Others 23 180 1.2 16 034 1.0 14 654 1.2 7 146 44.6 1 380 9.4 

TOTAL 1 898 873 100.0 1 562 532 100.0 1 206 487 100.0 336 341 21.5 356 045 29.5 

The trend in membership proceeds was mainly determined by the variation in the capital received under 

Capitalization Schemes (Retirement Capitals and Retirement Savings Schemes). 

Under Other Schemes different year-on-year performances are observed in the evolution of membership 

proceeds as can be seen from the table below: 


2005 2004 Variation 


1. MEMBERSHIP WELFARE BENEFIT 3 660 1.01 3 142 0.83 +518 +16.5 

2. INDIVIDUAL SCHEMES 356 125 98.49 372 112 98.66 -15 987 -4.3 

2.1. Retirement Capitals 299 801 82.91 304 194 80.65 -4 393 -1.4 

2.2. Retirement Savings 2 601 0.72 17 114 4.54 -14 513 -84.8 

2.3. Other Schemes 53 723 14.86 50 804 13.47 +2 919 +5.7 

Retirement Pensions 5 324 1.47 6 220 1.65 -896 -14.4 

Retirement Pensions – Quotes Restitution 441 0.12 459 0.12 -18 -3.9 

Retirement Pensions – Additional Disability 13 0.00 15 0.00 -2 -13.3 

Pensions for the Handicapped 25 0.01 24 0.01 +1 +4.2 

Survivorship and Dowry Pensions 12 0.00 12 0.00 +0 +0.0 

Survivorship Annuities 55 0.02 48 0.01 +7 +14.6 

Welfare Capitals 664 0.18 634 0.17 +30 +4.7 

Deferred Welfare Capitals with Option 28 177 7.79 26 562 7.04 +1 615 +6.1 

Forward Welfare Capitals 181 0.05 288 0.08 -107 -37.2 

Welfare Capitals for Younger 4 062 1.12 3 965 1.05 +97 +2.4 

Guarantee Capitals 55 0.02 38 0.01 +17 +44.7 

Deferred Capitals with Additional Cover 12 0.00 40 0.01 -28 -70.0 

Welfare Capitals for Study 682 0.19 596 0.16 +86 +14.4 

Temporary Disability Capital 14 0.00 14 0.00 +0 +0.0 

Death Grant 19 0.01 19 0.01 +0 +0.0 

Payment of Expenses Guarantee 13 981 3.87 11 864 3.15 +2 117 +17.8 

Miscellaneous Schemes 6 0.00 6 0.00 +0 +0.0 

3. COLLECTIVE SCHEMES 811 0.22 1 042 0.28 -231 -22.2 

4. CAPITALS TRANSFERRED TO PENSIONS 1 002 0.28 889 0.24 +113 +12.7 

5. TOTAL (1) + (2) + (3) + (4) 361 598 100.0 377 185 100.0 -15 587 -4.1 

31

32 

Capitalization Schemes still make up the lion’s share of the monies submited by Members. 

82.9% 

Under Retirement Capitals Scheme the capital received was contributed the lion’s share (82.9%) to the 

total monies submitted in 2005. Although the Capitalization Schemes segment accounts for a tiny proportion, 

mention should be made of the falls in the total value of submissions applied to Collective 

Schemes (-22.2%) and in the Retirement Savings scheme (-84.8%), with the latter not being unrelated 

to the lack of tax breaks in 2005. 

As regards Other Schemes, mention should be made of the importance of quotizations from Deferred 

Welfare Capitals with Option (with a proportion of 7.8%), Payment of Expenses Guarantee Scheme 

(3.9%), Retirement Pensions (1.5%) and Youth Schemes (1.1%). Although almost all schemes showed 

a volume of proceeds greater than that of last year (+5.7% on average), there were others where the 

annual variation was negative as was the case of Retirement Pensions (-14.4%) and Forward Welfare 

Capitals (-37.2%). 

7.1.3. Benefits Due and Refunds 

Designation 

STRUCTURE OF QUOTIZATIONS AND CAPITALS 

0.1 

TREND IN BENEFITS DUE AND REFUNDS 

Retirement Capitals 

The volume of Benefits Due and Refunds recorded in 2005 stood at 96 884 000 euros. Compared with 

2004, there was a growth of 17 320 000 euros i.e. over 21.8%. 



Number Value Number Value Value % 

PENSIONS AND ANNUITIES 5 580 5 381 5 282 4 733 648 +13.7 

Amounts subscribed 5 580 1 917 5 282 1 509 408 +27.1 

Improvements to Benefits 3 464 3 224 240 +7.4 

CAPITALS AND SUBSIDIES 8 526 21 348 7 510 18 292 3 056 +16.7 

Amounts subscribed 8 526 17 290 7 510 13 944 3 346 +24.0 

Improvements to Benefits 4 058 4 348 -290 -6.7 

REFUNDS 28 338 59 833 22 134 47 891 11 942 +24.9 

OUTHER COSTS 1 781 10 322 1 397 8 648 1 674 +19.4 

TOTAL 44 225 96 884 36 323 79 564 17 320 +21.8 

0.7% 

0.2% 

15.1% 

Retirement Savings 

Other Individual 

Schemes 

Collective Schemes 

Membership Welfare 

Benefit

This performance can be put down to the following factors which occurred during the year: 

• Increase in the costs defrayed on paying Pensions and Annuities and the respective Additional 

Benefits (+13.7%) which can mainly be put down to the greater number of Pensions being paid 

and the qualification of new beneficiaries; Retirement Pensions and Survivorship and Dowry Pensions 

were the schemes which made the biggest contribution to the total volume of these costs, 

accounting for around 44.5% and 32.7%, respectively; 

• Greater volume of Capital and Improvements to Benefits due under schemes for definite terms 

(+16.7%); the vast majority of these monies relate to the maturity of fractions of subscriptions to 

temporary schemes, as is the case with Deferred Welfare Capitals with Option which account for 

83.1% of the total volume of these benefits paid; 

• Increase in the value of Refunds made under Capitalization Schemes, specifically under Retirement 

Capitals which stood at 59 251 000 euros, around 25% up on the figure recorded for 2004; 

• Rise in «Other Members’ Costs» to 10 322 000 euros (+19.4%), particularly payments under the 

Payment of Expenses Guarantee Scheme (5 796 000 euros), the allocation to the «Prémio Decenal» 

of Retirement Schemes (2 313 000 euros) and the Assignments of Rights to Deferred Welfare Capitals 

with Option which, as a whole, accounted for 88.5% of the said total amount. 

7.1.4. Improvements Allocated to Benefits under Formation and in Progress for Actuary Schemes 

In 2005 the Associação Mutualista, pursuant to Article 18 of the Articles of Association and Article 53 

of the Mutualist Code, assigned a rate of additional benefits of 2% in line with the volume of Reserves 

to Cover Liabilities formed under Actuarial Schemes (with the exception of Retirement Pensions which 

had a technical rate of 6%) and whose proposal was approved at the General Meeting. 

By year-end around 3 758 000 euros had been distributed to Members in the form of additional benefits. 

7.1.5. Return on Capitalization Schemes 

A total annual return of 4.15% was distributed to subscribers to Capitalization Schemes made up of a 

guaranteed annual income component (3%) and a share in annual results (1.15%). An annual guaranteed 

income of 5.5% was assured to subscriptions to Retirement Capitals carried out on March 1st 

1990 to August 31st 1992. 

7.1.6. Life Annuities 

866 annuities and 485 annuity holders were registered in 2005. The sharp increase in the number of 

annuities on the 2004 figure (437 annuities) can be put down to the fact that increases in existing 

annuities are now regarded as new annuities. 

The value of capital received during the first quarter totalled 1 382 000 euros. As these annuities were 

causing the Associação Mutualista heavy losses, particularly as they were calculated in line with totally 

out-of-date life tables, the formation of new annuities was suspended from that time. Approval by the 

competent official entities of up-to-date technical bases is now being awaited so that this scheme can 

be reintroduced as soon as possible. Owing to the suspension the annuities formed during the year 

stood at only 19 (70 new annuities had been formed in 2004). 

The annual volume of costs defrayed on life annuities stood at 2 822 000 euros, slightly up on the 2004 

figure (2 653 000 euros). 

33

34 

7.2. NET RETURN ON ASSETS 

The management of financial assets – which had a mean value of 1 753 231 000 euros – afforded an 

accumulated income of 82 177 000 euros, corresponding to a mean annual rate of return (including 

extraordinary results) of 4.69%. 

Items 

NET RETURNS ON MUTUAL BENEFIT ASSOCIATION’S ASSETS 


Mean Balance Return Rate of Return 

Value % Value % 2005 2004 

Real Estate 119 183 6.8 13 106 15.9 11.00% 9.37% 

Securities 569 872 32.5 28 028 34.2 4.92% 5.69% 

Institutional Financial Interest 475 769 27.1 24 583 29.9 5.17% 3.65% 

Other Financial Interest 41 977 2.4 2 148 2.6 5.12% 6.13% 

Available Funds 526 064 30.0 14 248 17.3 2.71% 2.55% 

Others 20 366 1.2 64 0.1 0.31% 0.81% 

TOTAL 1 753 231 100.0 82 177 100.0 4.69% 4.50% 

Worthy of special mention was the improvement in returns associated with the Institutional Financial 

Interest and Real Estate and the slight fall in the return on Credit Securities which can be put down to 

the downward trend in interest rates on medium and long-term bonds on the financial markets of the 

euro. 

7.2.1. Real Estate Portfolio 

At year-end 2005 the Property Portfolio of the Associação Mutualista had a gross inventory value of 

159 617 000 euros. This constituted a year-on-year rise of 2 775 000 euros, around 1.8%, essentially 

attributable to remodelling and improvement works to some properties and, in particular, the variations 

in Land for Construction (one property was disposed of and there was a transfer of 2 335 000 euros 

deriving from Constructions in Progress). 

Designation 

STRUCTURE OF REAL ESTATE PORTFOLIO 



% % % 

Property for rental 138 977 87.1 138 457 88.3 +520 +0.4 

Buildings for own Facilities 18 173 11.4 18 139 11.6 +34 +0.2 

Land for Construction 2 467 1.5 246 0.2 +2 221 +902.8 

TOTAL a) 159 617 100.0 156 842 100.0 +2 775 +1.8 

a) These amounts differ from the figures shown in the table «Trend in the Net Assets of the Mutual Benefit Association» on page 31 as amortizations 

are deducted from them for the sum of 39 572 000 euros and 36 905 000 euros in 2005 and 2004, respectively. 

During this period income from the property portfolio stood at 13 106 000 euros which can be broken 

down as follows:

Designation 


• rents paid by CEMG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 538 

• rents paid by third parties . . . . . . . . . . . . . . . . . . . . . . . . . . 4 598 

• expenses on property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1 271 

• depreciations for the financial year . . . . . . . . . . . . . . . . . . . . -2 668 

• gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 909 

Compared to last year there was growth of 16.1% which can be put down to the legal updating of 

rents in 2005 (2.5%), lower expenses on property maintenance and, in particular, the income deriving 

from the disposal of Land. 

7.2.2. Loans to Members 

758 new Loans from Provisions to Cover Liabilities contracts were signed in 2005, up 76 on the previous 

year’s figure. The amount of credit granted stood at 1 523 000 euros (1 259 000 euros in 2004) which 

contributed to an accumulated loan balance of around 969 000 euros (836 000 euros in 2004). This 

performance derives from the characteristics of the loans in question whose repayment periods are no 

more than 18 months, determining a high degree of rotativity. 

7.2.3. Securities’ Portfolio 

At year-end 2005 the Securities’ Portfolio had an accumulated gross value of 638 719 000 euros, 

equivalent to a positive annual variation of 45.3% (+199 028 000 euros). The main financial movements 

focused on long-term public debt investments, new investment fund subscriptions (real estate 

and stock), applications in structured products and the subscription of bonds in national and foreign 

companies. In the last quarter there was also an application in Asian investment funds. 

At the end of the period the portfolio structure had the following make up: 

TREND IN SECURITIES’ PORTFOLIO AHEAD OF PROVISONS 




Portuguese Public Debt Securities 465 419 72.9 365 572 83.1 +99 847 +27.3 

State-backed Bonds 118 0.0 205 0.0 -87 -42.4 

Bonds in National Entities 39 079 6.1 11 735 2.7 +27 344 +233.0 

Shares in National Companies 505 0.1 505 0.1 +0 +0.0 

Shares in Foreign Companies 12 0.0 12 0.0 +0 +0.0 

Overseas Company Bonds 56 682 8.9 15 508 3.5 +41 174 +265.5 

Participation Units – Stock Invest. Funds 22 060 3.4 21 074 4.,8 +986 +4.7 

Participation Units – Real Estate Invest. Funds 34 844 5.5 25 080 5.7 +9 764 +38.9 

Participation Units – Foreigns Inv. Funds 20 000 3.1 0 0.0 +20 000 

TOTAL a) 638 719 100.0 439 691 100.0 +199 028 +45.3 

a) These amounts differ from the figures shown in the table «Trend in the Net Assets of the Mutual Benefit Association» on page 31 as provisons 

are deducted from them for the sum of 3 274 000 euros and 4 810 000 euros in 2005 and 2004, respectively. 

35

36 

The most visible feature of the performance of the securities’ portfolio is based on the diversification of 

investments made during the year, setting great store by alternative applications (such as structured 

products and investment funds) to the of the strengthening of interests in national public debt. The vast 

majority of investments, which constitute the portfolio due of Associação Mutualista, is mainly made up 

of securities with long-term maturities. 


500 000 

450 000 

400 000 

350 000 

300 000 

250 000 

200 000 

150 000 

100 000 

50 000 

0 

2004 2005 

Portuguese Public Debt Securities 

State-backed Bonds 

Bonds in National Entities 

Shares in National Companies 

Shares in Foreign Companies 

Overseas Company Bonds 

Participation Units 

– Stock Invest. Funds 


– Real Estate Invest. Funds 


– Foreign Invest. Funds 

During 2005 the credit securities’ portfolio afforded accumulated net income of 28 028 000 euros 

(22.3% up on 2004) to which the financial income from the various applications contributed as well as 

the recovery in provisions associated with financial investments deriving from the improvement in the 

majority of financial markets. 

Designation 

TREND IN SECURITIES’ PORTFOLIO INCOME 




Portuguese Public Debt Securities 20 537 73.3 19 333 84.4 +1 204 +6.2 

State-backed Bonds 5 0.0 6 0.0 -1 -14.5 

Bonds in National Entities 1 036 3.7 207 0.9 +829 

Shares in National Companies 16 0.1 27 0.1 -11 -40.4 

Shares in Foreign Companies 9 0.0 9 0.0 -0 -2.5 

Overseas Company Bonds 1 490 5.3 532 2.3 +958 +180.3 


– Stock Investment Funds 


2 519 9.0 1 383 6.0 +1 136 +82.1 

– Real Estate Investment Funds 


2 209 7.9 1 423 6.2 +785 +55.2 

– Foreign Investment Funds 208 0.7 0 0.0 +208 

TOTAL 28 028 100.0 22 920 100.0 +5 109 +22.3

7.2.4. Portfolio of Financial Interests 

70.9% 

TREND IN THE PORTFOLIO OF FINANCIAL INTERESTS AND ITS INCOME 

Designation 

0.3% 

2.4% 0.8% 

1.4% 

4.7% 

19.6% 

Insurance 

Pension Funds 

Financial 

Health 

Education 

«Residências Assistidas» 

Others 



Investment % Income % Investment % Income % Investment % Income % 

Srategic 33 036 76.7 1 391 64.8 33 073 78.4 2 131 83.8 -37 -0.1 -740 -34.7 

MG GESTÃO DE ACTIVOS FINANCEIROS 1 331 3.1 271 12.6 1 331 3.2 1 258 49.5 +0 +0.0 -988 -78.5 

FUTURO 1 963 4.6 241 11.2 3 019 7.2 279 11.0 -1 056 -35.0 -38 -13.6 

LUSITANIA – VIDA 4 954 11.5 247 11.5 4 954 11.8 176 6.9 +0 +0.0 +71 +40.0 

LUSITANIA – Companhia de Seguros 23 769 55.2 632 29.4 23 769 56.4 417 16.4 +0 +0.0 +215 +51.5 

RESIDÊNCIAS MONTEPIO, Serv. Saúde, S.A. 1 020 2.4 0 0.0 0 0.0 0 0.0 +1 020 +0 

Non-strategic 10 051 23.3 757 35.2 9 085 21.6 413 16.2 +966 +10.6 +344 +83.2 

LEACOCK 242 0.6 770 35.8 242 0.6 122 4.8 +0 +0.0 +648 

SILVIP 308 0.7 187 8.7 308 0.7 269 10.6 +0 +0.0 -82 -30.5 

BAO – BANCO DA ÁFRICA OCIDENTAL 153 0.4 35 1.6 153 0.4 42 1.6 +0 +0.0 -6 -15.1 

CAIXA ECONÓMICA CABO VERDE 2 582 6.0 183 8.5 2 582 6.1 183 7.2 +0 +0.0 +0 +0.0 

BDC – Banco de Desenv. e Comércio 2 943 6.8 0 0.0 2 943 7.0 0 0.0 +0 +0.0 +0 

PREVISÃO 50 0.1 1 0.1 50 0.1 2 0.1 +0 +0.0 -1 -31.2 

OTHERS 3 772 8.8 -420 -19.6 2 806 6.7 -205 -8.1 +966 +34.4 -215 +105.1 

TOTAL a) 43 088 100.0 2 148 100.0 42 158 100.0 2 544 100.0 +929 +2.2 -396 -15.6 

a) These amounts differ from the figures shown in the table «Trend in the Net Assets of the Mutual Benefit Association» on page 31 

as provisions are deducted from them for the sum of 1 310 000 euros and 915 000 euros in 2005 and 2004, respectively. 

The structure of the Other Financial Interests of the Associação Mutualista underwent some changes in 

2005 by dint of the incorporation of a new undertaking in the Health sector (Residências Montepio, 

Serviços de Saúde, SA), the acquisition of third party stakes (except CEMG) in the company Credint and 

also the reduction in the investment value in Futuro, S.A. by dint of a reduction in its share capital. 

The total value of investment calculated at year-end stood at 43 088 000 euros, representing annual 

growth of 2.2%, basically in assisted residence and home care services. 

A graphical representation of the structure of the miscellaneous financial interests has been set out 

below: 

37

38 

The rate of return generated by this portfolio (5.12%) stood below last year’s value (6.13%), with net 

income standing at around 2 148 000 euros (2 544 000 euros in 2004). The main contributor to this fall 

in returns was the fact that in 2004 there was an integration of the activity of MG Patrimónios into MG 

Gestão de Activos Financeiros, with the liquidation of the former which led to a gain of 954 000 euros 

which self-evidently was not repeated in 2005. 

7.2.4.1. Institutional Financial Interest in Caixa Económica Montepio Geral 

Further to the proposal submitted at the General Meeting held on March 30th 2005, the Institutional 

Financial Interest in the Caixa Económica was increased by 40 000 000 euros (the same as the amount 

registered in 2004), rising from 445 000 000 to 485 000 000 euros. 

The value of the results transferred from CEMG stood at 24 783 000 euros, i.e. up 53.8% on the previous 

year’s figure (16 119 000 euros). This amount was applied to Own Funds (Scholarship Grants and Membership 

Welfare), in the Available Funds of the Mutualist Schemes and also in the General Reserve Fund. 

7.2.5. Available Funds 

The low return and great volatility of interest rates on bonds and the very high risks of the share market, 

particularly its recent performance, have led to a high level of Associação Mutualista Assets being 

kept in the form of available funds. Better rates of return and lower volatility is being awaited on the 

financial markets to reduce this proportion in accordance with the needs of the Associação Mutualista. 

This is why the volume of capital received during 2005 strengthened the Available Funds structure of the 

Associação Mutualista for its assets as a whole, in particular current accounts which increased from 

22.7% to 23.1%. Of the amount accumulated in Available Funds (593 423 000 euros) interest was 

received for the sum of 14 248 000 euros which represented a rate of return of 2.71%, slightly greater 

than that of the previous year (2.55%) by dint of the revision of interest rates paid to the deposits of the 

Associação Mutualista formed at CEMG. 

7.3. MEMBERSHIP ACTIVITIES 

7.3.1. Complementary Benefits to Members 

With a view to expanding the network of complementary benefits at the disposal of the Members of 

Montepio Geral, Agreements were signed in 2005 with 78 Institutions from all over Portugal, of which 

51 were in the Health, Welfare and Social Protection area, 26 in the field of Tourism, Consumption and 

Leisure and 1 in the field of Training and Culture. 

The 78 Agreements signed in 2005 allowed access to over 116 discount points. 

At year-end 2005 the Associação Mutualista had Agreements in force with 388 Entities, providing access 

to 1 073 Discount Points, throughout Portugal. 

The Discount Points were distributed as follows: 

– Health, Welfare and Social Protection – 595 (55.4%) 

– Tourism, Consumption and Leisure – 386 (36.0%) 

– Training and Culture – 92 (8.6%).

7.3.2. Inauguration of Mutualist Space 

On October 4th 2005 as part of the commemorations of the 165th anniversary of Montepio Geral – Associação 

Mutualista the first Mutualist Space was inaugurated in the revitalised downtown Lisbon area of 

Chiado. 

Situated at Rua do Carmo, no. 62, this spacious, comfortable and cheerful facility seeks to achieve more 

personalised customer service and to provide a place for meeting and dialoguing with Members. 

On this occasion, and in a gesture rife with symbolism, Member number 300 000, a 4-year old girl, was 

distinguished, thereby paying tribute not only to youth but also to the all-embracing nature of the mutualist 

movement. 

7.3.3. Tribute to Members with 50 or more years of membership 

With a view to promoting membership life and the mutualist spirit, tributes were organised throughout 

the year and at various points of the country to Members who celebrated their 50th year or more connected 

to Montepio Geral – Associação Mutualista, having offered a commemorative medal and 

diploma to each, a gesture that was very much appreciated by the 442 members honoured. 

7.3.4. Institutional Commemorative Actions 

To mark the 165th anniversary of Montepio Geral – Associação Mutualista, a concert was promoted at 

the Lisbon Coliseu with the Metropolitan Orchestra of Lisbon and the artist singer, attended by Members, 

Clients and Employees. 

In this context also worthy of special mention was the celebration of the 161st anniversary of Caixa 

Económica Montepio Geral whose commemoration, shared with Members, Clients and Employees, took 

place at Camões Theatre in Lisbon with a concert by the Metropolitan Orchestra of Lisbon. 

7.4. PERMANENT FUNDS, OWN FUNDS AND RESERVES 

The amount of Funds and Reserves of the Associação Mutualista grew in 2005 by around 331 440 000 

euros (a positive annual variation of 21.8%) attaining a total volume of 1 855 116 000 euros by year-end. 

TREND IN FUNDS AND RESERVES 

Designation 2005 2004 


Variation 

Value % 

PERMANENT FUNDS 1 644 534 1 331 931 +312 603 +23.5 

PROVISIONS TO COVER LIABILITIES 1 591 222 1 220 694 +370 528 +30.4 

For Capitals and Pensions 1 414 287 1 102 706 +311 581 +28.3 

For Life Annuities 21 293 21 715 -422 -1.9 

Actuarial Provisions to Cover Liabities 59 312 0 +59 312 

Surplus for Subsidies and Additional Benefits 96 330 96 273 +57 +0.1 

TECHNICAL SURPLUSES 53 312 111 237 a) -57 925 -52.1 

OWN FUNDS 51 763 18 455 +33 308 +180.5 

MEMBERSHIP WELFARE FUND 20 096 17 227 +2 869 +16.7 

SCHOLARSHIP FUND 822 786 +36 +4.6 

PAYMENT OF EXPENSES GUARANTEE FUND 30 411 0 a) +30 411 

CLINICAL SERVICE FUND – MONTEPIO EGITANIENSE 434 442 -8 -1.8 

TOTAL PERMANENT AND OWN FUNDS 1 696 297 1 350 386 +345 911 +25.6 

RESERVES 158 819 173 290 -14 471 -8.4 

TOTAL FUNDS AND RESERVES 1 855 116 1 523 676 +331 440 +21.8 

a) Accounting reclassification GPE/88 (30 411 thousands of euros) 

39

40 

The table above shows us that most of the amount already accumulated derives from Provisions to 

Cover Liabilities formed by the Associação Mutualista (85.8%) in line with its future responsibilities 

towards Members. It should also be pointed out that the Associação took advantage of the transformations 

in progress in the field of accounting rules with a view to achieving convergence with the 

International Financial Reporting Standards to alter the accounts policy vis-à-vis reserves to cover liabilities, 

also carrying out a check on the suitability of responsibilities on the date of each report on the 

financial statements, using actuarial assumptions which are better suited to the current situation in 

terms of life expectancy and the interest rate to be used when discounting responsibilities. On this 

basis an additional amount had to be added to reserves to cover liabilities, to wit 59 312 000 euros. 

Own Funds underwent a more significant annual variation owing to the accounting reclassification of 

the Payment of Expenses Guarantee Scheme 1988 which was moved from the Technical Surpluses 

item of Permanent Funds. 

Generally speaking, the interpretation for the various performances turned in during the year is as follows: 

• Provisions to Cover Liabilities – refers to future responsibilities assumed under membership 

schemes; the increase in this item (+30.4%) can particularly be put down to the responsibilities 

formed under Retirement Capitals Scheme (around 79.4% of total Provisions to Cover Liabilities), 

but also owing to the formation of «Actuarial Provisions to Cover Liabilities» for the sum of 

59 312 000 euros which corresponds to an increase in accordance with the responsibility adequacy 

test; 

• Technical Surpluses – express the remainder of Permanent Funds vis-à-vis the Reserves to Cover Liabilities 

of membership schemes accumulated over the years; excluding the effect of the accounting 

reclassification of GPE/88, this item had a negative annual variation of 27 514 000 euros by dint of 

the fact that the increases in allocations to Reserves to Cover Liabilities imply the use of the remainder 

of Permanent Funds of the respective schemes; 

• Own Funds – this is formed for each scheme whose benefits do not require the existence of 

reserves to cover liabilities; in the period under analysis (once again isolating the effect of GPE/88), 

this item showed growth of 2 897 000 euros, particularly due to the Membership Welfare Fund; 


2 000 000 

1 800 000 

1 600 000 

1 400 000 

1 200 000 

1 000 000 

800 000 

600 000 

400 000 

200 000 

0 


Funds and Reserves 

Provisions to Cover Liabilities 

Improvements to Benefits 

Technical Surpluses 

Own Funds 

Reserves

• Reserves – these include Revaluation, General and Free Reserves which suffered a negative annual 

variation in 2005 for the sum of -14 471 000 euros (-8.4% on the previous year), closing the financial 

year on 158 820 000 euros; this negative trend can be put down to the need to resort to the 

General Reserve Fund to complement Technical Surpluses which proved to be insufficient to cater 

for the formation of the aforementioned «Actuarial Provisions to Cover Liabilities». 

At year-end the degree of coverage of responsibilities of the Associação Mutualista stood at 1.17. 

Although slightly lower than the indicator for 2004 (1.25) it still means that financial soundness and 

capacity to meet future commitments are still at healthy levels. 

7.5. RESULTS 

The accumulated Net Result of the Associação Mutualista for 2005 stood at 38 198 000 euros, in other 

words an annual increase of 20% (6 358 000 euros). 

The table below illustrates the movements which contributed to this increase: 

PROFIT-AND-LOSS ACCOUNT FOR THE MUTUAL BENEFIT ASSOCIATION 


1. INCOME AND GAINS 


Variation 

Value % 

Membership Income 429 137 435 590 -6 453 -1.5 

Supplementary Income 4 20 -16 -80.0 

Contributions and Operating Subsidies 24 583 15 919 +8 664 +54.4 

Financial Income and Gains 57 694 43 355 +14 339 +33.1 

Extraordinary Income and Gains 6 143 8 599 -2 456 -28.6 

2. COSTS AND LOSSES 

TOTAL 517 561 503 483 +14 078 +2.8 

Membership Costs 462 435 460 143 +2 292 +0.5 

External Supplies and Services 2 169 1 977 +192 +9.7 

Personnel Costs 7 594 2 874 +4 720 +164.2 

Other Operating Costs 689 629 +60 +9.5 

Financial Costs and Losses 1 385 1 637 -252 -15.4 

Extraordinary Costs and Losses 264 238 +26 +10.9 

TOTAL 474 536 467 498 +7 038 +1.5 

3. CASH FLOW 43 025 35 985 +7 040 +19.6 

4. DEPRECIATION 2 668 2 673 -5 -0.2 

5. DEPRECIATION AND PROVISIONS 

FOR FINANCIAL INVESTMENTS 2 159 1 472 +687 +46.7 

6. RESULT FOR THE FINANCIAL YEAR (3–4–5) 38 198 31 840 +6 358 +20.0 

41

42 


600 000 

500 000 

400 000 

300 000 

200 000 

100 000 

0 


Income and Gains 

Costs and Losses 

Depreciations 

and Provisions 

Result for the 

Financial Year 

Generally speaking, the performance of results during the financial year of 2005 was marked by the following 

events: 

• Increase in the results transferred from the Caixa Económica (+53.8%) which made a decisive contribution 

to the Income item and, self-evidently, to the formation of the results themselves; 

• A considerable improvement in almost all components of Financial Income and Gains (+33.1%), 

though more pronounced in the interest obtained from bank deposits and the income earned from 

the credit securities portfolio; 

• High amounts borne as Administrative Costs, particularly on personnel costs whose value has more 

than doubled since last year as staffing costs assigned to Associação services are now imputed to 

the Associação Mutualista whereas in previous years they had been registered as costs of the Caixa 

Económica; 

• Exacerbation of the Income and Costs ratio inherent to Membership, basically by dint of the costs 

borne vis-à-vis the guaranteed income of Capitalization Schemes (+8 895 000 euros) and the larger 

payments made under the Payment of Expenses Guarantee scheme; 

• Reduction in Extraordinary Income which can be put down to the lack of income from trading 

operations which were only carried out in 2004.

7.6. PROPOSED APPLICATION OF RESULTS AND RESOURCES TO TECHNICAL 

SURPLUSES AND TO THE GENERAL RESERVE FUND 

In view of the Results for the Financial Year formed by the Balances of Available Funds of Mutualist 

Schemes and the income from the General Reserve Fund, in accordance with annex II to this report, for 

the sum of 38 198 364.98 euros; 

In view of the possibility of recourse to the Technical Surpluses of the Permanent Funds of the respective 

Schemes to cover the negative annual balance of Available Funds of some Mutualist Schemes for the 

sum of 27 752.06 euros; 

In view of the possible recourse to the General Reserve Fund to complement coverage of the negative 

annual balance of the Available Fund of Temporary Welfare Schemes owing to Disability or Death and 

Retirement Pensions (Articles of Association of 1922) by dint of the depletion of the Technical Surpluses 

of Permanent Funds of the respective schemes for the sum of 13 521.04 euros; 

In view of the fact that by dint of the above the amount available for application was the sum of the 

Results for the Financial Year of the Associação Mutualista for 2005 along with the Recourse to Technical 

Surpluses of the Permanent Funds and to the General Reserve Fund which stood at 38 239 638.08 euros. 

It is thus proposed: 

7.6.1. Resource to Technical Surpluses of the Permanent Funds and to the General Reserve Fund 

That under the terms of Article 59 of the Articles of Association there be due recourse to the following 

Funds: 

7.6.1.1. Permanent Funds of the Respective Schemes 

(Euros) 

–Technical Surpluses – Free Reserves: 

(that which is necessary to cover the negative annual 

balance of the Available Funds for the scheme) 

Disability and Retirement Pensions 186.01 

Life Annuities in Favour of Nominees 1 462.15 

Retirement Capitals Pensions 18 009.66 

Collective Scheme Pensions 

(The amount to be found in the respective Technical Surpluses 

for the partial coverage of the negative annual balance 

of the respective Available Fund of the scheme) 

38.22 19 696.04 

Retirement Pensions (Articles of Association of 1922) 11.26 

Temporary Welfare Capitals in case of Disability or Death 8 044.76 8 056.02 27 752.06 

7.6.1.2. General Reserve Fund: 

(The remainder to complement total coverage of the negative 

annual balance of the respective Available Funds) 

Retirement Pensions (Articles of Association of 1922) 172.28 

Temporary Welfare Capitals in case of Disability or Death 13 348.76 13 521.04 

TOTAL (1) 41 273.10 

43

44 

7.6.2. Balance of Available Funds and Income from the General Reserve Fund plus Resource to 

Technical Surpluses and to the General Reserve Fund 

That it be applied in the following way: 

7.6.2.1. To the General Reserve Fund: 

– Income from the Fund under the terms of subparagraph a) 

no.2, Article 56 of the Articles of Association: 10 685 099.54 

– Allocation according to subparagraph b), no.2 of Article 56 

and subparagraph a), no.1 of Article 60 

(5% of net results from the corresponding mutual schemes): 

Individual Schemes 

Membership Welfare Benefit 206 219.00 

Montepio Egitaniense Clinical Services 1 311.04 

Survivorship and Dowry Pensions 41 527.34 

Welfare Capitals 72 531.26 

Deferred Welfare Capitals with Option 153 782.65 

Forward Welfare Capitals 5 067.67 

Welfare Capitals in Favour of Nominees 40.95 

Welfare Capitals for Younger 54 311.09 

Temporary Disability Capital 1 544.02 

Retirement Capitals 320 925.73 

Retirement Savings 7 000.83 

Guarantee Capitals 3 035.72 

Welfare Capitals for Study 6 593.01 

Death Grant 3 984.94 

Death Grant – Lutuosa Nacional 73.86 

Retirement Pensions 36 499.74 

Pensions for the Handicapped 1 033.24 

Survivorship Annuities 312.81 

Payment of Expenses Guarantee (1983 Articles of Association) 77.77 

Release of Emphiteutic Property 109.92 

Retirement Pensions – Quotes Restitution 16 643.18 

Retirement Pensions – Additional Disability 1 369.23 

Deferred Capitals with Additional Cover 124.84 

Disability – Collective Schemes 59.57 

Collective Schemes 1 890.57 

Life Annuities 6 741.34 942 811.32 

– (Provision under the terms of Article 18 and of sub-paragraph c) 

of no.1 of Article 60 of the Articles of Association 

(52% of the annual balance of the Available Fund 

of the respective mutualist scheme): 

Payment of Expenses Guarantee 4 523 122.55 16 151 033.41 

(Euros)

7.6.2.2. To the Permanent Funds of the Respective Schemes: 

– (Allocation under the terms of subparagraph c), no.1 of Article 60 of the Articles of Association) 

– Technical Surpluses – Free Reserves: 

(Euros) 

Survivorship and Dowry Pensions 789 019.45 

Welfare Capitals 1 378 093.86 

Deferred Welfare Capitals with Option 2 921 870.32 



Welfare Capitals for Younger 1 031 910.65 




Death Grant – Lutuosa Nacional 1 403.26 

Retirement Pensions 693 495.20 


Survivorship Annuities 5 943.36 

Payment of Expenses Guarantee (1983 Articles of Association) 1 477.63 

Release of Emphiteutic Property 2 088.44 

Retirement Pensions – Restitution of Quotas 316 220.51 

Retirement Pensions – Additional Disability 26 015.37 

Deferred Capitals with Additional Cover 2 371.89 

Disability – Collective Schemes 1 131.46 

Life Annuities 128 085.53 7 646 139.59 

7.6.2.3. To the Own Funds of the Respective Schemes: 

(Euros) 

(Allocation under the terms of subparagraph c), no.1 of Article 60 of the Articles of Association) 

– Capitalization Schemes 

Individual Schemes 

Retirement Capitals 6 097 588.88 

Retirement Savings 133 015.77 

Guarantee Capitals 57 678.59 

Collective Schemes 35 921.13 6 324 204.37 

– Membership Welfare Fund 3 918 160.91 

– Montepio Egitaniense Clinical Services Fund 24 909.75 

– Payment of Expenses Guarantee Fund 4 175 190.05 14 442 465.08 

TOTAL (2) 38 239 638.08 

TOTAL (3) = TOTAL (2) - TOTAL (1) 38 198 364.98 

45

46 

7.7. PROPOSAL FOR ALLOCATION OF IMPROVEMENTS IN BENEFITS 

(Allocation under the terms of Article 18 of the Articles of Association and 53 of the Mutualist Code) 

In view of the impossibility to assign Additional Benefits: 

– To Schemes with negative Available Funds: 

Temporary Welfare Capitals for Disability or Death 

Retirement Pensions (Articles of Association 1922) 

Disability and Retirement Pensions 

Retirement Capitals Pensions 

Life Annuities in favour of Nominees 

– To schemes whose Reserves to Cover Liabilities calculated under the terms of no.4, Article 54 

of the Articles of Association, in other words, in accordance with the officially approved technical 

bases are inadequate to cover the respective responsabilities calculated in accordance with the technical 

bases defined by an independent consultant, taking into account up-to-date Life Tables and technical 

rates, with the existing technical Surpluses proving insufficient which is why recourse to the General 

Reserve Fund proved vital in order to allow compliance with no.5 of the aforementioned Article 54 of the 

Articles of Association: 

Retirement Pensions and the respective Additional Disability pension (technical rates of 6% and 4%) 

It is proposed that Additional Benefits be assigned (1.5% in Reserves to Cover Liabilities relating to benefits 

under formation and in progress), partially using the Technical Surpluses of the respective Permanent Funds 

to the following schemes: 

Survivorship and Dowry Pensions 357 927.00 

Welfare Capitals 494 587.50 

Deferred Welfare Capitals with Option 1 420 621.50 



Welfare Capitals for Younger 498 466.50 




Death Grant – Lutuosa Nacional 270.00 


Survivorship Annuities 4 338.00 

Deferred Capitals with Additional Cover 927.00 

(Euros) 

TOTAL 2 884 440.00 

7.8. PROPOSAL FOR REPLACEMENT IN GENERAL RESERVE FUND OF THE 

AMOUNTS USED TO COMPLETE AVAILABLE FUNDS 

Pursuant to no. 3 of Article 56 of the Montepio Geral – Associação Mutualista Articles of Association 

Life Annuities should compensate the General Reserve Fund for the sum of 404 804.56 euros, an 

amount used in 2004 to complete its Available Fund (no. 3, Article 64 of the Articles of Association) and 

it is thus proposed that the General Reserve Fund is compensated by 128 085.53 euros, the value of the 

outstanding balance of the Available Fund for 2005 of Life Annuities after the endowment to the General 

Reserve Fund.

7.9. PROPOSAL FOR ALLOCATION OF RETURN ON RETIREMENT CAPITALS, ON 

RETIREMENT SAVINGS AND COLLECTIVE SCHEMES 

Assuming the annual income generated by Retirement Capitals, Retirement Savings and Collective 

Schemes which, after covering the guaranteed rates, is expressed in the values of endowments to the 

respective Equity set out in the previous number above 7.6.2.3., it is proposed that the general annual 

return of 3.5% is assigned to these capitalisation schemes, thus ensuring the guaranteed annual income 

of 3% under the terms of the respective Regulations plus 0.5% as a share in the annual results for the 

schemes. For Retirement Capitals subscriptions made between March 1st 1990 and August 31st 1992 

an annual guaranteed income of 5.5% is assured. 

7.10. PROPOSAL FOR APPLICATION OF AMOUNT TO BE TRANSFERRED FROM 


In view of the amount to be transferred from the Caixa Económica, it is proposed that, in accordance 

with Article 62 of the Articles of Association, it be applied in the following way: 

(Thousands of Euros) 

To the Membership Welfare Fund 70 

To the Scholarship Fund 30 

To Available Funds, the Administration Fund and the General Reserve Fund 11 497 

Total 11 597 

7.11. PROPOSAL FOR INCREASE IN INSTITUTIONAL FINANCIAL INTEREST IN 


As it is still vital to increase the Institutional Capital of the Caixa Económica and as the Associação 

Mutualista will have funds at its disposal which may be assigned to this type of application, the Board 

of Directors, subject to a decision by the General Board, proposes: 

– to make an endowment to the Caixa Económica for the sum of 100 million euros to an increase its 

Institutional Capital. 

For the said proposal to be approved, the Institutional Financial Interest in the Caixa Económica shall rise 

to 585 million euros. 

7.12. PROPOSED ENDOWMENT TO THE MONTEPIO GERAL FOUNDATION 

In order to allow the Montepio Geral Foundation, founded by Montepio Geral – Associação Mutualista, 

to meet its statutory requirements, the Board of Directors dos duly propose to the General Meeting that 

an endowment be allocated, to be transferred from the Membership Welfare Fund for the sum of 500 

thousand euros. 

47

48 

7.13. BALANCE SHEET AND PROFIT-AND-LOSS ACCOUNT 

BALANCE SHEET AS AT 31ST DECEMBER 2005 AND 2004 

Tangible Assets 23 143 5 173 17 970 16 228 

Land and Natural Resources 7 3 040 – 3 040 819 

Buildings and Other Constructions 7 17 600 5 173 12 427 12 745 

Other Tangible Assets 7 77 – 77 77 

Work in Progress 7 2 426 – 2 426 2 587 

Financial Investments 1 307 616 38 981 1 268 635 1 029 349 

Institutional Financial Interest 9 485 000 – 485 000 445 000 

Other Financial Interests 9 43 088 1 309 41 779 41 243 

Stakes in Capital – Miscellaneous Shares 8 517 – 517 517 

Bonds and Other Fixed Income Securities 8 95 879 622 95 257 27 286 

Financing Loans 1 832 – 1 832 1 851 

Real Estate Investment 7 138 977 34 399 104 578 106 374 

Other Financial Applications 8 542 323 2 651 539 672 407 078 

Debts by Third Parties 1 636 152 1 484 721 

Members 448 – 448 442 

State and Other Public Entities 17 186 – 186 134 

Other Debtors 1 002 152 850 145 

Trading Securities 20 000 

Other Securities – – – 20 000 

Bank and Cash Deposits 593 423 593 423 485 436 

Bank Deposits 35 593 423 – 593 423 485 436 

Accruals and Deferred 17 361 17 361 10 798 

Accrued Income 32 17 361 – 17 361 10 798 

TOTAL DEPRECIATION – 39 572 – – 

TOTAL PROVISIONS – 4 734 – – 

TOTAL ASSETS 1 943 179 44 306 1 898 873 1 562 532 

Lisbon: March 1st 2006 

THE CHIEF ACCOUNTANT 


ASSETS NOTES GROSS ACCUM. DEPRECIATION 

ASSETS 

AND PROVISIONS 

See accompanying notes to the financial statements 

2005 2004 

NET ASSETS NET ASSETS


EQUITY AND LIABILITIES NOTES 2005 

2004 

EQUITY 

Social Fund 

Own Funds 23 51 763 18 455 

Technical Surpluses 20 and 23 53 312 110 847 

Life annuities – Technical Surpluses 20 and 23 – 390 

Revaluation Reserves 10 and 23 32 910 32 910 

Legal Reserves 23 124 577 139 211 

Other Reserves 23 1 332 1 169 

Net Result for the Financial Year 38 198 31 840 

TOTAL EQUITY 302 092 334 822 

LIABILITIES 

Provisions for Risks and Costs 1 591 222 1 220 694 

Provisions to Cover Liabilities for Membership Schemes 20 and 23 1 494 891 1 124 421 

Surplus for Subsidies and Additional Benefits 20 and 23 96 331 96 273 

Debts to Third Parties 4 578 7 014 

Beneficiaries 1 363 1 063 

Amounts owed to Credit Institutions 33 2 760 4 037 

State and Other Public Entities 17 37 28 

Suppliers 87 156 

Other Creditors 331 1 730 

Accruals and Deferrals 981 2 

Accrued Costs 32 981 2 

TOTAL LIABILITIES 1 596 781 1 227 710 

TOTAL EQUITY AND LIABILITIES 1 898 873 1 562 532 

OBLIGATIONS AND FUTURE COMMITMENTS 

Foundations’ Funds Management 18 1 426 1 382 

Commitments from Third Parties 18 5 112 4 253 

Commitments to Third Parties 18 670 265 

TOTAL 7 208 5 900 

THE BOARD OF DIRECTORS 

José da Silva Lopes – Chairman 

Alberto José dos Santos Ramalheira 

Ludovico Morgado Cândido 

José de Almeida Serra 

António Tomás Correia 

49

50 

PROFIT-AND-LOSS ACCOUNT AS AT 31ST DECEMBER 2005 AND 2004 

DEBIT NOTES 2005 

2004 

COSTS AND LOSSES 

Membership Costs 462 435 460 143 

Increase of Provisions to Cover Liabilities 

Other Membership Scheme Costs 

362 729 377 926 

Payments 1 917 1 509 

Overdue Capitals 36 77 123 61 835 

Subsidies and Additional Benefits 7 522 7 572 

Life Annuities 2 822 2 653 

Other Membership Costs 10 322 8 648 

External Supplies and Services 2 169 1 977 

Personnel Costs 26 7 594 2 874 

Depreciation 7 352 351 

Provisions 90 75 

Other Operating Costs and Losses 689 629 

Depreciation and Provisions for Financial Investments 27 4 385 3 719 

Interest and Similar Costs 27 1 385 1 637 

Extraordinary Costs and Losses 

(A) 479 099 471 405 

Donations 29 88 68 

Losses arising from Fixed Assets 29 33 42 

Corrections on Previous Years 29 128 

Other Extraordinary Losses 29 143 

TOTAL COSTS (C) 479 363 471 643 

RESULT FOR THE FINANCIAL YEAR 38 198 31 840 

TOTAL DEBIT 517 561 503 483 




See accompanying notes to the financial statements


CREDIT NOTES 2005 

2004 

INCOME AND GAINS 

Membership Income 429 137 435 590 

Reduction in Provisions to Cover Liabilities 64 414 51 804 

Other Membership Scheme Profits 364 723 383 786 

Fees 515 464 

Quotizations 57 382 53 946 

Capitals Received 304 216 323 239 

Life Annuities 1 382 4 558 

Other Membership Income 1 228 1 579 

Supplementary Income 4 20 

Contributions and Operating Subsidies 24 583 15 919 

Allocation from Caixa Económica 23 24 583 15 919 

Financial Income and Gains 57 694 43 355 

Interest Income 27 38 502 24 232 

Return on Real Estate 27 and 28 14 136 13 540 

Return on Interests in Capital 27 2 593 1 802 

Exchange Rate Gains 27 208 – 

Other Financial Income and Gains 27 2 247 3 781 

Income from Coverage Operations 27 8 – 

Extraordinary Income and Gains 

(B) 511 418 494 884 

Gains arising from fixed assets 29 2 915 5 904 

Depreciation and Provisions decrease 29 3 211 2 651 

Corrections on Previous Years 29 – 44 

Other Extraordinary Income and Gains 29 17 – 

TOTAL CREDIT (D) 517 561 503 483 

SUMMARY: 

CURRENT PROFIT (B) – (A) 32 319 23 480 

NET PROFIT (D) – (C) 38 198 31 840 







51

52 

7.14. STATEMENT OF CASH-FLOWS 

FOR THE YEARS ENDED 31 DECEMBER, 2005 AND 2004 

Cash flow arising from operating activities 



Increase / (Decrease) in suppliers (43) (1 173) 

Debtors and creditors (1 483) (88) 

Membership costs (97 393) (80 227) 

Membership profits 364 465 383 786 

Members and beneficiaries 297 261 

Other operating profits 31 47 

Other operating costs (9 479) (5 480) 

Own funds (446) (366) 

Technical surpluses (689) (679) 

Extraordinary losses and costs (80) (56) 

Taxes (43) 174 

Cash flow arising from investment activities 

255 137 296 199 

Proceeds from sale of other investments 839 2 704 

Disposal/(acquisition) of investment property 13 007 13 721 

Disposal/(acquisition) of investment securities (177 442) (125 957) 

Disposal/(acquisition) of trading securities – 2 323 

Deposits with fixed maturity date (21 852) (57 944) 

Commercial paper 20 590 (20 000) 

Interest income from deposits repayable on demand 8 979 3 881 

Acquisition of tangible assets 315 430 

Cash flow arising from financing activities 

(155 564) (180 842) 

Institutional financial investment (40 000) (40 000) 

Profits transferred from CEMG 24 783 16 119 

Financing loans (16) (25) 

Loans from credit institutions (1 353) (1 326) 

(16 586) (25 232) 

Net changes in cash and equivalents 82 987 90 125 

Cash and equivalents at the beginning of the period 355 436 265 311 

Cash and equivalents at the end of the period 438 423 355 436 

See accompanying notes to the financial statements

7.15. NOTES TO THE FINANCIAL STATEMENTS 

31 DECEMBER, 2005 AND 2004 

Introduction 

Montepio Geral – Associação Mutualista («Association») is a private social welfare institution, established 

on 4 October, 1840. 

The purpose of the Association is to develop and promote social protection, solidarity and integrity 

activities in benefit of the Associates and its families, as well as the beneficiaries designated by them. 

3. Accounting policies 

3.1. Basis of presentation 

Montepio Geral – Associação Mutualista is a private mutual benefit institution established in Portugal in 

1840. The Association has commenced its operations in 4 October, 1840, and the Financial Statements 

presented reflect the results of the operations for the years ended 31 December, 2005 and 2004, and 

have been prepared in accordance with the basic principle of historical cost. 

The following notes are numbered in accordance with the Mutual Associations Accounting Plan. This 

report only includes the notes applicable or significant to the Financial Statements. 

The Association is exempt from presenting consolidated Financial Statements. On this basis, the Financial 

Statements do not reflect the patrimonial changes that could result from the consolidation method 

application to investments and institutional financial investments. 

The Financial Statements were prepared on a going concern basis based on the Association’s accounting 

records, maintained in accordance with the accounting principles of the Mutual Associations 

Accounting Plan, which is based on the principles established on the Portuguese Official Accounting 

Plan, and regulated by the Decree-Law No. 422/93 of 28 December. 

3.2. Tangible assets 

Tangible assets are recorded at cost or revalued amounts in accordance with the Portuguese Legislation. 

The revaluation effects are recorded in the balance «Revaluation reserves» (notes 10, 11 and 23). 

Depreciation is calculated on a straight-line basis, at the maximum rates permitted for taxation purposes, 

in accordance with Decree-Law No. 2/90, of 12 January, over the following periods, which do not 

differ significantly from their estimated useful life: 

Number of years 

Buildings and other constructions 50 

Investment property 50 

The buildings booked at the balance «Investment property» (note 7), are held for investment purposes 

and are not related to the Association operational activity. 

53

54 

3.3. Investments 

Investments are accounted for at acquisition cost. The investments held correspond to equity investments 

in companies that are related to the Association’s and Caixa Económica Montepio Geral («Caixa») 

activities, with long-term nature. If unrealised losses are permanent, an impairment is recognised. 

The institutional financial investment is accounted for at acquisition cost and corresponds to the subscribed 

and realised capital of Caixa Económica Montepio Geral («Caixa»). 

3.4. Securities 

Treasury bonds are recorded at cost. The positive difference between the acquisition cost and the nominal 

value, which corresponds to the premium paid upon purchase, is amortised over the period to maturity. 

Other securities are recorded at the lower of cost or market value (or presumed realisable value in case 

of unlisted securities). 

Excluding Treasury bonds, unrealised losses resulting from the difference between cost and market value 

(or presumed realisable value) are fully provided for. 

3.5. Provisions for doubtful debts 

Provision for doubtful debts is charged based on the evolution of doubtful debts balance, and is presented 

as a deduction to this balance. 

The provision for doubtful debts is assessed every quarter, based on the debt overdue period. 

3.6. Recognition of income and expenses 

Income and expenses are recorded on an accrual basis. The differences between the amounts received 

and paid and the corresponding generated revenues and expenses are accounted for as accruals and 

deferred income. 

3.7. Mathematical provisions 

Mathematical provisions cover the liabilities arising from the different forms of benefits subscribed by 

the Associates. These provisions are calculated on a monthly basis using actuarial bases approved by 

Ministério do Trabalho e da Solidariedade Social. In 31 December, 2005, the Association, considering the 

changes in course related with the accounting standards and with the purpose of a progressive convergence 

with the requirements of the International Financial Reporting Standards («IFRS»), has changed 

the accounting policy concerning the mathematical provisions, and started to perform additionally, at 

each reporting date, a liability adequacy test («LAT»), in order to evaluate the mathematical provisions. 

The liability adequacy test is based on the application of best estimates, namely those concerning the life 

expectation and the interest rate used in liabilities discount. 

Considering that the liability adequacy test represents a change to the current accounting policies, the 

respective impact determined as at 31 December, 2005, was recognised against the permanent fund 

– technical surpluses of each scheme up to the respective amount, and against the legal reserve fund, 

in accordance with the article 59 of the Association by-laws. 

The liability adequacy test will be performed separately to each scheme. Any deficiency detected will be 

recognised by the Association against income when determined.

3.8. Expenses related to Caixa Económica Montepio Geral 

The Association expenses related with personnel costs and other services are supported by Caixa. Until 

2003 no costs have been charged to the Association by Caixa. In 2004, Caixa has proceeded to the 

imputation to the Association of the expenditures incurred for its account. 

In 2005, the Association started to support not only the costs with the employees allocated to the 

Direcção and Núcleo de Desenvolvimento of the Association, on the straight dependence of Direcção 

Informática, but also the costs with the Órgãos de Gestão e Fiscalização and employees of the Direcção 

Imobiliária e de Instalações. The amount supported corresponds to the compensation due by the Association 

regarding the assistance rendered by Caixa in several areas in which the Association does not 

have in place any organisational structure and for the selling of mutualism schemes by the commercial 

network (see note 26). 

3.9. Profits related to Caixa Económica Montepio Geral 

Net income received from Caixa was accounted between the balances «Own funds» and «Contributions 

and operating subsidies» in the income statement of the year in which they are received (note 35). 

6. Number of associates 

As at 31 December, 2005, the Association had 333 638 (2004: 291 789) effective associates responsible 

for 506 321 subscriptions (2004: 418 504). As at 31 December, 2005 and 2004, the number of 

associates subscribing the different membership schemes, are analysed as follows: 


Individual schemes: 

Retirement capitals 182 767 149 005 

Warranty of responsibilities payment 122 509 108 487 

Deferred welfare capitals with option 67 932 56 605 

Retirement saving 10 812 9 785 

Welfare capitals for younger 7 937 7 367 

Welfare capitals 7 524 7 722 

Retirement pensions 5 885 5 809 

Survival pensions and dowries 1 976 2 046 

Others 3 123 3 049 

410 465 349 875 

Additional coverage schemes: 

Retirement pensions – quotes restitution 5 756 5 670 

Disability temporary capitals 306 336 

Retirement pensions – additional disability 305 305 

Warrant capitals quotes 31 30 

6 398 6 341 

55

56 

7. Tangible assets 

This balance is analysed as follows: 


Euros '000 Euros '000 

Cost: 

Tangible assets: 

Land and natural resources 3 040 819 

Buildings and other constructions 17 600 17 566 

Other tangible assets 77 77 

Work in progress 2 426 2 587 

23 143 21 049 

Investments: 

Investment property 138 977 138 457 

Accumulated depreciation: 

162 120 159 506 

Charge for the year (2 668) (2 673) 

Accumulated charge for the previous years (36 904) (34 231)) 

(39 572) (36 904) 

122 548 122 602 

As at 31 December, 2005 and 2004, the balance «Work in progress» includes an amount of Euros 

94 000 (2004: Euros 57 000) related to costs incurred, acquisition and improvements, on facilities to be 

used by Caixa Económica Montepio Geral future branches network. 

As at 31 December, 2004, this balance also included an amount of Euros 2 204 000 related to costs 

incurred with the construction of a residential complex in Caldas da Rainha, named «Residências assistidas». 

During 2005, the Association decided not to proceed with the construction of the mentioned 

residential complex, and has transferred the correspondent amount to the balance «Land and natural 

resources» (Euros 2 335 000). 

The tangible assets movements during the year 2005 are analysed as follows: 

Balance as at Acquisitions/ Balance as at 

1 January /Changes Transfers Disposals 31 December 

Euros '000 Euros '000 Euros '000 Euros '000 Euros '000 

Cost: 


Lands and natural resources 819 – 2 335 (114) 3 040 

Buildings and other constructions 17 566 34 – – 17 600 

Other tangible assets 77 – – – 77 

Work in progress 2 587 2 673 (2 834) – 2 426 

21 049 2 707 (499) (114) 23 143 

Investments: 

Investment property 138 457 21 499 – 138 977 

159 506 2 728 – (114) 162 120 



Buildings and other constructions 4 821 352 – – 5 173 

Investments: 

Investment property 32 083 2 316 – – 34 399 

36 904 2 668 – – 39 572

8. Securities portfolio 


Shares: 



In Portuguese companies 505 505 

In foreign companies 12 12 

Bonds and other fixed income securities: 

517 517 

Issued by resident entities: 

Guaranteed by public entities 118 205 

Other resident issuers 39 079 11 735 

Issued by non-resident entities 56 682 15 508 

95 879 27 448 

Provisions for bonds and other fixed income securities (622) (162) 

95 257 27 286 

Other securities: 

Government bonds 

Investment funds units: 

465 419 365 572 

In national securities funds 22 060 21 074 

In foreign securities funds 20 000 – 

In real estate funds 34 844 25 080 

542 323 411 726 

Provisions for other securities (2 651) (4 648) 

539 672 407 078 

635 446 434 881 

The securities portfolio with reference to 31 December, 2005, is presented in the Appendix I. 

The Association accounts for the Government bonds as part of the held-to-maturity portfolio. As at 31 

December, 2005, and resulting from the accounting policy described in note 3.4, if the held-to-maturity 

portfolio was valued at market value, it would present unrealised gains in the amount of Euros 

37 502 000 (2004: Euros 28 172 000). 

57

58 

As at 31 December, 2005 and 2004, the difference between the acquisition cost and the market value 

(quoted securities based on the Stock Exchange List or estimated realisable value for the non quoted 

securities), can be analysed as follows: 


Euros’ 000 

Bonds and 

other fixed Other 

Shares income securities Securities Total 

Acquisition cost 517 95 879 542 323 638 719 

Provisions booked – (622) (2 651) (3 273) 

Book value 517 95 257 539 672 635 446 

Unrealised gains 224 893 36 385 37 502 

Market value 741 96 150 576 057 672 948 

2004 

Euros’ 000 

Bonds and 

other fixed Other 

Shares income securities Securities Total 

Acquisition cost 517 27 448 411 726 439 691 

Provisions booked – (162) (4 648) (4 810) 

Book value 517 27 286 407 078 434 881 

Unrealised gains 285 574 27 313 28 172 

Market value 802 27 860 434 391 463 053 

The movements occurred in the provision for shares, bonds and other securities during the year 2005 

are analysed as follows: 

Euros’ 000 

Balance as at Charge for Balance as at 

1 January the year Charge-off 31 December 

Shares, bonds and other securities 4 810 1 674 (3 211) 3 273 

9. Investments 




Institutional financial investment 485 000 445 000 

Other investments 43 088 42 158 

528 088 487 158 

Provisions for investments (1 309) (915) 

526 779 486 243

The balance of Investments can be analysed as follows: 


Acquisition Shareholders’ Provisions 

Share Number Percentage cost equity (*) charged 

capital of shares held Euros '000 Euros '000 Euros '000 

Caixa Económica Montepio Geral 485 000 – 100.000% 485 000 690 770 – 

Lusitania, Companhia de Seguros, S.A. 19 250 2 529 816 65.710% 23 769 21 915 – 

Lusitania Vida, Companhia de Seguros, S.A. 

Impar – Comp. Cabo Verdiana 

9 000 141 192 39.220% 4 954 8 254 – 

de Seguros, S.A.R.L. (CVE) 

MCS – Moçambique, 

400 000 105 250 26.313% 1 183 783 – 

Comp. de Seguros, S.A.R.L. (MZM) 24 000 000 43 200 18.000% 379 179 95 

Silvip, S.A. 750 3 960 26.400% 308 795 – 

Futuro – Soc. Gest. de Fundos de Pensões, S.A. 2 567 52 822 61.737% 1 963 3 640 – 

MG Gestão de Activos Financeiros – S.G.F.I.M., S.A. 1 200 239 655 99.856% 1 331 2 168 – 

MG Investimento Imobiliário, S.A. 50 10 000 100.000% 50 34 – 

Previsão – Soc. Gest. F.P., S.A 3 500 10 000 1.429% 50 69 – 

Clínica de Santa Maria de Belém, S.A. 2 240 66 240 14.786% 493 388 178 

Hospital do Coração, S.A. 25 50 10.000% 2 N/D – 

Sagies, S.A. 500 27 000 27.000% 97 151 – 

Leacock (Seguros), Lda. 300 a) 81.000% 242 2 150 – 

E.I.A. – Soc. de Ensino, Investig. e Adm., S.A. 1 825 70 000 3.836% 349 89 279 

Soficatra, S.A. 7 859 1 500 0.473% 37 32 – 

Bolsimo, Lda. 50 a) 91.000% 45 59 – 

Banco da África Ocidental, S.A. (CFA) 1 343 200 10 074 7.500% 153 287 – 

Credint, S.A. 

BDC – Banco Desenv. e Comércio 

50 4 350 87.000% 986 (301) 394 

Moçambique, S.A.R.L. (MZM) 190 331 900 663 224 34.846% 2 943 1 659 363 

Caixa Económica de Cabo Verde, S.A.R.L. (CVE) 348 000 61 272 17.607% 2 582 2 535 – 

Nova Câmbios, S.A. 500 3 000 30.000% 152 209 – 

Residências Montepio, Serviços de Saúde, S.A. 3 000 1 529 700 50.990% 1 020 N/D – 

a) Represented by quotas 

528 088 1 309 

* The shareholders’ equity shown is referred to the latest financial statements available. 

59

60 

The Institutional financial investment corresponds to the institutional capital (100%) in Caixa Económica 

Montepio Geral. The balance sheet of Caixa, for the years ended 31 December, 2005 and 2004, can be 

presented as follows: 



Assets 

Cash and deposits at central banks 207 707 236 653 

Loans and advances to credit institutions repayable on demand 94 396 46 573 

Other loans and advances to credit institutions 910 890 1 067 201 

Loans and advances to customers 11 500 659 10 391 117 

Securities 706 701 274 237 

Investments 31 352 39 821 

Intangible assets 5 551 3 927 

Tangible assets 80 402 84 263 

Other debtors 124 213 133 110 

Prepayments and accrued income 305 316 142 002 

13 967 187 12 418 904 

Liabilities 

Amounts owed to credit institutions 893 129 792 310 

Amounts owed to customers 7 562 599 7 504 239 

Debt securities 4 070 415 2 912 270 

Other liabilities 236 406 44 517 

Accruals and deferred income 119 217 104 143 

Provision for liabilities and charges 84 675 78 869 

Subordinated debts 309 976 329 928 

Total Liabilities 13 276 417 11 766 276 

Shareholders’ Equity 

Share capital 485 000 445 000 

Reserves 182 846 174 585 

Retained earnings (22 388) – 

Net income for the year 45 312 33 043 

Total Shareholders’ Equity 690 770 652 628 

10. Fixed assets revaluation criteria 

13 967 187 12 418 904 

In prior years, Montepio Geral – Associação Mutualista has revalued the tangible assets, investment 

property and respective accumulated depreciations, resulting on a revaluation reserve in the amount of 

Euros 32 910 000 (note 23). 

In accordance with the Accounting Directive No. 16, No. 2.4, the referred revaluation is considered as 

realised only by use or sell of the assets to which concerns.

11. Revaluation 

The revaluation is analysed as follows: 


Historical Revalued 

cost Revaluations amounts 

Euros '000 Euros '000 Euros '000 

Land and natural resources 2 580 460 3 040 

Buildings and other constructions 12 344 5 256 17 600 

14 924 5 716 20 640 

Investments: 

Investment property 102 604 36 373 138 977 

17. State and other public entities 


Assets: 

117 528 42 089 159 617 



Income tax with-held at source 4 4 

Recoverable VAT 110 78 

VAT – reimbursements claimed 72 52 

Liabilities: 

186 134 

Income tax with-held at source 30 22 

VAT settlement 7 6 

18. Obligations and future commitments 

This account is analysed as follows: 

Commitments to third parties 

37 28 



Creditors for contract works awarded 670 265 

Amounts received for deposit and management 1 426 1 382 

Commitments from third parties 5 112 4 253 

The balance «Amounts received for deposit and management» includes the assets of several foundations 

and some attributed awards, which are managed by the Association. 

61

62 

20. Permanent Funds 

As at 31 December, 2005, the balance «Permanent funds of the associated schemes», can be analysed 

as follows: 

Schemes: 

Surplus for 

Mathematical subsidies and Technical 

provisions additional surpluses Total 

benefits 

Euros '000 Euros '000 Euros '000 Euros '000 

Retirement capitals 1 186 741 – 8 644 1 195 385 

Retirement saving 28 914 – – 28 914 

Welfare capitals 8 857 24 311 10 000 43 168 

Deferred welfare capitals with option 89 397 13 636 22 419 125 452 

Retirement pensions 92 643 25 252 – 117 895 

Welfare capitals for younger 27 863 7 220 8 698 43 781 

Survival pensions and dowries 7 926 23 315 321 31 562 

Others 23 607 2 597 3 230 29 434 

1 465 948 96 331 53 312 1 615 591 

Perpetual rents: 

By-laws of 1966 28 943 – – 28 943 

1 494 891 96 331 53 312 1 644 534 

The allocation of the Association’s net assets by the different schemes has underlying the following distribution: 

(i) Retirement capitals, retirement saving and collective schemes; and 

(ii) Other schemes. 

As at 31 December, 2005, the level of coverage of the net assets by the mathematical provisions corresponds 

to 101.4% (2004: 101.5%) for retirement capitals, retirement saving and collective schemes, and 

to 167.2% (2004: 192.6%) for other schemes. 

The mathematical provisions include the amount of Euros 59 312 000, related to the schemes liabilities 

increase due to the introduction of the liability adequacy test, as referred in note 3.7. The discount 

interest rate considered in the liability adequacy test performed as at 31 December, 2005 was 3.5%.

23. Own and permanent funds, reserves and mathematical provisions 

The balances included in Own funds and permanent funds, reserves and mathematical provisions, are 

analysed as follows: 

Own and 

permanent funds: 

Dividends paid Net changes on 

Balance as at From From mathematical Transfers Balance as at 

1 January Association Caixa provisions and charges Others 31 December 

Euros '000 Euros '000 Euros '000 Euros '000 Euros '000 Euros '000 Euros '000 

Own funds 18 455 3 143 200 – 30 011 (46) 51 763 

Technical surpluses 

Perpetual rents 

110 847 8 509 – – (30 411) (35 633) 53 312 

Technical surpluses 390 – – – – (390) – 

Reserves: 

129 692 11 652 200 – (400) (36 069) 105 075 

Revaluation reserves 32 910 – – – – – 32 910 

Legal reserves 139 211 7 856 – – – (22 490) 124 577 

Other reserves 1 169 – – – 163 – 1 332 

173 290 7 856 – – 163 (22 490) 158 819 

Provisions for liabilities 

and charges 

Mathematical provisions for 

membership schemes 1 124 421 9 400 – 302 015 – 59 055 1 494 891 

Surplus for subsidies and 

additional benefits 96 273 3 758 – (3 700) – – 96 331 

1 220 694 13 158 – 298 315 – 59 055 1 591 222 

1 523 676 32 666 200 298 315 (237) 496 1 855 116 

As at 31 December, 2005, the amount referred as «Others» on the mathematical provisions for membership 

schemes, includes the amount of Euros 59 312 000 related to the schemes liabilities increase 

due to the introduction of the liability adequacy test, as referred in note 3.7. The impact of this change 

on the accounting policy was booked against the technical surpluses (Euros 37 226 000) and against the 

Legal reserves (Euros 22 086 000), in a total amount of Euros 59 312 000. 

As at 31 December, 2005, the amount referred on «Others» transferred from the balance «Technical 

surpluses» also includes the annual charge for the decennial premium to be paid to the Associates of 

«Retirement Capital» scheme. This amount was charged against the balance Other membership scheme 

costs in the statement of income. 

As at 31 December, 2005, the Association has reclassified the amount correspondent to Subventions 

and benefits improvement, comprehending several schemes balances, from own funds to liabilities (Provisions 

for liabilities and charges), as this balance represents obligations already assumed with the associates, 

although not yet overdue. Due to this reclassification, Provisions for liabilities and charges has 

increased by an amount of Euros 96 330 000 and Euros 96 273 000 as at 31 December, 2005 and 

2004, respectively. On the referred dates, own funds decreased by the same amounts. 

As at 31 December, 2005, the amount referred on «Transfers and charges» transferred to the balance 

Other reserves, is related to the write-off of building improvement reserves. 

63

64 

As at 31 December, 2005, the amount referred as «Transfers and charges» transferred from Technical 

surpluses to Own funds, is related to the reclassification of the Technical surpluses of the scheme «Care 

payment guarantee» to Own funds. 

During the years 2005 and 2004, the Association dividends received from Caixa (note 35), were 

accounted for in the following balances: 



Contributions and operating subsidies 24 583 15 919 

Own funds 200 200 

24 783 16 119 

As established on the Association by-laws, the purpose of Permanent Funds is to ensure the pensions’ 

payment, capitals or other costs related to the different schemes to the Associates and its beneficiaries. 

This balance includes the commitments to beneficiaries related to subventions and improvements 

granted and technical surpluses, namely: 

a) Technical surpluses – Part of the permanent funds, not covering the liabilities granted to the 

beneficiaries of the associative schemes. 

b) Subventions and benefits improvement 

i) Subventions excess – This excess is meant to cover the charges related with existent pensioners 

and members benefits improvement at the balance sheet date. The benefits are calculated 

according to the percentages approved by the General Meeting. 

ii) Benefits improvement excess – This excess is meant to cover the improvement in actual and 

future benefits, in accordance to the Association by-laws. These benefits are calculated on an 

actuarial basis. Its distribution is made at the benefits maturity date. 

Legal reserves – A legal reserve comprising at least 5% of the balances of the funds at the end of each 

year, after the mathematical provisions calculation, must be established in accordance with the Association 

by-laws. The legal reserve can be used to cover costs resulting from contingencies, to complement 

the Available Funds when their income is insufficient to cover the respective costs and to cover potential 

losses of the Association. 

Revaluation reserves – This reserve results from the fixed assets revaluation in compliance with the 

applicable legislation (note 3.2). 

Mathematical provisions – These provisions are recorded at the balance Provisions for liabilities and 

charges and its purpose is to cover the future liabilities with membership schemes. These provisions 

were calculated according to actuarial technical bases approved by Ministério do Trabalho e da Solidariedade 

Social. Additionally, as at 31 December, 2005, these provisions were subjected to a liability 

adequacy test, as described in note 3.7.

26. Personnel expense 

In 2005, the Association started to support not only the costs with the employees allocated to the 

Direcção and Núcleo de Desenvolvimento of the Association, on the straight dependence of Direcção 

Informática, but also the costs with the Órgãos de Gestão e Fiscalização and employees of the Direcção 

Imobiliária e de Instalações. The amount supported corresponds to the compensation due by the Association 

regarding the assistance rendered by Caixa in several areas in which the Association does not 

have in place any organisational structure and for the selling of mutualism schemes by the commercial 

network. As at 31 December, 2005, the personnel expense supported by Association amounts to Euros 

7 594 000 (2004: Euros 2 874 000). 

27. Statement of financial results 

The amount of the accounts included in the Statement of financial results is analysed as follows: 

Revenue: 



Interest income 38 502 24 232 

Investment property income 14 136 13 540 

Profits arising from investments 2 593 1 802 

Oher financial profits and gains 2 463 3 781 

57 694 43 355 

Expenses: 

Interest expenses 114 135 

Buildings improvement 1 271 1 502 

Interest and similar expenses 1 385 1 637 

Depreciation for investment property 2 316 2 322 

Provisions for financial investments 2 069 1 397 

Depreciation and provisions for financial investments 4 385 3 719 

5 770 5 356 

Net financial income 51 924 37 999 

28. Investment property income 

The amount of this account is analysed as follows: 

Investment 

Book Repairs and property 

value maintenance income 

Euros ’000 Euros ’000 Euros ’000 

Buildings 159 617 1 271 14 136 

65

66 

29. Statement of extraordinary results 

The amount of the accounts included in the Statement of extraordinary results is analysed as follows: 

Revenue: 



Gains arising from fixed assets 2 915 5 904 

Depreciation and provisions decrease 3 211 2 651 

Other gains attributable to previous years – 44 

Other extraordinary gains 17 – 

Expenses: 

6 143 8 599 

Donations 88 68 

Losses arising from fixed assets 33 42 

Losses attributable to previous years – 128 

Other extraordinary losses 143 – 

264 238 

Extraordinary income 5 879 8 361 

32. Prepayments and accrued income 


Accrued income: 



Interest receivable 

Securities 13 508 8 976 

Others 

Other accrued income 

1 746 209 

Real estate funds 2 098 1 610 

Others 9 3 

17 361 10 798 

Accrued expense 981 2 

As at 31 December, 2005, the balance Accrued expense includes the amount of Euros 838 000, related 

to obligations with the holiday pay (including subsidies).

33. Amounts owed to credit institutions 

As at 31 December, 2005 and 2004, this balance refers to a loan granted from Caixa (note 35), with the 

purpose of financing the reconstruction of «Edifício Grandella», in the amount of Euros 2 760 000 and 

Euros 4 037 000, respectively. The loan bears interest every six months and benefits from a reduction of 

50% on the interest rate supported by the Direcção Geral do Tesouro, in accordance with the paragraph 

b), No. 2, 2nd article, of the Decree-Law No. 355/88, that established FEARC (Fundo Extraordinário 

de Ajuda à Reconstrução do Chiado). As at 31 December, 2005, the loan interest rate in force 

was 5% (2004: 5.5%). 

As at 31 December, 2005, the loan repayable plan is analysed as follows: 

34. Income tax 

Euros '000 

2006 1 343 

2007 1 417 

2 760 

The Association is a private social welfare institution (reciprocal aid association), benefiting from income 

tax exemption (Imposto sobre o Rendimento das Pessoas Colectivas – IRC) in accordance with the Article 

10, No. 1 b) of IRC Legislation. This exemption was confirmed by Law No. 10-B/96 of 23 March, 

which approved the Public Budget for the year of 1996. 

35. Transactions with Caixa Económica Montepio Geral 

The balances and main transactions between the Association and Caixa during the years ended 31 

December, 2005 and 2004, were the following: 



Deposits repayable on demand 438 423 355 436 

Deposits with fixed maturity date 155 000 130 000 

Amounts owed to credit institutions (Note 33) 2 760 4 037 

Income received from investment property 9 538 9 140 

Dividends received (Note 23) 24 783 16 119 

Caixa institutional share capital increase (Note 9) 40 000 40 000 

The increase in «Deposits repayable on demand» (Euros 82 987 000) is related with the underwriting of 

«Retirement capitals» during the year, whose amounts received have not yet been invested by the Association 

(as at December 31, 2005, the deposits repayable on demand related with this scheme amounts 

to Euros 333 673 000). 

The amount of Euros 155 000 000 recorded in «Deposits with fixed maturity date» is related with capitalisation 

schemes. 

67

68 

36. Overdue capitals 




Retirement capitals 59 251 47 396 

Deferred welfare capitals with option 14 941 11 633 

Welfare capitals for younger 1 907 1 818 

Others 1 024 988 

77 123 61 835 

The balance «Overdue capitals» refers to capital reimbursements of schemes for which the benefits are 

processed by partial or total amortisation of the amounts paid by the Associates. These reimbursements 

are deducted from the Association liabilities on the calculation of the mathematical provisions.

SECURITIES PORTFOLIO 

AS AT 31 DECEMBER, 2005 

Type of securities 

Nominal 

Value 

Euros 

Unit 

Value 

Book Value 

Total 

Euros '000 

Unit 

Value 

Market Value 

APPENDIX I 

Total 

Euros '000 

INVESTMENT SECURITIES 638 719 672 948 

Portuguese treasury bonds 465 419 495 377 

Certificado de Renda Perpétua n. o 118 377.57 198.16% 1 100.00% 0 

Consolidado 1941 648.44 65.85% – 85.60% 1 

Consolidado 1942 278 668.42 94.00% 262 71.50% 199 

Consolidado 1943 2 209.67 47.18% 1 65.25% 1 

Consolidado–Centenários 1940 409 842.28 99.84% 409 91.74% 376 

O. T´s Setembro 98/2013 72 200 000.97 100.72% 72 723 112.02% 80 878 

O. T´s Julho 99/2009 19 205 000.00 97.54% 18 732 100.65% 19 330 

O. T´s Maio 2000/2010 1 300 000.00 99.42% 1 292 112.20% 1 459 

O. T´s Junho 2001/2011 90 000 000.00 101.66% 91 495 105.20% 94 680 

O. T´s Junho 2002/2012 105 000 000.00 101.88% 106 972 110.00% 115 500 

O. T´s Junho 2003/2014 73 000 000.00 100.94% 73 685 111.58% 81 453 

O. T’s Abril 2005/2021 100 000 000.00 99.85% 99 847 101.50% 101 500 

Bonds 95 879 96 150 

Issued by residents 39 197 39 444 

Lisnave – Série A – 1991 7 464.03 100.00% 7 99.75% 7 

Lisnave – Série B – 1991/1995/2006 13 924.43 100.00% 14 99.75% 14 

Lisnave – 1992/1997/2007 96 966.25 100.00% 97 98.01% 95 

Somec/94 149 700.00 99.46% 149 0.00% – 

ESSI/96 748 200.00 99.60% 745 99.90% 747 

E.D.P. – 25. a emissão – 1998/2006/2008 1 995 191.59 99.82% 1 992 99.97% 1 994 

C.E.M.G. / 2001 – Prazo Indeterminado 74 900.00 100.00% 75 99.50% 75 

C.G.D. Hedge Funds 2012 1 000 000.00 97.00% 970 100.00% 1 000 

MG Aforro em Caixa 2005 – 1. a Série 262 500.00 97.72% 257 100.00% 263 



MG Cabaz Top 1 550.00 94.45% 1 100.00% 2 


MG Especial Poupança 38 350.00 97.21% 37 100.00% 38 

MG Busines Invest 11 500.00 98.52% 11 100.00% 12 

Mundicenter 1 000 000.00 100.00% 1 000 100.00% 1 000 

Portucel 2005/2010 5 000 000.00 100.00% 5 000 100.00% 5 000 

Celulose Do Caima, Sgps 5 000 000.00 100.00% 5 000 100.00% 5 000 

Portucel 2005/2012 4 500 000.00 100.00% 4 500 100.00% 4 500 

C.G.D. Tripla Garantia 3 000 000.00 99.75% 2 993 100.00% 3 000 

B.P.I. 2017 10 000 000.00 99.90% 9 990 100.00% 10 000 

Parpublica 5 000 000.00 100.00% 5 000 105.53% 5 276 

C.E.M.G. – Obrig. Cx. Sub. – 1996 726 000.34 98.78% 717 99.95% 726 

C.G.D. – Obrig. Cx. Sub. – 1998 249 398.95 99.82% 249 115.90% 289 

Issued by non-residents 56 682 56 706 

Council Europe Fund/97 498 800.00 100.00% 499 100.00% 499 

Citicorp/2007 299 278.80 100.00% 299 100.00% 299 

Zurich Financial Services 500 000.00 100.00% 500 101.09% 505 

Sun Life Canada Funding 750 000.00 99.92% 749 110.10% 826 

Nationwide 500 000.00 99.75% 499 112.49% 562 

B.N.P. Paribas 500 000.00 99.96% 500 115.41% 577 

TELE Danmark 250 000.00 99.79% 249 101.33% 253 

Atlanteo Capital Limited (Tx. Fixa) – 2,5% 250 000.00 99.00% 248 100.00% 250 

See accompanying notes to the financial statements Ctd. 

69

70 

Type of securities 

Atlanteo Capital Limited (Cup 0) 650 000.00 97.54% 634 100.00% 650 

NIB Capital – 6% 1 497 500.00 100.00% 1 498 100.00% 1 498 

NIB – Triplo 5 – 5% 1 300 000.00 100.00% 1 300 100.00% 1 300 

Atlanteo 2019 – 7% 1 000 000.00 100.00% 1 000 100.00% 1 000 

Golden 2 Series 2 500 000.00 100.00% 2 500 100.00% 2 500 

BNP Paribas – 7% 5 000 000.00 99.00% 4 950 100.00% 5 000 

Brisa / 2003 500 000.00 100.00% 500 107.58% 538 

Finantia 2 500 000.00 100.00% 2 500 100.00% 2 500 

Caja Sevilla Monpis 5 000 000.00 100.00% 5 000 99.75% 4 988 

Barclays Bank 3 000 000.00 100.00% 3 000 100.00% 3 000 

Atlanteo 2020 5 000 000.00 99.75% 4 988 100.00% 5 000 

B.E.I. 2016 5 000 000.00 98.50% 4 925 94.26% 4 713 

Pyramid 2005 4 000 000.00 100.00% 4 000 100.00% 4 000 

KBC Ifima 750 000.00 99.90% 749 100.00% 750 

J.P. Morgan 150 000.00 182.94% 274 100.00% 274 

B.E.I. 2017 15 000 000.00 99.60% 14 940 97.96% 14 694 

B.E.I. 96/2016 379 240.00 100.43% 381 139.73% 530 

Shares 517 741 

Issued by residents 505 729 

Imobiliária Construtora – Grão Pará 118 715.00 3.18 75 4.45 106 

Sociedade Portuguesa de Administrações 653.69 1.00 – 1.00 – 

SODIMUL – Soc. Portuguesa de Comércio e Turismo 1 496.00 2.49 – 2.49 – 

Estoril Sol – Portador 335 125.00 5.51 370 7.75 519 

Fomento – Soc. Gestão, S.A., S.G.P.S. «em liquidação» 51.25 0.96 – 0.96 – 

Comp. Produtora de Malte e Cerveja, Portugália 286.35 1.13 – 1.13 – 

BES – Nominativas 6 105.00 7.27 9 13.60 17 

Portugal Telecom 10 200.00 4.96 51 8.55 87 

J. Pimenta 49.90 0.00 – 0.00 – 

Issued by non-residents 12 12 

Sociedade Agrícola do Cassequel 3 286.80 0.00 – – – 

Five Arrows 181.75 0.64 12 0.64 12 

Investment funds 76 904 80 680 

Issued by residents 55 149 56 896 

Fundo VIP 8.60 27 273 9.04 28 651 

Fundo Vision Escritórios 5.46 5 459 6.26 6 255 

Fundo Logística Distribuição 5.28 2 112 5.36 2 144 

MG Acções 106.15 10 084 107.10 10 175 

MG Acções Europa 50.00 2 000 39.40 1 576 

MG Obrigações Agressivo 50.00 500 53.46 535 

MG Multi Gestão Dinâmica 46.27 2 638 39.83 2 270 

MG Multi Gestão Equilibrada 48.54 1 165 47.74 1 146 

MG Multi Gestão Prudente 49.28 1 183 50.11 1 203 

MG Euro Telcos 48.91 489 51.37 514 

MG Euro Utilities 49.76 498 58.54 585 

Fundo Alves Ribeiro (A.R. Medias Emp. Portugal) 49.88 748 74.79 1 122 

Fundo Alves Ribeiro Acções Europa 50.00 1 000 36.02 720 

Issued by non-residents 21 755 23 784 

Global High Yield Bond Fund 11.70 1 755 9.58 1 437 

Fundo Asia Ex Japan 24.40 6 666 27.14 7 415 

Fundo Indian Equity 71.54 6 667 83.26 7 759 

Fundo Chinese Equity 30.02 6 667 32.30 7 173 

TOTAL 638 719 672 948 

See accompanying notes to the financial statements 

Nominal 

Value 

Euros 

Unit 

Value 

Book Value 

Total 

Euros '000 

Unit 

Value 

Market Value 

APPENDIX I 

Total 

Euros '000

7.16. INDEPENDENT AUDITORS’ REPORT 

Introduction 

1. We have audited the financial statements of Montepio Geral – Associação Mutualista, which includes 

the Balance Sheet as at 31 December, 2005 (which shows total assets of 1 898 873 thousand Euros 

and Shareholders’ Equity of 302 092 thousand Euros, including a net income for the year of 38 198 

thousand Euros), and the statements of income and cash flows for the year then ended and the corresponding 

notes to the accounts. 

Responsabilities 

2. The Board of Directors is responsible for the preparation of the financial statements in accordance 

with generally accepted accounting principles in Portugal for Mutual Associations, which presents 

fairly the financial position of the Association and of its results, as well as for the adoption of adequate 

accounting policies and the maintenance of an appropriate system of internal control. 

3. Our responsibility is to express an independent opinion on those financial statements based on our audit. 

Scope 

4. Our audit was conducted in accordance with the Technical Standards and Guidelines issued by the 

Portuguese Institute of Statutory Auditors («Ordem dos Revisores Oficiais de Contas»), which require 

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 

are free of material misstatement. Our audit included the following: 

– verification on a test basis, of the documents underlying the figures contained therein, and an 

assessment of the estimates made, based on judgements and criteria defined by the respective 

Board of Directors, used in preparation of the referred financial statements; 

– assessing the adequacy of the accounting principles used as well as their disclosures; 

– verification of the application of the going concern principle; and 

– evaluating the overall financial statements presentation. 

5. Our audit included the verification of the consistency of the financial information included in the 

Directors’ Report with the financial statements. 

6. We believe that our audit provides a reasonable basis for our opinion. 

Opinion 

7. In our opinion, the financial statements referred to above present fairly, in all material respects, the 

financial position of Montepio Geral – Associação Mutualista, as at 31 December 2005, and of the 

results of its operations and its cash flows for the year then ended, in accordance with generally 

accepted accounting principles in Portugal for Mutual Associations. 

Lisbon, 10 March, 2006 

KPMG & ASSOCIADOS – SROC, S.A. 

Represented by 

Ana Cristina Soares Valente Dourado 

(Statury Auditor nr. 1011) 

71

8. CAIXA ECONÓMICA MONTEPIO GERAL – INDIVIDUAL 

8.1. TREND IN THE MAIN BALANCE SHEET AGGREGATES 

Caixa Económica Montepio Geral ended the financial year of 2005 with net assets of 13 967 millions of 

euros, recording an increase in business assets of 1 548 millions of euros (+12.5%), far higher growth 

than that observed in 2004 of 304 millions of euros (+2.5%). 

Type of Assets 

TREND IN NET ASSETS 




Customer Credit 11 798 174 84.5 10 653 708 85.8 1 144 466 10.7 

Customer credit without securitisation 12 771 770 11 785 535 986 235 8.4 

Available Funds and Financial Applications 1 927 871 13.8 1 634 310 13.2 293 561 18.0 

Miscellaneous Assets 241 142 1.7 130 886 1.0 110 256 84.2 

TOTAL ASSETS 13 967 187 100.0 12 418 904 100.0 1 548 283 12.5 

The structure of the assets did not suffer any substantial alteration but, differently to the trend recorded 

in 2004, there was a reduction in the proportion of the credit as a total of net assets, standing at 84.5% 

(-1.3 b.p. on a year-on-year basis) and a slight increase in the proportion of availabilities and financial 

applications which now represent 13.8% of net total assets (+0.6 b.p. compared with the proportion 

they represented a year ago). 

(Millions of euros) 

14 000 

10 500 

7 000 

3 500 

0 

124 

1 850 

10 141 

ASSET STRUCTURE 

131 1 928 

1 634 

10 654 

Miscellaneous Assets Available Funds and Financial Applications Customer Credit 

241 

11 798 

2003 2004 


Total third-party resources for the sum of 13 191,7 millions of euros, recorded growth of 12.9%, 

increasing their proportion of total liabilities, own resources and provisions to 94.4% (+0.3 b.p. on 

2004). 

73

74 

Client Resources have continued to constitute the lion’s share, 58.5% of Liabilities and Equity though 

they lost their relative proportion in the structure to the detriment of Other Credit Institution Resources 

and Represented by Securities whose position at year-end 2005 stood at 33.4% (+2.4 b.p. up on late 

2004) and Other Liabilities which represented only 2.5% (+1.3 b.p. up on last year). 

Own Resources and Provisions stood at 775 445 thousands of euros (+6.0% up on 2004), representing 

5.6% of Liabilities and Equity (-0.3 b.p. compared to 2004). 


14 000 

10 500 

7 000 

3 500 

Designation 

0 

670 

151 

2 997 

8 297 

TREND IN LIABILITIES AND EQUITY 

STRUCTURE IN LIABILITIES AND EQUITY 

731 

150 

3 845 

7 692 

775 

359 

4 669 

8 164 

2003 2004 





Total Credit Institutions 

and Customer Deposits 

Securities Placed with Clients 

7 929 060 56.8 7 692 391 61.9 236 669 3.1 

(Cash Liabilities) 235 000 1.7 0 0.0 235 000 n.d. 

1. Total Client Resources 8 164 060 58.5 7 692 391 61.9 471 669 6.1 

Subordinated and Non-Subordinated 

Bonds and Debt Certificates 4 663 391 33.4 3 735 198 30.1 928 193 24.8 

Other Credit Institution Resources 5 322 0.0 110 110 0.9 -104 788 -95.2 

2. Total Other Credit Institution Resources 

and Represented by Securities 4 668 713 33.4 3 845 308 31.0 823 405 21.4 

3. Other Liabilities 358 969 2.5 149 708 1.2 209 261 139.8 

4. Total Third-Party Resources (1+2+3) 13 191 742 94.4 11 687 407 94.1 1 504 335 12.9 

5. Own Resources and Provisions 775 445 5.6 731 497 5.9 43 948 6.0 

TOTAL LIABILITIES, OWN RESOURCES 

AND PROVISIONS (4+5) 13 967 187 100.0 12 418 904 100.0 1 548 283 12.5 

Own Resources 

and Provisions 

Other Liabilities 

Other Cred. Inst. 

Resources and 

Represented 

by Securities 

Client Resources

8.2. COMMERCIAL ACTIVITY 

8.2.1. Distribution Channels 

The commercial network of the Caixa Económica Montepio Geral was endowed with the following at 

year-end 2005: 

– 295 branches; 

– 6 Representative Offices; and 

– 2 Financial Branches (off-shore). 

In 2005 the domestic commercial network had two less distribution points owing to the closure as from 

December 1st 2005 of the Metal and Precious Stones Stores which were exclusively dedicated to loans 

backed by these products. 

In line with greater approximation to the market and segmentation, development and business diversification 

strategies, a new commercial structure was implemented with the subdividing of the commercial 

network into two networks: the Private Individual, Micro-Company and Construction Network and 

the Company network. 

The Commercial Network of Private Individual, Micro-Company and Construction made up of 6 Commercial 

Departments (North, Greater Oporto, Centre, Lisbon and Autonomous Regions, Greater Lisbon 

and South), including 32 Regional Departments and total Branches (295) boosts Branch activity and 

their respective teams. 

The Company Network is not endowed with specific Branches, using the support of Private Individuals, 

Micro-Companies and Construction Network branches for the achievement of operations. It is made up 

of the Company Commercial Management which includes 4 Regional Company Departments responsible 

for promoting and boosting business. The Management also includes the Credit Risk Analysis 

Department and the Leasing and Factoring Department. 

The complementary activity of the other distribution channels has been vital for increasing the efficiency 

of distribution and of the service provided to Clients. The proportion of operations migrating to complementary 

channels has attained 65% in terms of the total number of operations processed compared 

to 61% in 2004, with the number of adherents to multi-channel services having grown 18.4% in the 

private individual segments and 47.4% in company segments. 

The Montepio Geral site recorded a very significant increase in usage, exceeding 6 million visits in 2005 

which corresponded to year-on-year growth of +50.3%. The Casa Habinet portal also has growing 

importance in complementing the commercial activity of Housing Credit in its mission to win over clients 

and its proactive approach to arranging interviews, it was associated with 66 million euros in new contracts. 

The new On-Line Banking service – which allows bank transactions to be carried out via mobile phone 

by the short message service (SMS24) – attained 90 000 messages in the first six months of activity. 

In the field of Self Service and Means of Payment in 2005 the growth of previous years became sharper, 

with Montepio Geral having attained a market share, in terms of the number of SIBS network Cashpoints, 

of 5.47% (compared to 5.01% in 2004). As regards Automatic Payment Terminals, the market 

share attained 4.34% (compared to 4.07% on a year-on-year basis). 

The Chave24 network did not undergo alterations in the number of cashpoints installed, continuing 

the diversification policy vis-à-vis the type of machines on this network, providing cheque dispensers 

which allow intelligent cheque deposit operations and bankbook updaters. 

75

76 

During the second half activity Abroad was reorganised, to wit the opening of Banco Montepio Geral 

Cabo Verde, IFI, SA., which replaced MG Cayman, now concentrating the management of Client 

resources Residing Abroad. 

As regards support to the needs of the clients which integrate the Portuguese Communities Residing 

Abroad, Montepio Geral maintains 6 representation offices distributed amongst the countries where 

the said communities are larger, in Europe and the USA. 

8.2.2. New Saving Products 

With a view to diversifying the range of products and services so as to meet the needs of the market 

and of Clients, Montepio Geral has launched new savings solutions aimed at private individual and company 

segments. As from the second half of the year the CEMG started issuing products issued in the 

form of Cash Bonds, allowing greater flexibility in the attraction and management of Client Resources. 

As a consequence 2005 was characterised by the diversification of savings products. 

The diversification of structured products was carried out for Clients by way of solutions adjusted to various 

risk profiles, ensuring the capital invested. Products were thus launched for private individuals and 

companies, including cash bonds with equity linked, range accrual or non callable step up structures. Six 

new Capitalization Insurance policies were marketed, designed by Lusitania Vida, and two Mixed Products 

combining time deposits with investment funds and time deposits with capitalization insurance. 

Two sectorial MG Financial Asset Management funds were also launched, one comprising a diversified 

portfolio of European telecommunications’ company shares and another made up of a diversified portfolio 

of European company shares in the utilities sector (to wit, motorways, electrical system, water distribution 

and natural gas network). 

The product range for Clients aged under seven (MG Mini Range) was totally reformulated, creating a 

specific product package for medium-long range savings needs. The kids’ character Noddy was associated 

with the range and a loyalty programme was created with a view to continuing the policy to rejuvenate 

the Client age base. 

8.2.3. New Personal Credit Schemes 

In the field of Personal Credit the main launches are related with Consumer Credit, to wit through the 

creation of specific credit lines for the acquisition of cars and holidays and the carrying out of works. The 

reformulation of the product range to meet personal financing needs was decisive for the development 

of the activity of CEMG with short and medium-term credits as a way of diversifying the composition of 

Assets and increasing their level of returns. 

8.2.4. Summary of Commercial Activity 

The commercial activity of Caixa Económica Montepio Geral during 2005 was characterised by a 

widespread increase in the active and passive aspects of business. This positive trend can be put down 

to the attraction of resources through action plans implemented by the commercial departments and 

aimed at low level savings and structured products with a view, on the one hand, to enhancing the stability 

of the resource portfolio and on the other hand credit aimed at private individuals, an area in 

which various promotional campaigns were launched in 2005.

Designation 

If there was consolidation of accounts with the Associação Mutualista, the assets of the Associação 

financed by subscriptions (at Caixa Económica branches) would have to be added to the figures of the 

previous table for the various Mutualist Schemes, without including that represented by the applications 

of the Associação Mutualista in the Caixa Económica (Deposits and Bonds). The amount of said 

consolidated accounts increased by 8% in 2005, attaining 12 797,6 millions of euros at year-end. 

8.2.4.1. Customer Resources 

GENERAL BUSINESS INDICATORS 



Value Value % 

Total Client Resources 11 956 890 11 208 908 6.7 

– Resources featured on the Balance Sheet (a) 8 164 060 7 692 391 6.1 

– Off-Balance Sheet Resources (b) 3 792 830 3 516 517 7.9 

Credit Portfolio 11 798 174 10 653 708 10.7 

Credit Due Ratio 2.8% 3.3% -15.2 

(a) Deposits and Securities placed with Clients. 

(b) Securities Deposited, Capitalization Insurance and Investment Funds. Mutualist Schemes are not included. 

2005 was typified by an upward trend in resource attraction activity and Total Deposits and Other Client 

Resources as a whole represented on the Balance Sheet increased by 471 669 thousands of euros 

(+6.1%). 

Designation 

TREND IN CLIENT FINANCIAL RESOURCES 




Customers' Sight Deposits 2 241 727 27.5 2 153 298 28.0 88 429 4.1 

Customers' Time Deposits 3 534 636 43.3 3 374 812 43.9 159 824 4.7 

Customers' Savings Deposits 1 742 890 21.3 1 935 081 25.1 -192 191 -9.9 

Credit Institutions' Deposits 409 807 5.0 229 200 3.0 180 607 78.8 

Total Deposits by Customers 

and Credit Institutions 7 929 060 97.1 7 692 391 100.0 236 669 3.1 

Securities Placed with Clients 

(Cash Bonds) 235 000 2.9 0 0.0 235 000 n.d. 

TOTAL CLIENT FINANCIAL 

RESOURCES 8 164 060 100.0 7 692 391 100.0 471 669 6.1 

Total Deposits achieved growth of 236 669 thousands of euros (+3.1%), reversing the downward trend 

observed in the previous financial year. 

Time Deposits, the main component of Client Deposits, recorded the sharpest growth under this item 

(+4.7%). However, Savings Deposits fell by 9.9%, particularly by dint of their transformation into applications 

in structured products, cash bonds (securities placed with clients) and mutualist products. 

77

78 

19.7% of total Time Deposits were deposits associated with structured products which recorded 

year-on-year growth of 79.2%, up 8.2 b.p., in its structural proportion of Time Deposits. 


4 000 

3 000 

2 000 

1 000 

0 


10 000 

7 500 

5 000 

2 500 

0 

3 375 

389 

2004 

TIME DEPOSITS 

Total Time Deposits Time Deposits associated with Structured Products 

448 

1 685 

3 983 

2 181 

TREND IN DEPOSITS 

229 

1 935 

3 375 

2 153 

2003 2004 

In terms of the distribution of deposits by client segments, it can be observed that the deposits of Private 

Individuals recorded a fall of 262 675 thousands of euros (-4,6%), still reflecting the impact of the 

policy implemented in 2004 to contain higher interest rates, the effect of the poor buoyancy in economic 

activity and the transfers to cash bonds and structured products. 

3 535 


696 

410 

1 743 

3 535 

2 242 


Sight Time Savings Credit Inst.

Type 

TREND IN DEPOSITS BY TYPE OF CUSTOMERS 




Private Individuals 5 413 008 68.3 5 675 683 73.8 -262 675 -4.6 

– Residents 5 208 373 65.7 5 327 034 69.3 -118 661 -2.2 

– Expatriates 190 205 2.4 326 860 4.2 -136 655 -41.8 

– Other Non-Residents 14 430 0.2 21 789 0.3 -7 359 -33.8 

Non Profit-Making Institutions 757 540 9.6 680 833 8.9 76 707 11.3 

Traders and Liberal Professions 34 423 0.4 31 083 0.4 3 340 10.7 

Credit Institutions 409 807 5.2 229 200 3.0 180 607 78.8 

Non-Monetary Companies 1 017 131 12.8 926 142 12.0 90 989 9.8 

Public Administrative Sector 297 151 3.7 149 450 1.9 147 701 98.8 

TOTAL 7 929 060 100.0 7 692 391 100.0 236 669 3.1 

The Private Individuals segment, which now represents 68.3% of Total Deposits (-5.5 b.p. down on the 

previous year), lost its relative position vis-à-vis the other segments, to wit to the deposits of Non-Monetary 

Companies, Non-profit Making Institutions and the Public Administrative Sector which as at December 

31st 2005 accounted for 12.8% (+0.8 b.p.), 9.6% (+0.7 b.p.) and 3.7% (+1.8 b.p.) of total 

deposits, respectively. 

TREND IN INTERMEDIATION AND DISINTERMEDIATION RESOURCES 


Type 



1. INTERMEDIATION 8 164 060 68.3 7 692 391 68.6 471 669 6.1 

Client Deposits 7 519 253 62.9 7 463 191 66.6 56 062 0.8 

Credit Institution Deposits 409 807 3.4 229 200 2.0 180 607 78.8 

Securities Placed with Clients 235 000 2.0 0 0.0 235 000 

2. DISINTERMEDIATION 3 792 830 31.7 3 516 517 31.4 276 313 7.9 

Securities Deposited 2 871 644 24.0 2 702 979 24.1 168 665 6.2 

Capitalization Insurance 110 922 0.9 51 226 0.5 59 696 116.5 

Open Pension Funds 177 836 1.5 178 145 1.6 -309 -0.2 

Stock Investment Funds * 366 530 3.1 346 827 3.1 19 703 5.7 

Real Estate Investment Funds * 265 898 2.2 237 340 2.1 28 558 12.0 

* Share price value 

TOTAL (1+2) 11 956 890 100.0 11 208 908 100.0 747 982 6.7 

Generally speaking, resources recorded on the Balance Sheet and off Balance Sheet attained 

11 956 890 thousands of euros (+6.7%). 

Disintermediation Resources continued to rise at a rate greater than that of Intermediation Resources 

despite the fact that the latter recorded higher absolute growth. 

Securities Deposited are the biggest component of off Balance Sheet resources (75.7% of total Disintermediation 

Resources). 

79

80 

Investment, Stock and Real Estate Funds continued their upward trend, attaining more pronounced positive 

variations (+5.7% and +12.0%, respectively). 

Asset Management 

The trend in the volume of third party assets marketed by CEMG reflected the extension of the range 

of savings solutions in 2005, particularly the launch of two new sectorial share funds and six new capitalisation 

insurance policies already mentioned above. Generally speaking, these assets rose by 13.2% in 

2005, totalling 921 million euros. 

In 2005 the portfolio of investment funds marketed by CEMG was made up of thirteen stock investment 

funds, two of which were treasury, four bonds, four shares and three fund funds, managed by 

MG Financial Asset Management, and of a real estate fund managed by SILVIP. 

The amount of stock investment funds being managed grew by 5.7% in 2005, standing at 367 million 

euros at year-end. This growth was supported by the clearly positive trend in share funds and fund 

funds which as a whole now represent 22.3% of total stock funds (13.2% in late 2004). Also worthy of 

special mention is the extension of the range of variable yield funds as well as the performance of fund 

funds with returns above the averages for the sector in its categories. 

The Stock and Building Investment Fund – VIP maintained two-figure growth in 2005 (12.0%) in the 

volume of assets under its management as had occurred in previous years, revealing strong resistance to 

the negative cycle that the real estate sector had been crossing in recent years. The excellent returns 

achieved by the fund have contributed to this, having been the most profitable on the market in 2005 

of all the real estate funds opened with an annualised return of 5.5%. 

Further to the healthy results achieved in 2004 with the launch of capitalization insurance by Lusitania 

Vida, CEMG continued to set great store by this type of savings product in 2005, having successfully 

marketed six new products. Consequently, the portfolio of capitalisation insurance more than doubled 

in 2005 with high relative growth (116.5%), now representing around 12.0% (6.3% in 2004) of total 

third party assets marketed by CEMG. 

The volume of assets under the management of open pension funds relating to FUTURO, marketed 

by CEMG, stagnated in 2005 as a result of the elimination of the tax benefits traditionally associated 

with this type of products. 

THIRD-PARTY ASSETS COMMERCIALISED BY CEMG 


2005 2004 Variation Structure 

Stock Investment Funds 366 530 346 827 5.7% 39.8% 

Treasury Funds 263 431 274 216 -3.9% 28.6% 

Bond Funds 21 198 26 792 -20.9% 2.3% 

Share Funds 55 313 31 501 75.6% 6.0% 

Fund Funds 26 588 14 318 85.7% 2.9% 

Real Estate Investment Fund 265 898 237 340 12.0% 28.9% 

Open Pension Funds 177 836 178 145 -0.2% 19.3% 

Capitalization Insurance 110 922 51 226 116.5% 12.0% 

TOTAL 921 186 813 538 13.2% 100.0%

8.2.4.2. Customer Credit 

The balance of the Client Credit portfolio stood at 11 798 174 thousands of euros, registering growth 

of 10.7% (+5.6 b.p. more than that recorded in 2004). 

The analysis of total credit by client segment allowed the identification of the main contribution to overall 

growth originated from the Private Individual segment, with a rate of variation of +15.9%. The Company 

segment achieved a growth rate of 2.7%. 


12 000 

10 000 

8 000 

6 000 

4 000 

2 000 

0 

10 141 

297 

3 840 

6 004 

TREND IN CREDIT BY SEGMENTS 

Private Individuals 

10 654 

275 

3 858 

6 521 

Companies 

11 798 

281 

2003 2004 


With the sharp growth in Private Individuals Credit this segment now represents 64.1% of total credit 

(+2.9 b.p. on a year-on-year basis). The remaining segments reduced their proportion in the credit structure, 

to wit Companies who now represent 33.5% of the portfolio (-2.7 b.p. compared to 2004). 


12 000 

10 000 

8 000 

6 000 

4 000 

2 000 

0 

10 141 

2 356 

5 750 

TREND IN CREDIT BY PURPOSE 

10 654 

2 394 

6 229 

3 961 

7 557 

Others 

11 798 

2 612 

7 076 

2 035 2 031 2 110 

2003 2004 


Construction Housing Other Credits 

81

82 

By purpose, Housing Credit still constituted the largest component (60.0% of total credit), a position 

which was strengthened in 2005, +1.5 b.p. on last year’s position. The total balance of this type of 

credit increased by 847.4 million euros (+13.6%), reflecting the result of the promotional actions carried 

out (MG Housing campaign). 

Construction Credit remained in second place though it reduced its proportion from 19.1% in 2004 to 

17.9% in 2005. The growth in its balance in absolute terms stood at 78.4 million euros (+3.9%). 

TREND IN CREDIT TO CUSTOMERS BY TYPE OF SEGMENTS AND PURPOSES 


Purposes 



1. COMPANIES 3 960 754 33.5 3 857 913 36.2 102 841 2.7 

Construction 2 109 587 17.9 2 031 165 19.0 78 422 3.9 

Investment 970 214 8.2 930 122 8.7 40 092 4.3 

Treasury 818 388 6.9 837 962 7.9 -19 574 -2.3 

Other Purposes 62 565 0.5 58 664 0.6 3 901 6.7 

2. PRIVATE INDIVIDUALS 7 556 533 64.1 6 520 745 61.2 1 035 788 15.9 

Housing 7 076 337 60.0 a) 6 228 969 58.5 847 368 13.6 

Individual 162 559 1.4 140 192 1.3 22 367 16.0 

Individual – Revolving 36 454 0.3 33 406 0.3 3 048 9.1 

Other Purposes 281 183 2.4 a) 118 178 1.1 163 005 137.9 

3. NON PROFIT-MAKING INSTITUTIONS 51 402 0.4 51 175 0.5 227 0.4 

4. TRADERS AND LIBERAL PROFESSIONS 170 925 1.5 162 999 1.5 7 926 4.9 

5. PUBLIC ADMINISTRATIVE SECTOR 58 560 0.5 60 876 0.6 -2 316 -3.8 

TOTAL CREDIT (1+2+3+4+5) 11 798 174 100.0 10 653 708 100.0 1 144 466 10.7 

a) These amounts differ from the amounts set out in the Annual Report for 2004 owing to the reclassification of Private Individuals Credit by new 

purposes carried out in 2005. 

( ) in 2004 

Other Sectors 

1.1% (1.4%) 


66.2% (63.1%) 

SECTORIAL DISTRIBUTION OF CREDIT IN 2005 

Industry 

1.1% (1.1%) 

Const. and Public Works 

19% (20.3%) 

Commerce 

2.5% (2.4%) 

Tourism 

1.2% (1.1%) 

Property Mediation 

0.3% (0.4%) 

Assoc. and Collectives 

0.4% (0.4%) 

Other R. E. Activities and Serv. Prov. 

7.7% (9.2%) 

Public Administration 

0.5% (0.6%)

Guarantees of the Customer Credit Portfolio 

Credits with Collateral increased their proportion of the portfolio from 88.9% to 90.4%. 

Type of Guaranties 

(as %) 

100 % 

80 % 

60 % 

40 % 

20 % 

0 % 

Credit and Interest Due 

CREDIT PORTFOLIO BY TYPE OF GUARANTY 

CREDIT PORTFOLIO BY TYPE OF GUARANTY 

3.5 

11.8 

84.7 

2003 2004 2005 

Mortgage Guarantee 

3.1 

10.5 

86.4 

Other Guarantees 

3.0 

9.2 

87.8 

No Guarantee 




Collateral – Mortgage 10 361 052 87.8 9 203 270 86.4 1 157 782 12.6 

Collateral – Others 302 083 2.6 262 165 2.5 39 918 15.2 

Public Administrative Sector 58 560 0.5 60 876 0.5 -2 316 -3.8 

Other Guarantees 718 929 6.1 794 553 7.5 -75 624 -9.5 

No Guarantee 357 550 3.0 332 844 3.1 24 706 7.4 

TOTAL 11 798 174 100.0 10 653 708 100.0 1 144 466 10.7 

The amount recorded under Credit and Interest Due fell by 16.3 million euros (-4.7%), having attained 

333.6 million euros. The major contributor to this trend was the fall in Housing Credit and Interest Due 

by 33.4 million euros (-20.4%), with the respective ratio having fallen to 1.8% (-0.8 b.p. down on last 

year’s figure). 

Taking write-off operations into account, the value of credit due stood at 495.9 million euros (+1.5% 

compared to last year’s figure), with a ratio of Credit Interest Due of 4.1% (-0.4 b.p. on a year-on-year 

basis). 

83

84 

As a whole, the ratio of Credit and Interest Due fell by 0.5 b.p., standing at 2.8%, whilst the ratio of 

Adjusted Credit Due (the value of Credit and Interest Due deducted from that share which is 100% 

covered) underwent a 0.4 b.p. fall, standing at 1.8% at year-end 2005. 

4.5% 

3.0% 

1.5% 

0.0% 

TREND IN CREDIT AND INTEREST DUE 

BY TYPE OF CUSTOMERS AND PURPOSES 

TREND IN RATIO OF CREDIT AND INTEREST DUE 

4.4% 

4.1% 

3.2% 

3.3% 

3.1% 

2.2% 

2.8% 

2.6% 

1.8% 

2003 2004 2005 

Total Credit Due Credit Due > 3 months Adjusted Credit Due 



Purposes Ratio Ratio 

Value Credit Due a) Value Credit Due a) Value % 

% % 

1. COMPANIES 141 622 3.6 119 763 3.1 21 859 18.3 

Construction 72 292 3.4 58 088 2.9 14 204 24.5 

Investment 39 878 4.1 27 941 3.0 11 937 42.7 

Treasury 28 946 3.5 32 529 3.9 -3 583 -11.0 

Other Purposes 506 0.8 1 205 2.1 -699 -58.0 

2. PRIVATE INDIVIDUALS 179 028 2.4 219 022 3.4 -39 994 -18.3 

Housing 130 653 1.8 b) 164 082 2.6 -33 429 -20.4 

Individual 1 739 1.1 1 706 1.2 33 1.9 

Individual – Revolving 703 1.9 2 856 8.5 -2 153 -75.4 

Other Purposes 45 933 16.3 b) 50 378 42.6 -4 445 -8.8 

3. INON PROFIT-MAKING INSTITUTIONS 998 1.9 1 982 3.9 -984 -49.6 

4. TRADERS AND LIBERAL PROFESSIONS 11 837 6.9 9 073 5.6 2 764 30.5 

5. PUBLIC ADMINISTRATIVE SECTOR 100 0.2 83 0.1 17 20.5 

6. TOTAL CREDIT AND INTEREST DUE 333 585 2.8 349 923 3.3 -16 338 -4.7 

a) Calculated for total credit (due + falling due) of the respective aggregate. 

b) These amounts differ from the amounts set out in the Annual Report 2004 owing to the reclassification of Private Individuals Credit by new purposes 

carried out in 2005.

The ratio of credit in arrears (adding credit due over 90 days to bad credit reclassified as due divided by 

total credit), calculated in accordance with the recommendations of the Bank of Portugal, stood at 

3.4%, compared to 3.7% at the end of the previous year. This same ratio, calculated for net values of 

provisions, fell to 0.9% (-0.4 b.p. down on a year-on-year basis). 

The predominance of mortgage guarantees in core CEMG activity mitigates the associated risk because 

it usually, largely speaking, allows the credit granted to be recovered through the sale of the bond. 

Housing and Construction, the main purposes of Credit and Interest Due – which represented as at 

December 31st 2005, 60.8% of the credit due portfolio – are operations backed by periodically 

reassessed collateral. 

Overall Total 

Total – 


Total for Companies 

Other Purposes – 


Housing 

Other Purposes – 

Companies 

Treasury 

Investment 

Construction 

DISTRIBUTION OF CREDIT AND INTEREST DUE BY GUARANTEES 

40.6 

44.3 

47.4 

75.0 

80.3 

85.1 

75.1 21.5 

3.4 

93.4 5.3 1.3 

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 

Mortgage Guarantee Other Guarantees No Guarantee 

The structure of the credit due portfolio by delay scales changed favourably with a reduction in the proportion 

of those credits which were most in arrears. 

The healthy trend in arrears ratios can be put down to the settlement of credit recovery procedures, particularly 

the joint action of the Legal and Credit Recovery Management and the Commercial Network 

Department which has been achieving an ever more effective performance in this field. This favourable 

trend constituted one of the most relevant aspects of the reinforcement of the financial soundness of 

the Caixa Económica and the improvement in its results. 

94.2 

36.9 

43.0 9.6 

49.5 6.2 

21.1 

16.6 

22.5 

12.1 

3.1 

2.8 

3.9 

5.2 0.6 

85

86 

TREND IN MAIN INDICATORS OF CREDIT AND INTEREST DUE (Thousands of euros) 

Indicators 2005 2004 

Year-on-year Variation 

Value % 

Customer Credit 11 798 174 10 653 708 1 144 466 10.7 

Credit Due 333 585 349 923 -16 338 -4.7 

Credit Due for less than 3 months 30 147 20 724 9 423 45.5 

Credit Due for over 3 months 303 438 329 199 -25 761 -7.8 

Credit Due for over 12 months 273 095 298 306 -25 211 -8.5 

Bad Debt Credit reclassified as Due 93 235 67 788 25 447 37.5 

Credit Due without Write Off 

Credit Due up to 3 months in arrears 

495 887 488 600 7 287 1.5 

compared to total Credit Due (%) 

Credit Due for over 3 months compared 

9.0 5.9 3.1 b.p. 52.5 

to total Credit Due (%) 

Credit Due for over 12 months compared 

91.0 94.1 -3.1 b.p. -3.3 

to total Credit Due (%) 81.9 85.2 -3.3 b.p. -3.9 

Total Provisions for Credit 377 037 335 846 41 191 12.3 

General Credit Risks 79 522 73 255 6 267 8.6 

Credit Due and Bad Debt 297 515 262 591 34 924 13.3 

Ratios of Credit Due as a % of Total Credit 

Ratio of Credit and Interest Due 2.8 3.3 -0.5 b.p. -15.2 

Ratio of Credit and Interest Due for over 3 months 2.6 3.1 -0.5 b.p. -16.1 

Ratio of Credit and Interest Due for over 12 months 2.3 2.8 -0.5 b.p. -17.9 

Ratio of Credit in arrears 3.4 3.7 -0.3 b.p. -8.1 

Ratio of Credit in arrears net of provisions 0.9 1.3 -0.4 b.p. -30.8 

Coverage of Credit Due by Provisions (%) 

Credit Due 113.0 96.0 17.0 b.p. 17.7 

Credit Due for over 3 months 124.3 102.0 22.3 b.p. 21.9 

Credit Due for over 12 months 138.1 112.6 25.5 b.p. 22.6 

The degree of Credit and Interest Due over 3 months in arrears owing to Provisions improved considerably 

rising from 102.0% in 2004 to 124.3% in 2005. This trend in provisions is one of the best indicators 

of the strengthening of the financial structure of the Caixa Económica, particularly if you bear in 

mind that the risks in a high percentage of credit due are significantly limited by the existence of mortgage 

guarantees. 

COVERAGE OF CREDIT AND INTEREST DUE OVER 3 MONTHS IN 

ARREARS BY PROVISIONS 

(Millions of euros) (%) 

450 

124.3% 

140.0 

400 

350 

102.0% 

120.0 

300 

82.3% 

100.0 

250 

80.0 

200 

150 

100 

418 

344 329 

336 

303 

377 

60.0 

40.0 

50 

20.0 

0 

2003 2004 2005 

Credit Due + 3 months Provisions Coverage ratio 

0.0

8.2.5. International Activity 

The set of transactions included in this field of activity registered growth of 16.5%, rising from 901 million 

euros in 2004 to 1 049 million euros in 2005 (+10 b.p. compared to the growth recorded in 2004). 

Operations 

Owing to the need to adapt and adjust to new market rules, and with a view to improving the provision 

of services, worthy of special mention was the formation and coming in service of Banco Montepio 

Geral – Cabo Verde, S.A. Montepio Geral – Cayman was closed. 

8.2.6. Insurance 

TREND IN MAIN OVERSEAS’ OPERATIONS 




1. GENERAL OPERATIONS 1 005 001 95.8 849 443 94.3 155 558 18.3 

Cheques Issues 19 757 1.9 24 875 2.8 -5 118 -20.6 

Payment Orders Issued 191 296 18.2 164 181 18.2 27 115 16.5 

Cheques Purchased 62 547 6.0 55 905 6.2 6 642 11.9 

Payment Orders Received 715 683 68.2 592 611 65.8 123 072 20.8 

Money Gram Orders 15 718 1.5 11 871 1.3 3 847 32.4 

2. DOCUMENTARY OPERATIONS 44 337 4.2 51 540 5.7 -7 203 -14.0 

Dispatch of Export Documents 2 596 0.2 3 010 0.3 -414 -13.8 

Dispatch of Import Documents 14 530 1.4 18 063 2.0 -3 533 -19.6 

Documentary Credits for Export 7 989 0.8 13 928 1.5 -5 939 -42.6 

Documentary Credits for Import 5 773 0.5 5 555 0.6 218 3.9 

Funding in Foreign Currency 5 139 0.5 3 978 0.5 1 161 29.2 

Discounts on Overseas Operations 5 487 0.5 5 214 0.6 273 5.2 

Guarantees 2 823 0.3 1 792 0.2 1 031 57.5 

TOTAL (1+2) 1 049 338 100.0 900 983 100.0 148 355 16.5 

CEMG activity in the insurance area encompasses the life and non-life branches and results from the 

partnerships with the Montepio Geral insurance companies, Lusitania Companhia de Seguros and Lusitania 

Vida. 

69 494 

NEW POLICIES 

(Amounts) 

67 677 

78 875 

Dec. 03 Dec. 04 Dec. 05 

87

88 

2005 saw the development of a project shared by three companies aimed at simplifying procedures and 

developing new sales support tools which enabled significant improvements in productivity and returns 

to be achieved. 

A new product was developed and launched, MG Auto, the upshot of the joint work of CEMG and 

Lusitania Companhia de Seguros. 

As a result of the aforementioned work and the good performance turned in by the Branch network, 

the placement of new insurance policies resulted in a significant increase in sales and commissions 

earned by the marketing of insurance during the course of the year: 

• The new sales made excellent progress, up by +16.5%, totalling 78,875 new life and non-life policies; 

• Commissions also registered a very positive evolution with year-on-year growth of 43.2%, having 

attained 9 587 000 € (this figure includes the commissions relating to capitalisation insurance for 

the sum of 733 000 €). 

5 372 

COMMISSIONS 


6 696 

9 587 

Dec. 03 Dec. 04 Dec. 05

8.3. ACTIVITY IN REAL ESTATE CONNECTED WITH CREDIT RECOVERY 

The inventory value of the portfolio stood at 104 016 thousands of euros as at December 31st 2005, i.e. 

-0.1% compared to last year’s figure. 


105 

104 

103 

102 

101 

TREND IN BALANCE OF REAL ESTATE REPOSSESSED 

Value of Portfolio Rate of Growth 

Real Estate Mediation companies continued to ensure the lion’s share of sales of repossessed property 

(+2.7 b.p. up on 2004). 

Type 

100 

103 

6.3% 

104 104 

0.5% 

-0.1% 

2003 2004 2005 

BREAKDOWN IN THE BALANCE OF REPOSSESSED REAL ESTATE 


7% 

5% 

3% 

1% 

-1% 


Value Value Value % 

1. Initial Balance 104 071 103 551 520 0.5 

2. Incomings 29 024 25 871 3 153 12.2 

3. Outgoings 29 079 25 351 3 728 14.7 

4. Final Balance (1+2-3) 104 016 104 071 -55 -0.1 

The value of the sale made afforded accounting gains, exceeding the respective inventory value by 

7.2%. 

In most cases, on the date of entry of real estate into the portfolio, said real estate do not have conditions 

for immediate sale. Of the 1 720 properties going to make up the portfolio as at December 31st 

2005, 55.0% are unavailable for sale as they required some diligence or adjustment of a legal nature 

and/or remained occupied, with pending issues usually dragging on in the Courts for many years, with 

serious losses for the Institution. 

89

90 

8.4. FINANCIAL AND INVESTMENT ACTIVITY 

As regards the CEMG financial management plan, particular mention should be made of the development 

of actions to attract the funds needed to ensure the financing of activity and permanent compliance 

with the minimum limit set by the Bank of Portugal for the liquidity ratio. 

The basic instrument for achieving these objectives was once again the carrying out of debenture stock, 

organised and placed on the external financial market, particularly 6 issues of Floating Rate Notes (FRN) 

for a total of 1 555 million euros. The settlements/repayments of FRN and Definite Term Cash Bonds 

stood at 655 million euros, meaning that the external debt balance rose by 925 million euros. 

The conditions in force on the market allowed an extension of the terms of the debt issued, which 

stood at between 5 and 10 years. The reduction in the all-in cost of new operations compared to similar 

operations carried out in previous financial years resulted in a fall in the mean cost of financing. 

The diversification of issue leaders registered in 2005 facilitated access to a wider range of investors, an 

aspect which is relevant for the success of placements. 

Títulos 

BOND PORTFOLIO FLOWS 



Event Value Event Value 

1. INCOMINGS 1 580 1 319 

Debits Represented by Debt Certificates and Securities Issue 1 580 Issue 1 319 

2. OUTGOINGS 655 320 

Debits Represented by Securities Maturing 635 Maturing 300 

Subordinates Bonds with Set Time Period Amortization 20 Amortization 20 

TOTAL (1-2) 925 999 

As a result, Bonds and Debt Certificates accounted for 33.4% of total liabilities at year-end 

(+3.3 b.p.compared to last year’s figure). 

TREND IN THE RESOURCES OF CREDIT INSTITUTIONS AND REPRESENTED BY SECURITIES 


Type 



1. Resources from Credit Institutions 415 129 8.2 339 310 8.3 75 819 22.3 

% of Liabilities 

2. Bonds and Debt Certificates 

3.0 2.7 0.3 b.p. 

Subordinated Bonds 309 976 6.1 329 928 8.1 -19 952 -6.0 

Non-subordinated Bonds 3 835 415 75.5 2 912 270 71.5 923 145 31.7 

Debt Certificates 518 000 10.2 493 000 12.1 25 000 5.1 

TOTAL 2 4 663 391 91.8 3 735 198 91.7 928 193 24.8 

% of Liabities 33.4 30.1 3.3 b.p. 

TOTAL (1+2) 5 078 520 100.0 4 074 508 100.0 1 004 012 24.6 

% of Liabilities 36.4 32.8 3.6 b.p.

Credit Institution Resources turned in overall growth of +75 819 thousands of euros (+22.3%) by way 

of an increase in deposits of +180 607 thousands of euros, making up for the fall of -104 788 thousands 

of euros recorded in Other Resources, an item which as at December 31st 2005 mainly consisted 

of resources from International Financial Bodies (European Investment Bank). 

(Milllions of euros) 

5 000 

4 000 

3 000 

2 000 

1 000 

0 

TREND IN RESOURCES FROM CREDIT INST. AND FROM 

BONDS AND DEBT CERTIFICATES 

709 

2 735 

28.4% 

339 

32.8% 

3 735 

2003 2004 2005 

Resources form Credit Inst. Subord. Bonds, Debits Represented 

by Securities and Debt Certificates 

% of Liabilities 

Financial and investment activity as a whole (applications in Credit institutions and investments in Securities) 

registered growth of 293.6 million euros (+18.0%), now representing 13.8% of total assets 

(+0.6 b.p. compared to last year’s figure). 

Type 

36.4% 

415 

4 663 

TREND IN APPLICATIONS IN CREDIT INSTITUTIONS 

AND INVESTMENTS IN SECURITIES 

36% 

34% 

32% 

30% 

28% 




1. Financial Activity 

Cash and Available Funds 302 103 15.7 283 226 17.3 18 877 6.7 

Applications in Credit Institutions 910 890 47.2 1 067 201 65.3 -156 311 -14.6 

TOTAL 1 1 212 993 62.9 1 350 427 82.6 -137 434 -10.2 

% of Assets 8.7 10.9 -2.2 b.p. 

2. Investment Activity 

Bonds 696 895 36.2 264 552 16.2 432 343 163.4 

Shares and Other Securities 17 983 0.9 19 331 1.2 -1 348 -7.0 

TOTAL 2 714 878 37.1 283 883 17.4 430 995 151.8 

% of Assets 5.1 2.3 2.8 b.p. 

TOTAL (1+2) 1 927 871 100.0 1 634 310 100.0 293 561 18.0 

% of Assets 13.8 13.2 0.6 b.p. 

91

92 


2 000 

1 750 

1 500 

1 250 

1 000 

750 

500 

250 

0 

8.5. RISK MANAGEMENT 

Risk Management Activity 

TREND IN FINANCIAL AND INVESTMENT ACTIVITIES 

69 

15.3% 

1 781 

Investment Activity Financial Activity 

% of Assets 

As regards risk management, previous work was continued aimed at introducing the improvements 

imposed under increasingly more demanding negotiating conditions, the most evident example being 

the Basel II Agreement. 

Risk management includes general risk analysis from a Group perspective, to wit monitoring the Asset 

and Liability Committee (ALCO). Within the framework of risk management, the following activities 

should be highlighted: 

– the measurement, analysis and control of general risks, reporting information and presenting 

operating proposals with a view to achieving effective balance sheet management; 

– application of Value-at-Risk (VaR) methodology in setting operating limits on the Trading Floor; 

– continuance of works with a view to applying the Basel II Agreement, to wit the estimation of 

Probability of Default (PD), simulation of the calculation of equity requirements and stress testing 

exercises, the measurement of the performance of existing risk evaluation models and the selection 

of more appropriate computing solutions; 

– development of credit imparity and financial asset calculation models in the context of new International 

Accounting Standards (IAS); 

– continuation of works to revise credit risk models (internal rating and scorings) with a view to 

aligning them with the best international practises and with the requirements of Basel II; 

– continuance of works to develop a credit risk model for the corporate segment; 

– development of a credit risk model for small businesses; 

– adjustment to the pricing risk of the majority of personal credits. 

284 

13.2% 

1 350 

2003 2004 

Pursuing the drive to align with the recommendations of the best practices of the Basel Banking Supervision 

Committee, the following actions are worthy of special note: 

715 

13.8% 

1 213 


16% 

14% 

12%

– analysis and regular monitoring of credit portfolio trends; 

– analysis, regular monitoring and reporting of portfolios of credits in arrears; 

– regular monitoring of scoring models and analysis of the decision-making process; 

– adaptation of the real estate evaluation process (collateral); 

– introduction of improvements to market risk evaluation, to wit by integrating VaR methodologies 

into portfolio analysis; 

– implementation of operating risk management models. 

When monitoring market, interest rate and exchange risks, the CEMG general risk positions are identified 

and assessed. 

The evaluation and monitoring of exchange rate risk is carried out with similar regularity to that carried 

out for interest rate risk. 

The monitoring and analysis of liquidity risk carried out by CEMG on a daily basis, is discussed by the 

ALCO committee. In this context various metrics are considered for the liquidity risk and stress testing 

exercises are carried out. 

The application methodologies and policies fit in with the principles recommended by the Bank for International 

Settlements (BIS). 

Credit Risk 

The Credit Risk Department ensures the capacity of the evaluation models used internally and regularly 

proceeds with the analysis of the quality of the credit portfolio, defining norms and other instruments to 

support credit decisions in coordination with other internal bodies. 

The credit risk evaluation is based on processes and models adjusted to the specific risk profile of each 

of the various client segments (internal rating and scorings); an instrument is used to support analysis 

and credit decisions called MARE – Company Risk Analysis Model for the company/sole trader segment 

and other instruments and mechanisms for preventive monitoring, control and credit recovery are used. 

Market Risks 

The Market Risk Department includes the management of liquidity, market and interest rate risks. Within 

the remit of its duties it is charged with analysing and implementing measures deriving from community 

and national legislation about the various activities, to wit vis-à-vis the regulation of equity, the calculation 

of provisions and risk control rules for asset management. 

Generally speaking, CEMG has been observing the principles recommended by the Basel Banking Supervision 

Committee and uses a diversified range of risk measurement tools in line with the risk factor, 

prioritising VaR (Value-at-Risk) as an essential measure for controlling exposure to market risks complemented 

by analyses of sensitivity and simulations for the various types of risk. 

In conjunction with the Trading Floor, the measurement and control of operations and portfolio risk is 

carried out as well as appropriate monitoring of CEMG’s general risk positions. 

As regards the liquidity risk it is incumbent upon the Studies and Planning Management – Budget and 

Control Department – to disclose information to the whole institution structure on its evolution. 

As regards the interest rate risk level, adaptation management is carried out between the CEMG business 

structure and the interest rate risk level assumed. The general risk limits for exposure in assets and memo- 

93

94 

randum items are established by the Asset and Liability Committee (ALCO) and reviewed periodically or 

whenever justified. Periodically, reports are also produced in the context of interest rate risk analysis. 

Operational Risk 

Operational risk management forms part of the duties assigned to the Operational Risk Department. It 

is incumbent upon it, amongst other duties, to collect from the various internal bodies the elements 

required to identify exposure to operational risk; the definition of norms in terms of the analysis, collection, 

processing and monitoring of this type of risks. 

With a view to adapting internal strategies to the requirements of Basel II, a proposal for implementing 

an operational risk management model, it being the responsibility of this Department to coordinate the 

activities required to define the appropriate management model to identify, assess qualitatively and 

quantitatively, monitor, control/mitigate the various operational risk events. 

It should be pointed out that the development of works conducive to the implementation of the operational 

risk management model – at an initial stage – covers organic structure units, having appointed 

Interlocutors responsible for Operational Risk under the remit of the respective Managements/Departments. 

However, the CEMG is already endowed with mechanisms and instruments which control this 

type of risk. 

Compliance Risk 

Further to the review of the organisational structure, those adaptations required to implement and 

develop compliance risk management were made in the Risk Analysis and Management and forms 

part of the duties assigned to the Operational Risk Department, charged with the mission of ensuring 

compliance with legal and regulatory rules by the CEMG and its employees. 

8.6. PROMOTIONAL CAMPAIGNS 

Impact of Advertising Campaigns on Activity 

2005 saw Montepio Geral continue its communication strategy, making an active contribution to the 

increased notoriety of the advertising and brand campaigns. The notoriety of advertising campaigns 

attained its highest levels ever, considering the Spontaneous Notoriety (14.8%) and Total Notoriety 

(35.7%) indicators measured in studies carried out by specialist companies. 

The results of the advertising campaigns are plain to see from the evolution of portfolios like housing 

credit, individual credit, the number of credit cards of Montepio Geral in circulation and savings’ products 

for minors. 

8.7. HUMAN RESOURCES 

A policy was pursued in 2005 to contain staff admissions, with natural departures only having been 

partially compensated by the admission of specialised, skilled staff. A slight reduction in the number of 

permanent CEMG employees was thus observed during 2005, falling from 2 863 on December 31st 

2004 to 2 853 on December 31st 2005.

Distribution 

Studies were carried out with a view to the implementation of the new Integrated Human Resource 

Management Model in 2006 which will accommodate management aligned with the best practices in 

the sector, essentially based on the improvement in performance and results and impacting the returns 

policy. 

2005 was thus characterised by the pursuit of measures which enable the fine-tuning of Human 

Resource management instruments which, in sustained fashion, allow the continuation of the policy 

already commenced and which seeks to enhance the qualifications, skills and development of employees 

as a key competitiveness factor in view of the new market requirements and the permanent alteration of 

business variables. 

To this end professional training – regarded as an essential, favoured instrument for the development 

and implementation of policies aimed at the qualification and enhancement of professional skills – continued 

with the PDIF - Integrated Development Plans by Function – having increased technical and 

behavioural training actions using remote education methodologies. 317 training schemes were carried 

out involving 3259 participations and a total of 82 274 hours training. 

The commercial network strengthened its training in Sales’ Techniques, inter alia, for all employees 

whilst at the central services the implementation of the PDF gained particular visibility for all managements 

in terms of Team Management and Leadership. 

8.8. TECHNOLOGICAL RESOURCES 

Technological and Computing Resources 

TREND IN AND COMPOSITION OF STAFF STRUCTURE 

During the financial year the consolidation and improvement in Information Systems was continued, 

having invested 6 390 thousands of euros on the introduction of new computing applications and on 

improving existing ones. One of the areas that concentrated major resources was that of the development 

of technical structures to meet the requirements deriving from the alterations to which the business 

was subject and which are related, inter alia, with: 

• Implementation of international accounting standards; 

• Computing developments under the Savings Directive; 


No. % No. % No. % 

Staff Structure 2 866 100.0 2 891 100.0 -25 -0.9 

Prolonged Lay-offs 37 1.3 51 1.8 -14 -27.5 

Permanent staff 2 829 98.7 2 840 98.2 -11 -0.4 

Fixed-term employees 24 23 1 4.3 

Total permanent staff 2 853 2 863 -10 -0.3 

• mplementation of a new technical structure for the automatic processing of structured products; 

• Computing developments supporting new CEMG departments and new Group companies. 

95

96 

Part 2 of the MG-SINE (Integrated Business System) was completed, having chosen the technical solution 

for the Datawarehouse platform to be implemented. 

Projects were continued or commenced whose completion is envisaged for 2006, in particular: 

• Computing developments under Basel II; 

• Completion of stage 3 of the MGSINE project; 

• Improvements to the Workflow system; 

• Technological renovation of branch network systems (Hardware and Software). 

Re-engineering and Quality 

In the field of re-engineering and quality, continuing the strategy to reduce administrative costs, process 

rationalisation costs and circuits and with a view to improving effectiveness and productivity, various 

actions were carried out with the following being worthy of special mention in view of their impact on 

activity: 

• Time Deposit Workflow System; 

• Filing system using document digitisation; 

• Centralisation of branch activities at back-office structures (to be continued in 2006); 

• Implementation of a general, shared Client Complaint Management system (to be continued in 2006). 

8.9. RESULTS, EFFICIENCY AND PROFITABILITY 

Results by Functions 

The Result for the Financial Year of 2005 stood at 45 312 thousands of euros, an increase of 12 269 

thousands of euros (+37.1%) on that recorded last year (33 043 thousands of euros). Various factors 

contributed to this healthy trend: 

– Positively: 

• Increase in active business operations, to wit in the balance of credit granted to clients; 

• Increase in the average rate on applications, namely in terms of the level of returns on interbanking 

applications; 

• A drop in mean interest rates on deposit operations, increasing the activity to attract client resources; 

• Increase in income from net Commissions and Equivalent Items; 

• Increase in results recorded by market operations; 

• Controlling increases in administrative costs; 

• Reduction in the impact of amortizations as a consequence of the policy adopted vis-à-vis software 

and equipment rental; 

• Increase in the result of sale of Repossessed Property activity associated with the increase in the 

gains generated in sales; 

• Increase in Extraordinary Results;

– Negatively: 

• Increase in the mean rate for attracting the financial resources on markets which determined an 

increase in the general mean rate of returns on passive operations; 

• Increase in General Provisions, Net of Replacements, for credit and other assets under the terms of 

the regulations laid down by the supervision and the internal policy put into effect with a view to 

strengthening the financial soundness of the Caixa Económica. 

Designation 

TREND IN RESULTS 




+ Interest and Equivalent Income 595 326 559 282 36 044 6.4 

– Interest and Equivalent Costs 328 376 312 119 16 257 5.2 

= FINANCIAL MARGIN 266 950 77.7 247 163 79.8 19 787 8.0 

+ Result of Service Rendered to Customers 71 440 20.8 65 149 21.0 6 291 9.7 

Income on Commissions and Equivalent Items 86 093 25.1 76 513 24.7 9 580 12.5 

Costs on Commissions and Equivalent Items 14 653 4.3 11 364 3.7 3 289 28.9 

+ Result of Operations on Markets 2 112 0.6 -3 683 -1.2 5 795 157.3 

Capitals -112 0.0 -2 169 -0.7 2 057 94.8 

Forex 2 224 0.6 -1 514 -0.5 3 738 246.9 

+ Earnings on Financial Interests 3 013 0.9 1 033 0.4 1 980 191.7 

= OPERATING BANK REVENUE 343 515 100.0 309 662 100.0 33 853 10.9 

– ADMINISTRATIVE COSTS 199 965 58.2 190 652 61.6 9 313 4.9 

Staffing Costs 127 690 37.2 126 692 40.9 998 0.8 

Supplies and Third Party Services 72 275 21.0 63 960 20.7 8 315 13.0 

= OPERATIONAL RESULT 143 550 41.8 119 010 38.4 24 540 20.6 

– Amortizations (Am) 11 085 13 252 -2 167 -16.4 

– Net Provisions for Replacements (NP) 92 785 71 341 21 444 30.1 

– Formation of Provisions for Credit 193 578 174 950 18 628 10.6 

+ Replacement of Provisions for Credit 108 635 106 865 1 770 1.7 

– Formation of Provisions for Securities 1 358 1 581 -223 -14.1 

+ Replacement of Provisions for Securities 1 373 2 850 -1 477 -51.8 

– Formation of Provisions for other Assets 10 753 5 847 4 906 83.9 

+ Replacement of Provisions for other Assets 2 896 1 322 1 574 119.1 

= OPERATING RESULT 39 680 34 417 5 263 15.3 

+ Extraordinary Results – Property Repossessed 2 350 1 830 520 28.4 

+ Extraordinary Results – Others 3 282 -3 204 6 486 202.4 

= RESULT FOR FINANCIAL YEAR (RFY) 45 312 33 043 12 269 37.1 

As per memorandum: 

«CASH FLOW» FOR FINANCIAL YEAR (Am+NP+RFY) 149 182 117 636 31 546 26.8 

The table below sets out the numerical variations on last year which, as a whole, explain the increase in 

the result: 

97

98 

BREAKDOWN OF YEAR-ON-YEAR VARIATION OF RESULTS (Thousands of euros) 

Variation in Positive Impact Variation in Negative Impact 

Designation Value Variation 

Designation Value Variation 

% % 

Financial Margin 19 787 8.0 Staffing Costs 998 0.8 

Result of Service Rendered to Customers 6 291 9.7 Supplies and Third Party Services 8 315 13.0 

Result of Operations on Markets 5 795 157.3 Formation of Provisions 23 311 12.8 

Earnings on Financial Interests 1 980 191.7 

Replacement of Provisions 1 867 1.7 

Amortizations 2 167 16.4 

Ext. Results – Property Repossessed 520 28.4 

Extraordinary Results – Others 6 486 202.4 

TOTAL 44 893 TOTAL 32 624 

TOTAL VARIATION = 44 893 - 32 624 = 12 269 

The variation occurring in staff expenses also reflects the containment followed during the financial year 

in the number of employees as departures were only partially compensated by new admissions. But the 

main reason behind such a small increase was the transfer to the Associação Mutualista of costs on 

those employees assigned to it which, in previous years, had been recorded as expenses of the Caixa 

Económica. 

The variation occurring in the item «Third Party Services and Supplies» can basically be put down to the 

increased use of advertising campaigns and the launch or continuation of structuring computing projects. 

The increase in provisions reflects the policy to increase coverage of credit and general risks, augmenting 

the relevant ratios and improving the soundness of the Institution. 

Banking Product 

The Banking Product attained the sum of 343 515 thousands of euros, corresponding to a positive variation 

of 33 853 thousands of euros (+10.9%) compared to last year’s figure, with contributions essentially 

deriving from the Financial Margin (77.7% of Banking Product as opposed to 79.8% in 2004) and 

net revenue from commissions, in other words, from the Result of the Service Rendered to Customers 

(20.8% compared to 21.0% in 2004). 

90.0% 

80.0% 

70.0% 

60.0% 

50.0% 

40.0% 

30.0% 

20.0% 

10.0% 

0% 

-10.0% 

79.8% 77.7% 

Fin. Margin 

FORMATION AND DISTRIBUTION OF BANKING PRODUCT 

FORMATION DISTRIBUTION 

21.0% 20.8% 

R.S.R. Customers 

1.5% 

-0.8% 

Others 


40.9% 37.2% 

Staffing Costs 

20.7% 21.0% 

TPSS 

38.4% 41.8% 

Operational 

Result

As regards the formation of Banking Product, there was a reduction in the proportion of the Financial 

Margin as a result of the deconcentration of income. In terms of its distribution, there was a rise in the 

proportion of the Operational Result. 

Financial Margin 

The increase in business afforded a variation in the Financial Margin of 20 517 thousands of euros 

(103.7% of the total) and, on other hand, the appropriate management of interest rates produced an 

increase in the Financial Margin of 5 616 thousands of euros (28.4% of the total), slightly driving the 

rise in the Financial Intermediation Rate (FIR). 

The value of these increases fell by 6 346 thousands of euros owing to the structural effect of Assets 

and Liabilities and the impact of interest rate coverage associated with the issues of debenture stock and 

with the products structured for placement vis-à-vis clients to which end, as a norm, swaps were contracted. 

Designation 

BREAKDOWN OF VARIATION IN FINANCIAL MARGIN 




1. Increase in Financial Margin deriving from 

the increase in the business base (activity) 

2. Increase in Financial Margin deriving from 

20 517 103.7 4 566 37.2 15 951 349.3 

the variation in interest rates 5 616 28.4 5 034 41.0 582 11.6 

3. Effect Risk Coverage -4 573 -23.1 2 960 24.0 -7 533 -254.5 

4. Structural Effect of Assets and Liabilities -1 773 -9.0 -271 -2.2 -1 502 554.2 

5. Final Variation in Financial Margin (1+2+3+4) 19 787 100.0 12 289 100.0 7 498 61.0 

Variables 

PROFITABILITY BY MARGINS 



Average Average Income/ Average Average Income/ 

Capital Rate /Costs Capital rate /Costs 

Value % Value Value % Value 

1. APPLICATIONS 12 836 504 4.64 595 326 12 251 518 4.57 559 282 

Availabilities 249 282 1.21 3 022 301 953 1.09 3 285 

Interbank Applications 940 995 2.19 20 606 1 433 389 1.96 28 076 

Customer Credit 11 171 358 4.24 473 360 10 387 071 4.28 444 562 

Applications in Securities 474 869 3.36 15 945 129 105 4.99 6 436 

Swaps 82 393 76 923 

2. BORROWED RESOURCES 12 049 876 2.73 328 376 11 543 789 2.70 312 119 

Deposits 7 602 712 1.77 134 532 7 713 097 1.78 137 372 

Interbank Resources 81 870 2.31 1 889 453 179 2.46 11 149 

Other Resources 4 365 294 2.98 129 978 3 377 513 3.22 108 891 

Swaps 61 977 54 707 

3. OWN RESOURCES ASSIGNED 

TO OPERATING 786 628 0.17 707 729 0.16 

4. FINANCIAL INTERM. RATE 12 836 504 2.08 266 950 12 251 518 2.02 247 163 

99

100 

The management of interest rates has meant the variation in the mean rate on active operations of 

+0.07 b.p. – basically by dint of the reduction in the mean interest rate on Applications in Securities 

(-1.63 b.p.) – was still enough to compensate the increase in passive rates of +0.03 b.p., impacting the 

upward trend in the Financial Intermediation Rate which rose from 2.02% in 2004 to 2.08% in 2005. 

6.0% 

3.0% 

0.0% 

TREND IN FINANCIAL INTERMEDIATION RATE 

5.00% 

3.20% 

4.57% 

1.99% 2.02% 2.08% 

2003 2004 2005 

Financial Interm. Rate 

2.70% 

Average Rate Applic. 

4.64% 

2.73% 

Result of the Service Rendered to Customers and of Operations on Markets 

Average Rate Borrowed Res. 

The difference between the Mean Rates on Applications and those from Borrowed Resources is no the same as the Financial Intermediation 

Rate owing to the positive impact on activity brought about by Equity. 

In line with the trend in the Financial Margin, Other Net Banking Income – which includes the Result of 

the Service Rendered to Customers, the Result of Operations on Markets and the Earning on Financial 

Interests – registered an increase of 14 066 thousands of euros (+22.5%). However, this increase was 

greatly influenced by the negative result which had to be registered in 2004, particularly by dint of the 

inclusion in accounts of forex losses which occurred in previous years. 


75 

65 

55 

45 

35 

25 

TREND IN RESULT OF SERVICE RENDERED TO CUSTOMERS 

18.7% 

54.9 

21.0% 

65.1 

20.8% 

71.4 

2003 2004 2005 

25.0% 

20.0% 

15.0% 

10.0% 

5.0% 

0.0% 

Res. Serv. R. Customers 

(RSRC) 

Rácio, RSRC / 

/ Banking Product (%)

The trend in the Result of the Service Rendered to Customers was essentially influenced by the increase 

in the commissions from the cross-selling of products from undertakings (+23.7%), credit operations 

(+20.4%), the sale of cards (+16.4%), deposit account maintenance (+57.7%) and the valuation service 

(+16.5%). 

Commissions from operations involving securities and the management of credit contracts integrated 

within securitisation operations fell on a year-on-year basis by 14.8% and 11.9%, respectively. 

MAIN ITEMS OF THE RESULT OF COMMISSIONS AND COMPARABLES 


Items 

2005 2004 a) Variation 


Cross-Selling Comp. in which Interest is held 15 143 21.2 12 245 18.8 2 898 23.7 

Securitisation 1 196 1.7 1 358 2.1 -162 -11.9 

Maintenance of Deposit Accounts 2 381 3.3 1 510 2.3 871 57.7 

Operation on Securities 626 0.9 735 1.1 -109 -14.8 

Overseas Operations 1 623 2.3 1 714 2.6 -91 -5.3 

Valuations Service 4 748 6.6 4 076 6.3 672 16.5 

Cards 6 181 8.7 5 309 8.2 872 16.4 

Transactions with SIBS 13 657 19.1 13 020 20.0 637 4.9 

Credit Operations 18 591 26.0 15 444 23.7 3 147 20.4 

Other Items 7 294 10.2 9 738 14.9 -2 444 -25.1 

TOTAL 71 440 100.0 65 149 100.0 6 291 9.7 

a) Some parts differ from the amounts set out in the Annual Report for 2004 owing to the reclassifications carried out in 2005, to wit the sub-division 

of «Other Items» into commissions on «Credit Operations» and «Other Items». Also the «Overseas Operations», «Cards» and «SIBS Transactions» 

items underwent minor adjustments. The final total remained the same. 

As regards commissions from the sale or placement of products from some undertakings through the 

CEMG commercial network (cross-selling), the emphasis remains on commissions deriving from 

insurance activity both in life and non-life products which generated 63.1% of the said commissions. 

TREND IN COMMISSIONS RECEIVED FROM COMPANIES IN WHICH INTERESTS ARE HELD 


Companies 



MG Gestão de Activos Financeiros 2 322 2 181 141 6.5 

Lusitania – Seguros 3 476 640 2 836 443.1 

Lusitania – Vida 6 076 219 5 857 2 674.4 

Leacock – Corretora de Seguros 35 5 838 -5 803 -99.4 

Fundo VIP 633 718 -85 -11.8 

Futuro – Soc. Gest. F. Pensões 1 791 1 933 -142 -7.3 

CREDINT 521 485 36 7.4 

NORFIN 289 231 58 25.1 

TOTAL 15 143 12 245 2 898 23.7 

Earnings on Financial Interests 

The increase in the Earnings on Financial Interests for the sum of 1 980 thousands of euros, can essentially 

be put down to the result generated by the closure of the undertaking MG Cayman. 

101

102 

Provisions 

TREND IN DIVIDENDS OF COMPANIES IN WHICH INTERESTS ARE HELD 



Companies % of Interest 

held by CEMG* 

Value of 

interest 

Value of 

dividends 

Value of 

dividends 

Value % 

MG Cayman a) 2 046 0 2 046 

Caixa Económica de Cabo Verde 9.8 1 444 102 102 0 0.0 

Banco da África Ocidental 7.5 174 35 23 12 51.3 

MG Patrimónios 0.0 0.0 0.0 0.7 -0.7 -100.0 

MG Gestão Activos Financeiros 0.1 1 0.34 0.07 0.27 385.7 

Lusitania Vida – Companhia de Seguros 39.3 5 202 248 177 71 40.1 

Lusitania – Companhia de Seguros 26.2 10 816 253 167 86 51.5 

Futuro – Soc. Gest. F. Pensões 9.8 419 33 42 -9 -21.4 

UNICRE 2.8 311 92 92 0 0.0 

SIBS 1.3 1 074 113 380 -267 -70.3 

EURONEXT 0.1 1 841 51 49 2 4.1 

NORFIN 9.9 50 40 

TOTAL 21 332 3 013 1 033 1 980 191.7 

* Montepio Geral – Associação Mutualista also holds an interest in the capital of Caixa Económica de Cabo Verde, of MG Patrimónios, of MG 

Gestão Activos Financeiros, of Lusitania Seguros, of Lusitania Vida, of Futuro and of Banco da África Ocidental. 

a) Interest in MG Cayman was liquidated. 

The negative impact of Net Provisions for Replacements on the Profit-and-loss Account stood at 

21 444 thousands of euros as a consequence, in particular, of the increase in credit provisions. 

As has already been mentioned above, the increase in provisions partly resulted from the regulations of 

the Supervision and partly from the policy adopted internally to strengthen the soundness of the financial 

structure of the Caixa Económica. 

If not for the highly positive results achieved in the containment of, and even reduction in, credit due 

– which allowed very considerable recoveries in provisions – the negative effect of provisions on the 

result for the financial year would have been much greater. 

BREAKDOWN OF IMPACT IN YEAR-ON-YEAR VARIATION OF PROVISIONS ON RESULTS 

Provisions 

Impact on Results 


Positive Negative Net 

(1) (2) (3)=(1)-(2) 

General Credit Risks -2 355 

Formation of Provisions 1 423 

Replacement of Provisions 932 

Credit Due -11 882 


Replacement of Provisions 3 158 

Bad Debt -2 717 



Securities (Investment Portfolio) -1 254 

Formation of Provisions 223 


Properties Repossessed -3 681 



Other Assets 445 

Formation of Provisions 363 


TOTAL 5 415 26 859 -21 444

Cash Flow 

Cash Flow for the financial year stood at 149 182 thousands of euros, representing an increase of 

31 546 thousands of euros (+26.8%) vis-à-vis the previous year. 

Items 

Of those components making positive contributions to Cash-Flow, the Result for the Financial Year has 

the greatest economic significance by dint of its direct relationship with the Institution’s capacity for 

self-financing and it was this figure that registered the highest growth rate. 

Extraordinary Results 

BREAKDOWN IN CASH FLOW 




Amortizations 11 085 7.4 13 252 11.3 -2 167 -16.3 

Net Provisions 92 785 62.2 71 341 60.6 21 444 30.1 

Resultof the Financial Year 45 312 30.4 33 043 28.1 12 269 37.1 

TOTAL 149 182 100.0 117 636 100.0 31 546 26.8 


150 000 

120 000 

90 000 

60 000 

30 000 

0 

TREND IN CASH FLOW AND IN ITS COMPONENTS 

110 842 

21 492 

74 156 

117 636 

15 194 13 252 

11 085 

2003 2004 2005 

Amortizations Provisions R. Financial Year 

The contribution of Extraordinary Results to the Result for the Financial Year was positive and quite different 

from that observed in the previous year as can be seen from the table below. 

33 043 

71 341 

149 182 

45 312 

92 785 

103

104 

Although pressured by the less favourable trade cycle on the housing market, the sales of real estate for 

repossession afforded accounting gains of 2 350 thousands of euros (+28.4% on the previous year). 

Other Extraordinary Gains registered a quite sharp positive variation, essentially related with gains in the 

sale of financial fixed assets (MG Cayman) and miscellaneous gains relating to previous financial years. 

Other Extraordinary Losses registered a fall of 50.9%. 

Efficiency 

BREAKDOWN OF EXTRAORDINARY RESULTS 

Extraordinary Results 2005 2004 


Variation 

Value % 

Property Repossessed 2 350 1 830 520 28.4 

+ Profit from the sale of properties resulting 

from credit recovery 4 138 3 294 844 25.6 

– Losses from the sales of properties resulting 

from credit recovery 1 788 1 464 324 22.1 

Pensions Fund - 678 -1 713 1 035 -60.4 

– Contributions from Staff 

in active employed as at 31/12/94 678 678 0 0.0 

– Actuarial Losses 0 1 035 -1 035 -100.0 

+ Gains from the sale of Financial Fixed Assets 3 420 2 3 418 

Others 540 -1 493 2 033 136.2 

+ Other Extraordinary Gains 1 434 327 1 107 338.5 

– Other Extraordinary Losses 894 1 820 -926 -50.9 

TOTAL 5 632 -1 374 7 006 509.9 

The financial year of 2005 was characterised by the favourable evolution in the operational efficiency of 

the Institution. The cost to income ratio (Operating Costs/ Banking Product as a %) registered a 

favourable variation of -4.4 b.p., having fallen from 65.8% in 2004 to 61.4% in 2005. 


450 

300 

150 

0 

294 

67.2% 

198 

TREND IN COST TO INCOME 

310 

2003 2004 

65.8% 61.4% 

204 

Banking Product Operating Costs 

Cost to Income (%) 

344 


211

The exacerbation of the Cost to Income ratio is related, on one hand, with the improvement recorded 

in Banking Product (+10.9%) and, on other hand, with the reduction in Amortizations (-16.4%) and the 

reduction in the proportion of Administrative Costs in the Banking Product (-3.4 b.p.). 

The reduction in amortizations does not represent any alteration to policy in this area, deriving from the 

deployment over recent years of hired equipment with a reduction in the base of incidence thereof. 

Items 

TRERND IN OPERATING COSTS 




1. Staffing Costs 127 690 126 692 998 0.8 

Management and Supervisory Bodies 1 061 2 265 -1 204 -53.2 

Employees 93 623 90 784 2 839 3.1 

Compulsory Company Expenses 31 730 32 174 -444 -1.4 

Other Costs 1 276 1 469 -193 -13.1 

2. Supplies and Third Party Services 72 275 63 960 8 315 13.0 

Supplies from Third Parties 4 857 4 890 -33 -0.7 

Rental and Hiring 19 579 18 303 1 276 7.0 

Casual Labour 3 024 2 035 989 48.6 

Consultancy and Auditing 3 076 590 2 486 421.4 

Cash Machine costs paid to SIBS 3 207 3 224 -17 -0.5 

Transport of Valuables 2 163 1 707 456 26.7 

Training 1 359 1 159 200 17.3 

Others 35 010 32 052 2 958 9.2 

3. Amortizations 11 085 13 252 -2 167 -16.4 

Software 2 885 3 277 -392 -11.9 

Real Estate 4 021 4 193 -172 -4.1 

Equipment 4 178 5 782 -1 604 -27.7 

4. TOTAL OPERATING COSTS (1+2+3) 211 050 203 904 7 146 3.5 

5. BANKING PRODUCT 343 516 309 662 33 854 10.9 

Financial Result 266 950 247 163 19 787 8.0 

Commissions and Comparables 76 566 62 499 14 067 22.5 

6. COST TO INCOME RATIO (4/5) 61.4% 65.8% -4.4 b.p. -6.7 

The migration of movements from Branches to automatic channels – associated with new functionalities 

on these distribution channels with a view to making the use of new technologies more widespread – 

has contributed to the result achieved with the cost reduction measures, resulting in a deceleration in 

the growth in Operating Costs. 

Ratios 

RELATIVE EFFICIENCY (%) 



1. Staffing Costs / Banking Product 37.2 40.9 -3.7 b.p. -9.0 

2. Third Party Supplies and Services / Banking Product 21.0 20.7 0.3 b.p. 1.4 

3. Amortizations / Banking Product 3.2 4.3 -1.1 b.p. -25.6 

4. RATIO COST TO INCOME (1+2+3) 61.4 65.8 -4.4 b.p. -6.7 

105

106 

The Staffing Costs/Banking Product ratio fell, down from 40.9% in 2004 to 37.2% in 2005. It should be 

noted that, as noted above, part of this improvement can be put down to the transfer from the Caixa 

Económica to the Associação Mutualista of the staff who work directly for the latter. 

The banking product per employee had a positive variation (+12.0%). 

The proportion of automatic transactions associated with current accounts increased by 0.4 b.p., rising 

from 85.6% in 2004 to 86.0% in 2005. This situation expresses the preference of clients for automatic 

channels (Chave24, Phone24/Net24/NetMóvel24) to the detriment of the traditional trip to the Branch. 

Return 

Indicators 

OPERATIONAL INDICATORS 

Unit of 

Variation 


measurement em % 

Average Net Assets / Average no. of Workers (thous. euros) 4 583 4 321 6.1 

Administrative Costs / Average Net Assets (%) 1.5 1.5 0.0 b.p. 

Banking Product / Average no. of Workers 

Operating Costs + Amortizations / Banking 

(thous. euros) 121 108 12.0 

Product (Cost to Income) (%) 61.4 65.8 -4.4 b.p. 

Staffing Costs / Banking Product (%) 37.2 40.6 -3.7 b.p. 

Total Headcount / No. of Branches (as no.) 9.7 9.6 1.0 

Percentage of Automatic Transactions % 86.0 85.6 0.4 b.p. 

Percentage of Transactions via Alternative Channels % 56.0 54.7 1.3 b.p. 

Return indicators have shown the improvement observed in activity operating conditions, in the main 

the Return on Equity (ROE), rising from 5.33% to 6.67% (+1.34 b.p.) and the Banking Product / Average 

Net Assets which improved from 2.5% in 2004 to 2.6% in 2005. 

Ratios 

RETURN (%) 



1. Results / Average Net Assets (ROA) 0.35 0.27 0.08 b.p. 29.6 

2. Results / Average Equity (ROE) 6.67 5.33 1.34 b.p. 25.1 

3. Banking Product / Average Net Assets (%) 2.63 2.50 0.13 b.p. 5.2 

The main components impacting return ratios positively were the increase in Interest and Equivalent 

Income, the increase in the results of the Service Rendered to Customers and Other Banking Income and 

the containment in Staffing Costs.

BREAKDOWN OF RETURN RATIOS 

Indicators 2005 2004 

The reduction in the financial leverage indicator is associated with the growth in average own resources 

(+8.2%), proportionally greater than that of average Net Assets (+5.3%). 

8.10. TRANSITION TO IFRS (INTERNATIONAL FINANCIAL REPORTING 

STANDARDS) 

Variation 

Value % 

1. Ratio of Interest and Equivalent Income / ANA 4.56 4.50 0.06 1.3 

2. Ratio Result of Service rendered to Customers / ANA 0.55 0.52 0.03 5.8 

3. Ratio Recovery in Provisions / ANA 0.86 0.89 -0.03 -3.4 

4. Ratio Other Income / ANA 0.09 0.00 0.09 

5. Ratio Total Income / ANA (1+2+3+4) 6.06 5.91 0.15 2.5 

6. Ratio of Interest and Equivalent Costs / ANA 2.51 2.51 0.00 0.0 

7. Ratio of Staffing Costs / ANA 0.98 1.02 -0.04 -3.9 

8. TPSS Ratio and Amortizations / ANA a) 0.64 0.62 0.02 3.2 

9. Ratio Formation of Provisions / ANA 1.57 1.47 0.10 6.8 

10. Ratio Other Costs / ANA 0.01 0.02 -0.01 -50.0 

11. Ratio Total Costs / ANA (6+7+8+9+10) 5.71 5.64 0.07 1.2 

12. ROA = (5-11) 0.35 0.27 0.08 29.6 

13. Financial leverage (no. of time) b) 19.06 19.74 -0.68 -3.4 

14. ROE = (12 x 13) 6.67 5.33 1.34 25.1 

ANA = Average Net Assets 

a) TPSS = Third Party Supplies and Services 

b) Average Net Assets / Average Own Resources 

Under the provisions of regulation no.1606/2002 issued by the European Parliament and Council on 

July 19th 2002, the consolidated financial statements of the CEMG shall comply with international 

financial reporting standards (IFRS) for financial years starting after January 1st 2005. 

During 2005 the CEMG proceeded with the adoption of the accounting procedures required for conversion 

to IAS with a view to submitting and disclosing the consolidated financial statements in accordance 

with the said standards. 

Considering the complexity of changes to international accounting standards, the establishment of a 

transition plan was justified with the CEMG opting in the financial year of 2005 still to submit financial 

statements in accordance with local standards, in other words, the Chart of Accounts for the Banking 

System. 

Considering that the greatest impact deriving from alterations to accounting standards is on responsibilities 

vis-à-vis the Pension Fund to harmonise the inclusion of these responsibilities in the consolidated 

accounts with the individual accounts, the CEMG invoked the application of no. 2, Notice no.12/2005 

which foresees the possibility of the institutions anticipating the calculation of some of the accounting 

alterations deriving from the fact that new accounting standards may benefit from the transition period 

which was accepted by the Bank of Portugal. 

Financial statements on an individual basis in 2005 already reflect, under results carried forward, the 

share of the impact of alterations to responsibilities vis-à-vis the Pensions Fund, which stood at 

107

108 

117 498 942 euros and which, under the terms of no.13.º-A, Notice no.12/2001 and with the wording 

attributed to it under Notice no.12/2005, both issued by the Bank of Portugal - may be deferred for a 

period of 5 or 7 years depending on whether the impacts were originated by: 

– alterations deriving from the transition to applicable accounting standards: 5 years; 

– benefits of post-employment medical care to employees: 7 years; 

– alterations to life-table related assumptions: 7 years. 

8.11. RATING 

The evaluation of the Caixa Económica Montepio Geral has been the responsibility of two of the main 

international rating agencies, Fitch Ratings and Moody’s, which in 2005 maintained the rating previously 

assigned. 

The ratings assigned have achieved stability, essentially expressing the low risk of activity and the good 

general quality of assets, with mortgage credit being worthy of special mention by dint of the collateral 

associated. 

The latest ratings assigned for 2005 were as follows: 

Some of the aspects highlighted by the Rating Agencies in the analysis reports carried out were as follows: 

Fitch Ratings: 

• Rating A- with a negative Outlook was maintained. In its report in August 2005 the rating company 

adds that «the Outlook may be reviewed to stable if returns keep improving, continuing the 

trend started in 2004»; 

• Low credit risk, to wit in the main business feature, the mortgage credit; 

• Increase in income from commission deriving from the increase in the cross-selling of Montepio 

Geral Group products; 

• Improvement in the cost to income ratio afforded by the increase in the operating banking product 

and the effort to manage cost control. 

Moody’s: 

Rating Agencies Short-Time Long-Time 

FITCH RATINGS F2 A – 

MOODY’S P –1 A3 

• Rating same as in the previous year, reflecting the positioning of the Institution on the mortgage 

credit market (construction and housing) and good financial indicators; 

• Strategy to increase commissions through cross-selling and improving operating efficiency; 

• Maintenance of the quality of assets and the adaptation of structural liquidity;

• Benefits in terms of funding deriving from the consolidation of the client portfolio; 

• Suitable economic capitalisation considering the low business risk. 

8.12. CAPITALIZATION AND PRUDENTIAL RATIOS 

The 40 million euro increase in CEMG Institutional Capital carried out in the first half of 2005, plus the 

assignment to Reserves, under the statutory terms, of part of the results of the previous year, enabled 

Own Resources, made up of Institutional Capital, Reserves and Results for the Financial Year – to stand 

at 691million euros at year-end. 


800 

700 

600 

500 

400 

300 

200 

100 

0 

Instit. Capital 

SHAREHOLDERS’ EQUITY 

Reserves 

Eligible Own Funds (Basic Own Funds + Complementary Own Funds – Deductions) rose from 

935 827 thousands of euros in 2004 to 1 010 926 thousands of euros in 2005, an increase of 

75 099 thousands of euros (+8.0%). 


1 000 

750 

500 

250 

0 

358 

571 

596 

21 

170 

405 

653 

33 

175 

445 

691 

45 

160 

485 

2003 2004 2005 

TREND IN POSITIVE ELIGIBLE OWN FUNDS 

338 

617 

Basic Complementary 

Results 

398 

629 

2003 2004 2005 

109

110 

The value of Eligible Own Funds widely exceeded that of Minimum Own Funds (753 364 thousands of 

euros), determining an amount of Available Own Funds of 257 562 thousands of euros, ensuring the 

financial soundness of the institution and the capacity to continue to support the growth of activity. 

Worthy of special mention amongst the main ratios is the Solvency and Market Ratio from the perspective 

of the Bank of Portugal which stood at 10.7% in late 2005, considerably above the minimum 

required by the Bank of Portugal (8%). 

The variation in the Solvency and Market Ratio can be put down both to the impact of the accrual in 

results for the financial year for the previous period as well as to the increased responsibilities vis-à-vis 

the Pensions Fund owing to the compliance of CEMG with International Accounting Standards (NIC’s). 

According to the BIS (Bank for International Settlements) the Solvency Ratio stood at 11.7 % and Tier 1 

at 7.5% as opposed to 12.9% and 7.7%, respectively in 2004. 

14.0% 

12.0% 

10.0% 

8.0% 

6.0% 

4.0% 

2.0% 

OWN FUNDS ADEQUACY IN THE VIEW OF THE BANK OF PORTUGAL 


Items 

12.8% 

Global BIS 

SOLVENCY AND MARKET RATIO 

12.9% 

11.4% 

11.4% 

10.7% 

Global Ratio BdP 

7.2% 

7.7% 

7.5% 

Minimum Global Limit of Ratio 

Tier 1 BIS 

7.2% 7.5% 

6.7% 

Tier 1 BdP 

Minimum Limit Tier 1 

0.0% 

2003 2004 


Tier 1 BdP Minimum Limit Tier 1 



1. Eligible Own Funds 

1.1 Basic Own Funds 629 001 616 801 12 200 2.0 

1.2 Complementary Own Funds 397 902 338 332 59 570 17.6 

1.3 Deductions 15 977 19 306 -3 329 -17.2 

TOTAL 1 1 010 926 935 827 75 099 8.0 

2. Net Assets and Memorandum Items 9 266 462 8 000 126 1 266 336 15.8 

3. Own Funds Requirements 753 364 654 321 99 043 15.1 

4. Available Own Funds (1-3) 257 562 281 506 -23 944 -8.5 

5. Solvency and Market Ratio (1/(3x12,5)) 10.7% 11.4% -0.7 b.p. -6.1 

6. Adequacy Ratio of Basic Own Funds 

(1.1/3 x 12,5) (Tier 1) 6.7% 7.5% -0.8 b.p. -10.7 

11.7% Global Ratio BIS 

Global BdP Tier 1 BIS 

Minimum Global Limit

The liquidity ratio, calculated in accordance with the requirements of the Bank of Portugal, remains at 

higher levels than the minimum value required: 

Designation 

TREND IN LIQUIDITY RATIO 

8.13. PROPOSAL FOR THE APPLICATION OF RESULTS 




1. Assets Considered 2 779 699 2 446 452 333 247 13.6 

2. Liabilities Considered 2 482 058 2 400 614 81 444 3.4 

3. Mismatch not compensated -331 927 -13 146 -318 781 2 425.0 

4. Ratio (1. / (2.-3. se 3.

112 

8.14. BALANCE SHEET AND PROFIT-AND-LOSS ACCOUNT 

8.14.1. BALANCE SHEET AS AT 31 DECEMBER 2005 AND 2004 

1. Cash and Availabilities at Central Banks 207 707 207 707 236 653 

2. On sight availabilities with Credit Institutions 94 396 94 396 46 573 

3. Other Credit with Credit Institutions 910 890 910 890 1 067 201 

4. Customers Credit 11 798 174 297 515 11 500 659 10 391 117 

5. Bonds and Other Fixed Income Securities 696 896 7 854 689 042 256 939 

a) issued by public entities 34 238 2 34 236 33 397 

b) issued by other entities 662 658 7 852 654 806 223 542 

6. Shares and other Variable Income Securities 17 982 323 17 659 17 298 

7. Interests 24 548 197 24 351 24 514 

8. Interests in Associated Companies 7 001 7 001 15 307 

9. Intangible Fixed Assets 19 675 14 124 5 551 3 927 

10. Tangible Fixed Assets 163 370 82 968 80 402 84 263 

(Of which: Property) (98 227) (32 509) (65 718) (69 690) 

13. Other Assets 138 530 14 317 124 213 133 110 

15. Adjustment Accounts 305 316 305 316 142 002 

TOTAL ASSETS 14 384 485 417 298 13 967 187 12 418 904 


MEMORANDUM ACCOUNTS 

1. POSSIBLE LIABILITIES 313 901 306 358 

Of which: Bonds and Assets provided as Guarantee 32 873 31 109 

2. COMMITEMENTS 1 318 348 1 182 831 



ASSETS GROSS 

ASSETS 


AMORTIZATIONS 

AND PROVISIONS 

NET ASSETS NET ASSETS

LIABILITIES 

1. Debts with Credit Institutions 893 129 792 310 

a) Repayable on demand 26 029 24 510 

b) Term or notice deposits 867 100 767 800 

2. Debts with Customers 7 562 599 7 504 239 

a) – Saving Deposits 1 742 890 1 935 081 

b) – Other Debts 5 819 709 5 569 158 

ba) – Repayable on demand 2 241 727 2 153 298 

bb) – Term or notice 3 577 982 3 415 860 

3. Debts Securities 4 070 415 2 912 270 

a) Floating Bonds 4 070 415 2 912 270 

4. Other Liabilities 236 406 44 517 

5. Adjustment Accounts 119 216 104 143 

6. Provisions for Risks and Charges 80 992 74 604 

b) Other Provisions 80 992 74 604 

6A. Fund for General Bank Risks 3 683 4 265 

8. Subordinated Liabilities 309 976 329 928 

9. Institutional Capital 485 000 445 000 

11. Reserves 174 442 166 181 

12. Revaluation Reserves 8 404 8 404 

13. Results Carried Forward -22 387 


14. Result for the Financial Year 45 312 33 043 









113

114 

8.14.2. PROFIT-AND-LOSS ACCOUNT BY NATURE 

AS AT 31 DECEMBER 2005 AND 2004 

A. COSTS 

1. Interest and Equivalent Costs 328 376 312 119 

2. Commissions 9 414 8 644 

3. Losses on Financial Operations 5 129 24 874 

4. General Administrative Costs 199 965 190 652 

a) Staffing Costs 

Of which: 

127 690 126 692 

(salaries and wages) (94 684) (93 049) 

(welfare costs) 

Of which: 

(32 942) (33 500) 

(on pensions) (19 528) (20 239) 

b) Other Administrative Expenditure 72 275 63 960 

5. Depreciations for the Financial Year 11 085 13 252 

6. Other Operating Costs 5 032 2 676 

7. Provisions for Credit Due and Other Risks 205 690 182 378 

8. Provisions for Fixed Financial Assets 

10. Result of Present Activity (39 887) (34 461) 

11. Extraordinary Losses 3 360 4 997 

14. Other Taxes 207 44 

15. Result for the Financial Year 45 312 33 043 

TOTAL DEBIT 813 570 772 679 




DEBIT 2005 2004

B. INCOME 

CREDIT 2005 2004 

1. Interest and Equivalent Income 595 326 559 282 

Of which: 

(from fixed income Securities) (15 939) (6 428) 

2. Income from Securities 3 013 1 033 

a) – Income from shares, quotas, and from other 

variable income securities 

b) – Income from interests 3 013 1 033 

3. Commissions 67 428 60 642 

4. Profit from Financial Operations 7 241 21 191 

5. Reversals relating to adjustments of loans 

and provisions for contingent liabilities 

and commitments 112 905 111 037 

6. Reversals relating to adjustments of 

Stock Values which are as Financial Fixed Assets, 

Interests in associated companies 

7. Other Operating Income 18 665 15 871 

9. Extraordinary Gains 8 992 3 623 

TOTAL CREDIT 813 570 772 679 








115

116 

8.14.3. PROFIT-AND-LOSS ACCOUNT BY FUNCTIONS 

AS AT DECEMBER 31ST 2005 AND 2004 

ITEMS 2005 2004 


1 – INTEREST AND EQUIVALENT INCOME 595 326 559 282 

From Availabilities 3 022 3 285 

From Applications 504 220 475 669 

From Interest and Other Income 88 084 80 328 

2 – INTEREST AND EQUIVALENT COSTS 328 376 312 119 

From Borrowed Resources 254 177 244 801 

From Equity and Equivalents 10 632 10 996 

From Other Interest and Costs 63 567 56 322 

3 – FINANCIAL MARGIN (1 – 2) 266 950 247 163 

4 – COMMISSIONS AND OTHER INCOME AND PROFITS 86 093 76 513 

Commissions 67 428 60 642 

Other Income and Profits 18 665 15 871 

5 – COMMISSIONS AND OTHER COSTS AND LOSSES 14 653 11 364 

Commissions 9 414 8 644 

Other Costs and Losses 5 239 2 720 

6 – RESULT OF SERVICE RENDERED TO CUSTOMERS (4 – 5) 71 440 65 149 

7 – PROFIT FROM FINANCIAL OPERATIONS 7 241 21 191 

8 – LOSSES FROM FINANCIAL OPERATIONS 5 129 24 874 

9 – INCOME FROM SECURITIES APPLICATIONS 0 0 

10 – RESULT GENERATED BY MARKET OPERATIONS (7– 8+9) 2 112 -3 683 

11 – INCOME FROM FINANCIAL INTERESTS 3 013 1 033 

12 – OPERATING BANK REVENUE (3+6+10+11) 343 515 309 662 

13 – ADMINISTRATIVE COSTS 199 965 190 652 

Staffing Costs 127 690 126 692 

Third-Party Supplies 4 857 4 890 

Third-Party Services 67 418 59 070 

14 – ALLOCATION FOR DEPRECIATIONS 11 085 13 252 

15 – GROSS OPERATIONAL RESULT (12–13–14) 132 465 105 758 

16 – ALLOCATION FOR PROVISIONS 92 785 71 341 

Allocations 205 690 182 378 

Replacements 112 905 111 037 

17 – EXTRAORDINARY GAINS 8 992 3 623 

Gains from Fixed Assets 3 464 5 

Gains on Previous Years 1 053 65 

Other Extraordinary Gains 4 475 3 553 

18 – EXTRAORDINARY LOSSES 3 360 4 997 

Losses on Previous Years 725 692 

Other Extraordinary Losses 2 635 4 305 

19 – NET RESULT (15–16+17–18) 45 312 33 043 

See accompanying notes to the Financial Statements

8.15. STATEMENT OF CASH FLOWS 


Cash flows arising from operating activities 

2004 2003 


Interest and commissions income received 664 280 617 088 

Interest and commissions expense paid (339 437) (326 996) 

Payments to suppliers and employees 

Recovered loans and interest which 

(186 215) (198 995) 

had been previously charged-off 985 499 

Other payments and receivables 16 554 9 152 

(Increase) / decrease in operating assets 

156 167 100 748 

Loans and advances to credit institutions and customers (1 032 902) (318 118) 

Other debtors, prepayments and accrued income 11 557 5 954 

(Increase) / decrease in operating liabilities 

(1 021 345) (312 164) 

Amounts owed to customers 58 360 (386 278) 

Amounts owed to credit institutions 100 819 (316 951) 

159 179 (703 229) 

Cash flows arising from investing activities 

(705 999) (914 645) 

Dividends received 3 013 1 033 

(Acquisition) / sale of negociation securities – – 

(Acquisition) / sale of investment securities (398 278) (214 821) 

(Acquisition) / sale of held to maturity securities (34 171) – 

(Acquisition) / sale of investments 8 968 2 913 

Deposits owned with the purpose of monetary control 33 751 63 865 

Sale of fixed assets 194 – 

Acquisition of fixed assets (8 261) (4 136) 

Cash flows arising from financing activities 

(394 784) (151 146) 

Dividends paid (24 782) (16 119) 

Increase in share capital 40 000 40 000 

Issuance of subordinated debt 1 793 145 1 266 843 

Reinbursement of subordinated debt (654 952) (319 952) 

1 153 411 970 772 

Net changes in cash and equivalents 52 628 (95 019) 

Cash and equivalents balance at the beginning of the year 97 284 192 303 

Cash and equivalents balance at the end of the year 149 912 97 284 

See accompanying notes to the Financial Statements 

117

8.16. ANNEX TO THE FINANCIAL STATEMENTS 

31 DECEMBER, 2005 

Information required in accordance with the Portuguese Chart of Accounts for the Banking Sector and 

the Bank of Portugal Rules, as per Instructions No. 4/96 (BNBP No. 1, 17.06.96) – VI: 

1. As at 31 December, 2005, Caixa early adopted Regulations No. 4/2005 and No. 12/2005, in accordance 

with Bank of Portugal formal permission, as referred in note 21 to the Financial Statements. 

2. No material reclassifications were made to the Financial Statements presented. 

3. he accounting policies and valuation criteria are presented in note 1 to the Financial Statements. 

The amounts included in the Financial Statements in foreign currency were translated using the following 

exchange rates: 

Euros 

U.S. Dollar 1.1797 

Australian Dollar 1.6109 

Canadian Dollar 1.3725 

Sterling Pound 0.6853 

Czech Koruna 29.0000 

Danish Krone 7.4605 

Norwegian Krone 7.9850 

Swedish Krona 9.3885 

Swiss Franc 1.5551 

African Financial Community Franc 656.2200 

Japonese Yen 138.9000 

Macau Pataca 9.4218 

South African Rand 7.4642 

Cape Verde Escudo 110.2650 

Mozambique Metical 27 911.7000 

4. No derogations of the valuation criteria set out by the Chart of Accounts were performed. 

5. There are no significant differences between the assets carrying amount and their market value. 

6. As at 31 December, 2005, the investments held by Caixa Económica Montepio Geral («Caixa») 

equivalent to 20% or more of the undertakings' share capital, are presented in note 7 to the Financial 

Statements and at the end of this annex to the Financial Statements. 

7. The total amount of fixed income securities which will mature during 2006, is presented in note 6 

to the Financial Statements. 

8. As at 31 December, 2005, Caixa had credits over undertakings, represented or not by securities, 

included in items 2 to 5 of the assets, which are presented in note 36 to the Financial Statements. 

119

120 

9. As at 31 December, 2005, there are no credits over subsidiaries, represented or not by securities, 

included in items 2 to 5 of the assets. 

10. As at 31 December, 2005, the securities portfolio is presented at the end of this annex to the Financial 

Statements. 

11. The intangible and tangible assets related to the year 2005, are presented in notes 8 and 9 to the 

Financial Statements, respectively. 

12. Bonds and other fixed income securities, which are classified as subordinated, are presented in note 

6 to the Financial Statements. 

13. As at 31 December, 2005, there are no assets sold with repurchase agreement. 

14. Other loans and advances to credit institutions and customers, by the period to maturity, included 

in items 3 and 4 of the assets are presented in notes 4 and 5 to the Financial Statements. 

15. As at 31 December, 2005, the revaluation reserve amounts to Euros 8 404 000. 

16. Set-up cost, key money and research and development expenditure are presented in note 8 to the 

Financial Statements. 

17. There are no changes to the historical cost of assets other than fixed assets due to fiscal requirements. 

18. The disclosure of the amounts owed to credit institutions, amounts owed to customer and debt 

securities, by the period to maturity, is presented in notes 12 and 13 to the Financial Statements. 

19. Debt securities with maturity date in 2006, are analysed in note 14 to the Financial Statements. 

20. As at 31 December, 2005, the debits with undertakings, represented or not by securities, included 

in items 1, 2, 3 and 8 of Caixa liabilities are presented in note 35 to the Financial Statements. 

21. As at 31 December, 2005, the debits with subsidiaries, represented or not by securities, included in 

items 1, 2, 3 and 8 of Caixa liabilities are presented in note 37 to the Financial Statements. 

22. As at 31 December, 2005, the subordinated debts are analysed in note 18 to the Financial Statements. 

23. As at 31 December, 2005, obligations and future commitments are analysed in note 34 to the 


24. The balances and the movements for the provisions of Caixa included in the balance sheet and 

income statement are analysed in notes 5, 6, 7, 10, 17, 24 and 31 to the Financial Statements. 

25. The criteria distinguishing the trading account securities, the investment account securities and the 

securities portfolio held to maturity included in items 5 and 6 of the Assets are described in note 1.8 

to the Financial Statements. 

26. As at 31 December, 2005, Caixa did not realise purchases or sales regarding securities classified as 

held to maturity. 

27. The balances prepayments, accruals and deferred income and expenses are analysed in notes 11 

and 16 to the Financial Statements, respectively. 

28. a) Amounts not yet taken to the Profit and Loss Account 

The amounts not yet taken to the profit and loss account, resulting from the acquisition of 

investment securities by a value not equal to the reimbursement, are not significant. 

b) Fair value of Investment securities 

An analysis between the net book value and the market value of the investment securities is presented 

in note 6 to the Financial Statements.

c) Trading account securities 

As at 31 December, 2005, there were no trading securities held by Caixa. 

d) Unrealised gains and losses 

The amounts of unrealised gains and losses are presented in note 6 to the Financial Statements. 

29. Caixa’s share capital increases, during the year, are analysed in note 19 to the Financial Statements. 

30. As at 31 December, 2005, there are no share capital interests beneficiary from convertible bonds or 

any securities or equivalent rights. 

31. The disclosure of the balances other debtors and other liabilities are presented in notes 10 and 15 

to the Financial Statements, respectively. 

32. As at 31 December, 2005, the funds managed by Caixa on behalf of third parties arise to Euros 

973 068 000, as presented in note 5 to the Financial Statements. 

33. The forward off-balance sheet operations are analysed in note 34 to the Financial Statements and 

are destined for exchange rate hedging purposes. 

34. The average number of employees by professional category at service in Caixa, during 2005, is analysed 

in note 29 to the Financial Statements. 

35. The compensations of Directors and Officers are analysed in note 29 to the Financial Statements. 

The commitment referred to retirement pensions for the former Management and Audit Committee 

members amounts to Euros 12 331 000. 

36. The income derived from advisory and representation fees does not exceed 5% of total income. 

37. The total assets and liabilities represented in foreign currencies are analysed as follows: 



Assets 84 800 77 546 

Liabilities 125 185 110 288 

38. The amounts registered in the statement of income and balance sheet, have been fully generated 

in Portugal. 

Given the nature of its activity and clients, Caixa is focused under one business segment. 

39. Other operating and extraordinary income and expenses are analysed in notes 32 and 28 to the 

Financial Statements, respectively. 

40. The charges included and paid with subordinated debt are analysed in note 18 to the Financial 

Statements. 

41. Caixa is exempt from income taxes payment («IRC – Imposto sobre o rendimento das Pessoas 

Colectivas»), as referred in note 1.15 to the Financial Statements. 

42. There is no different fiscal treatment between the operating and the extraordinary results. 

43. The share capital is 100% held by Montepio Geral – Associação Mutualista that, in accordance with 

Decree-Law No. 238/91, was exempt from presenting Consolidated Financial Statements until 31 

December, 2004. After the 1st January 2005, Caixa has to present Consolidated Financial Statements, 

in accordance with Decree-Law No. 35/2005, 17 February. 

44. Caixa has no subsidiaries located in other European Union member states, which are exempt from 

legal supervision and from publication of statement of income. 

121

122 

45. As at 31 December, 2005, there are no finance lease operations held as a lessee. Caixa’s financial 

lease operations as a lessor amounts to Euros 14 606 000, as referred in note 5 to the Financial 

Statements. 

46. There are no amounts resulting from netting of balances from third parties and accruals under the 

netting contracts referred to in the final part of note 1.3 of Chapter II – Accounting Principles. 

47. The amounts recorded as cost and included in the statement of income related to transactions 

occurring with companies in which Caixa exercises control classified under the scope of Instruction 

No. 7/98 – (BNBP No. 5, 15.05.98) are in the amount of Euros 4 364 000 accounted for as cost. 

48. The information about the securitisation operations occurred during the year, is analysed in note 5 

of the Financial Statements. 

49. The qualitative and quantitative information regarding the pension fund are presented in note 39 to 

the Financial Statements and in the accounting policy described in note 1.14. 

50. The information about investments is presented in note 7 to the Financial Statements. 

51. There is no other significant information, apart from the one presented in these notes, which would 

lead to a different appraisal to the financial situation of Caixa.

SECURITIES AND INVESTMENTS PORTFOLIO 


The Securities and Investments portfolio held by Caixa, as at 31 December 2005, is analysed as follows: 

Type of securities Quantity Currency 

Nominal 

Value 

(Euros) 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

B. INVESTMENT ACCOUNT SECURITIES 680 706 911 

Fixed income securities – issued by Public entities 66 771 

Government bonds 66 771 

– Medium and long terms 

– Bonds 

66 771 

O.T. – Fevereiro 1996/2006 – 9,5% 189 EUR 0.01 0.01 0.01 2 

O.T. – Junho 1998/2008 – 5,375% 5 819 123 EUR 0.01 0.01 0.01 62 929 

O.T. – Setembro 1998/2013 – 5,45% 55 EUR 0.01 0.02 0.01 1 

O.T. – Julho 1999/2009 – 3,95% 35 EUR 0.01 0.00 0.01 – 

Consolidado 1943 – 2,75% 276 334 EUR 0.01 0.00 0.00 1 326 

Consolidado 1942 – 3% 299 279 EUR 0.01 0.01 0.01 2 257 

Consolidado certificado C/C – 3% 33 918 EUR 0.01 0.01 0.01 256 

Fixed income securities – issued by other entities 648 556 579 

Issued by residents 57 705 958 

– Short term 

– Commercial paper 

Bento Pedroso Construções, S.A. 

36 934 134 

– 155.ª Emissão 

Sumolis – Comp. Ind. Frutas 

126 562 500 EUR 0.01 0.01 0.01 1 265 625 

e Bebidas, S.A. – 26.ª Emissão 

SAG Gest – Sol. Aut. Globais, SGPS, S.A. 

250 000 000 EUR 0.01 0.01 0.01 2 500 000 

– 17.ª Emissão 508 000 000 EUR 0.01 0.01 0.01 5 080 000 

Altri SGPS, S.A. – 18.ª Emissão 2 300 000 000 EUR 0.01 0.01 0.01 23 000 000 

Mota Engil, SGPS, S.A. - 45. ª Emissão 409 090 909 EUR 0.01 0.01 0.01 4 090 909 

ECOP 20 EUR - 49 880.00 - 997 600 


– Obrigações de caixa 

20 771 824 

Banco Invest 2005/2008 – 1.ª Emissão 

– Other bonds 

5 000 EUR 1 000 1 000.00 1 000 5 000 000 

Lisnave – 1992/1997/2007 35 459 942 EUR 0.01 0.00 0.01 96 709 

Lisnave – Série B – 1991/1995/2006 318 233 EUR 0.01 0.00 0.01 678 

E.D.P. – 25.ª emissão – 1998/2006/2008 174 579 264 EUR 0.01 0.01 0.01 1 742 738 

Sagres STC, S.A. 2005/2039 200 EUR 10 000.00 10 000.00 10 000.00 2 000 000 

Banco Itau Europa S.A. 05/22-06-2010 

Sagres STC, S.A./Douro Mortgages 

4 932 EUR 1 000.00 1 000.79 1 001.12 4 935 899 

1A 05/21-06-2056 30 EUR 50 000.00 50 000.00 50 000.00 1 500 000 

Banco Itau BI Europa S.A. 05/22-12-2015 

Banif Banco Intern. do Funchal S.A. 

3 000 EUR 1 000.00 998.60 998.60 2 995 800 

05/28-09-2010 2 .500 EUR 1 000.00 1 000.00 1 000.00 2 500 000 

Issued by non-residents 590 850 621 

Issued by other entities 590 850 621 


– Bonds 

590 850 621 

F. Van Lanschot Bankiers 2004/2008 100 EUR 50 000.00 49 980.00 50 038.00 4 998 000 

Landsbanki Islands HF 2004/2009 3 000 EUR 1 000.00 998.47 999.65 2 995 400 

123

124 



(continuation) 

Type of securities Quantity Currency Nominal 

Value 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

Banco BPI, S.A. Cayman 2004/2009 4 000 EUR 1 000.00 998.45 1 000.68 3 993 800 

BES Finance LTD 2004/2009 2 000 EUR 1 000.00 997.65 1 000.08 1 995 300 

BCP Finance Bank LTD 2004/2009 2 000 EUR 1 000.00 998.73 1 000.13 1 997 450 

Cassa Risparmio di Forli 2004/2009 3 000 EUR 1 000.00 997.80 1 000.17 2 993 400 

Kaupthing Bank HF 2004/2009 5 000 EUR 1 000.00 997.61 995.34 4 988 050 

Anglo Irish Bank Corp. 2004/2009 2 000 EUR 1 000.00 997.60 1 000.60 1 995 200 

Friesland Bank 2004/2011 2 000 EUR 1 000.00 999.35 1 006.06 1 998 700 

Bradford & Bingley PLC 2003/2008 50 EUR 10 000.00 9 982.00 10 007.45 499 100 

Sparebanken Rogaland 2004/2007 2 000 EUR 1 000.00 999.20 1 000.55 1 998 400 

EBS Building Society 2004/2007 350 EUR 10 000.00 9 992.70 10 009.44 3 497 445 

Household Finance Corp. 2004/2007 1 300 EUR 1 000.00 998.83 1 001.13 1 298 479 

Lansforsakringar Bank 2004/2007 1 000 EUR 1 000.00 999.40 1 000.45 999 400 

Banca Pop di Vicenza 2004/2007 2 000 EUR 1 000.00 999.12 1 000.74 1 998 240 

Banco Desio Della Brianz 2002/2007 1 236 EUR 1 000.00 1 005.20 1 003.39 1 242 427 

Yorkshire Building Soc. 2004/2009 2 000 EUR 1 000.00 998.57 1 000.17 1 997 140 

Northern Rock PLC 2004/2009 2 000 EUR 1 000.00 998.80 1 001.34 1 997 600 

Banco Desio Della Brianz 2004/2009 1 000 EUR 1 000.00 999.00 1 000.42 999 000 

Banca Lombarda, SPA 2004/2011 250 EUR 10 000.00 10 003.60 10 025.20 2 500 900 

Alliance & Leicester, PLC 2004/2009 2 000 EUR 1 000.00 997.61 1 000.30 1 995 220 

Portman Building Society 2004/2009 2 000 EUR 1 000.00 997.37 999.71 1 994 740 

Banche Popolari Unite 2004/2009 2 000 EUR 1 000.00 998.57 999.64 1 997 140 

Hypo Real Estate Int. 2004/2009 2 500 EUR 1 000.00 996.67 1 001.93 2 491 675 

Wuerttembergische Hypobk 2004/2008 2 000 EUR 1 000.00 1 000.15 1 001.67 2 000 300 

Deut Apotheke Aerztebank 2004/2007 30 EUR 100 000.00 100 120.00 100 153.70 3 003 600 

SNS Bank Nederland 2004/2011 300 EUR 10 000.00 9 990.00 10 027.75 2 997 000 

ABN AMRO Bank NV 2004/2011 10 000 EUR 1 000.00 997.25 999.93 9 972 500 

Volkswagen Bank GMBH 2003/2007 2 000 EUR 1 000.00 999.47 1 000.43 1 998 940 

Banca Agrileasing 2002/2007 2 000 EUR 1 000.00 1 004.50 1 002.65 2 009 000 

Banco Bilbao Vizcaya Arg. 2004/2009 70 EUR 100 000.00 100 010.00 99 993.00 7 000 700 

Allied Irish Banks PLC 2004/2007 1 000 EUR 1 000.00 999.00 999.86 999 000 

Banca Popolare di Milano 2004/2007 150 EUR 10 000.00 9 994.10 9 997.90 1 499 115 

Allied Irish Banks 2004/2009 5 000 EUR 1 000.00 999.04 1 000.24 4 995 200 

Caisse Cent. Credit Immob 2000/2010 500 EUR 10 000.00 10 041.90 10 024.20 5 020 950 

Hansabank 2004/2009 2 000 EUR 1 000.00 1 001.20 1 003.98 2 002 400 

Bk Austria Creditanstalt 2004/2009 5 000 EUR 1 000.00 999.39 1 000.62 4 996 928 

Bradford & Bingley BS 2004/2009 2 000 EUR 1 000.00 999.05 1 003.00 1 998 100 

EGG Banking PLC 2004/2006 1 000 EUR 1 000.00 999.50 1 000.56 999 500 

Chelsea Bldg Society 2004/2009 3 000 EUR 1 000.00 998.20 1 000.23 2 994 600 

Banco Espanol de Credito 2004/2009 30 EUR 100 000.00 99 990.00 100 069.90 2 999 700 

Banque Fed. Cred. Mutuel 2004/2014 2 000 EUR 1 000.00 1 000.20 1 000.76 2 000 400 

Caixa D' Estalvis Catalun 2004/2009 40 EUR 100 000.00 99 905.00 100 079.80 3 996 200 

Delphinus BV 2004/2090 2 000 EUR 1 000.00 1 000.00 1 000.00 2 000 000 

Irish Nationwide BLDG S 2004/2009 30 EUR 100 000.00 99 785.00 100 025.20 2 993 550 

Banco de Sabadell, S.A. 2004/2007 29 EUR 100 000.00 100 014.48 100 028.30 2 900 420 

BBVA FTPYME Fondo de Titulariz. de Activo 2004/2028 2 000 EUR 1 000.00 1 000.00 1 000.00 2 000 000 

Islandsbanki FBA HF 2004/2007 20 EUR 100 000.00 99 927.00 99 803.50 1 998 540 

Caja Rural Intermedi 2004/2009 20 EUR 100 000.00 100 000.00 100 000.00 2 000 000 

BCP Finance Bank LTD 2005/2010 6 000 EUR 1 000.00 999.43 999.45 5 996 550 

Cassa di Risparm Bolzano 2005/2012 1 500 EUR 1 000.00 998.37 1 000.15 1 497 555 

Irish Nationwide Bldg., S. 2005/2008 4 000 EUR 1 000.00 999.55 1 000.10 3 998 200 

Banco Pastor, S.A. 2005/2010 45 EUR 100 000.00 100 033.33 100 082.40 4 501 500


Value 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

Monte dei Paschi di Siena 2005/2010 1 750 EUR 1 000.00 998.81 999.40 1 747 918 

Bank Austria Creditanstanstalt 2005/2010 2 000 EUR 1 000.00 999.22 1 000.46 1 998 440 

Caisse Nationale des Caisses d’ Epargne 2005/2009 2 000 EUR 1 000.00 999.03 999.28 1 998 060 

Kaupthing Bank HF 2005/2008 2 000 EUR 1 000.00 999.56 997.67 1 999 120 

Bes Finance LTD 2005/2010 4 500 EUR 1 000.00 999.53 999.88 4 497 900 

Leaseplan Corporation NV 2005/2007 40 EUR 50 000.00 49 975.50 49 975.50 1 999 020 

Anglo Irish Bank Corp 2005/2010 3 500 EUR 1 000.00 999.31 998.32 3 497 600 

SNS Bank Nederland 2004/2014 200 EUR 10 000.00 9 998.00 10 021.26 1 999 600 

Banca Intesa SPA 2005/2010 2 000 EUR 1 000.00 997.61 998.61 1 995 220 

Santander INTL DEBT AS 2005/2010 3 000 EUR 1 000.00 998.00 997.81 2 994 000 

Islandsbanki HF 2005/2010 60 EUR 50 000.00 49 950.00 49 773.20 2 997 000 

Crédito Emiliano 2005/2010 1 500 EUR 1 000.00 999.05 999.94 1 498 575 

Banche Popolari Unite 2005/2008 30 EUR 50 000.00 49 956.00 49 986.75 1 498 680 

Britannia Bldg Society 2005/2010 4 000 EUR 1 000.00 1 000.10 1 000.81 4 000 400 

Caja Ahorro Monte Madrid 2005/2008 3 000 EUR 1 000.00 999.27 999.12 2 997 810 

Caja Valencia Castel & A 2005/2010 20 EUR 100 000.00 100 000.00 99 908.10 2 000 000 

Cassa Risparmio Firenze 2005/2010 100 EUR 50 000.00 49 995.75 49 994.55 4 999 575 

EBS Building Society 2005/2008 20 EUR 100 000.00 100 031.45 100 002.40 2 000 629 

Caixa D’ Estalvis Catalun 2005/2010 20 EUR 100 000.00 99 976.00 99 909.90 1 999 520 

Banco Pop Verona Novara 2005/2010 50 EUR 100 000.00 99 863.50 99 881.30 4 993 175 

Caja Municipal de Burgos 2005/2009 30 EUR 100 000.00 99 903.00 99 799.90 2 997 090 

Unicredito Italiano SPA 2004/2005 80 EUR 50 000.00 50 000.00 49 913.60 4 000 000 

Hypo Real Estate Int. 2005/2009 2 500 EUR 1 000.00 999.60 1 000.23 2 499 000 

FIH Erhvervsbank 2005/2010 7 000 EUR 1 000.00 998.95 994.98 6 992 620 

Lansforsakringar Bank 2005/2010 5 000 EUR 1 000.00 998.01 997.32 4 990 070 

Raiff Zentralbk Oest AG 2005/2010 5 000 EUR 1 000.00 999.70 999.89 4 998 500 

A / S Jyske Bank 2005/2012 3 000 EUR 1 000.00 998.69 999.27 2 996 070 

IKB Deutsche Industriebk 2005/2009 4 000 EUR 1 000.00 999.42 999.63 3 997 680 

Banca Italease 2005/2012 3 000 EUR 1 000.00 998.30 1 000.09 2 994 900 

Caja Santander Cantabria 2005/2010 20 EUR 100 000.00 100 000.00 100 000.00 2 000 000 

BBVA Senior Finance AS 2005/2008 30 EUR 100 000.00 99 883.00 99 928.50 2 996 490 

Crédito Emiliano 2005/2012 7 000 EUR 1 000.00 998.04 999.55 6 986 280 

Allied Irish Banks LTD 2005/2010 2 000 EUR 1 000.00 999.52 999.88 1 999 040 

Coventry Bldg, Society 2005/2010 5 000 EUR 1 000.00 997.13 998.05 4 985 650 

Banca Intesa SPA 2005/2012 5 000 EUR 1 000.00 997.43 999.02 4 987 130 

F Van Lanschot Bankiers 2005/2012 7 000 EUR 1 000.00 998.05 999.98 6 986 350 

Leaseplan Corporation NV 2005/2010 100 EUR 50 000.00 49 940.50 49 991.40 4 994 050 

Rural Hipotecário Fondo de Titulizacion 2005/2038 50 EUR 89 805.55 89 805.54 89 805.55 4 490 277 

Sabadell Intl Finance BV 2003/2008 2.000 EUR 1 000.00 1 001.80 1 001.21 2 003 600 

Banca Lombarda e Piemont 2004/2007 250 EUR 10 000.00 10 005.00 10 003.50 2 501 250 

BPE Financiaciones SA 2004/2009 50 EUR 100 000.00 99 990.00 99 959.20 4 999 500 

Hipocat Hipo Hipo – 8 A2 2005/2038 30 EUR 100 000.00 100 000.00 100 000.00 3 000 000 

Hipocat Hipo Hipo –- 8 A1 2005/2038 20 EUR 38 425.09 38 425.10 38 425.09 768 502 

Landsbanki Islands 2005/2008 2 000 EUR 1 000.00 999.41 997.04 1 998 820 

Banca Italease 2005/2008 2 000 EUR 1 000.00 998.83 1 000.70 1 997 660 

Kaupthing Bank HF 2005/2010 5 000 EUR 1 000.00 997.61 992.08 4 988 050 

Banca Agrileasing 2005/2012 3 000 EUR 1 000.00 998.05 998.76 2 994 150 

Caja Valencia Castel & A 2005/2012 50 EUR 100 000.00 99 739.00 99 829.70 4 986 950 

Caja Ahorro Monte Madrid 2005/2012 40 EUR 100 000.00 99 836.00 99 970.50 3 993 440 

Bradford & Bingley BS 2005/2010 250 EUR 10 000.00 9 990.40 10 006.22 2 497 600 

Geldilux Limited – TS 3A 2005/2012 30 EUR 50 000.00 50 000.00 50 000.00 1 500 000 

125

126 





Value 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

Fortis Bank 2005/2008 5 000 EUR 1 000.00 999.60 999.74 4 998 000 

Mediocredito Trento Alto 2005/2015 3 000 EUR 1 000.00 999.13 998.27 2 997 390 

BBVA Hipotecario Fondo de Tituliz A2 2005/2038 15 EUR 100 000.00 100 000.00 100 000.00 1 500 000 

BBVA Senior Finance S.A. 2005/2012 40 EUR 100 000.00 99 836.00 99 990.70 3 993 440 


Cam Global Finance S.A. 2005/2012 50 EUR 100 000.00 99 903.00 99 841.00 4 995 150 

Santander INTL DEBT S.A. 2005/2009 50 EUR 100 000.00 99 739.00 99 969.80 4 986 950 

Magellan Mortgages PLC 2005/2058 30 EUR 97 515.60 97 515.60 97 515.60 2 925 468 

Dresdner Bank AG 2005/2011 20 EUR 100 000.00 100 020.00 100 050.10 2 000 400 

Banque Federative du Credit Mutuel 2005/2012 40 EUR 50 000.00 50 017.00 50 036.85 2 000 680 

Caixa D’ Estalvis Catalun 2005/2012 40 EUR 100 000.00 99 738.00 99 875.10 3 989 520 

Banco Pastor, S.A. 2004/Perpetual 20 EUR 100 000.00 101 300.00 100 961.30 2 026 000 

West Bromwich Bldg. Society 2005/2008 2 000 EUR 1 000.00 999.70 999.53 1 999 400 

Merrill Lynch & Co, 2005/2012 2 000 EUR 1 000.00 999.60 1 000.75 1 999 200 

DNB Norbank ASA, 2005/2010 5 000 EUR 1 000.00 997.90 997.70 4 989 500 

Portman Building Society 2005/2010 3 000 EUR 1 000.00 997.61 998.19 2 992 830 

Morgan Stanley 2005/2012 200 EUR 50 000.00 49 922.50 49 951.75 9 984 500 

Sparebanken Nord – Norge 2005/2015 2 000 EUR 1 000.00 999.10 999.10 1 998 200 

Dresdner Bank AG 2005/2012 50 EUR 100 000.00 100 000.00 100 024.70 5 000 000 

Lehman Brothers Holdings 2001/2011 20 EUR 100 000.00 98 430.00 98 494.20 1 968 600 

SNS Reaal Groep NV 2005/2012 425 EUR 10 000.00 9 959.71 9 966.91 4 232 875 

Alpha Credit Group PLC 2005/2010 5 000 EUR 1 000.00 998.50 997.78 4 992 500 

Banca Pop di Vicenza 2004/2011 3 000 EUR 1 000.00 1 000.20 999.98 3 000 600 

Banche Popolari Unite 2005/2012 30 EUR 50 000.00 49 930.00 49 946.40 1 497 900 

SLM CORP 2005/2009 5 000 EUR 1 000.00 998.60 996.76 4 993 000 

Caja Ahorro Monte Madrid 2005/2010 30 EUR 100 000.00 99 729.00 99 763.90 2 991 870 

Banesto Banco Emisiones 2005/2010 30 EUR 100 000.00 99 917.00 99 902.60 2 997 510 

Lehman Brothers Holdings 2005/2012 300 EUR 10 000.00 9 974.30 9 972.89 2 992 290 

Banif Finance LTD 2004/2009 2 000 EUR 1 000.00 1 001.50 1 001.15 2 003 000 

HSBC Finance Corp, 2005/2010 7 500 EUR 1 000.00 998.18 998.66 7 486 350 

RCI Banque, S.A. 2005/2008 30 EUR 100 000.00 100 020.00 99 906.00 3 000 600 

Alpha Credit Group PLC 2005/2008 3 000 EUR 1 000.00 1 000.45 1 000.06 3 001 350 

Bear Stearns Co, Inc, 2005/2012 5 000 EUR 1 000.00 999.10 998.45 4 995 500 

Citigroup Inc, 2005/2012 5 000 EUR 1 000.00 999.50 999.17 4 997 500 

Unicredito Italiano SPA 2005/2013 30 EUR 50 000.00 49 932.00 49 906.15 1 497 960 

Banco de Sabadell SA 2005/2010 70 EUR 100 000.00 99 917.29 99 871.90 6 994 210 

Compagnie Fin du Credit 2005/2010 100 EUR 50 000.00 49 976.00 49 976.00 4 997 600 

Alliance & Leicester PLC 2005/2010 5 000 EUR 1 000.00 998.80 998.10 4 994 000 

Banca Pop Emilia Romagna 2005/2010 30 EUR 50 000.00 49 904.50 49 933.75 1 497 135 

DNB Norbank Asa 2005/2010 2 000 EUR 1 000.00 997.61 997.06 1 995 220 

Caja Rural del Mediterra 2005/2010 30 EUR 100 000.00 99 976.00 99 976.00 2 999 280 

RCI Banque 2005/2010 40 EUR 50 000.00 49 952.50 49 926.20 1 998 100 

Lusitano Mortgages PLC – 4A – 2005/2048 1 000 EUR 983.26 983.26 983.26 983 261 

Banca Pop di Vicenza 2005/2012 2 000 EUR 1 000.00 997.39 996.28 1 994 780 

BBVA Pyme Fondo de Titulizacion de Activos 

– 4A2 – 2005/2038 30 EUR 50 000.00 50 000.00 50 000.00 1 500 000 

F Van Lanschot Bankiers 2005/2016 4 000 EUR 1 000.00 998.99 997.27 3 995 960 


Caja San Fernando 2005/2010 35 EUR 100 000.00 99 993.63 99 993.63 3 499 777 

City of Rome 1996/2016 1 000 EUR 1 420.26 1 453.49 1 420.26 1 453 490 

Deut Apotheke Aerztebank 2005/2010 3 000 EUR 1 000.00 999.52 999.41 2 998 560


Value 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

JP Morgan Chase & Co, 2005/2015 60 EUR 50 000.00 49 920.00 49 900.45 2 995 200 

Sydbank A/S 2005/2013 2 000 EUR 1 000.00 999.05 999.05 1 998 100 

Banif Finance LTD 2005/2008 5 000 EUR 1 000.00 998.83 998.01 4 994 150 

Banca Intesa 2005/2015 60 EUR 50 000.00 49 843.00 49 793.30 2 990 580 

Banco Pop Verona Novara 2005/2010 40 EUR 50 000.00 49 940.50 49 873.45 1 997 620 

Merrill Lynch SA 2005/2011 4 000 EUR 1 000.00 998.31 998.02 3 993 240 

Sydbank A/S 2005/2010 4 000 EUR 1 000.00 998.57 998.78 3 994 280 

Bankinter S.A. 2005/2011 50 EUR 100 000.00 99 952.00 99 882.00 4 997 600 

Caja Municipal de Vigo 2005/2010 50 000 EUR 100.00 99.95 99.95 4 997 600 

Celtic Residential Irish Mortgage Securiti 


Celtic Residential Irish Mortgage Securiti 


Monte dei Paschi di Siena 2005/2017 40 EUR 50 000.00 49 839.50 49 818.35 1 993 580 

Caja General Canárias 2005/2010 50 EUR 100 000.00 99 905.00 99 905.00 4 995 250 

Rural Hipotecário Global A 2005/2039 20 EUR 100 000.00 100 000.00 100 000.00 2 000 000 

Caja de Ahorros Galicia 2005/2010 40 EUR 100 000.00 99 905.00 99 920.00 3 996 200 

EBS Building Society 2005/2010 4 000 EUR 1 000.00 998.82 998.47 3 995 280 

Caja MP Huelva Sevilla 2005/Perpetual 30 EUR 100 000.00 100 000.00 100 000.00 3 000 000 

Achmea Hypotheekbank NV 2005/2010 60 EUR 50 000.00 49 881.50 49 881.50 2 992 890 

Wuerttembergische Hypobk 2005/2010 4 000 EUR 1 000.00 999.58 998.45 3 998 320 

Provide PLC A05 – 1B – 2005/2048 20 EUR 100 000.00 100 000.00 100 000.00 2 000 000 

Santander INTL DEBT, S.A. 2005/2008 2 000 EUR 1 000.00 998.58 997.82 1 997 160 

Caja Castilla la Mancha 2005/2007 2 000 EUR 1 000.00 996.80 996.80 1 993 600 

Shield BV – 1B – 2005/2014 30 EUR 100 000.00 100 000.00 100 000.00 3 000 000 

Countrywide Home Loan 2004/2008 60 EUR 50 000.00 50 200.00 50 211.60 3 012 000 

NIB Capital Bank NV 2005/2008 3 000 EUR 1 000.00 999.20 999.05 2 997 600 

Veneto Banca 2004/2009 3 000 EUR 1 000.00 1 001.03 1 001.08 3 003 100 

Banco PSA Finance 2005/2010 60 EUR 50 000.00 49 955.00 49 920.55 2 997 300 

Hypo Alpe – Adria Bank AG 2005/2015 1 500 EUR 1 000.00 996.00 996.00 1 494 000 

Macquarie BanK LTD 2005/2010 25 EUR 100 000.00 100 130.00 100 039.10 2 503 250 

St. George Bank LTD 2005/2010 50 EUR 50 000.00 50 015.00 49 994.30 2 500 750 

Pelican Mortgages N.º 1 Classe D 325 EUR 10 000.00 10 000.00 – 3 250 000 

Pelican Mortgages N.º 2 Classe D 560 EUR 10 000.00 10 000.00 – 5 600 000 

Variable income securities 17 982 545 

Issued by residents 11 460 558 

– Shares 5 607 130 

SIAF 120 EUR 4.99 4.99 4.99 599 

Boavista F.C., Futebol SAD 21 950 EUR 5.00 5.00 5.00 109 750 

Belenenses – Soc. Desp. de Futebol, SAD 15 991 EUR 4.99 4.99 4.99 79 763 

Beira Vouga 8 EUR 4.99 4.99 0.80 40 

Nova C. a Grande Hotel Caldas da Felgueira, S.A. 7 270 EUR 4.99 12.37 4.99 89 931 

Salvor – Soc. Inv. Hoteleiro 601 000 EUR 5.00 8.86 8.86 5 327 047 

– Investment fund units 5 853 428 

M.G. Acções 22 000 EUR 49.88 101.26 5 366.62 2 227 779 

Multi Gestão Prudente 14 000 EUR 50.00 48.85 2 504.06 683 906 

Multi Gestão Equilibrada 14 000 EUR 50.00 47.57 2 384.91 665 959 

Multi Gestão Dinâmica 47 000 EUR 50.00 45.50 1 988.48 2 138 632 

127

128 





Value 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

M.G. Acções Europa 4 000 EUR 0.00 34.29 0.00 137 152 

Issued by non-residents 

– Investment fund units 6 521 987 

Fundo de Capital de Risco Baring Iberia 29 EUR 300 506.05 234 010.01 289 740.00 6 521 987 

Subordinated bonds 14 101 016 

– Medium and long terms 14 101 016 

BES – Obrig. Cx. Sub. – 1997/2007 559 651 241 EUR 0.01 0.01 0.01 5 596 512 

BPI – Obrig. Cx. Sub. – 1996/2006 850 450 415 EUR 0.01 0.01 0.01 8 504 504 

C. HELD TO MATURITY SECURITIES 

Fixed income securities – issued by Public entities 34 170 891 

Government bonds 34 170 891 

– Bonds 34 170 891 

O.T. – Junho 1998/2008 – 5,375% 645 408 000 EUR 0.01 0.01 0.01 6 827 702 

O.T. – Setembro 1998/2013 – 5,45% 9 455 400 EUR 0.01 0.01 0.01 95 559 

O.T. – Julho 1999/2009 – 3,95% 614 270 200 EUR 0.01 0.01 0.01 6 315 569 

O.T. – Junho 2002/2012 – 5,00% 10 000 000 EUR 0.01 0.01 0.01 105 020 

O.T. – Julho 2003/2006 – 3,00% 650 000 000 EUR 0.01 0.01 0.01 6 498 549 

O.T. – Maio 2000/2010 – 5,85% 611 811 900 EUR 0.01 0.01 0.01 6 767 577 

O.T. – Julho 2004/2008 – 3,25% 630 000 000 EUR 0.01 0.01 0.01 6 360 100 

O.T. – Junho 2001/2011 – 5,15% 100 000 000 EUR 0.01 0.01 0.01 1 100 772 

O.T. – Outubro 2005/2015 – 3,35% 10 000 000 EUR 0.01 0.01 0.01 100 043 

D. INVESTMENTS 32 749 419 

Investments 24 548 103 

– In credit institutions in Portugal 62 500 

– Shares 62 500 

GARVAL – Soc. de Garantia Mútua, S.A. 62 500 EUR 1.00 1.00 1.00 62 500 

– In other companies in Portugal 19 908 704 

– Shares 19 904 215 

Unicre – Cartão de Crédito Internacional, S.A. 48 260 EUR 5.00 6.45 – 311 449 

SIBS – Soc. Interbancária de Serviços, S.A. 65 558 EUR 5.00 16.38 – 1 073 976 

Norfin – Soc. Gest. Fundos Inv. Imob., S.A. 9 900 EUR 5.00 5.00 – 49 500 

MG Gestão de Activos Financeiros – SGFIM, S.A. 300 EUR 5.00 4.99 – 1 498 

Ambelis – Ag. para a Moder. Econ. de Lisboa, S.A. 400 EUR 50.00 49.88 – 19 952 

Futuro – Soc. Gest. de Fundos de Pensões, S.A. 8 400 EUR 50.00 49.87 – 418 880 

Margueira – Soc. Gest. de Fundos de Investimento 1 098 EUR 5.00 4.99 – 5 477 

Lusitania Vida – Companhia de Seguros, S.A. 141 631 EUR 25.00 36.73 – 5 202 423 

Lusitania – Companhia de Seguros, S.A. 1 010 564 EUR 5.00 10.70 – 10 815 993 

HTA – Hotéis, Turismo e Anim. Açores, S.A. 400 000 EUR 5.00 5.00 – 2 000 000 

Residências Montepio Serviços de Saúde, S.A. 100 EUR 1.00 0.67 – 67 

Credint – Consult. Financeira e Creditícia, S.A. 500 EUR 10.00 10.00 – 5 000


Value 

Average 

Acquisition 

Cost (Euros) 

Market 

Value 

(Euros) 

Book 

Value 

(Euros) 

Other type of shares 4 489 

Bolsimo – Gestão Imobiliária, Lda. 1 EUR – 4 489.00 – 4 489 

– In credit institutions abroad 2 530 455 

– Shares 2 530 455 

Banco da África Ocidental, S.A. 10 074 XOF 10 000.00 17.32 – 174 448 

Caixa Económica de Cabo Verde 34 204 CVE 1 000.00 42.22 – 1 443 956 

Banco Desenvolvimento e Comércio, S.A. 191 339 MZM 100 000.00 4.77 – 912 051 

– In other companies abroad 2 046 444 

– Shares 2 046 444 

MCS – Moçambique Comp. de Seguros, S.A.R.L. 21 600 MZM 100 000.00 8.80 – 190 174 

Euronext N.V. 94 973 EUR 1.00 19.38 – 1 840 577 

S.W.I.F.T., S.C.R.L. 8 EUR 124.00 1 961.63 – 15 693 

Investments in subsidiaries 7 001 316 

– In credit institutions abroad 7 001 316 

– Shares 7 001 316 

Montepio Geral – Cabo Verde, S.A. 77 200 CPV 1.00 90.69 – 7 001 316 

Other investments 1 200 000 

– Supplementary capital contributions 1 200 000 

HTA – Hotéis, Turismo e Anim. Açores, S.A. 400 000 EUR – – – 1 200 000 

TOTAL 747 627 221 

129

130 

BALANCE SHEET AS AT 31 DECEMBER, 2005 AND 2004 

ASSETS 


Notes 2005 

2004 

Cash and deposits at central banks 2 207 707 236 653 

Loans and advances to credit institutions repayable on demand 3 94 396 46 573 

Other loans and advances to credit institutions 4 910 890 1 067 201 

Loans and advances to customers 5 11 500 659 10 391 117 

Securities 6 706 701 274 237 

Investments 7 31 352 39 821 

Intangible assets 8 5 551 3 927 

Tangible assets 9 80 402 84 263 

Other assets 10 124 213 133 110 

Prepayments and accrued income 11 305 316 142 002 

Total Assets 13 967 187 12 418 904 

LIABILITIES 

Amounts owed to credit institutions 

Repayable on demand 26 029 24 510 

With agreed maturity date 

Amounts owed to customers 

12 867 100 767 800 

Repayable on demand 13 2 241 727 2 153 298 

With agreed maturity date 13 5 320 872 5 350 941 

Debt securities 14 4 070 415 2 912 270 

Other liabilities 15 236 406 44 517 

Accruals and deferred income 16 119 216 104 143 

Provision for liabilities and charges 17 84 675 78 869 

Subordinated debt 18 309 976 329 928 



Share capital 19 485 000 445 000 

Reserves and retained earnings 20 and 21 160 459 174 585 

Profit for the year 45 312 33 043 

Total Shareholders’ Equity 690 771 652 628 

Obligations and future commitments (Note 34) 


13 967 187 12 418 904

STATEMENT OF INCOME 



Notes 2005 

2004 

Interest income 22 595 326 559 282 

Interest expense 23 328 376 312 119 

Net interest income 266 950 247 163 

Provision for loan losses 24 85 956 68 085 

Net interest income after provision for loan losses 180 994 179 078 

Other operating income 

Income from securities 25 3 013 1 033 

Commissions 26 67 428 60 642 

Gains arising from trading activity 27 7 241 21 191 

Other operating income 28 27 657 19 494 

Other costs 

105 339 102 360 

Commissions 26 9 414 8 644 

Losses arising from trading activity 27 5 129 24 874 

Staff costs 29 127 690 126 692 

Other administrative costs 30 72 275 63 960 

Other taxes 207 44 

Depreciation 8 and 9 11 085 13 252 

Other provisions 31 6 829 3 256 

Other expenses 32 8 392 7 673 

241 021 248 395 



131

132 

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 


Total 

shareholders’ 

equity 

Capital 

stock 

General 

reserve 

Special 

reserve 

Revaluation 

reserve 

Retained 

earnings 

Balance on 31 December, 2003 595 704 405 000 111 229 49 579 8 404 21 492 

Transfers to reserves 

General reserve – – 4 298 – – (4 298) 

Special reserve – – – 1 075 – (1 075) 

Increase in share capital 40 000 40 000 – – – – 

Dividends paid (16 119) – – – – (16 119) 

Profit for the year 33 043 – – – – 33 043 

Balance on 31 December, 2004 652 628 445 000 115 527 50 654 8 404 33 043 

Transfers to reserves 


Special reserve – – – 1 652 – (1 652) 



Adjustment – Pension liabilities (see note 11) (22 387) – – – – (22 387) 


Balance on 31 December, 2005 690 771 485 000 122 136 52 306 8 404 22 925 


(Thousands of euros)

NOTES TO THE FINANCIAL STATEMENTS 




Caixa Económica Montepio Geral («Caixa») is a credit institution held by Montepio Geral – Associação 

Mutualista, established on 24 March, 1844, and authorised to operate in accordance with Decree-Laws 

No. 298/92 of 31 December, and No. 136/79 of 18 May, which regulate the activity of savings banks 

and establish some restrictions to their activities. However, Caixa is authorised to carry out banking operations 

in addition to those mentioned in its by-laws, if previously authorised by the Bank of Portugal. 

This fact conducts to the practice of banking operations in general. 

As at 31 December, 2004, in accordance with Decree-Law No. 36/92 of 28 March, Caixa Económica 

Montepio Geral was exempt from presenting Consolidated Financial Statements. After the 1st January, 

2005, Caixa Económica Montepio Geral has to present Consolidated Financial Statements, in accordance 

with Decree-Law No. 35/05, of 17 February. 

The Financial Statements presented, which have been prepared under the historical cost convention, 

reflect the results of the operations for the years ended 31 December, 2005 and 2004. 

The Financial Statements of Caixa Económica Montepio Geral have been prepared in accordance with 

generally accepted accounting principles in Portugal, and in compliance with the Portuguese Plan of 

Accounts for the Banking Sector, as established by the Bank of Portugal, including the application of the 

4th Directive – No. 86/635/EEC regarding the presentation of accounts by banks and other financial 

institutions. 

1.2. Recognition of income and expenses 

Income and expenses are recorded on an accrual basis. 

As established by the Bank of Portugal, interest on credit overdue for a period over 90 days not covered 

by asset-backed guarantees is only recorded as income when received. 

1.3. Specific provisions for loan losses 

The provision against identified doubtful credits is based on the appraisal of overdue loans including the 

related overdue amounts to cover specific credit risks. This provision is shown as a deduction against 

credit granted. 

The adequacy of this provision is reviewed regularly by Caixa taking into consideration the existence of 

asset-backed guarantees, the overdue period and the current financial situation of the client. 

The provision calculated under these terms, complies with the requirements established by the Bank of 

Portugal, in accordance with Regulations No. 3/95, of 30 June, No. 2/99, of 15 January, No. 7/00, of 27 

October and No. 8/03, of 30 January. 

1.4. Provisions for other assets 

The provision for other assets corresponds to the positive difference between the assets book value and 

its market value, in accordance with the Regulation No. 3/95, of 30 June, of the Bank of Portugal. 

133

134 

1.5. General provision for loan losses 

This provision is established to cover latent bad and doubtful debts which are present in any loan portfolio, 

including guarantees, but which have not been specifically identified as such. This provision is 

recorded under provision for liabilities and charges. 

The general provision for loan losses is in accordance with Regulation No. 3/95, of 30 June, Regulation 

No. 2/99, of 15 January and Regulation No. 8/03, of 30 January of the Bank of Portugal. 

1.6. Provision for country risk 

The provision for country risk is in accordance with Regulation No. 3/95, of 30 June of the Bank of Portugal, 

and is based on the Instruction No. 94/96, of 17 June, of the Bank of Portugal, including the 

adoption of changes made to paragraph 2.4 of the referred Instruction published in October 1998. 

1.7. Securitisation operations 

The credit portfolios transferred under securitisation programme are derecognised from the balance 

sheet with the respective gain or loss, calculated as the difference between the proceeds from the sale 

and the book value of the asset transferred being recognised in profit and loss account in the period. 

The retained interests, in the form of Notes, acquired as part of these transactions are accounted for as 

investment securities, in accordance with the accounting policy applicable to fixed income securities, as 

described in note 1.8. 

As established in the Instructions No. 27/00, of 15 December and No.18/03, of 18 August of the Bank 

of Portugal, Caixa provisions in its own financial statements in the same terms as if the loans transferred 

were accounted in the respective balance sheet, up to a maximum amount equivalent to the acquisition 

cost of the Notes acquired. 

If the Seller holds clean-up calls which do not state explicitly that the underlying assets can be reacquired 

at its market value, the maximum amount of provisions to be set up is the higher of the following 

amounts: 

– the acquisition cost of the Notes or other assets acquired under the securitisation operations; 

– the amount of assets that corresponds to the exercise of the clean-up call. 

1.8. Securities 

Securities are classified according to the following criteria: 

Trading account securities 

These securities are acquired for the purpose of being traded for a term not exceeding six months. 

Fixed income securities are revalued daily at market value, including interest accrued. Interest and the 

difference on revaluation are recorded as income or expense in the period to which they relate. 

In the absence of the market value, fixed income securities are valued at the acquisition cost plus 

accrued interest, based on the nominal interest rate. 

Variable income securities, which are quoted, are valued at the market value. Unquoted securities are 

valued at the lower of cost or estimated realisable value.

Investment account securities 

These securities will not be traded within a six months period from the acquisition date. 

Fixed income securities issued at their nominal value, are recorded at acquisition cost. Interest is accrued 

based on the nominal value and the applicable interest rate for the period. 

As established by the Bank of Portugal in paragraphs 10 and 20 of Regulation No. 3/95, of 30 June 

potential losses resulting from the difference between book value and market value should be provisioned. 

Variable income securities are recorded at acquisition cost. A provision is created to cover potential 

losses resulting from the difference between book value and market value, in accordance with Regulation 

No. 3/95, of 30 June, of the Bank of Portugal. 

In accordance with the Portuguese Plan of Accounts for the Banking Sector, provisions are presented in 

the balance sheet as deductions to the securities portfolio. 

Securities portfolio held to maturity 

These securities are acquired for the purpose of being held to maturity. This securities portfolio, includes 

exclusively fixed income securities, with unchanged interest rate and published at issuing period, 

including the «zero cupons» with fixed reimbursement date and issued by the entities mentioned in 

section 1.1 of paragraph 15 of Regulation No. 3/95, 30 June of the Bank of Portugal. 

This portfolio only includes securities with call option if the strike price is at least equal or higher than 

the nominal value at reimbursement date. 

Securities portfolio held to maturity are recorded at the acquisition cost and interest is accrued based on 

the nominal value and the applicable interest rate for the period. The premium or discount is depreciated 

over the period to maturity. 

As established in paragraph 10 of Regulation No. 3/95, 30 June, of the Bank of Portugal, potential 

losses resulting from the difference between acquisition cost and market value are fully provisioned. 

Trading securities are transferred to the securities portfolio held to maturity at market value. Investment 

securities are transferred to the securities portfolio held to maturity at the book value net of specific provisions. 

In the transfer of trading and investment securities to the portfolio held to maturity, the difference 

between the reimbursement value and the book value is accrued up to maturity, and accounted 

as gains or losses in the statement of income. 

1.9. Foreign exchange and derivatives transactions 

Assets, liabilities and commitments expressed in foreign currency, are accounted in accordance with the 

following criteria: 

Spot position 

This represents the net balance of assets and liabilities in the same foreign currency, spot transactions 

awaiting settlement, and forward exchange contracts where the settlement date is in the two subsequent 

working days. 

This balance is valued daily at the average daily exchange rate published by the Bank of Portugal. 

Exchange differences are accounted as gains or losses in the statement of income. 

135

136 

Forward exchange position 

This represents the net balance of forward exchange contracts awaiting settlement, excluding those transactions 

where the settlement date is up to the two subsequent working days. These contracts are revalued 

at the forward exchange rates applicable to their maturities. If these rates are not available, the revaluation 

is calculated by reference to the interest rates applicable to the contracts’ remaining maturities. 

Exchange differences are accounted as gains or losses in the statement of income in the period in which 

they occur. 

Cash in hand in foreign currency 

Foreign currency is revalued on a daily basis, using the average exchange rate published by the Bank of 

Portugal. The exchange differences are accounted as gains or losses in the statement of income. 

Currency Swap transactions 

The spot and forward elements of these transactions are not revalued. The premium or discount is 

depreciated up to maturity, and accounted as gains or losses in the statement of income. 

The currency swap transactions are recorded in Obligations and future commitments for the notional 

amount of the contracts, being the amount derecognised in the maturity of the contracts. 

Interest rate swap 

Interest receivable and payable is accrued over the period to maturity. 

The interest rate swap transactions are registered in Obligations and future commitments for the 

notional amount of the contracts, being the amount derecognised in the maturity of the contracts. 

Options 

Trading contracts negotiated in organised markets, are marked to market, and the revaluation differences 

are accounted for as gains or losses in the statement of income. The premium received in options 

sold is recorded in deferred income until the option is exercised. 

The premium paid in options purchased is recorded in deferred costs being added to the option acquisition 

cost if the option is exercised, and if not exercised, is accounted for as cost. Options sold over-thecounter 

are revalued at market value with the differences accounted for as gains or losses in the statement 

of income. Options purchased are recorded at cost until the option is exercised or sold. 

Hedging contracts are not revalued. The results are recorded according to the accounting policy of the 

assets which are being hedged. Trading contracts are marked to market, and the revaluation differences 

are accounted for as gains or losses in the statement of income, over the period between trading and 

settlement date. 

1.10. Investments 

Investments are recorded at acquisition cost. Potential losses resulting from the investments permanent 

depreciation must be provisioned. 

Foreign investments are recorded at exchange acquisition rate. Translation differences arising from the 

conversion to euros are recorded at Valuation changes in investments in accordance with Portuguese 

Plan of Accounts for the Banking Sector. 

Until 31 December, 2001, investments in companies where the share capital interest represented less 

than 20% and in which Caixa did not exercise significant influence but considered as strategic invest-

ments were accounted at acquisition cost and the income from such investments was recognised on a 

cash-flow basis. 

On 30 June, 2002, the Bank of Portugal issued Regulation No. 4/02, which sets the provisions rules of 

these investments, which are presented as follows: 

– the set-up of provisions is required whenever the potential losses are higher than 15% of the 

acquisition cost of the investment. The minimum provision to be constituted corresponds to 40% 

of the loss that exceeds 15% of the investment. The value not provisioned of this excess is 

deducted to the own funds for capital adequacy purposes; 

– in accordance with the referred regulation, the set-up of the provisions referred above, corresponds 

to 40% of the losses that exceed 15% of the investment, for all investments acquired 

before 31 December 2001, and depending on the nature of the activity of the company in which 

the investment is held, the provision is accrued over the following periods: 

Investment Period % 

Financial and insurance companies 2002 to 2011 10% per year 

Non financial companies 2002 to 2004 25% per year 

2005 15% 

2006 10% 

– under the referred Regulation and in accordance with the Regulation 4/2004, the provisions for 

the years 2002 to 2004 can be charged against reserves for all investments acquired until 31 

December, 2001. 

1.11. Tangible assets 

Tangible assets are recorded at acquisition cost or revalued amounts according to the Portuguese regulations. 

Depreciation is calculated on a straight-line basis, at rates allowed for taxation purposes, in 

accordance with Decree-Law No. 2/90, of 12 January, over the following periods, which do not differ 

significantly from their estimated useful life: 

1.12. Intangible assets 


Buildings 50 

Works in rented buildings 10 

Equipment 4 a 10 

Set-up costs and key money 

In accordance with the Bank of Portugal rules, these costs are depreciated over a three year period. 

Research and development expenditure 

Development expenditure in respect of new projects is deferred to future periods and depreciated over 

a three year period as long as the following criteria are satisfied: 

137

138 

– the product or process is clearly defined and the costs attributable to the product or process can 

be separately identified; 

– the technical feasibility of the product or process has been demonstrated; 

– the management has indicated its intention to develop and market, or use, the product or process; 

– there is a clear indication of a future market for the product or process or, its usefulness can be 

demonstrated; 

– adequate resources exist to complete the project and market the product or process. 

1.13. Finance lease transactions 

As lessor 

Finance lease transactions are recorded at the inception date of the lease as an asset and liability, at the 

fair value of the leased asset, which is equivalent to the present value of the future lease payments. 

Lease rentals are apportioned between the finance charge and depreciation of the capital outstanding. 

The finance charge is allocated to the periods during the lease term so as to produce a constant periodic 

rate of interest on the remaining liability balance for each period. 

1.14. Pension plan 

Caixa assumed the responsibility to pay its employees pensions on retirement or disabilities, as established 

in the terms of «Acordo Colectivo de Trabalho Vertical do Sector Bancário (ACTV)». 

The pension plan benefits is in accordance with the «Plano ACTV – Acordo Colectivo de Trabalho Vertical 

do Sector Bancário», «Plano ACTQ – Acordo Colectivo dos Quadros do Sector Bancário» and «Plano 

CCT – Contrato Colectivo de Trabalho da Actividade Seguradora». 

Caixa’s pension obligations are financed by a fund managed by Futuro – Sociedade Gestora de Fundos 

de Pensões, S.A. 

Until 31 December, 2004, the pension obligations were determined in accordance with Regulation No. 

12/01, of the Bank of Portugal. 

During 2005, following the formal authorisation of the Bank of Portugal, Caixa early adopted Regulations 

No. 4/2005 and No. 12/2005 of Bank of Portugal, recognising all accumulated actuarial and losses 

calculated in accordance with prior accounting principles booked in the financial statements as an asset 

against retained earnings. 

In accordance with No. 2 of Regulation No. 4/2005 of Bank of Portugal, it was established a deferral 

period for the impact arising from this change with reference to 1 January, 2004, which is of five years 

for health care benefits and seven years for other benefits. 

The net obligation in respect of pension plans (defined benefit pension plans) is calculated on an annual 

basis, at each balance sheet date. The calculation is made using the projected unit credit method and 

following actuarial and financial assumptions. 

The current service costs and any past service costs together with the expected return on plan assets less 

the unwinding of the discount on the plan liabilities are charged to operating expenses. 

The Caixa’s net obligation in respect of defined benefit pension plans is calculated separately for each 

plan by estimating the amount of future benefit that employees have earned in return for their service 

in the current and prior periods. The benefit is discounted in order to determine its present value, and

the fair value of any plan assets is deducted. The discount rate is the yield at balance sheet date on AAA 

credit rated bonds that have maturity dates approximating the terms of the Caixa’s obligations. 

Employee benefits, other than pension plans, namely post retirement health care benefits and death 

before retirement benefits are also included in the benefits plans calculation. 

Under the ‘corridor’ method, actuarial gains and losses not recognized, exceeding 10% of the greater 

of the present value of the defined benefit obligation and the fair value of plan assets, are recognized 

in the income statement over a period of 25 years, corresponding to the expected remaining working 

life of the employees participating in the plan. 

The funding policy of the Plan is to make annual contributions by each Group company so as to cover 

the projected benefits obligations, including the noncontractual projected benefits. The minimum level 

required is 100% regarding the liability with pensioners and 95% regarding the employees in service. 

1.15. Income tax 

According to the No. 1 a) of Article 10th, of IRC Legislation, Caixa is exempt from income tax payment 

(Imposto sobre o Rendimento das Pessoas Colectivas – IRC). This exemption was recognised by a regulation 

issued by the Ministerial Secretary of Fiscal Affairs dated 3 December, 1993, and confirmed by the 

Law No. 10-B/96 from 23 March, which approved the public budget for the year of 1996. 

139

140 

2. Cash and deposits at central banks 




Cash 55 516 50 711 

Bank of Portugal 152 191 185 942 

207 707 236 653 

The balance Bank of Portugal includes deposits to satisfy the legal requirements to maintain a cash 

reserve for which the value is based on the value of deposits and other liabilities. 

The cash reserve requirements according with the European Central Bank System for Euro Zone, establishes 

the maintenance of a deposit with the central bank equivalent to 2% of the average value of 

deposits and other liabilities, during each reserve requirement period. 

3. Loans and advances to credit institutions repayable on demand 




Credit institutions in Portugal 16 121 

Credit institutions abroad 7 450 5 915 

Amounts due for collection 86 930 40 537 

94 396 46 573 

The balance Amounts due for collection represents cheques receivable from other credit institutions.

4. Other loans and advances to credit institutions 




Inter-bank Money Market – 15 000 

Credit institutions in Portugal 30 258 26 356 

Credit institutions abroad 880 632 1 025 845 

910 890 1 067 201 

This balance, analysed by the period to maturity, is as follows: 



Up to 3 months 890 175 1 045 468 

3 months to 1 year 20 001 11 829 

1 to 5 years 714 9 904 

910 890 1 067 201 

5. Loans and advances to customers 




Asset-backed loans 10 410 170 9 223 192 

Other guaranteed loans 652 810 713 665 

Unsecured loans 328 037 288 675 

Portuguese public sector 58 460 60 793 

Foreign loans 506 3 319 

Finance leases 14 606 14 141 

11 464 589 10 303 785 

Overdue loans – less than 90 days 30 147 20 724 

Overdue loans – more than 90 days 303 438 329 199 

333 585 349 923 

11 798 174 10 653 708 

Specific provision for credit risk (297 515) (262 591) 

11 500 659 10 391 117 

141

142 

The analysis of Loans and advances to customers, by type of credit, is as follows: 

Residents: 



Short term 

Discounted bills 119 437 121 869 

Current account credits 626 450 642 635 

Overdrafts 22 468 20 474 

Loans 144 078 127 337 

Medium and long term 

Real estate loans 

912 433 912 315 

Mortgage 6 952 140 6 078 204 

Construction 2 974 809 2 882 129 


Other loans 610 095 413 677 

10 551 650 9 388 151 

Non-Residents: 

Short term 506 819 

Medium and long term – 2 500 

506 3 319 

Overdue loans: 

11 464 589 10 303 785 

Less than 90 days 30 147 20 724 

More than 90 days 303 438 329 199 

333 585 349 923 

11 798 174 10 653 708 


11 500 659 10 391 117 

The balance Overdue loans includes the overdue principal and interest. 

The balance Overdue loans – more than 90 days includes the amount of Euros 6 813 000 (2004: Euros 

7 113 000) related to loans bought at court auctions. These amounts correspond to loans overdue for 

more than three years for which the contractual obligation with the former debtor has been extinguished 

due to the acquisition in court auction, bankruptcy or acquisition through foresale but for which 

there are still pending legal actions.

The analysis of Loans and advances to customers, by type of client, is as follows: 

Corporate: 



Construction 2 109 587 2 031 165 

Investment 970 214 930 122 

Other short term loans 818 388 837 962 

Other loans 62 565 58 664 

Private: 

Mortgage loans 7 076 337 6 260 473 

Consumer credit 199 013 169 534 

Other loans 503 510 304 912 


11 798 174 10 653 708 


11 500 659 10 391 117 

The analysis of loans granted to residents and non-residents excluding the overdue amounts, by the 

period to maturity, is as follows: 



Up to 3 months 902 104 854 306 

3 months to 1 year 1 520 670 1 523 814 

1 to 5 years 2 272 923 2 109 980 

More than 5 years 6 768 892 5 815 685 

11 464 589 10 303 785 

The analysis of Overdue loans, by type of credit, is as follows: 



Asset-backed loans 252 965 242 242 



Finance leases 457 301 

333 585 349 923 

143

144 

The analysis of Overdue loans, by type of client, is as follows: 

Corporate: 



Construction 72 292 58 088 

Investment 39 878 27 941 


Other loans 506 1 205 

Private: 

Mortgage loans 130 653 164 519 


Other loans 50 528 47 750 

Portuguese public sector 100 83 

The specific provision for credit risk, by type of credit, is analysed as follows: 

333 585 349 923 







297 515 262 591 

The specific provision for credit risk is set up due to the existence of specific credit risks, in accordance 

with the accounting policies as described in note 1.3. 

The specific provision for credit risks is analysed as follows: 



Balance on 1 January 262 591 273 916 

Charge for the year 181 608 164 403 

Write-back for the year (101 919) (99 313) 

Amounts charged-off (44 765) (76 415) 

Balance on 31 December 297 515 262 591 

In accordance with the Bank of Portugal regulations, as set out in note 1.2 of the accounting policies, 

interest on overdue loans for a period of over 90 days not covered by asset-backed guarantees, is only 

recorded as income when received.

The analysis of loans charged-off, by type of credit, is as follows: 






44 765 76 415 

As at 31 December, 2005, there are two securitisation operations established between Caixa and other 

financial institutions presented in the following paragraphs. 

As at 19 December, 2002, Caixa Económica Montepio Geral has settled a securitisation operation with 

a Special Purpose Vehicle (SPV) – Pelican Mortgages No. 1 PLC, established in Dublin. The referred 

agreement consists in a mortgage credit transfer for a period of 35 years, without revolving period and 

with a fixed limit (Aggregate Principal Amount Outstanding) of Euros 650 000 000. The transfer price by 

which the loans were transferred was their nominal value. The settlement costs have represented 

0.016% of the referred nominal value. 

As at 29 September, 2003, Caixa Económica Montepio Geral has settled a securitisation operation with 

a Special Purpose Vehicle (SPV) – Pelican Mortgages No. 2 PLC, established in Dublin. The referred 





Caixa Económica Montepio Geral is the servicer, acting as collector of the credits sold. The received 

values are transferred to Pelican Mortgages No.1 PLC and to Pelican Mortgages No. 2 PLC. 

As at 31 December, 2005, the securitisation operations, are presented as follows: 

Issue Settlement date Currency Assets transferred Amount 

Pelican Mortgages No.1 December 2002 Euros Mortgage credit 650 000 000 

Pelican Mortgages No.2 September 2003 Euros Mortgage credit 700 000 000 

1 350 000 000 

The impact of loans transferred under the securitisation programmes in the Loans and advances to customers, 

is analysed as follows: 



Pelican Mortgages No.1 404 285 503 608 


973 068 1 131 544 

145

146 

As at 31 December, 2005, the Notes issued by the special purpose vehicles, are analysed as follows: 

Nominal Bonds 

Bonds value Reimbursement rating 

Issue issued Euros Currency date (Moody's) 

Pelican Mortgages No.1 Class A 611 000 000 Euros 2037 AAA 

Class B 16 250 000 Euros 2037 A2 

Class C 22 750 000 Euros 2037 BAA2 

Class D 3 250 000 Euros 2037 – 

Pelican Mortgages No.2 Class A 659 750 000 Euros 2036 AAA 

Class B 17 500 000 Euros 2036 A1- 

Class C 22 750 000 Euros 2036 BAA2 

Class D 5 600 000 Euros 2036 – 

As at 31 December, 2005, the residual securities acquired and the related provisions, booked on the balance 

sheet, are analysed as follows: 

Issue 


Book value Provisions Book value Provisions 


Pelican Mortgages No. 1 3 250 3 250 3 250 2 704 

Pelican Mortgages No. 2 5 600 3 251 5 600 3 172 

8 850 6 501 8 850 5 876 

6. Securities 





Issued by Government and Public entities 34 238 33 397 

Issued by other entities 661 660 229 542 

695 898 262 939 

Overdue securities 998 1 613 

Shares and other variable income securities 17 982 19 331 

18 980 20 944 

Specific provision for securities (8 177) (9 646) 

706 701 274 237 

In accordance with the accounting policy described in note 1.7 the securities acquired by Caixa as a 

result of the securitisation operations are accounted for as investment securities. As at 31 December, 

2005 and 2004, the securities held by Caixa amounted to Euros 8 850 000 and the corresponding provisions 

amounted to Euros 6 501 000 (2004: Euros 5 876 000), as referred in note 5.

The realised gains / (losses) on investment securities are analysed as follows: 



Realised gains 342 25 

Realised losses (378) (1 500) 

36 (1 475) 

The fixed income securities with maturity date in 2006 amounted to Euros 21 084 000. 

The securities portfolio, by type of security, is analysed as follows: 

Investment account securities: 



Bonds issued by Government and Public entities 

Bonds issued by other entities 

67 33 397 

Portuguese issuers 34 872 17 649 

Foreign issuers 590 851 167 896 

Commercial paper 36 935 45 610 

Shares in Portuguese companies 5 607 6 971 

Investment fund units 12 375 11 959 

Participation bonds – 401 

680 707 283 883 

Held to maturity securities: 

Bonds issued by Government and Public entities 34 171 – 

714 878 283 883 

Specific provision for securities (8 177) (9 646) 

706 701 274 237 

The balance Bonds issued by other Portuguese issuers includes the amount of Euros 14 101 000 (2004: 

Euros 15 128 000) related to subordinated securities. 

As at 31 December, 2005, there are no securities accounted as trading. 

147

148 

As at 31 December, 2005, the investment securities for which the net book value is different from market 

value, are analysed as follows: 

Net book Book Unrealised Unrealised Market 

value Provisions value gains losses value 

Euros '000 Euros '000 Euros '000 Euros '000 Euros '000 Euros '000 

Bonds issued by Portuguese 

Government and Public entities 

Bonds issued by other entities: 

34 236 2 34 238 – (2) 34 236 

Portuguese issuers 34 843 29 34 872 4 (29) 34 847 

Foreign issuers 584 026 6 825 590 851 355 (6 825) 584 381 

Commercial paper 35 937 998 36 935 – (998) 35 937 

Shares in portuguese companies 5 553 54 5 607 893 (54) 6 446 

Investment fund units 12 106 269 12 375 180 (269) 12 286 

706 701 8 177 714 878 1 432 (8 177) 708 133 

As at 31 December, 2004, the investment securities for which the net book value is different from market 

value, are analysed as follows: 

Net book Book Unrealised Unrealised Market 

value Provisions value gains losses value 





33 397 – 33 397 127 – 33 524 

Portuguese issuers 16 938 711 17 649 1 (711) 16 939 

Foreign issuers 161 992 5 904 167 896 84 (5 904) 162 076 

Commercial paper 44 612 998 45 610 – (998) 44 612 

Shares in portuguese Companies 6 085 886 6 971 – (886) 6 085 

Investment fund units 10 815 1 144 11 959 – (1 144) 10 815 

Participation bonds 398 3 401 – (3) 398 

274 237 9 646 283 883 212 (9 646) 274 449 

Specific provision for securities is analysed as follows: 






Amounts charged-off (1 454) – 

Balance on 31 December 8 177 9 646

7. Investments 


Investments in subsidiaries: 



Foreign credit institutions 7 001 15 307 

Investments in associated companies and other investments: 

Portuguese credit institutions 63 63 

Foreign credit institutions 2 530 2 530 

Other portuguese subsidiaries 19 909 20 077 

Other foreign subsidiaries 2 046 2 041 

24 548 24 711 

31 549 40 018 

Specific provision for investments: 

Foreign credit institutions (149) (149) 

Other foreign subsidiaries (48) (48) 

(197) (197) 

31 352 39 821 

As at 31 December, 2005, the investments owned directly by Caixa, are analysed as follows: 

Market Unrealised 

Book Net book value gains/ 

Investment value Provisions value (1) (losses) 


Banco MG – Cabo Verde 7 001 – 7 001 10 340 3 339 

Lusitania Companhia de Seguros, S.A. 10 816 – 10 816 13 131 2 315 

Lusitania Vida, Companhia de Seguros, S.A. 5 202 – 5 202 12 420 7 218 

HTA – Hotéis, T. e A. Açores, S.A. 2 000 – 2 000 3 995 1 995 

Banco de Desenvolvimento e Comércio, SARL 763 149 912 718 (194) 

Norfin – Sociedade Gestora de FIM, S.A. 50 – 50 459 409 

Credint – Cons. Financeira e Creditícia, S.A. 5 – 5 – (5) 

Caixa Económica de Cabo Verde 1 444 – 1 444 2 122 678 

Futuro – Soc. Gest. Fundos de Pensões, S.A. 419 – 419 975 556 

Moçambique Companhia de Seguros, SARL 143 48 191 134 (57) 

Bolsimo – Gest. Imob., Lda. 4 – 4 9 5 

Margueira 5 – 5 7 2 

Banco da África Ocidental 174 – 174 431 257 

SIBS – Soc. Int. Serviços, S.A. 1 074 – 1 074 1 290 216 

Unicre – Cartão Internacional de Crédito, S.A. 311 – 311 1 502 1 191 

Euronext NV 1 841 – 1 841 1 933 92 

S.W.I.F.T., S.C.R.L. 16 – 16 18 2 

Ambelis 20 – 20 – (20) 

Garval – Soc. de Garantia Mútua 63 – 63 94 31 

MG Gestão Activos Financeiros – SGFIM, S.A. 1 – 1 6 5 

31 352 197 31 549 49 584 18 035 

(1) The market value considered to calculate the unrealised gains or losses is in accordance with No. 4 of 10th paragraph of Regulation 

No. 3/95, of 30 June and No. 1.1 of annex of Regulation No. 4/02, of 11 June, of the Bank of Portugal. 

149

150 

At 30 November 2005, Montepio Geral – Cayman was liquidated. 

During 2005, Caixa fully subscribed the share capital of Banco Montepio Geral – Cabo Verde, Sociedade 

Unipessoal, S.A. (IFI) in the amount of Euros 7 001 000. 

During 2004, Caixa acquired the investment held in S.W.I.F.T., S.C.R.L. in the amount of Euros 11 000, 

representing 0.07% of share capital. 

During 2005, no changes have occurred in the specific provision for investments. 

Caixa has a portfolio of investments in associated companies. Associated companies are all permanent 

investments in which Caixa exercises significant influence but does not have control. The activity of the 

referred companies complements the one developed by Caixa. 

As at 31 December, 2005, the investments in associated companies, are as follows: 

Net income 

Head Share for the Equity 

Subsidiary office Activity capital Currency % year held 

Lusitania, Companhia 

Non-life 

insurance and 

de Seguros, S.A. Lisboa reinsurance 

Life insurance 

19 250 000 Euros 26% 2 911 8 754 

Lusitania Vida, Companhia and 

de Seguros, S.A. 

Banco Montepio Geral – Cabo 

Lisboa reinsurance 9 000 000 Euros 39% 2 192 8 280 

Verde, Soc. Unipessoal, Cidade 

S.A. (IFI) da Praia Banking 772 000 000 ECV 100% (108) 6 894 

Lusitania, Companhia de Seguros, S.A. was established on 6 June, 1986, and its purpose is the practice 

of insurance and reinsurance for all technical areas, with the exception of life insurance. The company’s 

share capital amounts to Euros 19 250 000 and its shareholders, in addition to Caixa, are Montepio 

Geral – Associação Mutualista (65.71%) and Lusitania Vida, Companhia de Seguros, S.A. (3.32%). 

Lusitania Vida, Companhia de Seguros, S.A. was established on 15 May, 1987, and its purpose is the 

practice of all forms of life insurance and reinsurance. The company’s share capital amounts to Euros 

9 000 000 and its shareholders, besides Caixa, are Montepio Geral – Associação Mutualista (39.22%) 

and Lusitania, Companhia de Seguros, S.A. (11.17%). 

To carry out their operations both companies have their own branches and a network of insurance brokers 

using also Caixa's branches to sell their products. 

Banco Montepio Geral – Cabo Verde, Sociedade Unipessoal, S.A. (IFI) was established on August, 2005 

and its purpose is the internationalisation of Caixa, namely to enable it to obtain and maintain funds 

and provide clients alternatives outside the domestic market. The company's share capital amounts to 

CVE 772 000 000 being fully subscribed and paid by Caixa.

8. Intangible assets 


Cost: 



Set up costs and key money 33 33 

Software 19 618 15 132 

Assets advances 24 – 

19 675 15 165 



Accumulated charge for the previous years (11 238) (7 961) 

(14 124) (11 238) 

5 551 3 927 

The Intangible assets movements, during the year 2005, are analysed as follows: 

Cost: 

Balance on Acquisitions/ Balance on 

1 January Charges 31 December 


Set up costs and key money 33 – 33 

Software 15 132 4 486 19 618 

Assets advances – 24 24 

15 165 4 510 19 675 


Software 11 238 2 886 14 124 

151

152 

9. Tangible assets 


Cost: 



Land and buildings: 

For own use 66 304 66 567 

Leasehold improvements in rented buildings 31 841 31 563 

Work in progress 82 82 

Equipment: 

Furniture 9 271 9 417 

Office equipment 2 737 2 875 

Computer equipment 26 967 41 453 

Interior installations 20 385 19 552 

Motor vehicles 1 464 1 655 

Security equipment 2 621 2 572 

Works of art 419 404 


Work in progress 1 249 735 


163 370 176 905 



(82 968) (92 642) 

80 402 84 263

The Tangible assets movements, during the year, are analysed as follows: 

Cost: 

Balance on Acquisitions/ Adjustment/ Balance on 

1 January Charges Disposals Transfers 31 December 



For own use 

Leasehold improvements in 

66 567 – (263) – 66 304 

rented buildings 31 563 155 – 123 31 841 

Work in progress 82 – – – 82 

98 212 155 (263) 123 98 227 

Equipment: 

Furniture 9 417 74 (220) – 9 271 

Office equipment 2 875 50 (188) – 2 737 

Computer equipment 41 453 1 905 (16 387) (4) 26 967 

Interior Installations 19 552 519 – 314 20 385 

Motor vehicles 1 655 37 (228) – 1 464 

Security Equipment 2 572 49 – – 2 621 

77 524 2 634 (17 023) 310 63 445 

Works of art 404 15 – – 419 


Work in progress 735 947 – (433) 1 249 



176 905 3 751 (17 286) – 163 370 

For own use 11 457 1 043 (34) – 12 466 

Leasehold improvements in 

rented buildings 17 065 2 978 – – 20 043 

Equipment: 

Furniture 6 909 698 (212) – 7 395 


Computer equipment 40 016 1 254 (17 205) 10 24 075 

Interior Installations 11 282 1 766 – (10) 13 038 


Security Equipment 2 055 172 (4) – 2 223 

92 642 8 199 (17 873) – 82 968 

153

154 

10. Other assets 




Investments arising out of recovered loans 112 948 108 913 

Recoverable subsidies from the Portuguese Government 21 222 29 906 

Other financial investments 1 218 1 218 


138 530 142 294 

Provision for other debtors (13 382) (8 966) 

Provision for country risk (935) (218) 

(14 317) (9 184) 

124 213 133 110 

The balance Investments arising out of recovered loans includes the buildings recovered related with 

overdue loans in the amount of Euros 104 016 000 (2004: Euros 104 071 000). The referred buildings 

are not subject to revaluation and depreciation and are recorded at cost. The potential losses resulting 

from the difference between their book value and their estimated realisable value are fully provisioned. 

As at 31 December, 2005 and 2004, this balance also includes the amount of Euros 4 804 000 related 

to 963 316 investment fund units of Fundo de Investimento Imobiliário Fechado – Margueira Capital, 

resulting from Lisnave’s restructuring debt agreement. These investment fund units are totally guaranteed 

by the Portuguese Government. 

The balance Recoverable subsidies from the Portuguese Government, in the amount of Euros 21 222 000 

(2004: Euros 29 906 000), corresponds to mortgage credit interest subsidies, in accordance with the 

regulations applicable to mortgage loans benefits. The referred amounts do not bear interest and are 

claimed monthly. 

This balance also includes the amount of Euros 2 904 000 (2004: Euros 3 724 000) related to recoverable 

subsidies arising from contracts securitised during 2004, to be delivered to the fund Pelican Mortgages 

No. 2 and is recorded in the caption Other creditors, as referred in note 15. 

As at 31 December, 2005 and 2004, the balance Recoverable subsidies from the Portuguese Government 





Subsidies unclaimed 10 479 12 486 

Overdue subsidies unclaimed 6 217 381 

21 222 29 906 


includes the amount of Euros 3 473 000 non-recognised by the treasury authorities. This amount is 

totally provided for in the balance Provision for general banking risks, as referred in note 17. 

The balance Other financial investments includes the amount of Euros 1 200 000 related to supplementary 

capital contributions to HTA – Hotéis, Turismo e Animação dos Açores, S.A.

In accordance with the accounting policy described in note 1.4, the balance Provision for other debtors 

records the negative differences between the buildings valuation and the amount they are accounted 

for. The balance Provision for other debtors is analysed as follows: 






Amounts charged-off (1 531) – 


The provision for country risk is analysed as follows: 



Balance on 1 January 218 160 

Charge for the year 937 196 

Write-back for the year (220) (138) 

Balance on 31 December 935 218 

11. Prepayments and accrued income 




Interest receivable from loans and advances to customers 35 712 34 105 

Interest receivable from loans to credit institutions 617 609 

Interest receivable from swap transactions 27 269 30 410 

Other accrued income 5 072 4 246 

Prepayments and deferred costs 137 035 39 436 

Corridor (Pensions) 87 692 26 336 

Other sundry assets 11 919 6 860 

305 316 142 002 

The balance Interest receivable from swap transactions corresponds to interest rate swap operations, 

used for hedging purposes related to Caixa’s activity. 

The balance Prepayments and deferred costs includes the amount of Euros 11 298 000 (2004: Euros 

14 443 000) related to prepaid interest from CEMG/03 cash bonds, issued in August of 2003. 

This balance also includes the amount of Euros 95 111 000 respecting to changes on requirements 

established by the Bank of Portugal, in accordance with Regulations No. 4/2005 and No. 12/2005, in 

accordance with the accounting policy described in note 1.14. This amount will be charge against 

retained earnings, for five or seven years period depending on whether it relates to obligations with 

health or employees benefits, respectively. 

155

156 

The total impact of the changes on requirements established by the Bank of Portugal through above 

regulations mentioned is analysed as follows: 

Balance 

Euros '000 

Deferral Total Depreciation Amount 

period impact 2005 to depreciate 

Obligations with health benefits 

Amortisation of deferred actuarial losses, 

7 19 470 2 782 16 688 

corridor and disability decreases 5 47 450 9 490 37 960 

Other responsabilities increases 5 50 579 10 116 40 463 

Total 117 499 22 388 95 111 

As at 31 December, 2005 this balance also includes actuarial gains or losses above corridor in the 

amount of Euros 25 514 000 (2004: Euros 21 114 000), which are going to be amortised in 25 years in 

accordance employees expected remaining working life, as referred in the accounting policy described in 

note 1.14 and note 39. 

The balance Corridor (Pensions) refers to the corridor in the amount of Euros 87 692 000 (2004: Euros 

26 336 000), in accordance with accounting policy as described in note 1.14 and as mentioned in note 

39. 

12. Amounts owed to credit institutions with agreed maturity date 




European Central Bank – 100 000 



867 100 767 800 

The balance Amounts owed to credit institutions with agreed maturity date, analysed by the period to 

maturity, is as follows: 



Up to 3 months 241 722 270 808 

3 to 6 months 141 300 32 733 

6 months to 1 year 4 145 6 878 

1 to 5 years 440 000 439 381 

More than 5 years 39 933 18 000 

867 100 767 800

13. Amounts owed to customers 


Amounts owed to customers repayable on demand: 



Demand deposits 2 241 727 2 153 298 

Amounts owed to customers with agreed maturity date: 

Time deposits 3 577 982 3 415 860 

Saving accounts 1 742 890 1 935 081 

5 320 872 5 350 941 

7 562 599 7 504 239 

In accordance with Regulation No. 180/94, of 15 December, the Deposit Guarantee Fund was established 

to guarantee the reimbursement of funds deposited in Credit Institutions. The calculations of the annual 

contributions for this Fund are based on the criterion laid out in Regulation No. 11/94, of the Bank of 

Portugal. 

The balance Amounts owed to customers with agreed maturity date, analysed by the period to maturity, 

is as follows: 



Up to 3 months 3 167 466 2 962 151 

3 to 6 months 811 065 1 230 441 

6 months to 1 year 617 219 692 459 

1 to 5 years 677 461 405 703 


5 320 872 5 350 941 

14. Debt securities 




Bonds 4 070 415 2 912 270 

This balance, analysed by the period to maturity, is as follows: 



Up to 6 months 550 000 305 000 

6 months to 1 year 200 000 330 000 

1 to 5 years 2 525 415 2 112 270 


4 070 415 2 912 270 

157

158 

The characteristics of Debt securities issued, as at 31 December, 2005, are analysed as follows: 

Issue Reimbursement Interest 2005 

Issue date date rate Euros '000 

Bonds issued: 

Obr. CEMG / 01 1.ª Emissão Mar. 2001 Mar. 2006 Euribor 3 months + 0.35% 250 000 

Obr. CEMG / 01 2.ª Emissão Jun. 2001 Jun. 2006 Fixed rate of 5.25% 300 000 

Obr. CEMG / 02 1.ª Emissão Jan. 2002 Jan. 2012 Euribor 6 months + 1% 50 000 

Obr. CEMG / 03 Mar. 2003 Mar. 2008 Fixed rate of 3.8% 100 000 

Obr. CEMG / 03 Aug. 2003 Aug. 2009 Fixed rate of 3.548% 100 000 

Obr. CEMG / 03 Nov. 2003 Nov. 2008 Pribor 6 months + 0.18% 17 241 

Obr. CEMG / 03 Nov. 2003 Nov. 2008 Euribor 3 months + 0.30% 200 000 

Obr. CEMG / 03 Jan. 2004 Nov. 2008 Euribor 3 months + 0.30% 100 000 

Obr. CEMG / 04 Feb. 2004 Aug. 2007 Fixed rate of 3.25% 120 000 

Obr. CEMG / 04 Mar. 2004 Mar. 2007 Euribor 3 months + 0.20% 400 000 

Obr. CEMG / 04 Mar. 2004 Mar. 2009 Hibor 3 months + 0.26% 10 933 

Obr. CEMG / 04 Jul. 2004 Jul.2006 Euribor 3 months + 0.125% 200 000 

Obr. CEMG / 04 Sep. 2004 Sep. 2014 Euribor 3 months + 0.25% 15 000 

Obr. CEMG / 04 Sep.2004 Sep.2014 Euribor 3 months + 0.31% 50 000 


Obr. CEMG / 04 Sep. 2004 Sep. 2009 Fixed rate of 4,6% 17 241 


Obr. CEMG / 04 Feb. 2005 Nov.2009 Euribor 3 months + 0.25% 300 000 

Obr. CEMG / 05 Feb. 2005 Feb. 2015 Fixed rate of 3,5% 125 000 

Obr. CEMG / 05 Mar. 2005 Mar. 2015 Euribor 3 months + 0.25% 5 000 

Obr. CEMG / 05 May 2005 May 2012 Euribor 3 months + 0.25% 500 000 

Obr. caixa MG Aforro 1.ª Em. Aug. 2005 Aug.2009 Taxa fixa anual de 1.85% 19 000 

Obr. CEMG / 05 Sep. 2005 Sep. 2010 Euribor 3 months + 0.20% 500 000 

Obr. CEMG / 05 Oct. 2005 Sep. 2010 Euribor 3 months + 0.20% 125 000 

Obr. caixa MG Aforro 2.ª Em. 

Obr. caixa MG Cabaz TOP 

Oct. 2005 Oct. 2009 Taxa fixa anual de 1.85% 62000 

1.ª Emissão Oct. 2005 Oct. 2007 Taxa fixa anual de 2% 8 500 


Obr. caixa MG 

Nov. 2005 Nov. 2009 Taxa fixa anual de 1.85% 14 000 

Especial Poupança Nov. 2005 Nov. 2010 Taxa fixa anual de 1.85% 23 000 

Obr. caixa MG Aforro 4.ª Em. Dec. 2005 Dec. 2009 Taxa fixa anual de 1.85% 52 000 

Obr. caixa MG Business Invest Dec. 2005 Dec. 2008 Taxa fixa anual de 2% 26 500 

Obr. caixa MG Aforro Especial Dec. 2005 Dec. 2008 Taxa fixa anual de 5% 30 000 

4 070 415 

As at 31 December, 2005, the bonds issued bear postponed and anticipated interest and the effective 

interest rate range is between 1.85% and 5.25%. 

The CEMG/02 1.ª Emissão cash bonds present a 6% cap. 

The MG Cabaz Top 1.ª Emissão bonds present a 2% floor.

The reimbursements in 2005, are analysed as follows: 

Reimbursement 

Issue Reimbursement Interest Amount 

Issue date date Rate Euros '000 

Bonds issued 

Obr. CEMG / 04 Abr. 2004 Abr. 2005 Euribor 3 months + 0.07% 5 000 

Obr. CEMG / 02 2.ª Em May 2002 May 2005 Fixed rate of 5% 300 000 

Obr. CEMG / 00 1.ª Em Jul. 2000 Jul. 2005 Euribor 3 months + 0.30% 130 000 

Obr. CEMG / 00 2.ª Em Oct. 2000 Oct. 2005 Euribor 3 months + 0.325% 200 000 

635 000 

The debt securities with reimbursement date during 2006 amount to Euros 750 000 000. 

15. Other liabilities 




Suppliers 5 046 2 958 

Other creditors 30 945 8 540 


Other liabilities 192 881 25 779 

236 406 44 517 

The balance Other creditors includes the amount of Euros 2 904 000 (2004: Euros 3 724 000) related 

with recoverable subsidies from the Portuguese Government to be returned to Pelican Mortgages No. 2 

under the mortgage securitisation operation signed during 2003, as mentioned in note 10. 

The balance Other liabilities includes the amount of Euros 140 415 000 (2004: Euros 8 835 000) and 

Euros 39 860 000 (2004: Euros 16 353 000) related with the obligations not covered by the fund and 

additional contributions to be made to the pension fund during 2006 with 2005 book value, respectively, 

as referred in note 39. 

159

160 

16. Accruals and deferred income 




Interest payable 58 827 62 411 

Interest payable of swap operations 9 369 7 432 

Holiday pay and subsidies 13 948 14 156 

Other administrative costs payable 6 341 101 

Deferred income 1 459 1 492 

FValuation changes in investments – 2 921 

Other sundry liabilities 29 272 15 630 

119 216 104 143 

The balance Interest payable includes the amount of Euros 24 650 000 (2004: Euros 27 421 000) 

referred to interest on bonds issued. 

The balance Interest payable of swap operations corresponds to interest rate swap operations, used for 

hedging purposes related to Caixa’s activity. 

The balance Other administrative costs payable includes the amount of Euros 6 001 000 related to the 

2005 employee bonuses estimates. 

The balance Other sundry liabilities includes the amount of Euros 15 883 000 (2004: Euros 8 613 000) 

related with client operations that will be settled in the subsequent period.

17. Provision for liabilities and charges 




General provision for loan losses 79 522 73 255 

Other provisions for liabilities and charges 1 470 1 349 

Provision for general banking risks 3 683 4 265 

84 675 78 869 

The provision for general banking risks includes the amount of Euros 3 473 000 related to subsidies 

claimed to the Portuguese Government not recognised, as referred in note 10. 

The general provision for loan losses, is analysed as follows: 







The general provision for loan losses was charged in accordance with Regulations No. 3/95, of 30 June, 

No. 2/99, of 15 January and No. 8/03, of 30 January of the Bank of Portugal, as referred in the accounting 

policy as described in note 1.5. 

The other provisions for liabilities and charges are analysed as follows: 



Balance on 1 January 1 349 50 



Amounts charged-off (90) (903) 


The provision for general banking risks is analysed as follows: 




Write-back for the year (31) – 

Amounts charged-off (551) – 


161

162 

18. Subordinated debt 




Cash bonds 9 976 29 928 

Bonds with fixed maturity date 150 000 150 000 

Perpetual bonds 150 000 150 000 

309 976 329 928 

As at 31 December, 2005, the subordinated debt issues, are analysed as follows: 

Issue Reimbursement Interest Number 2005 

Issue date date rate of bonds Euros '000 

Cash bonds: 

CEMG / 96 Dec. 1996 Dec. 2006 Euribor 6 months + 0.20% 4 987 978 972 9 976 

Bonds with fixed 

maturity date: 

CEMG / 03 1. a Em. Feb. 2003 Feb. 2013 Euribor 3 months + 1.3% 10 000 100 000 

CEMG / 03 2. a Em. May 2003 Feb. 2013 Euribor 3 months + 1.3% 5 000 50 000 

150 000 

Perpetual bonds: 

CEMG / 99 May 1999 Undetermined Euribor 3 months + 1.1% 1 000 000 50 000 

CEMG / 01 Jul. 2001 Undetermined Euribor 3 months + 1.1% 2 000 000 100 000 

150 000 

309 976 

The CEMG/95 and CEMG/96 cash bonds have a maximum maturity of 10 years. However, they are 

redeemable over the last five years by reduction of 20% of their nominal value each year. 

At the end of the seventh year of the CEMG/99 and CEMG/01 perpetual bonds and subsequently at 

each interest payment date, Caixa can reimburse the bonds in full at par, after authorisation of the Bank 

of Portugal. If the bonds are not reimbursed during that period the interest rate spread will be increased 

to 210 basis points. These issues are listed at Euronext. 

The CEMG/03 subordinated bonds have an anticipated reimbursement option in 2008. 

As at 31 December, 2005, the effective interest rate range of the subordinated debt which bear postponed 

interest every three or six months is set between 2.88% and 3.75%.

The balance Subordinated debt, analysed by the period to maturity, is as follows: 



Up to 1 year 9 976 9 976 

1 to 5 years – 19 952 


309 976 329 928 

The charges incurred and paid with subordinated debt, are analysed as follows: 



Charges incurred 10 632 10 996 

Charges paid 10 681 11 112 

The reimbursements occurred during 2005, are analysed as follows: 

Issue Reimbursement Interest Number of Reimbursement 

Issue date date Rate bonds Amount 

CEMG/95 Jan. 1995 Jan. 2005 Euribor 6 months + 0.25% 3 990 383 174 9 976 

CEMG/96 Dec. 1996 Dec. 2006 Euribor 6 months + 0.20% 4 987 978 972 9 976 

19 952 

19. Share capital 

On 30 March, 2005, following the General Assembly deliberation, Caixa increased the share capital in 

the amount of Euros 40 000 000, by cash transfer. 

After the referred operation, the share capital of Caixa amounts to Euros 485 000 000, totally subscribed 

by Montepio Geral – Associação Mutualista. 

20. General and special reserve 

The general and special reserves are charged under the scope of Decree-Law No. 136/79, of 18 May. 

The general reserve is charged to cover any risk and extraordinary losses or depreciation. 

Under the Portuguese regulations, the general reserve should be charged, at least, in a minimum of 

20% of the net income for the year. The limit of general reserve is 25% of total deposits. This reserve 

is not available for distribution and can be used to improve future income performances or to increase 

capital. 

The special reserve is charged to cover losses from current operations. Under the Portuguese regulations, 

the special reserve should be charged, at least, in a minimum of 5% of the net income for the 

year. This reserve is not available for distribution and it can be used to improve income performances or 

to increase capital. 

163

164 

21. Reserves and retained earnings 




General reserve 122 136 115 527 

Special reserve 52 306 50 654 

Revaluation reserve 8 404 8 404 

Retained earnings (22 387) – 

160 459 174 585 

The revaluation reserve results from fixed assets revaluation, in accordance with current legislation. This 

revaluation reserve is annulled by use or sale of the revaluated assets. 

On 30 March, 2005, following the General Assembly deliberation, Caixa paid dividends to Montepio 

Geral – Associação Mutualista in the amount of Euros 24 782 000 (2004: Euros 16 119 000). 

As referred in the accounting policy described in note 1.14, as at 31 December, 2005, following the formal 

authorisation from the Bank of Portugal, Caixa early adopted Regulations No. 4/2005 and No. 

12/2005, originating an increase in the pension liabilities in the amount of Euros 117 449 000. This 

amount will be amortised against retained earnings in five or seven years period, as referred in note 11. 

22. Interest income 

The amount of this account is comprised of: 



Interest on loans and advances 467 566 441 052 

Interest on swap operations 82 290 76 818 

Interest on other assets 26 504 31 691 

Interest on deposits 3 022 3 285 

Interest on investment securities 14 666 5 839 

Interest on trading securities – 597 

Interest on securities held to maturity 1 278 – 

595 326 559 282

23. Interest expense 





Interest on securities issued 112 966 93 305 

Interest on swap operations 61 967 54 696 

Interest on other funding 23 275 26 746 

328 376 312 119 

24. Provision for loan losses 

The provision for loan losses, net of the amounts recovered, is analysed as follows: 

Charge for 


Write-back Net 

the year for the year charge 


Specific provision for credit risk 181 608 (101 919) 79 689 

General provision for loan losses 11 970 (5 703) 6 267 

193 578 (107 622) 85 956 

Charge for 

2004 


the year for the year charge 


Specific provision for credit risk 164 403 (99 313) 65 090 

General provision for loan losses 10 547 (7 552) 2 995 

174 950 (106 865) 68 085 

25. Income from securities 

The balance Income from securities in the amount of Euros 3 013 000 (2004: Euros 1 033 000) related 

to income from investments in associated companies. 

165

166 

26. Commissions 


Commission income: 



From banking services 41 057 43 658 

From guarantees granted 4 488 4 558 

From securities operations 793 879 

From commitments to third parties 3 8 

From other services 21 087 11 539 

67 428 60 642 

Commission expenses: 

In banking services 7 234 6 330 

In securities operations 241 439 


9 414 8 644 

Net commission income 58 014 51 998 

27. Gains and losses arising from trading activity 


Gains arising from trading activities: 



Foreign exchange activity 6 896 12 925 

Trading activity 345 8 266 

Losses arising from trading activities: 

7 241 21 191 


Trading activity 378 10 436 

Option 79 – 

5 129 24 874 

Net gains/losses from trading activity 2 112 (3 683)

28. Other operating income 


Other operating profits: 



Income from services 7 307 6 382 

Reimbursement of expenses 5 268 4 050 

Profits arising from deposits on demand management 3 760 3 698 

Recovey of overdue loans and interests 985 499 

Profits arising from loans settlement 108 154 

Other operating income 1 237 1 088 

18 665 15 871 

Extraordinary gains: 

Gains on sale of investments arising from recovered loans 4 138 3 294 

Gains on sale of fixed assets 44 3 

Gains on sale of investments 3 420 2 

Other extraordinary gains 1 390 324 

8 992 3 623 

27 657 19 494 

As at 31 December, 2005, the caption Gains on sale of investments corresponds to the gains from the 

liquidation of Montepio Geral – Cayman. 

29. Staff costs 




Remunerations 94 684 93 049 

Mandatory social security charges 31 730 32 174 

Optional social security charges 1 212 1 326 

Other staff costs 64 143 

127 690 126 692 

As at 31 December, 2005, the remunerations attributable to the Management and Audit Committee 

registered in the balance Remunerations amounts to Euros 1 061 000 (2004: Euros 2 265 000). 

167

168 

The average number of employees by professional category at service in Caixa during 2005 and 2004, 



Management 115 111 

Managerial staff 656 623 

Technical staff 276 262 

Specific categories 236 261 

Administrative 1 545 1574 

Staff 94 96 

30. Other administrative costs 


2 922 2 927 



Rents 19 579 18 303 

Specialised services 14 031 10 070 

Advertising 10 591 7 819 

Communications 6 975 7 697 

Water, energy and fuel 3 409 3 169 

Outsourcing 3 590 2 901 

Maintenance and related services 2 814 2 620 

Representation costs 1 340 1 856 

Insurance 1 920 1 614 

Consumption material 1 083 1 273 

Training costs 1 359 1 159 

Other supplies and services 5 584 5 479 

72 275 63 960

31. Other provisions 

Other provisions, net of amounts recovered, is analysed as follows: 

Charge for 



the year for the year Charge 


Securities 1 358 (1 373) (15) 

Country risk 937 (220) 717 

Other debtors 8 624 (2 677) 5 947 

Liabilities and charges 1 193 (982) 211 

Provision for general banking risks – (31) (31) 

12 112 (5 283) 6 829 

Charge for 

2004 


the year for the year Charge 


Securities 1 581 (2 850) (1 269) 

Country risk 196 (138) 58 

Other debtors 3 354 (1 089) 2 265 

Liabilities and charges 2 297 (95) 2 202 

7 428 (4 172) 3 256 

32. Other expenses 


Other operating expenses: 



Credit operations expenses 1 805 590 

Quotations and donations 264 415 

Investment costs available for sale 2 136 914 

Other operating expenses 827 757 

5 032 2 676 

Extraordinary losses: 

Depreciation of actuarial gains and losses – 1 036 

Depreciation of disability decreases 678 678 

Losses on sale of investments arising from recovered loans 1 788 1 464 

Losses on sale of fixed assets 78 – 

Other extraordinary losses 816 1 819 

3 360 4 997 

8 392 7 673 

169

170 

33. Income taxes 






These balances are analysed as follows: 



Guarantees granted 281 027 275 249 

Guarantees received 2 224 651 2 266 722 

Commitments to third parties 1 318 348 1 182 831 


Spot foreign exchange contracts: 

Purchased 823 476 

Sold 823 475 

Forward foreign exchange contracts: 

Purchased 216 186 169 512 

Sold 216 150 169 506 

Currency swap operations 97 320 101 710 

Interest rate swap operations 5 530 315 5 255 763 

Options 12 000 – 

Securitised loans 973 068 1 131 544 

Loans charged-off 214 706 176 381 

Interests and expenses related to credit annulled 27 624 31 797 

Amounts received on deposit 4 556 235 4 267 236 

Assets received on guarantee 29 152 270 26 817 939 

Outsanding rents 15 128 14 511 

Residual values 736 744 

The financial instruments are recorded at the balance sheet when they become payable. The financial 

instruments recorded at the off – balance sheet accounts are subject to the same control and approval 

procedures required for the loan portfolio. The management does not anticipate any material losses as 

a result of these transactions. 

Caixa manages the trading and hedging financial instruments on the basis of maturity period categories, 

as presented below: 

Hedging operations: 

More than 

1 year 

Euros '000 

Currency swap 97 320 

Interest rate swap 5 530 315 

Options 12 000 

5 639 635

35. Amounts owed by Caixa to associated companies 

As at 31 December, 2005 the Amounts owed by Caixa to associated companies, represented or not by 

securities, included in the balances Amounts owed to credit institutions, Amounts owed to customers 

and Subordinated debt, are analysed as follows: 

Amounts owed Amounts 

to credit owed to Subordinated 

Company institutions customers Debt Total 


Lusitania – Companhia de Seguros, S.A. – 20 818 1 499 22 317 

Lusitania Vida – Companhia de Seguros, S.A. – 17 795 2 048 19 843 

HTA – Hotéis, Turismo e Animação dos Açores, S.A. – 2 556 – 2 556 

Caixa Económica de Cabo Verde 3 615 – – 3 615 

SIBS – Sociedade Interbancária de Serviços, S.A. – 355 – 355 

MG Gestão de Activos Financeiros – S.G.F.I.M., S.A. – 46 385 – 46 385 

Futuro – Soc. Gestora de Fundo de Pensões, S.A. – 50 811 100 50 911 

Banco da África Ocidental 253 – – 253 

Norfin – Soc. Gestora de FIM, S.A. – 11 082 – 11 082 

Credint – Consultoria Financeira e Creditícia, S.A. – 153 – 153 

Bolsimo – Gest. Imob., Lda. – 58 – 58 

3 868 150 013 3 647 157 528 

36. Amounts owed by associated companies to Caixa 

As at 31 December, 2005, the Amounts owed by associated companies to Caixa, represented or not by 

securities, included in the balance Loans and advances to customers, are analysed as follows: 

Loans and 

advances 

to customers 

Euros '000 

HTA – Hotéis, Turismo e Animação dos Açores, S.A. 20 600 

Unicre – Cartão Internacional de Crédito, S.A. 830 

Futuro – Sociedade Gestora de Fundo de Pensões, S.A. 274 

Credint – Consultoria Financeira e Creditícia, S.A. 660 

23 364 

37. Amounts owed by Caixa to subsidiary companies 

As at 31 December, 2005 the Amounts owed by Caixa to subsidiary companies, represented or not by 

securities, included in the balance Amounts owed to credit institutions, are analysed as follows: 

Amounts 

owed to credit 

institutions 

Euros '000 

Banco MG – Cabo Verde, Sociedade Unipessoal, S.A. (IFI) 226 880 

171

172 

38. Related party transactions 

The significant transactions and balances with the Group companies are detailed in the corresponding 

notes. 

39. Pensions 

Caixa assumed the responsibility to pay to their employees pensions on retirement or disabilities, as 

established in the terms of «Acordo Colectivo de Trabalho Vertical do Sector Bancário (ACTV)». To cover 

its responsibilities, Caixa makes annual contributions to the pension fund, managed by Futuro – Sociedade 

Gestora de Fundos de Pensões, S.A. 

As at 31 December, 2005 and 2004, the number of participants covered by this pension plan is analysed 

as follows: 

Number of participants 


Pensioners 451 426 

Employees 2 938 2 952 

3 389 3 378 

In accordance with the accounting policy, described in note 1.14, the pension obligation and the respective 

funding for Caixa as at 31 December, 2005 and 2004 based on an actuarial valuation made using 

the projected unit credit method, are analysed as follows: 

Projected benefit obligations 



Pensioners 115 393 91 920 

Employees 352 743 188 233 

468 136 280 153 

Fair value of the plan assets (327 721) (259 798) 

Unfunded liabilities 140 415 20 355 

Disability decreases – (11 520) 

Liabilities exempt from financing (140 415) (8 835) 

– – 

Liabilities from future services 355 026 173 310 

As at 31 December, 2005 there are no buildings in use or securities issued by Caixa recorded in the 

Pension Fund’s Financial Statements.

During 2004 and 2005, the change in the present value of obligations based on an actuarial valuation 

made using the project credit method is analysed as follows: 



Balance on 31 December 

Adjustment related to Regulations No. 6/05 and 

20 355 – 

No.12/05 (see note 1.14) 72 599 – 


Service cost 14 206 19 728 

Interest cost 18 639 13 148 

Expected return on plan assets 

Actuarial gains and losses 

(12 675) (12 406) 

Current 

Arising from changes in actuarial assumptions 

(6 829) 3 672 

Changes in assumptions 15 437 11 795 

Changes in discount rates 38 107 – 

Changes in mortality tables 43 585 – 

Contributions to the fund (62 198) (36 813) 

Fund expenses (811) 1 274 


The change in the fair value of assets of the Fund during 2005 is analysed as follows: 

Fair value of 

assets 

Euros '000 


Expected return on plan assets 12 675 

Actuarial gains or losses 1 124 

Contributions to the fund 61 073 

Payments (8 074) 

Contributions of employees 1 125 


The contributions to the fund include the additional contribution in the amount of Euros 39 860 000 

made by Caixa during January 2006 with value date of 2005. The pension fund contributions in 2005 

were fully paid in cash. 

The securities issued by companies of Caixa accounted on the portfolio of the Fund are analysed as follows: 




173

174 

As at 31 December, 2005 deferred actuarial losses, including the corridor, are analysed as follows: 

Actuarial losses 

Amount in 

excess of the 

Corridor Corridor 


Balance on 31 December 2004 

Adjustment related to Regulations No. 6/05 and 

26 336 21 114 

No.12/05 (see note 1.14) (3 430) (21 114) 

Balance on 1 January 2005 22 906 – 

Actuarial gains or losses: 

Current 


– (6 829) 

Changes in assumptions – 15 437 

Changes in discount rates – 38 107 

Changes in mortality tables – 43 585 

Variation in the corridor 64 786 (64 786) 

Balance on 31 December 2005 87 692 25 514 

As at 31 December, 2005, the value of the Fund calculated in accordance with the No. 2 of Regulation 

No. 4/05 from Bank of Portugal, amounts to Euros 87 692 000 (2004: Euros 26 336 000) and is 

accounted at the balance Prepayments and accrued income, as referred in note 11. 

As at 31 December, 2005, the net actuarial gains and losses in excess of corridor amounted to Euros 

25 514 000 and will be amortised against staff cost over a 25 years period considering the balance at 

beginning of the year, as referred in the accounting policy presented in note 1.14. 

In 2005, Caixa accounted as pension costs the amount of Euros 20 170 000 (2004: Euros 22 183 000). 

The pension costs incurred are analysed as follows: 





Expected return on plan assets (12 675) (12 406) 

Amortisation of actuarial gains and losses – 1 036 

Amortisation of disability decreases – 677 

Cost of the year 20 170 22 183

Considering market indicators, particularly the estimation of the inflation and the long term interest 

rate for Euro Zone as well as the demographic characteristics of the participations, Caixa changed the 

actuarial assumptions used for the calculation of the liabilities for the pension obligations with reference 

to 31 December, 2005. The comparative analysis of the actuarial assumptions is shown as follows: 


Increase in future compensation levels 3.00% 2.50% 

Pensions increase rate 2.00% 2.00% 

Projected rate of return of fund assets 4.75% 5.25% 

Discount rate 4.75% 5.25% 

Mortality table TV 88/90 TV 73/77 

Disability table SOA Trans Male SOA Trans Male 

The effect of the change in the discount rate and the mortality tables occurred in 2005, increased the 

liabilities of the Caixa in the amount of Euros 38 107 000 and Euros 43 585 000, respectively, values 

which are going to be amortised in 25 years in accordance with the accounting policy presented in note 

1.14. 

No disability retirements are considered in the calculation of total liabilities. 

175

176 

8.17. STATUTORY AUDIT OPINION AND AUDITORS’ REPORT 

I Introduction 

1. In accordance with the applicable legislation, we present our Statutory Audit Opinion and Audit 

Report on the financial information included in the Annual Report of the Board of Directors and in 

the accompanying financial statements for the year ended 31 December, 2005, of Caixa Económica 

Montepio Geral, which comprise the Balance Sheet as at 31 December, 2005 (showing total assets of 

13 967 187 thousands of Euros and shareholders’ equity of 690 771 thousands of Euros, including 

a profit for the year of 45 312 thousands of Euros), the Statements of Income, the Statement of 

Cash Flows and Statement of Changes in Shareholders’ Equity for the year then ended and the 

corresponding Notes. 

2. Financial statements and financial information are the same than account registered. 

Responsibilities 

3. It is the responsibility of the Board of Directors: 

a) preparing financial statements that present truly and fairly the financial position of the Caixa, the 

results of its operations and its cash flows, in accordance with general accepted accounting principles 

in Portugal for banking sector; 

b) maintaining historical financial information, prepared in accordance with the generally accepted 

accounting principles and that is complete, true, timely, clear, objective and lawful as required by 

the Stock Exchange Code («Código dos Valores Mobiliários»); 

c) adopting adequate accounting criteria and policies; 

d) maintaining an appropriate system of internal control; 

e) providing information of any relevant fact influencing the business of the Caixa, its financial situation 

or results; and 

4. It is our responsibility to verify the financial information included in the above referred documents, 

namely as to whether it is complete, true, timely, clear, objective and lawful as required by the Stock 

Exchange Code («Código dos Valores Mobiliários»), and to issue a professional and independent 

report based on our audit. 

Scope 

5. Our audit was performed in accordance with the Rules and Technical Recommendations of the Portuguese 

Institute of Chartered Accountants («Ordem dos Revisores Oficiais de Contas»), which 

require that we plan and perform the audit to obtain a reasonable degree of assurance as to whether 

or not the financial statements are free of material misstatements. Accordingly our audit included: 

– verification, based on sampling, of the documents underlying the figures anddisclosures contained 

on the financial statements and an appraisal of estimates, basedon judgements and criteria defined 

by the Board of Directors, used in their preparation; 

– assessment of the appropriateness of the accounting policies used and of theirdisclosure, taking 

into account the circumstances; 

– verification of the applicability of the going concern principle;

– assessment of the appropriateness of the overall presentation of the financial statements; and 

– assessment of whether the financial information, is complete, true, timely, clear,objective and lawful. 

6. Our review also included the verification that the financial information contained in the Annual 

Report of the Board of Directors is consistent with the financial statements presented. 

7. We believe that our audit provides a reasonable basis for the expression of our opinion. 

Opinion 

8. In our opinion, the above mentioned financial statements present fairly in all material respects the 

financial position of Caixa Económica Montepio Geral as at 31 December, 2005, the results of its 

operations and cash flows for the year then ended in accordance with the generally accepted 

accounting principles in Portugal for the banking sector, and the information contained therein is 

complete, true, timely, clear, objective and lawful. 




Vítor Manuel da Cunha Ribeirinho 

(Statutory Auditor No. 1081) 

177

178 

8.18. INSTITUTION GOVERNANCE REPORT 

In accordance with the stipulations of the Regulations of CMVM no.7/2001 (altered by Regulation 

nos.11/2003 and 10/2005) concurrently with the recent alterations to the CMVM Recommendations 

on Corporate Governance, the present report was drawn up with a description of those aspects deemed 

to be relevant vis-à-vis the degree of adaptation of the aforementioned recommendations and pursuant 

to the specific nature of its legal status. 

Caixa Económica Montepio Geral (CEMG), in its pursuance of a strategy aimed at achieving a permanent 

improvement in the quality of the services provided, has been complying with the general CMVM 

guidelines and the duty to provide information which it duly complied with voluntarily, to wit as regards 

the progress of the disclosure of information to the market, to clients and to the general public, using 

appropriate new technologies with a view to improving the visibility, quality and profitability of activity. 

CHAPTER I 

1. Disclosure of information 

1.1. Bodies and Division of Duties 

The Articles of Association of the Caixa Económica Montepio Geral (CEMG) sets out the following institutional 

bodies: the General Meeting, the Board of Directors, the Internal Audit Board and the General 

Board. 

General Meeting 

The General Meeting is formed by the permanent members of Montepio Geral – Associação Mutualista 

employed over 2 years ago. The General Meeting Board is made up by a Chairman and two Secretaries, 

with the Chairman being replaced in his absence or if he is unable to attend, the 1st Secretary and, in 

the absence of the latter or if he is unable to attend, by the 2nd Secretary. 

The main duties of the General Meeting are: 

• To elect or remove the incumbents of the Bodies; 

• To make a decision on the Board of Directors (BD) management report, accounts for the financial 

year and opinion of the Internal Audit Board and also appreciate the General Board report; 

• To make a decision on the action programme and budget submitted by the BD and on the opinion 

of the Internal Audit Board; 

• To make a decision on the distribution of results; 

• To authorise the formation of unforeseen equity, specifically in the Articles of Association and the 

increase in any funds when this does not fall within the duties of the Board of Directors; 

• To make a decision on the alteration to the Articles of Association; 

• To elect a committee every three years and duly empower it to stipulate the earnings of the incumbents 

of the Bodies. 

In 2005 the General Meeting met twice in an ordinary session and once in an extraordinary session.

General Meetings are convened with a minimum of fifteen days notice and the following elements are 

mandatory by law or regulation: 

• the convening, according to legal and statutory obligations, is published in the media; furthermore, 

it is indicated on the Montepio Geral webpage (www.montepiogeral.pt). On the occasion 

of rendering of annual accounts it is also published on the CMVM site; 

• the documents itemised in the agenda of the convening for consultation by members and also 

sent to CMVM in the matter of the rendering of annual accounts. 

The General Meeting may not meet on the first convening date unless at least half of members are present. 

Upon the second convening the General Meeting may make a decision with any number of members. 

Decisions about the reformation of or alteration to the Articles of Association, merger, split, transformation 

and incorporation of or into the Caixa Económica, requires the presence of at least two thirds of 

all its members upon the first convening and may be held with any number of members upon second 

convening, in which case the Meeting shall take place within twenty days but never in less than fifteen. 

Board of Directors 

The CEMG is managed by the Board of Directors which is made up of five members (a Chairman and 

four Members). The Articles of Association foresee that the number of Members be altered by a qualified 

majority of two thirds of the General Meeting at the proposal of the Board of Directors and the 

opinion of the General Board. 

It is incumbent upon the Board of Directors to exercise the administration of CEMG and to wit: 

• To make a decision on the increase in institutional capital and on the issuing of securities representing 

the units of the participation fund; 

• To make a decision on the acquisition, disposal and encumbrance of real estate; 

• To make a decision on the opening and closure of branches and of any other form of representation; 

• To draft the annual report and the proposed distribution of results as well as the action programme 

and budget for the following year. 

Internal Audit Board 

The Internal Audit Board is made up of a Chairman and two Members, one of whom should be a Chartered 

Accountant. It meets at least once a month and may only make decisions provided that the majority 

of its incumbents are present and the Chairman has the casting vote. 

The main duties of the Internal Audit Board are as follows: 

• To supervise the administration of the Institution; 

• To see to compliance with the Law and the Articles of Association; 

• To verify the correctness of the books, accounting records and supporting documents; 

• To draft, every year, a report on its action and provide an opinion thereupon as well as on the 

accounts, the proposals, the budget and the action programme submitted by the Board of Directors. 

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180 

General Board 

The General Board is made up of the members of the General Meeting Board, the Board of Directors, 

the Internal Audit Board and the members elected from the members of the General Meeting. It is 

incumbent upon the General Board to see to the strategic guidance of the CEMG and, upon the proposal 

of the Board of Directors, to approve the general guidelines of multi-annual action plans and 

updates thereunto. 

It also falls to said Board: to make a decision on the geographic localisation policy; on the report of 

undertakings to be submitted by the Board of Directors and to provide an opinion on such subject 

matter as any of the Bodies may submit to its appreciation. 

Every year it drafts a report on its activity which is submitted to the appreciation of the General Meeting. 

1.2. Functional Organigram of the CEMG 

Further to the process to alter its organic structure which occurred in 2004, a new readjustment was 

made in 2005, endowing the Institution with a set of units differentiated by the type of activity they 

undertake and with a view to providing instruments which are consistent with requirements on both the 

banking market and in other business areas. 

These units bring together first-line bodies, Departments and Management Entities which operate in 

decentralised fashion when taking decisions through the various hierarchical levels whose assignment of 

duties and responsibilities is incumbent upon the Board of Directors. 

Financial and 

International 

Management 

Greater Oporto 

Commercial 

Management 

General Secretariat 

Studies 

and Planning 

Management 

Risk Analysis 

and 

Management 

Marketing and 

New Channels’ 

Management 

North 

Commercial 

Management 

Computing and 

Organisation 

Management 

Centre 

Commercial 

Management 

Legal and Credit 

Recovery 

Management 

BOARD OF 

DIRECTORS 

Lisbon and 

Autonomous 

Regions 

Commercial 

Management 

Human 

Resources 

Management 

Real Estate 

and Premises 

Management 

Greater Lisbon 

Commercial 

Management 

Institutional 

Public Relations 

Office 

ADVICE 

Auditing and 

Inspection 

Management 

Operations and 

Logistic 

Management 

South 

Commercial 

Management 

Accounts 

Department 

Companies 

Commercial 

Management 

Under this reorganisation worthy of special mention is the implementation of a new commercial structure; 

the integration of services and the creation of new organic units.

In this context the Posts assigned to the members of the Board of Directors were redistributed as follows: 

José da Silva Lopes 

General Secretariat, the Studies and Planning Management, the Auditing and Inspection Management, 

the Risk and Analysis Management, the Institutional Public Relations Office, Undertakings of the financial, 

insurance and pension funds areas. 


Associação Mutualista Management, Accounts Department, Undertakings in Africa. 


Human Resources Management, Operations and Logistic Management, Undertakings in the insurance 

areas and others. 


Commercial Management – Company Network, except for micro-companies and companies in the 

construction sector, Financial and International Management, Computing and Organisation Management, 

Real Estate and Premises Management and Undertakings in the financial and pension fund areas. 


Commercial Management – Private Individual Network, micro-companies and companies in the construction 

sector, Legal and Credit Recovery Management and the Marketing and New Channels Management. 

2. Risk Management and Control 

During the course of its duties the Board of Directors is responsible for strategy and for the policies to 

be adopted by the Institution vis-à-vis risk management and it is advised in this regard by the Risk and 

Analysis Management which periodically drafts reports from a consolidated perspective (companies from 

the Montepio Geral Group) on the evaluation of the effectiveness of the management of various types 

of risk. 

3 Departments directly answerable to this Management body were established based on well-defined 

duties and in interconnection with the remaining entities and bodies concerned. 

Credit 

Risk 

Department 

RISK AND ANALYSIS MANAGEMENT 

RISK 

AND ANALYSIS 

MANAGEMENT 

Market 

Risks 

Department 

Operational 

Risk 

Department 

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182 

The principles, methodologies and instruments adopted by the CEMG vis-à-vis risk management have 

been described in detail in a specific chapter of the Management Report and are deemed to form an 

integral part of this report. 

3. Institutional Capital and the Distribution of Results 

The institutional capital of the CEMG is permanent and does not give rise to the payment of interest or 

dividends pursuant to the stipulations of article 7 of its Articles of Association. 

On December 31st 2005 institutional capital stood at 485 million euros which was fully paid up. 

As CEMG is an institution which is attached to Montepio Geral – Associação Mutualista the results of its 

financial years – after making the deductions foreseen in the Articles of Association – are placed at the 

disposal of its founder, Montepio Geral -–Associação Mutualista. 

4. Annual Remuneration paid to the Auditor 

During the financial year of 2005 the fees for the Auditing services provided by KPMG & Associados – SROC, 

S.A. stood at 178,9 thousands of euros. 

CHAPTER II 

Statutory Rules on the exercising of voting rights 

Under the terms of the Articles of Association, to take part in the General Meeting members should 

have been admitted more than 2 years ago and should have full rights. Each member is entitled to one 

vote. 

The form of voting used is usually public. 

The election of Governing and Institutional Bodies is carried out by direct, secret ballot or by correspondence 

in accordance with the conditions set out in the Articles of Association. 

There is still no system in place to allow votes to be made electronically, though studies are planned in 

the near future to analyse this possibility. 

CHAPTER III 

Institutional Rules 

1. Internal Regulations 

CEMG complies with those rules of conduct specifically relating to its activity, to wit those set out in the 

General Regime on Credit Institutions and Financial Companies, the Stock Code and the stipulations of 

the Code of Conduct drawn up by the Portuguese Bank Association. 

The activities carried on by the CEMG are subject to given internal control procedures and rules, to wit 

in terms of clashes of interest, confidentiality and incompatibilities. 

The fundamental rules of the internal control system are set out in the Internal Norms which defines a 

set of directives of mandatory compliance disclosed to Institution employees and workers. 

At the internal Portal, Intranet, employees are informed of the organic structure of the Institution, its 

organisation and operation, as well as the internal regulations vis-à-vis the financial intermediation acti-

vity of CEMG which institutes basic procedures and standards including the ethical rules to be observed 

in the activity pursued by the Institution as a financial intermediary. 

2. Internal risk control procedures in CEMG activity 

Depending on the nature and relevance of the risk, plans, programmes or actions are drawn up, supported 

by information systems, defining procedures which afford a high degree of reliability vis-à-vis 

risk management measures defined in due time. 

Appropriate policies and procedures are set out in the control activities, supported by several organic 

units and monitoring, on a continuous basis, is the responsibility of the Risk and Analysis Management. 

The main purpose of the Auditing and Inspection Management is to support the management of the 

design, implementation and monitoring of an internal control system which is suitable for the pursuit of 

the efficiency and effectiveness objectives set in accordance with prevailing legislation and with the standards 

and criteria defined. 

CHAPTER IV 

The Board 

1. Characterisation of the Board of Directors 

The Board of Directors, made up of independent members, is made up of a Chairman and four Members, 

with a mandate of three years and all of whom may be re-elected 

The Board of Directors operates on a collegial basis and may make decision as long as the majority of its 

incumbents are present. As a rule it meets twice a week and decisions are made by a majority of the 

votes made by its members with the Chairman having the casting vote. 

The Board of Directors is made up as follows: 

Chairman: José da Silva Lopes 

Members: Alberto José dos Santos Ramalheira 




2. Duties exercised in undertakings 

As at December 31st 2005 several members of the Board of Directors were also members of boards in 

undertakings (companies in which interests are held): 

Chaiman: José da Silva Lopes 

Chairman of the Board of Directors of Lusitania, Companhia de Seguros, S.A. 

Chairman of the Board of Directors of Lusitania Vida, Companhia de Seguros, S.A. 

Chairman of the Board of Directors of Futuro – Soc. Gestora de Fundos e Pensões, S.A. 

Chairman of the General Meeting Board of Caixa Económica de Cabo Verde, S.A. (CECV) 

Member of the Board of Directors of MG Gestão de Activos Financeiros – SGFIM, S.A. 

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184 

Member: Alberto José dos Santos Ramalheira 

Chairman of the Board of Directors of Caixa Económica de Cabo Verde, S.A. (CECV) 

Vice-Chairman of Moçambique, Companhia de Seguros, SARL (MCS) 

Member of the Board of Directors of Banco de Desenvolvimento e Comércio, SARL (BDC) in Mozambique 

Member: Ludovico Morgado Cândido 

Chairman of the Management Board of Leacock, Corretora de Seguros, Lda. 

Member of the Board of Directors of SAGIES, Soc. de Análise e Gestão de Instalações e Equipamentos 

Sociais, S.A. 

Member of the Board of Directors of Clínica de Santa Maria de Belém, S.A. 

Member of the Board of Directors of SIBS 

Member of the Board of Directors of HTA – Hotéis,Turismo e Animação dos Açores, S.A. 

Member of the Board of Directors of Norfin – Sociedade Gestora de Fundos de Investimento Imobiliários, 

S.A. 

Member: José de Almeida Serra 

Chairman of the Board of Directors of MG Investimentos Imobiliários, S.A. 

Chairman of the Management Board of Bolsimo - Gestão imobiliária, Lda. 

Chairman of the Board of Directors of Banco Montepio Geral – Cabo Verde, Sociedade Unipessoal, 

S.A. (IFI) 

Member of the Board of Directors of MG Gestão de Activos Financeiros – SGFIM, S.A. 

Member of the Board of Directors of Futuro – Soc. Gestora de Fundos e Pensões, S.A. 

3. Remuneration of the Board 

In the financial year ending on December 31st 2005 the total amount of remunerations earned by all of 

the members of the Board stood at 1 718,6 thousands of euros.

9. CAIXA ECONÓMICA MONTEPIO GERAL – CONSOLIDATED 

9.1. INTRODUCTION 

The Management Report corresponding to the individual activity of the CEMG sets out a detailed 

description of relevant aspects relating to the progress of the various businesses carried on by MG Group 

entities, so for any such information said report should be consulted. The present report refers to the 

main aspects related with the consolidation of accounts and with the transition to International 

Accounting Standards (IAS/«NIC»). 

Consolidation Perimeter 

The consolidation perimeter, defined in accordance with the rules laid down to this end, includes the following 

entities: 

1. Consolidated by the integral consolidation method: 

– CEMG 

– MG Cabo Verde 

– Credit securitisation vehicles («Pelican Mortgages No.1» and «Pelican Mortgages No. 2»); these 

entities, through which securitisation operations were carried out, are included in consolidation as 

it is possible to deduce that CEMG exercises, pursuant to the criteria defined by NIC, control over 

their activities. 

2. Consolidated by the equity method - associate companies are consolidated in this way in which the 

CEMG has a long-lasting interest but not a controlling one. The following undertakings are in this 

situation: 

– Lusitania, Companhia de Seguros S.A. (*) 

– Lusitania Vida, Companhia de Seguros S.A. (*) 

– HTA – Hotéis, Turismo e Animação dos Açores, S.A. 

– Norfin – Soc. Gestora de Fundos de Investimentos Imobiliários, S.A. 

During 2005 the consolidation perimeter underwent an alteration with the closure of MG Cayman and 

the opening of MG Cabo Verde in November 2005. 

Recalculation of the Consolidated Financial Statements as at December 31st 2004 

The CEMG has consolidated accounts for the first time in 2005 and so for the sake of comparison consolidated 

accounts have also been provided for 2004, calculated in accordance with the standard which 

was previously in force, the PCSB – «Plano de Contas para o Sistema Bancário» (Instruction 71/96 of the 

Bank of Portugal). In order to make this transition to the new accounting standards, the consolidated 

financial statements for 2004 were adapted by registering in the accounts transition adjustments, culminating 

in the recalculation of results and the Shareholders’ Equity. Transition adjustments were registered 

on two occasions: 

(*) This consolidation only considers the stake of the CEMG in Lusitania (26.2%) and in Lusitania Vida (39.3%). The stake of MG-AM 

in these strategic undertakings (65.7% and 39.2%%, respectively) are not considered in this consolidation perimeter. 

185

186 

– Dec.31st 2004: adjustments related with the registration under Shareholders’ Equity of the impact 

of alterations to the actuarial assumptions and the accounting standards of the Pension Fund as 

well as the registration of the impact of the increase in the value of investments in associates. 

– Jan.1st 2005: in addition to the previous adjustments the other adjustments related with the alteration 

to accounting methods brought about by the IAS were carried out. 

TRANSITION ADJUSTMENTS 

Differential between Individual and Consolidated Results for 2005 

(Thousands of euros)) 

Jan.1st 2005 Dec. 31st 2004 

Shareholders’ Equity Shareholders’ Equity 

Bank of Portugal Standards 653 096 653 096 

IAS Adjustments 

Retirement pensions and other employee benefits (117 499) (117 499) 

Increase in investment value (745) (2 289) 

Credit imparity 4 698 – 

Actual rate (13 693) – 

Effect of consolidation of SPE (*) (2 724) – 

Coverage accounting 1 639 – 

Financial assets or liabilities at fair value 3 610 – 

Total transition adjustments (124 714) (119 788) 

IAS 528 382 533 308 

(*) Credit securitisation vehicles. 

The analysis of the differential in 2005 between the individual Net Results and Shareholders’ Equity (calculated 

in accordance with PCSB rules – Plano de Contas para o Sistema Bancário) and the consolidated 

figures (calculated in accordance with IAS), reveals the limited impact of the consolidation of undertakings 

in view of their relatively small size compared to that of CEMG. 

Adjustments impacting the consolidated accounts for 2005 were carried out on two occasions: 

– on the date of transition to IAS (January 1st 2005) the amounts were calculated vis-à-vis previous 

financial years and entered under Results Carried Forward; 

– upon the closure of the financial year of 2005 conversion adjustments were carried out vis-à-vis 

the impact of IAS on the accounts for 2005 under the relevant items which were entered under 

Results for the Financial Year. 

As from 2006, inclusive, as the transition to IAS is completed, there will be no need to register any further 

adjustments. 

The main aspects to be highlighted when calculating transition/conversion adjustments are as follows: 

– the release of acknowledged amounts in the CEMG individual accounts such as surplus provisions 

for credit risks for the sum of 9 024 thousands of euros in view of the imparity amount calculated 

for the financial year, and a correction of 4 698 thousands of euros to Shareholders’ Equity;

– the correction of the increase in the value of the financial liabilities, to wit Debenture Loans and 

Structured Deposits, which totalled 18 895 thousands of euros, to be accrued to the result, and 

the sum of 21 815 thousands of euros to be deducted from Shareholders’ Equity; 

– the recognition under the equity account of Derivatives such as hedging Swaps associated with 

Debenture Loans and Structured Deposits which meant a 14 591 thousands of euros deduction 

from the results and a 24 341 thousands of euros increase in Shareholders’ Equity; 

– the impacts of the accrual of responsibilities caused by the alteration to actuarial assumptions, the 

accrual to responsibilities relating to the cost defrayed on post-employment medical care (which 

were previously recognised at the time of their payment) and the alteration to accounting methods 

brought about a deduction from Shareholders’ Equity of 95 112 thousands of euros (a deduction 

to be added to the deduction made from individual accounts for 2005 through Results Carried 

Forward for the sum of 22 387 thousands of euros); 

– the deferral of commissions and external costs associated with credit contracts and their impact on 

the actual rate brought about a differential to be deducted from Shareholders’ Equity at the end 

of the year of 13 693 thousands of euros and a difference between individual and consolidated 

results of -1 990 euros. 

IMPACT ON THE RESULTS AND THE SHAREHOLDERS’ EQUITY OF THE CONSOLIDATION 

OF FINANCIAL INTERESTS AND TRANSITION ADJUSTMENTS TO IAS 


Items 

Net Shareholders’ 

Results Equity 

CEMG – Individual Accounsts Dec. 31st 2005 45 312 713 158 

Impact of the Consolidation of Financial Interests 903 -2 345 

Integral Consolidation -108 – 

MG Cabo Verde -108 – 

Equity Method 1 011 -2 345 

Lusitania 738 -2 442 

Lusitania Vida 919 232 

NORFIN 124 172 

HTA Hotéis Turismo A. Açores -230 -307 

Earnings on Financial Interests -540 – 

Impact caused by Transition Adjustments (IAS) 11 528 -123 122 

Portfolio of Securities – IAS Adjustments relating to difference 

between the Marker Value and the Amortised Cost -435 846 

Imparity of the Credit Portfolio 9 024 4 698 

Effective Rate / Standardisation -1 990 -13 693 

Financial Liabilities 18 895 -21 815 

Derivatives -14 591 24 341 

PM Adjustment (Pelican Mortage) / CEMG 625 – 

Pension Fund – -117 499 

Impact of the Consolidation of Financial Interests 

and Transition Adjustments (IAS) on Results – 12 431 

CEMG – Consolidated Accounts Dec. 21 st 2005 57 743 600 122 

N.B.: the value of Shareholders’ Equity shown in the individual accounts does not include Results Carried Forward. 

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188 

Summary of Indicators 

The analysis of the main indicators for the consolidated accounts of CEMG for 2004 and 2005 allows us 

to conclude the following: 

1. SIZE 

– Net Results recorded growth of 65.7% between 2004 and 2005, though the value for 2005 was 

positively influenced by conversion adjustments. 

– the average return on equity (ROE) attained a value of 10.2% in 2005. 

– the solvency ratio stood at 10.68% with Tier 1 of 6.53%. 

9.2. SUMMARY OF GROUP ACTIVITY 


Indicators for the consolidated 2005 2004 

Net Assets 14 671 864 12 261 237 

Variation 19.66% n.a. 

Equity (Capital, Reserves and Results) 600 122 533 308 

2. PROFITABILITY AND EFFICIENCY 

Cash Flow for the Financial Year 151 391 118 952 

Result for the Financial Year 57 743 34 858 

Result for the Financial Year / Mean Net Assets (ROA) 0.43% n.a. 

Result for the Financial Year / Mean Equity (ROE) 10.19% n.a. 

Banking Product / Mean Net Assets 2.58% n.a. 

Staffing Costs / Banking Product 36.90% 41.39% 

Administrative Overheads / Banking Product 56.93% 62.01% 

Amortizations / Banking Product 3.19% 4.27% 

Costo to Income 60.12% 66.28% 

3. CREDIT RISK 

Ratio of Credit Due at over 90 days 2.39% n.a. 

Ratio of Credit in arrears 2.62% n.a. 

4. PRUDENTIAL 

Solvency and Market Ratio 10.68% n.a. 

Ratio of Adaptation of Basic Equity (Tier 1) 6.53% n.a. 

* n.a. = not available 

According to the consolidation perimeter observed, the Montepio Geral Group ended 2005 with consolidated 

net assets of 14 671,9 millions of euros, representing year-on-year growth of 19.7%. 


TREND IN NET ASSETS 




Customer Credit 12 415 395 84.6 10 349 675 84.4 2 065 720 20.0 

Available Funds and Financial Applications 2 008 171 13.7 1 632 622 13.3 375 549 23.0 

Miscellaneous Assets 248 298 1.7 278 940 2.3 -30 642 -11.0 

TOTAL ASSETS 14 671 864 100.0 12 261 237 100.0 2 410 627 19.7

The asset structure did not undergo any major changes, it being observed that the increases entered 

under Credit and Available Funds and Financial Applications for the sum of 2 065,7 millions of euros 

(+20.0%) and of 375,5 millions of euros (+23.0%), respectively, resulted in slight increases in the proportion 

of each item in the asset structure. On December 31st 2005 Customer Credit and Available 

Funds and Financial Applications represented 84.6% (+0.2 b.p.) and 13.7% (+0.4 b.p.) of Total Net 

Assets, respectively. 

Total third-party resources for the sum of 14 066,6 millions of euros recorded growth of 20.0%, increasing 

its proportion of total liabilities, equity and provisions to 95.9% (+0.3 b.p. compared to 2004). 


TREND IN LIABILITIES AND EQUITY 




Client Resources 7 779 526 53.0 7 623 286 62.2 156 240 2.0 

Other CI Resources 

Subordinated and non-Subordinated 

706 601 4.8 689 215 5.6 17 386 2.5 

Bonds and Debt Certificates 5 377 390 36.7 3 254 030 26.5 2 123 360 65.3 

Other Liabilities 203 072 1.4 155 784 1.3 47 288 30.4 

Total Third-Party Resources 14 066 589 95.9 11 722 315 95.6 2 344 274 20.0 

Provisions 5 153 0.0 5 614 0.0 -461 -8.2 

Own Resources 600 122 4.1 533 308 4.4 66 814 12.5 

Total Own Resources and Provisions 605 275 4.1 538 922 4.4 66 353 12.3 

TOTAL LIABILITIES AND OWN 

RESOURCES AND PROVISIONS 14 671 864 100.0 12 261 237 100.0 2 410 627 19.7 

Client Resources continued to represent the lion’s share (53.0%) of Liability and Equity, though having 

lost proportion in the structure to the detriment of Other Credit Institution Resources and Represented 

by Securities whose position at the end of 2005 stood at 36.7% (+10.2 b.p. compared with year-end 

2004) and of Other Liabilities which made up only 1.4% (+0.1 b.p. on last year’s figure). 

Other Credit Institution Resources for the sum of 706,6 millions of euros registered growth of 2.5%, 

seeing its proportion of total Liabilities and Equity falling from 5.6% in 2004 to 4.8% in 2005. 

Own Resources and Provisions stood at 605,3 millions of euros (+12.3% on 2004), representing 4.1% 

of Liabilities and Equity (-0.3 b.p. compared to 2004). 

Client Resources 

2005 was characterised by the growing evolution in resource attraction activity with Total Client 

Resources featured on the Balance Sheet having attained 7 779,5 millions of euros after an increase of 

156,2 millions of euros (+2.0%). 

Time Deposits are the main component of Client Deposits and accounted for 48.6% of the total for this 

item in late 2005. The remaining deposits were distributed between Current Accounts (28.8%) and 

Savings Deposits (22.6%). 

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190 

Designation 

Credit Applications 

FINANCIAL RESOURCES OF CLIENTES 


The consolidated Client Credit portfolio balance (including securitised credit) stood at 12 785,2 millions 

of euros distributed in the following manner: 

Private Individuals Credit accounted for 68.3% of total credit with the remaining 31.7% relating to 

Credit granted to Companies and Public Administration. 

By purposes Housing Credit represented the largest component (63.1%) followed by Construction 

Credit (16.5%). 


Value % 

Client Current Accounts 2 241 727 28.8 

Client Time Deposits 3 780 142 48.6 

Client Savings Deposits 1 756 528 22.6 

Other Client Resources 2 498 0.0 

Adjustments arising from hedging operations -1 369 0.0 

TOTAL CLIENT RESOURCES 7 779 526 100.0 

Designation 

CREDIT DUE AND FALLING DUE 



Value % 

Credit Falling Due 12 453 721 97.4 

Credit Due 331 490 2.6 

Total Credit 12 785 211 100.0 

Credit Due / Total Credit Ratio 2.6% 

Designation 

CREDIT BY SEGMENTS AND PURPOSES 



Value % 

Companies and Public Administrations 4 051 239 31.7 

Construction 2 103 836 16.5 

Other Purposes 1 947 403 15.2 

Private Individuals 8 733 972 68.3 

Housing 8 066 976 63.1 

Other Purposes 666 996 5.2 

TOTAL CREDIT 12 785 211 100.0 

Credit and Interest Due 

The amount recorded under Credit and Interest Due attained 331,5 millions of euros which allowed a 

Credit and Interest Due ratio to be calculated of 2.6%.

Credit and Interest Due > 3 months accounted for 91.7% of Total Credit and Interest Due as at December 

31st 2005. 

9.3. RESULTS, EFFICIENCY AND PROFITABILITY 

Result by Functions 

The Consolidated Result for the Financial Year of 2005 stood at 57 743 thousand euros, an increase of 

22 885 thousand euros (+65.7%), on last year’s figure (34 858 thousand euros). Besides transition and 

conversion adjustments, various factors contributed to this favourable trend such as: increased active 

business operations, to wit the balance of credit granted to clients, the increase in operating income, the 

control of the increase in administrative costs and the reduced impact of amortizations. 

The table below sets out the numerical variations which, as a whole, serve to explain the higher result 

with regard to the previous year: 

CONSOLIDATED PROFIT-AND-LOSS ACCOUNT BY FUNCTIONS 

FOR THE YEARS ENDING DECEMBER 31ST 2005 AND 2004 (Thousands of euros) 



Interest and equivalent income 602 808 559 282 43 526 7.8 

Interest and equivalent costs 328 449 310 984 17 465 5.6 

Financial margin 274 359 78.9 248 298 80.0 26 061 10.5 

Income from capital instruments 2 193 0.6 689 0.2 1 504 218.3 

Results of services and commissions 53 113 15.3 51 998 16.8 1 115 2.1 

Results in financial operations 6 002 1.7 (3 737) -1.2 9 739 -260.6 

Results for financial assets available for sale 390 0.1 – 390 

Other operating results 11 847 3.4 12 989 4.2 (1 142) -8.8 

Total operating income 73 545 21.1 61 939 20.0 11 606 18.7 

Banking product 347 904 100.0 310 237 100.0 37 667 12.1 

Staffing Costs 128 368 36.9 128 405 41.4 (37) 0.0 

Other administrative expenses 69 696 20.0 63 965 20.6 5 731 9.0 

Amortizations for the financial year 11 086 3.2 13 252 4.3 (2 166) -16.3 

Total operating costs 209 150 60.1 205 622 66.3 3 528 1.7 

Credit imparity 76 664 22.0 67 644 21.8 9 020 13.3 

Imparity of other assets 5 718 1.6 996 0.3 4 722 474.1 

Other provisions 180 0.1 2 202 0.7 (2 022) -91.8 

Operational result (218 167) -62.7 (214 525) -69.1 (3 642) 1.7 

Results by equity method 1 551 0.4 1 085 0.3 466 42.9 

CONSOLIDATED RESULT FOR 

THE FINANCIAL YEAR 57 743 16.6 34 858 11.2 22 885 65.7 

Cash Flow 151 391 118 952 32 439 27.3 

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192 

Cash Flow 

Cash Flow for the financial year stood at 151 391 thousands of euros, was up by 32 439 thousands of 

euros (+27.3%) on last year’s figure. 

Efficiency 

The financial year of 2005 was characterised by the favourable trend in the operating efficiency of the 

Institution. The cost to income ratio (Operating Costs/ Banking Product as a %) turned in a favourable 

variation of -6.2 b.p., having fallen from 66.3% in 2004 to 60.1% in 2005. 

The exacerbation in the Cost to Income ratio can be put down, on the one hand, to the improvement 

recorded in the Banking Product (+12.1%) and on the other to the reduction in Amortizations (-16.3%) 

and the reduction in the proportion of Administrative Costs in the Banking Product (-5.1 b.p.). 

The Staffing Costs/Banking Product ratio fell, having fallen from 41.4% in 2004 to 36.9% in 2005. 

Return 

RELATIVE EFFICIENCY 


The Return on Assets (ROA) and the average Return on Equity (ROE) stood at 0.4% and 10.2%, respectively. 

9.4. CAPITALIZATION AND PRUDENTIAL RATIOS 


Variation 

Absolute Relative 

Staffing Costs / Banking Product 36.9% 41.4% -4.5 b.p. -10.9% 

Administrative Overheads / Banking Product 56.9% 62.0% -5.1 b.p. -8.2% 

Amortizations / Banking Product 3.2% 4.3% -1.1 b.p. -25.4% 

Cost to Income 60.1% 66.3% -6.2 b.p. -9.3% 

RETURN 


Designation 2005 

Results / Average Net Assets (ROA) 0.4% 

Results / Average Equity (ROE) 10.2% 

Banking Product / Average Net Assets (%) 2.6% 

Consolidated Own Resources made up of Institutional Capital, Reserves and Results for the Financial 

Year stood at 643 682,3 thousands of euros in late 2005. On the same date Eligible Own Funds (Basic 

Own Funds + Complementary Own Funds) stood at 394 738,8 thousands of euros. As a consequence, 

the value of Eligible Own Funds surpassed that of Minimum Own Funds by 255 230,3 thousands of 

euros.

The consolidated Solvency and Market Ratio from the perspective of the Bank of Portugal stood at 

10.68%, comfortably above the minimum stipulated by the Bank of Portugal. 

1. Eligible Own Funds 

(Thousands of Euros) 

1.1. Basic Own Funds 643 682.3 

1.2. Complementary Own Funds 394 738.8 

1.3. Deductions 22 697.2 

2. Total Eligible Own Funds (1.1+1.2-1.3) 1 015 723.9 

2.1. Minimum Own Funds 760 493.5 

2.2. Available Own Funds 255 230.3 

3. Assets and Memorandum Items 9 765 893.0 

4. Ratios (%) 

4.1. Solvency 10.68 

4.2. Tier 1 6.53 

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194 

9.5. BALANCE SHEET AND PROFIT-AND-LOSS ACCOUNT BY FUNCTIONS 

CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31ST 2005 AND 2004 

ASSETS 

Cash and Availabilities at Central Banks 207 707 207 707 236 653 (28 946) -12.2 

On sight availabilities with Credit Institutions 129 688 129 688 46 573 83 115 178.5 

Applications in credit institutions 911 506 935 910 571 1 067 612 (157 041) -14.7 

Customers Credit 12 785 211 369 816 12 415 395 10 349 675 2 065 720 20.0 

Financial assets held for negotiation 17 610 17 610 – 17 610 

Financial assets available for sale 678 666 678 666 281 784 396 882 140.8 

Coverage derivatives 29 153 29 153 – 29 153 

Investments held until maturity 34 776 34 776 – 34 776 

Interests in Associated Companies 17 935 17 935 16 638 1 297 7.8 

Other tangible assets 163 378 82 969 80 409 84 263 (3 854) -4.6 

Intangible Fixed Assets 19 675 14 124 5 551 3 927 1 624 41.4 

Other Assets 157 785 13 382 144 403 174 112 29 709) -17.1 

LIABILITIES 

TOTAL ASSETS 15 153 090 481 226 14 671 864 12 261 237 2 410 627 19.7 

Resources of other credit institution 706 601 706 601 689 215 17 386 2.5 

Client resources 7 779 526 7 779 526 7 623 286 156 240 2.0 

Responsibilities represented by securities 5 066 741 5 066 741 2 923 487 2 143 254 73.3 

Financial liabilities held for negotiation 15 266 15 266 – 15 266 

Coverage derivatives 3 847 3 847 – 3 847 

Provisions 5 153 5 153 5 614 (461) -8.2 

Subordinated liabilities 310 649 310 649 330 543 (19 894) -6.0 

Other liabilities 183 959 183 959 155 784 28 175 18.1 

TOTAL LIABILITIES 14 071 742 14 071 742 11 727 929 2 343 813 20.0 


Capital 485 000 485 000 445 000 40 000 9.0 

Fair value reserves -148 (148) – (148) 

Other reserves and results carried forward 57 527 57 527 53 450 4 077 7.6 

Result for the financial year 57 743 57 743 34 858 22 885 65.7 

TOTAL SHAREHOLDERS’ EQUITY 600 122 600 122 533 308 66 814 12.5 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 14 671 864 14 671 864 12 261 237 2 410 627 19.7 

Lisbon: March 2006 

Gross 

Assets 


2005 2004 VARIATION 

Imparity and 

Amortizations 

Net 

Assets 

Net 

Assets 

Value % 

THE CHIEF ACCOUNTANT THE BOARD OF DIRECTORS 

Armindo Marques Matias José da Silva Lopes – Chairman 




António Tomás Correia

CONSOLIDATED PROFIT-AND-LOSS ACCOUNT BY FUNCTIONS 

FOR THE YEARS ENDING DECEMBER 31ST 2005 AND 2004 

Interest and equivalent income 602 808 559 282 43 526 7.8 

Interest and equivalent costs 328 449 310 984 17 465 5.6 

FINANCIAL MARGIN 274 359 78.9 248 298 80.0 26 061 10.5 

Income from capital instruments 2 193 0.6 689 0.2 1 504 218.3 

Results of services and commissions 53 113 15.3 51 998 16.8 1 115 2.1 

Results in financial operations 6 002 1.7 (3 737) -1.2 9 739 -260.6 

Results for financial assets available for sale 390 0.1 – 390 

Other operating results 11 847 3.4 12 989 4.2 (1 142) -8.8 

TOTAL OPERATING INCOME 73 545 21.1 61 939 20.0 11 606 18.7 

BANKING PRODUCT 347 904 100.0 310 237 100.0 37 667 12.1 

Staffing Costs 128 368 36.9 128 405 41.4 (37) 0.0 

Other administrative expenses 69 696 20.0 63 965 20.6 5 731 9.0 

Amortizations for the financial year 11 086 3.2 13 252 4.3 (2 166) -16.3 

TOTAL OPERATING COSTS 209 150 60.1 205 622 66.3 3 528 1.7 

Credit imparity 76 664 22.0 67 644 21.8 9 020 13.3 

Imparity of other assets 5 718 1.6 996 0.3 4 722 474.1 

Other provisions 180 0.1 2 202 0.7 (2 022) -91.8 

OPERATIONAL RESULT (218 167) -62.7 (214 525) -69.1 (3 642) 1.7 

Results by equity method 1 551 0.4 1 085 0.3 466 42.9 

CONSOLIDATED RESULT FOR THE FINANCIAL YEAR 57 743 16.6 34 858 11.2 22 885 65.7 

Cash-Flow 151 391 118 952 32 439 27.3 


Value % 

2004 

Value % 


VARIATION 

Value % 

195

196 

9.6. CONSOLIDATED STATEMENT OF CASH FLOWS 


Cash flows arising from operating activities 



Interest and commission income received 2 435 893 617 088 

Interest and commission expense paid (236 536) (325 851) 

Payments to employees and suppliers (110 153) (198 995) 

Recovered loans which had been previously charged-off 985 499 

Other payments and receivables 11 335 7 899 

(Increase) / decrease in operating assets 

2 101 524 100 640 

Loans and advances to credit institutions and customers (2 025 407) (318 116) 

Other debtors, prepayments and accrued income (65 180) 5 954 

(Increase) / decrease in operating liabilities 

(2 090 587) (312 162) 

Deposits from customers 124 198 (425 131) 

Deposits from credit institutions 12 963 (278 501) 

137 161 (703 632) 

Cash flows arising from investing activities 

148 098 (915 154) 

Dividends received 2 193 1 033 

(Acquisition) / sale of trading financial assets (20 334) – 

(Acquisition) / sale of available for sale financial assets (2 159 570) (214 821) 

(Acquisition) / sale of held to maturity financial assets (35 508) – 

(Acquisition) / sale of shares in investments 229 2 913 

Deposits owned with the purpose of monetary control 33 751 63 865 

Sales of fixed assets 194 – 

Acquisition of fixed assets (8 269) (4 136) 

Cash flows arising from financing activities 

(2 187 314) (151 146) 

Dividends paid (24 782) (16 119) 

Increase in share capital 40 000 40 000 

Issuance of subordinated debt 2 766 870 1 266 843 

Reinbursement of subordinated debt (654 952) (319 952) 

2 127 136 970 772 

Eschange differences effect on cash equivalents – 509 

Net changes in cash and equivalents 87 920 (95 019) 

Cash and equivalents balance at the beginning of the year 97 284 192 303 

Cash (note 16) 50 711 68 840 

Loans and advances to credit inst. repayable on demand (note 17) 46 573 123 463 

Cash and equivalents balance at the end of the year 185 204 97 284 

See accompanying notes to the consolidated Financial Statements

9.7. ANNEX TO THE CONSOLIDATED FINANCIAL STATEMENTS 

CONSOLIDATED STATEMENT OF INCOME 

FOR THE YEARS ENDED 31 DECEMBER, 2005 AND 2004 (Thousands of euros) 

NOTES 2005 

2004 

Interest income 3 602 808 559 282 

Interest expense 3 328 449 310 984 

NET INTEREST INCOME 274 359 248 298 

Dividends from equity instruments 4 2 193 689 

Net fees and commission income 5 53 113 51 998 

Net gains arising from trading and hedging activities 6 6 002 (3 737) 

Net gains arising from available for sale financial assets 7 390 – 

Other operating income 8 11 847 12 989 

TOTAL OPERATING INCOME 73 545 61 939 

Staff costs 9 128 368 128 405 

Other administrative costs 10 69 696 63 965 

Depreciacion 11 11 086 13 252 

OPERATING COSTS 209 150 205 622 

Loans impairment 12 76 664 67 644 

Other assets impairment 13 5 718 996 

Other provisions 14 180 2 202 

OPERATING LOSS (218 167) (214 525) 

Share of profit of associates under the equity method 15 1 551 1 085 

PROFIT FOR THE YEAR 57 743 34 858 

See accompanying notes to the consolidated Financial Statements 

197

198 

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER, 2005 AND 2004 

ASSETS 

NOTES 2005 

2004 

Cash and deposists at central banks 16 207 707 236 653 

Loans and advances to credit inst. repayable on demand 17 129 688 46 573 

Other loans and advances to credit institutions 18 910 571 1 067 612 

Loans and advances to customers 19 12 415 395 10 349 675 

Financial assets held for trading 20 17 610 – 

Financial assets available for sale 20 678 666 281 784 

Hedging derivatives 21 29 153 – 

Financial assets held to maturity 22 34 776 – 

Investments in associated companies 23 17 935 16 638 

Property and equipment 24 80 409 84 263 

Intangible assets 25 5 551 3 927 

Other assets 26 144 403 174 112 

LIABILITIES 

TOTAL ASSETS 14 671 864 12 261 237 

Deposits from other credit institutions 27 706 601 689 215 

Deposits from customers 28 7 779 526 7 623 286 

Debt securities issued 29 5 066 741 2 923 487 

Financial liabilities held for trading 30 15 266 – 

Hedging derivatives 21 3 847 – 

Provisions for liabilities and charges 31 5 153 5 614 

Subordinated debt 32 310 649 330 543 

Other liabilities 33 183 959 155 784 

EQUITY 


Share capital 34 485 000 445 000 

Fair value reserves 36 (148) – 

Reserves and retained earnings 35 and 36 57 527 53 450 


TOTAL EQUITY 600 122 533 308 

TOTAL LIABITIES AND EQUITY 14 671 864 12 261 237 

Obligations and future commitments (Note 37) 


CHIEF ACCOUNTANT THE BOARD OF DIRECTORS 

Armindo Marques Matias José da Silva Lopes – Chairman 





See accompanying notes to the consolidated Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

FOR THE YEARS ENDED DECEMBER, 2005 AND 2004 

Total 

Equity 

Share 

capital 

General 

and special 

reserves 

Other 

reserves 

Fair value 

reserves 


Retained 

earnings 

Balance on 31 December, 2003 

(without IAS 32 and 39 adjustments) 476 198 405 000 160 808 6 044 – (95 654) 

Transfers to reserves: 


Special reserve – – 1 075 – – (1 075) 



Equity method (1 629) – – (1 629) – – 


Balance on 31 December, 2004 533 308 445 000 166 181 4 415 – (82 288) 

IAS 32 and 39 adjustments (4 926) – – – 995 (5 921) 

528 382 445 000 166 181 4 415 995 (88 209) 

Transfers to reserves: 


Special reserve – – 1 652 – – (1 652) 



Fair value reserves (1 143) – – – (1 143) – 

Equity method (78) – – (78) – – 


Balance on 31 December, 2005 600 122 485 000 174 442 4 337 (148) (63 509) 

See accompanying notes to the consolidated Financial Statements 

199

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 




Caixa Económica Montepio Geral («Caixa») is a credit institution held by Montepio Geral – Associação 

Mutualista, established on 24 March, 1844, and authorised to operate in accordance with Decree-Laws 

No. 298/92 of 31 December, and No. 136/79 of 18 May, which regulate the activity of savings banks 

and establish some restrictions to their activities. However, Caixa is authorised to carry out banking 

operations in addition to those mentioned in its by-laws, if previously authorised by the Bank of Portugal. 

This fact conducts to the practice of banking operations in general. 

The Directors approved these consolidated financial statements on 9 March, 2006. The financial statements 

are presented in thousands of euros, rounded to the nearest thousand. 

For all periods up to and including the year ended 31 December, 2004, Caixa prepared its consolidated 

financial statements in accordance with the generally accepted accounting principles in Portugal for the 

banking sector («Local GAAP»). In accordance with Regulation (EC) No. 1606/2002 from the European 

Parliament and the Counsel, of 19 July 2002, and its adoption into Portuguese Law through Decree-Law 

No. 35/2002, of 17 February and Regulation No. 1/2005 from the Bank of Portugal, Caixa’s consolidated 

financial statements are required to be prepared in accordance with International Financial Reporting 

Standards («IFRS») as endorsed by the European Union («EU») for the year ended 31 December 

2005. IFRS comprise accounting standards issued by the International Accounting Standards Board 

(«IASB») as well as interpretations issued by the International Financial Reporting Interpretations Committee 

(«IFRIC») and their predecessor bodies. 

The consolidated financial statements for the year ended 31 December, 2005 have been prepared in 

accordance with the IFRS, effective and adopted for use in the EU until 31 December, 2005 and considering 

the standards available for early adoption at the present date. 

Considering that until 31 December 2004, Caixa prepared its financial statements in accordance with 

Local GAAP, the financial statements for the year ended as at that date, presented in this report, were 

prepared in accordance with IFRS for comparative purposes. 

The financial statements are prepared under the historical cost convention, as modified by the application 

of fair value basis for derivative financial instruments, financial assets and liabilities held for trading, 

and available-for-sale assets, except those for which a reliable measure of fair value is not available. 

Recognised assets and liabilities that are hedged under hedge accounting are stated at fair value in 

respect of the risk that is being hedged. Other financial assets and liabilities and non-financial assets and 

liabilities are stated at amortised cost or historical cost. Non-current assets and liabilities are stated at the 

amortised or historical cost. 

The accounting policies set out below have been applied consistently throughout Caixa entities and for 

all periods presented in these consolidated financial statements. They also have been applied in preparing 

the IFRS opening balance as at 1 January, 2004 for the purpose of transition to IFRS. 

The preparation of the financial statements in conformity with IFRS requires the Management to make 

judgments, estimates and assumptions that affect the application of the accounting policies and 

reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions 

are based on historical experience and various other factors that are believed to be reasonable 

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202 

under the circumstances, the results of which form the basis of making the judgments about carrying 

values of assets and liabilities that are not readily apparent from other sources. Actual results may differ 

from these estimates. The issues involving a higher degree of judgment or complexity, or where assumptions 

and estimates are considered to be significant are presented in note 1.20. 

Transition to IFRS 

These are Caixa’s first consolidated financial statements prepared in accordance with IFRS and are in 

compliance with IFRS 1 for the determination of the transition adjustments, as at 1 January 2004. The 

reconciliation of shareholders’ equity and profit for the year as presented under local GAAP and under 

IFRS as required by IFRS 1 is presented in note 40. 

In the preparation of the consolidated financial statements at the date of transition, Caixa has elected to 

take some exemptions as allowed by IFRS 1 which are presented as follows: 

(i) Property and equipment 

Caixa decided to elect as deemed cost of property and equipment, as at 1 January 2004, its carrying 

amount in accordance with the previous accounting policies. 

(ii) IAS 32 and IAS 39 adoption 

Caixa decided to elect transaction requirement defined by IFRS 1, which exempts for the requirement to 

restate comparatives for IAS 32 – Financial Instruments: Disclosure and Presentation, and IAS 39 – Financial 

Instruments: Recognition and Measurement. Therefore, comparative figures for 2004 include the 

financial instruments recognised and measured in accordance with the previous accounting policies of 

Caixa which are described below. However, in order to allow for comparability, the values of financial 

instruments for the comparative period were reclassified in accordance with 2005 presentation. 

Besides the exemptions referred to above, Caixa has adopted retrospectively the remaining IFRS. 

1.2. Basis of consolidation 

Investments in subsidiaries 

Investments in subsidiaries where Caixa exercises control are fully consolidated from the date Caixa 

assumes control over its activities and until the control ceases to exist. Control is presumed to exist when 

Caixa owns more than half of the voting rights. Additionally, control exists when Caixa has the power, 

directly or indirectly, to govern the financial and operating policies of an entity to obtain benefits from 

its activities, even if the percentage of shareholding is less than 50%. 

When the accumulated losses of a subsidiary attributable to the minority interest exceed the equity of 

the subsidiary attributable to the minority interest, the excess is attributed to Caixa and charged to the 

income statement as it occurs. Profits subsequently reported by the subsidiary are recognised as profits 

of Caixa until the prior losses attributable to minority interest previously recognised by Caixa have been 

recovered. 

Associates 

Investments in associated companies are consolidated by the equity method, since the date Caixa 

acquires significant influence until the date it ceases. Associates are those entities, in which Caixa has 

significant influence, but not control, over the financial and operating policy decisions of the investee. It 

is assumed that Caixa has significant influence when it holds, directly or indirectly, 20% or more of the

voting rights of the investee. Conversely, if Caixa holds, directly or indirectly less than 20% of the voting 

rights of the investee, it is presumed that Caixa does not have significant influence, unless such influence 

can be clearly demonstrated. The existence of significant influence by Caixa is usually evidenced in one 

or more of the following ways: 

– representation on the Board of Directors or equivalent governing body of the investee; 

– participation in policy-making processes, including participation in decisions about dividends or 

other distributions; 

– material transactions between Caixa and the investee; 

– interchange of managerial personnel; 

– provision of essential technical information. 

The consolidated financial statements include the attributable part of the total results and reserves of 

associated companies accounted on an equity basis. When Caixa share of losses exceeds its interest in 

an associate, Caixa’s carrying amount is reduced to nil and recognition of further losses is discontinued 

except to the extent that Caixa has incurred in legal or constructive obligations or made payments on 

behalf of an associate. 

Special Purpose Entities («SPE») 

Caixa fully consolidates certain SPE’s when the substance of the relation with those entities indicates 

that Caixa exercises control over its activities, independently of the percentage of the equity held. 

The evaluation of the existence of control is determined based on the criteria established by SIC 12 

– Consolidation – Special Purpose Entities, which can be analysed as follows: 

– The activities of the SPE, in substance, are being conducted on behalf of Caixa, in accordance with 

the specific needs of Caixa’s business, so as to obtain benefits from these activities; 

– Caixa has the decision-making powers to obtain the majority of the benefits of the activities of the 

SPE; 

– Caixa has the right to obtain the majority of the benefits of the SPE and therefore may be exposed 

to risks incident to the activities of the SPE; or 

– Caixa in substance retains the majority of the residual or ownership risks related to the SPE or its 

assets in order to obtain benefits from its activities. 

Transactions eliminated on consolidation 

Intragroup balances and any unrealised gains and losses arising from intragroup transactions, are eliminated 

in preparing the consolidated financial statements. Unrealised gains and losses arising from transactions 

with associates and jointly controlled entities are eliminated to the extent of Caixa's interest in 

the entity. 

1.3. Loans and advances to customers 

Loans and advances to customers include loans and advances originated by Caixa, which are not 

intended to be sold in the short term and are recognised when cash is advanced to borrowers. 

The derecognition of these assets occurs in the following situations: (i) the contractual rights of Caixa 

have expired; or (ii) Caixa transferred substantially all the risks and rewards associated. 

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204 

Loans and advances to customers are initially recognised at fair value plus any directly attributable transaction 

costs and are subsequently measured at amortised cost using the effective interest method, less 

impairment losses. 

Impairment 

Caixa policy consists in a regular assessment of the existence of objective evidence of impairment in 

their loan portfolios. Impairment losses identified are charged against income and subsequently the 

charge is reversed, if there is a reduction of the estimated impairment loss, in a subsequent period. 

After initial recognition, a loan or a loan portfolio, defined as a group of loans with similar credit risk 

characteristics, may be classified as impaired when there is objective evidence of impairment as a result 

of one or more events and when the loss event has an impact on the estimated future cash flows of the 

loan or of the loan portfolio that can be reliably estimated. 

In accordance with IAS 39, there are two methods for losses impairment calculation: (i) individually 

assessed loans; and (ii) collective assessed loans. 

i) Individually assessed loans 

Impairment losses on individually assessed loans are determined by an evaluation of the exposures on a 

case-by-case basis. For each loan considered individually significant, Caixa assesses, at each balance 

sheet date, the existence of any objective evidence of impairment. In determining such impairment 

losses on individually assessed loans, the following factors are considered: 

– Caixa aggregate exposure to the customer and the existence of overdue loans; 

– the viability of the customers’ business and capability to generate sufficient cash flow to service 

their debt obligations in the future; 

– the existence, nature and estimated value of the collaterals; 

– a significant downgrading in the clients rating; 

– the assets available on liquidation or bankruptcy; 

– the ranking of all creditor claims; 

– the amount and timing of expected receipts and recoveries. 

Impairment losses are calculated by comparing the present value of the expected future cash flows, discounted 

at the original effective interest rate of the loan, with its current carrying value and the amount 

of any loss is charged in the income statement. The carrying amount of impaired loans is reduced 

through the use of an allowance account. For loans with a variable interest rate, the discount rate used 

corresponds to the effective annual interest rate, which was applicable in the period that the impairment 

was determined. 

The present value of the estimated future cash flows of a collateralised loan reflects the cash flows that 

may result from the foreclosure less costs for obtaining and selling the collateral. 

Individual loans that are not identified as having an objective evidence of impairment are grouped on 

the basis of similar credit risk characteristics, and assessed collectively. 

ii) Collective assessment 

Impairment losses are calculated on a collective basis in two different scenarios: 

– for homogeneous groups of loans that are not considered individually significant; or

– in respect of losses which have been incurred but have not yet been identified («IBNR») on loans 

subject to individual assessment for impairment (see section(i)). 

The collective impairment loss is determined considering the following factors: 

– historical loss experience in portfolios of similar risk characteristics; 

– knowledge of the current economic and credit conditions and its influence in historical losses level; 

– the estimated period between a loss occurring and that loss being identified. 

The methodology and assumptions used to estimate the future cash flows are revised regularly by Caixa 

in order to monitor the differences between estimated and real losses. 

Loans which have been individually assessed and no evidence of impairment has been identified, are 

grouped together based on similar credit risk characteristics for calculating a collective impairment loss. 

This loss covers loans that are impaired at the balance sheet date but which will not be individually identified 

as such until some time in the future. 

The loans charge-off is performed against the related provision for loan impairment, when these correspond 

to 100% of the loans amount. Subsequent recoveries of amounts previously written off are 

accounted as profits in the income statement in the period they occur. 

1.4. Financial instruments 

i) Classification 

Trading financial instruments are those that Caixa principally holds for the purpose of short-term profit 

taking, with changes in fair value recognised against earnings and includes derivative contracts that are 

not designated as hedging instruments or at first recognition designated fair value through profit and 

loss. 

Changes in the fair value of such instruments are recorded in the income statement. All trading derivatives 

with positive fair value are reported as trading assets and negative fair value as trading liabilities. 

Held to maturity financial instruments are non-derivative financial assets with fixed payments or available 

and defined maturity, which Caixa has the purpose of being held to maturity. 

Available-for-sale financial assets are non derivative financial assets that are not classified as held to 

maturity investments or financial assets at fair value through profit or loss. Available-for-sale instruments 

include equity and debt instruments. 

Other financial liabilities comprise all financial liabilities not classified as financial liabilities at fair value 

with changes through the income statement. Other financial liabilities include, among others, money 

market funding, deposits from credit institutions and customers and issued debt. 

ii) Recognition date 

Financial assets and financial liabilities are recognised using trade date accounting. 

iii) Trading assets and trading liabilities 

Treasury bills, debt securities, equity shares, derivatives not accounted for as hedging instruments and 

short positions in securities which have been acquired or incurred principally for the purpose of selling 

or repurchasing in the near term or are part of a portfolio of identified financial instruments that are 

managed together and for which there is evidence of a recent actual pattern of short-term profit-taking 

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206 

are classified as held-for-trading. Such financial assets or financial liabilities are recognised initially at fair 

value, with transaction costs or profits taken to the income statement, and are subsequently remeasured 

at fair value. All subsequent gains and losses from changes in the fair value of these assets and liabilities, 

accrued interests and dividends received are recognised in the income statement within «Net 

gains arising from trading and hedging activities» as they arise. 

iv) Financial assets and liabilities at fair value through profit or loss 

Financial assets and liabilities at fair value through profit or loss are initially recognised at fair value, with 

transaction costs and profits are directly recognised in the income statement, and are subsequently 

remeasured at fair value. All subsequent gains and losses from changes in the fair value of these assets 

and liabilities, accrued interests and dividends received are recognised in the income statement within 

«Net gains arising from trading and hedging activities» as they arise. 

v) Available for sale assets 

Treasury bills, debt securities and equity shares intended to be held on a continuing basis are classified 

as available-for-sale assets unless designated at fair value through profit and loss or classified as held-to- 

-maturity. Available for sale assets are initially measured at fair value plus direct and incremental transaction 

costs or profits. For debt securities transactions, costs are amortised to profit and loss using the 

effective interest method. Available-for-sale assets are subsequently remeasured at fair value. Changes in 

fair value are recognised in equity until the securities are either sold or impaired. On the sale of available 

for sale assets, cumulative gains or losses previously recognised in equity are recognised through the 

income statement and classified as «Net gains arising from available for sale financial assets». Interest 

income is recognised on such securities using the effective interest method, calculated over the asset’s 

expected life. Where dated investment securities have been purchased at a premium or discount, these 

premiums and discounts are included in the calculation of the effective interest rate. Dividends are 

recognised in the income statement when the right to receive payment has been established. 

An assessment is made at each balance sheet date as to whether there is any objective evidence of 

impairment, namely circumstances where an adverse impact on estimated future cash flows of the 

financial asset or group of assets can be reliably estimated. 

If an available-for-sale asset is determined to be impaired, the cumulative loss (measured as the difference 

between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously 

recognised in the income statement) is removed from equity and recognised in the income statement. 

If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases 

and that increase can be objectively related to an event occurring after the impairment loss was recognised 

in the income statement, the impairment loss is reversed through the income statement. The reversal of 

impairment losses recognised in the income statement on equity instruments is recognised in equity. 

vi) Held to maturity investments 

Held to maturity investments are recognised at amortised cost, using interest effective method less 

impairment losses. 

1.5. Hedge accounting 

i) Hedge accounting 

Caixa uses derivative financial instruments to hedge its exposure to currency and interest rate risks, 

resulting from financing and investment activities. However, derivatives not qualified for hedging are 

accounted for as trading instruments.

Derivative hedging instruments are stated at fair value and gains and losses on remeasurement are 

recognised in accordance with the hedging accounting model adopted by Caixa. A hedging relationship 

exists when: 

– at the inception of the hedge there is formal documentation of the hedge; 

– the hedge is expected to be highly effective; 

– the effectiveness of the hedge can be reliably measured; 

– the hedge is highly effective throughout the reporting period; and 

– for hedges of a forecasted transaction, the transaction is highly probable and presents an exposure 

to variations in cash flows that could ultimately affect net profit or loss. 

When a derivative financial instrument is used to hedge exchange fluctuations arising from monetary 

assets or liabilities items, no hedge accounting model is applied and any gain or loss associated to the 

derivative or exchange difference associated with the monetary item is recognised through income. 

ii) Fair value hedge 

Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments 

are recorded in the income statement, together with changes in the fair value of the asset or liability 

or group thereof that are attributable to the hedged risk. If the hedging relationship no longer 

meets the criteria for hedge accounting, the cumulative adjustment to the carrying amount of a hedged 

item for which the effective interest method is used is amortised to the income statement over the residual 

period to maturity. 

iii) Hedge effectiveness 

For each hedging relationship in order to be classified as such according to IAS 39, effectiveness has to 

be demonstrated. As such Caixa performs prospective tests at inception date and retrospective tests in 

order to demonstrate in each reporting period the effectiveness, showing that the changes in the fair 

value of the hedging instrument are neutralised by the changes in the hedged item for the risk covered. 

Any ineffectiveness is recognised immediately in the statement of income. When a hedge relationship is 

outside of a range of 80 per cent to 125 percent effectiveness, hedge accounting is discontinued. 

iv) Embedded derivatives 

Embedded derivatives should be accounted for separately if the economic characteristics and risks of the 

embedded derivative are not closely related to the host contract, unless the hybrid (combined) instrument 

is measured at fair value with changes in fair value recognised directly in the income statement. Embedded 

derivatives are classified as trading and accounted for at fair value with changes through profit and loss. 

1.6. Reclassifications between financial instruments categories 

Reclassification of financial assets and liabilities into or out of the fair value through profit and loss category 

is prohibited. 

1.7. Derecognition 

Caixa derecognises financial assets when all rights to future cash flows have expired or the assets are 

transferred. In the event of a transferral of assets, derecognition can only occur either when risks and 

rewards have substantially been transferred or Caixa has not retained control of the assets. 

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208 

Caixa derecognises financial liabilities when these are discharged, cancelled or extinguished. 

1.8. Finance lease transactions 

Caixa classifies its lease agreements as finance leases or operating leases taking into consideration the 

substance of the transaction rather than its legal form, in accordance with IAS 17 – Leases. A lease is 

classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. 

All other leases are classified as operating leases. 

Operating leases 

Payments made under operating leases are charged to the income statement in the period to which 

they relate. 

Finance leases 

– As lessee 

Finance lease contracts are recorded at inception date, both under assets and liabilities, at the cost of 

the asset leased, which is equal to the present value of outstanding lease instalments. Instalments comprise 

(i) an interest charge, which is recognised in the income statement and (ii) the amortisation of 

principal, which is deducted from liabilities. Financial charges are recognised as costs over the lease 

period, in order to produce a constant periodic rate of interest on the remaining balance of liability for 

each period. 

– As lessor 

Assets leased out are recorded in the balance sheet as loans granted, for an amount equal to the net 

investment made in the leased assets. 

Interest included in instalments charged to customers is recorded as interest income, while amortisation 

of principal, also included in the instalments, is deducted from the amount of the loans granted. The 

recognition of the interest reflects a constant periodic rate of return on the lessor's net outstanding 

investment. 

1.9. Interest income and expense 

Interest income and expense for all instruments measured at amortised cost are recognised in the 

income statement using the effective interest method. 

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts 

through the expected life of the financial instrument or, when appropriate, a shorter period, to the net 

carrying amount of the financial asset or financial liability. 

When calculating the effective interest rate, Caixa estimates future cash flows considering all contractual 

terms of the financial instrument but without considering future impairment losses. The calculation 

includes all fees considered as included in the effective interest rate, transaction costs and all other premiums 

or discounts directly related with the transaction. 

If financial asset or a group of similar financial assets has been written down as a result of an impairment 

loss, interest income is recognised using the rate of interest used to discount the future cash flows 

for the purpose of measuring the impairment loss. 

For derivative financial instruments, except those classified as hedging instruments of interest rate risk, 

the interest component of the changes in the fair value is not separated out and is classified under net

losses/gains arising from financial assets. For hedging derivatives of interest rate risk, the interest component 

of the changes in their fair value is recognised under interest and similar income or interest 

expense and similar charges. 

1.10. Fee and commission income 

Fees and commissions are recognised according to the following criteria: 

– fees and commissions that are an integral part of the effective interest rate of a financial instrument 

are recognised in income using the effective interest rate method; 

– fees and commissions which are earned as services are provided are recognised in income over the 

period in which the service is being provided; 

– fees and commissions that are earned on the execution of a significant act, are recognised as 

income when the service is completed. 

1.11. Property and equipment 

Property and equipment are stated at deemed cost less accumulated depreciation and impairment 

losses. As referred in the accounting policy described in note 1.1, on transition to IFRS, the cost of property 

and equipment under the Local GAAP was treated as the deemed cost for IFRS reporting. Subsequent 

costs are recognised as a separate asset only when it is probable that future economic benefits 

associated with the item will flow to Caixa. All other repairs and maintenance are charged to the income 

statement during the financial period in which they are incurred. 

Caixa performs impairment testing whenever events or circumstances show that the book value exceeds 

the recoverable amount. The difference between the book value and recoverable amount is charged to 

the profit and loss. 

Depreciation is calculated on a straight-line basis, over the following periods which correspond to their 

estimated useful life: 

1.12. Intangible assets 

Software 


Buildings 50 

Works in rented buildings 10 

Equipment 4 a 10 

Software acquisition costs are capitalised and amortised over a three year period, as well as implementation 

costs. 

Maintenance costs are recognised as costs when occurred. 

Research and development expenditure 

Caixa has not incurred in research costs. 

Development expenditure in respect of new projects is deferred to future periods and amortised over a 

three year period as long as the following criteria are satisfied: 

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210 

– the product or process is clearly defined and the costs attributable to the product or process can 

be separately identified; 

– the technical feasibility of the product or process has been demonstrated; 

– the Management has indicated its intention to develop and market, or use, the product or process; 

– there is a clear indication of a future market for the product or process or, its usefulness can be 

demonstrated; 

– adequate resources exist to complete the project and market the product or process. 

1.13. Assets arising out of recovered loans 

Assets arising out of recovered loans include buildings and securities arising from the settlement of loan 

contracts. These assets are reported under «Other assets» and are initially recognised at the recovered 

loan value. 

Subsequent measurement is at the lower of its carrying amount and its corresponding fair value less estimated 

sale costs. No depreciation is provided in respect of those assets. Any subsequent write-down of 

the acquired asset to fair value is recorded as an impairment loss and included in the income statement. 

Fair value is based on the market value, being determined based on the expectable selling price estimated 

through regular valuations performed by Caixa. 

1.14. Cash and cash equivalents 

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less 

than three months’ maturity from the balance sheet date, including cash and deposits with banks. 

Cash and cash equivalents exclude restricted balances with central banks. 

1.15. Foreign currency transactions 

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the 

transaction. Monetary assets and liabilities denominated in foreign currencies, which are stated at historical 

cost, are translated at the foreign exchange rate ruling at that date. Foreign exchange differences 

arising on translation are recognised in the income statement. Non-monetary assets and liabilities 

denominated in foreign currencies, which are stated at historical cost, are translated at the foreign 

exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities denominated in 

foreign currencies that are stated at fair value are translated to the reporting currency at the foreign 

exchange rates ruling at the dates that the values were determined. 

1.16. Employee benefits 

Defined benefit plans 

Caixa assumed the responsibility to pay its employees pensions on retirement or disabilities, as established 

in the terms of «Acordo Colectivo de Trabalho Vertical do Sector Bancário (ACTV)». 

The pension plan benefits is in accordance with the «Plano ACTV – Acordo Colectivo de Trabalho Vertical 

do Sector Bancário» and the «Plano ACTQ – Acordo Colectivo dos Quadros do Sector Bancário». 

Caixa’s pension obligations are financed by a fund managed by Futuro – Sociedade Gestora de Fundos 

de Pensões, S.A.

The net obligation in respect of pension plans (defined benefit pension plans) is calculated on an annually, 

at each balance sheet date. 

As described in the accounting policy presented in note 1.1, and in accordance with IFRS 1, Caixa 

elected at the transition date, 1 January 2004, for the recognition at equity of all actuarial gains and 

losses, accounted as assets in accordance with prior accounting principles («reset method»). 

The actuarial calculation is made using the projected unit credit method and following actuarial and 

financial assumptions, in line with parameters required IAS 19 requirements. 

The current service costs and any past service costs together with the expected return on plan assets less 

the unwinding of the discount on the plan liabilities are charged to operating costs. 

Caixa’s net obligation in respect of defined benefit pension plans is calculated separately for each plan 

by estimating the amount of future benefit that employees have earned in return for their service in the 

current and prior periods. The benefit is discounted in order to determine its present value, and the fair 

value of any plan assets is deducted. The discount rate is the yield at balance sheet date on AAA credit 

rated bonds that have maturity dates approximating the terms of Caixa’s obligations. 

Employee benefits, other than pension plans, namely post retirement health care benefits and death 

before retirement benefits are also included in the benefits plans calculation. 

Under the corridor method, actuarial gains and losses not recognised, exceeding 10% of the greater of 

the present value of the defined benefit obligation and the fair value of plan assets, are recognised in 

the income statement over a period of 25 years, corresponding to the expected remaining working life 

of the employees participating in the plan. 

The funding policy of the Plan is to make annual contributions by Caixa so as to cover the projected 

benefits obligations, including the noncontractual projected benefits. The minimum level required is 

100% regarding the liability with pensioners and 95% regarding the employees in service. 

1.17. Income tax 





1.18. Segmental reporting 

A business segment is a distinguishable component of an entity that is engaged in providing an individual 

product or service or a group of related products or services and that is subject to risks and returns 

that are different from those of other business segments. 

A geographical segment is a distinguishable component of Caixa that is engaged in providing a product 

or service or a group of related products or services within a particular economic environment and that 

are subject to risks and returns that are different from those which operates in other economic environments. 


1.19. Provisions 

Provisions are recognised when (i) Caixa has a present legal or constructive obligation, (ii) it is probable that 

its payment will be required and (iii) a reliable estimate can be made of the amount of the obligation. 

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1.20. Critical accounting estimates and judgements in applying accounting policies 

IFRS set forth range of accounting treatments and require the Management to apply judgment and 

make estimates in deciding which treatment is most appropriate. The most significant of these accounting 

policies are discussed in this section in order to improve understanding of how their application 

affects Caixa reported results and related disclosure. 

Because in many cases there are several alternatives to the accounting treatment chosen by the Management, 

Caixa’s reported results would differ if a different treatment were chosen. Management 

believes that the choices made by it are appropriate and that the financial statements present Caixa’s 

financial position and results fairly in all material respects. 

The alternative outcomes discussed below are presented solely to assist the reader in understanding the 

financial statements and are not intended to suggest that other alternatives or estimates would be more 

appropriate. 

Impairment of available for sale equity investments 

Caixa determines that available for sale equity investments are impaired when there has been a significant 

or prolonged decline in the fair value below its cost. This determination of what is significant or 

prolonged requires judgement. In making this judgement, Caixa evaluates among other factors, the normal 

volatility in share price. 

In addition, valuations are generally obtained through market quotation or valuation models that may 

require assumptions or judgment in making estimates of fair value. 

Alternative methodologies and the use of different assumptions and estimates could result in a higher 

level of impairment losses recognised with a consequent impact in the income statement of Caixa. 

Fair value of derivatives 

Fair value is based on listed market prices if available, otherwise fair value is determined either by dealer 

price quotations (both for that transaction or for similar instruments traded) or by pricing models, based 

on net present value of estimated future cash flows which take into account market conditions for the 

underlying instruments, time value, yield curve and volatility factors. These pricing models may require 

assumptions or judgments in estimating their values. 

Consequently, the use of a different model or of different assumptions or judgments in applying a particular 

model could produced different financial results for a particular period. 

Impairment losses on loans and advances 

Caixa reviews its loan portfolios to assess impairment on a regularly basis, as described in note 1.3. 

The evaluation process in determining whether an impairment loss should be recorded in the income 

statement is subject to numerous estimates and judgments. The frequency of default, risk ratings, loss 

recovery rates and the estimation of both the amount and timing of future cash flows, among other 

things, are considered in making this evaluation. 

Alternative methodologies and the use of different assumptions and estimates could result in a different 

level of impairment losses with a consequent impact in the income statement of Caixa. 

Securitisations and special purpose entities (SPE) 

Caixa sponsors the formation of special purpose entities (SPE) primarily for asset securitisation transactions 

and for liquidity purposes.

Caixa does not consolidate SPE that it does not control. As it can sometimes be difficult to determine 

whether Caixa does control an SPE, it makes judgements about its exposure to the risks and rewards, as 

well as about its ability to make operational decisions for the SPE in question. 

The determination of the SPE that needs to be consolidated by Caixa requires the use of estimates and 

assumptions in determining the respective expected residual gains and losses and which party retains 

the majority of such residual gains and losses. Different estimates and assumptions could lead Caixa to 

a different scope of consolidation with a direct impact in net income. 

Held to maturity investments 

Caixa follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable 

payments and fixed maturity as held-to-maturity. This classification requires significant judgement. 

In making this judgement, Caixa evaluates its intention and ability to hold such investments to maturity. 

If Caixa fails to keep these investments to maturity other than for specific circumstances – for example, 

selling an insignificant amount close to maturity – it will be required to reclassify the entire class as 

available-for-sale. The investments would therefore be measured at fair value not amortised cost. 

The use of different assumptions and estimates would result in the determination of the fair value of this 

portfolio with a corresponding entry in the fair value reserve in equity. 

Pension and other employees’ benefits 

Determining pension liabilities requires the use of assumptions and estimates, including the use of actuarial 

projections, estimated returns on investment, and other factors that could impact the cost and liability 

of the pension plan. 

Changes in these assumptions could materially affect these values. 

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214 

2. Net interest income and net gains arising from trading and hedging 

activities 

IFRS require separate disclosure of net interest income and net gains arising from trading and hedging, 

as presented in notes 3 and 6. This required disclosure, however, does not take into account that net 

interest and trading income are generated by a range of different business activities. In many cases, 

a particular business activity can generate both net interest and trading income. 


Dec. 2005 Dec. 2004 


Net interest income 274 359 248 298 

Net gains arising from trading and hedging activities 6 002 (3 737) 

280 361 244 561 

3. Net interest income 


Interest income: 



Interest on loans and advances 475 048 441 052 

Interest on other assets 26 504 31 691 


Interest on available for sale securities 14 666 5 839 

Interest on held to maturity securities 1 278 – 

Interest on trading securities – 597 

Other interest and income 82 290 76 818 

602 808 559 282 

Interest expense: 


Interest on securities issued 112 966 93 305 

Interest on loans 12 994 11 532 

Interest on other funding 10 354 15 214 

Other interest and expense 61 967 54 696 

328 449 310 984 

Net interest income 274 359 248 298

4. Dividends from equity instruments 

This caption in the amount of Euros 2 193 000 (2004: Euros 689 000) is related to income from investments. 

5. Net fees and commission income 


Fees and commission income: 




From guarantees granted 4 488 4 558 


From commitments to third parties 8 166 11 384 

From other services 8 853 163 

62 413 60 642 

Fees and commission expenses: 




9 300 8 644 

Net fees and commission income 53 113 51 998 

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216 

6. Net gains arising from trading and hedging activities 


Gains arising from trading and hedging activities: 



Hedging derivatives 26 137 – 

Financial instruments at fair value through profit and loss 24 478 – 


Financial instruments held for trading 21 381 – 

Financial instruments held to maturity 59 

Securities – 8 266 

Losses arising from trading and hedging activities: 

78 951 21 250 

Hedging derivatives 26 402 – 

Financial instruments at fair value through profit and loss 17 127 – 


Financial instruments held for trading 24 243 – 

Financial instruments held to maturity 505 – 

Securities – 10 436 

72 949 24 987 

Net gains arising from trading and hedging activities 6 002 (3 737) 

In accordance with the exemptions allowed by IFRS 1, Caixa elected not to adopt IAS 32 and IAS 39 in 

the preparation of the comparative financial statements. Therefore, the amounts related to 31 December, 

2004 include available for sale financial assets recognised in accordance with Caixa’s previous 

accounting policies, as referred in note 1.1.

7. Net gains arising from available for sale financial assets 


Gains arising from available for sale financial assets: 




Issued by Public entities 305 – 

Issued by other entities 110 – 

Other securities 2 – 

417 – 

Losses arising from available for sale financial assets: 


Issued by Public entities 2 – 

Issued by other entities 25 – 

27 – 

Net gains arising from available for sale financial assets 390 – 




accounting policies, as referred in note 1.1. 

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218 

8. Other operating income 


Other operating income: 



Income from services 2 574 6 382 

Reimbursement of expenses 2 931 4 050 

Profits arising from deposits on demand management 3 760 3 698 

Gains on sale of investments 3 420 2 

Gains on sale of investments arising out of recovered loans 4 138 3 294 

Gains on sale of fixed assets 44 3 


19 883 18 995 

Other operating expenses: 

Indirect taxes 232 45 

Donations and quotizations 264 415 

Losses on sale of investments arising out of recovered assets 1 788 1 464 

Losses on sale of fixed assets 78 – 

Contributions to the Deposit Guarantee Fund 1 600 1 627 


8 036 6 006 

Other net operating income 11 847 12 989 

As at 31 December, 2005 the caption Gains on sale of investments is related to the unrealised gains 

from the liquidation of Montepio Geral – Cayman.

9. Staff costs 




Remunerations 94 684 93 049 

Mandatory social security charges 32 407 33 887 

Other staff costs 1 277 1 469 

128 368 128 405 

As at 31 December, 2005, the remunerations attributable to the Board of Directors and Audit Committee 

amount to Euros 1 061 000 (2004: Euros 2 265 000) referring to fixed remunerations. 

The average number of employees at service in Caixa during 2005 and 2004, by categories, is analysed 

as follows: 


Management 115 111 

Managerial staff 656 623 

Technical staff 276 262 

Specific categories 236 261 

Administrative 1 545 1 574 

Staff 94 96 

2 922 2 927 

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220 

10. Other administrative costs 




Rents 

Specialised services 

19 583 18 303 

Information technology services 3 033 2 435 

Outsourcing 988 2 901 

Other specialised services 12 614 9 294 

Advertising 10 688 7 970 

Communications 6 978 7 697 

Water, electricity and fuel 3 409 3 169 

Maintenance and related services 2 814 2 620 

Travel, hotel and representation costs 1 340 1 856 

Insurance 1 920 1 614 

Consumables 1 083 1 273 

Training costs 1 359 1 159 

Other supplies and services 3 887 3 674 

11. Depreciation 


Intangible assets: 

69 696 63 965 



Software 2 886 3 277 

Property and equipment: 

Land and buildings 

Equipment: 

4 021 4 193 

Furniture 699 878 

Office equipment 190 207 

Computer equipment 1 254 2 344 


Motor vehicles 98 181 

Security equipment 172 209 

8 200 9 975 

11 086 13 252

12. Loans impairment 




Impairment for Loans and advances to credit institutions: 

Impairment for the year 937 196 


717 58 

Impairment for Loans and advances to customers: 

Impairment for the year 193 578 174 950 


Recovery of loans previously charged-off (985) (499) 

13. Other assets impairment 


75 947 67 586 

76 664 67 644 



Impairment for Investments arising out of recovered loans 



5 947 2 265 

Impairment for Securities: 

Impairment for the year – 1 581 

Write-back for the year (229) (2 850) 

(229) (1 269) 

5 718 996 

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222 

14. Other provisions 




Provision for liabilities and charges: 



211 2 202 

Provision for other risks: 


15. Share of profit of associates under the equity method 

180 2 202 

The contribution of the associated companies accounted for under the equity method to Caixa’s profit 

is as follows: 



Lusitania, Companhia de Seguros, S.A. 738 673 

Lusitania Vida, Companhia de Seguros, S.A. 919 561 

Norfin – Soc. Gestora de Fundos Invest. Imob., S.A. 124 98 

HTA – Hotéis, Turismo e Animação dos Açores, S.A. (230) (247) 

1 551 1 085

16. Cash and deposits at central banks 




Cash 55 516 50 711 

Bank of Portugal 152 191 185 942 

207 707 236 653 

The balance Bank of Portugal includes deposits to satisfy the legal requirements to maintain a cash 

reserve for which the value is based on the value of deposits and other liabilities. 

The cash reserve requirements according with the European Central Bank System for Euro Zone, establishes 

the maintenance of a deposit with the central bank equivalent to 2% of the average value of 

deposits and other liabilities, during each reserve requirement period. 

17. Loans and advances to credit institutions repayable on demand 




Credit institutions in Portugal 35 309 121 


Amounts due for collection 86 929 40 537 

129 688 46 573 

The balance Amounts due for collection represents essentially cheques receivable from other credit institutions 

due for collection. 

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224 

18. Other loans and advances to credit institutions 




Inter-bank Money Market – 15 009 


Credit institutions abroad 881 000 1 026 358 

911 506 1 067 830 

Impairment for other loans and advances to credit institutions (935) (218) 

910 571 1 067 612 

The balance Other loans and advances to credit institutions, by the period to maturity, is analysed as follows: 



Up to 3 months 886 539 1 046 084 

3 months to 6 months 16 962 11 836 

6 months to 1 year 7 291 – 

1 year to 5 years – 9.142 

More than 5 years 590 661 

Undetermined 124 107 

911 506 1 067 830 

Impairment for other loans and advances to credit institutions is analysed as follows: 

Impairment for other loans and advances to credit institutions: 




Impairment for the year 937 196 


Balance on 31 December 935 218

19. Loans and advances to customers 




Asset-backed loans 11 170 990 9 861 240 



Public sector 58 805 61 118 

Foreign loans 506 3 319 

Finance leases 14.674 14 175 

12 453 721 10 337 025 

Overdue loans – less than 90 days 27 504 20 722 

Overdue loans – more than 90 days 303 986 327 774 

331 490 348 496 

12 785 211 10 685 521 

Impairment for loans and advances to customers (369 816) (335 846) 

12 415 395 10 349 675 




accounting policies, as referred in note 1.1. 

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226 

The analysis of loans and advances to customers, by type of credit, is as follows: 

Residents: 



Short term 

Discounted bills 120 743 122 184 

Current account credits 607 821 646 975 

Overdrafts 22 881 20 849 

Loans 61 104 132 730 

Medium and long term 

Real estate loans 

812 549 922 738 

Mortgage 7 949 713 6 086 582 

Construction 2 035 537 2 895 775 


Other loans 1 640 742 414 436 

11 640 666 9 410 968 

Non-Residents: 

Short term 506 819 

Medium and long term – 2 500 

506 3 319 

12 453 721 10 337 025 

Overdue loans: 

Less than 90 days 27 504 20 722 

More than 90 days 303 986 327 774 

331 490 348 496 

12 785 211 10 685 521 

Impairment for loans and advances to customers (369 816) (335 846) 

12 415 395 10 349 675 

The balance Overdue loans includes the overdue and not yet collected capital and interest. Therefore, 

this balance does not account the total outstanding loans of Caixa’s customers which registered overdue 

amounts which as at 31 December, 2005, amount to Euros 1 051 000 (2004: Euros 685 000). 

The balance Overdue loans more than 90 days includes the amount of Euros 6 813 000 (2004: Euros 

7 113 000) related to loans bought at court auctions. These amounts correspond to loans overdue for 

more than three years for which the contractual obligation with the former debtor has been extinguished 

due to the acquisition in court auction bankruptcy or acquisition through foresale but for which 

there are still pending legal actions.

Loans and advances to customers include only the amount of variable interest rate contracts. 

The analysis of Loans and advances to customers, by maturity date and type of credit as at 31 December, 

2005, is as follows: 

Loans 

Up to 1 year to Over Undetermined 

1 year 5 years 5 years maturity Total 


Asset-backed loans 207 582 2 115 020 8 848 388 264 793 11 435 783 

Other guarantee loans 558 282 233 954 143 384 60 359 995 979 

Unsecured loans 131 617 99 745 41 764 6 020 279 146 

Public sector 53 1 325 57 427 – 58 805 

Foreign loans 506 – – – 506 

Finance leases – 13 421 1 253 318 14 992 

898 040 2 463 465 9 092 216 331 490 12 785 211 

The balance Loans and advances to customers includes the amounts of securitised loans related with 

traditional securitisations held by SPV’s and consolidated in accordance with SIC 12, as referred in the 

accounting policy described in note 1.2. As at 31 December, 2005, these loans amount to Euros 

987 488 000 (2004: Euros 1 131 544 000), and are analysed as follows: 





987 488 1 131 544 

Caixa engages in mortgage loans securitisation operations. For this purpose, traditional securitisations 

and synthetic securitisations are used through specifically created Special Purpose Entities (SPEs). As 

referred in note 1.2, when the substance of the relationships with the SPE's indicates that Caixa holds 

control of the activities, the SPE's are fully consolidated. 

As at 31 December, 2005, there are two securitisation operations between Caixa and other financial 

institutions presented in the following paragraphs. 

As at 19 December, 2002, Caixa Económica Montepio Geral has settled a securitisation operation with 

a Special Purpose Vehicle («SPV») – Pelican Mortgages No. 1 PLC, established in Dublin. The referred 





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228 

As at 29 September, 2003, Caixa Económica Montepio Geral has settled a securitisation operation with 

a Special Purpose Vehicle («SPV») – Pelican Mortgages No. 2 PLC, established in Dublin. The referred 





Caixa Económica Montepio Geral is the operation servicer, acting as collector of the credits sold. The 

received values are transferred to Pelican Mortgages No.1 PLC and to Pelican Mortgages No. 2 PLC. 

As at 31 December, 2005, the securitisation operations, are presented as follows: 

Issue Settlement date Currency Assets transferred Amount 

Pelican Mortgages No.1 December 2002 Euros Mortgage credit 650 000 000 

Pelican Mortgages No.2 September 2003 Euros Mortgage credit 700 000 000 

1 350 000 000 

The balance Finance leases, by the period to maturity as at 31 December 2005, is analysed as follows: 


Up to 1 year to Over 

1 year 5 years 5 years Total 


Outstanding rents 9.077 5.706 345 15.128 

Outstanding interest (593) (565) (32) (1.190) 

Residual values 622 23 91 736 

9.106 5.164 404 14.674 

The balance Finance leases, by the period to maturity as at 31 December 2004, is analysed as follows: 


Up to 1 year to Over 

1 year 5 years 5 years Total 


Outstanding rents 7.995 6.413 102 14.510 

Outstanding interest (520) (554) (5) (1.079) 

Residual values 512 189 43 744 

7.987 6.048 140 14.175

The analysis of Overdue loans, by type of credit, is as follows: 







331 490 348 496 

The analysis of Overdue loans, by type of client, is as follows: 

Corporate: 



Construction 72 292 57 088 

Investment 39 878 27 714 


Other loans 506 1 205 

Private: 

Mortgage loans 128 558 164 519 


Other loans 50 528 47 750 

Public sector 100 83 

The impairment for loans and advances to customers is analysed as follows: 

Impairment for credit risk: 

331 490 348 496 






Loans charged-off (44 765) (76 415) 

Transfers 1 803 – 


The balance on 1 January, 2004 includes the amount of Euros 70 260 000 related with the reclassification 

of the general provision for loan losses, in accordance with the transition adjustments to IFRS. 

In accordance with Caixa’s policy, interest on credits overdue for a period over 30 days not covered by 

asset-backed guarantees, is only recorded as income when received. 

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230 

The table below shows the analysis of the impairment for loans and advances to customers as at 31 

December, 2005: 

Classes of overdue loans 

Up to 3 months to 6 months to 1 year to Over 

3 months 6 months 12 months 3 years 3 years Total 


Secured overdue loans 33 829 8 372 23 155 151 158 106 494 323 008 

Impairment 1 586 3 080 12 490 165 042 99 925 282 123 

Unsecured overdue loans 2 108 282 1 144 2 098 2 850 8 482 

Impairment 224 230 1 724 2 937 3 056 8 171 

Total overdue loans 35 937 8 654 24 299 153 256 109 344 331 490 

Total impairment 

for overdue loans 

Total impairment for 

overdue loans and for 

1 810 3 310 14 214 167 979 102 981 290 294 

other credit risks 

Total impairment for 

77 243 971 941 338 29 79 522 

credit risks 79 053 4 281 15 155 168 316 103 011 369 816 

The impairment for loans and advances to customers, by type of credit, is as follows: 






369 816 335 846 

The loans charge-off is performed during 2005 and is related with the impairment for credit risk. 

The analysis of the loans charged-off, by type of credit, is as follows: 






44 765 76 415 

The analysis of recovered loans and overdue interest, performed during 2005 and 2004, amounts to 

Euros 985 000 (2004: Euros 499 000) related with asset-backed loans recovered.

20. Financial assets held for trading and available for sale 


Financial assets held for trading: 



Derivatives 17 610 – 

Financial assets available for sale: 


Issued by Government and Public entities 68 34 101 

Issued by other entities 654 476 229 936 

Impairment for fixed income securities – (5 999) 

654 544 258 038 

Overdue securities 998 1 613 

Impairment for overdue securities (998) (1 613) 

– – 

Shares and other variable income securities 24 373 25 977 

Impairment for shares (251) (2 231) 

24 122 23 746 

678 666 281 784 

696 276 281 784 


the preparation of the comparative financial statements. Therefore the amounts related to 31 December, 

2004 include available for sale financial assets recognised in accordance with Caixa’s previous accounting 

policies, as referred in note 1.1. 

At 1 January, 2005, Caixa recognised available for sale financial assets at fair value in accordance with 

the accounting policy described in note 1.4. Until that date, these assets were recognised at acquisition 

cost net of provisions for potential losses, calculated as the difference between acquisition cost and 

market value. 

Caixa transferred the amount of Euros 33 330 000 from the balance financial assets available for sale to 

the balance investments held to maturity, as referred in note 22. 

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232 

The analysis of financial assets held for trading and available for sale, by type of financial instrument, is 

as follows: 


Securities Securities 

Available Available 

Trading for sale Total Trading for sale Total 


Derivatives 17 610 – 17 610 – – – 

Fixed income: 




– 68 68 – 34 101 34 101 

Portuguese issuers – 34 889 34 889 – 17 674 17 674 

Foreign issuers – 583 705 583 705 – 168 337 168 337 

Commercial paper – 36 880 36 880 – 45 538 45 538 

– 655 542 655 542 – 265 650 265 650 

Quoted – 526 901 526 901 – 210 646 210 646 

Unquoted – 128 641 128 641 – 55 004 55 004 

Variable income: 

Shares in portuguese Companies – 12 087 12 087 – 13 615 13 615 

Investment fund units – 12 286 12 286 – 11 959 11 959 

Participation bonds – – – – 403 403 

– 24 373 24 373 – 25 977 25 977 

Quoted – 5 764 5 764 – 12 362 12 362 

Unquoted – 18 609 18 609 – 13 615 13 615 

Impairment for overdue securities – (998) (998) – (1 613) (1 613) 

Impairment for securities – (251) (251) – (8 230) (8 230) 

– (1 249) (1 249) – (9 843) (9 843) 

The trading portfolio is stated at market value. 

17.610 678 666 696 276 – 281 784 281 784 

As referred in the accounting policy presented in note 1.4, the available for sale securities portfolio is 

presented net of fair value reserve and impairment losses in the amount of Euros 148 000 and Euros 

1 249 000 (31 December 2004: Euros 9 843 000), respectively. 

The balance Bonds issued by other Portuguese issuers includes the amount of Euros 14 090 000 (2004: 

Euros 15 128 000) related to subordinated securities.

The analysis of the securities portfolio, namely trading and available for sale securities, by maturity date 

as at 31 December, 2005, is as follows: 

Due within 3 months to Over Undetermined 

3 months 1 year 1 year maturity Total 


Derivatives 9 1 17 600 – 17 610 

Fixed income: 


Government and 

Public entities 

Bonds issued by 

other entities: 

– – 63 5 68 

Portuguese issuers – 8 496 26 393 – 34 889 

Foreign issuers – 1 004 577 669 5 032 583 705 

Commercial paper 35.882 – 998 – 36.880 

35 882 9 500 605 123 5 037 655 542 

Quoted – – 524 873 2 028 526 901 

Unquoted 35 882 9 500 80 250 3 009 128 641 


Shares in companies 12 087 12 087 


24 373 24 373 

Quoted 5 764 5 764 

Unquoted 18 609 18 609 

Impairment for securities – – (998) (251) (1 249) 

35 891 9 501 621 725 29 159 696 276 

233

234 

The analysis of the securities portfolio, namely trading and available for sale securities, by maturity date 

as at 31 December, 2004, is as follows: 

Fixed income: 

Due within 3 months to Over Undetermined 

3 months 1 year 1 year maturity Total 



Portuguese Government 

and Public entities 


other entities 

– – 34 101 – 34 101 

Portuguese issuers 616 30 17 028 – 17 674 

Foreign issuers – 4 527 163 810 – 168 337 

Commercial paper 43 052 1 488 998 – 45 538 

43 668 6 045 215 937 – 265 650 

Quoted – 4 557 206 089 – 210 646 

Unquoted 43 668 1 488 9 848 – 55 004 


Shares in portuguese 

companies 13 615 13 615 


Participation bonds 403 403 

25 977 25 977 

Quoted 12 362 12 362 

Unquoted 

Impairment for overdue 

13 615 13 615 

securities (1 613) (1 613) 

Impairment for securities – – (5 999) (2 231) (8 230) 

43 668 6 045 209 938 22 133 281 784

The analysis of the trading derivatives by maturity as at 31 December, 2005, is as follows: 

Dec. 2005 

Notional with remaining term Fair value 

Less than 3 months More than 

3 months to 1 year 1 year Total Positive Negative 


OTC Market: 

Interest rate swaps – – 2 880 372 2 880 372 17 274 14 943 

Currency swaps 

Interest rate options 

2 479 119 2 460 5 058 36 23 

(purchase) – – 12 000 12 000 300 300 

2 479 119 2 894 832 2 897 430 17 610 15 266 

21. Hedging derivatives 


Assets: 



Interest rate swaps 29 153 – 

Liabilities: 

Interest rate swap 3 847 – 

Caixa uses derivatives to hedge interest rate risks. The accounting method depends on the nature of the 

hedged risk, namely if Caixa is exposed to fair value changes, variability in cash-flows or highly probable 

forecast transactions. As at 31 December, 2004, in compliance with applicable accounting criteria, 

Caixa had a set of fixed rate debt issues for which there were financial derivative instruments (IRS) with 

the purpose of hedging the interest rate risk related to those issues. 

From 1 January, 2005, for the hedging relationships which comply with the hedging requirements of IAS 

39, Caixa adopted the fair value hedge model, and holds in its derivatives portfolio mainly interest rate 

swaps, which are hedging fair value changes of interest rate risk of Deposits from other credit institutions 

and Deposits from customers. 

Caixa accounted in earnings the amount of Euros 29 891 000 regarding the fair value changes of the 

risk of interest rate associated to the assets and liabilities before described. 

Caixa performs periodical effectiveness tests of the hedging relationships and for the period ended 31 

December, 2005 accounted for against earnings the amount of Euros 265 000, corresponding to the 

ineffective part of the fair value hedge relationships. 

235

236 

The adjustment calculated to the assets and liabilities which includes hedged items is analysed as follows: 


Euros '000 

Deposits from other credit institutions (28 739) 

Deposits from customers (1 152) 

The analysis of the hedging derivatives by maturity as at 31 December, 2005, is as follows: 


(29 891) 

Notional with remaining term Fair value 

Less than 3 months More than 

3 months to 1 year 1 year Total Positive Negative 


Fair value hedge derivatives 

with interest rate risk – – 867 054 867 054 29 153 3 847 

22. Financial assets held to maturity 


Fixed income securities: 



Bonds issued by Portuguese Government and Public Entities 34 776 – 

As at 31 December, 2005, the investments held to maturity, are analysed as follows: 

Reimbursement 

Issue Issue date date Interest rate Euros '000 

OT – Junho 98/2008 June, 1998 June, 2008 Fixed rate of 5.375% 6 968 

OT – Setembro 98/2013 September, 1998 September, 2013 Fixed rate of 5.45% 97 

OT – Julho 99/2009 July, 1999 July, 2009 Fixed rate of 3.95% 6 415 

OT – Maio 00/2010 May, 2000 May, 2010 Fixed rate of 5.85% 6 936 

OT – Junho 01/2011 June, 2001 June, 2011 Fixed rate of 5.15% 1 120 

OT – Junho 02/2012 June, 2002 June, 2012 Fixed rate of 5.00% 107 



OT – Outubro 05/2015 July, 2005 October, 2015 Fixed rate of 3.35% 102 

34 776 

The investments held to maturity are stated in accordance with the established in the accounting policy 

presented in note 1.4.

23. Investments in associated companies 


Investments in associated companies and other: 



Lusitania, Companhia de Seguros, S.A. 8 860 8 228 

Lusitania Vida, Companhia de Seguros, S.A. 6 106 5 277 

HTA – Hotéis, Turismo e Animação dos Açores, S.A. 2 663 2 894 

Norfin – Soc. Gestora de Fundos Invest. Imob., S.A. 306 239 

17 935 16 638 

Unquoted 17 935 16 638 

Equity method 17 935 16 638 

The main indicators of the associated companies are analysed as follows: 

31 December, 2005 

Assets Liabilities Income Profit 


Lusitania, Companhia de Seguros, S.A. 238 989 205 234 113 039 2 813 


HTA – Hotéis, Turismo e Animação 

256 609 241 090 112 900 2 335 

dos Açores, S.A. 

Norfin – Soc. Gestora de Fundos 

66 523 53 207 7 966 (1 150) 

Invest. Imob., S.A. 3 677 588 2 973 1 251 

31 December, 2004 

Lusitania, Companhia de Seguros, S.A. 212 109 182 354 108 894 2 677 



198 843 185 757 93 714 1 173 

dos Açores, S.A. 


76 104 61 637 3 587 (1 236) 

Invest. Imob., S.A. 2 906 488 2 428 991 

Caixa has a portfolio of investments in associated companies. Associated companies are all permanent 

investments in which Caixa exercises significant influence but does not have control. The activity of the 

referred companies should complement the one developed by Caixa. 

237

238 

Lusitania, Companhia de Seguros, S.A. was established on 6 June, 1986, and its purpose is the practice 

of insurance and reinsurance for all technical areas, with the exception of life insurance. The company’s 

share capital amounts to Euros 19 250 000 and its shareholders, in addition to Caixa, are Montepio 

Geral – Associação Mutualista (65.71%) and Lusitania Vida, Companhia de Seguros, S.A. (3.32%). 

Lusitania Vida, Companhia de Seguros, S.A. was established on 15 May, 1987, and its purpose is the 

practice of all forms of life insurance and reinsurance. The company’s share capital amounts to Euros 

9 000 000 and its shareholders, besides Caixa, are Montepio Geral – Associação Mutualista (39.22%) 

and Lusitania, Companhia de Seguros, S.A. (11.17%). 

To carry out their operations both companies have their own branches and a network of insurance brokers 

using also Caixa's branches to sell their products. 

As at 31 December, 2005, the companies considered for consolidation purposes are analysed as follows: 

Head Share % Held Consolidation 

Subsidiary office Capital Currency Activity by Caixa method 

Lusitania, Non-life 

Companhia de Seguros, S.A. Lisbon 19 250 000 Euros insurance and Equity 

reinsurance 26% method 

Lusitania Vida, Life insurance 

Companhia de Seguros, S.A. Lisbon 9 000 000 Euros and Equity 

reinsurance 39% method 

Banco Montepio Geral – Cabo Full 

Verde, Soc. Unipessoal, S.A. (IFI) Praia 772 .000 000 CVE Banking 100% consolidation 

method

24. Property and equipment 


Cost: 




For own use 66 304 66 567 

Leasehold improvements in rented buildings 31 841 31 563 

Work in progress 82 82 

Equipment: 

Furniture 9 277 9 417 

Office equipment 2 737 2 875 

Hardware 26 969 41 453 


Motor vehicles 1 464 1 655 

Security equipment 2 621 2 572 

Works of art 419 404 


Work in progress 1 249 735 


163 378 176 905 



(82 969) (92 642) 

80 409 84 263 

239

240 

The Property and equipment movements, during the year 2005, are analysed as follows: 

Cost: 

Balance on Acquisitions/ Adjustment/ Balance on 

1 January Charges Disposals Transfers 31 December 



For own use 

Leasehold improvements 

66 567 – (263) – 66 304 

in rented buildings 31 563 155 – 123 31 841 

Work in progress 82 – – – 82 

98 212 155 (263) 123 98 227 

Equipment: 

Furniture 9 417 80 (220) – 9 277 


Hardware 41 453 1 907 (16 387) (4) 26 969 

Interior installations 19 552 519 – 314 20 385 


Security equipment 2 572 49 – – 2 621 

77 524 2 642 (17 023) 310 63 453 

Works of art 404 15 – – 419 


Work in progress 735 947 – (433) 1 249 


176 905 3 759 (17 286) – 163 378 


For own use 

Leasehold improvements 

11 457 1 043 (34) – 12 466 

in rented buildings 17 065 2 978 – – 20 043 

Equipment: 

Furniture 6 909 699 (212) – 7 396 


Hardware 40 016 1 254 (17 205) 10 24 075 

Interior installations 11 282 1 766 – (10) 13 038 


Security equipment 2 055 172 (4) – 2 223 

92 642 8 200 (17 873) – 82 969

25. Intangible assets 


Cost: 



Set up costs and key money 33 33 

Software 19 618 15 132 

Assets advances 24 – 

19 675 15 165 




(14 124) (11 238) 

5 551 3 927 

The Intangible assets movements, during the year 2005, are analysed as follows: 

Cost: 

Balance on Acquisitions/ Balance on 

1 January Charges 31 December 


Set up costs and key money 33 – 33 

Software 15 132 4 486 19 618 

Assets advances – 24 24 

15 165 4 510 19 675 


Software 11 238 2 886 14 124 

241

242 

26. Other assets 




Investments arising out of recovered loans 112 948 108 913 



Other accrued income 2 623 4 869 

Prepayments and deferred costs 1 005 1 250 

Sundry debtors 14 764 35 883 

157 785 183 078 

Impairment for investments arising out of recovered loans (13 382) (8 966) 

144 403 174 112 

The balance Investments arising out of recovered loans includes the buildings recovered related with 

overdue loans in the amount of Euros 104 016 000 (2004: Euros 104 071 000). The referred buildings 

are recognised in accordance with the accounting policy described in note 1.13. 

As at 31 December, 2005 and 2004, this balance also includes the amount of Euros 4 804 000 related 

to 963 316 investment fund units of Fundo de Investimento Imobiliário Fechado – Margueira Capital, 

resulting from Lisnave’s restructuring debt agreement. These investment fund units are totally guaranteed 

by the Portuguese Government. 

The balance Recoverable subsidies from the Portuguese Government, in the amount of Euros 21 222 000 

(2004: Euros 29 906 000), corresponds to mortgage credit interest subsidies, in accordance with the 

regulations applicable to mortgage loans benefits. The referred amounts do not bear interest and are 

claimed monthly.






Subsidies unclaimed 10 479 12 486 

Overdue subsidies unclaimed 6 217 381 

21 222 29 906 


includes an amount of Euros 3,473,000 not-recognised by the treasury authorities. This amount is 

totally provided for in the balance Provisions, as referred in note 31. 

The impairment for investments arising from recovered loans is analysed as follows: 






Amounts charged off (1 531) – 


27. Deposits from other credit institutions 



Non interest Interest Non interest Interest 

bearing bearing Total bearing bearing Total 


European Central Bank – – – – 100 047 100 047 

Credit institutions in Portugal – 148 380 148 380 – 73 478 73 478 

Credit institutions abroad 10 751 547 470 558 221 8 809 506 881 515 690 

10 751 695 850 706 601 8 809 680 406 689 215 

243

244 

The balance Deposits from other credit institutions, analysed by the period to maturity, is as follows: 



Up to 3 months 31 417 189 190 

3 months to 6 months 141 454 1 737 

6 months to 1 year 4 146 908 

1 year to 5 years 463 843 439 380 


701 143 689 215 

Adjustments arising from hedging operations 5 458 – 

706 601 689 215 

28. Deposits from customers 



Non interest Interest Non interest Interest 

bearing bearing Total bearing bearing Total 


Deposits repayable on demand 2 241 727 – 2 241 727 2 153 298 – 2 153 298 

Time deposits (*) – 3 780 142 3 780 142 – 3 521 744 3 521 744 

Saving accounts (*) – 1 756 528 1 756 528 – 1 948 088 1 948 088 

Other items 

Adjustments arising from 

2 498 – 2 498 156 – 156 

hedging operations – (1 369) (1 369) – _ – 

2 244 225 5 535 301 7 779 526 2 153 454 5 469 832 7 623 286 

Observations: (*) Deposits for which the embedded derivative was separate from the host contract, in accordance with note 21 and 

accounting policy in note 1.5. 

In accordance with Regulation No. 180/94, of 15 December, the Deposit Guarantee Fund was established 

to guarantee the reimbursement of funds deposited in Credit Institutions. The calculations of the 

annual contributions for this Fund are based on the criteria laid out in Regulation No. 11/94, of the 

Bank of Portugal.

The balance Deposits from costumers, analysed by the period to maturity, is as follows: 



Deposits repayable on demand 2 241 727 2 153 298 

Time deposits and saving accounts: 

Up to 3 months 3 257 519 2 990 998 

3 months to 6 months 866 065 1 360 485 

6 months to 1 year 684 234 692 459 

1 year to 5 years 681 191 405 703 


5 536 670 5 469 823 

Adjustments arising from hedging operations (1 369) – 

5 535 301 5 469 832 

Other items: 

Up to 3 months 2 498 156 

5 537 799 5 469 988 

7 779 526 7 623 286 

29. Debt securities issued 

The balance Debt securities issued is related with Bonds issued. This balance, analysed by the period to 

maturity, is as follows: 



Up to 6 months 558 209 316 217 

6 months to 1 year 199 925 330 000 

1 year to 5 years 2 521 709 2 112 270 

More than 5 years 1 788 067 165 000 

5 067 910 2 923 487 

Adjustments arising from hedging operations (1 169) – 

5 066 741 2 923 487 

245

246 

As at 31 December, 2005, the balance Bonds is comprised of the following issues: 

Issue Reimbursement Interest 2005 


Bonds issued: 

Obr. CEMG / 01 1.ª Emissão Mar. 2001 Mar. 2006 Euribor 3 months + 0.35% 250 000 

Obr. CEMG / 01 2.ª Emissão Jun. 2001 Jun. 2006 Fixed rate of 5.25% 300 000 

Obr. CEMG / 02 1.ª Emissão Jan. 2002 Jan. 2012 Euribor 6 months + 1% 50 000 

Pelican Mortage No. 1 Dec. 2002 Dec. 2037 W.A.I. – 1.33% 413 817 

Pelican Mortage No. 2 Sep. 2003 Sep. 2036 W.A.I. – 1.53% 573 671 

Obr. CEMG / 03 Mar. 2003 Mar .2008 Fixed rate of 3.8% 100 000 

Obr. CEMG / 03 Aug. 2003 Aug. 2009 Fixed rate of 3.548% 100 000 

Obr. CEMG / 03 Nov. 2003 Nov. 2008 Pribor 6 months + 0.18% 17 241 

Obr. CEMG / 03 Nov .2003 Nov. 2008 Euribor 3 months + 0.30% 200 000 

Obr. CEMG / 03 Jan. 2004 Nov. 2008 Euribor 3 months + 0.30% 100 000 

Obr. CEMG / 04 Feb. 2004 Aug. 2007 Fixed rate of 3.25% 120 000 

Obr. CEMG / 04 Mar. 2004 Mar. 2007 Euribor 3 months + 0.20% 400 000 

Obr. CEMG / 04 Mar. 2004 Mar. 2009 Hibor 3 months + 0.26% 10 933 

Obr. CEMG / 04 Jul. 2004 Jul. 2006 Euribor 3 months + 0.125% 200 000 




Obr. CEMG / 04 Sep. 2004 Sep. 2009 Fixed rate of 4.6% 17 241 


Obr. CEMG / 04 Feb. 2005 Nov. 2009 Euribor 3 months + 0.25% 300 000 

Obr. CEMG / 05 Feb. 2005 Feb. 2015 Fixed rate of 3.5% 125 000 

Obr. CEMG / 05 Mar. 2005 Mar. 2015 Euribor 3 months + 0.25% 5 000 

Obr. CEMG / 05 May 2005 May 2012 Euribor 3 months + 0.25% 500 000 

Obr. caixa MG Aforro 1.ª Em. Aug. 2005 Aug. 2009 Fixed rate of 1.85% 19 000 

Obr. CEMG / 05 Sep. 2005 Sep. 2010 Euribor 3 months + 0.20% 500 000 

Obr. CEMG / 05 Oct. 2005 Sep. 2010 Euribor 3 months + 0.20% 125 000 


Obr. caixa MG Cabaz TOP 

Oct. 2005 Oct. 2009 Fixed rate of 1.85% 62 000 

1.ª Emissão Oct. 2005 Oct. 2007 Fixed rate of 2% 8 500 


Obr. caixa MG 

Nov. 2005 Nov. 2009 Fixed rate of 1.85% 14 000 

Especial Poupança Nov. 2005 Nov. 2010 Fixed rate of 1.85% 23 000 

Obr. caixa MG Aforro 4.ª Em. Dec. 2005 Dec. 2009 Fixed rate of 1.85% 52 000 

Obr. caixa MG Business Invest Dec. 2005 Dec. 2008 Fixed rate of 2% 26 500 

Obr. caixa MG Aforro Especial Dec. 2005 Dec. 2008 Fixed rate of 5% 30 000 

5 057 903 

Adjustments arising from hedging operations (1 169) 

Accruals, deferred costs and income 10 007 

5 066 741 

As at 31 December, 2005, for the bonds issued bear postponed and anticipated interest at an effective 

interest rate ranging between 1.85% and 5.25%. 

The CEMG/02 1.ª Emissão cash bonds present a 6% cap.

The MG Cabaz Top 1.ª Emissão bonds present a 2% floor. 

The reimbursements of bonds in 2005, are analysed as follows: 

Reimbursement 

Issue Reimbursement Interest amount 


Bonds issued: 

Obr. CEMG / 04 Apr. 2004 Apr. 2005 Euribor 3 months + 0.07% 5 000 

Obr. CEMG / 02 2.ª Emissão May 2002 May 2005 Fixed rate of 5% 300 000 

Obr. CEMG / 00 1.ª Emissão Jul. 2000 Jul. 2005 Euribor 3 months + 0.30% 130 000 

Obr. CEMG / 00 2.ª Emissão Oct. 2000 Oct. 2005 Euribor 3 months + 0.325% 200 000 

The Debt securities issued with reimbursement date during 2006 amount to Euros 750 000 000. 

30. Financial liabilities held for trading 


635 000 



Currency derivatives 23 – 

Interest rate derivatives 14 943 – 

Options 300 – 

15 266 – 

The valuation of embedded derivatives separated from the host contract recognised as trading instruments 

are recorded in the balance Interest rate derivates 

247

248 

31. Provisions for liabilities and charges 




Other provisions for liabilities and charges 1 470 1 349 

Provisions for general banking risks 3 683 4 265 

5 153 5 614 

The other provisions for liabilities and charges are analysed as follows: 



Balance on 1 January 1 349 50 



Amounts charged-off (90) (903) 


The provision for general banking risks is analysed as follows: 





Amounts charged-off (551) – 

Balance on 31 December 3 683 4 265

32. Subordinated debt 




Cash bonds 9 982 30 048 

Bonds with fixed maturity date 149 770 150 017 

Perpetual bonds 150 897 150 478 

310 649 330 543 

As at 31 December, 2005, the subordinated debt issues, are analysed as follows: 

Issue Reimbursement Interest Number of Dec. 2005 

Issue date date date bonds Euros '000 

Cash bonds: 

CEMG / 96 Dec. 1996 Dec. 2006 Euribor 6 months + 0.20% 4 987 978 972 9 982 

Bonds with fixed 

maturity date: 

CEMG / 03 1. a Em. Feb. 2003 Feb. 2013 Euribor months + 1.3% 10 000 99 784 

CEMG / 03 2. a Em. May 2003 Feb. 2013 Euribor months + 1.3% 5 000 49 986 

Perpetual bonds: 

149 770 

CEMG / 99 May1999 Undetermined Euribor 3 months + 1.1% 1 000 000 50 267 

CEMG / 01 Jul. 2001 Undetermined Euribor 3 months + 1.1% 2 000 000 100 630 

150 897 

310 649 

The CEMG/95 and CEMG/96 cash bonds have a maximum maturity of 10 years. However, they are 

redeemable over the last five years by reduction of 20% of their nominal value each year. 

At the end of the seventh year of the CEMG/99 and CEMG/01 perpetual bonds and subsequently at 

each interest payment date, Caixa can reimburse the bonds in full at par, after authorisation of the Bank 

of Portugal. If the bonds are not reimbursed during that period the interest rate spread will be increased 

to 210 basis points. These issues are listed at Euronext. 

The CEMG/03 subordinated bonds have an anticipated reimbursement option in 2008. 

As at 31 December, 2005, the effective interest rate range of the subordinated debt bears postponed 

interest every three and six months is set between 2.88% and 3.75%. 

249

250 

The reimbursements of subordinated debt in 2005, are analysed as follows: 

Issue Reimbursement Interest Number of Reimbursement 

Issue date date date bonds amount 

CEMG/95 Jan. 1995 Jan. 2005 Euribor 6 months + 0.25% 3 990 383 174 9 976 

CEMG/96 Dec. 1996 Dec. 2006 Euribor 6 months + 0.20% 4 987 978 972 9 976 

19 952 

The analysis of the subordinated debt, by the period to maturity, is as follows: 



Up to 1 year 9 982 10 086 

1 year to 5 years – 19 962 


310 649 330 543 

33. Other liabilities 




Suppliers 5 046 2 958 

Other creditors 34 431 8 540 

Public sector 7 550 7 247 

Interest payable 5 578 7 432 

Holiday pay and subsidies 19 950 14 156 

Other administrative costs payable 340 113 

Deferred income 548 627 

Valuation changes in investments – 2.921 

Other sundry liabilities 110 516 111 790 

183 959 155 784 

As at 31 December, 2005, the balance Other sundry liabilities includes the additional contribution to the 

Fund in the amount of Euros 39 860 000 made by Caixa during 2006 with value date of 2005.

34. Share capital 

On 30 March, 2005, following the General Assembly deliberation, Caixa increased the share capital in 

the amount of Euros 40 000 000, by cash transfer. 

After the referred operation, the share capital of Caixa amounts to Euros 485 000 000, totally subscribed 

by Montepio Geral – Associação Mutualista. 

35. General and special reserve 

The general and special reserves are charged under the scope of Decree-Law No. 136/79, of 18 May. 

The general reserve is charged to cover any risk and extraordinary losses or depreciation. 

Under the Portuguese regulations, the general reserve should be charged, at least, in a minimum of 

20% of the profit for the year. The limit of general reserve is 25% of total deposits. This reserve is not 

available for distribution and it can be used to improve future income performances or to increase 

capital. 

The special reserve is charged to cover losses from current operations. Under the Portuguese regulations, 

the special reserve should be charged, at least, in a minimum of 5% of the profit for the year. This 

reserve is not available for distribution and it can be used to improve income performances or to 

increase capital. 

36. Fair value reserves, other reserves and retained earnings 




Fair value reserves (148) – 

Reserves and retained earnings 

General reserve 122 136 115 527 

Special reserve 52 306 50 654 

Other reserves 4 337 4 415 

Retained earnings (121 252) (117 146) 

57 527 53 450 

57 379 53 450 

The Fair value reserves correspond to the accumulated fair value changes of the financial instruments 

available for sale, in accordance with the accounting policy described in note 1.5. 

As at 31 December, 2005, the balance Retained earnings includes the trasition adjustments in the 

amount of Euros 124 714 000 (2004: Euros 119 788 000). 

251

252 





Guarantees granted 281 027 275 249 

Guarantees received 31 376 921 29 084 661 

Commitments to third parties 1 328 288 1 171 311 


Securitised loans 973 068 1 131 544 

Amounts received on deposit 4 556 235 4 267 236 

The amounts of Guarantees granted and Commitments to third parties are analysed as follows: 

Guarantees granted: 



Guarantees 278 580 273 415 

Open documentary credits 2 447 1 834 

281 027 275 249 

Commitments to third parties: 



Irrevocable commitments 

Term deposits contracts 5 327 6 213 

Irrevocable credit lines 

Annual contribution to the obligations 

191 904 151 635 

of Guarantee Deposits Fund 18 859 18 071 

Potential obligation with the Investors’ Indemnity System 

Revocable commitments 

1 896 1 679 

Revocable credit lines 1 110 302 993 713 

1 328 288 1 171 311 

As at 31 December, 2005 and 2004, the balance Annual contribution to the obligations of Guarantee 

Deposits Fund is related with the irrevocable commitment assumed by Caixa and required by law, to 

deliver the unrealised amounts of annual contributions required by the Fund.

The balance Potential obligation with the Investors’ Indemnity System, as at 31 December, 2005 and 

2004, is related with the irrevocable commitment assumed by Caixa and required by law, to deliver to 

that System the necessary amounts for Caixa’s obligation with the investors’ indemnities to be paid. 

The financial instruments recorded in off-balance sheet accounts, are also subject to the same control 

and approval procedures required for the credit portfolio. The Management does not anticipate any 

material losses as a result of these transactions. 

38. Distribution of profit 

On 30 March, December, 2005, following the General Assembly deliberation, Caixa distributed to Montepio 

Geral – Associação Mutualista in the amount of Euros 24 782 000 (2004: Euros 16 119 000). 

39. Relevant events occurred during 2005 

Montepio Geral – Cayman liquidation 

On 30 November, 2005, CEMG liquidated Montepio Geral – Cayman. 

Banco Montepio Geral – Cabo Verde, Sociedade Unipessoal, S.A. (IFI) establishment 

Banco Montepio Geral – Cabo Verde, Sociedade Unipessoal, S.A. (IFI) was established on 16 August, 

2005 and its purpose is the internationalisation of Caixa, namely to enable it to obtain and maintain 

funds and provide clients alternatives outside the domestic market. The company's share capital 

amounts to CVE 772 000 000 being fully subscribed and paid by Caixa. 

40. Transition adjustments to IFRS 

In accordance with Regulation No. 1606/2002 of the European Parliament and European Council of 19 

July, 2002, the consolidated financial statements of Caixa have to be prepared in accordance with International 

Financial Reporting Standards («IFRS») for the period starting at 1 January, 2005. 

The accounting policies described in note 1.1 to 1.20 were used in the preparation of the financial statements 

as at and for the year ended 31 December, 2005, in the preparation of the comparative financial 

information for the year ended 31 December, 2004, as well in the preparation of the opening consolidated 

balance sheet in accordance with the IFRS as at 1 January, 2004 (transition date). 

Until 31 December, 2004, Caixa’s consolidated financial statements were prepared in accordance with 

the generally accepted accounting principles in Portugal, in accordance with the Plan of Accounts for 

the banking sector as established by the Bank of Portugal («Local GAAP»). 

253

254 

The major differences between Local GAAP and IFRS, with impact in Caixa's consolidated financial statements 

as at 1 January and 31 December, 2004 and 1 January, 2005 and the reconciliation of consolidated 

equity and consolidated profit as at those dates are presented as follows: 

1 January 1 January 

2005 31 December, 2004 2004 

Equity Equity Profit Equity 


Local GAAP Note 653 096 653 096 34 858 595 986 

Adjustments to IFRS 

Retirement pensions 

and other post- 

-retirement benefits 

Valuation of investments in 

associates and financial 

(a) (117.499) (117.499) – (103.046) 

assets (b) (745) (2.289) – (932) 

Loan portfolio impairment (c) 4.698 – – – 

Effective interest rate 

Impact of the consolidation 

(d) (13.693) – – – 

of SPE 

Hedging accounting and 

(e) (2.724) – – – 

embedded derivatives 

Financial assets and 

liabilities through income 

(f) 1.639 – – – 

statement 

Total of transition 

(g) 3.610 – – – 

adjustments (124.714) (119.788) – (103.978) 

IFRS 528.382 533.308 34.858 492.008 

The major adjustments are analysed as follows: 

a) Retirement pensions and other post-retirement benefits 

Until 31 December, 2004 and in accordance with Local GAAP the value of actuarial gains and losses 

was calculated on an annual basis and registered against income in accordance with the corridor 

method. Following this method and as established in regulations No. 12/2001 and No. 7/2002, the 

value exceeding the corridor is recognised in deferred costs and amortised against income over a 

period of 10 years, based on its balance at the end of the previous year. 

As established by IFRS 1, Caixa elected at transition date, 1 January, 2004, to recognise the impacts 

of the application of IAS 19 requirements against equity (defined as reset method). Transition adjustments 

to retirement pensions and other post-retirement benefits includes the recognition of obligation 

with health care, which were recognised at payment date in accordance with Local GAAP. 

The transition adjustment calculated for retirement pensions and other post-retirement benefits, 

referred above, represented at the transition date a decrease in equity of Caixa as at 1 January, 2004 

in the amount of Euros 103 million.

The adjustment for retirement pensions and other post-retirement benefits, as at 1 January, 2004 

and 31 December, 2005, is analysed as follows: 

Amounts accumulated 

1 Jan. 2004 31 Dec. 2004 


Obligations with healthcare benefits 18 182 19 470 

Deferred actuarial costs, corridor and disability decreases 33 019 47 450 

Other liabilities increases 51 845 50 579 

Total 103 046 117 499 

b) Valuation of investments in associates and financial assets 

i) Financial assets 

Under Local GAAP, the fixed income and variable income securities are recorded at nominal value 

and cost, respectively and the potential losses resulting from the difference between the carrying 

amount and market value are fully provided against income statement. 

In accordance with IFRS, and as referred in the accounting policy presented in note 1.4, the securities 

which are held as available for sale are carried at fair value, and the difference between the 

acquisition cost and the market value is accounted for against fair value reserves. These financial 

assets are periodically subject to impairment tests. 

ii) Investments in associates 

Investments in companies where the investment represented less than 20% of the share capital 

and on which Caixa did not exercise significant influence but considered as strategic investments, 

until 31 December 2004, were accounted for at cost in accordance with Local GAAP deducted of 

provisions calculated according to the following criterion: 

– the set-up of provisions was required whenever the potential losses were higher than 15% of the 

acquisition cost of the investment. The minimum provision to be constituted corresponded to 

40% of the loss that exceeded 15% of the investment and the value not provisioned of this 

excess was deducted to the own funds for capital adequacy purposes; 

– the set-up of the provisions referred to above, corresponded to 40% of the losses that exceeded 

15% of the investment, for all investments acquired before 31 December, 2001, and depending 

on the nature of the activity of the company in which the investment was held, the provision was 

accrued over the following periods: 

Investment Period % 

Financial and insurance companies 2002 to 2011 10% per year 

Non financial companies 2002 to 2004 25% per year 

2005 15% 

2006 10% 

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The adjustment as at 1 January, 2004 and 31 December, 2004 refers to investments transition 

adjustments attributable to Caixa. 

c) Loan porfolio impairment 

According to IAS 39, and as referred in the accounting policy presented in note 1.3, the credit portfolio 

is carried at amortised cost and is subject to impairment tests. As a result of the policy followed 

by Caixa in Local GAAP, the adoption of IAS 39 did not introduce substantial changes to the assessment 

of the economic risk associated to the credit portfolio or to the impairment criteria, therefore 

the increase of provisions for credit risks amounting to Euros 4.7 millions, mainly as a result of the 

introduction of the discounted cash flows method in impairment calculation. 

d) Effective interest rate 

Fee and commission income was previously accounted for, in accordance with Local GAAP, in the 

period when the service was charged to the customers, except when charged to cover the costs of a 

continuing service over a period. In these cases, income was recognised on an appropriate basis over 

the relevant period. 

Under IFRS, the main change in accounting relates to loan fee income and incremental income and 

costs that are directly attributable to loan origination, which are amortised against the income statement 

over the expected life of the loan as part of the effective interest rate calculation. 

e) Impact of the consolidation of SPE’s 

Under Local GAAP, the assets, securities and credit portfolios, transferred under securitisation programmes 

were derecognised from the consolidated balance sheet with the respective gain or loss, 

calculated as the difference between the proceeds from the sale and the book value of the assets 

transferred, being recognised in the profit and loss account in the period. 

The retained interests, in the form of notes, acquired by Caixa as part of these transactions were 

accounted for at cost. As established in the Instruction No. 27/2000 and No. 18/2003 of the Bank of 

Portugal, Caixa made provisions in its own financial statements in the same terms as if the loans and 

securities transferred were accounted in the respective balance sheet up to a maximum amount 

equivalent to the acquisition cost of the notes (retained interests) and other assets acquired. If the 

Seller held clean-up calls which did not state explicitly that the underlying assets could be reacquired 

at its market value, the maximum amount of provisions to be set up was the higher of the following 

amounts: 

– the acquisition cost of the notes or other assets acquired under the securitisation; 

– the amount of assets that corresponded to the exercise of the clean-up call. 

In accordance with IFRS 1, the derecognition criterion followed in the financial statements of Caixa 

according to Local GAAP, as described above, did not change for all the operations carried out until 

1 January, 2004. 

All the operations carried out since then, were analysed considering the derecognition rules established 

by IAS 39. 

In addition, and even for assets eligible for derecognition under IAS 39, the consolidation of the vehicles 

(SPEs) which acquired the assets, loans and securities through securitisation operations was 

analysed under SIC 12. 

In accordance with SIC 12, Caixa consolidated by the full consolidation method the financial statements 

of the operations Pelican Mortgages No. 1 and Pelican Mortgages No. 2. The adjustment 

made reflect the effect of the consolidation of these entities.

f) Hedge accounting and embedeed derivatives 

In accordance with Local GAAP, the hedging derivatives transactions are registered in Obligations and 

future commitments (Off-balance sheet) for the notional amount of the contracts, until the maturity 

of the contracts. The hedging contracts were not revalued and the interest receivable and payable 

was accrued over the period of the contracts. 

In accordance with IFRS 1, and with the accounting policy presented in note 1.5, the transition date 

for adoption of IAS 39 was 1 January 2005. The adoption of IAS 39 had a significant impact in the 

procedures and systems of Caixa, as a result of the following aspects: i) classification of the operations 

under the scope of the rules applicable to each operation ii) complexity in complying with the 

criteria related to hedging; iii) rigorous valuation requirements; and iv) requirements underlying hedge 

accounting and embedded derivatives. 

On this basis, Caixa identified the operations which had been considered for hedging purposes in 

accordance with Local GAAP and simultaneously identified the hedging models to be adopted under 

IAS 39. Thus, considering the current policy of hedging of risks defined by Caixa and with the purpose 

of minimizing the volatility of results, fair value hedge accounting model was adopted for financial 

assets and liabilities that generate fixed income and for which Caixa intends to reduce the exposure 

to fair value hedge variations. When a derivative financial instrument hedges the exposure to 

changes in the fair value of an asset or liability, the hedged item is stated at fair value in respect of 

the risk being hedged. Gains or losses on remeasurement of both the hedging instrument and the 

hedged item are recognised in the income statement. 

Embedded derivatives are accounted for separately as derivatives if the economic characteristics and 

risks of the embedded derivative are not closely related to the host contract with changes in fair 

value recognised directly in the income statement. Embedded derivatives are classified as trading and 

accounted for at fair value with changes through profit and loss. 

g) Financial assets and liabilities through income statement 

In accordance with IAS 39 revised at July, 2005, Caixa registered financial assets and liabilities at fair 

value through profit or loss recognised before as fair value accounting hedge items and financial liabilities 

with embedded derivatives. 

The classification of these items was changed in accordance with paragraph 105B of revised version 

of IAS 39 at June, 2005 and designated at fair value through profit and loss. 

As at 1 January, 2005, the transition adjustment includes the adjustment of fair value of financial liabilities 

through profit and loss, as well as the adjustment of derivatives fair value contracted by Caixa 

in the associate market. 

Fair value of financial assets and liabilities through profit and loss are initially recognised at fair value, 

with transaction costs and profits recognised through profit and loss, and subsequently recognised at 

fair value. Subsequent costs and profits resulting from changes in fair value, interest accrual and dividends 

receipts are recognised in balance Net gains arising from trading and hedging activities of 

income statement. 

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41. Balance sheet and average rates 

The book average value of assets and liabilities, as well average interest rates are analysed as follows: 

Assets generations of interest: 


Average Average 

balance Rate balance Rate 

Euros '000 % Euros '000 % 

Loans and advances to credit institutions (1) 1 190 277 1.99% 1 735 342 1.09% 

Securities 474 869 3.36% 129 105 4.97% 

Loans and advances to costumers 12 471 194 3.84% 10 387 071 4.27% 

Assets held for trading 4 804 2.17% 4 804 2.18% 

Total of assets generations of interest 14 141 144 4.25% 12 256 322 4.55% 

Assets not generations of interest 708 068 442 587 

Total Assets 14 849 212 12 698 909 

Liabilities generations of interest: 

Deposits from credit institutions (1) 81 870 2.31% 453 179 2.45% 

Deposits from costumers 7 602 712 1.77% 7 713 096 1.78% 

Debt securities issued 4 044 960 2.91% 3 037 609 3.16% 

Subordinated debt 320 335 3.32% 339 904 3.23% 

Liabilities held for trading – – 

Total liabilities generations of interest 12 049 877 2.71% 11 543 788 2.70% 

Liabilities not generations of interest 1 748 319 184 141 


Equity 578 940 533 308 

Total Liabilities and Equity 14 377 136 12 261 237 

Net interest income (2) 1.94% 2.02% 

(1) – Includes interest related to obligation and future commitment transactions. 

(2) – Correlation between Net interest income and Total Assets generated interest.

42. Fair value 

The fair value of financial assets and liabilities accounted at book value and at fair value is analysed as 

follows: 

Financial assets: 


Book Fair Book Fair 

value value Difference value value Difference 


Loans and advances to 

credit institutions 

Loans and advances to 

910.571 910.740 169 1.067.612 1.067.602 (10) 

costumers 

Financial assets 

12.415.395 12.679.630 264.235 10.349.675 10.543.529 193.854 

held for trading 

Financial assets 

17.610 17.610 – – – – 

available for sale 678.666 678.666 – 281.784 281.784 – 

Financial liabilities: 

Deposits from credit 

institutions 706.601 706.601 – 689.215 689.215 – 

Deposits from costumers 7.779.526 7.305.432 (474.094) 7.623.286 7.186.326 (436.960) 

Debt securities issued 

Financial liabilities held 

5.066.741 5.066.741 – 2.923.487 2.923.487 – 

for trading 15.266 15.266 – – – – 

Subordinated debt 310.649 310.649 – 330.543 330.543 – 

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43. Pensions 

Caixa assumed the responsibility to pay to their employees, pensions on retirement or disabilities. These 

responsibilities also comply with the terms of the «Acordo Colectivo de Trabalho do Sector Bancário» 

(ACTV). To cover its responsibilities, Caixa makes annual contributions to the pension fund, managed by 

Futuro – Sociedade Gestora de Fundos de Pensões, S.A. 

As at 31 December, 2005 and 2004, the number of participants covered by this pension plan is analysed 

as follows: 

Number of participants 



Pensioners 451 426 

Employees 2 938 2 952 

3 389 3 378 

In accordance with the accounting policy, described in note 1.16, the pension obligation and the respective 

funding as at 31 December, 2005 and 2004 based on an actuarial valuation made using the projected 

unit credit method are analysed as follows: 

Projected benefit obligations 



Pensioners 115 393 97 345 

Employees 352 743 255 407 

468 136 352 752 

Value of the fund (327 721) (259 798) 

Unfunded liabilities 140 415 92 954 

Liabilities exempt from financing (140 415) (92 954) 

– – 

Liabilities from future services 355 026 242 743 

As at 31 December, 2005 there are no buildings in use or securities issued by Caixa recorded in the 

Pension Fund’s Financial Statements.

The change in the present value of obligations during 2004 and 2005 is analysed as follows: 






Expected return on plan assets 

Actuarial gains and losses 

(12 675) (12 385) 

Current 


(6 829) – 

Increase in future compensation levels 15 437 22 906 

Changes in discount rates 38 107 – 

Changes in mortality tables 43 585 – 

Contributions to the Fund (62 198) (36 814) 

Fund expenses (811) (461) 


The change in the fair value of assets of the Fund during 2005 is analysed as follows: 

Fair value of 

assets 

Euros '000 


Expected return on plan assets 12 675 

Actuarial gains and losses 1 124 

Contributions to the Fund 62 198 

Payments (8 074) 


The contributions to the Fund include the additional contribution in the amount of Euros 39 860 000 

made by Caixa during January 2006 with value date of 2005. The pension fund contributions in 2005 

were fully paid in cash. 

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The securities issued by companies of Caixa accounted on the portfolio of the Fund are analysed as follows: 




In accordance with IAS 19, deferred actuarial losses, including the corridor, as at 31 December, 2005 are 

analysed as follows: 

Actuarial losses 

Amount in 

excess of the 

Corridor corridor 


Balance on 1 January, 2005 22 906 – 

Actuarial gains and losses: 

Current 


– (6 829) 

Increase in future compensation levels 15 437 

Changes in discount rate 38 107 

Changes in mortality table 43 585 

Variation in the corridor 64 786 (64 786) 

Balance on 31 December, 2005 87 692 25 514 

As at 31 December 2005, considering the value of the actuarial gains and losses registered in the calculation 

of the benefit obligations and in the value of the Fund, the value of the corridor calculated in 

accordance with paragraph 92 of IAS 19, amounted to Euros 87 692 000 (2004: Euros 22 906 000). 

As at 31 December 2005, the net actuarial gains and losses in excess of the value of the corridor 

amounted to Euros 25 514 000 and will be recorded in results over a 25 year period considering the balance 

at the beginning of the year, as referred in the accounting policy presented in note 1.16. 

In 2005, Caixa accounted as pension costs the amount of Euros 20 170 000 (2004: Euros 17 339 000).

The analysis of the cost of the year is as follows: 





Expected return on plan assets (12 675) (12 385) 

Cost of the year 20 170 17 339 

Considering the market indicators, particularly the estimations of the inflation and the long term interest 

rate for Euro Zone as well as the demographic characteristics of the participants, Caixa changed the 

actuarial assumptions used for the calculation of the liabilities for the pension obligations with reference 

to 31 December, 2005. The comparative analysis of the actuarial assumptions is shown as follows: 


Increase in future compensation levels 3.00% 2.50% 

Pensions increase rate 2.00% 2.00% 

Projected rate of return of fund assets 4.75% 5.25% 

Discount rate 4.75% 5.25% 

Mortality tables TV 88/90 TV 73/77 

Disability rate SOA Trans Male SOA Trans Male 

The effect of the change in the discount rate and the mortality tables occurred in 2005, increased the 

liabilities of Caixa in the amount of Euros 38 107 000 and Euros 43 585 000, respectively. 

The assumptions used in the calculation of the pension liabilities are in accordance with the requirements 

of IAS 19. 

No disability retirements are considered in the calculation of the total liabilities. 

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44. Related parties 

As at 31 December 2005, Caixa had credits over subsidiaries, represented or not by securities, included 

in the items of Loans and advances to credit institutions and to customers are analysed as follows: 

Loans and 

advances to 

costumers 

Euros '000 

HTA – Hotéis, Turismo e Animação dos Açores, S.A. 20 600 

Unicre – Cartão Internacional de Crédito, S.A. 830 

Futuro – Sociedade Gestora de Fundo de Pensões, S.A. 274 

Credint – Consultoria Financeira e Creditícia, S.A. 660 

22 364 

As at 31 December 2005, the Caixa's liabilities with subsidiaries, represented or not by securities, 

included in items Deposits from credit institutions and to customers, Debt securities issued and in Subordinated 

debt, are analysed as follows: 

Deposits from 

Credit Deposits from Subordinated 

institutions Costumers debt Total 

Company Euros '000 Euros '000 Euros '000 Euros '000 

Lusitania, Companhia de Seguros, S.A. – 20 818 1 499 22 317 



– 17 795 2 048 19 843 

dos Açores, S.A. – 2 556 – 2 556 

Caixa Económica de Cabo Verde 

SIBS – Sociedade Interbancária 

3 615 – – 3 615 

de Serviços, S.A. 

MG Gestão de Activos Financeiros 

– 355 – 355 

– S.G.F.I.M., S.A. 

Futuro – Sociedade Gestora de Fundos 

– 46 385 – 46 385 

de Pensões, S.A. – 50 811 100 50 911 

Banco de África Ocidental, S.A. 


253 – – 253 

Invest. Imob., S.A. 

Credint – Consultoria Financeira 

– 11 082 – 11 082 

e Creditícia, S.A. – 153 – 153 

Bolsimo – Gest. Imob., Lda. – 58 – 58 

3 868 150 013 3 647 157 528

45. Segmental reporting 


Caixa offers a wide range of banking activities and financial services in Portugal and Cape Verde. 

Geographical Segments 

Aimed at the strategy of development, Caixa operates with special emphasis in the Portuguese and 

Cape Verde markets. Considering this, the geographical segments include Portugal and Cape Verde. 

The segment Portugal reflects, essentially, the activities carried by Caixa Económica Montepio Geral. The 

segment Cape Verde includes the business carried by Banco Montepio Geral – Cabo Verde, Sociedade 

Unipessoal, S.A. (IFI). 

As at 31 December, 2005, the net contribution of the major geografic segments is analysed as follows: 

Statement of income 

Cape 

Portugal Verde 

Adjustments Consolidated 

Interest income 602 808 576 (576) 602 808 

Interest expense 328 393 632 (576) 328 449 

Net interest income 274 415 (56) – 274 359 

Commissions and other income 84 906 – – 84 906 

Commissions and other costs 17 338 25 – 17 363 

Net commissions and other income 67 568 (25) – 67 543 

Net gains arising from trading activity 6 002 – – 6 002 

Staff costs and administrative costs 198 038 26 – 198 064 

Depreciations 11 085 1 – 11 086 

Total operating costs 209 123 27 – 209 150 

Impairment and provisions 82 562 – – 82 562 

Income before share of profit of associates 

under the equity method 56 300 (108) – 56 192 

Share of profit of associates under 

the equity method 1 551 – – 1 551 

Profit for the year 57 851 (108) – 57 743 

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Balance sheet Portugal 

Cape 

Verde 


Cash and Loans and advances to credit 

institutions 1 246 664 237 745 (236 443) 1 247 966 

Loans and advances to customers 12 415 395 – – 12 415 395 

Financial assets available for sale 685 667 – (7 001) 678 666 

Other assets 329 830 7 – 329 837 

Total Assets 14 677 556 237 752 (243 444) 14 671 864 

Deposits from other credit institutions 943 044 – (236 443) 706 601 

Deposits from customers 7 548 667 230 859 – 7 779 526 

Debt securities issued 5 066 741 – – 5 066 741 

Other liabilities 518 874 – – 518 874 

Total Liabilities 14 077 326 230 859 (236 443) 14 071 742 

Total Equity 600 230 6 893 (7 001) 600 122 

Total Liabilities and Equity 14 677 556 237 752 (243 444) 14 671 864 

As at 31 December, 2004, the net contribution of the major geographic segments is analysed as follows: 

Statement of income Portugal 

Cayman 

Islands 


Interest income 559 282 4 696 (4 696) 559 282 

Interest expense 312 119 3 561 (4 696) 310 984 

Net interest income 247 163 1 135 – 248 298 

Commissions and other income 80 326 – – 80 326 

Commissions and other costs 14 649 1 – 14 650 

Net commissions and other income 65 677 (1) – 65 676 

Net gains arising from trading activity (3 683) (54) – (3 737) 

Staff costs and administrative costs 192 363 7 – 192 370 

Depreciations 13 252 – – 13 252 

Total operating costs 205 615 7 – 205 622 

Impairment and provisions 70 842 – – 70 842 

Income before share of profit of associates 

under the equity method 32 700 1 703 – 33 773 

Share of profit of associates under the 

equity method 1 085 – – 1 085 

Profit for the year 33 785 1 703 – 34 858

Cayman 

Balance sheet Portugal Islands Adjustments Consolidated 

Cash and Loans and advances to credit 

institutions 1 350 838 147 417 (147 417) 1 350 838 

Loans and advances to customers 10 349 675 – – 10 349 675 

Financial assets available for sale 297 091 – (15 307) 281 784 

Other assets 278 940 – – 278 940 

Total Asset 12 276 544 147 417 (162 724) 12 261 237 

Deposits from other credit institutions 836 632 – (147 417) 689 215 

Deposits from customers 7 492 533 130 753 – 7 623 286 

Debt securities issued 2 923 487 – – 2 923 487 

Other liabilities 491 941 – – 491 941 

Total Liabilities 11 744 593 130 753 (147 417) 11 727 929 

Total Equity 531 951 16 664 (15 307) 533 308 

Total Liabilities and Equity 12 276 544 147 417 (162 724) 12 261 237 

46. Accounting standards recently issued 

The new standards and interpretations that have been issued, but are not yet effective and that Caixa 

has not yet applied in the preparation of the Financial Statements can be analysed as follows: 

IFRIC 8 – Scope of IFRS 2 

The International Financial Reporting Interpretations Committee (IFRIC) has issued on 12 January, 2006 

an Interpretation – IFRIC 8 Scope of IFRS 2, which is effective for annual periods beginning on or after 

1 May 2006. 

The Interpretation clarifies that the accounting standard IFRS 2 – Share-based Payment applies to 

arrangements where an entity makes share based payments for apparently nil or inadequate consideration. 

If the identifiable consideration given appears to be less than the fair value of the equity instruments 

granted or liability incurred, this situation typically indicates that other consideration has been or 

will be received. IFRS 2 therefore applies. 

The Amendment has not yet been endorsed by the European Commission (EC). 

This standard will not impact Caixa’s consolidated financial statements. 

IFRIC 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental 

Rehabilitation Funds 

The International Financial Reporting Interpretations Committee (IFRIC) has issued on 16 December, 

2004 an Interpretation – IFRIC 5 – Rights to Interests arising from Decommissioning, Restoration and 

Environmental Rehabilitation Funds, which is effective for annual periods beginning on or after 1 January, 

2006. 

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268 

IFRIC 5 explains how to treat expected reimbursements from funds set up to meet the costs of decommissioning 

plant (such as nuclear plant) or equipment (such as cars) or in undertaking environmental 

restoration or rehabilitation (such as rectifying pollution of water or restoring mined land). 


IFRIC 4 – Determining whether an Arrangement contains a Lease 

The International Financial Reporting Interpretations Committee (IFRIC) has released on 2 December, 

2004 an Interpretation – IFRIC 4 – Determining whether an Arrangement contains a Lease, which is 

effective for annual periods beginning on or after 1 January, 2006. 

IFRIC 4 gives guidance on determining whether arrangements that do not take the legal form of a lease 

(eg some take-or-pay contracts) should, nonetheless, be accounted for in accordance with IAS 17 

– Leases. It specifies that an arrangement contains a lease if it depends on the use of a specific asset and 

conveys a right to control the use of that asset. 

Caixa is evaluating the impact of adopting this amendment. 

IFRS 6 – Exploration for and Evaluation of Mineral Resources 

The International Accounting Standards Board (IASB) issued on 9 December, 2004 International Financial 

Reporting Standard 6 – Exploration for and Evaluation of Mineral Resources (IFRS 6). The publication of 

this IFRS provides, for the first time, guidance on accounting for exploration and evaluation expenditures, 

including the recognition of exploration and evaluation assets, and completes the first step in the 

IASB’s project to achieve the convergence of widely varying accounting practices for extractive activities 

around the world. 

IFRS 6 is effective for annual periods beginning on or after 1 January, 2006. However, earlier application 

is encouraged, and if an entity adopts IFRS 6 before 1 January, 2006, transitional relief is available for 

some comparative disclosures. 


Amendment to IAS 19 – Employee Benefits 

The International Accounting Standards Board (IASB) issued on 16 December, 2004 an amendment to 

IAS 19 – Employee Benefits, which is effective for annual periods beginning on or after 1 January, 2006. 

The IASB has decided to allow the option of recognising actuarial gains and losses in full in the period 

in which they occur, outside profit or loss, in a statement of recognised income and expense. 

Until now IAS 19 has required actuarial gains and losses (unexpected changes in value of the benefit 

plan) to be recognised in profit or loss, either in the period in which they occur or spread over the service 

lives of the employees. Many entities choose to spread the gains and losses. Under the amendment, 

entities that at present spread the gains and losses are not required to change their approach, but 

are now free to choose to do so. 

The amendment also (a) specifies how Caixa entities should account for defined benefit plans in individual 

financial statements and (b) requires entities to give additional disclosures.

The IASB has previously signalled its intention to undertake a comprehensive project on postemployment 

benefits, looking at fundamental aspects of measurement and recognition. 


Amendment to the hedge accounting provisions of IAS 39 – Financial Instruments: Recognition 

and Measurement 

The International Accounting Standards Board (IASB) issued on 14 April, 2005 an amendment to the 

hedge accounting provisions of IAS 39 – Financial Instruments: Recognition and Measurement. 

The IASB developed this amendment after constituents raised concerns that it was common risk management 

practice for entities to designate the foreign currency risk of a forecast intra-group transaction 

as the hedged item and that IAS 39 (as revised in 2003) did not permit hedge accounting for this. Furthermore, 

IAS 39 (as revised in 2003) created a difference from US accounting requirements on this 

point. 

Following publication of an Exposure Draft and extensive consultation with constituents, the IASB has 

decided to allow the foreign currency risk of a highly probable forecast intra-group transaction to qualify 

as a hedged item in consolidated financial statements. This is consistent with the provisions of the 

international accounting standard on foreign currency, IAS 21 – The Effects of Changes in Foreign 

Exchange Rates. 


Amendment to the fair value option in IAS 39 – Financial Instruments: Recognition and Measurement 

The International Accounting Standards Board (IASB) issued on 16 June 2005 an amendment to the fair 

value option in IAS 39 – Financial Instruments: Recognition and Measurement. The amendment is effective 

for annual periods beginning on or after 1 January, 2006, with earlier application encouraged. 

The IASB developed this amendment after commentators, particularly prudential supervisors of banks, 

securities companies and insurers, raised concerns that the fair value option contained in the 2003 revisions 

of IAS 39 might be used inappropriately. The option allowed entities to designate irrevocably on 

initial recognition any financial instruments as ones to be measured at fair value with gains and losses 

recognised in profit or loss. The purpose of the option was to simplify the application of the standard. 

Following publication of an exposure draft and extensive consultation with interested parties, the IASB 

has decided to revise the fair value option by limiting its use to those financial instruments that meet 

certain conditions. 


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IFRS 7 – Financial Instruments: Disclosures and a complementary Amendment to IAS 1 – Presentation 

of Financial Statements – Capital Disclosures 

The International Accounting Standards Board (IASB) issued on 18 August, 2005 International Financial 

Reporting Standard (IFRS) 7 – Financial Instruments: Disclosures and a complementary Amendment to 

IAS 1 – Presentation of Financial Statements – Capital Disclosures. 

The IFRS introduces new requirements to improve the information on financial instruments that is disclosed 

in entities’ financial statements. It replaces IAS 30 – Disclosures in the Financial Statements of 

Banks and Similar Financial Institutions and some of the requirements in IAS 32 – Financial Instruments: 

Disclosure and Presentation. The Amendment to IAS 1 introduces requirements for disclosures about an 

entity’s capital. 


Amendments to IAS 39 – Financial Instruments: Recognition and Measurement and IFRS 4 – 

Insurance Contracts 

The International Accounting Standards Board (IASB) issued on 18 August, 2005 amended requirements 

for financial guarantee contracts, in the form of limited amendments to IAS 39 – Financial Instruments: 

Recognition and Measurement and IFRS 4 – Insurance Contracts. 

The amendments are intended to ensure that issuers of financial guarantee contracts include the resulting 

liabilities in their balance sheet. The amendments define a financial guarantee contract as a «contract 

that requires the issuer to make specified payments to reimburse the holder for a loss it incurs 

because a specified debtor fails to make payment when due in accordance with the original or modified 

terms of a debt instrument». These contracts could have various legal forms, including a guarantee, 

some types of letter of credit, or a credit insurance contract. 

Issuers must apply the amendments for annual periods beginning on or after 1 January, 2006. 


Amendment to International Accounting Standard (IAS) 21 – The Effects of Changes in Foreign 

Exchange Rates 

The International Accounting Standards Board (IASB) issued on 15 December, 2005 a limited amendment 

to International Accounting Standard (IAS) 21 – The Effects of Changes in Foreign Exchange Rates. 

The amendment clarifies the requirements of IAS 21 regarding an entity’s investment in foreign operations 

and will therefore help the financial reporting of entities that invest in businesses operating in a 

currency different from that used by the entity. 

The Amendment has not yet been endorsed by the European Commission (EC).

9.8. STATUTORY AUDIT OPINION AND AUDITORS’ REPORT OF 

CONSOLIDATED FINANCIAL STATEMENTS 

Introduction 

1. In accordance with the applicable legislation, we present our Statutory Audit Opinion and Audit 

Report on the financial information included in the Annual Report of the Board of Directors and in 

the accompanying financial statements for the year ended 31 December, 2005, of Caixa Económica 

Montepio Geral, which comprise the Balance Sheet as at 31 December, 2005 (showing total assets of 

14 671 864 thousands of Euros and equity of 600 122 thousands of Euros, including a profit for the 

year of 57 743 thousands of Euros), the Statements of Income, the Statements of Cash Flows and 

Statement of Changes in Equity for the year then ended and the corresponding Notes. 

2. Financial statements and financial information are the same than account registered. 

Responsabilities 

3. It is the responsability of the Board of Directors: 

a) preparing financial statements that present truly and fairly the financial position of the consolidated 

companies, the consolidated results of its operations and its consolidated cash flows, in 

accordance with International Financial Reporting Standards (IFRS), as endorsed by European 

Union; 

b) maintaining historical financial information, prepared in accordance with the generally accepted 

accounting principles and that is complete, true, timely, clear, objective and lawful as required by 

Stock Exchange Code («Código dos Valores Mobiliários»); 

c) adopting adequate accounting criteria and policies; 

d) maintaining an appropriate system of internal control; and 

e) providing information of any relevant fact influencing the business of the consolidated companies, 

their financial situation or results. 

4. It is our responsability to verify the financial information included in the above referred documents, 

namely as to whether it is complete, true, timely, clear, objective and lawful as required by the Stock 

Exchange Code («Código dos Valores Mobiliários»), and to issue a professional and independent 

report based on our audit. 

Scope 

5. Our audit was performed in accordance with the Rules and Technical Recommendations of the Portuguese 

Institute of Chartered Accountants («Ordem dos Revisores Oficiais de Contas»), which require 

that we plan and perform the audit to obtain a reasonable degree of assurance as to whether or not 

the financial statements are free of material misstatements. Accordingly our audit included: 

– verification, based on sampling, of the documents underlying the figures and disclosures contained 

on the financial statements and an appraisal of estimates, based on judgements and criteria 

defined by the Board of Directors, used in their preparation; 

– verification of consolidation transactions; 

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– assessment of the appropriateness of the accounting policies used and of their disclosure, taking 

into account the circumstances; 

– verification of the applicability of the going concern principle; 

– assessment of the appropriateness of the overall presentation of the financial statements; and 

– assessment of whether the financial information, is complete, true, timely, clear, objective and lawful. 

6. Our review also includes the verification that the financial information contained in the Annual 

Report of the Board of Directors is consistent with the financial statements presented. 

7. We believe that our audit provides a reasonable basis for the expression of our opinion. 

Opinion 

8. In our opinion, the above mentioned consolidated financial statements present fairly in all material 

respects the financial position of Caixa Económica Montepio Geral as at 31 December, 2005, the 

consolidated results of its operations and consolidated cash flows for the year then ended in accordance 

with International Financial Reporting Standards (IFRS) as endorsed by the European Union, 

and the information contained therein is complete, true, timely, clear, objective and lawful. 





(Staturory Auditor no. 1081)

10. REPORT ON THE AUDIT WORK CARRIED OUT FOR THE YEAR 

ENDED 31 DECEMBER, 2005 

1. In accordance with point 2 of Article 451 of the Company Law and line a) of point 1 of Article 52 of 

Decree Law 487/99, of 16 November, we present the Repor on the Audit Work 

2. We have carried out a statutory audit of the individual and consolidated financial statements of Caixa 

Económica Montepio Geral for the year ended 31 December, 2005, in accordance with the Rules 

and Technical Recommendations of the Portuguese Institute of Chartered Accountants («Ordem dos 

Revisores Oficiais de Contas»), with the depth considered necessary in the circumstances. Following 

our audit we issued a statutory audit opinion and auditors’ report of individual and consolidated 

financial statements, both without reserves dated of today. 

3. Amongst others, the following procedures were adopted: 

(1) Accompanying the management of Caixa, including reading the relevant minutes of the Board of 

Directors and attending meetings with the Board members, on which we have requested and 

obtained any clarifications that we considered necessary. 

(2) Consideration as to the adequacy and consistent application of the accounting policies adopted by 

the Caixa and which are referred to in the notes to the financial statements. 

(3) Verification that the individual and consolidated financial statements, which comprise the Balance 

Sheet as at 31 December, 2005, the Statements of Income, the Statement of Cash Flow and Statement 

of Changes in Equity for the year then ended and the corresponding Notes. The first ones are 

in accordance with general accepted accounting principles in Portugal for banking sector. The consolidated 

financial statements are in accordance with International Financial Reporting Standards 

(IFRS), as endorsed by European Union. 

(4) Verification that the financial statements are in accordance with the supporting accounting 

records. 

(5) Analysis of Caixa’s internal control system, carrying out tests on a sample basis. 

(6) Analysis of the financial information disclosed, carrying substantive tests according to the materiality. 

– Loans to costumers analytical review; 

– Analysis and tests of bank reconciliations prepared by the Bank; 

– Written confirmation to Caixa’s banks; 

– Analysis of other Assets, other Liabilities, Prepayments and Accrued income and Accruals and 

Deferred income; 

– Assessment of the appropriateness of the depreciation policies of tangible and intangible assets; 

– Analysis of accruals recorded on Liabilities; 

– Analysis of Caixa’s tax requirements; 

– Analysis of costs and income, losses and gains registered in the year, particularly in its balance, 

accrual and deferral; 

– Analysis of operations and balances with related companies; 

– Analysis of information disclosed on notes to the financial statements. 

4. We reviewed the Directors report and its compliance with audit financial statements and legal 

requirements. 

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5. We required Management Representation Letter in accordance with the Rules and Technical Recommendations. 

6. We have determined that there are no significant matters arising from our audit which we consider 

should be brought to the Board of Directors attention. 

7. We take this opportunity to thank everyone for excellent collaboration received form Caixa’s Board of 

Directors, Directors and staff during the course of our work. 

Lisboa, 10 de March, 2006 




(Statutory Auditor No. 1081)

11. SOCIAL RESPONSIBILITY 

MG SOCIAL – MONTEPIO GERAL AND THE COMMUNITY 

As Montepio Geral is a Group of a mutualist nature operating in the field of social economy, it has 

always lent its support to society through the Associação Mutualista and the Caixa Económica and 

Group companies and more recently the Montepio Geral Foundation. 

Today there is a better perception and awareness of the importance of the actions, support and policies 

of Social Responsibility of Institutions as an effective contribution to the sustainable development of the 

society whereof they form part. Social Responsibility is now an important strategic area and, in particular, 

an area of great visibility. 

Montepio Geral has a great tradition in this area and has been concentrating its action – having 

assigned human resources to the field of Social Responsibility – on the Associação Mutualista structure, 

creating the «MG Social» concept whose visual identity is associated with all the actions of this area. 

The social responsibility area basically involved the granting, mainly through the Montepio Geral Foundation, 

of financial support to various entities. In 2005 support totalled 736 684.50 euros distributed in 

the manner set out below: 

SOCIAL RESPONSIBILITY – FINANCIAL SUPPORT 

AREAS 2005 

Arts/Sciences/Culture/Health 353.6 

Social Action/Welfare 316.9 

Scholarships 34.5 

Economy/Management/Social Sciences 21.7 

Studies on Mutualism 10.0 

TOTAL 736.7 

Worthy of special mention were the following: 

Thousands of euros 

a) In the field of Arts, Sciences and Culture – Support to the Lisbon Metropolitan Orchestra (125 000 

euros), the construction of the new library of the Faculty of Law of the University of Coimbra (25 000 

euros), the granting of the Prize to social scientists by the Social Studies’ Centre of Coimbra University 

(15 000 euros), the commemoration of the 75th Anniversary of Lisbon Technical University 

(10 000 euros), to the Portuguese Confederation of Collective Schemes (10 000 euros), to the 

research project into cot death by the Faculty of Pharmacy of Lisbon University (10 000 euros) and to 

the Agostinho da Silva Association (10 000 euros); 

b) In the Health area – Subsidy to the Association of Mutual Aid for Lisbon Commerce Employees to 

purchase radiology equipment (65 000 euros); 

c) In the Social Welfare field – Support to the Association of Parents and Friends of Child Cancer Sufferers 

– ACREDITAR (50 000 euros), to the EQUAL Project «P’lo sonho é que vivemos» in terms of the 

Association for the Development of Portuguese Traveller Women and Children (25 000 euros), to the 

National Committee of Justice and Peace (10 000 euros), to the Victims of the South East Asian 

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Tsunami (20 000 euros) and the assignment of the amount previously allocated to purchasing traditional 

Christmas gifts (150 000 euros) to the distribution in equal parts of subsidies to 6 Social Welfare 

Institutions: Mão Amiga -– Home; Vida e Paz Community; Casa do Gaiato do Tojal; D. Francisco 

Gomes de Faro Institute; Association of Love for the Education of Maladjusted Children in Lourinhã 

(APADECIL) and Friar Gil Works. 

d) In the fields of University Scholarships and Prizes – Granting of scholarships to students from PALOP’s 

(34 500 euros). Also worthy of special mention is that part of the Agostinho da Silva Prize borne by 

the Montepio Geral Foundation and other prizes to university students totalling 45 678 euros 

(included under the item relating to Arts, Sciences and Culture). 

DISTINCTION RECEIVED IN THE CONTEXT OF THE SOCIAL RESPONSIBILITY OF 

COMPANIES 

In 2005 worthy of special mention was the participation of Montepio Geral in the 1st Portuguese Forum 

on the Social Responsibility of Organisations held at the Congress Centre in Lisbon and its distinction, 

through the awarding of a diploma at the ceremony to launch the book «The Social Responsibility of 

Companies – 25 Case Studies», for practising socially responsible management (Montepio Geral was 

one of 25 entities referred to in this book).

12. REPORT AND OPINION OF THE INTERNAL AUDIT BOARD 

REPORT AND OPINION OF THE INTERNAL AUDIT BOARD ON THE INDIVIDUAL 

ANNUAL REPORT FOR 2005 OF MONTEPIO GERAL AND THE CAIXA ECONÓMICA 

To the Members of Montepio Geral: 

1. In compliance with the responsibilities set out in sub-paragraph d) of no. 1 of article 36 of the Articles 

of Association of Montepio Geral – Associação Mutualista, henceforth called Montepio Geral 

and in sub-paragraph f) of article 25 of the Articles of Association of Caixa Económica Montepio 

Geral, henceforth called Caixa Económica, and in its capacity as the Internal Audit Board of these 

Institutions, this body does hereby submit to your appreciation the Report on its activity and its 

Opinion on the Report of the Board of Directors and Accounts pertaining to the financial year 2005 

for Montepio Geral and the Caixa Económica, drawn up by the Board of Directors. 

REPORT 

2. In 2005 the Internal Audit Board monitored the management of Montepio Geral and of the Caixa 

Económica by reading the minutes of the Board of Directors and through periodic meetings with the 

latter and with some of its members as well as the accounting documentation and reports and 

quantitative data supplied on a monthly basis by the Services, attending those meetings of the 

General Board held, and also working meetings with some Managers whose duties are closely 

aligned with those of the Internal Audit Board. 

3. Both the Board of Directors and the Departmental Managers provided the Internal Audit Board with 

all the clarifications requested of it. 

4. During the financial year the Internal Audit Board drew up the various documents incumbent upon 

them under the Articles of Association and such others as were required by the Bank of Portugal. 

5. In 2005 the Individual Accounts of Montepio Geral and of the Caixa Económica continued to be 

drawn up in accordance with the «Plano de Contas das Associações Mutualistas» (PCAM) and the 

«Plano de Contabilidade para o Sector Bancário» (PCSB). However, we should point out that in 

2005 the Board of Directors altered some of the accounting policies previously followed vis-à-vis 

the processing of some items – Provisions and Reserves – which affected the Liabilities and Equity, 

though did not impact the Assets of Montepio Geral (see Notes 3 (3.9) and 21 to the Financial 

Statements). We would also like to point out that the Board of Directors, with its early application 

of the alterations made by Notices no.4/2005 and no.12/2005 of the Bank of Portugal, registered 

under Results Carried Forward in 2005 the sum of around 22 387 000 Euros, including the Equity 

of the Caixa Económica in this amount (See Note 21 to the Financial Statements). 

6. In its appreciation of the Accounts for the financial year the Internal Audit Board paid particular 

attention to the Statutories Audit Opinions and Auditor’s Reports drafted by the Chartered Accountants 

and the Auditors’ Report drafted by the Independent Multinational Auditors, these being entities 

which were contracted to monitor and audit those accounts during the course of 2005 which 

the Board of Directors drew up under the legal and statutory terms. Both the documents produced 

by the aforementioned entities were submitted without reservations. 

7. The Internal Audit Board would also like to point out the importance of the Report on the Governance 

of the Institution vis-à-vis CEMG which has been included in the Annual Report for 2005. 

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8. We are grateful for the mention made in the Board of Directors’ Report to our activity. We would 

like to join the Board of Directors in acknowledging the Entities, the other Governing Bodies and the 

other Employees referred to in the Report. 

9. By dint of the work carried out it is the firm belief of the Internal Audit Board that the Board of 

Directors’ Report and the Financial Statements of the Institutions respect the applicable legal and 

statutory provisions, providing a clear picture of its position as at December 31st 2005 of the results 

calculated and the cash flows for the financial year. This belief is also supported by the technical 

opinions expressed by the Chartered Accountant and the Independent Multinational Auditors which 

accompany the Annual Report. 

10. There is agreement between the content of the Board of Directors’ report and the Financial Statements. 

11. The Internal Audit Board expresses its belief that the overall performance of Montepio Geral and the 

Caixa Económica in 2005 was very positive. It would like to express its appreciation whose actions 

contributed to this. 

12. The Internal Audit Board also expresses its confidence in the progress of Montepio Geral and its 

Caixa Económica which started to recover growth in 2004 and progressed very well in 2005 despite 

the low growth observed in the national economy as a result of the concrete measures of the Board 

of Directors with a view to increasing productivity based on the appropriate training of Employees, 

the growing use of technologies and, in particular, the corrections and improvements to the organisational 

structure of the Institutions. 

OPINION 

Further to that set out in our report, we believe that the following are worthy of your approval: 

1. As regards the Caixa Económica: 

a) The Board of Directors’ Report and the Accounts for the Financial Year of 2005; 

b) The Proposed Application of Results put forward. 

2. As regards Montepio Geral: 

a) The Board of Directors’ Report and the Accounts for the financial year of 2005; 

b) The Proposed Application of Results and Recourse to the Technical Surpluses and to the General 

Reserve Fund presented by the Board of Directors (point 7.6 Report); 

c) The Proposed Allocation of Improvements in Benefits (point 7.7 of the Report); 

d) The Proposed Replacement in the General Reserve Fund of those amounts used to complete the 

Available Funds (point 7.8 of the Report); 

e) The Proposed Allocation of Returns on Retirement Capitals, on Retirement Savings and Collective 

Schemes (point 7.9 of the Report); 

f) The Proposed Application of the Amount to be Transferred from the Caixa Económica (point 7.10 of 

the Report); 

g) The Proposed Increase in the Institutional Financial Interest in Caixa Económica (point 7.11 of the 

Report);

h) The Proposed Endowment to the Montepio Geral Foundation (point 7.12 of the Report). 

3. As regards the Board of Directors and all the Workers and other Institution Employees: 

That they be duly paid tribute for the work carried out. 

Lisbon: March 16th 2006 

THE INTERNAL AUDIT BOARD 

Vítor José Melícias Lopes – Chairman 

Leontino Raimundo Aleixo – Member 

José Joaquim Rosa – Member 

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REPORT AND OPINION OF THE INTERNAL AUDIT BOARD ON THE CONSOLIDATED 

REPORT AND ACCOUNTS FOR 2005 OF THE CAIXA ECONÓMICA MONTEPIO 

GERAL 

To: the Members of Montepio Geral 

1. In compliance with the duties defined in subparagraph f), Article 25 of the Articles of Association of 

the Caixa Económica Montepio Geral, henceforth called the Caixa Económica, the Internal Audit 

Board does hereby submit to your appreciation the Report and Opinion on the Report and the Consolidated 

Financial Statements for the financial year of 2005 vis-à-vis the Caixa Económica and its 

undertakings included in the consolidation, duly drawn up by the Board of Directors. 

2. We duly proceeded to an analysis of the Report of the Board of Directors on the Consolidated Statement 

and the Consolidated Accounts, encompassing the Consolidated Balance Sheet as at December 

31st 2005, the Consolidated Profit-and-loss Account, the Consolidated Cash Flow Statements and 

the alterations to Equity for the financial year of 2005 and the respective Notes to the Consolidated 


3. In its assessment of the Consolidated Accounts for the Financial Year, the Internal Audit Board based its 

work on the Statutory Audit Opinion and Auditor’s Report for the Consolidated Accounts and the 

Annual Report of the Chartered Accountants on the audit carried out on the Consolidated Accounts 

drawn up by the Chartered Accountants as well as the report drafted by the Independent Multinational 

Auditors. 

4. In compliance with the provisions of Article 11 of Statute Law no. 35 enacted on February 17th 2005, 

applied to the Financial Institutions under Notice nos.1 to 6 issued on February 28th 2005 by the 

Bank of Portugal, when drawing up its Consolidated Financial Statements the Caixa Económica 

began in 2005 to adopt the International Financial Reporting Standards (IFRS) adopted in the European 

Union and, for the purposes of comparison, the Consolidated Accounts for 2004, drawn up in 

accordance with the PCSB, were also restated for the IFRS. 

5. As a result of the work carried out the Internal Audit Board believes that the Consolidated Financial 

Statements (Consolidated Balance Sheet as at December 31st 2005, Consolidated Profit-and-loss 

Account, Consolidated Cash Flow Statements and the Alterations to Equity for the financial year of 

2005 and the respective explanatory Notes) provide a true picture of the net worth of the Caixa 

Económica and its undertakings as at December 31st 2005 and of the way in which the consolidated 

results for 2005 were formed. 

OPINION 

Further to that set out in our Report, we believe that the Report of the Board of Directors on the Consolidated 

Statements and the Consolidated Financial Statements for the financial year of 2005 is worthy 

of your approval. 

Lisbon: March 16th 2006 

THE INTERNAL AUDIT BOARD 

Vítor José Melícias Lopes – Chairman 

Leontino Raimundo Aleixo – Member 

José Joaquim Rosa – Member

13. FINANCIAL INTEREST HELD BY MONTEPIO GERAL GROUP 

LUSITANIA – COMPANHIA DE SEGUROS, S.A. 

Object and background 

LUSITANIA is a non-life insurance company belonging to the Montepio Geral Group, carrying on its business 

since 1986. 

The following constitute permanent operating principles of LUSITANIA: 

• Maintenance of a high standard of efficiency for all services; 

• Promotion of an appropriate resource application policy; 

• Increase in market share; 

• Maintenance of a permanent attitude of innovation and operating criteria; 

• High quality of service provided to insured and third parties; 

• Strict compliance with prevailing laws and standards. 

During 2005 Lusitania continued to implement the strategic decision taken in 2004 to simplify the monitoring 

of activity to gain insurance clients originating from the commercial network of CEMG which 

began to be carried out directly by LUSITANIA. By way of this alteration it was basically sought to boost 

the increase in turnover in the insurance area generated by the CEMG network by way of a greater 

proximity between the various participants in the process and allow the effective implementation of the 

concept of «Bancasseguros» in the MG Group. 

With a view to refining the range of products and adapting them to the needs of the CEMG commercial 

network and mediators, LUSITANIA launched new products during the course of the year, particularly 

the new «MG Auto» car insurance, a Bancasseguros Channel exclusive which puts forward innovative 

characteristics. 

Financial Indicators 

In 2005 LUSITANIA attained turnover (Gross Premiums Issued) of 129.7 million euros, corresponding to 

a year-on-year increase of 6.3%. 

This growth clearly exceeded the overall growth in the Non-Life market (1.35%), with LUSITANIA being 

one of the top 10 companies in the sector, second with the highest growth. 

FINANCIAL INDICATORS 



Variation 

Absolute Relative (%) 

Net Assets 238 586 214 031 24 555 11.5% 

Own Resources 33 351 31 677 1 674 5.3% 

Gross Premiums Issued 129 725 122 023 7 702 6.3% 

Result for the Financial Year 2 911 2 563 348 13.6% 

ROA 1.29% 1.19% +0.1 b.p. – 

ROE 9.19% 8.76% +0.43 b.p. – 

No. Employees as at Dec. 31st 331 330 1 0.3% 

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There was a substantial increase in net results of 13.6%. This was made up of increase in levels of return 

with the ROA rising from 1.19% in 2004 to 1.29% in 2005 and the ROE up from 8.76% to 9.19% during 

the same period. 

With this performance LUSITANIA remained 10th in the Non-Life Market ranking, increasing its share to 

3.2% of those insurers with activity in Portugal under the supervision of the Portuguese Institute of 

Insurance. 

LUSITANIA VIDA – COMPANHIA DE SEGUROS, S.A. 


LUSITANIA VIDA, a life assurance insurer in the Montepio Geral Group, was formed in May 1987. It is an 

insurance company specialising in individual and group life insurance, covering risks of death, disability, 

accidents and daily hospitalisation subsidies. 

In 2005, similarly to LUSITANIA, the optimisation of the communication channel between the company 

and the CEMG commercial network continued to improve, with the elimination of Leacock’s intermediation 

with a view to improving the response capacity to the demands of clients and the increase in 

turnover of the MG Group in this area. 

During this period the activity of LUSITANIA VIDA was essentially geared towards the development of 

capitalisation products, to be commercialised by the banking network, though without neglecting the 

monitoring of the channel mediators. Six new Capitalisation Insurance Policies were launched, specifically 

to meet the needs of CEMG clients. 


In 2005 LUSITANIA VIDA registered a revenue for premiums issued of 105.5 million euros, representing 

a positive variation of 29.9% vis-à-vis 2004. 

The placement of products by the banking channel is responsible for 89.3% of the aforementioned 

revenue, with the remaining 10.7% being ensured by the mediation channel. Of those insurance policies 

subscribed through the banking channel, 86.5% related to capitalisation insurance policies, an area 

in which the activity was more buoyant. 

Benefiting from the increase in activity in capitalisation insurance, the net assets of LUSITANIA VIDA 

were up 28.9% in 2005 which also determined a major impact on results (+53.6%). 




Variation 


Net Assets 262 136 203 378 58 758 28.9% 

Own Resources 21 046 17 261 3 785 21.9% 

Gross Premiums Issued 105 500 81 189 24 311 29.9% 

Result for the Financial Year 2 192 1 427 765 53.6% 

Cash Flow 46 828 70 541 -23 713 -33.6% 

ROA 0.94% 0.85% +0.9 b.p. – 

ROE 12.70% 10.44% +2.3 b.p. – 

No. Employees as at Dec. 31st 25 25 0 0.0%

FUTURO – SOCIEDADE GESTORA DE FUNDOS DE PENSÕES, S.A. 


Since its foundation in 1988, this company has been involved in the management of Pension Funds in 

two main areas: the management of closed pension funds for large companies and the management of 

open pension funds (PPR/PPR-E) for PME’s and private customers. Since late 2003 Futuro has included 

the APFIPP Management, the association representing the investment fund, pension fund and assets. 

In 2005 the total assets under the management of Futuro increased by 16.4%, reflecting the differing 

performance levels by type of fund managed. With open funds, the amounts being managed stagnated 

as a result of the elimination of tax breaks by dint of subscription, compensated by a 24.2% growth in 

closed pension funds. 

As a consequence closed pension funds now account for 73% of the total funds managed by Futuro 

(69% in 2004), with 1% in open PME funds and 25% to personal open funds. In the portfolio of open 

funds commercialised the PPR-5* is worthy of special mention, the largest of the six open pension funds 

managed by Futuro and the oldest PPR fund on the market. 

In the ranking of management companies, in terms of the amounts of pension funds being managed, 

Futuro fell from 7th to 6th place which corresponded to a market share of 5.5% at the end of 2005. 

Futuro has been entrusted with the management of Montepio Geral Pension Fund which attained a 

total return of 5.7% in 2005. 


Operating income in 2005 fell by 1.1% which can be put down to the loss in revenue associated with 

the transfer of funds (around 300 million euros) to the General Pension Fund. 

Notwithstanding the fall in revenue, the Net Result and Cash-flow achieved considerable increases, 

reflecting a major fall in operating costs, highlighting the reduction seen in the external supply and services 

item, an upshot of the implementation of cost rationalisation measures. It should be remembered 

that the results for 2004 were negatively affected by the settlement of a Balance Sheet amount included 

under Clients – Medium/Long-Term in the wake of a decision by Futuro to alter the accounting policy 

registering open fund redemptions. 

With a view to optimising the capital assigned to the activity, in late 2005 Futuro reduced the share 

capital of the company from 4.3 million euros to 2.6 million euros, something which, in conjunction 

with the increase in results, allowed the average return on assets to be increased from 5.3% to 18.1% 

and the return on equity rose from 6.3% to 20.7%. 




Variation 


Assets under Management 1 042 385 895 342 147 043 16.4% 

Net Assets 7 397 7 690 -293 -3.8% 

Own Resources 5 895 6 620 -725 -10.9% 

Operating Income 6 608 6 682 -74 -1.1% 

Result for the Financial Year 1 367 416 951 228.7% 

Cash Flow 1 551 571 980 171.8% 

ROA 18.12% 5.27% 12.9 b.p. – 

ROE 20.65% 6.25% 14.4 b.p. – 

No. of Employees as at Dec. 31 st 35 35 0 0.0% 

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MG GESTÃO DE ACTIVOS FINANCEIROS – SGFIM 


Further to the publication of the new legal framework of the asset management activity by third parties 

(Statute Law no. 252 enacted on October 17th 2003), the MG Group decided to focus the management 

of financial assets into a single entity in 2004. Hence, in said year the name of the company MG 

Fundos was changed to MG Gestão de Activos Financeiros and its line of business, previously limited to 

the management of stock investment funds, was extended to risk capital and to asset management. The 

restructuring of this business area was completed in 2005 with the winding-up of MG Patrimónios 

whose activity had been wholly included in MG Gestão de Activos Financeiros during the course of 

2004. 

In late 2005 the amount of assets under the management of MG Gestão de Activos Financeiros stood 

at 1,103.5 million euros, 1.5% above the value observed in 2004. This trend essentially reflects the 

stagnation observed in the discretionary management of portfolios, influenced negatively by the impact 

of the integration into the General Pension Fund of Pension Fund assets from State sector companies. 

The stock investment fund management activity registered greater buoyancy with the portfolio of assets 

being managed achieving growth of 5.7%, standing at 366.5 million euros at year-end, representing a 

market share of 1.3%. 

In the stock investment fund business segment MG Gestão de Activos Financeiros extended its product 

range to thirteen funds with the launch of two new sectorial share funds, taking advantage of the current 

increase in the demand for higher returns and risks. 


The turnover of MG Gestão de Activos Financeiros attained around 2 million euros in late 2005, observing 

a 23% increase as a result of the increase in the proportion of variable yield funds and fund funds 

out of the total portfolio of stock investment funds. These generate commissions by asset unit greater 

than those of the fixed-yield funds. 

Benefiting from the accrual in revenue and the drive to contain costs started in 2004 with the merger of 

stock investment fund and individual portfolio management activities, the net result and Cash-flow grew 

by 11% and 10%, respectively. 




Variation 


Assets under Management (*) 366 523 346 903 19 620 5.7% 

Net Assets 2 570 2 502 68 2.7% 

Own Resources 2 172 2 109 63 3.0% 

Operating Income 1 959 1 593 366 23.0% 

Result for the Financial Year 331 298 33 11.0% 

Cash Flow 368 334 34 10.2% 

ROA 13.04% 14.37% -1.3 b.p. – 

ROE 15.68% 20.34% -4.7 b.p. – 

No. of Employees as at Dec. 31st 

(*) only FIM 

14 13 1 7.7%

LEACOCK (SEGUROS). LDA. 


Further to the decision taken during the course of the financial year of 2004 making a substantial 

change to the modus operandi of the insurance area (non-life and life insurance) within the MG Group, 

Leacock ceased to mediate business originating from the CEMG commercial network which originated 

a major reduction in the activity mediated by Leacock. 


In view of the aforementioned alteration Leacock recorded a 79.5% fall in turnover, corresponding to an 

ROE ratio of 2.33% and a ROA of 1.46%. 




Variation 


Net Assets 4 602 6 944 -2 342 -33,7% 

Own Resources 2 654 3 630 -976 -26,9% 

Provision of Services 1 177 5 735 -4 559 -79,5% 

Result for the Financial Year 84 1 079 -994 -92,2% 

Cash Flow 202 1 234 -1 032 -83,6% 

ROA 1,46% 16,89% -15,4 b.p. – 

ROE 2,33% 38,17% -35,8 b.p. – 

No. Employees as at Dec. 31st 13 38 -25 -65,8% 

BANCO MONTEPIO GERAL CABO VERDE 


Banco Montepio Geral Cabo Verde is a credit institution incorporated under local law in late 2005 by 

CEMG. It is an autonomous business unit whose activity focuses on attracting funding from resident and 

non-resident entities, playing the role of an institutional instrument of CEMG for activities of an international 

nature. 

Further to the creation of Banco Montepio Geral Cabo Verde, it was decided to close the activity of 

Banco MG Cayman and the Exterior Financial Branch of Madeira. 



Designation 2005 

Net Assets 237 860 

Own Resources 7 001 

Result for the Financial Year 108 

The result for the financial year of 2005 is still quite negligible as the institution commenced its activity 

at the end of the year. 

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14. ACKNOWLEDGEMENTS 

The lack of buoyancy of economic growth and the prevailing pessimism of Portuguese society have 

made the financial year of 2005 hard. Notwithstanding this problem, 2005 was marked by relevant 

events at our Institution. 

At the Associação Mutualista we commemorated 165 years of activity, demonstrating our capacity for 

adaptation to the requirements of the day as well as the modern nature of the values we defend. 

We have seen the Portuguese society take on board the mutualist project which we develop, already 

exceeding 300 000 Members, strengthening the position of the largest Associação Mutualista in 

Portugal. 

On the other hand, in the banking field in which the Caixa Económica has been operating for 161 years, 

despite the adverse economic backdrop, the Institution has revealed a renewed capacity for adaptation 

and growth. Strategic guidelines have been defined with a view to the diversification of markets, products 

and activities; the technological development of systems to support the management and control 

risks continued as well as the adaptation of the organic structure to the requirements of market dynamics 

and new prudential rules. 

Under current market conditions, combining the values of a socially responsible institution to the 

requirements of competitive pressure is a hard task, but which it has been possible to materialise with 

the intense work and commitment of all. To this end the Board of Directors would like to express its 

appreciation and acknowledgment to everyone, to Members, Clients and Authorities, thanking them on 

behalf of the whole Montepio Geral team for their confidence and stimulation . 

We would like to express our thanks quite specifically to: 

• the current Executive, to wit the Prime Minister, the Ministers of Finance, Labour and Welfare and 

Health and the Regional Governments of the Azores and Madeira which, in the light of the difficulties 

of the specific nature of our Institution, were capable of meeting these problems and also 

recognising the potential and the mission which the Mutualities, as a whole, and Montepio Geral, 

in particular, played in Portuguese society; 

• to the Governor of the Bank of Portugal as well as its Board of Directors and the Management 

Departments, for their support, understanding and the attentive way in which they followed the 

evolution of the Institution; 

• to the Portuguese Association of Banks and Credit Institution as a whole for all the support provided; 

• to the Stock Market Committee for the assistance and clarifications they have provided; 

• to the various national and overseas mutualist organisations for their helpfulness and collaboration; 

• to the Members of the General Meeting Board of the General Board and of the Internal Audit 

Board for the collaboration and help they provided; 

• to the Members and Clients for the trust they placed in us and the collaboration they provided; 

• to the employees and other workers for their priceless dedication and commitment, always identified 

with the strategies and culture of the Institution, affording a decisive contribution to face 

and overcome present e future challenges.

In submitting the present Annual Report to the appreciation of the General Meeting, the Board of Directors 

proposes that the latter accompany it in reiterating the aforementioned thanks and acknowledgments 

as well as its condolences for those members and Employees who passed away. 

Lisbon: February 20th 2006 







287

ANNUAL REPORT 2005 


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