banif finance, ltd.

OFFERING CIRCULARBANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A.(incorporated with limited liability in Portugal)as IssuerBANIF FINANCE, LTD.(incorporated with limited liability in Cayman Islands)as IssuerBANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A.,SUCURSAL FINANCEIRA EXTERIOR(incorporated with limited liability in Portugal)as Issuer and as Guarantor of Notes issued by Banif Finance, Ltd.Euro 1,000,000,000Euro Medium Term Note ProgrammeApplication has been made to list notes (“Notes”) issued under the Euro Medium Note Programme (the“Programme”) described in this Offering Circular during the period of twelve months after the date hereofon the Luxembourg Stock Exchange. The Programme also permits Notes to be issued on an unlisted basisor to be admitted to listing, trading and/or quotation by such other or further listing authorities, stockexchanges and/or quotation systems as may be agreed with the relevant Issuer.ArrangersBANIF – BANCO DE INVESTIMENTO, S.A.CAIXA – BANCO DE INVESTIMENTO, S.A.CITIGROUPDealersBANIF – BANCO DE INVESTIMENTO, S.A.BARCLAYS CAPITALBNP PARIBASCAIXA – BANCO DE INVESTIMENTO, S.A.CITIGROUPCREDIT SUISSE FIRST BOSTONDEUTSCHE BANKJPMORGANMERRILL LYNCH INTERNATIONAL13 December 2004

TABLE OF CONTENTSIMPORTANT NOTICES.............................................................................................................. 3DOCUMENTS INCORPORATED BY REFERENCE................................................................ 5SUMMARY OF THE PROGRAMME ........................................................................................ 6FORMS OF THE NOTES ............................................................................................................ 10TERMS AND CONDITIONS OF THE NOTES ........................................................................ 13FORM OF PRICING SUPPLEMENT ........................................................................................ 39SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM 47DESCRIPTION OF THE ISSUERS AND THE GUARANTOR ................................................ 50TAXATION .................................................................................................................................. 63SUBSCRIPTION AND SALE...................................................................................................... 67GENERAL INFORMATION........................................................................................................ 70INDEX TO FINANCIAL STATEMENTS AND AUDITOR’S REPORTS ................................ 722

IMPORTANT NOTICESEach of Banif – Banco Internacional do Funchal, S.A. (“Banif”), Banif Finance, Ltd. (“BanifFinance”) and Banif – Banco Internacional do Funchal, S.A., Sucursal Financeira Exterior (“BanifMadeira”) (each an “Issuer” and together the “Issuers”) and Banif – Banco Internacional do Funchal, S.A.,Sucursal Financeira Exterior in its capacity as guarantor of Notes issued by Banif Finance (the“Guarantor”) accepts responsibility for the information contained in this document and to the best of theknowledge and belief of each of the Issuers and the Guarantor (which have taken all reasonable care toensure that such is the case), the information contained in this document is in accordance with the facts anddoes not omit anything likely to affect the import of such information.This Offering Circular should be read and construed together with any amendments or supplementshereto and with any other documents incorporated by reference herein and, in relation to any Tranche (asdefined herein) of Notes, should be read and construed together with the relevant Pricing Supplement (asdefined herein).The Issuers and the Guarantor have confirmed to the Dealers named under “Subscription and Sale”below that this Offering Circular (including for this purpose, each relevant Pricing Supplement) contains allinformation which is (in the context of the Programme, the issue, offering and sale of the Notes, whereapplicable, and the guarantee of the Notes) material; that such information is true and accurate in all materialrespects and is not misleading in any material respect; that any opinions, predictions or intentions expressedherein are honestly held or made and are not misleading in any material respect; that this Offering Circulardoes not omit to state any material fact necessary to make such information, opinions, predictions orintentions (in the context of the Programme, the issue, offering and sale of the Notes and, where applicable,the guarantee of the Notes) not misleading in any material respect; and that all proper enquiries have beenmade to verify the foregoing.No person has been authorised to give any information or to make any representation not containedin or not consistent with this Offering Circular or any other document entered into in relation to theProgramme or any information supplied by the Issuers or the Guarantor or such other information as is inthe public domain and, if given or made, such information or representation should not be relied upon ashaving been authorised by the Issuers, the Guarantor, the Trustee or any Dealer.No representation or warranty is made or implied by the Dealers or the Trustee or any of theirrespective affiliates, and neither the Dealers, the Trustee nor any of their respective affiliates makes anyrepresentation or warranty or accepts any responsibility as to the accuracy or completeness of theinformation contained in this Offering Circular. Neither the delivery of this Offering Circular or any PricingSupplement nor the offering, sale or delivery of any Note shall, in any circumstances, create any implicationthat the information contained in this Offering Circular is true subsequent to the date hereof or the date uponwhich this Offering Circular has been most recently amended or supplemented or that there has been noadverse change, or any event reasonably likely to involve any adverse change, in the condition (financial orotherwise) of the Issuers or the Guarantor since the date thereof or, if later, the date upon which this OfferingCircular has been most recently amended or supplemented or that any other information supplied inconnection with the Programme is correct at any time subsequent to the date on which it is supplied or, ifdifferent, the date indicated in the document containing the same.The distribution of this Offering Circular and any Pricing Supplement and the offering, sale anddelivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession thisOffering Circular or any Pricing Supplement comes are required by the Issuers, the Guarantor, the Trusteeand the Dealers to inform themselves about and to observe any such restrictions. For a description of certainrestrictions on offers, sales and deliveries of Notes and on the distribution of this Offering Circular or anyPricing Supplement and other offering material relating to the Notes, see “Subscription and Sale”. Inparticular, Notes have not been and will not be registered under the United States Securities Act of 1933 (asamended) (the “Securities Act”) and are subject to U.S. tax law requirements. Subject to certain exceptions,Notes may not be offered, sold or delivered within the United States or to U.S. persons. In addition, theIssuers have not authorised any offer of Notes having a maturity of one year or more to the public in the3

United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 (the“Regulations”). Notes may not lawfully be offered or sold to persons in the United Kingdom except incircumstances which do not result in an offer to the public in the United Kingdom within the meaning of theRegulations or otherwise in compliance with all applicable provisions of the Regulations.Neither this Offering Circular nor any Pricing Supplement constitutes an offer or an invitation tosubscribe for or purchase any Notes and should not be considered as a recommendation by the Issuers, theGuarantor, the Trustee, the Dealers or any of them that any recipient of this Offering Circular or any PricingSupplement should subscribe for or purchase any Notes. Each recipient of this Offering Circular or anyPricing Supplement shall be taken to have made its own investigation and appraisal of the condition(financial or otherwise) of the Issuers and the Guarantor.The maximum aggregate principal amount of Notes outstanding and guaranteed at any one time underthe Programme will not exceed Euro 1,000,000,000 (and for this purpose, any Notes denominated in anothercurrency shall be translated into euro at the date of the agreement to issue such Notes (calculated inaccordance with the provisions of the Dealer Agreement). The maximum aggregate principal amount ofNotes which may be outstanding and guaranteed at any one time under the Programme may be increasedfrom time to time, subject to compliance with the relevant provisions of the Dealer Agreement as definedunder “Subscription and Sale”.In this Offering Circular, unless otherwise specified, references to “U.S.$”, “U.S. dollars” or“dollars” are to United States dollars and references to “EUR” or “euro” are to the single currencyintroduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treatyestablishing the European Community, as amended.Certain figures included in this Offering Circular have been subject to rounding adjustments;accordingly, figures shown for the same category presented in different tables may vary slightly and figuresshown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.In connection with the issue of any Tranche of Notes under the Programme, the Dealer (if any)which is specified in the relevant Pricing Supplement as the Stabilising Manager (or any person actingfor the Stabilising Manager) may over-allot or effect transactions with a view to supporting the marketprice of the Notes at a level higher than that which might otherwise prevail for a limited period.However, there may be no obligation on the Stabilising Manager (or any agent of the StabilisingManager) to do this. Such stabilising, if commenced, may be discontinued at any time and must bebrought to an end after a limited period. Such stabilising shall be in compliance with all applicablelaws, regulations and rules.Potential holders of the Notes are alerted to the description of the requirements to qualify forthe withholding tax exemption in relation to any payments of interest by Banif Madeira to the holdersof the Notes. In particular, payments of interest in respect of the Notes made by Banif Madeira maybe subject to withholding tax if certain information regarding holders of the Notes is not provided inaccordance with the procedures described herein. (See “Taxation – Notes issued or guaranteed byBanif Madeira” on page 64.)4

DOCUMENTS INCORPORATED BY REFERENCEThe following documents shall be deemed to be incorporated in, and to form part of, this OfferingCircular:(1) the most recently published audited consolidated and unconsolidated annual financialstatements and any consolidated and unconsolidated interim semi-annual financial statementspublished (whether audited or unaudited) subsequently to such annual financial statements, ofBanif and Banif SGPS, SA (holding company of the Banif Group) from time to time; and(2) the most recent unaudited unconsolidated annual financial statements and any interim semiannualfinancial statements (whether audited or unaudited) subsequent to such annual financialstatements of Banif Madeira, acting as both Issuer and Guarantor, from time to time; and(3) the most recent audited unconsolidated annual financial statements and any interim semiannualfinancial statements (whether audited or unaudited) subsequent to such annual financialstatements of Banif Finance; and(4) all amendments and supplements to this Offering Circular prepared by the Issuers and theGuarantor from time to time,provided, however, that any statement contained in this Offering Circular or in any of the documentsincorporated by reference in, and forming part of, this Offering Circular shall be deemed to be modified orsuperseded for the purpose of this Offering Circular to the extent that a statement contained in any documentsubsequently incorporated by reference modifies or supersedes such statement.The Issuers will, at the specified offices of the Paying Agents, provide, free of charge, upon oral orwritten request, a copy of this Offering Circular (or any document incorporated by reference in this OfferingCircular). Written or telephone requests for such documents should be directed to the specified office of anyPaying Agent or the specified office of the Listing Agent in Luxembourg.SUPPLEMENTARY OFFERING CIRCULARThe Issuers and the Guarantor have undertaken, in connection with the listing of the Notes on theLuxembourg Stock Exchange, that if there shall occur any adverse change in the business or financialposition of the Issuers or the Guarantor or any change in the information set out under “Terms andConditions of the Notes”, that is material in the context of issuance under the Programme, the Issuers andthe Guarantor will prepare or procure the preparation of an amendment or supplement to this OfferingCircular or, as the case may be, publish a new Offering Circular, for use in connection with any subsequentissue by an Issuer of Notes to be listed on the Luxembourg Stock Exchange.5

SUMMARY OF THE PROGRAMMEThe following summary does not purport to be complete and is qualified in its entirety by theremainder of this Offering Circular. Words and expressions defined in “Forms of the Notes” or “Terms andConditions of the Notes” below shall have the same meanings in this summary.Issuers:Guarantor:Substitute Guarantor:Arrangers:Dealers:Banif – Banco Internacional do Funchal, S.A., Banif Finance, Ltd.and Banif – Banco Internacional do Funchal, S.A., SucursalFinanceira ExteriorBanif – Banco Internacional do Funchal, S.A., Sucursal FinanceiraExterior, as Guarantor of Notes issued by Banif FinanceBanif-Banco Internacional do Funchal, S.A., Sucursal FinanceiraExterior may be substituted in its capacity as Guarantor by Banif-Banco Internacional do Funchal, S.A.Banif – Banco de Investimento, S.A., Caixa – Banco deInvestimento, S.A. and Citigroup Global Markets LimitedBanif – Banco de Investimento, S.A., Barclays Bank PLC, BNPParibas, Caixa – Banco de Investimento, S.A., Citigroup GlobalMarkets Limited, Credit Suisse First Boston (Europe) Limited,Deutsche Bank AG London, J.P. Morgan Securities Ltd., MerrillLynch International and any other Dealer appointed from time totime by the Issuers and the Guarantor either generally in respect ofthe Programme or in relation to a particular Tranche of Notes.Trustee: Citicorp Trustee Company Limited pursuant to a trust deed dated 28October 2003 as supplemented by a supplemental trust deed dated13 December 2004 (the “Trust Deed”) a copy of which will beavailable for inspection (during normal office hours) at the specifiedoffice of the Principal Paying Agent and at the registered office ofthe Trustee.Principal Paying Agent:Luxembourg Listing Agent:ListingClearing Systems:Initial Programme Amount:Issuance in Series:Citibank, N.A.Dexia Banque Internationale à LuxembourgApplication has been made to list the Notes on the LuxembourgStock Exchange during the 12 months from the date of this OfferingCircular. Each Series may be listed on the Luxembourg StockExchange and/or admitted to listing, trading and/or quotation byany other listing authority, stock exchange and/or quotation systemas may be agreed between the relevant Issuer and the relevantDealer and specified in the relevant Pricing Supplement or may beunlisted.Euroclear and/or Clearstream, Luxembourg and/or, in relation toany Tranche of Notes, any other clearing system as may bespecified in the relevant Pricing Supplement.Up to Euro 1,000,000,000 (or its equivalent in other currencies)aggregate principal amount of Notes outstanding and guaranteed atany one time.Notes will be issued in Series. Each Series may comprise one ormore Tranches issued on different issue dates. The Notes of eachSeries will all be subject to identical terms, except that the issue6

date and the amount of the first payment of interest may be differentin respect of different Tranches. The Notes of each Tranche will allbe subject to identical terms in all respects save that a Tranche maycomprise Notes of different denominations.Pricing Supplements:Forms of Notes:Currencies:Status of the Notes:Status of the Guarantee:Issue Price:Maturities:Each Tranche will be the subject of a Pricing Supplement which, forthe purposes of that Tranche only, supplements the Terms andConditions of the Notes and this Offering Circular and must be readin conjunction with this Offering Circular. The terms and conditionsapplicable to any particular Tranche of Notes are the Terms andConditions of the Notes as supplemented, amended and/or replacedby the relevant Pricing Supplement.Notes may only be issued in bearer form. Each Tranche of Noteswill initially be in the form of either a Temporary Global Note or aPermanent Global Note, in each case as specified in the relevantPricing Supplement. Each Global Note will be deposited on oraround the relevant issue date with a depositary or a commondepositary for Euroclear and/or Clearstream, Luxembourg and/orany other relevant clearing system. Each Temporary Global Notewill be exchangeable for a Permanent Global Note or, if so specifiedin the relevant Pricing Supplement, for Definitive Notes. If theTEFRA D Rules are specified in the relevant Pricing Supplement asapplicable, certification as to non-U.S. beneficial ownership will bea condition precedent to any exchange of an interest in a TemporaryGlobal Note or receipt of any payment of interest in respect of aTemporary Global Note. Each Permanent Global Note will beexchangeable for Definitive Notes in accordance with its terms.Definitive Notes will, if interest-bearing, have Coupons attachedand, if appropriate, a Talon for further Coupons.Notes may be denominated in any currency or currencies, subject tocompliance with all applicable legal and/or regulatory and/orcentral bank requirements. Payments in respect of Notes may,subject to such compliance, be made in and/or linked to, anycurrency or currencies other than the currency in which such Notesare denominated.Notes may be issued on a subordinated or unsubordinated basis, asspecified in the relevant Pricing Supplement.Notes issued by Banif Finance will be unconditionally andirrevocably guaranteed by the Guarantor, on an unsubordinated or asubordinated basis, as specified in the relevant Pricing Supplement.Notes may be issued at any price which is at par or at a discount to,or premium over, par and either on a fully or partly paid basis, asspecified in the relevant Pricing Supplement.Any maturity, subject, in relation to specific currencies, tocompliance with all applicable legal and/or regulatory and/orcentral bank requirements.Where Notes have a maturity of less than one year and either (a) theissue proceeds are received by the relevant Issuer in the UnitedKingdom or (b) the activity of issuing the Notes is carried on froman establishment maintained by the relevant Issuer in the United7

Kingdom, such Notes must: (i) have a minimum redemption valueof £100,000 (or its equivalent in other currencies) and be issuedonly to persons whose ordinary activities involve them in acquiring,holding, managing or disposing of investments (as principal oragent) for the purposes of their businesses or who it is reasonable toexpect will acquire, hold, manage or dispose of investments (asprincipal or agent) for the purposes of their businesses; or (ii) beissued in other circumstances which do not constitute acontravention of section 19 of the FSMA by the relevant Issuer.Redemption:Optional Redemption:Tax Redemption:Interest:Denominations:Negative Pledge:Cross Default:Taxation:Notes may be redeemable at par or at such other RedemptionAmount (detailed in a formula, index or otherwise) as may bespecified in the relevant Pricing Supplement. Notes may also beredeemable in two or more instalments on such dates and in suchmanner as may be specified in the relevant Pricing Supplement.Notes may be redeemed before their stated maturity at the option ofthe relevant Issuer (either in whole or in part) and/or theNoteholders to the extent (if at all) specified in the relevant PricingSupplement.Except as described in “Optional Redemption” above, earlyredemption will only be permitted for tax reasons as described inCondition 10(b) (Redemption and Purchase – Redemption for taxreasons).Notes may be interest-bearing or non-interest bearing. Interest (ifany) may accrue at a fixed rate or a floating rate or other variablerate or be index-linked and the method of calculating interest mayvary between the issue date and the maturity date of the relevantSeries.Notes issued by Banif Finance which may be listed on theLuxembourg Stock Exchange and/or admitted to listing, tradingand/or quotation by any other listing authority, stock exchangeand/or quotation system situated or operating in a member state ofthe European Union may not (a) have a minimum denomination ofless than EUR1,000 (or nearly equivalent in another currency), or(b) carry the right to acquire shares (or transferable securitiesequivalent to shares) issued by Banif Finance or by any entity towhose group Banif Finance belongs. Subject thereto, Notes will beissued in such denominations as may be specified in the relevantPricing Supplement, subject to compliance with all applicable legaland/or regulatory and/or central bank requirements.The Notes will have the benefit of a negative pledge as described inCondition 5 (Negative Pledge).The Notes will have the benefit of a cross default as described inCondition 13 (Events of Default).All payments in respect of Notes will be made free and clear ofwithholding taxes of the country of incorporation of the relevantIssuer, or if applicable, the Guarantor, or if different, the country oftax residence of the Issuer, or if applicable, the Guarantor, as thecase may be, unless the withholding is required by law. In thatevent, the Issuer will (subject as provided in Condition 128

(Taxation)) pay such additional amounts as will result in theNoteholders receiving such amounts as they would have received inrespect of such Notes had no such withholding been required.All payments in respect of Notes issued by Banif – BancoInternacional do Funchal, S.A. will be made after deduction for oron account of withholding taxes imposed by or on behalf ofPortugal which are required by law or regulation. Banif – BancoInternacional do Funchal, S.A. will (subject as provided inCondition 12 (Taxation)) pay such additional amounts as will resultin the Noteholders receiving such amounts as they would havereceived in respect of such Notes had no such withholding beenrequired.For a description of the requirements to qualify for the withholdingtax exemption in relation to any payments of interest to theNoteholders by Banif-Banco Internacional do Funchal, S.A.,Sucursal Financeira Exterior as Issuer or Guarantor, see “Taxation– Notes issued or guaranteed by Banif Madeira” below.Redenomination:Governing Law:In respect of any Tranche of Notes, if the country of the SpecifiedCurrency becomes or, announces its intention to become, aParticipating Member State, the Notes may be redenominated ineuro in accordance with Condition 22 (Redenomination,Renominalisation and Reconventioning) if so specified in therelevant Pricing SupplementThe Notes will be governed by, and construed in accordance withEnglish law except for the subordination provisions set out inConditions 4(c) and 4(d), which will be governed by, and construedin accordance with, Portuguese law.Enforcement of Notes in Global Form: In the case of Global Notes, individual investors’ rights against therelevant Issuer will be governed by the Trust Deed, a copy of whichwill be available for inspection (during normal office hours) at thespecified office of the Principal Paying Agent and at the registeredoffice of the Trustee.Ratings:Selling Restrictions:Notes issued pursuant to the Programme may be rated or unrated.Where an issue of Notes is rated, its rating will not necessarily bethe same as the rating applicable to the Programme. A securityrating is not a recommendation to buy, sell or hold securities andmay be subject to suspension, reduction or withdrawal at any timeby the assigning rating agency.For a description of certain restrictions on offers, sales anddeliveries of Notes and on the distribution of offering material in theUnited States of America, the United Kingdom, Portugal, theCayman Islands and Japan, see “Subscription and Sale” below.9

FORMS OF THE NOTESEach Tranche of Notes will initially be in the form of either a temporary global note (the “TemporaryGlobal Note”), without interest coupons, or a permanent global note (the “Permanent Global Note”),without interest coupons, in each case as specified in the relevant Pricing Supplement. Each TemporaryGlobal Note or, as the case may be, Permanent Global Note (each a “Global Note”) will be deposited on oraround the issue date of the relevant Tranche of the Notes with a depositary or a common depositary forEuroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”) and/or Clearstream Banking,société anonyme, Luxembourg (“Clearstream, Luxembourg”) and/or any other relevant clearing system.The relevant Pricing Supplement will also specify whether United States Treasury Regulation §1.163-5(c)(2)(i)(C) (the “TEFRA C Rules”) or United States Treasury Regulation §1.163-5(c)(2)(i)(D) (the“TEFRA D Rules”) are applicable in relation to the Notes or, if the Notes do not have a maturity of morethan 365 days, that neither the TEFRA C Rules nor the TEFRA D Rules are applicable.Temporary Global Note exchangeable for Permanent Global NoteIf the relevant Pricing Supplement specifies the form of Notes as being “Temporary Global Noteexchangeable for a Permanent Global Note”, then the Notes will initially be in the form of a TemporaryGlobal Note which will be exchangeable, in whole or in part, for interests in a Permanent Global Note,without interest coupons, not earlier than 40 days after the issue date of the relevant Tranche of the Notesupon certification as to non-U.S. beneficial ownership. No payments will be made under the TemporaryGlobal Note unless exchange for interests in the Permanent Global Note is improperly withheld or refused.In addition, interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership.Whenever any interest in the Temporary Global Note is to be exchanged for an interest in a PermanentGlobal Note, the relevant Issuer shall procure (in the case of first exchange) the prompt delivery (free ofcharge to the bearer) of such Permanent Global Note to the bearer of the Temporary Global Note or (in thecase of any subsequent exchange) an increase in the principal amount of the Permanent Global Note inaccordance with its terms against:(i)(ii)presentation and (in the case of final exchange) surrender of the Temporary Global Note at theSpecified Office of the Principal Paying Agent; andreceipt by the Principal Paying Agent of a certificate or certificates of non-U.S. beneficialownership,within 7 days of the bearer requesting such exchange.The principal amount of the Permanent Global Note shall be equal to the aggregate of the principalamounts specified in the certificates of non-U.S. beneficial ownership; provided, however, that in nocircumstances shall the principal amount of the Permanent Global Note exceed the initial principal amountof the Temporary Global Note.The Permanent Global Note will be exchangeable in whole, but not in part, for Notes in definitiveform (“Definitive Notes”):(i)(ii)(iii)on the expiry of such period of notice as may be specified in the relevant Pricing Supplement;orat any time, if so specified in the relevant Pricing Supplement; orif the relevant Pricing Supplement specifies “in the limited circumstances described in thePermanent Global Note”, then if (a) Euroclear or Clearstream, Luxembourg or any otherrelevant clearing system is closed for business for a continuous period of 14 days (other thanby reason of legal holidays) or announces an intention permanently to cease business and has10

in fact done so and no successor clearing system satisfactory to the Trustee is available or (b)any of the circumstances described in Condition 13 (Events of Default) occurs.Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuershall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticatedand with Coupons and Talons attached (if so specified in the relevant Pricing Supplement), in an aggregateprincipal amount equal to the principal amount of the Permanent Global Note to the bearer of the PermanentGlobal Note against the surrender of the Permanent Global Note at the Specified Office of the PrincipalPaying Agent within 30 days of the bearer requesting such exchange.Temporary Global Note exchangeable for Definitive NotesIf the relevant Pricing Supplement specifies the form of Notes as being “Temporary Global Noteexchangeable for Definitive Notes” and also specifies that the TEFRA C Rules are applicable or that neitherthe TEFRA C Rules or the TEFRA D Rules are applicable, then the Notes will initially be in the form of aTemporary Global Note which will be exchangeable, in whole but not in part, for Definitive Notes not earlierthan 40 days after the issue date of the relevant Tranche of the Notes.If the relevant Pricing Supplement specifies the form of Notes as being “Temporary Global Noteexchangeable for Definitive Notes” and also specifies that the TEFRA D Rules are applicable, then the Noteswill initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, forDefinitive Notes not earlier than 40 days after the issue date of the relevant Tranche of the Notes uponcertification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot becollected without such certification of non-U.S. beneficial ownership.Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the relevant Issuershall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticatedand with Coupons and Talons attached (if so specified in the relevant Pricing Supplement), in an aggregateprincipal amount equal to the principal amount of the Temporary Global Note to the bearer of the TemporaryGlobal Note against the surrender of the Temporary Global Note at the Specified Office of the PrincipalPaying Agent within 30 days of the bearer requesting such exchangePermanent Global Note exchangeable for Definitive NotesIf the relevant Pricing Supplement specifies the form of Notes as being “Permanent Global Noteexchangeable for Definitive Notes”, then the Notes will initially be in the form of a Permanent Global Notewhich will be exchangeable in whole, but not in part, for Definitive Notes:(i)(ii)(iii)on the expiry of such period of notice as may be specified in the relevant Pricing Supplement;orat any time, if so specified in the relevant Pricing Supplement; orif the relevant Pricing Supplement specifies “in the limited circumstances described in thePermanent Global Note”, then if (a) Euroclear or Clearstream, Luxembourg or any otherrelevant clearing system is closed for business for a continuous period of 14 days (other thanby reason of legal holidays) or announces an intention permanently to cease business or (b) anyof the circumstances described in Condition 13 (Events of Default) occurs.Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuershall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticatedand with Coupons and Talons attached (if so specified in the relevant Pricing Supplement), in an aggregateprincipal amount equal to the principal amount of the Permanent Global Note to the bearer of the PermanentGlobal Note against the surrender of the Permanent Global Note at the Specified Office of the PrincipalPaying Agent within 30 days of the bearer requesting such exchange.11

Terms and Conditions applicable to the NotesThe terms and conditions applicable to any Definitive Note will be endorsed on that Note and willconsist of the terms and conditions set out under “Terms and Conditions of the Notes” below and theprovisions of the relevant Pricing Supplement which supplement, amend and/or replace those terms andconditions.The terms and conditions applicable to any Note in global form will differ from those terms andconditions which would apply to the Note were it in definitive form to the extent described under “Summaryof Provisions Relating to the Notes while in Global Form” below.Legend concerning United States personsIn the case of any Tranche of Notes having a maturity of more than 365 days, the Notes in global form,the Notes in definitive form and any Coupons and Talons appertaining thereto will bear a legend to thefollowing effect:“Any United States person who holds this obligation will be subject to limitations under the UnitedStates income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the InternalRevenue Code.”The sections referred to in such legend provide that a United States person who holds a Note, Couponor Talon will generally not be allowed to deduct any loss realised on the sale, exchange or redemption ofsuch Note, Coupon or Talon and any gain (which might otherwise be characterised as capital gain)recognised on such sale, exchange or redemption will be treated as ordinary income.12

TERMS AND CONDITIONS OF THE NOTESThe following is the text of the terms and conditions which, as supplemented, amended and/or replaced bythe relevant Pricing Supplement, will be endorsed on each Note in definitive form issued under theProgramme. The terms and conditions applicable to any Note in global form will differ from those terms andconditions which would apply to the Note were it in definitive form to the extent described under “Summaryof Provisions Relating to the Notes while in Global Form” below.1. Introduction(a)(b)Programme: Banif – Banco Internacional do Funchal, S.A. (“Banif”), Banif – Banco Internacional doFunchal, S.A., Sucursal Financeira Exterior (“Banif Madeira”) and Banif Finance, Ltd. (“BanifFinance”) (each an “Issuer” and together, the “Issuers”) have established a Euro Medium Term NoteProgramme (the “Programme”) for the issuance of up to Euro 1,000,000,000 in aggregate principalamount of notes (the “Notes”), with Notes issued by Banif Finance being guaranteed by BanifMadeira (the “Guarantor”).Pricing Supplement: Notes issued under the Programme are issued in series (each a “Series”) andeach Series may comprise one or more tranches (each a “Tranche”) of Notes. Each Tranche is thesubject of a pricing supplement (the “Pricing Supplement”) which supplements these terms andconditions (the “Conditions”). The terms and conditions applicable to any particular Tranche ofNotes are these Conditions as supplemented, amended and/or replaced by the relevant PricingSupplement. In the event of any inconsistency between these Conditions and/or the Trust Deed and/orthe relevant Pricing Supplement, the relevant Pricing Supplement shall prevail.(c) Trust Deed: The Notes are constituted by, are subject to, and have the benefit of, a trust deed dated 28October 2003 (the “Trust Deed”) made between the Issuers, the Guarantor and Citicorp TrusteeCompany Limited as trustee (the “Trustee” which expression shall include all persons for the timebeing the trustee or trustees appointed under the Trust Deed).(d) Agency Agreement: The Notes are the subject of an issue and paying agency agreement dated 28October 2003 (the “Agency Agreement”) between the Issuers, the Guarantor, the Trustee, Citibank,N.A. as principal paying agent (the “Principal Paying Agent”, which expression includes anysuccessor principal paying agent appointed from time to time in connection with the Notes) and thepaying agents named therein (together with the Principal Paying Agent, the “Paying Agents”, whichexpression includes any successor or additional paying agents appointed from time to time inconnection with the Notes).(e)(f)The Notes: All subsequent references in these Conditions to “Notes” are to the Notes which are thesubject of the relevant Pricing Supplement. All subsequent references in these Conditions to the“Issuer” are to the Issuer of the relevant Notes. Copies of the relevant Pricing Supplement areavailable for inspection and may be obtained by holders of the Notes (the “Noteholders”) duringnormal business hours at the registered office of the Trustee and the Specified Office of the PrincipalPaying Agent, the initial Specified Office of which is set out below.Summaries: Certain provisions of these Conditions are summaries of the Trust Deed and the AgencyAgreement and are subject to their detailed provisions. The holders of the Notes (the “Noteholders”)and the holders of the related interest coupons, if any, (the “Couponholders” and the “Coupons”,respectively) are bound by, and are deemed to have notice of, all the provisions of the Trust Deed andthe Agency Agreement applicable to them. Copies of the Trust Deed and Agency Agreement areavailable for inspection by Noteholders during normal business hours at the registered office of theTrustee and the Specified Offices of each of the Paying Agents.2. Interpretation(a)Definitions: In these Conditions the following expressions have the following meanings:13

“Accrual Yield” has the meaning given in the relevant Pricing Supplement;“Additional Business Centre(s)” means the city or cities specified as such in the relevant PricingSupplement;“Additional Financial Centre(s)” means the city or cities specified as such in the relevant PricingSupplement;“Business Day” means:(i)(ii)in relation to any sum payable in euro, a TARGET Settlement Day and a day on whichcommercial banks and foreign exchange markets settle payments generally in each (if any)Additional Business Centre; andin relation to any sum payable in a currency other than euro, a day on which commercial banksand foreign exchange markets settle payments generally in London, in the Principal FinancialCentre of the relevant currency and in each (if any) Additional Business Centre;“Business Day Convention”, in relation to any particular date, has the meaning given in the relevantPricing Supplement and, if so specified in the relevant Pricing Supplement, may have differentmeanings in relation to different dates and, in this context, the following expressions shall have thefollowing meanings:(i)(ii)(iii)(iv)“Following Business Day Convention” means that the relevant date shall be postponed to thefirst following day that is a Business Day;“Modified Following Business Day Convention” or “Modified Business Day Convention”means that the relevant date shall be postponed to the first following day that is a Business Dayunless that day falls in the next calendar month in which case that date will be the firstpreceding day that is a Business Day;“Preceding Business Day Convention” means that the relevant date shall be brought forwardto the first preceding day that is a Business Day;“FRN Convention”, “Floating Rate Convention” or “Eurodollar Convention” means thateach relevant date shall be the date which numerically corresponds to the preceding such datein the calendar month which is the number of months specified in the relevant PricingSupplement as the Specified Period after the calendar month in which the preceding such dateoccurred provided, however, that:(A)(B)(C)if there is no such numerically corresponding day in the calendar month in which anysuch date should occur, then such date will be the last day which is a Business Day inthat calendar month;if any such date would otherwise fall on a day which is not a Business Day, then suchdate will be the first following day which is a Business Day unless that day falls in thenext calendar month, in which case it will be the first preceding day which is a BusinessDay; andif the preceding such date occurred on the last day in a calendar month which was aBusiness Day, then all subsequent such dates will be the last day which is a BusinessDay in the calendar month which is the specified number of months after the calendarmonth in which the preceding such date occurred; and(v)“No Adjustment” means that the relevant date shall not be adjusted in accordance with anyBusiness Day Convention;“Calculation Agent” means the Principal Paying Agent or such other Person specified in the relevantPricing Supplement as the party responsible for calculating the Rate(s) of Interest and InterestAmount(s) and/or such other amount(s) as may be specified in the relevant Pricing Supplement;14

“Coupon Sheet” means, in respect of a Note in definitive form, a coupon sheet relating to the Note;“Dated Subordinated Notes” means Notes which are specified in the Pricing Supplement as beingdated subordinated Notes;“Day Count Fraction” means, in respect of the calculation of an amount for any period of time (the“Calculation Period”), such day count fraction as may be specified in these Conditions or the relevantPricing Supplement and:(i)if “Actual/Actual (ISMA)” is so specified, means:(a)(b)where the Calculation Period is equal to or shorter than the Regular Period during whichit falls, the actual number of days in the Calculation Period divided by the product of (1)the actual number of days in such Regular Period and (2) the number of Regular Periodsin any year; andwhere the Calculation Period is longer than one Regular Period, the sum of:(A)(B)the actual number of days in such Calculation Period falling in the Regular Periodin which it begins divided by the product of (1) the actual number of days in suchRegular Period and (2) the number of Regular Periods in any year; andthe actual number of days in such Calculation Period falling in the next RegularPeriod divided by the product of (1) the actual number of days in such RegularPeriod and (2) the number of Regular Periods in any year;(ii)(iii)(iv)if “Actual/365” or “Actual/Actual (ISDA)” is so specified, means the actual number of daysin the Calculation Period divided by 365 (or, if any portion of the Calculation Period falls in aleap year, the sum of (A) the actual number of days in that portion of the Calculation Periodfalling in a leap year divided by 366 and (B) the actual number of days in that portion of theCalculation Period falling in a non-leap year divided by 365);if “Actual/365 (Fixed)” is so specified, means the actual number of days in the CalculationPeriod divided by 365;if “Actual/360” is so specified, means the actual number of days in the Calculation Perioddivided by 360;(v) if “30/360” is so specified, means the number of days in the Calculation Period divided by 360(the number of days to be calculated on the basis of a year of 360 days with 12 30-day months(unless (i) the last day of the Calculation Period is the 31st day of a month but the first day ofthe Calculation Period is a day other than the 30th or 31st day of a month, in which case themonth that includes that last day shall not be considered to be shortened to a 30-day month, or(ii) the last day of the Calculation Period is the last day of the month of February, in which casethe month of February shall not be considered to be lengthened to a 30-day month)); and(vi)if “30E/360” or “Eurobond Basis” is so specified means, the number of days in theCalculation Period divided by 360 (the number of days to be calculated on the basis of a yearof 360 days with 12 30-day months, without regard to the date of the first day or last day of theCalculation Period unless, in the case of the final Calculation Period, the date of final maturityis the last day of the month of February, in which case the month of February shall not beconsidered to be lengthened to a 30-day month);“Early Redemption Amount (Tax)” means, in respect of any Note, its principal amount or such otheramount as may be specified in, or determined in accordance with, the relevant Pricing Supplement;“Early Termination Amount” means, in respect of any Note, its principal amount or such otheramount as may be specified in, or determined in accordance with, these Conditions or the relevantPricing Supplement;15

“Extraordinary Resolution” has the meaning given in the Trust Deed;“Final Redemption Amount” means, in respect of any Note, its principal amount or such otheramount as may be specified in, or determined in accordance with, the relevant Pricing Supplement;“Fixed Coupon Amount” has the meaning given in the relevant Pricing Supplement;“Guarantee” means, in relation to any Indebtedness of any Person, any obligation of another Personto pay such Indebtedness including (without limitation):(i)(ii)(iii)(iv)any obligation to purchase such Indebtedness;any obligation to lend money, to purchase or subscribe shares or other securities or to purchaseassets or services in order to provide funds for the payment of such Indebtedness;any indemnity against the consequences of a default in the payment of such Indebtedness; andany other agreement to be responsible for such Indebtedness;“Guarantee of the Notes” means the guarantee of the Notes issued by Banif Finance given by theGuarantor in the Trust Deed;“Indebtedness” means any indebtedness of any Person for money borrowed or raised including(without limitation) any indebtedness for or in respect of:(i)(ii)(iii)(iv)(v)amounts raised by acceptance under any acceptance credit facility;amounts raised under any note purchase facility;the amount of any liability in respect of leases or hire purchase contracts which would, inaccordance with applicable law and generally accepted accounting principles, be treated asfinance or capital leases;the amount of any liability in respect of any purchase price for assets or services the paymentof which is deferred for a period in excess of 60 days; andamounts raised under any other transaction (including, without limitation, any forward sale orpurchase agreement) having the commercial effect of a borrowing;“Interest Amount” means, in relation to a Note and an Interest Period, the amount of interest payablein respect of that Note for that Interest Period;“Interest Commencement Date” means the Issue Date of the Notes or such other date as may bespecified as the Interest Commencement Date in the relevant Pricing Supplement;“Interest Determination Date” has the meaning given in the relevant Pricing Supplement;“Interest Payment Date” means the date or dates specified as such in, or determined in accordancewith the provisions of, the relevant Pricing Supplement and, if a Business Day Convention is specifiedin the relevant Pricing Supplement:(i)(ii)as the same may be adjusted in accordance with the relevant Business Day Convention; orif the Business Day Convention is the FRN Convention, Floating Rate Convention orEurodollar Convention and an interval of a number of calendar months is specified in therelevant Pricing Supplement as being the Specified Period, each of such dates as may occur inaccordance with the FRN Convention, Floating Rate Convention or Eurodollar Convention atsuch Specified Period of calendar months following the Interest Commencement Date (in thecase of the first Interest Payment Date) or the previous Interest Payment Date (in any othercase);16

“Interest Period” means each period beginning on (and including) the Interest Commencement Dateor any Interest Payment Date and ending on (but excluding) the next Interest Payment Date;“ISDA Definitions” means the 2000 ISDA Definitions (as amended and updated as at the date of issueof the first Tranche of the Notes of the relevant Series (as specified in the relevant PricingSupplement) as published by the International Swaps and Derivatives Association, Inc.);“Issue Date” has the meaning given in the relevant Pricing Supplement;“Margin” has the meaning given in the relevant Pricing Supplement;“Maturity Date” has the meaning given in the relevant Pricing Supplement;“Maximum Redemption Amount” has the meaning given in the relevant Pricing Supplement;“Minimum Redemption Amount” has the meaning given in the relevant Pricing Supplement;“Optional Redemption Amount (Call)” means, in respect of any Note, its principal amount or suchother amount as may be specified in, or determined in accordance with, the relevant PricingSupplement;“Optional Redemption Amount (Put)” means, in respect of any Note, its principal amount or suchother amount as may be specified in, or determined in accordance with, the relevant PricingSupplement;“Optional Redemption Date (Call)” has the meaning given in the relevant Pricing Supplement;“Optional Redemption Date (Put)” has the meaning given in the relevant Pricing Supplement;“Participating Member State” means a Member State of the European Communities which adoptsthe euro as its lawful currency in accordance with the Treaty;“Payment Business Day” means:(i)if the currency of payment is euro, any day which is:(A)(B)a day on which banks in the relevant place of presentation are open for presentation andpayment of bearer debt securities and for dealings in foreign currencies; andin the case of payment by transfer to an account, a TARGET Settlement Day and a dayon which dealings in foreign currencies may be carried on in each (if any) AdditionalFinancial Centre; or(ii)if the currency of payment is not euro, any day which is:(A)(B)a day on which banks in the relevant place of presentation are open for presentation andpayment of bearer debt securities and for dealings in foreign currencies; andin the case of payment by transfer to an account, a day on which dealings in foreigncurrencies may be carried on in the Principal Financial Centre of the currency ofpayment and in each (if any) Additional Financial Centre;“Permitted Indebtedness” means any Indebtedness which does not exceed, in aggregate, 20% ofBanif’s consolidated total assets calculated at the time of creation of the relevant Security Interest byreference to Banif’s most recently published financial statements.“Person” means any individual, company, corporation, firm, partnership, joint venture, association,organisation, state or agency of a state or other entity, whether or not having separate legalpersonality;“Principal Financial Centre” means, in relation to any currency, the principal financial centre forthat currency provided, however, that:17

(i)(ii)in relation to euro, it means the principal financial centre of such Member State of the EuropeanCommunities as is selected (in the case of a payment) by the payee or (in the case of acalculation) by the Calculation Agent; andin relation to Australian dollars, it means either Sydney or Melbourne and, in relation to NewZealand dollars, it means either Wellington or Auckland; in each case as is selected (in the caseof a payment) by the payee or (in the case of a calculation) by the Calculation Agent;“Put Option Notice” means a notice which must be delivered to a Paying Agent by any Noteholderwanting to exercise a right to redeem a Note at the option of the Noteholder;“Put Option Receipt” means a receipt issued by a Paying Agent to a depositing Noteholder upondeposit of a Note with such Paying Agent by any Noteholder wanting to exercise a right to redeem aNote at the option of the Noteholder;“Rate of Interest” means the rate or rates (expressed as a percentage per annum) of interest payablein respect of the Notes specified in the relevant Pricing Supplement or calculated or determined inaccordance with the provisions of these Conditions and/or the relevant Pricing Supplement;“Redemption Amount” means, as appropriate, the Final Redemption Amount, the Early RedemptionAmount (Tax), the Optional Redemption Amount (Call), the Optional Redemption Amount (Put), theEarly Termination Amount or such other amount in the nature of a redemption amount as may bespecified in, or determined in accordance with the provisions of, the relevant Pricing Supplement;“Reference Banks” has the meaning given in the relevant Pricing Supplement or, if none, four majorbanks selected by the Calculation Agent in the market that is most closely connected with theReference Rate;“Reference Price” has the meaning given in the relevant Pricing Supplement;“Reference Rate” has the meaning given in the relevant Pricing Supplement;“Regular Period” means:(i)(ii)(iii)in the case of Notes where interest is scheduled to be paid only by means of regular payments,each period from and including the Interest Commencement Date to but excluding the firstInterest Payment Date and each successive period from and including one Interest PaymentDate to but excluding the next Interest Payment Date;in the case of Notes where, apart from the first Interest Period, interest is scheduled to be paidonly by means of regular payments, each period from and including a Regular Date falling inany year to but excluding the next Regular Date, where “Regular Date” means the day andmonth (but not the year) on which any Interest Payment Date falls; andin the case of Notes where, apart from one Interest Period other than the first Interest Period,interest is scheduled to be paid only by means of regular payments, each period from andincluding a Regular Date falling in any year to but excluding the next Regular Date, where“Regular Date” means the day and month (but not the year) on which any Interest PaymentDate falls other than the Interest Payment Date falling at the end of the irregular Interest Period;“Relevant Date” means, in relation to any payment, whichever is the later of (a) the date on whichthe payment in question first becomes due and (b) if the full amount payable has not been received inthe Principal Financial Centre of the currency of payment by the Principal Paying Agent on or priorto such due date, the date on which (the full amount having been so received) notice to that effect hasbeen given to the Noteholders;“Relevant Financial Centre” has the meaning given in the relevant Pricing Supplement;“Relevant Screen Page” means the page, section or other part of a particular information service(including, without limitation, the Reuter Money 3000 Service and the Telerate Service) specified as18

the Relevant Screen Page in the relevant Pricing Supplement, or such other page, section or other partas may replace it on that information service or such other information service, in each case, as maybe nominated by the Person providing or sponsoring the information appearing there for the purposeof displaying rates or prices comparable to the Reference Rate;“Relevant Time” has the meaning given in the relevant Pricing Supplement;“Reserved Matter” has the meaning given in Schedule 3 of the Trust Deed;“Security Interest” means any mortgage, charge, pledge, lien or other security interest including,without limitation, anything analogous to any of the foregoing under the laws of any jurisdiction;“Senior Notes” means Notes which are specified in the Pricing Supplement as being unsubordinatedNotes;“Specified Currency” has the meaning given in the relevant Pricing Supplement;“Specified Denomination(s)” has the meaning given in the relevant Pricing Supplement;“Specified Office” has the meaning given in the Agency Agreement;“Specified Period” has the meaning given in the relevant Pricing Supplement;“Subsidiary” means, in relation to any Person (the “first Person”) at any particular time, any otherPerson (the “second Person”):(i)(ii)whose affairs and policies the first Person controls or has the power to control, whether byownership of share capital, contract, the power to appoint or remove members of the governingbody of the second Person or otherwise; orwhose financial statements are, in accordance with applicable law and generally acceptedaccounting principles, consolidated with those of the first Person;“Talon” means a talon for further Coupons;“TARGET Settlement Day” means any day on which the Trans-European Automated Real-TimeGross Settlement Express Transfer (TARGET) System is open;“Treaty” means the Treaty establishing the European Communities, as amended;“Undated Subordinated Notes” means Notes which are specified in the applicable PricingSupplement as being undated subordinated Notes;“Zero Coupon Note” means a Note specified as such in the relevant Pricing Supplement.(b)Interpretation: In these Conditions:(i)(ii)(iii)(iv)if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are notapplicable;if Talons are specified in the relevant Pricing Supplement as being attached to the Notes at thetime of issue, references to Coupons shall be deemed to include references to Talons;if Talons are not specified in the relevant Pricing Supplement as being attached to the Notes atthe time of issue, references to Talons are not applicable;any reference to principal shall be deemed to include the Redemption Amount, any additionalamounts in respect of principal which may be payable under Condition 12 (Taxation) or anyundertakings given in addition to or in substitution for that Condition, any premium payable inrespect of a Note and any other amount in the nature of principal payable pursuant to theseConditions;19

(v)(vi)(vii)any reference to interest shall be deemed to include any additional amounts in respect ofinterest which may be payable under Condition 12 (Taxation) or any undertakings given inaddition to or in substitution for that Condition and any other amount in the nature of interestpayable pursuant to these Conditions;references to Notes being “outstanding” shall be construed in accordance with the Trust Deed;if an expression is stated in Condition 2(a) to have the meaning given in the relevant PricingSupplement, but the relevant Pricing Supplement gives no such meaning or specifies that suchexpression is “not applicable” then such expression is not applicable to the Notes;(viii) any reference to the Agency Agreement or the Trust Deed shall be construed as a reference tothe Agency Agreement or the Trust Deed as the case may be, as amended and or supplementedup to and including the Issue Date of the Notes; and(ix)any reference to a person includes a reference to that persons successors and permitted assigns.3. Form Denomination and TitleThe Notes are in bearer form in the Specified Denomination(s) with Coupons and, if specified in therelevant Pricing Supplement, Talons attached at the time of issue. In the case of a Series of Notes withmore than one Specified Denomination, Notes of one Specified Denomination will not beexchangeable for Notes of another Specified Denomination. The Notes are Senior Notes orSubordinated Notes, as indicated in the applicable Pricing Supplement. Title to the Notes and theCoupons will pass by delivery. The holder of any Note or Coupon shall (except as otherwise requiredby law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardlessof any notice of ownership, trust or any other interest therein, any writing thereon or any notice of anyprevious loss or theft thereof) and no Person shall be liable for so treating such holder. No person shallhave any right to enforce any term or condition of any Note or the Trust Deed under the Contracts(Rights of Third Parties) Act 1999.4. Status and Guarantee(a)(b)(c)(i)Status of the Senior Notes: If the Notes are specified as Senior Notes in the applicable PricingSupplement, the Notes constitute direct, general, unsubordinated and unconditional obligations of theIssuer which will at all times rank pari passu among themselves and at least pari passu with all otherpresent and future unsecured obligations of the Issuer, save for such obligations as may be preferredby provisions of law that are both mandatory and of general application.Guarantee of the Senior Notes: Where the relevant Issuer is Banif Finance and the Notes are specifiedas Senior Notes in the applicable Pricing Supplement, the Guarantor has in the Trust Deedunconditionally and irrevocably guaranteed the due and punctual payment of all principal and interestand other sums from time to time payable by the Issuer in respect of the Notes. This Guarantee of theNotes constitutes direct, general, unsubordinated and unconditional obligations of the Guarantorwhich will at all times rank at least pari passu with all other present and future unsecured obligationsof the Guarantor, save for such obligations as may be preferred by provisions of law that are bothmandatory and of general application.Status of the Subordinated NotesDated Subordinated NotesDated Subordinated Notes will constitute direct, unsecured, subordinated and unconditionalobligations of the Issuer and rank and will rank pari passu among themselves and at least pari passuwith all other present and future dated subordinated obligations of the Issuer, save for those that havebeen accorded by law preferential rights.20

In the event of the liquidation, bankruptcy or analogous proceedings of the Issuer, the claims of theholders of the Dated Subordinated Notes against the Issuer will be subordinated in right of paymentto the claims of all other creditors (other than holders of Subordinated Indebtedness, if any) of theIssuer in the manner provided in the Trust Deed.“Subordinated Indebtedness” means all the indebtedness of the Issuer under the terms of which theright to payment of the person(s) entitled thereto is, or is expressed to be, subordinated, in the eventof the winding up of the Issuer, to the right to payment of the holder of Dated Subordinated Notes andso that for the purpose of this definition indebtedness shall include all liabilities, whether actual orcontingent, under guarantees or indemnities.(ii)Undated Subordinated NotesUndated Subordinated Notes will constitute direct, unsecured, subordinated and unconditionalobligations of the Issuer which are subordinated to the claims of Senior Creditors of the Issuer and tothe claims of the holders of the Dated Subordinated Notes in that payments are conditional upon theIssuer and the Guarantor being solvent at the time of payment and no such payment shall be madeexcept to the extent that such payment could be made and the Issuer and the Guarantor would still besolvent immediately thereafter. For this purpose, each of the Issuer and the Guarantor shall beconsidered to be solvent if both (i) it is able to pay its debts to Senior Creditors as they fall due and(ii) its Assets exceed its Liabilities to its Senior Creditors.Furthermore, in order to allow Banif and Banif Madeira as Issuers and the Guarantor to continue itsbusiness activities (in accordance with the Bank of Portugal Regulation 12/92 as amended), anyamounts which would be payable as principal or interest under the Undated Subordinated Notes, willbe available to meet the losses of the Issuer or of the Guarantor provided: (a) that there has occurred(i) consumption of the whole of the reserves and retained earnings; (ii) writing down of the ordinaryshare capital of the Issuer and the Guarantor and (iii) writing down of the Issuer’s and the Guarantor’spreference shares (including any preference share capital guaranteed by the Guarantor); and (b) thattherefore, the Issuer’s and the Guarantor’s total shareholders’ equity and the preference shares havebeen reduced to zero.In the above circumstances where unpaid principal and interest may be used to meet the losses of theIssuer or of the Guarantor, the unpaid amounts of interest first and then principal will be cancelled andutilised to the extent that may be necessary to meet the losses of the Issuer or of the Guarantor. Thecancelled amounts will only be reinstated as subordinated credits of the corresponding holders as ifsuch amounts had never been written down or cancelled in the event of (i) the winding-up, liquidationor bankruptcy of the Issuer or of the Guarantor, in which event such reinstatement will be deemed totake effect at the moment which immediately precedes the commencement of the winding-up,liquidation or bankruptcy proceedings; or of (ii) a decision being taken by the shareholders of theIssuer or of the Guarantor to allow a dividend to be paid or to reinstate the cancelled or written downamounts, in each case subject to the approval of the Bank of Portugal. In both the above cases and atall times, cancelled or written down amounts will revert to being treated as subordinated credits of thecorresponding holders, without prejudice to the subordination regime applying thereto.During any period of cancellation or writing down such cancelled or written amounts shall not bearinterest.In the event of liquidation, bankruptcy or analogous proceedings of the Issuer, no Noteholder (havinga debt or a liability towards the Issuer) may exercise any set–off, compensation or retention or othersimilar rights against any amounts held by the Issuer.Without prejudice to the foregoing, the Undated Subordinated Notes will, in the event of a distributionof the assets in the dissolution or liquidation of the Issuer, rank senior to the share capital of the Issuer.A report as to the solvency of the Issuer or the Guarantor as the case may be, by (a) two directors ofthe Issuer or the Guarantor as the case may be, or, if the directors have not reported to the Issuer orthe Guarantor as the case may be, within 14 days before any payment needs to made pursuant to21

Condition 6, the auditors of the Issuer or the Guarantor as the case may be, or (b) if the Issuer or theGuarantor as the case may be, is being wound up, its liquidator shall, in each case in the absence ofmanifest error, be treated and accepted by the Issuer, the Guarantor, the Trustee and the holders ofUndated Subordinated Notes as correct and sufficient evidence thereof.For the purposes of this Condition 4(c) (ii):(A)(B)“Assets” means, in the case of Banif Finance, the total gross assets of Banif Finance and, inthe case of Banif or the Guarantor, the total consolidated gross assets of Banif and “Liabilities”means, in the case of Banif Finance, the total gross liabilities of Banif Finance and, in the caseof Banif or the Guarantor, the total consolidated gross liabilities of Banif, all as shown by, inthe case of Banif Finance, the latest published audited balance sheet of Banif Finance and, inthe case of Banif or the Guarantor, the last published audited consolidated balance sheet ofBanif, but in each case adjusted for contingencies and for subsequent events in such mannerand to such extent as such directors, auditors or liquidator, as the case may be, may determineto be appropriate; and“Senior Creditors” means creditors of the Issuer or, as the case may be, the Guarantor who (x)are depositors or other unsubordinated creditors of the Issuer or, as the case may be, theGuarantor or (y) are subordinated creditors of the Issuer or, as the case may be, the Guarantorother than those whose claims rank pari passu with or junior to the claims of the holders ofUndated Subordinated Notes or (in respect of the Guarantor) persons entitled to claim underthe Guarantee in respect of such Notes.(d)(i)(ii)Status of the Subordinated GuaranteeIf the Notes are Dated Subordinated Notes issued by Banif Finance, the obligation of the Guarantor,acting under the Guarantee constitutes direct, unsecured, subordinated and unconditional obligationsof the Guarantor but, in the event of the dissolution, bankruptcy or liquidation or analogousproceedings of the Guarantor, subordinated in right of the payment to the claims of the depositors andother unsecured creditors of the Guarantor (other than creditors in respect of indebtedness of theGuarantor which is subordinated to at least the same extent as the obligations of the Guarantor underits guarantee in respect of such Dated Subordinated Notes); andIf the Notes are Undated Subordinated Notes issued by Banif Finance, the obligation of the Guarantor,under the Guarantee constitutes direct, unsecured, subordinated and unconditional obligations of theGuarantor which, to the extent permitted by Portuguese law, are subordinated to the claims of SeniorCreditors of the Guarantor, and to the claims of the holders of the Dated Subordinated Notes in thatpayment under the guarantee is conditional upon the Guarantor being solvent at the time of paymentand that no such payment shall be made except to the extent that the Guarantor could make suchpayment and still be solvent immediately thereafter. For this purpose, the Guarantor shall beconsidered to be solvent if both (a) it is able to pay its debts to the Senior Creditors of the Guarantoras they fall due and (b) its Assets exceed its Liabilities to Senior Creditors of the Guarantor.Without prejudice to the foregoing, the obligations of the Guarantor, under the Guarantee in respectof Undated Subordinated Notes issued by Banif Finance will, in the event of a distribution of theassets in the dissolution or liquidation of the Guarantor, rank senior to the share capital of theGuarantor.A report as to the solvency of the Guarantor by (a) two directors of the Guarantor or, if the directorshave not reported to the Guarantor within 14 days before any payment needs to be made pursuant tothis Condition 4(d)(ii), the auditors of the Guarantor or (b) if the Guarantor is being wound up, itsliquidator shall, in each case in the absence of manifest error, be treated and accepted by BanifFinance, the Guarantor, the Trustee and the holders of Undated Subordinated Notes issued by BanifFinance as correct and sufficient evidence thereof.For the purposes of this Condition 4(d)(ii):22

(A)(B)“Assets” means the total consolidated gross assets of the Guarantor and “Liabilities” means thetotal consolidated gross liabilities of the Guarantor, all as shown by the latest published auditedconsolidated balance sheet of the Guarantor but adjusted for contingencies and for subsequentevents in such manner and to such extent as such directors, auditors or liquidator, as the casemay be, may determine to be appropriate; and“Senior Creditors of the Guarantor” means creditors of the Guarantor who (x) are depositorsor other unsubordinated creditors of the Guarantor or (y) are subordinated creditors of theGuarantor other than those whose claims rank pari passu with or junior to the claims of theholders of Undated Subordinated Notes and persons entitled to claim under the Guarantee inrespect of such Notes.The obligations of the Guarantor under the Guarantee in respect of Undated Subordinated Notesissued by Banif Finance are conditional upon the Guarantor being solvent immediately before andafter payment by the Guarantor. Any amount, which might otherwise have been allocated in ortowards payment by Banif Finance of principal or interest in respect of the Undated SubordinatedNotes, will be available to meet the losses of the Guarantor.Furthermore, in order to allow the Guarantor to continue its business activities (in accordance withthe Bank of Portugal Regulation 12/92), any amounts which, under the Conditions, would be payableas principal or interest under the Guarantee in respect of Undated Subordinated Notes issued by BanifFinance, will be available to meet the losses of the Guarantor, provided: (a) that there has occurred (i)utilisation of the whole of the reserves and retained earnings; (ii) writing down of the ordinary sharecapital of the Guarantor and (iii) writing down of the Guarantor’s preference shares (including anypreference share capital guaranteed by the Guarantor); and (b) that therefore the Guarantor’s totalshareholders’ equity and the preference share interests of Banif have been reduced to zero.In the above circumstances where unpaid principal and interest may be used to meet the losses of theGuarantor, the unpaid amounts of interest first and then principal will be cancelled and utilised to theextent that may be necessary to meet the losses of the Guarantor. The cancelled amounts will only bereinstated as subordinated credits to the corresponding holders as if such amounts had never beenwritten down or cancelled in the event of (i) the winding-up, liquidation or bankruptcy of theGuarantor, in which event such reinstatement will be deemed to take effect at the moment whichimmediately precedes the commencement of the winding-up, liquidation or bankruptcy proceedings;or of (ii) a decision being taken by the shareholders of the Issuer or of the Guarantor to allow adividend to be paid or to reinstate the cancelled or written down amounts, in each case subject to theapproval of the Bank of Portugal in both the above cases and at all times, cancelled or written downamounts will revert to being treated as subordinated credits of the corresponding holders, withoutprejudice to the subordination regime applying thereto.During any period of cancellation or writing down such cancelled or written down amounts shall notbear interest.In the event of liquidation, bankruptcy or analogous proceedings of the Guarantor, no Noteholder(having a debt or a liability towards the Guarantor) may exercise any set-off, compensation orretention or other similar rights against any amounts held by the Guarantor.5. Negative PledgeThis Condition 5 shall apply only to Senior Notes and references to “Notes” and “Noteholders” shallbe construed accordingly.So long as any Note remains outstanding, neither the Issuer nor, if applicable, the Guarantor shall, andthe Issuer and, if applicable, the Guarantor shall procure that none of their respective Subsidiarieswill, create or permit to subsist any Security Interest upon the whole or any part of its present or futureundertaking, assets or revenues (including uncalled capital) to secure any Indebtedness (except wherethis is Permitted Indebtedness) or Guarantee of Indebtedness (except where this is Permitted23

7. Floating Rate Note and Index-Linked Interest Note Provisions(a)(b)(c)Application: This Condition 7 (Floating Rate Note and Index-Linked Interest Note Provisions) isapplicable to the Notes only if the Floating Rate Note Provisions or the Index-Linked Interest NoteProvisions are specified in the relevant Pricing Supplement as being applicable.Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate ofInterest payable in arrear on each Interest Payment Date, subject as provided in Condition 11(Payments). Each Note will cease to bear interest from the due date for final redemption unless, upondue presentation, payment of the Redemption Amount is improperly withheld or refused, in whichcase it will continue to bear interest in accordance with this Condition (as well after as beforejudgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Noteup to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is sevendays after the Principal Paying Agent or as the case may be the Trustee has notified the Noteholdersthat it has received all sums due in respect of the Notes up to such seventh day (except to the extentthat there is any subsequent default in payment).Screen Rate Determination: If Screen Rate Determination is specified in the relevant PricingSupplement as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interestapplicable to the Notes for each Interest Period will be determined by the Calculation Agent on thefollowing basis:(i)(ii)(iii)if the Reference Rate is a composite quotation or customarily supplied by one entity, theCalculation Agent will determine the Reference Rate which appears on the Relevant ScreenPage as of the Relevant Time on the relevant Interest Determination Date;in any other case, the Calculation Agent will determine the arithmetic mean of the ReferenceRates which appear on the Relevant Screen Page as of the Relevant Time on the relevantInterest Determination Date;if, in the case of (i) above, such rate does not appear on that page or, in the case of (ii) above,fewer than two such rates appear on that page or if, in either case, the Relevant Screen Page isunavailable, the Calculation Agent will:(A)(B)request the principal Relevant Financial Centre office of each the Reference Banks toprovide a quotation of the Reference Rate at approximately the Relevant Time on theInterest Determination Date to prime banks in the Relevant Financial Centre interbankmarket in an amount that is representative for a single transaction in that market at thattime; anddetermine the arithmetic mean of such quotations; and(iv)if fewer than two such quotations are provided as requested, the Calculation Agent willdetermine the arithmetic mean of the rates (being the nearest to the Reference Rate, asdetermined by the Calculation Agent) quoted by major banks in the Principal Financial Centreof the Specified Currency, selected by the Calculation Agent, at approximately 11.00 a.m.(local time in the Principal Financial Centre of the Specified Currency) on the first day of therelevant Interest Period for loans in the Specified Currency to leading European banks for aperiod equal to the relevant Interest Period and in an amount that is representative for a singletransaction in that market at that time,and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as thecase may be) the arithmetic mean so determined; provided, however, that if the Calculation Agent isunable to determine a rate or (as the case may be) an arithmetic mean in accordance with the aboveprovisions in relation to any Interest Period, the Rate of Interest applicable to the Notes during suchInterest Period will be the sum of the Margin and the rate or (as the case may be) the arithmetic meanlast determined in relation to the Notes in respect of a preceding Interest Period.25

(d)ISDA Determination: If ISDA Determination is specified in the relevant Pricing Supplement as themanner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to theNotes for each Interest Period will be the sum of the Margin and the relevant ISDA Rate where “ISDARate” in relation to any Interest Period means a rate equal to the Floating Rate (as defined in the ISDADefinitions) that would be determined by the Calculation Agent under an interest rate swaptransaction if the Calculation Agent were acting as Calculation Agent for that interest rate swaptransaction under the terms of an agreement incorporating the ISDA Definitions and under which:(i)(ii)(iii)the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the relevantPricing Supplement;the Designated Maturity (as defined in the ISDA Definitions) is a period specified in therelevant Pricing Supplement; andthe relevant Reset Date (as defined in the ISDA Definitions) is either (A) if the relevantFloating Rate Option is based on the London inter-bank offered rate (LIBOR) for a currency,the first day of that Interest Period or (B) in any other case, as specified in the relevant PricingSupplement.(e)(f)(g)(h)(i)(j)Index-Linked Interest: If the Index-Linked Interest Note Provisions are specified in the relevantPricing Supplement as being applicable, the Rate(s) of Interest applicable to the Notes for eachInterest Period will be determined in the manner specified in the relevant Pricing Supplement.Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of Interestis specified in the relevant Pricing Supplement, then the Rate of Interest shall in no event be greaterthan the maximum or be less than the minimum so specified.Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time atwhich the Rate of Interest is to be determined in relation to each Interest Period, calculate the InterestAmount payable in respect of each Note for such Interest Period. The Interest Amount will becalculated by applying the Rate of Interest for such Interest Period to the principal amount of suchNote during such Interest Period and multiplying the product by the relevant Day Count Fraction.Calculation of other amounts: If the relevant Pricing Supplement specifies that any other amount isto be calculated by the Calculation Agent, the Calculation Agent will, as soon as practicable after thetime or times at which any such amount is to be determined, calculate the relevant amount. Therelevant amount will be calculated by the Calculation Agent in the manner specified in the relevantPricing Supplement.Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount determinedby it, together with the relevant Interest Payment Date, and any other amount(s) required to bedetermined by it together with any relevant payment date(s) to be notified to the Paying Agents andeach listing authority, stock exchange and/or quotation system (if any) by which the Notes have thenbeen admitted to listing, trading and/or quotation as soon as practicable after such determination but(in the case of each Rate of Interest, Interest Amount and Interest Payment Date) in any event not laterthan the first day of the relevant Interest Period. Notice thereof shall also promptly be given to theNoteholders. The Calculation Agent will be entitled to recalculate any Interest Amount (on the basisof the foregoing provisions) without notice in the event of an extension or shortening of the relevantInterest Period.Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations anddecisions given, expressed, made or obtained for the purposes of this Condition by the CalculationAgent will (in the absence of manifest error) be binding on the Issuer, the Guarantor (if the Notes areguaranteed), the Trustee, the Paying Agents, the Noteholders and the Couponholders and (subject asaforesaid) no liability to any such Person will attach to the Calculation Agent or the Trustee inconnection with the exercise or non-exercise by it of its powers, duties and discretions for suchpurposes.26

(k)Determination or Calculation by Trustee: If the Calculation Agent fails at any time to determine aRate of Interest or to calculate an Interest Amount or Additional Interest Amount, the Trustee willdetermine such Rate of Interest and make such determination or calculation which shall be deemed tohave been made by the Calculation Agent. In doing so, the Trustee shall apply all of the provisions ofthese conditions with any necessary consequential amendments to the extent that, in its sole opinionand with absolute discretion, it can do so and in all other respects it shall do so in such manner as itshall deem fair and reasonable in all the circumstances and will not be liable for any loss, liability,cost, charge or expense which may arise as a result thereof. Any such determination or calculationmade by the Trustee shall be binding on the Issuer, the Guarantor (if the Notes are guaranteed), thePaying Agents, the Noteholders and the Couponholders.8. Zero Coupon Note Provisions(a)(b)Application: This Condition 8 is applicable to the Notes only if the Zero Coupon Note Provisions arespecified in the relevant Pricing Supplement as being applicable.Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any ZeroCoupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be anamount equal to the sum of:(i)(ii)the Reference Price; andthe product of the Accrual Yield (compounded annually) being applied to the Reference Priceon the basis of the relevant Day Count Fraction from (and including) the Issue Date to (butexcluding) whichever is the earlier of (i) the day on which all sums due in respect of such Noteup to that day are received by or on behalf of the relevant Noteholder and (ii) the day which isseven days after the Principal Paying Agent, or as the case may be, the Trustee, has notified theNoteholders that it has received all sums due in respect of the Notes up to such seventh day(except to the extent that there is any subsequent default in payment).9. Dual Currency Note Provisions(a)(b)Application: This Condition 9 is applicable to the Notes only if the Dual Currency NoteProvisions are specified in the relevant Pricing Supplement as being applicable.Rate of Interest: If the rate or amount of interest falls to be determined by reference to anexchange rate, the rate or amount of interest payable shall be determined in the mannerspecified in the relevant Pricing Supplement.10. Redemption and Purchase(a)(b)Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will beredeemed at their Final Redemption Amount on the Maturity Date, subject as provided in Condition11 (Payments). If the Note is an Undated Subordinated Note, it has no final maturity and is onlyredeemable in accordance with the following provisions of this Condition 10 or Condition 13b(Events of Default relating to Subordinated Notes).Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but notin part (after obtaining the consent of the Bank of Portugal whenever it is required in the case ofSubordinated Notes):(i)(ii)at any time (if neither the Floating Rate Note Provisions or the Index-Linked Interest NoteProvisions are specified in the relevant Pricing Supplement as being applicable); oron any Interest Payment Date (if the Floating Rate Note Provisions or the Index-Linked InterestNote Provisions are specified in the relevant Pricing Supplement as being applicable),27

on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall beirrevocable), at their Early Redemption Amount (Tax), together with interest accrued (if any) to thedate fixed for redemption, if:(A)(B)the Issuer has or will become obliged to pay additional amounts as provided or referredto in Condition 12 (Taxation) as a result of any change in, or amendment to, the laws orregulations of the country of incorporation of the Issuer, or if different, the country oftax residence of the Issuer, or any political subdivision or any authority thereof ortherein having power to tax, or any change in the application or official interpretation ofsuch laws or regulations (including a holding by a court of competent jurisdiction),which change or amendment becomes effective on or after the date of issue of the firstTranche of the Notes; andsuch obligation cannot be avoided by the Issuer taking reasonable measures available toit,provided, however, that no such notice of redemption shall be given earlier than:(1) where the Notes may be redeemed at any time, 90 days prior to the earliest dateon which the Issuer would be obliged to pay such additional amounts if apayment in respect of the Notes were then due; or(2) where the Notes may be redeemed only on an Interest Payment Date, 60 daysprior to the Interest Payment Date occurring immediately before the earliest dateon which the Issuer would be obliged to pay such additional amounts if apayment in respect of the Notes were then due.Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliverto the Trustee (A) a certificate satisfactory to the Trustee signed by two directors of the Issuer statingthat the Issuer is entitled to effect such redemption and setting forth a statement of facts showing thatthe conditions precedent to the right of the Issuer so to redeem have occurred of and (B) an opinionof independent legal advisers of recognised standing to the effect that the Issuer has or will becomeobliged to pay such additional amounts as a result of such change or amendment (and the Trustee shallbe entitled to accept the certificate as sufficient evidence of the satisfaction of the conditionsprecedent set out above in which event it shall be conclusive and binding on the Noteholders and theCouponholders). Upon the expiry of any such notice as is referred to in this Condition 10(b), theIssuer shall be bound to redeem the Notes in accordance with this Condition 10(b).(c)(d)Redemption at the option of the Issuer: If the Call Option is specified in the relevant PricingSupplement as being applicable, the Notes may be redeemed at the option of the Issuer in whole or,if so specified in the relevant Pricing Supplement, in part (after obtaining the consent of the Bank ofPortugal whenever it is required in the case of Subordinated Notes) on any Optional Redemption Date(Call) at the relevant Optional Redemption Amount (Call) on the Issuer’s giving not less than 30 normore than 60 days’ notice to the Noteholders and having notified the Trustee prior to the provision ofsuch notice (which notice shall be irrevocable and shall oblige the Issuer to redeem the Notes or, asthe case may be, the Notes specified in such notice on the relevant Optional Redemption Date (Call)at the Optional Redemption Amount (Call) plus accrued interest (if any) to such date).Partial redemption: If the Notes are to be redeemed in part only on any date in accordance withCondition 10(c) (Redemption at the option of the Issuer), the Notes to be redeemed shall be selectedby the drawing of lots in such place as the Trustee approves and in such manner as the Trusteeconsiders appropriate, subject to compliance with applicable law and the rules of each listingauthority, stock exchange and/or quotation system (if any) by which the Notes have then beenadmitted to listing, trading and/or quotation, and the notice to Noteholders referred to in Condition10(c) (Redemption at the option of the Issuer) shall specify the serial numbers of the Notes so to beredeemed. If any Maximum Redemption Amount or Minimum Redemption Amount is specified in28

the relevant Pricing Supplement, then the Optional Redemption Amount (Call) shall in no event begreater than the maximum or be less than the minimum so specified.(e)(f)(g)Redemption at the option of Noteholders: If the Put Option is specified in the relevant PricingSupplement (provided that a Put Option may not be specified if this is a Subordinated Note) as beingapplicable, the Issuer shall, at the option of the holder of any Note redeem such Note on the OptionalRedemption Date (Put) specified in the relevant Put Option Notice at the relevant OptionalRedemption Amount (Put) together with interest (if any) accrued to such date. In order to exercise theoption contained in this Condition 10(e), the holder of a Note must, not less than 30 nor more than 60days before the relevant Optional Redemption Date (Put), deposit with any Paying Agent such Notetogether with all unmatured Coupons relating thereto and a duly completed Put Option Notice in theform obtainable from any Paying Agent. The Paying Agent with which a Note is so deposited shalldeliver a duly completed Put Option Receipt to the depositing Noteholder. No Note, once depositedwith a duly completed Put Option Notice in accordance with this Condition 10(e), may be withdrawn;provided, however, that if, prior to the relevant Optional Redemption Date (Put), any such Notebecomes immediately due and payable or, upon due presentation of any such Note on the relevantOptional Redemption Date (Put), payment of the redemption moneys is improperly withheld orrefused, the relevant Paying Agent shall mail notification thereof to the depositing Noteholder at suchaddress as may have been given by such Noteholder in the relevant Put Option Notice and shall holdsuch Note at its Specified Office for collection by the depositing Noteholder against surrender of therelevant Put Option Receipt. For so long as any outstanding Note is held by a Paying Agent inaccordance with this Condition 10(e), the depositor of such Note and not such Paying Agent shall bedeemed to be the holder of such Note for all purposes.No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as providedin paragraphs (a) to (e) above.Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant PricingSupplement, the Redemption Amount payable on redemption of a Zero Coupon Note at any timebefore the Maturity Date shall be an amount equal to the sum of:(i)(ii)the Reference Price; andthe product of the Accrual Yield (compounded annually) being applied to the Reference Pricefrom (and including) the Issue Date to (but excluding) the date fixed for redemption or (as thecase may be) the date upon which the Note becomes due and payable.Where such calculation is to be made for a period which is not a whole number of years, thecalculation in respect of the period of less than a full year shall be made on the basis of such DayCount Fraction as may be specified in the Pricing Supplement for the purposes of this Condition 10(g)or, if none is so specified, a Day Count Fraction of 30E/360.(h)(i)Purchase: The Issuers, the Guarantor or any of their respective Subsidiaries may (after obtaining theconsent of the Bank of Portugal whenever it is required in the case of Subordinated Notes) at any timepurchase Notes in the open market or otherwise and at any price, provided that all unmatured Couponsare purchased therewith.Cancellation: All Notes so redeemed or purchased by an Issuer, the Guarantor or any of theirrespective Subsidiaries and any unmatured Coupons attached to or surrendered with them shall becancelled and may not be reissued or resold.11. Payments(a)Principal: Payments of principal shall be made only against presentation and (provided that paymentis made in full) surrender of Notes at the Specified Office of any Paying Agent outside the UnitedStates by cheque drawn in the currency in which the payment is due on, or by transfer to an accountdenominated in that currency (or, if that currency is euro, any other account to which euro may becredited or transferred) and maintained by the payee with, a bank in the Principal Financial Centre of29

that currency (in the case of a sterling cheque, a town clearing branch of a bank in the City ofLondon).(b)(c)(d)(e)Interest: Payments of interest shall, subject to paragraph (h) below, be made only against presentationand (provided that payment is made in full) surrender of the appropriate Coupons at the SpecifiedOffice of any Paying Agent outside the United States in the manner described in paragraph (a) above.Payments in New York City: Payments of principal or interest may be made at the Specified Office ofa Paying Agent in New York City if (i) the Issuer has appointed Paying Agents outside the UnitedStates with the reasonable expectation that such Paying Agents will be able to make payment of thefull amount of the interest on the Notes in the currency in which the payment is due when due, (ii)payment of the full amount of such interest at the offices of all such Paying Agents is illegal oreffectively precluded by exchange controls or other similar restrictions and (iii) payment is permittedby applicable United States law.Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to anyapplicable fiscal or other laws and regulations in the place of payment, but without prejudice to theprovisions of Condition 12 (Taxation). No commissions or expenses shall be charged to theNoteholders or Couponholders in respect of such payments.Deductions for unmatured Coupons: If the relevant Pricing Supplement specifies that the Fixed RateNote Provisions are applicable and a Note is presented without all unmatured Coupons relatingthereto:(i)(ii)if the aggregate amount of the missing Coupons is less than or equal to the amount of principaldue for payment, a sum equal to the aggregate amount of the missing Coupons will be deductedfrom the amount of principal due for payment; provided, however, that if the gross amountavailable for payment is less than the amount of principal due for payment, the sum deductedwill be that proportion of the aggregate amount of such missing Coupons which the grossamount actually available for payment bears to the amount of principal due for payment;if the aggregate amount of the missing Coupons is greater than the amount of principal due forpayment:(A)(B)so many of such missing Coupons shall become void (in inverse order of maturity) aswill result in the aggregate amount of the remainder of such missing Coupons (the“Relevant Coupons”) being equal to the amount of principal due for payment;provided, however, that where this sub-paragraph would otherwise require a fraction ofa missing Coupon to become void, such missing Coupon shall become void in itsentirety; anda sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount ofprincipal due for payment) will be deducted from the amount of principal due forpayment; provided, however, that, if the gross amount available for payment is less thanthe amount of principal due for payment, the sum deducted will be that proportion of theaggregate amount of the Relevant Coupons (or, as the case may be, the amount ofprincipal due for payment) which the gross amount actually available for payment bearsto the amount of principal due for payment.Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) above againstpresentation and (provided that payment is made in full) surrender of the relevant missing Coupons.(f)Unmatured Coupons void: If the relevant Pricing Supplement specifies that this Condition 11(f) isapplicable or that the Floating Rate Note Provisions or the Index-Linked Interest Note Provisions areapplicable, on the due date for final redemption of any Note or early redemption of such Notepursuant to Condition 10(b) (Redemption for tax reasons), Condition 10(e) (Redemption at the optionof Noteholders), Condition 10(c) (Redemption at the option of the Issuer) or Condition 13 (Events of30

Default), all unmatured Coupons relating thereto (whether or not still attached) shall become void andno payment will be made in respect thereof.(g)(h)(i)(j)Payments on business days: If the due date for payment of any amount in respect of any Note orCoupon is not a Payment Business Day in the place of presentation, the holder shall not be entitled topayment in such place of the amount due until the next succeeding Payment Business Day in suchplace and shall not be entitled to any further interest or other payment in respect of any such delay.Payments other than in respect of matured Coupons: Payments of interest other than in respect ofmatured Coupons shall be made only against presentation of the relevant Notes at the Specified Officeof any Paying Agent outside the United States (or in New York City if permitted by paragraph (c)above).Partial payments: If a Paying Agent makes a partial payment in respect of any Note or Couponpresented to it for payment, such Paying Agent will endorse thereon a statement indicating the amountand date of such payment.Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the time ofissue) part of a Coupon Sheet relating to the Notes, the Talon forming part of such Coupon Sheet maybe exchanged at the Specified Office of the Principal Paying Agent for a further Coupon Sheet(including, if appropriate, a further Talon but excluding any Coupons in respect of which claims havealready become void pursuant to Condition 14 (Prescription). Upon the due date for redemption ofany Note, any unexchanged Talon relating to such Note shall become void and no Coupon will bedelivered in respect of such Talon.12. Taxation(a)Gross up: All payments of principal and interest in respect of the Notes and the Coupons by or onbehalf of the Issuer or, if applicable, the Guarantor shall be made free and clear of, and withoutwithholding or deduction for or on account of, any present or future taxes, duties, assessments orgovernmental charges of whatever nature imposed, levied, collected, withheld or assessed by or onbehalf of the country of incorporation of the Issuer, or, if applicable, the Guarantor, or if different, thecountry of tax residence of the Issuer, or, if applicable, the Guarantor (in the case of the Issuer, the“Issuer Taxing Jurisdiction” and, in the case of the Guarantor, the “Guarantor Taxing Jurisdiction”) orany political subdivision therein or any authority therein or thereof having power to tax, unless thewithholding or deduction of such taxes, duties, assessments, or governmental charges is required bylaw. In that event, the Issuer or (as the case may be) the Guarantor shall pay such additional amountsas will result in receipt by the Noteholders and the Couponholders after such withholding or deductionof such amounts as would have been received by them had no such withholding or deduction beenrequired, except that no such additional amounts shall be payable in respect of any Note or Couponpresented for payment:(i)(ii)(iii)by or on behalf of a holder which is liable to such taxes, duties, assessments or governmentalcharges in respect of such Note or Coupon by reason of its having some connection with thejurisdiction by which such taxes, duties, assessments or charges have been imposed, levied,collected, withheld or assessed other than the mere holding of the Note or Coupon; orby or on behalf of a holder which is able to avoid such withholding or deduction by making adeclaration of non-residence or other claim for exemption to the relevant tax authority; orwhere such withholding or deduction is imposed on a payment to an individual and is requiredto be made pursuant to European Council Directive 2003/48/EC or any other Directiveimplementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 onthe taxation of savings income or any law implementing or complying with, or introduced inorder to conform to, such Directive; or31

(B)Events of Default relating to Subordinated NotesIf any one or more of the following events (each an “Event of Default”) occurs with respect to anySubordinated Note (any reference to “Note”, “Notes” and “Noteholders” shall be construedaccordingly):(i)(ii)(iii)the Issuer fails to pay for a period of 7 days or more any amount of principal in respect of theNotes on the due date for payment thereof; orthe Issuer fails to pay for a period of 14 days or more any amount of interest in respect of theNotes on the due date for payment thereof; orany order shall be made by any competent court or resolution passed for the winding-up ordissolution of the Issuer or the Guarantor (where the Issuer is Banif Finance) (other than forthe purpose of an amalgamation, merger or reconstruction approved by the Trustee or by anExtraordinary Resolution of the Noteholders),then the Trustee at its discretion may, and if so requested in writing by the holders of not less than 20per cent. in principal amount of the Notes then outstanding or if so directed by an ExtraordinaryResolution of the holders shall (subject in each case to the Trustee having been indemnified and/orsecured to its satisfaction), give written notice to the Issuer declaring the Notes to be, whereupon theyshall accordingly immediately become, immediately due and repayable at their Early TerminationAmount together, with any accrued interest (as provided in the Trust Deed) without any further actionor formality.Notwithstanding the Trustee having given notice that the Notes are immediately due and repayable,the Issuer may only redeem such Notes with the prior approval of the Bank of Portugal.There can be no assurance that the Bank of Portugal will give its approval to any such earlyredemption. Noteholders should be aware of the fact that the Bank of Portugal’s approval will dependon the capital adequacy of Banif.14. PrescriptionClaims for principal shall become void unless the relevant Notes are presented for payment within tenyears of the appropriate Relevant Date. Claims for interest shall become void unless the relevantCoupons are presented for payment within five years of the appropriate Relevant Date.15. Replacement of Notes and CouponsIf any Note or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at theSpecified Office of the Principal Paying Agent (and, if the Notes are then admitted to listing, tradingand/or quotation by any listing authority, stock exchange and/or quotation system which requires theappointment of a Paying Agent in any particular place, the Paying Agent having its Specified Officein the place required by such listing authority, stock exchange and/or quotation system), subject to allapplicable laws and listing authority, stock exchange and/or quotation system requirements, uponpayment by the claimant of the costs and expenses incurred in connection with such replacement andon such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require.Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued.16. Trustee and AgentsThe Trust Deed contains provisions for the indemnification of the Trustee and for its relief fromresponsibility, including provisions relieving it from taking proceedings to enforce payment unlessindemnified and/or secured to its satisfaction, and to be paid its costs and expenses in priority to theclaims of Noteholders and Couponholders. The Trustee is entitled to enter into business transactionswith any Issuer, the Guarantor and any entity related to any Issuer or the Guarantor withoutaccounting for any profit.34

In the exercise of its powers and discretions under these Conditions and the Trust Deed, the Trusteewill have regard to the interests of the Noteholders as a class and will not be responsible for anyconsequences for individual holders of Notes, Coupons or Talons as a result of such holders beingconnected in any way with a particular territory or taxing jurisdiction.In acting under the Agency Agreement and in connection with the Notes and the Coupons, the PayingAgents and the Calculation Agent act solely as agents of the Issuer and, if applicable the Guarantor,or following the occurrence of an Event of Default, the Trustee and do not assume any obligationstowards or relationship of agency or trust for or with any of the Noteholders or Couponholders.The initial Paying Agents and their initial Specified Offices are listed below. The initial CalculationAgent (if any) is specified in the relevant Pricing Supplement. The Issuer and, if applicable theGuarantor, reserves the right (with the prior written approval of the Trustee) at any time to vary orterminate the appointment of any Paying Agent or the Calculation Agent and to appoint a successorprincipal paying agent or calculation agent and additional or successor paying agents; provided,however, that:(a)(b)(c)(d)(e)the Issuer and, if applicable, the Guarantor shall at all times maintain a Principal Paying Agent;andif European Council Directive 2003/48/EC or any other Directive implementing theconclusions of the ECOFIN Council meeting of 26-27 November 2000 is brought into force,the Issuer and, if applicable the Guarantor, will ensure that they maintain a Paying Agent in anEU member state that will not be obliged to withhold or deduct tax pursuant to such Directiveor any law implementing or complying with, or introduced to conform to, such Directive; andif a Calculation Agent is specified in the relevant Pricing Supplement, the Issuer and, ifapplicable the Guarantor, shall at all times maintain a Calculation Agent;if and for so long as the Notes are admitted to listing, trading and/or quotation by any listingauthority, stock exchange and/or quotation system which requires the appointment of a PayingAgent in any particular place, the Issuer and, if applicable the Guarantor, shall maintain aPaying Agent having its Specified Office in the place required by such listing authority, stockexchange and/or quotation system; andin the circumstances described in Condition 11(c) (Payments in New York City), a PayingAgent with a specified office in New York City).Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be givenby the Issuer to the Noteholders.17. Meetings of Noteholders; Modification and Waiver(a)Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of Noteholdersto consider matters relating to the Notes, including the modification of any provision of theseConditions or the provisions of the Trust Deed. Any such modification may be made if sanctioned byan Extraordinary Resolution. Any modification to the Conditions in respect of Subordinated Notes is,however, conditional upon the approval of the Bank of Portugal and, notwithstanding its sanctioningby Extraordinary Resolution, such modification will only take effect upon the Bank of Portugalgranting the Issuer such approval. Such a meeting may be convened by the Issuer or the Trustee andshall be convened by them upon the request in writing of Noteholders holding not less than one-tenthof the aggregate principal amount of the outstanding Notes. The quorum at any meeting convened tovote on an Extraordinary Resolution will be two or more Persons holding or representing one morethan half of the aggregate principal amount of the outstanding Notes or, at any adjourned meeting, twoor more Persons being or representing Noteholders whatever the principal amount of the Notes heldor represented; provided, however, that Reserved Matters may only be sanctioned by an ExtraordinaryResolution passed at a meeting of Noteholders at which two or more Persons holding or representingnot less than three-quarters or, at any adjourned meeting, one quarter of the aggregate principal35

amount of the outstanding Notes form a quorum. Any Extraordinary Resolution duly passed at anysuch meeting shall be binding on all the Noteholders and Couponholders, whether present or not.In addition, a resolution in writing signed by or on behalf of all Noteholders who for the time beingare entitled to receive notice of a meeting of Noteholders will take effect as if it were an ExtraordinaryResolution. Such a resolution in writing may be contained in one document or several documents inthe same form, each signed by or on behalf of one or more Noteholders.(b)(c)(d)Modification and Waiver: The Trustee may agree without the consent of the Noteholders or theCouponholders to (i) any modification of any provision of these Conditions or the Trust Deed whichis of a formal, minor or technical nature or is made to correct a manifest error and (ii) any othermodification (other than in respect of a Reserved Matter) and any waiver or authorisation of anybreach or proposed breach of any provision of these Conditions or the Trust Deed which is in theopinion of the Trustee not materially prejudicial to the interests of the Noteholders. In addition, theparties to the Agency Agreement may agree to modify any provision thereof, save the Trustee shallonly agree, without the consent of the Noteholders, to such modification if, in the opinion of theTrustee, such modification is not materially prejudicial to the interests of the Noteholders. Any suchmodification, authorisation or waiver shall be binding on the Noteholders and Couponholders.Substitution: The Trustee may agree without the consent of the Noteholders or the Couponholders tothe substitution of a Subsidiary of the Issuer in place of the Issuer as principal debtor under the TrustDeed, the Notes and the Coupons provided that certain conditions specified in the Trust Deed arefulfilled, including, in the case of a substitution of Banif Finance by a company other than theGuarantor, a requirement that the Guarantee of the Notes is fully effective in relation to the obligationsof the new principal debtor under the Trust Deed and the Notes.No Noteholder or Couponholder shall, in connection with any substitution, be entitled to claim anyindemnification or payment in respect of any tax consequence thereof for such Noteholder or (as thecase may be) Couponholder except to the extent provided for in Condition 12 (Taxation) (or anyundertaking given in addition to or substitution for such Condition).18. EnforcementThe Trustee may at any time, at its discretion and without notice, institute such proceedings as itthinks fit to enforce its rights under the Trust Deed in respect of the Notes, but it shall not be boundto do so unless:(a)(b)it has been so requested in writing by the holders of at least one quarter in principal amount ofthe outstanding Notes or has been so directed by an Extraordinary Resolution; andit has been indemnified and/or provided with security to its satisfaction.No Noteholder may proceed directly against the Issuer or, if applicable, the Guarantor.19. Further IssuesThe Issuer may (after obtaining the consent of the Bank of Portugal whenever it is required in the caseof Subordinated Notes) from time to time, without the consent of the Noteholders or theCouponholders, and in accordance with the Trust Deed create and issue further notes having the sameterms and conditions as the Notes in all respects (or in all respects except for the date of the firstpayment of interest) so that the same shall be consolidated and form a single series with the Notes.20. NoticesNotices to the Noteholders shall be valid if published in a leading English language daily newspaperpublished in London (which is expected to be the Financial Times) and, if the Notes are listed on theLuxembourg Stock Exchange and the rules of that exchange so require, a leading newspaper havinggeneral circulation in Luxembourg (which is expected to be the Luxemburger Wort) or in either case,36

if such publication is not practicable, in a leading English language daily newspaper having generalcirculation in Europe. Any such notice shall be deemed to have been given on the date of firstpublication (or if required to be published in more than one newspaper, on the first date on whichpublication shall have been made in all the required newspapers). Couponholders shall be deemed forall purposes to have notice of the contents of any notice given to the Noteholders.21. RoundingFor the purposes of any calculations referred to in these Conditions (unless otherwise specified inthese Conditions or the relevant Pricing Supplement), (a) all percentages resulting from suchcalculations will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point(with 0.000005 per cent. being rounded up to 0.00001 per cent.), (b) all United States dollar amountsused in or resulting from such calculations will be rounded to the nearest cent (with one half centbeing rounded up), (c) all Japanese Yen amounts used in or resulting from such calculations will berounded downwards to the next lower whole Japanese Yen amount, and (d) all amounts denominatedin any other currency used in or resulting from such calculations will be rounded to the nearest twodecimal places in such currency, with 0.005 being rounded upwards.22. Redenomination, Renominalisation and Reconventioning(a) Application: This Condition 22 (Redenomination, Renominalisation and Reconventioning) isapplicable to the Notes only if it is specified in the relevant Pricing Supplement as being applicable.(b)(c)Notice of redenomination: If the country of the Specified Currency becomes or, announces itsintention to become, a Participating Member State, the Issuer may, without the consent of theNoteholders and Couponholders, on giving at least 30 days’ prior notice to the Noteholders and thePaying Agents and having notified the Trustee prior to the provision of such notice, designate a date(the “Redenomination Date”), being an Interest Payment Date under the Notes falling on or after thedate on which such country becomes a Participating Member State.Redenomination: Notwithstanding the other provisions of these Conditions, with effect from theRedenomination Date:(i)(ii)the Notes shall be deemed to be redenominated into euro in the denomination of euro 0.01 witha principal amount for each Note equal to the principal amount of that Note in the SpecifiedCurrency, converted into euro at the rate for conversion of such currency into euro establishedby the Council of the European Union pursuant to the Treaty (including compliance with rulesrelating to rounding in accordance with European Community regulations); provided, however,that, if the Issuer determines, with the agreement of the Trustee that market practice in respectof the redenomination into euro 0.01 of internationally offered securities is different from thatspecified above, such provisions shall be deemed to be amended so as to comply with suchmarket practice and the Issuer shall promptly notify the Noteholders and Couponholders, eachlisting authority, quotation system and/or stock exchange (if any) by which the Notes are thenlisted, traded or quoted and the Paying Agents of such deemed amendments;if Notes have been issued in definitive form:(A)(B)all unmatured Coupons denominated in the Specified Currency (whether or not attachedto the Notes) will become void with effect from the date (the “Euro Exchange Date”)on which the Issuer gives notice (the “Euro Exchange Notice”) to the Noteholders thatreplacement Notes and Coupons denominated in euro are available for exchange(provided that such Notes and Coupons are available) and no payments will be made inrespect thereof;the payment obligations contained in all Notes denominated in the Specified Currencywill become void on the Euro Exchange Date but all other obligations of the Issuerthereunder (including the obligation to exchange such Notes in accordance with thisCondition 22) shall remain in full force and effect; and37

(C)new Notes and Coupons denominated in euro will be issued in exchange for Notes andCoupons denominated in the Specified Currency in such manner as the Trustee mayspecify and as shall be notified to the Noteholders in the Euro Exchange Notice; and(iii)all payments in respect of the Notes (other than, unless the Redenomination Date is on or aftersuch date as the Specified Currency ceases to be a sub-division of the euro, payments of interestin respect of periods commencing before the Redenomination Date) will be made solely in euroby cheque drawn on, or by credit or transfer to a euro account (or any other account to whicheuro may be credited or transferred) maintained by the payee with, a bank in the principalfinancial centre of any Member State of the European Communities.(d)(e)Interest: Following redenomination of the Notes pursuant to this Condition 22, where Notes havebeen issued in definitive form, the amount of interest due in respect of the Notes will be calculated byreference to the aggregate principal amount of the Notes presented (or, as the case may be, in respectof which Coupons are presented) for payment by the relevant holder.Interest Determination Date: If the Floating Rate Note Provisions are specified in the relevant PricingSupplement as being applicable and Screen Rate Determination is specified in the relevant PricingSupplement as the manner in which the Rate(s) of Interest is/are to be determined, with effect fromthe Redenomination Date the Interest Determination date shall be deemed to be the second TARGETSettlement Day before the first day of the relevant Interest Period.23. Governing Law and Jurisdiction(a) Governing law: The Notes (except Conditions 4(c) and 4(d)) and the Trust Deed (except for Clause 5insofar as it relates to Subordinated Notes) and all matters arising from or connected with the Notesand the Trust Deed are governed by, and shall be construed in accordance with, English law. Clause5 of the Trust Deed (insofar as it relates to Subordinated Notes) and Condition 4(c) and 4(d) aregoverned by, and shall be construed in accordance with, Portuguese law. In each case, the applicationof such governing law shall be without prejudice to the applicability, under the conflict rulesapplicable in the relevant forum, in the light of such submission, of Cayman Islands law (in relationto matters concerning Banif Finance) or Portuguese law (in relation to matters concerning Banif orBanif Madeira as an Issuer or as Guarantor, as the case may be).(b)Jurisdiction: The Issuer has in the Trust Deed: (i) agreed for the exclusive benefit of the Trustee andthe Noteholders that the courts of England shall have exclusive jurisdiction to settle any dispute (a“Dispute”) arising from or connected with the Notes; (ii) agreed that those courts are the mostappropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue that anyother courts are more appropriate or convenient; (iii) designated a person in England to accept serviceof any process on its behalf; and (iv) consented to the enforcement of any judgment. The Trust Deedalso states that nothing contained in the Trust Deed prevents the Trustee or any of the Noteholdersfrom taking proceedings relating to a Dispute (“Proceedings”) in any other courts with jurisdictionand that, to the extent allowed by law, the Trustee or any of the Noteholders may take concurrentProceedings in any number of jurisdictions.38

FORM OF PRICING SUPPLEMENTThe Pricing Supplement in respect of each Tranche of Notes will be substantially in the followingform, duly supplemented (if necessary), amended (if necessary) and completed to reflect the particular termsof the relevant Notes and their issue. Text in this section appearing in italics does not form part of the formof the Pricing Supplement but denotes directions for completing the Pricing Supplement.Pricing Supplement dated ●[Banif – Banco Internacional do Funchal, S.A./Banif Finance, Ltd./Banif – Banco Internacional do Funchal, S.A., Sucursal Financeira Exterior]Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes][Guaranteed byBanif – Banco Internacional do Funchal, S.A., Sucursal Financeira Exterior]under the Euro 1,000,000,000Euro Medium Term Note ProgrammeThis document constitutes the Pricing Supplement relating to the issue of Notes described herein.Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in theOffering Circular dated 13 December 2004. This Pricing Supplement contains the final terms of the Notesand must be read in conjunction with such Offering Circular.The following alternative language applies if the first tranche of an issue which is being increasedwas issued under a Information Memorandum with an earlier date.Terms used herein shall be deemed to be defined as such for the purposes of the conditions (the“Conditions”) set forth in the Offering Circular dated [●]. This Pricing Supplement contains the final termsof the Notes and must be read in conjunction with the Offering Circular dated 13 December 2004, save inrespect of the Conditions which are extracted from the Offering Circular dated [●] and are attached hereto.[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that thenumbering should remain as set out below, even if “Not Applicable” is indicated for individual paragraphsor sub-paragraphs. Italics denote directions for completing the Pricing Supplement.]1. (i) Issuer: [Banif – Banco Internacional do Funchal, S.A./Banif Finance, Ltd./ Banif – Banco Internacionaldo Funchal, S.A., Sucursal Financeira Exterior][(ii) Guarantor: [Banif – Banco Internacional do Funchal, S.A.,Sucursal Financeira Exterior]2. [(i) [Series Number:] [ ][ii)[Tranche Number:(If fungible with an existing Series,details of that Series, including the dateon which the Notes become fungible).][ ]3. Specified Currency or Currencies: [ ]4. Aggregate Nominal Amount:[(i)] [Series:] [ ][(ii) [Tranche: [ ]]5. [(i)] Issue Price: [ ] per cent. of the Aggregate Nominal Amount[plus accrued interest from [insert date] (in thecase of fungible issues only, if applicable)]39

[(ii) Net proceeds: [ ] (Required only for listed issues)]6. Specified Denominations: [ ][ ]7. [(i)] Issue Date: [ ][(ii) Interest Commencement Date: [ ]][Notes issued by Banif Finance which may belisted on the Luxembourg Stock Exchange and/oradmitted to listing, trading and/or quotation byany other listing authority, stock exchange and/orquotation system situated or operating in amember state of the European Union may not havea minimum denomination of less than EUR 1,000(or nearly equivalent in another currency).]8. Maturity Date: [specify date or (for Floating Rate Notes) InterestPayment Date falling in the relevant month andyear][If the Maturity Date is less than one year from theIssue Date and either (a) the issue proceeds arereceived by the Issuer in the United Kingdom or(b) the activity of issuing the Notes is carried onfrom an establishment maintained by the Issuer inthe United Kingdom, (i) the Notes must have aminimum redemption value of £100,000 (or itsequivalent in other currencies) and be sold only to“professional investors” or (ii) another applicableexemption from section 19 of the FSMA must beavailable.]9. Interest Basis: [● per cent. Fixed Rate][[specify reference rate] +/- ● per cent. FloatingRate][Zero Coupon][Index-Linked Interest][Other (specify)](further particulars specified below)10. Redemption/Payment Basis: [Redemption at par][Index-Linked Redemption][Dual Currency][Partly Paid][Instalment][Other (specify)]11. Change of Interest or Redemption/PaymentBasis:[Specify details of any provision for convertibilityof Notes into another interest or redemption/payment basis]12. Put/Call Options: [Investor Put][Issuer Call][(further particulars specified below)]13. [(i)] Status of the Notes: [Senior/Subordinated]40

[(ii) Status of the Guarantee: [Senior/Subordinated]]14. Listing: [Application has been made for the Notes to belisted on the Luxembourg Stock Exchange/other(specify)/None]15. Method of distribution: [Syndicated/Non-syndicated]PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE16. Fixed Rate Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining subparagraphsof this paragraph)(i) Rate[(s)] of Interest: [ ] per cent. per annum [payable [annually/semi-annually/quarterly/monthly] in arrear](ii) Interest Payment Date(s): [ ] in each year [adjusted in accordancewith [specify Business Day Convention and anyapplicable Business Centre(s) for the definition of“Business day”)]/not adjusted(iii) Fixed Coupon Amount[(s)]: [ ] [per Note of [ ] Specified Denominationand per Note of [ ] Specified Denomination](iv) Day Count Fraction: [30/360]/[Actual/Actual (ISMA)]/[If neither ofthese options applies, give details](v) Broken Amount(s): [Insert particulars of any initial or final brokeninterest amounts which do not correspond with theFixed Coupon Amount[(s)]](vi)Other terms relating to the method ofcalculating interest for Fixed Rate Notes:[Not Applicable/give details](Also consider what should happen to unmaturedCoupons in the event of early redemption of theNotes.)17. Floating Rate Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining subparagraphsof this paragraph. Also considerwhether EURO BBA LIBOR or EURIBOR is theappropriate reference rate)(i) Interest Period(s): [ ](ii)Specified Period(s)/Specified InterestPayment Dates:[ ](iii) Business Day Convention: [Floating Rate Convention/ Following BusinessDay Convention/Modified Following BusinessDay Convention/Preceding Business DayConvention/other (give details)](iv) Additional Business Centre(s): [Not Applicable/give details](v)Manner in which the Rate(s) of Interestis/are to be determined:[Screen Rate Determination/ISDA Determination/other (give details)]41

(vi)(vii)Party responsible for calculating theRate(s) of Interest and InterestAmount(s) (if not the Citibank, N.A.):Screen Rate Determination:[[Name] shall be the Calculation Agent (no need tospecify if the Principal Paying Agent is to performthis function)]– Reference Rate: [For example, LIBOR or EURIBOR]– Relevant Screen Page: [For example, Telerate page 3750/248]– Interest Determination Date(s): [ ]– Relevant Time: [For example, 11.00 a.m. London time/Brusselstime]– Relevant Financial Centre: [For example, London/Euro-zone (where Eurozonemeans the region comprised of the countrieswhose lawful currency is the euro)](viii) ISDA Determination:– Floating Rate Option: [ ]– Designated Maturity: [ ]– Reset Date: [ ](ix) Margin(s): [+/-][ ] per cent. per annum(x) Minimum Rate of Interest: [ ] per cent. per annum(xi) Maximum Rate of Interest: [ ] per cent. per annum(xii) Day Count Fraction: [ ](xiii) Fall back provisions, roundingprovisions, denominator and any otherterms relating to the method ofcalculating interest on Floating RateNotes, if different from those set out inthe Conditions:[ ]18. Zero Coupon Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining subparagraphsof this paragraph)(i) [Amortisation/Accrual] Yield: [ ] per cent. per annum(ii) Reference Price: [ ](iii)Any other formula/basis of determiningamount payable:[Consider whether it is necessary to specify a DayCount Fraction for the purposes of Condition[10(g)]]19. Index-Linked Interest Note Provisions [Applicable/Not Applicable](If not applicable, delete the remainingsubparagraphs of this paragraph)(i) Index/Formula: [Give or annex details](ii)Calculation Agent responsible forcalculating the interest due:[ ]42

(iii)Provisions for determining Couponwhere calculation by reference to Indexand/or Formula is impossible orimpracticable:[ ](iv) Interest Period(s): [ ](v)Specified Period(s)/ Specified InterestPayment Dates:[ ](vi) Business Day Convention: [Floating Rate Convention/ Following BusinessDay Convention/ Modified Following BusinessDay Convention/ Preceding Business DayConvention/other (give details)](vii) Additional Business Centre(s): [ ](viii) Minimum Rate of Interest: [ ] per cent. per annum(ix) Maximum Rate of Interest: [ ] per cent. per annum(x) Day Count Fraction: [ ]20. Dual Currency Note Provisions [Applicable/Not Applicable](If not applicable, delete the remaining subparagraphsof this paragraph)(i)(ii)(iii)(iv)Rate of Exchange/method of calculatingRate of Exchange:Calculation Agent, if any, responsible forcalculating the principal and/or interestdue:Provisions applicable where calculationby reference to Rate of Exchangeimpossible or impracticable:Person at whose option SpecifiedCurrency(ies) is/are payable:[Give details][ ][ ][ ]PROVISIONS RELATING TO REDEMPTION21. Call Option [Applicable/Not Applicable](If not applicable, delete the remaining subparagraphsof this paragraph)(i) Optional Redemption Date(s) (Call): [ ](ii)(iii)Optional Redemption Amount(s) of eachNote (Call) and method, if any, ofcalculation of such amount(s):If redeemable in part:[ ] per Note of [ ] specifieddenomination(a) Minimum Redemption Amount: [ ](b) Maximum Redemption Amount: [ ](iv) Notice period: [ ]43

22. Put Option [Applicable/Not Applicable](If not applicable, delete the remaining subparagraphsof this paragraph)(i) Optional Redemption Date(s): [ ](ii)Optional Redemption Amount(s) andmethod, if any, of calculation of suchamount(s):(iii) Notice period: [ ]23. Final Redemption Amount of each Note [Par [ ] per Note of [ ] specifieddenomination/other/ see Appendix]24. Early Redemption AmountEarly Redemption Amount(s) payable onredemption for taxation reasons or on event ofdefault and/or the method of calculating thesame (if required or if different from that setout in the Conditions):[Not Applicable (if both the Early RedemptionAmount (Tax) and the Early Termination Amountare the principal amount of the Notes/specify theEarly Redemption Amount (Tax) and/or the EarlyTermination Amount if different from the principalamount of the Notes)]GENERAL PROVISIONS APPLICABLE TO THE NOTES25. Form of Notes: Bearer Notes:[Temporary Global Note exchangeable for aPermanent Global Note which is exchangeable forDefinitive Notes on [ ] days’ notice/at anytime/in the limited circumstances specified in thePermanent Global Note.][Temporary Global Note exchangeable forDefinitive Notes on [ ] days’ notice.][Permanent Global Note exchangeable forDefinitive Notes on [ ] days’ notice/at anytime/in the limited circumstances specified in thePermanent Global Note].26. Financial Centre(s) or other special provisionsrelating to Payment Dates:27. Talons for future Coupons or Receipts to beattached to Definitive Notes (and dates onwhich such Talons mature):28. Details relating to Partly Paid Notes: amount ofeach payment comprising the Issue Price anddate on which each payment is to be made andconsequences (if any) of failure to pay,including any right of the Issuer to forfeit theNotes and interest due on late payment:[Not Applicable/give details. Note that this itemrelates to the date and place of payment, and notinterest period end dates, to which items 16(ii),17(iv) and 19(vi) relate][Yes/No. If yes, give details][Not Applicable/give details]44

29. Details relating to Instalment Notes: amount ofeach instalment, date on which each payment isto be made:30. Redenomination, renominalisation andreconventioning provisions:[Not Applicable/give details][Not Applicable/The provisions [in Condition 22(Redenomination, Renominalisation andReconventioning)] [annexed to this PricingSupplement] apply]31. Consolidation provisions: [Not Applicable/The provisions [in Condition 18(Further Issues)] [annexed to this PricingSupplement] apply]32. Other terms or special conditions: [Not Applicable/give details]DISTRIBUTION33. (i) If syndicated, names of Managers: [Not Applicable/give names](ii) Stabilising Manager (if any): [Not Applicable/give name]34. If non-syndicated, name of relevant Dealer: [Not Applicable/give name]35. TEFRA: [Not Applicable/The [C/D] Rules are applicable36. Additional selling restrictions: [Not Applicable/give details]OPERATIONAL INFORMATION37. ISIN Code: [ ]38. Common Code: [ ]39. Any clearing system(s) other than EuroclearBank S.A./N.V., as operator of the EuroclearSystem and Clearstream Banking, SocieteAnonyme and the relevant identificationnumber(s):[Not Applicable/give name(s) and number(s)]40. Delivery: Delivery [against/free of] payment41. Additional Paying Agent(s) (if any): [ ][LISTING APPLICATIONThis Pricing Supplement comprises the final terms required to list the issue of Notes described hereinpursuant to the Euro 1,000,000,000 Euro Medium Term Note Programme of [Banif – Banco Internacionaldo Funchal, S.A./Banif Finance, Ltd./Banif – Banco Internacional do Funchal, S.A., Sucursal FinanceiraExterior] [guaranteed by Banif – Banco Internacional do Funchal, S.A., Sucursal Financeira Exterior.]45

RESPONSIBILITYThe Issuer [and the Guarantor] accept[s] responsibility for the information contained in this PricingSupplement.Signed on behalf of the Issuer:By: ....................................................Duly authorised[Signed on behalf of the Guarantor:By:................................................Duly authorised]46

SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORMClearing System AccountholdersEach Global Note will be in bearer form. Consequently, in relation to any Tranche of Notesrepresented by a Global Note, references in the Terms and Conditions of the Notes to “Noteholder” arereferences to the bearer of the relevant Global Note which, for so long as the Global Note is held by adepositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevantclearing system, will be that depositary or common depositary.Each of the persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/or anyother relevant clearing system as being entitled to an interest in a Global Note (each an “Accountholder”)must look solely to Euroclear and/or Clearstream, Luxembourg and/or such other relevant clearing system(as the case may be) for such Accountholder’s share of each payment made by the Issuer or, if applicable,the Guarantor to the bearer of such Global Note and in relation to all other rights arising under the GlobalNote. The extent to which, and the manner in which, Accountholders may exercise any rights arising underthe Global Note will be determined by the respective rules and procedures of Euroclear and Clearstream,Luxembourg and any other relevant clearing system from time to time. For so long as the relevant Notes arerepresented by the Global Note, Accountholders shall have no claim directly against the relevant Issuer or,if applicable, the Guarantor in respect of payments due under the Notes and such obligations of the relevantIssuer and, if applicable, the Guarantor will be discharged by payment to the bearer of the Global Note.Exchange of Temporary Global NotesWhenever any interest in a Temporary Global Note is to be exchanged for an interest in a PermanentGlobal Note, the Issuer shall procure:(a)(b)in the case of first exchange, the prompt delivery (free of charge to the bearer) of suchPermanent Global Note, duly authenticated, to the bearer of the Temporary Global Note; orin the case of any subsequent exchange, an increase in the principal amount of such PermanentGlobal Note in accordance with its terms,in each case in an aggregate principal amount equal to the aggregate of the principal amountsspecified in the certificates issued by Euroclear and/or Clearstream, Luxembourg and/or any other relevantclearing system and received by the Principal Paying Agent against presentation and (in the case of finalexchange) surrender of the Temporary Global Note at the Specified Office of the Principal Paying Agentwithin 7 days of the bearer requesting such exchange.Whenever a Temporary Global Note is to be exchanged for Definitive Notes, the relevant Issuer shallprocure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated andwith Coupons and Talons attached (if so specified in the relevant Pricing Supplement), in an aggregateprincipal amount equal to the principal amount of the Temporary Global Note to the bearer of the TemporaryGlobal Note against the surrender of the Temporary Global Note at the Specified Office of the PrincipalPaying Agent within 30 days of the bearer requesting such exchange.If:(a)(b)a Permanent Global Note has not been delivered or the principal amount thereof increased by5.00 p.m. (London time) on the seventh day after the bearer of a Temporary Global Note hasrequested exchange of an interest in the Temporary Global Note for an interest in a PermanentGlobal Note; orDefinitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day afterthe bearer of a Temporary Global Note has requested exchange of the Temporary Global Notefor Definitive Notes; or47

(c)a Temporary Global Note (or any part thereof) has become due and payable in accordance withthe Terms and Conditions of the Notes or the date for final redemption of a Temporary GlobalNote has occurred and, in either case, payment in full of the amount of principal falling duewith all accrued interest thereon has not been made to the bearer of the Temporary Global Notein accordance with the terms of the Temporary Global Note on the due date for payment,then the Temporary Global Note (including the obligation to deliver a Permanent Global Note or increasethe principal amount thereof or deliver Definitive Notes, as the case may be) will become void at 5.00 p.m.(London time) on such seventh day (in the case of (a) above) or at 5.00 p.m. (London time) on such thirtiethday (in the case of (b) above) or at 5.00 p.m. (London time) on such due date (in the case of (c) above) andthe bearer of the Temporary Global Note will have no further rights thereunder.Exchange of Permanent Global NotesWhenever a Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer shallprocure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated andwith Coupons and Talons attached (if so specified in the relevant Pricing Supplement), in an aggregateprincipal amount equal to the principal amount of the Permanent Global Note to the bearer of the PermanentGlobal Note against the surrender of the Permanent Global Note at the Specified Office of the PrincipalPaying Agent within 30 days of the bearer requesting such exchange.If:(a)(b)Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day afterthe bearer of a Permanent Global Note has duly requested exchange of the Permanent GlobalNote for Definitive Notes; ora Permanent Global Note (or any part of it) has become due and payable in accordance withthe Terms and Conditions of the Notes or the date for final redemption of the Notes hasoccurred and, in either case, payment in full of the amount of principal falling due with allaccrued interest thereon has not been made to the bearer of the Permanent Global Note inaccordance with the terms of the Permanent Global Note on the due date for payment,then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) onsuch due date (in the case of (b) above) and the bearer of the Permanent Global Note will have no furtherrights thereunder.Conditions applicable to Global NotesEach Global Note will contain provisions which modify the Terms and Conditions of the Notes asthey apply to the Global Note. The following is a summary of certain of those provisions:Payments: All payments in respect of the Global Note will be made against presentation and (in thecase of payment of principal in full with all interest accrued thereon) surrender of the Global Note at theSpecified Office of any Paying Agent and will be effective to satisfy and discharge the correspondingliabilities of the relevant Issuer in respect of the Notes. On each occasion on which a payment of principalor interest is made in respect of the Global Note, the relevant Issuer shall procure that the same is noted ina schedule thereto.Exercise of put option: In order to exercise the option contained in Condition 10(e) (Redemption atthe option of Noteholders) the bearer of the Permanent Global Note must, within the period specified in theConditions for the deposit of the relevant Note and put notice, give written notice of such exercise to thePrincipal Paying Agent specifying the principal amount of Notes in respect of which such option is beingexercised. Any such notice will be irrevocable and may not be withdrawn.Partial exercise of call option: In connection with an exercise of the option contained in Condition10(c) (Redemption at the option of the Issuer) in relation to some only of the Notes, the Permanent Global48

Note may be redeemed in part in the principal amount specified by the relevant Issuer in accordance withthe Conditions and the Notes to be redeemed will not be selected as provided in the Conditions.Notices: Notwithstanding Condition 20 (Notices), while all the Notes are represented by a PermanentGlobal Note (or by a Permanent Global Note and/or a Temporary Global Note) and the Permanent GlobalNote is (or the Permanent Global Note and/or the Temporary Global Note are) deposited with a depositaryor a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearingsystem, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and/orClearstream, Luxembourg and/or any other relevant clearing system and, in any case, such notices shall bedeemed to have been given to the Noteholders in accordance with Condition 20 (Notices) on the date ofdelivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system.Redenomination: If the Notes are redenominated pursuant to Condition 22 (Redenomination,Renominalisation and Reconventioning), then following redenomination:(a)(b)if Definitive Notes are required to be issued, they shall be issued at the expense of the Issuerin the denominations of euro 0.01, euro 1,000, euro 10,000, euro 100,000 and such otherdenominations as the Principal Paying Agent shall determine and notify to the Noteholders; andthe amount of interest due in respect of Notes represented by a Permanent Global Note and/ora Temporary Global Note will be calculated by reference to the aggregate principal amount ofsuch Notes and the amount of such payment shall be rounded down to the nearest euro 0.01.49

DESCRIPTION OF THE ISSUERS AND THE GUARANTORBanif – Banco Internacional do Funchal, SA (“Banif”)Banif was established on 1 April 2002, from the restructuring process, which occurred in the BanifGroup (the “Group”), with the purpose of concentrating the Group companies according to their businessactivity. Those business activities are commercial banking, insurance and investment and internationalbanking activities. The impact of the restructuring process was merely organisational, since the businessactivities of the Group remained unchanged.50

The organisational structure of the Group is set out below:BANIF GROUP HOLDINGS STRUCTUREas at 30 September 2004Banif - SGPS, SAShare Capital: e200,000,000Banif ImobiliáriaShare Cap: e750,000,000100%BanifServ (a)100%Soc. ImobiliariaPiedadeShare Cap: e50,00084.80%Banif Comercial -SGPS, SAShare Cap: e280,000,000100%Banif Seguros-SGPS, SAShare Cap: e23,300,000100%Banif InvestimentosSGPS, SAShare Cap: e8,750,00015.20%100%100%100%Banif - BancoInternacional doFunchal, SAShare Cap: e240,000,000Banco Comercialdos Açores, SAShare Cap: e51,892,365Banif Leasing, SAShare Cap: e10,000,000100%100%100%100%Banif (Açores)SGPS, SAShare Cap: e240,000,000Banif Finance, LtdShare Cap: (C)Banif & CommercialAçores, IncSan José (b)Share Cap: USD 1,000,000Banif & CommercialAçores, IncFall RiverShare Cap: USD 100,00014.07%52.31%Companhia deSeguros Açoreana, SAShare Cap: e36,250,000 Banif Banco deInvestimentoShare Cap: e20,000,000100%29.19%47.57%10.81%60%100%Banif Gestão deActivosShare Cap: e20,000,000Banif AçorPensõesShare Cap: e1,850,000NewcapitalShare Cap: e750,000100%100%Banif (Cayman),Ltd (d)Share Cap: USD 42,000,00085%100%Banif InternationalHoldings, LtdShare Cap: USD 1,200,000FINABShare Cap: USD 35,000Banif SecuritiesHoldings, LtdShare Cap: USD 2,108,000100%100%100%Banif FinancialServices Inc.Share Cap: USD 371,000Banif MortgageCompanyShare Cap: USD 300,000Banif SecuritiesIncShare Cap: USD 1,620,000100%Banif Crédito-SFAC, SAShare Cap: e3,000,000100%Banif InternationalAsset ManagementShare Cap: USD 50,000100%20%80%Banif (Brasil), LtdShare Cap: BRL 150,000100%Econofinance, SAShare Cap: BRL: 2,817,750Banif Multi Fund (e)Share Cap: USD 50,000Banif Rent, SA100% Share Cap: e300,000100%Banif Primus (f)Share Cap: BRL 41,000,00075%Banif PrimusCorretoraShare Cap: BRL 11,350,00010%90%Banif PrimusAsset ManagementShare Cap: BRL 100,000(a) Complementary Company Grouping(b) Paid-up Share Capital USD 100(c) Voting rights represent 100%, with a Share Capital of:1.000 ordinary stock of USD e5.000 preference of e1 with no voting rights(d) Voting rights represent 100%, with a Share Capital of:26,000,000 ordinary stock of USD 1 and 16,000,000 preference shares of e1 with no votingrights(e) Paid-up Share Capital USD 100.(f) Paid-up Share Capital BRL 31,000,000.51

The company formally known as Banif – Banco Internacional do Funchal, S.A. was transformed intoBanif – SGPS, S.A., (the holding company of the Group), and a new bank with the same name, “Banif –Banco Internacional do Funchal, S.A.” was created by the transfer of the whole of the banking activity ofthe former company and of the holding company of the Group to Banif. As a result Banif now acts only asa commercial bank and no longer as a holding company of the Group.Banif is 100 per cent. indirectly owned by the holding company of the Group, Banif – SGPS, S.A.,which has its shares listed on Euronext Lisbon.Banif operates in mainland Portugal and in Madeira. In Madeira, it has approximately 26 per cent.market share of the local commercial and retail banking market, concentrating on relationship bankingthrough two commercial divisions:(i)(ii)retail banking, comprising a distribution network of 33 branches, which offer a wide range ofbanking products and services (such as mortgage and consumer loans, credit and debit cards,deposit and investment products, commercial lending and bancassurance);private banking to high net worth individuals and institutional clients, offering tailor-madeproducts and services, and corporate lending to the larger corporations in the Madeira Islands.Banif benefits from a close relationship with the Regional Government and the local administrationsas it is the main financial institution not only managing the public offices accounts, and where most of thepublic servants’ wages are paid, but also in the financing of the main projects and public works that takeplace in Madeira.In June 2004 the loan portfolio of Banif in Madeira was approximately Euro 925 million and the totaldeposits from customers amounted to over Euro 1,373 million. For the same period fees and other incomereached Euro 4.3 million, a contribution of 18.9 per cent. of all fees and other income generated by Banif.In mainland Portugal, Banif operates in two main market segments:(i)(ii)retail banking;corporate banking, which provides services to small and medium sized corporations.The retail banking division, “Banif Retalho”, was restructured in 1998. Its 117 branches in mainlandPortugal have been organised into “sales centres” aimed at marketing the Group’s products. Front and backoffice operations within the branches are limited to the provision of basic cash transaction services, therebyreleasing approximately 70 per cent. of staff to support marketing and customer service. “Banif Retalho” iscomplemented with a private banking unit specialising in services to high net worth individuals andinstitutional investors.To support the retail network, increase sales and as a way to capture new business without increasingfixed costs, a network of Financial Agents was created in 2001 with three different types of agents:Commercial Agents, who sell all the products available to Banif’s clients; Real-Estate Agents, which sellexclusive mortgage loans and “Assurfinance” Agents, who sell mainly insurance but are being givenincentives to sell Banif’s other products to their clients. As of June 2004, the volume of business totalledEuro 43.5 million, which was generated by a network of 703 Financial Agents (119 assurfinance, 160 realestateand 424 commercial agents). These agents limit their activity to introducing the client and identifyingthe closest branch, which is, then, responsible for approving and concluding the operations.The total loan portfolio managed by “Banif Retalho” as of June 2004, was approximately Euro 1,481million, total customer deposits amounted to approximately Euro 1,418 million and total fees and otherincome reached Euro 9.2 million, 40.7 per cent. of Banif’s total.The development of technology, the growing demand for alternative distribution channels and Banif’sconcern to continually satisfy the needs and expectations of it’s clients, led Banif to launch Banif@st in2001.52

This service has three distinctive channels, Internet, Telephone (Banifone) and Wap (Wap Banif). Theuse of any of these three channels allow clients who have subscribed to this service to connect to Banif in adistinctive way and have access to their account.In June 2004, 18.3 per cent. of the Bank’s active clients used Banif@st (representing 41.6 per cent. oftotal corporates and 16.5 per cent of total individuals), whilst 36.3 per cent. of total clients had, already,subscribed to the service (61.4 per cent. of total corporates subscribed against 33.8 per cent. of totalindividuals).In the past five years competition and the need to cover the whole country, has led Banif to expandits branch network, with the opening of 47 branches (from 100 in 1998 to 147 in June 2004). Branchesusually take 4 to 5 years to reach break-even, a fact that has penalised Banif’s Cost to Income ratio which isstill relatively high at 62.7 per cent. (June 2004). Since the opening of a large number of new branches is notanticipated in the coming years, it is expected that the Cost to Income ratio will stabilise close to 50 per cent.by 2007.The corporate banking division, “Banif Empresas”, was created in 1993, and currently servesapproximately 7,000 small and medium sized companies from a network of 19 corporate centres. Thedivision has 50 “account management teams”, each team serving an average portfolio of 130 companies. Thecorporate loan portfolio, managed by “Banif Empresas”, amounts to approximately Euro 1,358 million,while total deposits taken by this unit amounted to approximately Euro 365 million, as at June 2004. In June2004, this unit generated Euro 7.3 million in fees and other income contributing 32 per cent. of the total feesand other income of Banif.Banif has also created “product units” that specialise in specific products and operate exclusively inmainland Portugal. In February 2003, the “product units” were merged into a single department, the DP –Direcção de Produtos. This department also absorbed some functions previously under the responsibility ofthe Marketing Department, namely the management of deposit products. The rationale of this change was toenhance “cross-selling” possibilities, to standardise procedures and to centralise credit analysis.Notwithstanding the merger, the function of each unit has not been changed:• Unidade de Crédito Imobiliário (UCI) mortgage lending, with a loan portfolio ofapproximately Euro 892 million as of June 2004, (of which Madeira retail contributed Euro236 million). In addition total securitised loans amounted to Euro 437 million.• Unidade de Crédito Pessoal (UCP) – personal and consumer loans, with a loan portfolio ofapproximately Euro 70.3 million as of June 2004.• Unidade de Cartões (UC) – credit/debit cards provider, controlling and managing a total ofapproximately 120,000 cardholders and 175,000 cards, of which 40,000 are credit cards.• Unidade de Pequenos Negócios (UPN) – serving a specific market composed of smallbusinesses, individual traders and independent workers through a single account thatincorporates credit facilities, cash management and banking services (known as Conta Gestãode Tesouraria – Cash Management Account). The total loan portfolio amounted toapproximately Euro 226.5 million as of June 2004 split between more than 16,000 clients. Forthe same period the total of customers deposits attached to this account amounted to Euro 31million.• Unidade de Banca e Seguros (UBS) – specialising in the cross-selling of banking products andservices through Companhia de Seguros Açoreana (CSA) and insurance products (life and nonlifeproducts) through Banif.Main Financial Indicators of BanifThe total net assets of Banif stood at Euro 4.2 billion in June 2004, representing a reduction of 10 percent. against June 2003, due to the offset of the operations with Banif Madeira since December 2003.Currently, Banif operates directly with Banif Madeira and no longer through a third entity. As of June 2004,the loan portfolio reached Euro 3.4 billion (an increase of 8.9 per cent. over June 2003) and represented 82.253

per cent. of total net assets against 67.9 per cent. in June 2003. The customer deposit base amounted to Euro2.3 billion as of June 2004, the same level reached in June 2003.In June 2004 the ratio of Deposits converted into Loans stood at 150.44 per cent. If Deposits bookedin the Cayman subsidiary of the Group and marketed by the retail network of Banif, had been accounted for,this ratio would be reduced to 106.31 per cent..In terms of client concentration, Banif’s top ten clients represented 6.3 per cent of it’s total loanportfolio, with Euro 312.9 million in credit as of 30 June 2004. In terms of deposits, Banif’s exposure to itsclient base is limited to 4.5 per cent. of its top ten clients with Euro 104.1 million in deposits for the sameperiod.In June 2004, the ratio of non-performing loans in respect of the total loan portfolio stood at 2.6 percent. compared to 2.47 per cent. in June 2003. In June 2004, total provisions for loan losses representedapproximately 123.9 per cent. of the non-performing loans.Other Income decreased by Euro 4.2 million in June 2004 compared to June 2003 (June 2003 includesEuro 6.8 million from the securitisation of Euro 500 million of mortgage loans that occurred in February2003). On the other hand, the increase in Total Overheads (9.6 per cent. from 30 June 2003 to 30 June 2004)is justified almost exclusively by the rents paid in 2004 by Banif to Banif Imobiliária (the real estatecompany of the Group which bought in November 2003 all the premises of Banif).Total Provisions were up to Euro 21 million in June 2004,which represented a decrease of 10.4 percent. when compared with June 2003 as a consequence of a) June 2003, includes Euro 7.5 million extraprovisioning to cover a fraud incident detected in one of Banif’s branches, and b) in 2004, more provisionswere required in respect of non performing mortgage loans following a change in the rules imposed by Bankof Portugal after the first six months of 2003.As a result Net Profit reached Euro 6 million, an increase of 3.4 per cent, when compared with thefirst six months of 2003.In June 2004, Banif reported a return on equity of 4.6 per cent. (4.5 per cent. in June 2003) and areturn on assets of approximately 0.29 per cent. (0.24 per cent. in June 2003).The total capital and reserves of Banif amounted to Euro 262.3 million including net profit, in June2004 (Euro 250.9 million, in June 2003), and the capital adequacy ratio stood at 9.98 per cent. (10.12 percent. in June 2003), above the imposed minimum of 8 per cent. while Tier I capital ratio reached 7.15 percent. in June 2004 against 7 per cent. in June 2003.54

2002111120031111Jun/031111Jun/041111(in Euro millions)Balance sheetNet assets...................................................................... 4,960.9 4,126.7 4,673.5 4,207.8Loan portfolio .............................................................. 3,512.7 3,276.6 3,174.9 3,458.4Deposits from customers(Inc.Cert of Depos.) ................................................ 2,365.4 2,317.9 2,316.2 2,298.8Net interbank borrowing .............................................. (993.5) (934.0) (797.5) (1,073.6)Capital Reserves and Results ...................................... 254.7 268.3 250.9 262.3Profit & Loss accountInterest margin.............................................................. 99.2 104.3 51.1 55.4Other income................................................................ 38.5 46.8 26.4 22.2Gross Margin................................................................ 137.7 151.1 77.5 77.6Total overheads (includingdepreciation) ............................................................ 90.8 92.6 45.9 48.6Provisions .................................................................... 26.5 29.4 23.9 20.7Extraordinary Gains and losses.................................... 0.6 (5.7) (0.5) (0.7)Income Tax .................................................................. 5.2 0.2 1.3 1.5Net Profit...................................................................... 15.8 23.2 5.8 6.0No of Branches ............................................................ 143 149 146 150No of Employees.......................................................... 1,472 1,478 1,521 1,565Key RatiosNet assets/employee .................................................... 3.37 2.79 3.07 2.69Loans/employee .......................................................... 2.39 2.22 2.09 2.2Deposits (inc. Cert of depo.)/employee .................................................................. 1.61 1.57 1.56 1.47NPL/Loan Portfolio...................................................... 1.9% 2.2% 2.47% 2.6%Provisions/NPL ............................................................ 117.7% 111.3% 105.9% 123.9%Cost to income (includingdepreciation) ............................................................ 65.6% 61.3% 59.24% 62.72%Interest margin/Gross Margin ...................................... 72.0% 69.0% 65.94% 71.4%Average income tax rate .............................................. 27.2% 23.2% 18.95% 20.52%Return on Equity .......................................................... 6.9% 8.6% 4.5% 4.6%Return on Assets .......................................................... 0.3% 0.6% 0.24% 0.29%Solvency ratio Tier 1 + Tier 2...................................... 10.2% 10.8% 10.12% 9.83%Solvency ratio Tier 1.................................................... 7.05% 7.84% 7.00% 7.15%Total weighted assets.................................................... 3,290 3,251 3,403 3,506Total own funds............................................................ 337 345 345 34555

The following table shows the capitalisation of Banif as at 30 June 2004:As atJun/20041111(in Euromillions)Short-term liabilities .................................................................................................................. 2,446.8Long-term liabilities.................................................................................................................... 357.1Stockholders’ equityShare Capital ................................................................................................................................ 240Reserves ........................................................................................................................................ 16.3Retained earnings.......................................................................................................................... 6.01111Total Stockholders’ equity ............................................................................................................ 262.3Total Capitalisation .................................................................................................................... 3,066.21111History and Organisation of the GroupThe former Banif – Banco Internacional do Funchal, S.A. (currently “Banif – SGPS, S.A.”) wasestablished in Funchal, Madeira, Portugal in January 1988, incorporating the assets and liabilities of CaixaEconómica do Funchal, which was founded in 1897.In the three years after 1998, the Group focused on consolidating its position in Madeira andimproving its financial condition. The Group extended its business portfolio by establishing a pension fundmanagement company in 1989, a leasing company (Banif Leasing (formerly Mundileasing)) in 1990 and aconsumer credit company (Banif Crédito (formerly Mundicre)) in 1991. In addition, the Group establishedtwo asset management subsidiaries, Banifundos (a Mutual Fund Management Company) and Banifólio (aportfolio management company, which is now merged into Banif – Banco de Investimento, S.A.), andacquired a brokerage company (Ascor Dealer) in 1994. The shares of Banif have been listed on the LisbonStock Exchange since November 1992. In 1993, Banif established Banif (Cayman) Ltd. as a wholly ownedsubsidiary in the Cayman Islands.Currently, the main business activities of the Group include banking (including commercial, private,investment, international and off-shore banking), insurance, leasing, specialised consumer credit, brokerage,and asset management and other activities. The Group is strongly involved in the cross-selling among itscompanies in order to better serve clients needs.BankingInsuranceLeasingConsumer CreditBrokerageAsset ManagementBanif – Banco Internacional do Funchal, S.A.Banco Comercial dos Açores, SABanif – Banco Internacional do Funchal (Cayman), LtdBanco Banif Primus, SABanif – Banco de Investimento, SACompanhia de Seguros Açoreana, SABanif Leasing, SA (leasing in Portugal)Banif Rent, SABanif Crédito – SFAC, SA (consumer credit in Portugal)Banif Primus Corretorra, SA (brokerage in Brasil)Banif Securities Inc. (brokerage in USA)Banif Gestão de Activos, SGFIM, SA (securities and real estate mutualfunds in Portugal)Banif Açor Pensões, SGFP, SA (pension fund management in Portugal)Banif Primus Asset Management, Lda (mutual funds in Brasil)56

New Capital, SABanif International Asset Management, LtdBanif Multifund, Ltd (offshore mutual funds)Other ActivitiesBanifServ, ACE (communication, technology and data processing)Banif Imobiliária, SA (real estate)Banif Financial Services Inc (personal services – Miami)Banif Information and Technology Holdings LTD (sub-holding forinvestments in technology and other new sectors abroad)Finab Ltd (management services and company formation)Banif Mortgage Company (mortgage financing in USA)EconoFinance, SA (financial portal in Brazil)Banif Securities Holdings, LtdBanif Finance, LtdSociedade Imobiliária PiedadeAs at 30 June 2004 the Group had 2,923 employees and 323 “points of sale” (including branches,business and corporate centres and representative offices abroad).The Group became the largest financial group in the Autonomous Region of the Azores when, in1996, it acquired a controlling interest in Banco Comercial dos Açores, S.A. (“BCA”) and, thereby, acontrolling interest in the insurance company, Companhia de Seguros Açoreana (“CSA”). The insurancebusiness was strengthened with the acquisition of another insurance company, Oceânica – Companhia deSeguros, in 1997. This company was merged with CSA in September 1999. In the first quarter of 2000, CSAacquired another insurance company, O Trabalho – Companhia de Seguros that merged with CSA inDecember 2002.CSA’s business volume reached Euro 177.6 million in June 2004, which represents an increase of 16.8per cent. when compared with June 2003, with a return on equity of 18.3 per cent. in June 2003 (14.4 percent. in June 2002). CSA’s market share decreased from 3.6 per cent. in June 2003 to 3.5 per cent. in June2004.With a total of 53 branches and corporate centres and 439 employees, BCA enjoys a 36 per cent.market share in the Açores, and is the second largest bank of the Group.In the Açores, BCA has positioned itself as the “reference bank” for corporate and individuals, fordomestic and offshore investors and for the Regional Government of the Açores and its public servants. BCAhas pursued a relationship banking strategy in the retail sector with its main focus on providing a wide rangeof banking services and products.For the period from June 2003 to June 2004, lending grew by 8.9 per cent. (approximately Euro 985million as of June 2004). Its most successful products include mortgage finance and consumer finance(which includes auto loans and personal credit loans). The total customer deposit base of BCA exceededEuro 796 million as of June 2004.BCA also launched its internet banking network, “bcaglob@l” in the first half of 2002, allowing itsclients remote access to different banking operations.Banif (Cayman) Ltd. operates in the international capital markets, with an emphasis upon depositstaken from private customers and cross border operations and the provision of services to the Portuguesecommunities in the Americas and South Africa.In 1999, in order to strengthen the investment activity, the Group acquired a 51 per cent. stake (andcurrently owns 100 per cent.) in a Brazilian investment bank, Banco Primus, which has been renamed BancoBanif Primus. However, the total exposure to non-Portuguese risks (including Brazil) represents less than 1per cent. of the total net assets of the Group.In December 2000, the spin-off of Ascor Dealer led to the establishment of Banif – Banco deInvestimento, S.A. (entailing investment banking within the Group, covering the main business areas of57

corporate finance, capital markets, brokerage and asset management). The investment bank Banif – Bancode Investimento, S.A. was incorporated with a share capital of Euro 20 million. In June 2004, BanifInvestimento’s net profit was Euro 2.02 million, a significant increase of 15.7 per cent., when compared withJune 2003.In 2001, the Group expanded its international presence by opening an office in Miami and purchasinga securities broker-dealer in New York.Shareholder Structure of the Group (expressed as percentage, as at 30 June 2004)Horácio da Silva Roque ................................................................................................................ 66.87Seguros e Pensões Gere, SGPS, S.A. .......................................................................................... 4.08Instituto de Seguros de Portugal – Fundo de Garantia Autómovel.............................................. 3.82Fundo de Pensões do Grupo BCP Atlântico ................................................................................ 3.67Vestiban – Gestão e Investimentos, S.A....................................................................................... 3.48Jorge Sá ........................................................................................................................................ 2.49Other Shareholders (individuals and institutional investors) ...................................................... 15.591111Total .............................................................................................................................................. 100.001111In June 2003, Rentipar SGPS, SA (a holding company controlled by Mr Horácio Roque) entered intoan agreement with Fundação Horácio Roque, for the purchase of 799,793 shares representing 1.99 per cent.of Banif SGPS, SA share capital. With the purchase of the above mentioned shares, Rentipar’s participationin Banif SGPS, SA exceeded half of the total voting rights and according to the Portuguese Stock ExchangeCode the launch of a public offer of acquisition of the remaining 19,914,668 shares in the market wasrequired. This offer which was concluded on 9 October 2003, confirmed Mr Horácio Roque as thecontrolling shareholder of the Group. Mr Horácio Roque now holds 66.87 per cent. of Banif, SGPS, SA sharecapital.Stock Market EvolutionBanif – SGPS, S.A.’s market capitalisation in June 2004 was approximately Euro 240 million (Euro6.00 per share and 40,000,000 shares outstanding)), which represented a 20.97 per cent. increase comparedto June 2003 when its capitalization was Euro 198 million (Euro 4.96 per share and 40,000,000 sharesoutstanding).Since 2000, Banif – SGPS, S.A.’s shares have been included in the PSI 30 Index (Euronext LisbonIndex). Due to the termination of this index at the end of June 2002, Banif – SGPS, S.A. shares are currentlyincluded in the “BVL Geral” Index.Main Financial Indicators – The Group (Banif – SGPS, S.A. Consolidated)The total net assets of the Group stood at Euro 5.8 billion as at 30 June 2004, representing an increaseof 6.5 per cent. year on year. The loan portfolio reached Euro 4.6 billion and represented 80.0 per cent. oftotal net assets in June 2004, which indicates an increase of 8.9 per cent. since June 2003. The customerdeposit base amounted to Euro 4.6 billion in June 2004, representing an annual increase of 8.9 per cent..The Group had a deposit market share in Portugal of 2.4 per cent. as at 31 December 2003 and 2.4per cent. as at 30 June 2004, and a loans market share of 2.4 per cent. as at 31 December 2003 and 2.5 percent. as at 30 June 2003.Due to the relatively consistent performance of the loan portfolio as a whole, and as a result of anincrease in the number of loans guaranteed by real estate (mainly mortgage loans), and the introduction ofnew credit policies, rating and scoring systems, the percentage of non-performing loans (“NPL’s”) to thetotal loan portfolio continues to be relatively low. As of 30 June 2004, the ratio of non-performing loans tothe total loan portfolio stood at 2.14 per cent., compared to 2.34 per cent. in June 2003. Currently, totalprovisions for loan losses represent approximately 119.1 per cent. of the NPL’s.58

In June 2004, Banif – SGPS, S.A. reported an annualised return on equity of 9.48 per cent. (6.03 percent. in June 2003) and a return on assets of approximately 0.55 per cent. (0.33 per cent. in June 2003).The total capital and reserves of the Group amounted to Euro 315 million in June 2004 (Euro 309million in June 2003) as a result of better tax efficiency. Net profit reached Euro 15.3 million in June 2004,an increase of 66 per cent. when compared with June 2003.2002111120031111Jun/031111Jun/041111(in Euro millions)Balance sheetNet assets...................................................................... 6,066.8 5,711.6 5,470.9 5,824.5Loan portfolio .............................................................. 4,424.7 4,406.9 4,276.5 4,657.7Deposits from customers(inc. Cert. of Deposit) .............................................. 4,034.3 4,219.5 4,046.7 4,250.9Capital Reserves and Results ...................................... 316.1 333.6 318.3 330.3Profit and Loss accountInterest margin.............................................................. 133.5 151.1 69.5 79.6Other income................................................................ 66.2 75.2 43.4 35.9Gross margin ................................................................ 199.7 226.3 112.9 115.5Total overhead (includingdepreciation) ............................................................ 136.8 149.9 71.8 75.2Provisions .................................................................... 36.0 41.1 28.6 23.2Extraordinary gains and losses .................................... 0.1 (11.3) (2.2) (1.3)Income Tax .................................................................. 11.2 4.1 5.3 4.0Net Profit...................................................................... 20.9 25.4 9.2 15.3Cost-to-Income ............................................................ 68.5% 66.2% 63.7% 65.1%No of Branches (Banking only) .................................. 187 194 189 195No of Employees (EoP) .............................................. 2,777 2,816 2,839 2,923The following table shows the capitalisation of Banif SGPS, S.A. as at 30 June 2004:As atJun/20041111(in Euromillions)Short-term liabilities .................................................................................................................. 4,145.6Long-term liabilities.................................................................................................................... 374.6Stockholders’ equityShare Capital ................................................................................................................................ 200Reserves ........................................................................................................................................ 115Retained earnings.......................................................................................................................... 15.31111Total Stockholders’ equity ............................................................................................................ 330.3Total Capitalisation .................................................................................................................... 4,850.51111Banif Finance, Ltd. (“Banif Finance”)Incorporation and Main ActivitiesBanif Finance is an exempted limited liability company registered and incorporated in the CaymanIslands on 6 August 2003 (registered under number 127987) and has its registered office at the offices ofM&C Corporate Services Limited, PO Box 309G.T., Ugland House, South Church Street, George Town,Grand Cayman, Cayman Islands. The objects of Banif Finance are set out in Clause 3 of its Amended andRestated Memorandum of Association (adopted on 29 December 2003) and is unrestricted.59

Capital and SharesOn 29 December 2003, Banif Finance issued 5,000 preference shares of Euro 1.00 par value each,guaranteed by Banif – Banco Internacional do Funchal, S.A., Sucursal Financeira Exterior at an issue priceof Euro 5,000 per share and an aggregate issue price of Euro 25,000,000. This issue was repurchased on9 December 2004.The authorised share capital of Banif Finance is US$1,000 and Euro 40,000 divided into 1,000ordinary shares of a par value of US$1.00 each and Euro 40,000 preference shares of a par value of Euro1.00 each. The issued ordinary share capital of Banif Finance is US$1,000.Banif holds 100% of the issued ordinary shares of Banif Finance and Citivic Nominees Limited,acting as Registrar for the preference shares, holds 100% of the issued preference shares of Banif Finance.The following table shows the unaudited capitalisation of Banif Finance as at 30 June 2004:As atJun/2004111112(in US$)Short-term liabilities.............................................................................................................. 0Long-term liabilities .............................................................................................................. 243,100,000.00Stockholders’ equityShare capital ............................................................................................................................ 7,077.50Issue Premiums........................................................................................................................ 30,381,422.50Reserves .................................................................................................................................. (55,352.37)Retained earnings .................................................................................................................... 0111112Total Stockholders’ equity ...................................................................................................... 30,333,147.63Total Capitalisation .............................................................................................................. 273,433,147.33111112Notes:There has been no material change in the capitalisation of Banif Finance since 30 June 2004, except for the issue of Euro 225,000,000 FloatingRate Notes due 2009 on 22 July 2004 and the buy-back of Euro 5,000 preference shares on 9 December 2004.DirectorsEmployeesAuditorThe directors of Banif Finance are:– Joaquim Filipe Marques dos Santos (Chairman)– Carlos David Duarte de Almeida– António Manuel Rocha MoreiraIndebtednessBanif Finance has no employees.The auditor of Banif Finance is Ernst & Young Audit & Associados.Banif Finance has issued two series of senior notes under the Programme in a global amount ofEuro 200,000,000 (on 21 November 2003) and Euro 225,000,000 (on 22 July 2004) respectively.60

Financial YearAccountsThe financial year-end of Banif Finance is 31 December.Banif Finance will prepare annual audited accounts. The first accounts were prepared in respect of theperiod from 23 October 2003 to 31 December 2003 and Banif Finance does not prepare interim financialstatements.No Material Adverse ChangeSince the date of Banif Finance’s incorporation (other than as set out above), there has been nomaterial adverse change, or any development reasonably likely to involve any material adverse change, inthe condition (financial or otherwise) of Banif Finance.Banif – Banco Internacional do Funchal, S.A., Sucursal Financeira Exterior (“Banif Madeira”)Establishment and Main ActivitiesBanif Madeira is a branch of Banif established in the Zona Franca da Madeira (the MadeiraInternational Business Centre) and as such benefits from a corporate tax exemption until 31 December 2011.As a branch of Banif, Banif Madeira is not a separate legal entity from Banif and accordingly Banif will beultimately responsible for actions of Banif Madeira carried out by Banif Madeira’s duly authorisedrepresentatives.Banif Madeira was established on 3 April 1989 (registered under number 03658-88/02/03-CIPC-511029730). Its registered office is at Rua João Tavira 30, Funchal, Madeira.The object of Banif Madeira is the carrying out of international banking and finance operations withnon-residents of Portugal.RepresentativesThe representatives of Banif Madeira are:– Joaquim Filipe Marques dos Santos (Director)– José Marques Almeida (Director)– Carlos David Duarte de Almeida (Director)– Artur Manuel Pires Chambel (Director)– António Manuel Rocha Moreira (Director)The representatives are granted all powers for the management of Banif Madeira and Banif Madeirais bound by the joint signature or joint act of two representatives.AttorneysThe following are appointed as Attorneys of Banif Madeira:– Eduardo Marcelo Silva– Joaquim Francisco Silva Pinto– João Ramiro Arede Pereira Reis– Vitorino Adriano de Sousa Gouveia– Daniela Maria de Castro Fernandes Pereira Agostinho– Hernâni Ferreira Cavilhas– José António Machado de Andrade– Wilson Pereira Camilo61

The attorneys are authorised to manage and administer Banif Madeira upon specific powers grantedby the Directors, and carrying out all acts necessary. Two attorneys signing jointly can bind Banif Madeira.Main Financial Indicators2002111120031111Jun/031111Jun/041111Balance sheetNet assets...................................................................... 761.1 696.1 740.1 593.6Loan portfolio .............................................................. 24.8 21.8 20.2 20.1Deposits from customers.............................................. 651.9 588.3 631.8 571.5Net interbank borrowing .............................................. 603.6 535.5 578.2 535.8Capital Reserves and Results ...................................... 2.4 5.1 4.1 5.1Profit and Loss accountInterest margin.............................................................. 2.6 2.4 1.6 0.3Other income................................................................ 0.5 0.4 0.2 0.3Gross margin ................................................................ 3.3 2.8 1.8 0.6Total overhead (including depreciation) ...................... (0.008) (0.004) (0.002) (0.002)Provisions .................................................................... 0.08 (0.06) (0.02) 0Extraordinary gains and losses .................................... (0.2) (0.1) (0.1) (0.8)Income Tax .................................................................. (0.03) (0.03) (0.02) (0.02)Net Profit...................................................................... 2.4 2.7 1.7 (0.2)The following table shows the unaudited capitalisation of Banif Madeira as at 30 June 2004:As atJun/20041111(in Euromillions)Short-term and long-term liabilities ........................................................................................ 571.5Stockholders’ equityShare Capital ................................................................................................................................ 0Reserves ........................................................................................................................................ 5.1Retained earnings.......................................................................................................................... 01111Total Stockholders’ equity ............................................................................................................ 5.1Total capitalization...................................................................................................................... 576.6111162

TAXATIONThe following is a general description of certain Cayman Islands and Portugal tax considerationsrelating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to theNotes, whether in those countries or elsewhere. Prospective purchasers of Notes should consult their owntax advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of Notesand receiving payments of interest, principal and/or other amounts under the Notes and the consequences ofsuch actions under the tax laws of those countries. This summary is based upon the law as in effect on thedate of this Offering Circular and is subject to any change in law that may take effect after such date.Cayman IslandsThe following discussion of certain Cayman Islands tax consequences of an investment in the Notesis based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a general summaryof present law, which is subject to prospective and retroactive change. It assumes that Banif Finance willconduct its affairs in accordance with assumptions made by, and representations made to, counsel. It is notintended as tax advice, does not consider any investor’s particular circumstances, and does not consider taxconsequences other than those arising under Cayman Islands law.Under existing Cayman Islands law:(i)(ii)payments of principal and interest in respect of the Notes will not be subject to taxation in theCayman Islands and no withholding will be required on such payment to any Holder of a Noteand gains derived from the sale of Notes will not be subject to Cayman Islands income orcorporate tax. The Cayman Islands currently have no income, corporation or capital gains taxand no estate duty, inheritance tax or gift tax; andthe Holder of any Note (or the legal personal representative of such Holder) whose Note isbrought into the Cayman Islands may in certain circumstances be liable to pay stamp dutyimposed under the laws of the Cayman Islands in respect of such Note. In addition, aninstrument transferring title to a Note, if brought into or executed in the Cayman Islands, wouldbe subject to Cayman Islands stamp duty.Banif Finance has been incorporated under the laws of the Cayman Islands as an exempted companyand, as such, has obtained an undertaking from the Governor In Cabinet of the Cayman Islands in thefollowing form:The Tax Concessions Law(1999 Revision)Undertaking as to Tax ConcessionsIn accordance with Section 6 of the Tax Concessions Law (1999 Revision) the Governor In Cabinetundertakes with Banif Finance Ltd. (the “Company”):(a)(b)that no law which is hereinafter enacted in the Islands imposing any tax to be levied on profits,income, gains or appreciations shall apply to the Company or its operations; andin addition, that no tax to be levied on profits, income, gains or appreciations or which is in thenature of estate duty or inheritance tax shall be payable(i)(ii)on or in respect of the shares, debentures or other obligations of the Company; orby way of the withholding in whole or in part of any relevant payment as defined inSection 6(3) of the Tax Concessions Law (1999 Revision).These concessions shall be for a period of twenty years from 19 August 2003.Acting Governor in Cabinet.63

PortugalNotes issued by BanifBanif has been advised that under the existing laws of Portugal any payment under the Notes deemedas interest pursuant to Portuguese tax legislation will be subject to Portuguese withholding tax at a primafacie rate of 20 per cent., except for payments made to (i) Portuguese credit institutions or (ii) non residententities that qualify as financial institutions as defined under Decree Law 298/92 of 31 December (asamended) and Directive 2000/12/EC of the European Parliament and the Council of 20 March 2000,excluding permanent establishments of such entities located on Portuguese territory. The rate of withholdingtax may be reduced pursuant to the terms of double tax treaties entered into by Portugal, as applicable.Notes issued or guaranteed by Banif MadeiraBanif Madeira has been advised that under the existing laws of Madeira and Portugal any paymentunder the Notes deemed as interest pursuant to Portuguese tax legislation, from Banif Madeira (either asIssuer or Guarantor) to non-residents of Portugal, will not be subject to Portuguese withholding tax, stamptax or any other taxes either local or national, until the year 2011, with the exception of payments to (i)entities not resident in Portugal with a permanent establishment in Portugal and (ii) entities not resident inPortugal which are controlled by Portuguese entities. In order to qualify for the withholding tax exemption,the beneficiary of the interests under the Notes must provide evidence that it is not resident in Portugal. Thisis made by presenting the following documentation (as relevant):(a)(b)tax payers identification (including jurisdiction of taxation and tax number), if the entities inquestion are central banks or institutions subject to public law or financial companies locatedin any OECD Member State or in a country with which Portugal has entered into a treaty toavoid international double taxation and are subject to a supervisory regime or to administrativeregistration (regime administrativo); orresidence certificate or equivalent document issued by the tax authorities or other officialauthority of the country of residence or by the Portuguese consulate of the country of residence,in all other cases.For (b) above, the documents cannot have been issued more than three years before the date of thetransaction in question or three months after the date of the transaction in question (unless the tax authoritiesof the country of residence of the non resident entity indicate a shorter period in which case such shorterperiod will apply).The tax exemption referred to above also applies to transactions carried out with entities resident inthe Zona Franca da Madeira (the “Madeira International Business Centre”) which are not creditinstitutions, financial companies or branches of financial companies carrying out banking or financialtransactions with entities resident in Portugal or with a permanent establishment in Portugal of an entity notresident therein. The tax regime applicable to entities with a license to operate in the Madeira InternationalBusiness Centre issued up to 31 December 2000, such as Banif Madeira, is set out in Article 33 of theEstatuto dos Benefícios Fiscais (the “Statute of Tax Incentives”). The main tax exemptions provided by theMadeira International Business Centre tax regime to Banif Madeira are granted until 31 December 2011(Article 33 of the Statute of Tax Incentives). The tax position with effect from 2011 is expected to be thesame as that on the Portuguese mainland unless an extension of the current position is granted. BanifMadeira is not in a position to predict at this time whether such an extension will be granted.There will be no Portuguese stamp duty payable on Notes issued by Banif Madeira brought intoPortugal but a holder of the Notes receiving interest payments in Portugal will be subject to normalPortuguese taxation.Pursuant to the provisions of Portuguese anti-avoidance legislation (Article 38, paragraph 2 of the LeiGeral Tributária) payments to entities not resident in Portugal which are resident for tax purposes in aterritory included in the list of jurisdictions with a clearly more favourable tax regime approved by Portaria(Ministerial Order) 1272/2001 of the Portuguese Minister of Finance could be challenged by the Portuguese64

authorities in the event that the Portuguese authorities consider that the transaction in question isimplemented with the principal aim of illegally avoiding tax.For the purposes of maintaining the tax exemption of the Madeira International Business Centre (asset out in Article 33 of the Statute of Tax Incentives, as amended) Banif Madeira must, when requested bythe Portuguese tax authorities, provide evidence that transactions, which in the absence of the MadeiraInternational Business Centre tax exemption would attract Portuguese taxation, were directly carried outwith entities not resident in Portugal. This is made by presenting the following documentation (as relevant):(a)(b)tax payers identification (including jurisdiction of taxation and tax number), if the entities inquestion are central banks or institutions subject to public law or financial companies locatedin any OECD Member State or in a country with which Portugal has entered into a treaty toavoid international double taxation and are subject to a supervisory regime or to administrativeregistration (regime administrativo); orresidence certificate or equivalent document issued by the tax authorities or other officialauthority of the country of residence or by the Portuguese consulate of the country of residence,in all other cases.For (b) above, the documents cannot have been issued more than three years before the date of thetransaction in question or three months after the date of the transaction in question (unless the tax authoritiesof the country of residence of the non resident entity indicate a shorter period in which case such shorterperiod will apply).Guarantee of Banif MadeiraPursuant to Article 33, paragraph 11 of the Statute of Tax Incentives, documents, books, papers,contracts, operations, acts and products, as set out in the Tabela Geral do Imposto de Selo (the general stamptax table), relating to entities licensed to operate in the Madeira International Business Centre are exemptfrom Portuguese stamp tax. Although not specifically stated in Article 33 paragraph 11 of the Statute of TaxIncentives, and in the absence of court decisions in relation to this matter, the Portuguese tax authorities areof the view that this exemption of stamp tax is only applicable to the provision of a guarantee by an entitylicensed to operate in the Madeira International Business Centre in the event that the guarantor directlybenefits from the provision of the guarantee, or in situations in which the entity having the benefit of theguarantee is licensed to operate in the Madeira International Business Centre.If the Portuguese tax authorities take the view that in the case in question there is no direct benefit toBanif Madeira, the guarantee given by Banif Madeira as guarantor of Notes issued by Banif Finance will besubject to Portuguese stamp duty at the following rates: (i) 0.04 per cent. per month or fraction thereof if theguarantee is given for a period of less than 1 year; (ii) 0.5 per cent. if the guarantee is given for a period ofmore than 1 year and less than 5 years; and (iii) 0.6 per cent. if the guarantee is given for a period of morethan 5 years. This stamp duty will only be payable upon enforcement of the guarantee in Portugal. The stampduty will be due from Banif Finance as beneficiary of the guarantee.Pursuant to Article 280 of the Código de Processo Civil (the Civil Procedural Code) enforceability ofthe guarantee will not be prejudiced by non-payment of Portuguese stamp duty in relation to the guarantee.EU Savings DirectiveOn 3 June 2003 the EU Council of Economic and Finance Ministers adopted a new directiveregarding the taxation of savings income. The directive is scheduled to be applied by Member States from 1July 2005, provided that certain non-EU countries adopt similar measures from the same date. Under thedirective each Member State will be required to provide to the tax authorities of another Member Statedetails of payments of interest or other similar income paid by a person within its jurisdiction to, or collectedby such person for, an individual resident in that other Member State; however, Austria, Belgium andLuxembourg may instead apply a withholding system for a transitional period in relation to such payments,deducting tax at rates rising over time to 35 per cent. The transitional period is to commence on the date from65

which the directive is to be applied by Member States and to terminate at the end of the first full fiscal yearfollowing agreement by certain non-EU countries to the exchange of information relating to such payments.66

SUBSCRIPTION AND SALENotes may be sold from time to time by an Issuer to any one or more of Banif – Banco deInvestimento, S.A., Caixa – Banco de Investimento, S.A., Citigroup Global Markets Limited, Barclays BankPLC, BNP Paribas, Credit Suisse First Boston (Europe) Limited, Deutsche Bank AG London, J.P. MorganSecurities Ltd. and Merrill Lynch International (the “Dealers”). The arrangements under which Notes mayfrom time to time be agreed to be sold by the Issuer to, and purchased by, Dealers are set out in a DealerAgreement dated 28 October 2003 as supplemented by a Supplemental Dealer Agreement dated 13December 2004 (the “Dealer Agreement”) and made between the Issuer, the Guarantor and the Dealers.Any such agreement will, inter alia, make provision for the form and terms and conditions of the relevantNotes, the price at which such Notes will be purchased by the Dealers and the commissions or other agreeddeductibles (if any) payable or allowable by the Issuer in respect of such purchase. The Dealer Agreementmakes provision for the resignation or termination of appointment of existing Dealers and for theappointment of additional or other Dealers either generally in respect of the Programme or in relation to aparticular Tranche of Notes.United States of America: Regulation S Category 2; TEFRA D or TEFRA C as specified in therelevant Pricing Supplement or neither if TEFRA is specified as not applicable in the relevant PricingSupplement.The Notes have not been and will not be registered under the Securities Act and may not be offeredor sold within the United States or to, or for the account or benefit of, U.S. persons except in certaintransactions exempt from the registration requirements of the Securities Act. Terms used in this paragraphhave the meanings given to them by Regulation S.The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered withinthe United States or its possessions or to a United States person, except in certain transactions permitted byU.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United StatesInternal Revenue Code and regulations thereunder.Each Dealer has agreed that, except as permitted by the Dealer Agreement, it will not offer, sell ordeliver Notes, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completionof the distribution of the Notes comprising the relevant Tranche, as certified to the Principal Paying Agentor the Issuer by such Dealer (or, in the case of a sale of a Tranche of Notes to or through more than oneDealer, by each of such Dealers as to the Notes of such Tranche purchased by or through it, in which casethe Principal Paying Agent or the Issuer shall notify each such Dealer when all such Dealers have socertified) within the United States or to, or for the account or benefit of, U.S. persons, and such Dealer willhave sent to each dealer to which it sells Notes during the distribution compliance period relating thereto aconfirmation or other notice setting forth the restrictions on offers and sales of the Notes within the UnitedStates or to, or for the account or benefit of, U.S. persons.In addition, until 40 days after the commencement of the offering of Notes comprising any Tranche,any offer or sale of Notes within the United States by any dealer (whether or not participating in the offering)may violate the registration requirements of the Securities Act.United KingdomEach Dealer has represented, warranted and agreed that:(a)No offer to public: in relation to Notes which have a maturity of one year or more, it has notoffered or sold and, prior to the expiry of a period of six months from the Issue Date of suchNotes, will not offer or sell any such Notes to persons in the United Kingdom except to personswhose ordinary activities involve them in acquiring, holding, managing or disposing ofinvestments (as principal or agent) for the purposes of their businesses or otherwise incircumstances which have not resulted and will not result in an offer to the public in the UnitedKingdom within the meaning of the Public Offers of Securities Regulations 1995;67

(b)No deposit-taking: in relation to any Notes having a maturity of less than one year:(i)(ii)it is a person whose ordinary activities involve it in acquiring, holding, managing ordisposing of investments (as principal or agent) for the purposes of its business; and:it has not offered or sold and will not offer or sell any Notes other than to persons:(A)(B)whose ordinary activities involve them in acquiring, holding, managing ordisposing of investments (as principal or agent) for the purposes of theirbusinesses; orwho it is reasonable to expect will acquire, hold, manage or dispose of investments(as principal or agent) for the purposes of their businesses,where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMAby the Issuer;(c)(d)Financial promotion: it has only communicated or caused to be communicated and will onlycommunicate or cause to be communicated any invitation or inducement to engage ininvestment activity (within the meaning of section 21 of the FSMA) received by it inconnection with the issue or sale of any Notes in circumstances in which section 21(1) of theFSMA does not apply to the Issuer or the Guarantor; andGeneral compliance: it has complied and will comply with all applicable provisions of theFSMA with respect to anything done by it in relation to any Notes in, from or otherwiseinvolving the United Kingdom.JapanThe Notes have not been and will not be registered under the Securities and Exchange Law of Japanand, accordingly, each Dealer has undertaken that it will not offer or sell any Notes directly or indirectly, inJapan or to, or for the benefit of, any Japanese Person or to others for re-offering or resale, directly orindirectly, in Japan or to any Japanese Person except under circumstances which will result in compliancewith all applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental andregulatory authorities and in effect at the relevant time. For the purposes of this paragraph, “JapanesePerson” shall mean any person resident in Japan, including any corporation or other entity organised underthe laws of Japan.Cayman IslandsEach Dealer has agreed that it has not made and will not make any invitation to the public in theCayman Islands to subscribe for any of the Notes.PortugalEach Dealer has represented and agreed that (i) it has not directly or indirectly taken any action oroffered, advertised, sold or delivered and will not directly or indirectly offer, advertise, sell, re-sell, re-offeror deliver any Notes in circumstances which could qualify as a public offer pursuant to the Código dosValores Mobiliários (the Portuguese capital markets code), or where the Issuer is Banif Madeira incircumstances which could qualify as a public or private offer pursuant to the Código dos ValoresMobiliários and (ii) it has not directly or indirectly distributed and will not directly or indirectly distributeany prospectus or any documents, circulars, advertisements or any offering material except in accordancewith all applicable Portuguese laws and regulations. No invitation may be made to residents of the Republicof Portugal to subscribe for any Notes issued by Banif Madeira.68

GeneralOther than with respect to the admission to listing, trading and/or quotation by such one or morelisting authorities, stock exchanges and/or quotation systems as may be specified in the Pricing Supplement,no action has been or will be taken in any country or jurisdiction by the relevant Issuer, if applicable, theGuarantor or the Dealers that would permit a public offering of Notes, or possession or distribution of anyoffering material in relation thereto, in any country or jurisdiction where action for that purpose is required.Persons into whose hands the Offering Circular or any Pricing Supplement comes are required by therelevant Issuer, if applicable, the Guarantor and the Dealers to comply with all applicable laws andregulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or havein their possession or distribute such offering material, in all cases at their own expense.The Dealer Agreement provides that the Dealers shall not be bound by any of the restrictions relatingto any specific jurisdiction (set out above) to the extent that such restrictions shall, as a result of change(s)or change(s) in official interpretation, after the date hereof, of applicable laws and regulations, no longer beapplicable but without prejudice to the obligations of the Dealers described in the paragraph headed“General” above.Selling restrictions may be supplemented or modified with the agreement of the relevant Issuer. Anysuch supplement or modification will be set out in the relevant Pricing Supplement (in the case of asupplement or modification relevant only to a particular Tranche of Notes) or (in any other case) in asupplement to this document.69

GENERAL INFORMATIONListingApplication has been made to list Notes issued under the Programme on the Luxembourg StockExchange and, in connection therewith, the Luxembourg Stock Exchange has assigned registration number12894 to the Programme. Prior to the listing of any Notes, the constitutional documents of the Issuers andthe legal notice relating to the issue will be registered with the Registrar of the District Court in Luxembourg(Registre de Commerce et des Sociétés à Luxembourg), where copies of these documents may be obtainedupon request.However, Notes may be issued pursuant to the Programme which will not be listed on theLuxembourg Stock Exchange or any other stock exchange or which will be listed on such stock exchange asthe relevant Issuer and the relevant Dealer(s) may agree.AuthorisationsThe establishment and update of the Programme was authorised by board resolutions of Banif Financedated 23 October 2003 and 26 November 2004 and the establishment of the Programme and the giving ofthe guarantee contained in the Trust Deed was authorised by board resolutions of Banif (in relation to Banifas Issuer and Banif Madeira as Issuer and Guarantor) dated 29 September 2003 and 26 November 2004.Each Issuer and the Guarantor has obtained or will obtain from time to time all necessary consents, approvalsand authorisations in connection with the issue and performance of the Notes and the giving of the guaranteerelating to them.Clearing of the NotesThe Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. Theappropriate common code and the International Securities Identification Number in relation to the Notes ofeach Series will be specified in the Pricing Supplement relating thereto. The relevant Pricing Supplementshall specify any other clearing system as shall have accepted the relevant Notes for clearance together withany further appropriate information.Use of proceedsThe net proceeds of the issue of each Tranche of Notes will be applied by the relevant Issuer and/orthe Guarantor to meet part of their general financing requirements.LitigationSave as disclosed in this Offering Circular, there are no litigation or arbitration proceedings againstor affecting an Issuer, the Guarantor, any of their respective Subsidiaries or any of their respective assets orrevenues, nor is any Issuer or the Guarantor aware of any pending or threatened proceedings of such kind,which are or might be material in the context of the Programme or the issue of the Notes thereunder.No significant changeSave as disclosed in this Offering Circular and since the last day of the financial period in respect ofwhich the most recent consolidated and unconsolidated audited financial statements of Banif and BanifSGPS, S.A. (holding company of the Banif Group) and the most recent unconsolidated and unauditedfinancial statements of Banif Madeira (acting as both Issuer and Guarantor) have been prepared, there hasbeen no adverse change, or any development reasonably likely to involve an adverse change, in the condition(financial or otherwise) or general affairs of any Issuer or any of its Subsidiaries or, as the case may be, theGuarantor or any of its Subsidiaries that is material in the context of the Programme or the issue of the Notesthereunder.70

Documents available for inspectionFor so long as the Programme remains in effect or any Notes shall be outstanding, copies and, whereappropriate, English translations of the following documents may be inspected during normal business hoursat the specified office of the Principal Paying Agent and the Paying Agent in Luxembourg, namely:(a)(b)(c)(d)(e)the Agency Agreement;the Trust Deed (which contains the forms of the Notes in global and definitive form);the Dealer Agreement;the Programme Manual;any Pricing Supplement relating to Notes which are admitted to listing, trading and/orquotation by any listing authority, stock exchange and/or quotation system. (In the case of anyNotes which are not admitted to listing, trading and/or quotation by any listing authority, stockexchange and/or quotation system, copies of the relevant Pricing Supplement will only beavailable for inspection by the relevant Noteholders.)Financial statements availableFor so long as the Programme remains in effect or any Notes shall be outstanding, copies and, whereappropriate, English translations of the following documents may be obtained during normal business hoursat the specified office of the Principal Paying Agent and the Paying Agent in Luxembourg, namely the mostrecent publicly available audited consolidated and unconsolidated financial statements of Banif and BanifSGPS, SA (holding of Banif Group) beginning with such financial statements for the years ended 2001, 2002and 2003 and the most recent audited statutory financial statements of Banif Finance and the most recentfinancial statements of Banif Madeira, beginning with such financial statements for the year ended 2003.Banif SGPS, SA (holding of Banif Group) produces semi-annual financial statements. Banif andBanif Madeira, acting as both Issuer and Guarantor, do not produce semi-annual financial statements otherthan as incorporated herein. Banif Finance does not publish semi-annual financial statements.71

Index to Financial Statements and Auditor’s ReportsBanif SGPS, S.A. – Financial Statements for year ended 31 December 2003 ............................ F-1Banif SGPS, S.A. – Financial Statements as at 30 June 2004 .................................................... F-4Banif S.A. – Financial Statements for year ended 31 December 2003........................................ F-7Banif S.A. – Financial Statements as at 30 June 2004................................................................. F-10Banif Madeira – Financial Statements for year ended 31 December 2003.................................. F-13Banif Madeira – Financial Statements as at 30 June 2004 .......................................................... F-16Banif Finance – Financial Statements for year ended 31 December 2003 .................................. F-19Banif – Banco Internacional do Funchal, S.A. – Legal Accounts Certificate andAuditor’s Report on Individual Accounts as at 31 December 2003 ........................................ F-22Banif – Banco Internacional do Funchal, S.A. – Report and Opinion of Audit Board for 2003 .. F-24Banif SGPS, S.A. – Legal Accounts Certificate and External Auditor’s Report onConsolidated Accounts as at 31 December 2003 .................................................................... F-26Banif SGPS, S.A. – Legal Accounts Certificate and External Auditor’s Report on IndividualAccounts as at 31 December 2003 .......................................................................................... F-28Banif SGPS, S.A. – Report and Opinion of Audit Board for 2003.............................................. F-30Banif SGPS, S.A. – Limited Revision Report on Half Yearly Consolidated Informationas at 30 June 2004 .................................................................................................................... F-32Banif SGPS, S.A. – Limited Revision Report on Half Yearly Individual Informationas at 30 June 2004 .................................................................................................................... F-34Page72

Balance SheetFINANCIAL STATEMENTS AND AUDITORS’ REPORTSBanif SGPS, S.A. (holding company of the Banif Group)Financial statements for year ended 31 December 200331 December 31 December2003111231111211211112200211112Prov. andGross11112Dep.11112Net11112Net11112Eur ’000AssetsCash and funds with Central Banks ............................ 277,056 277,056 146,269Sight deposits with Banks............................................ 85,331 43 85,288 113,475Other loans and advances to Banks ............................ 120,643 120,643 768,145Loans and advances to Clients .................................... 4,406,902 63,615 4,343,287 4,366,716Bonds and other fixed yield securities ........................ 329,686 875 328,811 222,814(a) Public ................................................................ 63,490 13 63,477 43,347(b) Other .................................................................. 266,196 862 265,334 179,468(c) Own securities .................................................. 0Shares and other variable yield securities.................... 89,020 13,228 75,792 53,538Shares in associated companiesShares in affiliated companies not included inconsolidated accounts .............................................. 48,084 48,084 32,516Other financial holdings .............................................. 4,649 313 4,336 2,843Intangible fixed assets.................................................. 59,621 37,797 21,824 23,263Tangible fixed assets .................................................... 192,735 71,210 121,525 135,410(Of which: property) ................................................ 112,707 8,963 103,744 116,108Revaluation differences - Equity Method .................... 2,070 13 2,057 16Goodwill ...................................................................... 26,347 10,334 16,013 17,594Unrealized share capitalOwn sharesOther assets .................................................................. 110,856 4,119 106,737 87,106Accruals and deferrals.................................................. 160,105 160,105 97,070Consolidated loss for the period .................................. 0Minority interests ........................................................11112 11112 11112 11112Total.............................................................................. 5,913,105 201,547 5,711,558 6,066,77511112 11112 11112 1111211112 11112 11112 11112F-1

31 December 31 December2003 200211112 11112Eur ’000Liabilities and Shareholders’ FundsDeposits by Banks .................................................................................................. 746,996 1,380,902(a) Sight .............................................................................................................. 15,809 496,778(b) Term or prior notice...................................................................................... 731,187 884,124Client accounts ........................................................................................................ 3,706,683 3,785,442(a) Savings accounts .......................................................................................... 166,765 153,485(b) Sight accounts .............................................................................................. 1,169,747 1,085,774(c) Term accounts .............................................................................................. 2,370,171 2,546,183Debts represented by securities .............................................................................. 512,768 248,869(a) Bonds in circulation ...................................................................................... 438,483 139,674(b) Others............................................................................................................ 74,285 109,195Other Liabilities ...................................................................................................... 31,379 29,314Accruals and deferrals ............................................................................................ 126,516 68,105Revaluation differences - equity method ................................................................ 3,629 5,422Goodwill.................................................................................................................. 8,468 4,915Provision for risks and charges .............................................................................. 43,833 47,119(a) Provision for pensions and other charges(b) Other provisions............................................................................................ 43,833 47,119Fund for general banking risks................................................................................ 1,854 2,456Subordinated liabilities............................................................................................ 153,597 153,597Paid up share capital................................................................................................ 200,000 200,000Issue premiums........................................................................................................ 58,214 58,214Reserves .................................................................................................................. 49,220 33,570Revaluation reserves................................................................................................ 1,940 1,940Profit and loss account brought forward ................................................................ (1,083) 1,468Minority interests .................................................................................................... 42,186 24,574Consolidated profit for the period .......................................................................... 25,3581111220,86811112Total ........................................................................................................................ 5,711,558 6,066,77511112 1111211112 1111231 December 31 December2003 200211112 11112Eur ’000Memorandum AccountsGuarantees given and contingent liabilities ............................................................ 669,249 662,354Of which:1. Bills accepted and endorsed2. Guarantees ...................................................................................................... 536,514 547,3293. Others ............................................................................................................ 132,736 115,025Commitments .......................................................................................................... 557,751 628,582Of which:1. Sales with repurchase option2. Others ................................................................................................................ 557,75111112628,58211112Total ........................................................................................................................ 1,227,000 1,290,93611112 1111211112 11112F-2

Income Statement31 December 31 December2003 200211112 11112Eur ’000DebitInterest and equivalent costs .................................................................................. 155,912 221,372Commissions .......................................................................................................... 8,240 6,403Losses on financial operations ................................................................................ 88,786 42,199Administrative overheads........................................................................................ 130,258 116,3651. Personnel costs .............................................................................................. 75,262 70,9382. Other administrative overheads .................................................................... 54,996 45,427Depreciation ............................................................................................................ 19,577 20,416Other operating costs .............................................................................................. 5,023 6,127Provisions for outstanding credit and other risks.................................................... 60,795 48,816Provision for financial fixed assets ........................................................................ 1 3Extraordinary losses ................................................................................................ 22,875 6,664Corporate Tax .......................................................................................................... 4,109 9,213Other taxes .............................................................................................................. 2,178 1,999Results from associated companies and aff. not included in the com. acc............. 179 123Minority interests .................................................................................................... 1,267 1,908Consolidated profit for the period .......................................................................... 25,3581111220,86811112Total ........................................................................................................................ 524,558 502,47611112 1111211112 11112CreditInterest and equivalent earnings.............................................................................. 306,973 354,912Earnings from securities.......................................................................................... 1,473 3,088Commissions .......................................................................................................... 43,649 35,213Profits on financial operations ................................................................................ 101,762 56,691Adjustments to provisions ...................................................................................... 19,700 12,815Results from associated companies and aff. not included in the com. acc............. 6,915 5,103Other operating income .......................................................................................... 32,464 27,886Extraordinary gains ................................................................................................ 11,622 6,768Minority interests ....................................................................................................Consolidated loss for the period..............................................................................11112 11112Total ........................................................................................................................ 524,558 11112502,47611112F-3

Balance SheetFINANCIAL STATEMENTS AS AT 30 JUNE 200430 June 30 June2004111231111211211112200311112Prov. andGross11112Dep.11112Net11112Net11112AssetsCash and funds with Central Banks ............................ 93,084 93,084 142,491Sight deposits with Banks............................................ 87,831 46 87,785 93,236Other loans and advances to Banks ............................ 120,996 120,996 161,943Loans and advances to Clients .................................... 4,657,686 74,814 4,582,872 4,222,435Bonds and other fixed yield securities ........................ 374,416 770 373,646 338,421(a) Public ................................................................ 58,202 20 58,182 66,538(b) Other .................................................................. 316,215 750 315,465 271,883(c) Own securitiesShares and other variable yield securities.................... 107,738 9,844 97,894 47,858Shares in associated companiesShares in affiliated companies not included inconsolidated accounts .............................................. 49,295 49,295 36,668Other financial holdings .............................................. 4,598 307 4,291 2,840Intangible fixed assets.................................................. 61,628 40,465 21,163 24,009Tangible fixed assets .................................................... 193,246 71,129 122,117 133,629(Of which: property) ................................................ (113,336) (9,460) (103,876) (116,028)Revaluation differences – Equity Method .................. 2,070 116 1,954 17Goodwill ...................................................................... 26,849 11,212 15,637 16,947Unrealized share capitalOwn sharesOther assets .................................................................. 109.766 6,066 103,700 91,859Accruals and deferrals.................................................. 150,030 150,030 158,605Consolidated loss for the period .................................. 0Minority interests11112 11112 11112 11112Total.............................................................................. 6,039,233 214,769 5,824,464 5,470,95811112 11112 11112 1111211112 11112 11112 11112F-4

30 June 30 June200411112200311112Eur ’000Liabilities and Shareholders’ FundsDeposits by Banks .................................................................................................. 809,808 760,633(a) Sight .............................................................................................................. 34,874 12,743(b) Term or prior notice...................................................................................... 774,934 747,890Client accounts ........................................................................................................ 3,710,460 3,765,287(a) Savings accounts .......................................................................................... 174,861 157,454(b) Sight accounts .............................................................................................. 1,244,989 1,159,391(c) Term accounts .............................................................................................. 2,290,610 2,448,442Debts represented by securities .............................................................................. 540,434 281,389(a) Bonds in circulation ...................................................................................... 466,054 190,390(b) Others............................................................................................................ 74,381 90,999Other Liabilities ...................................................................................................... 56,159 26,780Accruals and deferrals ............................................................................................ 127,563 75,408Revaluation differences – equity method................................................................ 3,629 5,450Goodwill.................................................................................................................. 6,200 5,191Provision for risks and charges .............................................................................. 44,944 54,027(a) Provision for pensions and other charges(b) Other provisions............................................................................................ 44,944 54,027Fund for general banking risks................................................................................ 1,556 2,016Subordinated liabilities............................................................................................ 153,297 153,581Paid up share capital................................................................................................ 200,000 200,000Issue premiums........................................................................................................ 58,214 58,214Reserves .................................................................................................................. 52,764 50,059Revaluation reserves................................................................................................ 1,940 1,940Profit and loss account brought forward ................................................................ 2,082 (1,083)Minority interests .................................................................................................... 40,126 22,856Consolidated profit for the period .......................................................................... 15,288111129,21011112Total ........................................................................................................................ 5,824,464 5,470,95811112 1111211112 1111230 June 30 June200411112200311112Eur ’000Memorandum AccountsGuarantees given and contingent liabilities ............................................................ 773,101 718,997Of which:1. Bills accepted and endorsed2. Guarantees ...................................................................................................... 549,588 546,3433. Others ............................................................................................................ 223,513 172,654Commitments .......................................................................................................... 714,214 759,195Of which:1. Sales with repurchase agreement2. Others ............................................................................................................ 714,21411112759,19511112Total ........................................................................................................................ 1,487,315 1,478,19211112 1111211112 11112F-5

Income Statement30 June 30 June200411112200311112Eur ’000DebitInterest and equivalent costs .................................................................................. 85,316 89,785Commissions .......................................................................................................... 3,240 3,130Losses on financial operations ................................................................................ 58,375 54,804Administrative expense .......................................................................................... 66,111 61,9091. Personnel costs .............................................................................................. 39,508 37,8852. Other administrative overheads...................................................................... 26,603 24,054Depreciation ............................................................................................................ 9,110 9,971Other operating costs .............................................................................................. 4,630 2,738Provisions for outstanding credit and other risks.................................................... 38,366 37,187Provision for financial fixed assets ........................................................................ 1 1Extraordinary losses ................................................................................................ 3,732 4,245Corporate Tax .......................................................................................................... 3,954 3,814Other taxes .............................................................................................................. 1,975 1,458Results from associated companies and aff. not included in the com. acc............. 268 49Minority interests .................................................................................................... 169 338Consolidated profit for the period .......................................................................... 15,288111129,21011112Total ........................................................................................................................ 290,535 278,63911112 1111211112 11112CreditInterest and equivalent earnings.............................................................................. 164,933 159,267Earnings from securities.......................................................................................... 1,506 2,119Commissions .......................................................................................................... 25,681 21,054Profits on financial operations ................................................................................ 62,224 64,854Adjustments to provisions ...................................................................................... 15,204 8,618Results from associated companies and aff. not included in the com. acc............. 3,936 3,180Other operating income .......................................................................................... 14,668 17,504Extraordinary gains ................................................................................................ 2,383 2,043Minority interestsConsolidated loss for the period11112 11112Total ........................................................................................................................ 290,535 11112278,63911112F-6

Balance SheetBanif S.A.Financial statements for year ended 31 December 200331 December 31 December2003111231111211211112200211112Prov. andGross11112Dep.11112Net11112Net11112AssetsCash and funds with Central Banks ............................ 192,206 192,206 83,953Sight deposits with Banks............................................ 49,061 43 49,018 70,779Other loans and advances to Banks ............................ 311,036 311,036 1,040,991Loans and advances to Clients .................................... 3,276,623 47,482 3,229,141 3,466,695Bonds and other fixed yield securities ........................ 136,560 188 136,372 43,495(a) Public ................................................................ 9,036 9,036 1,310(b) Other .................................................................. 127,524 188 127,336 42,185Shares and other variable yield securities.................... 41,455 9,244 32,211 21,538Shares and investments ................................................ 2,282 312 1,970 1,723Shares in related companies ........................................ 24,941 4,846 20,095 18,128Intangible fixed assets.................................................. 28,390 22,761 5,629 8,259Tangible fixed assets .................................................... 67,865 49,642 18,223 104,055(Of which: property) ................................................ 13,807 6,823 6,984 90,844Own sharesOther assets .................................................................. 60,523 3,139 57,384 53,839Accruals and deferrals.................................................. 73,405 73,405 47,407Loss for the period ......................................................11112 11112 11112 11112Total.............................................................................. 4,264,347 137,657 4,126,690 4,960,86211112 11112 11112 1111211112 11112 11112 11112F-7

31 December 31 December2003 200211112 11112Eur ’000Liabilities and Shareholders’ FundsDeposits by Banks .................................................................................................. 1,294,096 2,105,294(a) Sight .............................................................................................................. 34,342 665,849(b) Term or prior notice...................................................................................... 1,259,754 1,439,445Client accounts ........................................................................................................ 2,273,935 2,284,651(a) Savings accounts .......................................................................................... 101,557 99,221(b) Sight debit .................................................................................................... 796,554 742,976(c) Term debit .................................................................................................... 1,375,824 1,442,454Debts represented by securities .............................................................................. 43,961 80,775(a) Bonds in circulation ...................................................................................... 0 7,500(b) Others............................................................................................................ 43,961 73,275Other Liabilities ...................................................................................................... 12,524 13,273Accruals and deferrals ............................................................................................ 93,045 74,098Provision for risks and charges .............................................................................. 28,336 35,572(a) Provision for pensions and other charges .................................................... 0 0(b) Other provisions............................................................................................ 28,336 35,572Fund for general banking risks................................................................................ 127 123Subordinated liabilities............................................................................................ 112,380 112,380Paid up share capital................................................................................................ 240,000 240,000Issue premiums........................................................................................................ 451 451Reserves .................................................................................................................. 4,645Profit and loss account brought forwardProfit for the period ................................................................................................ 23,1901111214,24511112Total ........................................................................................................................ 4,126,690 4,960,86211112 1111211112 1111231 December 31 December2003 200211112 11112Eur ’000Memorandum AccountsContingent Liabilities.............................................................................................. 357,723 346,011Of which:1. Acceptances and Commitments fromEndorsements of Rediscounted Effects2. Bonds and Collateral ...................................................................................... 15,502 15,431Commitments .......................................................................................................... 323,455 420,856Of which:1. Sales with repurchase agreement2. Others ............................................................................................................ 323,45511112420,85611112Total ........................................................................................................................ 681,178 766,86711112 1111211112 11112F-8

Income Statement31 December 31 December2003 200211112 11112Eur ’000DebitInterest and equivalent costs .................................................................................. 136,500 127,133Commissions .......................................................................................................... 3,163 2,435Losses on financial operations ................................................................................ 4,145 6,528Administrative expense .......................................................................................... 82,480 59,929(a) Personnel costs.............................................................................................. 47,843 34,732Of which:(– Wages and Salaries) .................................................................................... 36,085 25,766(– Social Securities Contributions) ................................................................ 11,521 8,842Of which:(– pensions) .................................................................................................... 1,289 1,311(b) Other Administrative overheads .................................................................. 34,637 25,197Depreciation ............................................................................................................ 10,130 8,339Other Operating Costs ............................................................................................ 1,183 835Provisions for outstanding credit and other Risks .................................................. 42,249 23,608Provisions for Financial Fixed Assets .................................................................... 80Result from ordinary Operations before tax ..........................................................Extraordinary Losses .............................................................................................. 20,304 1,550Corporate Tax .......................................................................................................... 174 5,028Other Taxes.............................................................................................................. 272 540Profit for the Period ................................................................................................ 23,1901111214,24511112Total ........................................................................................................................ 323,790 250,25011112 1111211112 11112CreditInterest and equivalent earnings.............................................................................. 240,770 202,906Of which:Fixed Yield Securities ........................................................................................ 3,845 1,556Earnings from securities.......................................................................................... 239 205(a) Earnings from Shares and other Variable Yield Securities .......................... 16 69(b) Earnings from Capital Holdings .................................................................. 136 136(c) Earnings from Shares in Related Companies ..............................................Commissions .......................................................................................................... 25,003 17,470Profits on financial operations ................................................................................ 10,223 8,624Adjustments to Credits and Provisions for Contingent Liabilities andCommitments ...................................................................................................... 10,679 3,983Adjustments to securities with the character of financial fixed assets, to capitalholdings and shares in related companies .......................................................... 2,214Other operating income .......................................................................................... 20,125 15,040Results from ordinary operationsExtraordinary Gains ................................................................................................ 14,537 2,022Loss for the period ..................................................................................................11112 11112Total ........................................................................................................................ 323,790 11112250,25011112F-9

Balance SheetFinancial statements as at 30 June 200430 June 200411123111231111211211112Prov. andGross Dep. Net111112 111112 111112AssetsCash and funds with Central Banks .................................. 75,687,382 75,687,382Sight deposits with Banks ................................................. 44,807,391 13,991 44,793,399Other loans and advances to Banks................................... 260,496,016 32,534 260,463,481Loans and advances to Clients .......................................... 3,348,407,414 57,376,545 3,401,030,869Bonds and other fixed yield securities .............................. 175,661,228 147,402 175,513,826(a) Public....................................................................... 9,703,382 15,334 9,688,048(b) Other........................................................................ 165,957,846 132,068 165,825,778Shares and other variable yield securities ......................... 38,598,026 6,879,052 31,718,974Shares and investments...................................................... 2,257,448 301,720 1,955,728Shares in related companies ............................................. 24,941,169 4,630,559 20,310,611Intangible fixed assets ....................................................... 29,577,978 24,950,750 4,627,228Tangible fixed assets.......................................................... 68,929,031 50,929,404 17,999,627(Of which: property)...................................................... (13,951,961) (6,811,133) (7,140,828)Own shares ........................................................................ 0 0Other assets........................................................................ 69,787,462 4,624,189 65,163,273Accruals and deferrals ....................................................... 108,517,731 108,517,731Loss for the period............................................................. 0111112 1111120111112Total ................................................................................... 4,357,668,274 149,886,146 4,207,782,128111112 111112 111112111112 111112 111112F-10

30 June2004111112EurLiabilities and Shareholders’ FundsDeposits by Banks................................................................................................................... 1,378,859,352(a) Sight .............................................................................................................................. 39,848,054(b) Term or prior notice...................................................................................................... 1,339,011,299Client accounts ........................................................................................................................ 2,231,080,148(a) Savings accounts........................................................................................................... 106,353,555(b) Sight accounts............................................................................................................... 808,795,749(c) Term accounts ............................................................................................................... 1,315,930,844Debts represented by securities............................................................................................... 67,727,613(a) Bonds in circulation...................................................................................................... 12,340,601(b) Others............................................................................................................................ 55,387,013Other Liabilities....................................................................................................................... 40,491,610Accruals and deferrals............................................................................................................. 85,209,940Provision for risks and charges ............................................................................................... 29,637,334(a) Provision for pensions and other charges..................................................................... 0(b) Other provisions ........................................................................................................... 29,637,334Fund for general banking risks ............................................................................................... 126,755Subordinated liabilities............................................................................................................ 112,379,790Paid up share capital ............................................................................................................... 240,000,000Issue premiums........................................................................................................................ 451,058Reserves................................................................................................................................... 15,834,645Profit and loss account brought forward................................................................................. 0Profit for the period................................................................................................................. 5,983,883111112Total......................................................................................................................................... 4,207,782,12811111230 June2004111112EurMemorandum AccountsGuarantees given and contingent liabilities ............................................................................ 375,360,647Of which:1. Bills accepted and endorsed............................................................................................ 02. Bonds and Collateral....................................................................................................... 14,777,936Commitments .......................................................................................................................... 449,544,075Of which:1. Sales with repurchase option.......................................................................................... 0111112Total......................................................................................................................................... 824,904,722111112F-11

Income Statement30 June2004111112EurDebitInterest and equivalent costs.................................................................................................... 60,782,650Commissions............................................................................................................................ 1,386,227Losses on financial operations ................................................................................................ 1,736,347Administrative expense ........................................................................................................... 44,360,505(a) Personnel costs.............................................................................................................. 24,569,686Of which:(- Wages and Salaries) ..................................................................................................... (18,755,828)(- Social Securities Contributions) .................................................................................. (5,753,463)Of which:(- pensions) ...................................................................................................................... (480,000)(b) Other Administrative overheads ................................................................................... 19,790,820Depreciation............................................................................................................................. 4,279,088Other Operating Costs ............................................................................................................. 667,828Provisions for outstanding credit and other risks.................................................................... 25,609,562Provisions for Financial Fixed Assets ..................................................................................... 0Result from ordinary Operations before tax............................................................................ 0Extraordinary Losses ............................................................................................................... 1,761,666Corporate Tax .......................................................................................................................... 1,544,750Other Taxes.............................................................................................................................. 436,229Profit for the Period................................................................................................................. 5,983,883111112Total ......................................................................................................................................... 148,548,735111112CreditInterest and equivalent earnings .............................................................................................. 116,173,453Of which:Fixed Yield Securities...................................................................................................... (2,591,920)Earnings from securities.......................................................................................................... 505,881(a) Earnings from Shares and other Variable Yield Securities........................................... 20,734(b) Earnings from Capital Holdings ................................................................................... 485,146(c) Earnings from Shares in Related Companies ............................................................... 0Commissions............................................................................................................................ 13,302,697Profits on financial operations................................................................................................. 3,280,584Adjustments to Credits and Provisions for Contingent Liabilities and Commitments........... 4,691,185Adjustments to securities with the character of financial fixed assets, to capital holdingsand shares in related companies .......................................................................................... 226,084Other operating income ........................................................................................................... 9,299,718Results from ordinary operations ............................................................................................ 0Extraordinary Gains................................................................................................................. 1,069,134Loss for the period................................................................................................................... 0111112Total ......................................................................................................................................... 148,548,735111112F-12

Balance SheetBANIF MADEIRAFINANCIAL STATEMENTS FOR YEAR ENDED 31 DECEMBER 200331 December 200311123111231111211211112Prov. andGross111112Dep.111112Net111112EurAssetsCash and funds with Central Banks .................................. 0 0Sight deposits with Banks ................................................. 0 0Other loans and advances to Banks................................... 635,496,262 635,496,262Loans and advances to Clients .......................................... 21,824,001 109,040 21,714,961Bonds and other fixed yield securities .............................. 13,123,479 0 13,123,479(a) Public....................................................................... 0 0(b) Other........................................................................ 13,125,479 0 13,125,479(Of which: Own securities) ........................................... 0 0Shares and other variable yield securities ......................... 18,781,125 0 18,781,125Shares and Investments ..................................................... 0 0Shares in related companies .............................................. 0 0Intangible fixed assets ....................................................... 0 0 0Tangible fixed assets.......................................................... 0 0 0(Of which: property)...................................................... 0 0 0Unrealized Share CapitalOwn shares ........................................................................ 0 0Other assets........................................................................ 5,057,908 0 5,057,908Accruals and deferrals ....................................................... 1,922,948 1,922,948Loss for the period............................................................. 0111112 1111120111112Total ................................................................................... 696,205,723 109,040 696,096,683111112 111112 111112111112 111112 111112F-13

31 December2003111112EurLiabilities and Shareholders’ FundsDeposits by Banks................................................................................................................... 100,097,653(a) Sight .............................................................................................................................. 77,545(b) Term or prior notice...................................................................................................... 100,020,107Client accounts ........................................................................................................................ 588,269,610(a) Savings accounts........................................................................................................... 0(b) Sight debit..................................................................................................................... 11,769,593(c) Term debit ..................................................................................................................... 576,500,017Debts represented by securities............................................................................................... 0(a) Bonds in circulation...................................................................................................... 0(b) Others............................................................................................................................ 0Other Liabilities....................................................................................................................... 0Accruals and deferrals............................................................................................................. 2,510,855Provision for risks and charges ............................................................................................... 151,634(a) Provisions for pensions and other charges ...................................................................(b) Other provisions ........................................................................................................... 151,634Fund for general banking risks ............................................................................................... 0Subordinated liabilities............................................................................................................ 0Paid up share capital ............................................................................................................... 0Issue premiums........................................................................................................................ 0Reserves................................................................................................................................... 2,353,389Revaluation Reserves .............................................................................................................. 0Profit and loss account brought forward................................................................................. 0Consolidated profit for the period........................................................................................... 2,713,542111112Total......................................................................................................................................... 696,096,68311111231 December2003111112EurMemorandum AccountsContingent Liabilities.............................................................................................................. 1,286,837Of which:1. Acceptances and Commitments from Endorsement of Rediscounted Effects................ 02. Bonds and Collateral....................................................................................................... 0Commitments .......................................................................................................................... 258,228Of which:1. Sales with Repurchase Agreement.................................................................................. 0111112Total......................................................................................................................................... 1,545,065111112F-14

Income Statement31 December2003111112EurDebitInterest and equivalent costs.................................................................................................... 16,210,250Commissions............................................................................................................................ 0Losses on financial operations ................................................................................................ 109,804Administrative overheads........................................................................................................ 4,0591. Personnel costs ............................................................................................................... 02. Other administrative expense ......................................................................................... 4,059Depreciation in the period ....................................................................................................... 0Other operating costs............................................................................................................... 0Provisions for outstanding credit and other risks.................................................................... 199,258Provision for financial fixed assets ......................................................................................... 0Extraordinary losses ................................................................................................................ 116,989Corporate Tax .......................................................................................................................... 0Other taxes............................................................................................................................... 31,982Profit for the period ................................................................................................................. 2,713,542111112Total ......................................................................................................................................... 19,385,884111112CreditInterest and equivalent earnings .............................................................................................. 18,619,699Earnings from securities.......................................................................................................... 0Commissions............................................................................................................................ 323,982Profits on financial operations................................................................................................. 279,840Adjustments to credits and provisions for contingent liabilities and commitments............... 137,898Adjustments to securities with the character of financial fixed assets to capital holdingsand shares in related companies .......................................................................................... 0Other operating income ........................................................................................................... 24,466Result from ordinary operations.............................................................................................. 0Extraordinary gains.................................................................................................................. 0Loss for the period................................................................................................................... 0111112Total ......................................................................................................................................... 19,385,884111112F-15

Balance SheetBANIF MADEIRAFINANCIAL STATEMENTS AS AT 30 JUNE 200430 June 200411123111231111211211112Prov. andGross Dep. Net111112 111112 111112AssetsCash and funds with Central Banks .................................. 0 0Sight deposits with Banks ................................................. 0 0 0Other loans and advances to Banks................................... 535,857,294 0 535,857,294Loans and advances to Clients .......................................... 20,113,053 115,769 19,997,284Bonds and other fixed yield securities .............................. 13,587,595 13,587,595(a) Public....................................................................... 0 0 0(b) Other........................................................................ 13,587,595 0 13,587,595Shares and other variable yield securities ......................... 20,299,069 0 20,299,069Shares and investments...................................................... 0 0 0Shares in related companies .............................................. 0 0 0Intangible fixed assets ....................................................... 0 0 0Tangible fixed assets.......................................................... 0 0 0(Of which: property)...................................................... 0 0 0Unrealized Share Capital................................................... 0 0 0Own shares ........................................................................ 0 0Other assets........................................................................ 2,634,985 0 2,634,985Accruals and deferrals ....................................................... 991,950 991,950Loss for the period............................................................. 194,900111112 111112194,900111112Total ................................................................................... 593,678,846 115,769 593,563,076111112 111112 111112111112 111112 111112F-16

30 June2004111112EurLiabilities and Shareholders’ FundsDeposits by Banks................................................................................................................... 41,513(a) Sight .............................................................................................................................. 41,397(b) Term or prior notice...................................................................................................... 116Client accounts ........................................................................................................................ 571,538,589(a) Savings accounts........................................................................................................... 0(b) Sight debit..................................................................................................................... 40,135,637(c) Term debit ..................................................................................................................... 531,402,953Debts represented by securities............................................................................................... 14,515,101(a) Bonds in circulation...................................................................................................... 12,340,601(b) Others............................................................................................................................ 2,174,500Other Liabilities....................................................................................................................... 1,225Accruals and deferrals............................................................................................................. 2,254,928Provision for risks and charges ............................................................................................... 144,789(a) Provisions for pensions and other charges ................................................................... 0(b) Other provisions ........................................................................................................... 144,789Fund for general banking risks ............................................................................................... 0Subordinated liabilities............................................................................................................ 0Paid up share capital ............................................................................................................... 0Issue premiums........................................................................................................................ 0Reserves................................................................................................................................... 5,066,931Revaluation Reserves .............................................................................................................. 0Profit and loss account brought forward................................................................................. 0Profit for the period................................................................................................................. 0111112Total......................................................................................................................................... 593,563,07611111230 June2004111112EurMemorandum AccountsContingent Liabilities.............................................................................................................. 4,598,216Of which:1. Acceptances and Commitments from Endorsement of Rediscounted Effects................ 02. Bonds and Collateral....................................................................................................... 2,975,582Commitments .......................................................................................................................... 258,228Of which:1. Sales with repurchase option .......................................................................................... 258,228111112Total......................................................................................................................................... 4,856,444111112F-17

Income Statement30 June2004111112EurDebitInterest and equivalent costs.................................................................................................... 5,426,938Commissions............................................................................................................................ 28Losses on financial operations ................................................................................................ 2,495Administrative expense ........................................................................................................... 2,073a) Personnel costs ............................................................................................................... 0b) Other Administrative overheads..................................................................................... 2,073Depreciation............................................................................................................................. 0Other Operating Costs ............................................................................................................. 338Provisions for outstanding credit and other risks.................................................................... 173,065Provisions for Financial Fixed Assets ..................................................................................... 0Result from ordinary Operations............................................................................................. 0Extraordinary Losses ............................................................................................................... 803,594Corporate Tax .......................................................................................................................... 0Other Taxes.............................................................................................................................. 15,991Profit for the period ................................................................................................................. 0111112Total ......................................................................................................................................... 6,424,522111112CreditInterest and equivalent earnings .............................................................................................. 5,731,759Earnings from securities.......................................................................................................... 0Commissions............................................................................................................................ 196,083Profits on financial operations................................................................................................. 117,492Adjustments to Credits and Provisions for Contingent Liabilities and Commitments........... 173,180Adjustments to securities with the character of financial fixed assets, to capital holdingsand shares in related companies .......................................................................................... 0Other operating income ........................................................................................................... 10,643Result from ordinary operations.............................................................................................. 0Extraordinary Gains................................................................................................................. 465Loss for the period................................................................................................................... 194,900111112Total ......................................................................................................................................... 6,424,522111112F-18

Balance SheetBANIF FINANCEFINANCIAL STATEMENTS FOR YEAR ENDED 31 DECEMBER 200331 December 200311123111231111211211112Prov. andGross111112Dep.111112Net111112EurAssetsCash and funds with Central Banks .................................. 0 0 0Sight deposits with Banks ................................................. 32,025,728 0 32,025,728Other loans and advances to Banks................................... 192,200,000 0 192,200,000Loans and advances to Clients .......................................... 0 0 0Bonds and other fixed yield securities .............................. 0 0 0(a) Public....................................................................... 0 0 0(b) Other........................................................................ 0 0 0(c) Own securities......................................................... 0 0 0Shares and other variable yield securities ......................... 0 0 0Shares and investments......................................................Shares in related companies ..............................................Intangible fixed assets ....................................................... 0 0 0Tangible fixed assets.......................................................... 0 0 0(Of which: property)...................................................... 0 0 0Unrealized Share Capital...................................................Own shares ........................................................................Other assets........................................................................ 0 0 0Accruals and deferrals ....................................................... 1,295,525 0 1,295,525Loss for the period............................................................. 45,539111112011111245,539111112Total ................................................................................... 225,566,792 0 225,566,792111112 111112 111112111112 111112 111112F-19

31 December2003111112EurLiabilities and Shareholders’ FundsDeposits by Banks................................................................................................................... 0(a) Sight .............................................................................................................................. 0(b) Term or prior notice...................................................................................................... 0Client accounts ........................................................................................................................ 0(a) Savings accounts........................................................................................................... 0(b) Sight debit..................................................................................................................... 0(c) Term debit ..................................................................................................................... 0Debts represented by securities............................................................................................... 200,000,000(a) Bonds in circulation...................................................................................................... 200,000,000(b) Others............................................................................................................................ 0Other Liabilities....................................................................................................................... 0Accruals and deferrals............................................................................................................. 566,000Provision for risks and charges ............................................................................................... 0(a) Provision for pensions and other charges..................................................................... 0(b) Other provisions ........................................................................................................... 0Fund for general banking risks ............................................................................................... 0Subordinated liabilities............................................................................................................ 0Paid up share capital ............................................................................................................... 5,792Issue premiums........................................................................................................................ 24,995,000Reserves................................................................................................................................... 0Revaluation Reserves .............................................................................................................. 0Profit and loss account brought forward................................................................................. 0Profit for the period................................................................................................................. 0111112Total......................................................................................................................................... 225,566,79211111231 December2003111112EurMemorandum AccountsContingent Liabilities.............................................................................................................. 0Of which:1. Acceptances and Commitments from Endorsement of Rediscounted Effects................ 02. Bonds and Collateral....................................................................................................... 0Commitments .......................................................................................................................... 0Of which:1. Sales with repurchase option .......................................................................................... 0111112Total......................................................................................................................................... 0111112F-20

Income Statement31 December2003111112EurDebitInterest and equivalent costs.................................................................................................... 593,481Commissions............................................................................................................................ 0Losses on financial operations ................................................................................................ 0Administrative overheads........................................................................................................ 28,6581. Personnel costs ............................................................................................................... 02. Other administrative overheads...................................................................................... 28,658Depreciation in the period ....................................................................................................... 0Other operating costs............................................................................................................... 0Provisions for outstanding credit and other risks.................................................................... 0Provision for financial fixed assets ......................................................................................... 0Extraordinary losses ................................................................................................................ 0Corporate tax ........................................................................................................................... 0Other taxes............................................................................................................................... 0Profit for the period ................................................................................................................. 0111112Total ......................................................................................................................................... 622,139111112CreditInterest and equivalent earnings .............................................................................................. 576,600Earnings from securities.......................................................................................................... 0Commissions............................................................................................................................ 0Profits on financial operations................................................................................................. 0Adjustments to credits and provisions for contingent liabilities and commitments............... 0Adjustments to securities with the character of financial fixed assets, to capital holdingsand shares in related companies .......................................................................................... 0Other operating income ........................................................................................................... 0Results from ordinary operations ............................................................................................ 0Extraordinary gains.................................................................................................................. 0Loss for the period................................................................................................................... 45,539111112Total ......................................................................................................................................... 622,139111112F-21

BANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A. – AUDITOR’S REPORT ASAT 31 DECEMBER 2003LEGAL ACCOUNTS CERTIFICATE AND AUDIT REPORT(INDIVIDUAL ACCOUNTS)Introduction1. Under the terms of the relevant legislation, we are pleased to present the Legal Accounts Certificateand the Audit Report on the Management Report and Financial Statements attached for the financialyear ended 31 December 2003 of Banif – Banco Internacional do Funchal, SA, which comprise: theBalance Sheet as at 31 December 2003 (which records a total of 4,126,690 thousand euros and totalshareholders’ funds of 268,286 thousand euros, including a net profit of 23,190 thousand euros), theIncome Statements (by nature and by function), the statement of cash flows for the financial year thenended, and the corresponding notes to the financial statements.Responsibilities2. It is the responsibility of the Directors of the Bank to:2.1. prepare the financial statements for the financial year which give a true and fair view of thefinancial position of the Bank, the result of its operations and cash flows;2.2. to provide historic financial information, which shall be prepared in accordance with generallyaccepted accounting principles and which is complete, true, current, clear, objective and lawful,as required by the Securities Code;2.3. adopt appropriate accounting policies and criteria;2.4. maintain an appropriate system of internal control; and2.5. report on any relevant occurrence which has influenced the Bank’s activities, its state of affairsor results.3. It is our responsibility to check the financial information given in the financial statements referred toabove, and to ensure that it is complete, true, current, clear, objective and lawful, as required by theSecurities Code, and to express a professional and independent opinion on such information, on thebasis of our audit.Scope4. Our audit was performed in accordance with the Rules and Recommendations of the Chamber ofOfficial Auditors, which require that the audit be planned and performed in such a way as to give areasonable assurance that the consolidated financial statements are free from, or that they are not freefrom, material misstatement. To this end our audit included:– checking, on a test basis, of evidence relevant to the amounts and disclosures in the financialstatements and an assessment of estimates, based on judgements and criteria defined by therespective directors, used in preparing the financial statements;– an assessment of the suitability of the accounting policies adopted and disclosure of thesepolicies, taking the circumstances into account;– checking whether or not the going concern principle is applicable;– an assessment of the overall adequacy of the presentation of information in the consolidatedfinancial statements; andF-22

– an assessment of whether the consolidated financial information is complete, true, current,clear, objective and lawful.5. Our audit also included checking that the financial information contained in the management reportcorresponds to the other financial statements.6. We believe that our audit gives us a reasonable basis on which to issue our opinion.Opinion7. In our opinion, the financial information contained in the documents referred to above gives a trueand fair view, in all materially relevant aspects, of the state of affairs of Banif – Banco Internacionaldo Funchal, SA as at 31 December 2003 and the result of their operations and cash flows in thefinancial year then ended, in keeping with accounting principles generally accepted in Portugal for thebanking sector, and that the information which they contain is complete, true, current, clear, objectiveand lawful.Remarks8. Without prejudice to our opinion as stated in the preceding paragraph, we wish to draw attention tothe following points:8.1. The Legal Accounts Certificate and the Audit Report for the financial statements for 2002contained a reservation due to insufficiency of the provision for other risks and charges, in viewof the liabilities deriving from irregularities at a Bank branch which came to light after theclose of the accounts. As stated in Note 51 f) of the Notes to the Accounts, the losses incurredas a result of these irregularities were written off in full under Extraordinary Losses in theIncome Statement, meaning that this reserve is no longer applicable.8.2. As stated in the Introductory Note to the Notes to the Financial Statements, in view of thereorganisation of the Banif Group, which took place in the first half of 2002, the figures statedin the financial statements as at 31 December 2003 are not comparable with those for 2002. Apro-forma column is therefore included in the financial statements, containing figures forbanking business carried on under the Banif brand during the financial year of 2002.Lisbon, 10 March 2004Ernst & Young Audit & Associados – SROC, SARegistered with the Stock Market Board under no. 9011Represented by:Alfredo Guilherme da Silva GândaraF-23

BANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A.REPORT AND OPINION OF THE AUDIT BOARDShareholders1. In compliance with provisions of paragraph g) of article 420 of the Companies Code, the Audit Boardhas drawn up this report on its auditing work during 2003 and gives its opinion under the terms of thesaid law on the report, accounts and proposals submitted by the Directors.2. During the financial year the Bank celebrated the fifteenth anniversary of its launch, and thislandmark was the occasion for various commemorations, and also for reflection on the continuousgrowth which the Bank has steadily and firmly consolidated over this period.3. In keeping with the policy established in previous years, the Audit Board has continued to concentrateon supervising the Bank’s operations on a direct and permanent basis, maintaining frequent contactwith the Directors and the Bank’s staff. Contact with the Directors has been maintained throughrepresentation of this board at the meetings of the Directors and the Executive Board. We would likeonce again to point out that the members of these board have been ready at all times to provide uswith any information required and to consider any suggestions we have to make. Contact with theBank’s staff has been maintained through dialogue with the relevant managers, in order to gain suchinformation and explanations were felt necessary for the exercise of the Audit Board’s responsibilities.Special mention should be made of the relationship with the Audit and Inspection Department. Wehave also been in permanent contact with the external auditors and the chartered accountants, and thisdialogue has been essential for some of the fundamental aspects of our audit duties.4. The Directors’ Report gives a detailed account of the Bank’s affairs during the financial year of 2003.We shall here draw attention to what we regard as some of the most significant developments.5. First of all, we should refer in particular to the rating obtained by the Bank, which has allowed it togain greater visibility internationally, as well as enabling it to gain credit facilities abroad, which is ahighly positive development.6. Further progress has been made in the field of exploiting the potential of cross selling, in terms ofbuilding both customer loyalty and profitability. We believe it is very important that this policy shouldcontinue to be implemented gradually, as one of the prime objectives of the directors. It should benoted that a major contribution to success in his area has been made by a diversification of the rangeof financial products, which is important for increasing cross selling of Group company products. Weshould also mention the development of relation with other companies, notably the partnershiprecently established with Banco Cetelem and the progressive expansion of the business of the AgencyChannels.7. The increase in lending has been very significant, especially in Madeira, not least because thisincrease is concentrated in lending for investment. Equally significant has been the gradual growth inthe Client base, allowing the Bank to expand with steady commitment and on a secure footing.8. The Audit Board has continued to monitor closely the evolution of outstanding credit, recoverability,collection and the corresponding policy for provisions. Gradual progress has been made in thereduction in outstanding credit as a proportion of total lending. In addition to its concern for theprovisions for overdue credit, the Audit Board has paid careful attention to the problems of creatingother provisions, taking into account the rigour now required and compliance with the Bank ofPortugal rules in this field. Special attention has also been given to analysis and monitoring of accrualand deferral accounts, which at present provide no cause for concern.9. We have followed with great interest the measures taken to improve control of business risks,particularly in relation to the new requirements of the Basle Agreement, which will shortly come intoforce. Additional work has been conducted in this connection, in order to improve not only the lendingF-24

policy, but also the monitoring of existing lending. Special attention is also being paid to control ofoperating risks.10. Further improvements have also been made to make the internal control system more rigorous, andmajor progress was made, although much remains to be done in order to achieve the highest standards.The Bank of Portugal has introduced new rules on internal control, and these will have to be dulycomplied with. This is what the Bank has sought to do, in this case with collaboration between theAudit Board and the auditors, given that there is always room for significant improvements in thisarea. This has therefore been one of the Audit Board’s concerns.11. The Audit Board also monitored the work of the Audit and Inspection Division, which has producedvery interesting reports, on the activities of the different Business Units (Branches and BusinessCentres) and on the Bank’s Central Services, as well as on the development of internal control. Thishas permitted a clearer assessment of both the progress made and areas where adjustments are neededin order to improve efficiency and to eliminate weak points in service provision. Analysis of thesereports and the follow up to this have been of great value.12. The Audit Board has examined the Report of the OfficialAuditors and the Legal Accounts Certificate,and we hereby declare our agreement with the same, for the purposes of no.2 of article 453 of theCompanies Code.13. In conclusion, the Audit Board recommends that the General Meeting:13.1. Approves the Directors’ Report for the Financial Year ended on 31 December 2003.13.2. Approves the Accounts for the same financial year.13.3. Approves the proposal for the Distribution of Profits contained in the Directors’ Report, whichaccords with the relevant legal requirements (article 97, para. 1 of the General Regulations forCredit Institutions and Finance Companies).13.4. Under the terms of article 455 of the Companies Code, assesses the work of the Bank’sDirectors and the Audit Board.13.5. Issues a vote of thanks to the Directors and the Executive Board for their sterling work inmanaging the affairs of the Bank in 2003.13.6. Expresses its appreciation to the employees of the Bank, for the help they have given thecompany boards in the exercise of their duties.Lisbon, 10 March 2004Dr. Carlos Alberto Rosa (Presidente) (Chairman)Ernst & Young Audit & Associados – Sociedadede Revisores Oficiais de Contas, representada por / represented byDr. Alfredo Guilherme da Silva Gândara (ROC)Dr. José Luís Pereira de MacedoF-25

BANIF SGPS, S.A. – AUDITOR’S REPORT AS AT 31 DECEMBER 2003LEGAL ACCOUNTS CERTIFICATE AND EXTERNAL AUDITOR’S REPORT(CONSOLIDATED ACCOUNTS)Introduction1. Under the terms of the relevant legislation, we are pleased to present the Legal Accounts Certificateand the External Auditor's Report on the Management Report and Consolidated Financial Statementsattached for the financial year ended 31 December 2003 of Banif SGPS, SA, which comprise: theBalance Sheet as at 31 December 2003 (which records a total of 5,711,558 thousand euros and totalshareholders' funds of 345,746 thousand euros, including a net profit of 25,358 thousand euros), theConsolidated Income Statement (by nature and by function), the consolidated statement of cash flowsfor the financial year then ended, and the corresponding notes to the financial statements.Responsibilities2. It is the responsibility of the Directors of the Bank to:2.1. prepare the consolidated financial statements for the financial year which give a true and fairview of the financial position of the group of companies included in the consolidated accounts,the consolidated result of their operations and consolidated cash flows;2.2. to provide historic financial information, which shall be prepared in accordance with generallyaccepted accounting principles and which is complete, true, current, clear, objective and lawful,as required by the Securities Code;2.3. adopt appropriate accounting policies and criteria;2.4. maintain an appropriate system of internal control; and2.5. report on any relevant occurrence which has influenced the activities of the group of companiesincluded in the consolidated accounts, their state of affairs or results.3. It is our responsibility to check the financial information given in the financial statements referred toabove, and to ensure that it is complete, true, current, clear, objective and lawful, as required by theSecurities Code, and to express a professional and independent opinion on such information, on thebasis of our audit.Scope4. Our audit was performed in accordance with the Rules and Recommendations of the Chamber ofOfficial Auditors, and, on a supplementary basis, with International Audit Standards, which requirethat the audit be planned and performed in such a way as to give a reasonable assurance that theconsolidated financial statements are free from, or that they are not free from, material misstatement.To this end our audit included:4.1. checking that the financial statements of the companies included in the consolidated accountshave been correctly audited and, in significant instances where this is not the case examination,on a test basis, of evidence relevant to the amounts and disclosures in the financial statementsand an assessment of estimates, based on judgements and criteria defined by the respectivedirectors, used in preparing the financial statements;4.2. an examination of consolidation operations and the application of the equity method;4.3. an assessment of the suitability of the accounting policies adopted and disclosure of thesepolicies, taking the circumstances into account;F-26

4.4. checking whether or not the going concern principle is applicable;4.5. an assessment of the overall adequacy of the presentation of information in the consolidatedfinancial statements; and4.6. an assessment of whether the consolidated financial information is complete, true, current,clear, objective and lawful.5. Our audit also included checking that the financial information contained in the consolidatedmanagement report corresponding to the other financial statements.6. We believe that our audit gives us a reasonable basis on which to issue our opinion.Opinion7. In our opinion, the financial information contained in the documents referred to above gives a trueand fair view, in all materially relevant aspects, of the state of affairs of the companies included in theconsolidated accounts of Banif SGPS, SA as at 31 December 2003 and the consolidated result of theiroperations and consolidated cash flows in the financial year then ended, in keeping with accountingprinciples generally accepted in Portugal, and that the information which they contain is complete,true, current, clear, objective and lawful.Remarks8. Without affecting our opinion as stated in the preceding paragraph, we wish to draw attention to thefollowing:8.1. The Legal Accounts Certificate and Audit Report for the consolidated accounts for 2002contained a reservation regarding the shortfall in provisions for other risks and charges inrelation to liabilities deriving from irregularities at a branch of Banif – Banco Internacional doFunchal, SA, detected after the close of the accounts. As stated in § 17 c) of the Notes to theFinancial Statements, the losses incurred as a result of such irregularities are recorded in fullin the financial statements for 2003, in the Income Statement account for Extraordinary Losses,meaning that such reservation is no longer applicableLisbon, 10 March 2004Ernst & Young Audit & Associados – SROC, SARegistered with the Stock Market Board under no. 9011Represented by:Alfredo Guilherme da Silva GândaraF-27

BANIF SGPS, S.A.LEGAL ACCOUNTS CERTIFICATE AND EXTERNAL AUDITOR’S REPORT(INDIVIDUAL ACCOUNTS)Introduction1. Under the terms of the relevant legislation, we are pleased to present the Legal Accounts Certificateand the External Auditor’s Report on the Management Report and Financial Statements attached forthe financial year ended 31 December 2003 of Banif SGPS, SA, which comprise the Balance Sheetas at 31 December 2003 (which records a total of 426,098 thousand euros and total shareholders’funds of 283,999 thousand euros, including a net result of 12,443 thousand euros), the IncomeStatement (by nature and by function) the statement of cash flows, and the corresponding notes to thefinancial statements.Responsibilities2. It is the responsibility of the Directors to:2.1. prepare the management report and the financial statements for the financial year which give atrue and fair view of the financial position of the Bank, the result of its operations and cashflows;2.2. to provide historic financial information, which shall be prepared in accordance with generallyaccepted accounting principles and which is complete, true, current, clear, objective and lawful,as required by the Securities Code;2.3. adopt appropriate accounting policies and criteria;2.4. maintain an appropriate system of internal control; and2.5. report any relevant occurrence which has influenced the company’s activities, state of affairsor results.3. It is our responsibility to check the financial information given in the financial statements referred toabove, and to ensure that it is complete, true, current, clear, objective and lawful, as required by theSecurities Code, and to express a professional and independent opinion on such information, on thebasis of our audit.Scope4. Our audit was performed in accordance with the Rules and Recommendations of the Chamber ofOfficial Auditors, and, on a supplementary basis, with International Audit Standards, which requirethat the audit be planned and performed in such a way as to give a reasonable assurance that thefinancial statements are free from, or that they are not free from, material misstatement. To this endour audit included:4.1. examination, on a test basis, of the evidence relevant to the amounts and disclosures in thefinancial statements and an assessment of estimates, based on judgements and criteria definedby the Directors, used in preparing the financial statements;4.2. an assessment of the suitability of the accounting policies adopted and disclosure of thesepolicies, taking the circumstances into account;4.3. an assessment of whether or not the going concern principle is applicable;4.4. an assessment of the overall adequacy of the presentation of information in the financialstatements; andF-28

4.5. an assessment of whether the financial information is complete, true, current, clear, objectiveand lawful.5. Our audit also included checking to ensure that the financial information contained managementreport corresponds to that in the other financial statements.6. We believe that our audit gives us a reasonable basis on which to issue our opinion.Opinion7. In our opinion, the financial information contained in the documents referred to above give a true andfair view, in all materially relevant aspects, of the state of affairs of Banif SGPS, SA as at 31December 2003 and the result of its operations and cash flows in the financial year then ended, inkeeping with accounting principles generally accepted in Portugal, and the information containedthem is complete, true, current, clear, objective and lawful.Remarks8. Without affecting our opinion as stated in the preceding paragraph, we wish to draw attention to thefollowing:8.1. As indicated in § 51 e) of the Notes to the Financial Statements, in the financial year of 2003the Company recognised a sum of 1,677.6 thousand Euros in the Income Statement accountEarnings from securities, against the Balance Sheet account Other Assets, relating to part of theresults for 2003 recorded by the (wholly owned) subsidiary Banif Seguros, SGPS, SA,proposed for distribution in the respective Directors’ Report, dated 17 February 2004. On 5March 2004, the Bank of Portugal issued Circular 18/04/DSBDR giving notice that it will notlift its objections to this procedure.8.2. As indicated in the Introductory Note to the Notes to the Financial Statements (individualaccounts), in view of the reorganisation of the Banif Group, in the 1st half of 2002, the figuresstated in the financial statements as at 31 December 2003 are not comparable with those for2002. A separate pro-forma column is therefore included in the financial statements, indicatingthe figures for holding company business carried on in the previous year, which are comparablewith the figures for 2003.Lisbon, 10 March 2004Ernst & Young Audit & Associados – SROC, SARegistered with the Stock Market Board under no. 9011Represented by:Alfredo Guilherme da Silva GândaraF-29

BANIF SGPS, S.A.REPORT AND OPINION OF THE AUDIT BOARDShareholders,1. In compliance with provisions of paragraph g) of article 420 of the Companies Code, the SupervisoryBoard has drawn up this report on its auditing work during 2003 and to give its opinion under theterms of the said law on the report, accounts and proposals submitted by the Directors.2. The Audit Board has maintained, as is its custom, a constant dialogue with the auditors and the officialaudit firm, as this is essential for many aspects of its supervisory duties.3. The Directors’ Report provides a detailed account of the operations of the different Group companiesover the course of 2003. It should be noted that, in relation to the operations and accounts of each ofthese companies, the respective audit board and sole auditors have drawn up their opinions andreports, meaning that no further comment is required here. We shall merely refer here, in view of itsimportance, to the fact that Banif – Banco Internacional do Funchal, SA has obtained an internationalrating.4. We should however not omit to mention that progress has been made on the highly necessary anddesirable implementation of cross selling, and the progressive internationalization of the Group.5. We feel we should also mention a number of operations in 2003 which were of considerable relevanceto the Company and the Group, in terms of consolidating and reorganising the Group as a whole:5.1. the takeover bid for shares in Banif SGPS, SA, launched by Rentipar SGPS, SA, the mainshareholders in the company, which now directly holds 54.14% of the capital, and a total of66.67% when its direct and indirect holdings are considered;5.2. the 5th phase of privatisation of Banco Comercial dos Açores, which led to the sale, through apublic offering, of 15% of the share capital in the Company held by the Autonomous Regionof the Azores, meaning that the Bank is now 100% private;5.3. the takeover bid in December for shares in Banco Comercial dos Açores, SA by BanifComercial SGPS, SA, which now holds 99.57% of its share capital, given that a block of shareswas also acquired outside the context of the takeover bid;5.4. the sale by Banif SGPS, SA to Banif Investimentos SGPS, SA of 15.2% of the share capital ofBanif Comercial SGPS, SA;5.5. the increases in the share capital of Banif – Banco Internacional do Funchal (Cayman), Ltd andBanif Finance, Ltd;5.6. bond issues by Banif SGPS, SA, with a view to restructuring its borrowing;5.7. the granting of a shareholder loan by Banif SGPS, SA to Banif Imobiliária, SA, to allow thelatter to acquire the business premises belonging to Banco Internacional do Funchal and BancoComercial dos Açores.6. Having stressed these points, we do not feel that any additional comments are needed, on either theindividual or the consolidated accounts.7. The Audit Board has assessed the Report of the Official Audit Firm and the respective LegalCertificate issued by such firm, and hereby declares its agreement with this, for the purposes of para.2 of article 453 of the Companies Code.8. The Audit Board has examined the company’s consolidated accounts, as at 31 December 2003, andassessed the conformity of these accounts with the consolidated management report – article 508 D,para. 1, of the Companies Code.F-30

9. In conclusion, the Audit Board recommends that the General Meeting:9.1. Approves the Directors’ Report for the Financial Year ended on 31 December 2003;9.2. Approves the Accounts for the same financial year;9.3. Approves the proposal for the Distribution of Profits contained in the Directors’ Report, whichaccords with the relevant legal requirements;9.4. Approves the Bank’s Consolidated Management Report and the Consolidated Accounts for thesame financial year;9.5. Under the terms of article 455 of the Companies Code, assesses the work of the Bank’sDirectors and the Supervisory Board;9.6. Issues a vote of thanks to the Directors and the Executive Board for their sterling work inmanaging the affairs of the Bank in 2003.Lisbon, 10 March 2004Dr. Carlos Alberto Rosa (Presidente) (Chairman)Ernst & Young Audit & Associados – Sociedadede Revisores Oficiais de Contas, representada por / represented byDr. Alfredo Guilherme da Silva Gândara (ROC)Dr. José Luís Pereira de MacedoF-31

LIMITED REVISION REPORT MADE BY AN AUDITOR REGISTERED AT THE CMVM ONHALF -YEARLY CONSOLIDATED INFORMATION AS AT 30 JUNE 2004INTRODUCTION1. Pursuant to article 246 of the Portuguese Securities Code (“Código dos Valores Mobiliários”), wepresent our Limited Review Report on BANIF -SGPS S.A.’s consolidated information for the sixmonth period ended on 30 June 2004 included in: the Management Report, the consolidated BalanceSheet (which shows a total of 5,824,464 thousand euros and total equity of 330,288 thousand euros,including a net profit of 15,288 thousand euros) and the Consolidated account statements by natureand function, the Consolidated cash flow statement for the six month period ending on that date, andthe corresponding Annex.2. The figures in the financial statements, as well as those in the additional consolidated financialinformation, are the ones reported in the accounts of the Company and its Subsidiaries.RESPONSIBILITIES3. The following are the responsibility of the Company’s Board of Directors: (i) the preparation ofconsolidated financial information which gives a true and fair view of the state of affairs of the groupof companies included in the consolidation and of the consolidated result of its operations; (ii) thehistorical financial information, prepared in accordance with the accounting principles generallyaccepted in Portugal for the banking sector and which is complete, true, up-to-date, clear, objective,and lawful pursuant to the Portuguese Securities Code (“Código dos Valores Mobiliários”); (iii) theadoption of appropriate accounting policies and criteria; (iv) the maintenance of a proper internalcontrol system; and (v) the provision of information concerning any relevant fact which influenced itsactivity, financial situation or results.4. Our responsibility is to verify the financial information included in the documents referred to above,particularly whether it is complete, true, up-to-date, clear, objective, lawful and in compliance withthe requirements of the Portuguese Securities Code (“Código dos Valores Mobiliários”), being it ourduty to issue a professional and independent report based on our work.SCOPE5. The purpose of the work we carried out was to obtain a reasonable assurance that the financialinformation previously mentioned is free from material misstatements. Our work was based on theTechnical Rules and Revision/Auditing Guidelines (Normas Técnicas e Directrizes de Revisão/Auditoria) issued by the Official Chartered Accountant Bar (Ordem dos Revisores Oficiais deContas), planned in accordance with the purpose described above, and consisted mainly of enquiriesand analytical procedures intended to examine: (i) the trueness of the statements included in thefinancial information; (ii) the adequacy of the accounting policies adopted, considering thecircumstances and consistency of their application; (iii) the application, or not, of the continuityprinciple; (iv) the presentation of the financial information; and (iv) whether the financial informationis complete, true, up-to-date, clear, objective and lawful.6. Our work also included examination of the accordance between the consolidated financialinformation included in the Management Report and the other documents previously mentioned.7. It is our understanding that the work carried out offers an acceptable basis on which to issue thepresent report on the half-yearly information.OPINION8. Based on the work performed, which was executed with the purpose of obtaining a reasonableassurance, nothing came to our knowledge that would make us conclude that BANIF -SGPS S.A.’sF-32

consolidated financial information for the six month period ended on 30 June 2004 is not free frommaterial misstatements that could affect its compliance with the accounting principles generallyaccepted in Portugal for the banking sector or that it is not complete, true, up-to-date, clear, objective,and lawful.Lisbon, 24 September 2004ERNST & YOUNG AUDIT & ASSOCIADOS – SROC, S.A.Registered under number 9011 in CMVM’s Auditors RegisterRepresented by:Alfredo Guilherme da Silva GândaraF-33

LIMITED REVISION REPORT MADE BY AN AUDITOR REGISTERED AT THE CMVM ONHALF -YEARLY INDIVIDUAL INFORMATION AS AT 30 JUNE 2004INTRODUCTION1. Pursuant to article 246 of the Portuguese Securities Code (“Código dos Valores Mobiliários”), wepresent our Limited Review Report on BANIF -SGPS S.A.’s information for the six month periodended on 30 June 2004 included in: the Management Report, the Balance Sheet (which shows a totalof 421,599 thousand euros and total equity of 278,386 thousand euros, including a net profit of 4,388thousand euros) and the account statements by nature and function, the cash flow statement for the sixmonth period ending on that date, and the corresponding Annex.2. The figures in the financial statements, as well as those in the additional financial information, are theones reported in the accounts of the Company.RESPONSIBILITIES3. The following are the responsibility of the Company’s Board of Directors: (i) the historical financialinformation, prepared in accordance with the accounting principles generally accepted in Portugal forthe banking sector and which is complete, true, up-to-date, clear, objective, and lawful pursuant to thePortuguese Securities Code (“Código dos Valores Mobiliários”); (ii) the adoption of appropriateaccounting policies and criteria; (iii) the maintenance of a proper internal control system; and (iv) theprovision of information concerning any relevant fact which influenced its activity, financial situationor results.4. Our responsibility is to verify the financial information included in the documents referred to above,particularly whether it is complete, true, up-to-date, clear, objective, lawful and in compliance withthe requirements of the Portuguese Securities Code (“Código dos Valores Mobiliários”), being it ourduty to issue a professional and independent report based on our work.SCOPE5. The purpose of the work we carried out was to obtain a reasonable assurance that the financialinformation previously mentioned is free from material misstatements. Our work was based on theTechnical Rules and Revision/Auditing Guidelines (Normas Técnicas e Directrizes de Revisão/Auditoria) issued by the Official Chartered Accountant Bar (Ordem dos Revisores Oficiais deContas), planned in accordance with the purpose described above, and consisted mainly of enquiriesand analytical procedures intended to examine: (i) the trueness of the statements included in thefinancial information; (ii) the adequacy of the accounting policies adopted, considering thecircumstances and consistency of their application; (iii) the application, or not, of the continuityprinciple; (iv) the presentation of the financial information; and (iv) whether the financial informationis complete, true, up-to-date, clear, objective and lawful.6. Our work also included examination of the accordance between the consolidated financialinformation included in the Management Report and the other documents previously mentioned.7. It is our understanding that the work carried out offers an acceptable basis on which to issue thepresent report on the half-yearly information.F-34

OPINION8. Based on the work performed, which was executed with the purpose of obtaining a reasonableassurance, nothing came to our knowledge that would make us conclude that BANIF -SGPS S.A.’sfinancial information for the six month period ended on 30 June 2004 is not free from materialmisstatements that could affect its compliance with the accounting principles generally accepted inPortugal for the banking sector or that it is not complete, true, up-to-date, clear, objective, and lawful.Lisbon, 24 September 2004ERNST & YOUNG AUDIT & ASSOCIADOS -SROC, S.A.Registered under number 9011 in CMVM’s Auditors RegisterRepresented by:Alfredo Guilherme da Silva GândaraF-35

REGISTERED OFFICE OF THE ISSUERSBanif – Banco Internacional do Funchal, S.A.Banif Finance, Ltd.Rua de João Tavira, no. 30M&C Corporate Services Limited9004-509 Funchal PO Box 309G.T.PortugalUgland HouseSouth Church StreetGeorge TownGrand CaymanCayman IslandsBanif – Banco Internacional do Funchal, S.A.,Sucursal Financeira ExteriorRua de João Tavira, no. 309004-509 FunchalPortugalREGISTERED OFFICE OF THE GUARANTORBanif – Banco Internacional do Funchal, S.A., Sucursal Financeira ExteriorRua de João Tavira, no. 309004-509 FunchalPortugalARRANGERSBanif – Banco de Investimento, S.A.Rua Tierno Galvan, Torre 3-14 piso1070-274 LisboaPortugalCaixa – Banco de Investimento, S.A.Rua Barata Salgueiro, no 331269-057 LisboaPortugalCitigroup Global Markets LimitedCitigroup CentreCanada SquareCanary WharfLondon E14 5LBEnglandDEALERSBanif – Banco de Investimento, S.A.Barclays Bank PLCRua Tierno Galvan, Torre 3-14 piso5 The North Colonnade1070-274 Lisboa Canary WharfPortugalLondon E14 4BBEnglandBNP ParibasCaixa – Banco de Investimento, S.A.10 Harewood Avenue Rua Barata Salgueiro, no 33London NW1 6AA1269-057 LisboaEnglandPortugalCitigroup Global Markets LimitedCitigroup CentreCanada SquareCanary WharfLondon E14 5LBEnglandCredit Suisse First Boston (Europe) LimitedOne Cabot SquareCanary WharfLondon E14 4QJEngland

Deutsche Bank AG LondonJ.P.Morgan Securities Ltd.Winchester House125 London Wall1 Great Winchester Street London EC2Y 5AJLondon EC2N 2DBEnglandEnglandMerrill Lynch InternationalMerrill Lynch Financial Centre2 King Edward StreetLondon EC1A 1HQEnglandPRINCIPAL PAYING AGENTCitibank, N.A.5 Carmelite StreetLondon EC4Y 0PAEnglandPAYING AND LUXEMBOURG LISTING AGENTDexia Banque Internationale à Luxembourg69, route d’EschL – 1470 LuxembourgTRUSTEECiticorp Trustee Company LimitedCitigroup CentreCanada SquareCanary WharfLondon E14 5LBEnglandLEGAL ADVISERSTo the Issuers and the GuarantorTo the Issuers and the Guarantoras to Portuguese lawas to Cayman Islands law:Simmons & Simmons Rebelo de SousaMaples and CalderRebelo de Sousa & AssociadosPO Box 309GTRua Castilho 32-9th floorUgland House1250 - 070 Lisboa South Church StreetPortugalGeorge TownGrand CaymanCayman IslandsTo the Dealers and Trustee as to English law:Clifford ChanceLimited Liability Partnership10 Upper Bank StreetLondon E14 5JJEnglandAUDITORS TO THE ISSUERSAND THE GUARANTORErnst & Young Audit & Associados - SROC, S.A.Av Da República, 90-601600-206 LisboaPortugal

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