banif finance, ltd.

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