BANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A. (incorporated with limited liability in Portugal) as Issuer BANIF FINANCE, LTD. (incorporated with limited liability in the Cayman Islands) as Issuer BANIF – BANCO INTERNACIONAL DO FUNCHAL, S.A., ACTING THROUGH ITS SUCURSAL FINANCEIRA EXTERIOR (EXTERNAL FINANCIAL BRANCH) (incorporated with limited liability in Portugal) as Guarantor of certain Notes issued by Banif Finance, Ltd. Euro 2,500,000,000 Euro Medium Term Note Programme This Base Prospectus has been approved by the Luxembourg Commission de Surveillance du Secteur Financier (the "CSSF"), which is the Luxembourg competent authority for the purpose of Directive 2003/71/EC, as amended (the "Prospectus Directive") and relevant implementing measures in Luxembourg, as a base prospectus issued in compliance with the Prospectus Directive and relevant implementing measures in Luxembourg for the purpose of giving information with regard to the issue of notes ("Notes") issued under the Euro Medium Term Note Programme (the "Programme") described in this Base Prospectus during the period of twelve months after the date hereof. Applications have been made for such Notes to be admitted during the period of twelve months after the date hereof to listing on the official list and to trading on the regulated market of the Luxembourg Stock Exchange (and/or in any other regulated market for the purpose of Directive 2004/39/EC (the Markets in Financial Instruments Directive)) (the "Regulated Market"). Pursuant to Article 245-A of the Código dos Valores Mobiliários (the Portuguese Securities Code) and Regulation 1/2010 of the Comissão do Mercado de Valores Mobiliários (the Portuguese Securities Market Commission, the "CMVM") (the "Corporate Governance Regulation"), only companies which have their shares admitted to trading in a regulated market must issue certain information regarding compliance with the corporate governance regime set out in the Corporate Governance Regulation. Given the fact that Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) ("Banif Madeira") is a full branch of Banif – Banco Internacional do Funchal, S.A. ("Banif") and Banif is not a company with shares admitted to trading in a regulated market, there is no such requirement for Banif and Banif Madeira to comply with such corporate governance regime. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchange and/or quotation systems as may be agreed with the relevant Issuer. The Notes of each Tranche will either be in dematerialised book-entry form (forma escritural) and are registered notes (nominativas) (in the case of Notes integrated in and held through Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários S.A. ("Interbolsa"), hereinafter the Interbolsa Notes, as defined herein) or in bearer form. Bearer Notes will (unless otherwise specified in the applicable Final Terms) initially be represented by a temporary global Note which will be exchangeable either for interests in a permanent global Note or for definitive Notes, as indicated in the applicable Final Terms, all as further described in "Forms of the Notes" below. Banif has been assigned a long-term debt rating of B1 with a negative outlook from Moody's Investors Service España S.A. ("Moody's") and BB with a negative outlook from Fitch Ratings España S.A.U. ("Fitch"). Notes issued under the Programme have been rated (P)B1 (senior unsecured notes) and P(Not Prime) (short-term notes) by Moody's and BB (long-term senior notes) and B (short-term senior notes) by Fitch, respectively. Each of Moody's and Fitch is established in the European Economic Area ("EEA") and registered under Regulation (EC) No 1060/2009, as amended (the "CRA Regulation") and are, as of the date of this Base Prospectus, included in the list of credit rating agencies published by the European Securities and Markets Authority on its website (http://www.esma.europa.eu/page/List-registered-and-certified-CRAs) in accordance with the CRA Regulation. In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating agency established in the EEA and registered under the CRA Regulation unless (1) the rating is provided by a credit rating agency not established in the EEA but is endorsed by a credit rating agency established in the EEA and registered under the CRA Regulation or (2) the rating is provided by a credit rating agency not established in the EEA which is certified under the CRA Regulation. According to Moody's rating system, obligations rated B are considered speculative and are subject to high credit risk and the modifier 1 indicates that the obligation ranks in the higher end of its generic rating category. According to Fitch's rating system, "BB" ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time, but business or financial flexibility exists which supports the servicing of financial commitments and "B" ratings indicate that material default risk is present, but a limited margin of safety remains and that financial commitments are currently being met yet capacity for continued payment is vulnerable to deterioration in the business and economic environment. Notes will be issued in such denominations as may be specified in the relevant Final Terms, subject to compliance with all applicable legal and/or regulatory requirements. Notes to be issued under the Programme may be rated by Moody's and/or Fitch. Tranches of Notes issued under the Programme may be rated or unrated. Where a Tranche of Notes is rated, such rating will not necessarily be the same as the rating(s) described above or the rating(s) assigned to Notes already issued. Where a Tranche of Notes is rated, the applicable rating(s) will be specified in the relevant Final Terms. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. This Base Prospectus constitutes a base prospectus for the purposes of Article 5.4 of the Prospectus Directive and for the purpose of giving information with regard to the Issuers and the Notes, which, according to the particular nature of the Issuers and the Notes, is necessary to enable investors to make an informed assessment of the liabilities, financial position, profit and losses and prospects of the relevant Issuer. The CSSF gives no undertaking as to the economic and financial opportuneness of the transaction contemplated by this Base Prospectus or the quality or solvency of the Issuers in line with the provisions of Article 7(7) of the Luxembourg Prospectus Law. See "Risk Factors" below for a discussion of certain factors to be considered in connection with any investment in the Notes. Arrangers BANIF – BANCO DE INVESTIMENTO, S.A. CAIXA – BANCO DE INVESTIMENTO, S.A. CITIGROUP Dealers BANIF – BANCO DE INVESTIMENTO, S.A. BARCLAYS BNP PARIBAS BOFA MERRILL LYNCH CAIXA – BANCO DE INVESTIMENTO, S.A. CITIGROUP CREDIT SUISSE DEUTSCHE BANK 4 October 2012

TABLE OF CONTENTS

Page

IMPORTANT NOTICES ...... 3 SUMMARY ...... 7 RISK FACTORS ...... 22 INFORMATION INCORPORATED BY REFERENCE ...... 33 GENERAL DESCRIPTION OF THE PROGRAMME ...... 37 SUPPLEMENT TO THE BASE PROSPECTUS ...... 38 FORMS OF THE NOTES ...... 39 TERMS AND CONDITIONS OF THE NOTES ...... 43 FORM OF FINAL TERMS ...... 70 OVERVIEW OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM ...... 82 DESCRIPTION OF THE ISSUERS AND THE GUARANTOR ...... 85 TAXATION ...... 134 SUBSCRIPTION AND SALE ...... 147 GENERAL INFORMATION ...... 151

IMPORTANT NOTICES

Each of Banif – Banco Internacional do Funchal, S.A. ("Banif") and Banif Finance, Ltd. ("Banif Finance") (each an "Issuer" and together the "Issuers"), and Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) ("Banif Madeira") in its capacity as guarantor of certain Notes issued by Banif Finance (the "Guarantor", together with the Issuers, the "Responsible Persons") accepts responsibility for the information contained in this Base Prospectus and any applicable Final Terms. Each of the Issuers and the Guarantor declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Base Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Certain information and data contained in this Base Prospectus relating to the competitive position of the Issuers was derived from publicly available information. Each Issuer accepts responsibility that such publicly available information has been accurately reproduced and, as far as the relevant Issuer is able to ascertain, no facts have been omitted which would render such information inaccurate or misleading.

In addition, in the context of any offer of Notes that is not within an exemption from the requirement to publish a prospectus under the Prospectus Directive (a "Public Offer"), either Issuer may request the CSSF to provide a certificate of approval in accordance with Article 18 of the Prospectus Directive (a "passport") in relation to the passporting of the Base Prospectus to the competent authority of Portugal (the "Host Member State"), but it may choose not to do so. Even if the relevant Issuer passports the Base Prospectus into the Host Member State, it does not mean that it will choose to make any Public Offer in the Host Member State. Investors should refer to the Final Terms for any issue of Notes to see whether the relevant Issuer has selected for a Public Offer of Notes in the Host Member State and the period during which it intends to make a Public Offer in the Host Member State. Each Responsible Person accepts responsibility, in the Host Member State for which it has given consent referred to herein, for the content of this Base Prospectus, in relation to any person (an "Investor") to whom an offer of any Notes is made by any financial intermediary to whom the Responsible Persons have given their consent to use this Base Prospectus (an "Authorised Offeror"), where the offer is made during the period for which that consent is given and where the offer is made in the Host Member State for which that consent was given and is in compliance with all other conditions attached to the giving of the consent, all as mentioned in this Base Prospectus. However, neither any Responsible Person nor any Dealer has any responsibility for any of the actions of any Authorised Offeror, including compliance by an Authorised Offeror with applicable conduct of business rules or other local regulatory requirements or other securities law requirements in relation to such offer.

Each Tranche (as defined herein) of Notes will be issued on the terms set out herein under "Terms and Conditions of the Notes" (the "Conditions") as completed by a document specific to such Tranche called final terms (the "Final Terms") or in a separate prospectus specific to such Tranche (the "Drawdown Prospectus").

If so specified in the Final Terms in respect of any Tranche of Notes, the relevant Issuer and the Guarantor, where applicable, consent to the use of this Base Prospectus in connection with a Public Offer of the relevant Notes during the Offer Period specified in the relevant Final Terms (the "Offer Period") either (1) in the Member State(s) specified in the relevant Final Terms by any financial intermediary which is authorised to make such offers under the Markets in Financial Instruments Directive (Directive 2004/39/EC) and which satisfies the conditions (if any) specified in the relevant Final Terms or (2) by the financial intermediaries specified in the relevant Final Terms, in the Member State(s) specified in the relevant Final Terms and subject to the relevant conditions specified in the relevant Final Terms, for so long as they are authorised to make such offers under the Markets in Financial Instruments Directive (Directive 2004/39/EC). The relevant Issuer and the Guarantor, where applicable, may give consent to additional financial intermediaries after the date of the relevant Final Terms and, if they do so, the relevant Issuer will publish the above information in relation to them on their website.

The consent referred to above relates to Offer Periods occurring within 12 months from the date of this Base Prospectus.

Any Authorised Offeror who wishes to use this Base Prospectus in connection with a Public Offer as set out in (1) above is required, for the duration of the relevant Offer Period, to publish on its website that it is using this Base Prospectus for such Public Offer in accordance with the consent of the relevant Issuer and the conditions attached thereto.

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To the extent specified in the relevant Final Terms, a Public Offer may be made during the relevant Offer Period by any of the relevant Issuer, the Guarantor (where applicable), the Dealers or any relevant Authorised Offeror in any relevant Member State and subject to any relevant conditions, in each case all as specified in the relevant Final Terms.

Neither of the Issuers nor the Guarantor nor any of the Dealers has authorised the making of any Public Offer of any Notes by any person in any circumstances and such person is not permitted to use this Base Prospectus in connection with its offer of any Notes unless (1) the offer is made by an Authorised Offeror as described above or (2) the offer is otherwise made in circumstances falling within an exemption from the requirement to public a prospectus under the Prospectus Directive. Any such unauthorised offers are not made on behalf of either of the Issuers, the Guarantor, any Dealer or any Authorised Offeror and none of the Issuers, the Guarantor, any Dealer or any Authorised Offeror has any responsibility or liability for the actions of any person making such offers.

An Investor intending to acquire or acquiring any Notes from an Authorised Offeror will do so, and offers and sales of the Notes to an Investor by an Authorised Offeror will be made, in accordance with any terms and other arrangements in place between such Authorised Offeror and such Investor including as to price, allocation, settlement arrangements and any expenses or taxes to be charged to the Investor (the "Terms and Conditions of the Public Offer"). Neither any of the Issuers nor the Guarantor will be a party to any such arrangements with Investors (other than Dealers) in connection with the offer or sale of the Notes and, accordingly, this Base Prospectus and any Final Terms will not contain such information. The Terms and Conditions of the Public Offer shall be provided to Investors by that Authorised Offeror at the relevant time. None of the Issuers, the Guarantor, any of the Dealers or other Authorised Offerors has any responsibility or liability for such information.

In the case of any Tranche of Notes which are being (a) offered to the public in a Member State (other than pursuant to one or more of the exemptions set out in Article 3.2 of the Prospectus Directive) and/or (b) admitted to trading on a regulated market in a Member State, the relevant Final Terms shall not amend or replace any information in this Base Prospectus. Subject to this, to the extent permitted by applicable law and/or regulation, the Final Terms in respect of any Tranche of Notes may supplement, amend or replace any information in this Base Prospectus.

This Base Prospectus should be read and construed together with any supplements hereto and with any other documents incorporated by reference herein and, in relation to any Tranche (as defined herein) of Notes which is the subject of Final Terms (as defined herein), should be read and construed together with the relevant Final Terms.

The Issuers and the Guarantor have confirmed to the Dealers named under "Subscription and Sale" below that this Base Prospectus (including for this purpose, each relevant Final Terms) contains all information regarding the Issuers, the Guarantor and the Notes which is (in the context of the Programme, the issue, offering and sale of the Notes, where applicable, and the guarantee of the Notes thereunder) material; that such information is true and accurate in all material respects and is not misleading in any material respect; that any opinions, predictions or intentions expressed herein are honestly held or made and are not misleading in any material respect; that this Base Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in such context) not misleading in any material respect; and that all proper enquiries have been made to ascertain and to verify the foregoing.

No person has been authorised to give any information or to make any representation not contained in or not consistent with this Base Prospectus or any other document entered into in relation to the Programme or any information supplied by the Issuers or the Guarantor or such other information as is in the public domain and, if given or made, such information or representation should not be relied upon as having been authorised by the Issuers, the Guarantor, the Trustee or any Dealer.

No representation or warranty is made or implied by any of the Dealers or the Trustee or any of their respective affiliates, and none of the Dealers, the Trustee nor any of their respective affiliates makes any representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Base Prospectus. Neither the delivery of this Base Prospectus or any Final Terms nor the offering, sale or delivery of any Note shall, in any circumstances, create any implication that the information contained in this Base Prospectus is true subsequent to the date hereof or the date upon which this Base Prospectus has been most recently supplemented or that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the

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condition (financial or otherwise) of the Issuers or the Guarantor since the date thereof or, if later, the date upon which this Base Prospectus has been most recently supplemented or that any other information supplied in connection with the Programme is correct at any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same.

The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Base Prospectus or any Final Terms comes are required by the Issuers, the Guarantor, the Trustee and the Dealers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on the distribution of this Base Prospectus or any Final Terms and other offering material relating to the Notes, see "Subscription and Sale". In particular, Notes have not been and will not be registered under the United States Securities Act of 1933 (as amended) (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons.

Neither this Base Prospectus nor any Final Terms constitutes an offer or an invitation to subscribe for or purchase any Notes and should not be considered as a recommendation by the Issuers, the Guarantor, the Trustee, or any of the Dealers that any recipient of this Base Prospectus or any Final Terms should subscribe for or purchase any Notes. The content of this document should not be construed as providing legal, business, accounting or tax advice and each recipient of this Base Prospectus or any Final Terms shall be taken to have made its own investigation and appraisal of the condition (financial or otherwise) of the Issuers and the Guarantor.

Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

• have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained or incorporated by reference in this Base Prospectus or any applicable supplement or any applicable Final Terms;

• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio;

• have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including where principal or interest is payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor's currency;

• understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and

• be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

The maximum aggregate principal amount of Notes outstanding and guaranteed at any one time under the Programme will not exceed Euro 2,500,000,000 (and for this purpose, any Notes denominated in another currency shall be translated into euro at the date of the agreement to issue such Notes (calculated in accordance with the provisions of the Dealer Agreement). The maximum aggregate principal amount of Notes which may be outstanding and guaranteed at any one time under the Programme may be increased from time to time, subject to compliance with the relevant provisions of the Dealer Agreement as defined under "Subscription and Sale".

In this Base Prospectus, unless otherwise specified, references to "U.S.$", "U.S. dollars" or "dollars" are to United States dollars and references to "EUR", "€" or "euro" are to the single currency introduced at the start of the third stage of European economic and monetary union, and as defined in Article 2 of Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the euro as amended.

Certain figures included in this Base Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

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In connection with the issue of any Tranche of Notes, any Dealer or Dealers acting as the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) may over allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment shall be conducted in accordance with all applicable laws and rules.

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SUMMARY

Summaries are made up of disclosure requirements known as "Elements". These elements are numbered in Sections A – E (A.1 – E.7).

This summary contains all the Elements required to be included in a summary for this type of securities and Issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of "Not Applicable".

Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Base Prospectus have the same meanings in this summary.

Section A – Introduction and Warnings A.1 Introduction: Warning that: • this summary should be read as introduction to the Base Prospectus; • any decision to invest in the Notes should be based on consideration of the Base Prospectus as a whole by the investor; • where a claim relating to the information contained in the Base Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Base Prospectus before the legal proceedings are initiated; and • civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Base Prospectus or it does not provide, when read together with the other parts of the Base Prospectus, key information in order to aid investors when considering whether to invest in such Notes. A.2 Consent: The Issuer [and the Guarantor] consent[s] to the use of this Base Prospectus in connection with a Public Offer of the Notes by any financial intermediary which is authorised to make such offers under the Markets in Financial Instruments Directive (Directive 2004/39/EC) on the following basis: (a) the relevant Public Offer must occur during the period from and including [●] to but excluding [●](the "Offer Period"); (b) the relevant Authorised Offeror must satisfy the following conditions: [●] . The Issuer [and the Guarantor] consent[s] to the use of this Base Prospectus in connection with a Public Offer of the Notes by [●] on the following basis: (a) the relevant Public Offer must occur during the period from and including [●] to but excluding [●](the "Offer Period"); (b) the relevant Authorised Offeror must satisfy the following conditions: [●] .

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An Investor intending to acquire or acquiring any Notes from an Authorised Offeror will do so, and offers and sales of the Notes to an Investor by an Authorised Offeror will be made, in accordance with any terms and other arrangements in place between such Authorised Offeror and such Investor including as to price, allocation, settlement arrangements and any expenses or taxes to be charged to the Investor (the "Terms and Conditions of the Public Offer"). Neither an Issuer nor the Guarantor if applicable, will be a party to any such arrangements with Investors (other than Dealers) in connection with the offer or sale of the Notes and, accordingly, this Base Prospectus and any Final Terms will not contain such information. The Terms and Conditions of the Public Offer shall be published by that Authorised Offeror on its website at the relevant time. None of the Issuers, the Guarantor, any of the Dealers or other Authorised Offerors has any responsibility or liability for such information.

Section B – Issuers and Guarantor

B.1 Legal name of the Banif – Banco Internacional do Funchal, S.A. ("Banif" or "Bank") and Banif Issuers: Finance, Ltd. ("Banif Finance") Commercial name of Banif and Banif Finance the Issuers: B.2 Domicile, legal form, Banif was incorporated as a public company with limited liability (Sociedade legislation and country Anónima) in Funchal, Madeira, Portugal and is organised under the laws of of incorporation of the Portugal. Banif has its registered office in Funchal, Portugal. Issuers: Banif Finance is an exempted limited liability company registered and incorporated in the Cayman Islands and is organised under the laws of the Cayman Islands. Banif Finance has its registered office in the Cayman Islands. B.4b Trends: Throughout 2011, the prevailing economic and financial conditions worsened in Portugal, and the sovereign debt crisis has made the capital markets even less accessible to Portuguese banks. In fact, and considering the inability to access the public markets for short or medium-long term funding, Portuguese banks continue to be limited to the liquidity operations with the European Central Bank and to new deposits from clients, with an increase in cost due to aggressive competition. This situation has had a significant impact on the Issuers and Banif Financial Group. The Portuguese banking groups are required by the Bank of Portugal to mantain a Core Tier I capital ratio of at least 10 per cent. until 31 December 2012. In addition, the stabilisation programme (the "Stabilisation Programme") granted to the Portuguese state by the International Monetary Fund, the European Central Bank and the European Union also establishes key leverage reforms and specific medium term funding plans. This increase in supervision from the Bank of Portugal could increase costs and force Banif to dispose of its assets under unfavourable conditions. Banif is likely to be adversely affected by the requirements for public recapitalisation in accordance with the Stabilisation Programme.

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B.5 The Group: Banif – SGPS, S.A. together with its consolidated subsidiaries (the "Banif Financial Group"), was established in Madeira in January 1988, by incorporating the assets and liabilities of Caixa Económica do Funchal, which was founded in 1897. Currently, the main business activities of Banif Financial Group are carried out through more than 40 companies operating in sectors including banking, insurance leasing and consumer credit, brokerage, asset management, real estate, venture capital and trade finance. Banif is wholly owned by the holding company of the Banif Financial Group, Banif – SGPS, S.A.. Banif Finance is controlled by Numberone SGPS, Lda., a wholly-owned subsidiary of Banif. Numberone SGPS, Lda. and Banif together own 100 per cent. of the voting shares of Banif Finance. B.9 Profit Forecast: Not Applicable for either Issuer. Neither Issuer makes profit forecast. B.10 Audit Report Not Applicable for either Issuer. There are no qualification to the audit reports Qualifications: for either Issuer. B.12 Selected Key Financial Banif – selected key financial information Information: Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Net Assets ...... 15,959,757 16,753,823 -794,066 -4.74% Credit to Clients (gross) ..... 9,445,346 9,953,083 -507,737 -5.10% Client's deposits ...... 7,694,683 7,918,156 -223,473 -2.82% Client's funds ...... 7,849,124 8,529,517 -680,393 -7.98% Equity ...... 835,220 833,778 1,442 0.17%

Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Net interest Income (including income from equity instruments) ...... 90,224 99,590 -9,366 -9.4% Profits on financial operations (net) ...... 960 2,505 -1,545 -61.7% Other income (net) ...... 46,100 43,530 2,570 5.9% Operating Income ...... 137,284 145,625 -8,341 -5.7% Administrative costs ...... 87,956 88,038 -82 -0.09% Cash Flow ...... 49,328 57,587 -8,259 -14.3% Depreciation ...... 6,800 7,053 -253 -3.6% Provisions / impairment (net) ...... 81,640 51,614 30,026 58.2% Pre-tax Profits ...... -39,112 -1,080 -38,032 -3,521.5% Taxes (current and deferred) ...... -35,488 1,456 -36,944 -2,537.3% Net Profit ...... -3,624 -2,536 -1,088 42.9%

31-12-2010 Variation Balance Sheet 31-12-2011 Restated Absolute % € Thousand Net Assets ...... 16,753,823 15,079,100 1,674,723 1.1% Credit to Clients (gross) ..... 9,953,083 10,419,117 -466,034 -4.5% Deposits from Clients ...... 7,918,156 7,158,295 759,861 10.6% Client's funds (including 8,529,517 7,918,592 610,925 7.7% income from equity instruments) ...... Equity ...... 833,778 908,918 -75,139 -8.3%

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31-12-2010 Variation Income Statement 31-12-2011 Restated Absolute % € Thousand Net interest Income 223,710 231,818 -8,108 -3.5% (including income from equity instruments) ...... Profits on financial -7,251 527 -7,778 -1475.9% operations (net) ...... Other income (net) ...... 128,071 96,477 31,594 32.7% Operating Income ...... 344,530 328,822 15,708 4.8% Administrative costs ...... 182,804 184,739 -1,935 -1.0% Cash Flow ...... 161,726 144,083 17,643 12.2% Depreciation ...... 13,922 14,434 -512 -3.5% Provisions / impairment 265,767 85,604 180,163 210.5% (net) ...... Pre-tax Profits ...... -117,963 44,045 -162,008 -367.8% Taxes (current and deferred) -31,309 6,937 -38,246 -551.3% ...... Net Profit ...... -86,654 37,108 -123,762 -333.5%

Since 31 December 2011, the date of Banif's last published audited financial statements, there has been no material adverse change in the prospects of Banif, and since 30 June 2012, being the last day of the financial period in respect of which the most recent unaudited financial statements of Banif have been prepared, there has been no significant change in the financial or trading position of Banif. Banif Finance – selected key financial information

Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Total Assets ...... 273,324 551,801 -278,477 -50.47% Loans Portfolio ...... 178,397 333,058 -154,661 -46.44% Debt Securities Issued ...... 82,554 357,044 -274,490 -76.88% Total Shareholders' Equity .... 112,926 113,804 -878 -0.77%

Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Net interest Income ...... 4,160 3,995 165 4.13% Dividend Income ...... — — — — Other income (net) ...... 332 4,053 -3,721 -91.81% Operating Income ...... 4,492 8,048 -3,556 -44.18% Personnel Costs and Overheads (including depreciation) ...... -10 -34 24 70.59% Pre-tax Profits ...... 4,482 8,014 -3,532 -44.07% Net Profit ...... 4,482 8,014 -3,532 -44.07%

Variation Balance Sheet 31-12-2011 31-12-2010 Absolute % € Thousand Net Assets ...... 551,801 ...... 648,318 -96,517 -14.89% Loans Portfolio ...... 333,058 553,209...... -220,151 -39.80% Debt Securities Issued ...... 357,044...... 358,563 . -1,519 -0.42% Equity ...... 113,804 ...... 153,627 -39,823 -25.92%

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Variation Income Statement 31-12-2011 31-12-2010 Absolute % € Thousand Net interest Income ...... 7,140...... 7,574..... -434 -5.73% Other income (net) ...... 17,827...... 14,845...... 2,982 20.09% Operating Income ...... 18,729...... 22,670...... -3,941 -17.38% Personnel Costs and Overheads (including Depreciation) ...... -38 ...... -322 284 88.20% Pre-tax Profits ...... 18,691 22,348...... -3,657 -16.36% Net Profit ...... 18,691 ...... 22,348 -3,657 -16.36%

Since 31 December 2011, the date of Banif Finance's last published audited financial statements, there has been no material adverse change in the prospects of Banif Finance and since 30 June 2012, being the last day of the financial period in respect of which the most recent unaudited financial statements of Banif Finance have been prepared, there has been no significant change in the financial or trading position of Banif Finance.

B.13 Recent Events: Not Applicable for either Issuer. There has been no recent events particular to either Issuer which are to a material extent relevant to the evaluation of such Issuer's solvency since the publication of the relevant Issuer's unaudited financial statements for the six months ended 30 June 2012. B.14 Dependence upon other Not Applicable for Banif. Banif is not dependent on other entities. entities within the Banif Finance is a funding vehicle of Banif and therefore any failure by Banif Group: to pay amounts outstanding under any intragroup loans made by Banif Finance to Banif would affect Banif Finance’s ability to meet its payment obligations under the issued Notes. B.15 The Issuers’ Principal Banif is a well established bank in the Portuguese financial sector, with a Activities: nationwide network of branches, organised in accordance with the concept of modern points of sale, and an e-banking system which is increasingly being taken up by customers and potential customers. The Bank offers a comprehensive range of products and services, for both personal and corporate clients, and constantly adjusts those products and services to meet market needs. The Bank is currently the market leader in Madeira and is well established with Portuguese residents in Venezuela and South Africa, providing a personalised service and a full range of products. Banif operates in mainland Portugal, in the Madeira Autonomous Region and in the Azores Autonomous Region. Banif Finance's sole business activity is to participate in capital markets transactions, through the issuance of securities, to provide funding to the Banif Financial Group. B.16 Controlling Persons: Banif is wholly owned by the holding company of the Banif Financial Group, Banif – SGPS, S.A. The main shareholder of Banif – SGPS, S.A. is the undivided estate of the late Horácio da Silva Roque (the ―Herança Indivisa de Horácio da Silva Roque‖) which holds, directly and indirectly, approximately a 59.128 per cent. of the voting rights of Banif – SGPS, S.A. Banif Finance is controlled by Numberone SGPS, Lda., a subsidiary of Banif. Numberone SGPS, Ltd. and Banif together own 100 per cent. of the voting shares of Banif Finance.

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B.17 Ratings assigned to the As at the date of this Base Prospectus, Banif has a long-term debt rating of B1 Issuers or their Debt with a negative outlook from Moody's Investors Service España S.A. Securities: ("Moody's") and BB with a negative outlook from Fitch Ratings España S.A.U. ("Fitch"). Notes issued under the Programme have been rated (P)B1 (senior unsecured notes) and (P)Not Prime (short-term notes) by Moody's and BB (long-term senior notes) and B (short-term senior unsecured notes) by Fitch, respectively. Each of Moody's and Fitch is established in the European Economic Area ("EEA") and registered under Regulation (EC) No 1060/2009, as amended (the "CRA Regulation"). B.18 The Guarantee: Where the relevant Issuer is Banif Finance, the Guarantor has in the Trust Deed the option to unconditionally and irrevocably guarantee the due and punctual payment of all principal and interest and other sums from time to time payable by such Issuer in respect of the Notes. This Guarantee of the Notes constitutes direct, general, unsubordinated and unconditional obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured obligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. B.19 Legal name of the Banif - Banco Internacional do Funchal, S.A., acting through its Sucursal B.1 Guarantor: Financeira Exterior (External Financial Branch) ("Banif Madeira") Commercial name of Banif SFE the Guarantor: B.19 Domicile, legal form, Banif Madeira was established in Madeira on 3 April 1989 and acts under the B.2 legislation and country laws of Portugal. It has its registered office in Funchal, Portugal. of incorporation of the Banif Madeira is a branch of Banif established in the Zona Franca da Madeira Guarantor: (the Madeira International Business Centre). As a branch of Banif, Banif Madeira is not a separate legal entity from Banif and accordingly Banif will be ultimately responsible for actions of Banif Madeira carried out by Banif Madeira's duly authorised representatives. B.19 Trends: As set out in B.4b. B.4b B.19 The Group: As set out in B.5. B.5 B.19 Profit Forecast: Not Applicable. Banif Madeira does not make profit forecast. B.9 B.19 Audit Report Not Applicable. Banif Madeira's financial statements are not audited. B.10 Qualifications: B.19. Selected Key Financial Banif Madeira – selected key financial information B12 Information: Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Total Assets ...... 875,690 1,607,655 -731,965 -45.53% Loan Portfolio ...... 20,419 23,609 -3,190 -13.52% Customers' Funds ...... 770,529 1,266,250 -495,721 -39.15% Total Shareholders' Equity ... 36,010 38,984 -2,973 -7.63%

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Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Financial margin ...... — 3,008 -3,008 -100.00% Net Profit on Financial Operations ...... -32 58 -90 -155.17% Other income ...... 542 -207 749 -361.84% Gross Margin ...... 510 2,859 -2,349 -82.16% Personnel Costs and Overheads (including depreciation) ...... -167 -155 -12 7.74% Provisions and impairment . -3,489 -489 -3,000 613.50% Income Tax ...... — — — — Net Profits...... -3,146 2,215 -5,361 -242.03%

Variation Balance Sheet 31-12-2011 31-12-2010 Absolute % € Thousand Total Assets ...... 1,607,655 2,059,258...... -451,603 -21.93% Loan Portfolio ...... 23,609 ...... 14,116 9,493 67.25% Customers' Funds ...... 1,266,250...... 1,301,023...... -34,773 -2.67% Total Shareholders' Equity ...... 38,984 ...... 31,385 7,599 24.21%

Variation Income Statement 31-12-2011 31-12-2010 Absolute % € Thousand Financial margin ...... 8,459 657 7,802 1,187.52% Net Profit on Financial Operations ...... 280 257 23 8.95% Other income ...... -36 1,904 -1,940 -101.89% Gross Margin ...... 8,703 2,818 5,885 208.84% Personnel Costs and Overheads (including depreciation) ...... -344 -11 -333 -3,027.27% Provisions and impairment ...... -760 ...... -427 -333 -77.99% Income Tax ...... — — — Net Profits...... 7,599 .... 2,380 5,219 219.29%

Since 31 December 2011, the date of Banif Madeira's last annual unaudited financial statements, there has been no material adverse change in the prospects of Banif Madeira and since 30 June 2012, being the last day of the financial period in respect of which the most recent unaudited financial statements of Banif Madeira have been prepared, there has been no significant change in the financial or trading position of Banif Madeira. B.19 Recent Events: Not Applicable. There has been no recent events particular to Banif Madeira B.13 which are to a material extent relevant to the evaluation of Banif Madeira's solvency since the publication of its unaudited financial statements for the six months ended 30 June 2012. B.19 Dependence upon other Banif Madeira is a branch of Banif and is not a separate legal entity and B.14 entities within the accordingly Banif will be ultimately responsible for actions of Banif Madeira Group: carried out by Banif Madeira's duly authorised representatives. Please also see B.19 B.5. B.19 The Guarantor’s Carrying out international banking and finance operations with non-residents of B.15 Principal Activities: Portugal.

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B.19 Controlling Persons: Banif Madeira is a full branch of Banif, therefore it does not have a supervisory B.16 board, its own memorandum and articles of association or its own share capital. As a branch of Banif, Banif Madeira is not a separate legal entity from Banif and accordingly Banif will be ultimately responsible for actions of Banif Madeira carried out by Banif Madeira's duly authorised representatives. B.19 Ratings assigned to the Not Applicable, as Banif Madeira is a full branch of Banif. B.17 Guarantor or its Debt Securities:

Section C – The Notes C.1 Type and Class of Notes will be issued in Series. Each Series may comprise one or more Securities: Tranches issued on different issue dates. The Notes of each Series will all be subject to identical terms, except that the issue date and the amount of the first payment of interest may be different in respect of different Tranches. The Notes of each Tranche will all be subject to identical terms in all respects save that a Tranche may comprise Notes of different denominations. [The Notes are issued as Series number [ ], Tranche number [ ].] [The Notes shall be consolidated, form a single series and be interchangeable for trading purposes with the [insert description of the Series] on [insert date/the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Note, as specified in the relevant Final Terms.] Class of Notes: The Notes will be issued on an unsubordinated basis. Please also see C.8 Security Identification Number(s): In respect of each Tranche of Notes, the relevant security identification number(s) will be specified in the relevant Final Terms. [ISIN Code: [ ] Common Code: [ ]] Fixed Rate Notes: Notes may bear interests at a fixed rate. Floating Rate Notes: Notes may bear interests at a floating rate. Zero Coupon Notes: Notes may be non-interest bearing. C.2 Currency of the Notes may be denominated in any currency or currencies, subject to compliance Securities Issue: with all applicable legal and/or regulatory and/or central bank requirements. Payments in respect of Notes may, subject to such compliance, be made in and/or linked to, any currency or currencies other than the currency in which such Notes are denominated. [The Notes are denominated in [ ].] C.5 Restrictions on Free The Issuers, the Guarantor and the Dealers have agreed certain restrictions on Transferability: offers, sales and deliveries of Notes and on the distribution of offering material.

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C.8 The Rights Attaching to Forms of Notes: the Notes (except for Interbolsa Notes) may only be issued in the Securities, including bearer form and each Tranche of Notes will initially be in the form of a Ranking and Temporary Global Note or a Permanent Global Note. Each Global Note which Limitations to those is not intended to be issued in new global note form (a "Classic Global Note" Rights: or "CGN") will be deposited on or around the relevant issue date with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and each Global Note which is intended to be issued in new global note form (a "New Global Note" or "NGN") will be deposited on or around the relevant issue date with a common safekeeper for Euroclear and/or Clearstream, Luxembourg. Each Temporary Global Note will be exchangeable for a Permanent Global Note or Definitive Notes. If the TEFRA D Rules are specified in the relevant Final Terms as applicable, certification as to non-U.S. beneficial ownership will be a condition precedent to any exchange of an interest in a Temporary Global Note or receipt of any payment of interest in respect of a Temporary Global Note. Each Permanent Global Note will be exchangeable for Definitive Notes in accordance with its terms. Definitive Notes will, if interest-bearing, have Coupons attached and, if appropriate, a Talon for further Coupons. Interbolsa Notes will be issued in dematerialised book-entry form (forma escritural) and are registered notes (nominativas). Interbolsa Notes may only be transferred in accordance with the applicable procedures set out in the Portuguese Securities Code and the regulations issued by the CMVM and Interbolsa. No physical document of title will be issued in respect of Interbolsa Notes, which are held through Interbolsa. Title to Interbolsa Notes will be evidenced by book-entries in accordance with the Portuguese Securities Code and the regulations issued by the CMVM, by Interbolsa or otherwise applicable thereto. Denominations: No Notes may be issued under the Programme which (a) have a minimum denomination of less than EUR1,000 (or nearly equivalent in another currency), or (b) carry the right to acquire shares (or transferable securities equivalent to shares) issued by the Issuers or by any entity to whose group the Issuers belong. Subject thereto, Notes will be issued in such denominations as may be specified in the relevant Final Terms, subject to compliance with all applicable legal and/or regulatory and/or central bank requirements. Negative Pledge: The Notes will have the benefit of a negative pledge in respect of Indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is, or is capable of being, listed, quoted or traded on any stock exchange or in any securities market. Cross Default: The Notes will have the benefit of a cross default subject to a threshold of Euro 15,000,000 (or its equivalent in any other currency). Status of the Notes: Notes will be issued on an unsubordinated basis. [Status of the Notes: The Notes constitute direct, general and unconditional obligations of the Issuer which rank at least pari passu with all other present and future unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.]

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Status of the Guarantee: Notes issued by Banif Finance may be unconditionally and irrevocably guaranteed by the Guarantor, on an unsubordinated basis. [Status of the Guarantee: The Guarantee of the Notes constitute direct, general and unconditional obligations of the Guarantor which rank at least pari passu with all other present and future unsecured obligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.] Taxation: All payments in respect of Notes will be made free and clear of withholding taxes of the country of incorporation of the relevant Issuer, or if applicable, the Guarantor, or if different, the country of tax residence of the Issuer, or if applicable, the Guarantor, as the case may be, unless the withholding is required by law. In that event, subject to customary exceptions, the Issuer or the Guarantor, as the case may be, will pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding been required. Governing Law: The Notes (other than Interbolsa Notes) will be governed by and construed in accordance with English law. Interbolsa Notes will be governed by and construed in accordance with Portuguese law. Enforcement of Notes in Global Form: In the case of Global Notes, individual investors' rights against the relevant Issuer will be governed by the Trust Deed, a copy of which will be available for inspection (during normal office hours) at the specified office of the Principal Paying Agent and at the registered office of the Trustee. C.9 The Rights Attaching to See C.8 for a description of the rights attaching to the Notes, ranking and the Securities limitations. (Continued), Including Interest: Notes may be interest-bearing or non-interest bearing. Interest (if Information as to any) may accrue at a fixed rate or a floating rate or other variable rate and the Interest, Maturity, method of calculating interest may vary between the issue date and the maturity Yield and the date of the relevant Series. In respect of each Tranche of Notes, the date from Representative of the which interest becomes payable and the due dates for interest, the maturity date, Holders: the arrangements for the amortisation of the Notes, including the repayment procedures and an indication of yield will be specified in the relevant Final Terms. [Interest: The Notes bear interest from [ ] at a fixed rate of [ ] per cent. per annum payable in arrear on [ ].] [Interest: The Notes bear interest from [ ] at a rate equal to the sum of [ ] per cent. per annum and [period]/[currency][EURIBOR/LIBOR] determined in respect of each Interest Period on the day which is [ [ ] [London business days] before] the first day of the Interest Period and payable in arrear on [ ]. [EURIBOR in respect of a specified currency and a specified period is the interest rate benchmark known as the Euro zone interbank offered rate which is calculated and published by a designated distributor (currently Thomson Reuters) in accordance with the requirements from time to time of the European Banking Federation]/[LIBOR in respect of a specified currency and a specified period is the interest rate benchmark known as the London interbank offered rate which is calculated and published by a designated distributor (currently Thomson Reuters) in accordance with the requirements from time to time of the British Bankers' Association.]] [Interest: The Notes do not bear interest.]

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Maturities: Any maturity, subject, in relation to specific currencies, to compliance with all applicable legal and/or regulatory and/or central bank requirements. Where Notes have a maturity of less than one year and either (a) the issue proceeds are received by the Issuer in the United Kingdom or (b) the activity of issuing the Notes is carried on from an establishment maintained by the Issuer in the United Kingdom, such Notes must: (i) have a minimum redemption value of £100,000 (or its equivalent in other currencies) and be issued only to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses; or (ii) be issued in other circumstances which do not constitute a contravention of section 19 of the Financial Services and Markets Act 2000 ("FSMA") by the Issuer. [Maturity Date: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed on [ ].] Redemption: Notes will be redeemable at par and payments of principal shall be made only against presentation and surrender of Notes at the Specified Office of any Paying Agent outside the United States. [Final Redemption Amount: Unless previously redeemed, or purchased and cancelled, each Note will be redeemed at 100 per cent. of its nominal amount.] Optional Redemption: Notes may be redeemed before their stated maturity at the option of the relevant Issuer (either in whole or in part) and/or the Noteholders to the extent (if at all) specified in the relevant Final Terms. [Redemption at the Option of the Issuer: The Notes may be redeemed at the option of the Issuer [in whole]/[ in whole or in part] on [ ] at [ ], plus accrued interest (if any) to such date, on the Issuer's giving not less than 30 nor more than 60 days' notice to the Noteholders.] [Redemption at the Option of the Noteholders: The Issuer shall, at the option of the holder of any Note redeem such Note on [ ] at [ ] together with interest (if any) accrued to such date, on the Noteholders' giving not less than 30 nor more than 60 days' notice to the Issuer.] Tax Redemption: Except as described in "Optional Redemption" above, early redemption will only be permitted if the relevant Issuer or, if applicable, the Guarantor has or will become obliged to pay certain additional amounts in respect of the Notes as a result of any change in the tax laws of the country of tax residence of the relevant Issuer, or if applicable, the Guarantor. Yield: The yield of each Tranche of Notes will be calculated on an annual or semi-annual basis using the relevant Issue Price at the relevant Issue Date. [Yield: Based upon the Issue Price of [ ], at the Issue Date the anticipated yield of the Notes is [ ] per cent. per annum.] Representative of the Noteholders: Trustee

C.10 Derivative Components Not Applicable. Payments of interest on the Notes shall not involve any in interest payment: derivative component.

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C.11 Listing and Trading: Applications have been made for Notes to be admitted during the period of twelve months after the date hereof to listing on the official list and to trading C.21 on the regulated market of the Luxembourg Stock Exchange. The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent authorities, stock exchanges and/or quotation systems as may be agreed with the relevant Issuer. [Application has been made for the Notes to be admitted to listing on the official list and to trading on the regulated market of the Luxembourg Stock Exchange.] [Application has been made for the Notes to be admitted to listing, trading and/or quotation by [ ].] [The Issuer does not intend to make any application for the Notes to be admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system.]

Section D - Risks D.2 Risks Specific to the Risk Factors relating to Banif Issuers: • Economic activity – Banif’s performance, results of operations and financial conditions might be adversely influenced by the level and cyclical nature of business activity in Portugal, which is in turn affected by both domestic and international economic and political events. • Financial system – Conditions in the global financial markets and the macroeconomic context of the countries in which Banif operates generally influence the performance of Banif. • Banking markets – Intense competition in all areas of Banif’s operation can have an adverse effect on the Issuer’s operating results. • Risk of sovereign rating downgrade – The rating of the Republic of Portugal may be further downgraded again in the future which may have negative side effects on Portuguese banks, and might lead to further rating downgrades of Banif, and hence on its financial results. • Risk of a Banif rating downgrade – Future rating downgrades of Banif could increase its cost of funding and may result in the funding markets continuing to be inaccessible to Banif.

• Implications of the European banks' recapitalisation on Banif and on the Portuguese banking system - The adherence by Banif to the specific recapitalisation plan of the Portuguese banking system (namely through the credit line of an amount of up to EUR 12 billion foreseen in the Economical and Financial Adjustment Programme (―Programa de Ajustamento Económico e Financeiro‖)) may require the Portuguese state to take a stake in the share capital of Banif, under conditions to be defined, which may lead to several risks, namely loss of strategic autonomy, loss of interest from private investors and dilution of share capital.

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• Depreciation of real estate assets – Banif has a high exposure to the Portuguese real estate market, and the significant price decrease in the Portuguese real estate market could lead to direct losses, lower coverage of credit exposure with real estate collateral and on pension funds, which could adversely affect both the results of operations and financial situation of Banif. • Soundness of other financial institutions – Banif is exposed to many different counterparties in the normal course of its business, and many of these relationships expose Banif to credit risk in the event of default by a counterparty or client. • Credit risk – Risks arising from changes in credit quality and the recoverability of loans and amounts due from borrowers and counterparties are inherent to a wide range of Banif's business and may have a significantly adverse effect on its financial condition and results of operations. • Market risk – The performance of financial markets may decrease the value of Banif's investment and trading portfolios. However, it is difficult to predict with accuracy changes in economic or market conditions and to anticipate the effects that such changes could have on Banif's financial condition and results of operations. • Liquidity risk – A lack of liquidity in the financial markets would increase funding costs and limit Banif's capacity to increase its credit portfolio and the total amount of its assets, which could have a material adverse effect on Banif's business, financial condition or results of operations. • Interest rate risk – Banif is subject to the risk of interest rate fluctuations. If Banif is unable to adjust interest on deposits in line with the changes in market interest rates on loans, or if the monitoring procedures are unable to adequately manage interest rate risk, its interest income could rise less or decline more than its interest expense, in which case Banif's results of operations could be negatively affected. • Operational risk – Any failure to execute Banif's risk management and control policies successfully could materially adversely affect Banif's financial condition and results of operations. • Risks associated with the implementation of its risk management policies – Although Banif has implemented risk management policies for each of the risks that it is exposed to, such policies may not be fully effective. • Regulatory compliance risk – Banif operates in a highly regulated industry and the regulatory laws governing the activity of Banif may change at any time in ways which may have an adverse effect on its business. • Risks associated with the ability to maintain Banif’s client portfolio – The success of Banif depends largely on its ability to maintain its client portfolio and provide them with a diversified range of competitive and high quality products and services. The potential inability of Banif to do so could have an adverse effect on Banif’s financial situation and results. • Risks associated with the increasing use of sophisticated IT systems – Banking activities are highly dependent on sophisticated IT systems, which are vulnerable to a number of problems and require frequent updates. Any significant interruption to Banif’s IT systems can have a material adverse effect on its activities, results and financial condition.

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• Unforeseen events – events such as severe natural catastrophes, terrorist attacks or other states of emergency could lead to an abrupt interruption of Banif's operations, which could cause substantial losses and the incurrence of associated costs.

Risk Factors relating to Banif Finance Banif Finance is a funding vehicle of Banif. Therefore any failure by Banif to pay amounts outstanding under any intragroup loans made by Banif Finance to Banif would affect Banif Finance’s ability to meet its payment obligations under the issued Notes. Risks Specific to the Banif Madeira is a full branch of Banif. As such its risk factors are the same as Guarantor: stated above for Banif. D.3 Risks Specific to the • Notes subject to optional redemption by the Issuer – An optional Notes: redemption feature is likely to limit the market value of the Notes. • Notes issued at a substantial discount or premium – The market value of Notes of this type tends to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. • Fixed/Floating Rate Notes – An issuer's ability to convert such Notes will affect the secondary market and the market value of such Notes. There are also certain risks relating to the Notes generally, such as modification and waivers, EU Savings Directive and change of law. Investments in Interbolsa Notes will be subject to Interbolsa procedures and Portuguese law with respect to the form and transfer of Interbolsa Notes, payments on Interbolsa Notes and Portuguese tax rules. Holders of Interbolsa Notes must ensure that they comply with all procedures to ensure the correct tax treatment of their Interbolsa Notes.

Section E - Offer E.2b Reasons for the Offer The net proceeds of the issue of each Tranche of Notes will be applied by the and Use of Proceeds: relevant Issuer and/or the Guarantor to meet part of their general financing requirements. If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms. E.3 Terms and Conditions Notes may be issued at any price and on a fully paid basis, as specified in the of the Offer: relevant Final Terms. The price and amount of Notes to be issued under the Programme will be determined by the relevant Issuer, the Guarantor where applicable, and the relevant Dealer(s) at the time of issue in accordance with prevailing market conditions. The Terms and Conditions of any Public Offer shall be published by the relevant Authorised Offeror on its website at the relevant time. [The Issue Price of the Notes is [ ] per cent. of their principal amount.]

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E.4 Interests Material to [A description of any interest that is material to the issue/offer including the Issue: conflicting interests.] The Issuers and the Guarantor have appointed Banif – Banco de Investimento, S.A., Barclays Bank PLC, BNP Paribas, Caixa – Banco de Investimento, S.A., Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Deutsche Bank AG, London Branch, Merrill Lynch International and any other Dealer appointed from time to time (the "Dealers") as Dealers for the Programme. The arrangements under which Notes may from time to time be agreed to be sold by the relevant Issuer to, and purchased by, Dealers are set out in the Dealer Agreement made between the Issuers, the Guarantor and the Dealers. [Syndicated Issue: The Issuer [and the Guarantor] have appointed [ ], [ ] and [ ] (the "Managers") as Managers of the issue of the Notes. The arrangements under which the Notes are sold by the Issuer to, and purchased by, Managers are set out in the Subscription Agreement made between the Issuer[, the Guarantor] and the Managers] [Non-Syndicated Issue: The Issuer [and the Guarantor] have appointed [ ] (the "Dealer") as Dealer in respect of the issue of the Notes. The arrangements under which the Notes are sold by the Issuer to, and purchased by, Dealer are set out in the Dealer Agreement made between, amongst others, the Issuer[, the Guarantor] and the Dealer] E.7 Estimated Expenses: No expenses will be chargeable by the relevant Issuer to an Investor in connection with any offer of Notes. Any expenses chargeable by an Authorised Offeror to an Investor shall be charged in accordance with any contractual arrangements agreed between the Investor and such Authorised Offeror at the time of the relevant offer.

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RISK FACTORS

Prospective investors in the Notes should consider carefully, among other things and in light of their financial circumstances and investment objectives, all of the information in this Base Prospectus (including the information that has been incorporated by reference herein) and, in particular, the risk factors set forth below which each Issuer and the Guarantor believes represent, or may represent, the factors known to it which may affect its ability to fulfil its obligations under the Notes. Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Base Prospectus have the same meanings in this section. Investing in the Notes involves certain risks. Prospective investors should consider, among other things, the following:

Each Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. All of these factors are contingencies which may or may not occur and neither any of the Issuers or the Guarantor is in a position to express a view on the likelihood of any such contingency occurring.

Factors which each Issuer and the Guarantor believe may be material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below.

Each Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but each Issuer may be unable to pay interest, principal or other amounts on or in connection with any Notes for other reasons and neither Issuer nor the Guarantor represents that the statements below regarding the risks of holding any Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Base Prospectus (including any documents deemed to be incorporated by reference herein) and reach their own views prior to making any investment decision.

Factors that may affect the Issuers' and the Guarantor's ability to fulfil their obligations under Notes issued under the Programme

Risk Factors relating to Banif

Economic activity

As a bank whose core business is in Portugal, Banif's performance is influenced by the level and cyclical nature of business activity in the country, which is in turn affected by both domestic and international economic and political events. Consequently, Banif is particularly exposed to macroeconomic and other factors that affect growth in the Portuguese market as well as to the credit risk of its Portuguese banking private and corporate customers. From 2000 onwards, growth of the Portuguese economy has mirrored the simultaneous slow down of the world economy.

Following the financial crisis which began in 2007, the crisis in both confidence and liquidity in the financial market led to a fall in investment and production levels. The Portuguese economy, functioning within the European Union (the "EU"), experienced the adverse effects of the crisis and the Portuguese government requested financial assistance from the member states of the EU through the European Financial Stability Facility and the International Monetary Fund ("IMF") in April 2011, which resulted in a stabilisation programme (the "Stabilisation Programme") being granted by the IMF, the European Central Bank ("ECB") and the EU in May 2011. However, there can be no assurance that the Stabilisation Programme will be successfully implemented or that if implemented successfully, it will enable the Portuguese economy to grow sufficiently to ease Portugal's financial constraints. Further, the consecutive downgrading of the long-term debt rating of the Republic of Portugal as well as of some Portuguese banks since 2011 could have a negative impact on Banif's funding base. The prevailing economic conditions in the Portuguese market and the decrease in demand for credit and financial products and services in general, together with the deterioration in the quality of assets, has had and will likely continue to have an adverse effect on Banif's loan portfolio and, as a result, on Banif´s financial condition, cash flows, results of operations, as well as the performance of the Banif Financial Group as a whole.

To a lesser extent, the performance, results of operations and financial condition of the Banif Financial Group are also affected by the economic conditions and levels of economic activity in other countries and areas where the bank operates, such as Brazil, the United States of America, Malta, Spain, the United Kingdom and Hong Kong. A downturn in the economy of any of these countries or areas could lead to an increase in defaults by the customers of

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the Banif Financial Group on the loans advanced to them. In addition, protracted economic decline could reduce the overall level of economic activity in the market, thereby reducing the ability of the Banif Financial Group to collect deposits and forcing it to satisfy its liquidity requirements by resorting to the more expensive capital markets as a result. Any further significant deterioration of global economic conditions, including the credit profile of other EU countries, or the creditworthiness of Portuguese or international banks, or changes to the Euro zone, could have a material adverse impact on the financial conditions and results of operations of Banif and the Banif Financial Group.

Financial system

The performance of Banif is generally influenced by conditions in the global financial system. In particular, the global financial system has faced difficult conditions since August 2007 and the financial markets have had particularly negative performances after the declarations of insolvency of several international financial institutions since September 2008. This situation has caused unprecedented disruptions in the financial markets worldwide, in relation to liquidity and funding in the international banking system. Furthermore, this situation in turn has put significant pressure on the core business of many investment banks, commercial banks, and insurance companies worldwide. In response to the instability and lack of liquidity in the market, some countries, including some members of the EU and the United States, have intervened by injecting liquidity and capital into the system with the goal of stabilising the financial markets and, in some cases, with the aim of preventing the insolvency of financial institutions. Despite the measures, the volatility in the capital markets has continued at an extraordinary level compared to the past.

Furthermore, since the second half of 2010, financial markets have been marked by the deterioration of European sovereign risk. In addition to investors' fears, there emerged uncertainty about the potential impact of the sovereign risk crisis on the European financial sector, which affected in particular the economies in the periphery of the Euro zone. These developments have created an unfavourable environment for banking activities in general.

In addition, numerous banks worldwide have been and are being supported in part by various "rescue plans" and other types of support by their home country governments. Banif Financial Group is uncertain as to how much longer governmental support will be needed to keep these banks solvent and whether governments will have the means or the political will to continue this support. Any termination or reduction in the level of government support could result in more bank failures and heightened lack of confidence in the global banking system, thus increasing the challenges faced by Banif and other financial institutions.

The current economic environment creates challenges for Banif and may adversely affect its business, financial condition and results of operations through a general slowdown in the business of Banif, an increase in its cost of funding, higher volatility in the value of Banif's proprietary portfolio, lower results from credit operations, higher credit impairment and heightened liquidity constraints.

Competition in the banking markets

Structural changes in the Portuguese economy over the past several years have significantly increased competition in the Portuguese banking sector. These changes principally relate to the privatisation of several sectors of the economy, including banking and insurance, as well as to the integration of the Portuguese economy into the EU and the introduction of the euro.

Banif's competitors in the Portuguese markets are Portuguese commercial banks and savings banks and foreign banks which have entered the Portuguese market. Over the last years, mergers and acquisitions involving the largest Portuguese banks have resulted in a significant concentration of market share, a process which may continue. Competition has increased further with the emergence of non-traditional distribution channels, such as internet and telephone banking.

Competition levels are affected by consumer demand, technological changes, impact of consolidation, regulatory actions and other factors. If Banif is unable to provide attractive product and service offerings that are profitable, it may lose market share or incur losses on its activities, which could adversely affect its financial condition and its results of operations.

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Although Banif believes that it is in a position to compete in the Portuguese market, there is no assurance that it will be able to compete effectively in the markets in which it operates, or that it will be able to maintain or increase the level of its results of operations. As a result, competition in the Portuguese market can have an adverse effect on the activities of Banif.

Risk of a sovereign rating downgrade

Since April 2010, there has been consecutive downgrading of the long-term debt rating of the Republic of Portugal by rating agencies. The rating agencies' concerns were justified by the lack of significant and credible measures to control the Portuguese budget deficit on behalf of the Portuguese government, when public debt was approaching 100 per cent. of GDP and by the lack of consensus between the Portuguese government and the opposition on measures to be implemented for public finance consolidation in order to achieve the necessary convergence with countries of similar rating. The rating agencies' outlook on the Republic of Portugal will be dependent on the ability of the government to take the measures and meet the targets included in the bailout programme, namely to reduce the public deficit to 3 per cent. of GDP by 2013. The rating of the Republic of Portugal may be further downgraded again in the future in the event of a continued deterioration in public finances resulting from poor economic activity or from the perception that the measures proposed by the government are insufficient. An adverse impact on the Republic of Portugal may result in negative side effects on Portuguese banks and companies in general and hence on their financial results.

In the past, downgrades of the rating of the Republic of Portugal have also led to the rating downgrade of Portuguese banks in general, including Banif, and it is most likely that Banif's rating will continue to be affected by the sovereign rating of its home country and by the developments in the domestic economy.

Risk of a Banif rating downgrade

Credit ratings affect the cost and other terms upon which Banif may obtain funding. Ratings are based on a number of factors, including the relevant Issuer's financial strength and the conditions affecting the industry generally. As at the date of this Base Prospectus, Banif has a long-term debt rating of B1 with a negative outlook from Moody's and BB with a negative outlook from Fitch. Each of Moody's and Fitch is established in the EEA and registered under the CRA Regulation. In light of the difficulties in the Portuguese economy, there can be no assurance that the rating agencies will maintain Banif's current ratings. The recent downgrades of the Portuguese sovereign rating could in turn negatively affect the perception that these agencies have of Banif's rating. Banif's failure to maintain its current ratings or a further downgrade of its rating could increase its cost of funding and may result in the funding markets continuing to be inaccessible to Banif, which could in turn have a material adverse effect on its financial condition and results of operations.

Implications of the European banks' recapitalisation on Banif and on the Portuguese banking system

In light of the ongoing financial crisis, the European Banking Authority ("EBA") published, on 8 December 2011, a formal recommendation, stating that national supervisory authorities should require the banks included in the stress test sample to strengthen their capital positions by building up an exceptional and temporary capital buffer against sovereign debt exposures to reflect market prices as at the end of September 2011. In addition, banks were required to establish an exceptional and temporary buffer such that the Core Tier 1 capital ratio reaches a level of 9 per cent. by the end of June 2012. As a result of the implementation of the Stabilisation Programme, Portuguese banks are also required to comply with tighter regulatory capital ratios and are required to maintain a Core Tier 1 capital ratio of at least 10 per cent. until 31 December 2012.

The participation by Banif in the specific recapitalisation plan of the Portuguese banking system (namely through the credit line of an amount of up to EUR 12 billion foreseen in the Economic and Financial Adjustment Programme ("Programa de Ajustamento Económico e Financeiro")) may require the Portuguese state to take a stake in the share capital of Banif, under conditions to be defined, which may lead to several risks, namely loss of strategic autonomy, loss of interest from private investors and dilution of share capital. In addition, the level of interference and the conditions for the entry and exit of the Portuguese state are still two sensitive points in the recapitalisation plan of the Portuguese banking system, as they may impact the revenue distribution and corporate governance policies, including in relation to managers' remuneration. The acquisition by the Portuguese state of the share capital of

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Banif would also lead to associated financial cost, which would negatively affect Banif's results of operations and financial condition.

Depreciation of real estate assets

Banif has a high exposure to the Portuguese real estate market, both directly through assets related to its own transactions or obtained through "dação em pagamento" (delivery of secured assets by a debtor as a way of discharging unpaid or overdue payment obligations) and, indirectly, through mortgaged properties or through financings for property development projects (assets received by means of "dação em pagamento" in Portugal by Banif corresponded to 3.21 per cent. of its global assets as at 31 December 2011 and the direct exposure to the real estate sector, corresponding to credit granted to construction companies, to real estate activities and mortgage credit, represented 11 per cent. of the consolidated credit portfolio, as at 31 December 2011). This makes Banif vulnerable to a depression in the real estate market and a depreciation in the value of real estate assets. A significant price decrease in the Portuguese real estate market could lead to direct losses, lower coverage of credit exposure with real estate collateral and on pension funds, which could adversely affect both the results of operations and financial situation of Banif.

Soundness of other financial institutions

Banif is exposed to many different counterparties in the normal course of its business; hence its exposure to counterparties in the financial services industry is significant. This exposure can arise through trading, lending, deposit-taking, clearance and settlement and numerous other activities and relationships. These counterparties include institutional clients, brokers and dealers, commercial banks, investment banks and mutual societies. Many of these relationships expose Banif to credit risk in the event of default by a counterparty or client. In addition, Banif's credit risk may be exacerbated when the collateral it holds cannot be realised at, or is liquidated at prices not sufficient to recover, the full amount of the loan or derivative exposure it is due to cover, which could in turn affect the relevant Issuer's ability to meet its payment obligations under the Notes. Many of the hedging and other risk management strategies utilised by Banif also involve transactions with financial services counterparties. The insolvency of these counterparties may impair the effectiveness of Banif's hedging and other risk management strategies, which could in turn affect the relevant Issuer's ability to meet its payment obligations under the Notes and may have a material adverse effect on obligations, Banif's financial condition and results of operations.

Credit risk

Risks arising from changes in credit quality and the recoverability of loans and amounts due from borrowers and counterparties are inherent to a wide range of Banif's business. Adverse changes in the credit quality of Banif's borrowers and counterparties or a general deterioration in Portuguese or global economic conditions, or arising from systemic risks in financial systems, could affect the recoverability and value of Banif's assets and require an increase in Banif's provision for bad and doubtful debts and other provisions, and accordingly would have a material adverse effect on Banif's financial condition and results of operations, including the value of its debt securities in issue.

Accordingly, Banif faces the risk of its borrowers and counterparties being unable to fulfill their payment obligations. While Banif analyses its exposure to such borrowers, as well as its exposure to certain economic sectors and regions which Banif believes to be particularly critical, payment defaults may result from circumstances which are unforeseeable or difficult to predict. In addition, the security and collateral provided to Banif may be insufficient to cover its exposure, for instance, as a result of sudden depreciation in the market which dramatically reduce the value of collateral. As such, in case borrowers or other counterparties fail to comply with their payment obligations to Banif, this would have a material adverse effect on its financial condition and results of operations.

To the extent that Banif's operations are mainly located in Portugal, it is also particularly exposed to the risk of a general economic contraction or to another event affecting default rates in Portugal.

An increase in Banif's provisions for losses resulting from defaulted loans or possible losses which exceed the amount of such provisions may have a significantly adverse effect on its financial condition and results of operations.

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Market risk

Market risk is inherent to adverse changes in the overall valuation of the trading assets, and arises primarily from movements of trading and non-trading market parameters. The major market risks to which Banif is exposed are interest rate, foreign exchange, bond and equity price risks. Movements in interest rate levels, yield curves and spreads may affect the value of assets and liabilities denominated in foreign currencies and may affect income from foreign exchange trading. The performance of financial markets may decrease the value of Banif's investment and trading portfolios. Banif has implemented risk assessment and management methods to mitigate and control these and other market risks which may affect Banif and exposures are constantly assessed and monitored. However, it is difficult to predict with accuracy changes in economic or market conditions and to anticipate the effects that such changes could have on Banif's financial condition and results of operations.

Banif currently engages in various treasury activities for its own account, including placing euro and foreign currency-denominated deposits in the inter-bank market and trading in the primary and secondary markets for government securities. Proprietary trading includes taking positions in the fixed income and equity markets using both cash and derivative products and financial instruments. Although Banif's level of engagement in such activities is limited, proprietary trading involves a degree of risk. Future proprietary trading results will in part depend on market conditions and Banif could incur significant losses, which could adversely affect its financial condition and results of operations.

Liquidity risk

Liquidity is a component of market risk. A lack of liquidity can arise due to a lack of volume, legal restrictions or a one-way market. Liquidity risk, which is also referred to as funding risk, is the inability of a bank such as Banif to anticipate and provide for unforeseen events, decreases or changes in funding sources with consequences on Banif's ability to meet its obligations when they fall due. This risk is managed centrally for the Banif Financial Group as a whole and stress tests are conducted for liquidity risk.

Since the second half of 2007, disruption in the global credit markets, coupled with the re-pricing of credit risk and the deterioration of the housing markets in the United States and elsewhere, created increasingly difficult conditions in the financial markets and had a negative impact on investor confidence. This has negatively affected the interbank markets and debt issues in terms of volume, maturity and credit spreads. Among the sectors of the global credit markets experiencing particular difficulty due to the current crisis are those associated with sub-prime mortgage backed securities, asset backed securities, collateralised debt obligations, leveraged finance and complex structured securities. These conditions have resulted in volatility, less liquidity or no liquidity, widening of credit spreads and a lack of price transparency in certain markets, and have resulted in the failures of a number of financial institutions in the United States and Europe and unprecedented action by government authorities, regulators and central banks around the world. It is difficult to predict how long these conditions will last and the extent to which Banif's investments and the markets in which it operates will be adversely affected.

The pressure exerted by Portuguese and international markets, in relation to the excessive indebtedness of countries and institutions, has driven the cost of funding up and made it more difficult for financial institutions to obtain loans at longer maturities. This has meant that financial institutions have had to redesign their liquidity management policies and financing policies.

In the current context of the financial markets, Banif maintains a permanent oversight of its current liquidity position, not just by way of the indicators contained in the provisions issued by the supervisory authorities, but also by using in-house indicators oriented towards more efficient daily management.

Although Banif considers that its risk management and risk mitigation policies are adequate, a continuation of this market environment could cause Banif's liquidity position to deteriorate. Such deterioration would increase funding costs and limit Banif's capacity to increase its credit portfolio and the total amount of its assets, which could have a material adverse effect on Banif's business, financial condition or results of operations. Further, it is not possible to predict what structural and/or regulatory changes may result from the current market conditions or whether such changes may be materially adverse to Banif. If current market conditions and circumstances deteriorate further, or continue for prolonged periods of time, this could also lead to a decline in available funding, credit quality and increases in defaults and non-performing debt, which may have a negative impact on the rating, investments,

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business, financial condition and results of operations of Banif. In addition, Banif is exposed to the general risk of liquidity shortfalls and cannot ensure that the procedures in place to manage such risks will be suitable to eliminate liquidity risk, which could have a negative impact on its financial condition and results of operations.

Additionally, considering Banif's inability to access the public markets for short or medium-long term funding, its liquidity operations with the ECB are very important. The ECB establishes the valuation and the eligibility criteria for collateral assets to be used on repo transactions with financial institutions. Changes to these valuations or the eligibility criteria can have a negative impact on the amount of available assets for that purpose, and reduce the liquidity lines available from the ECB. Additionally, further downgrades of the long-term debt rating of the Republic of Portugal would result in increased haircuts to any eligible collateral and consequently a reduction in the pool of assets that might be considered eligible collateral. At 31 December 2011, Banif Financial Group's portfolio of securities eligible for rediscount with the ECB stood at € 2,500,460,462. However, there is no assurance that Banif Financial Group will be able to maintain such level of eligible collateral and any changes in the ECB's criteria or further downgrading of the Republic of Portugal could reduce the portfolio of securities that might be considered eligible collateral, which in turn, could have a negative impact on the Banif Financial Group's financial condition and results of operations.

Interest rate risk

Banif is subject to the risks typical of banking activities, such as interest rate fluctuations. Interest rate risk may be defined as the impact on shareholders' equity or on net interest income due to an adverse change in market interest rates. As is the case with other banks in Portugal, Banif, and especially its banking and corporate operations segment, is particularly exposed to differentials between the interest rates payable by it on deposits and the interest rates that it is able to charge on loans to customers and other banks. This exposure stems from the fact that, in the Portuguese market, loans typically have variable interest rates, whereas the interest rates applicable to deposits are usually fixed for periods that vary between three months and three years. As a result, Portuguese banks, including Banif, frequently experience difficulties in adjusting the interest rates that they pay for deposits in line with market interest rate changes. This trend is reinforced by intense competition in the sector. The current low interest rate environment puts pressure on a bank's deposit spread.

If Banif is unable to adjust interest on deposits in line with the changes in market interest rates on loans, or if the monitoring procedures are unable to adequately manage interest rate risk, its interest income could rise less or decline more than its interest expense, in which case Banif's results of operations could be negatively affected.

Operational risk

In the ordinary course of Banif's business and as a result of Banif's organisational structure, Banif is subject to certain operational risks, including interruption of service, errors, fraud, omissions, delays in providing services and risk management requirements. Banif constantly monitors these risks by means of, among other things, advanced administrative and information systems and insurance coverage in respect of certain operational risks. Any failure to execute Banif's risk management and control policies successfully could materially adversely affect Banif's financial condition and results of operations.

Risks associated with the implementation of its risk management policies

As described above, Banif is exposed to a number of risks, including, among others, market risk, credit risk, liquidity risk and operational risk. Although Banif has implemented risk management policies for each of the risks that it is exposed to, taking into account worst case scenarios, the policies and procedures it employs to identify, monitor and manage these risks may, at times, fail to capture the whole of potential risks affecting its activity and therefore could materially adversely affect its financial condition and results of operations.

Regulatory compliance risk

Banif is subject to extensive supervisory and regulatory regimes by the ECB, the Bank of Portugal and the CMVM, mainly relating to liquidity levels, solvency, provisioning, permitted investments, ethical issues, money laundering, privacy, securities (including debt instruments) issuance and offering/placement, financial intermediation issues, record-keeping, marketing and selling practices.

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These various regulations can significantly increase the cost structure of a bank and limit the possibilities for increasing its income. Specific examples where regulation can impact the conduct of Banif's business include the following:

 Currently, the minimum cash requirement applicable to Portuguese banks is fixed at 1 per cent. of the total amount of deposits. An increase in the minimum cash reserves or a decline in the rate accrued on those cash reserves would have an adverse impact on Banif's net income.

 The Portuguese banking groups are required by the Bank of Portugal to maintain a Core Tier I capital ratio of at least 9 per cent. until 30 June 2012 and 10 per cent. until 31 December 2012. Under the requirements of the Bank of Portugal, Banif's Core Tier I capital ratio was 10.1 per cent. as at 31 December 2010 and 10.1 per cent. as at 31 December 2011.

Although the Bank of Portugal's order is an appropriate response to the current financial and economic environment, the capital adequacy requirements applicable to Banif may limit Banif's ability to grant credit to customers and may require it to issue additional equity capital or subordinated debt in the future. Furthermore, capital adequacy ratios such as those mandated by Basel II have a "procyclical" effect, meaning that in difficult credit environments such as at present, a bank may find its capital ratios decreased limiting their ability to increase financing activity.

The regulatory laws governing the activity of Banif may also change at any time in ways which may have an adverse effect on its business. Furthermore, Banif cannot predict the timing or form of any future regulatory initiatives or the precise effects of the new requirements on both its own financial performance or the impact on the pricing of Notes issued under the Programme. Changes in existing regulatory laws may materially affect the way in which Banif conducts its business, the products and services it may offer and the value of its assets, and consequently its financial condition and results of operations.

In addition, the Stabilisation Programme also establishes key leverage reforms and specific medium term funding plans. This increase in supervision from the Bank of Portugal could increase costs and force Banif to dispose of its assets under unfavourable conditions. Banif could also be adversely affected if the requirements for public recapitalisation are implemented in accordance with the Stabilisation Programme.

Risks associated with the ability to maintain Banif's client portfolio

The success of Banif is largely dependent on its ability to maintain its client portfolio and to provide them with a diversified range of competitive and high quality products as well as high service levels.

Any factor affecting Banif's ability to maintain its client portfolio or to offer its clients a wide range of competitive and high quality products or high levels of service could have an adverse effect on its financial situation and the results of operations.

Risks associated with the increasing use of sophisticated information technology (IT) systems

Banking activities are highly dependent on sophisticated IT systems. IT systems are vulnerable to a number of problems, such as software and hardware flaws, criminal intrusion, physical damage to vital components and informatics viruses. IT systems require frequent updates in order to cope with the constant changes in business as well as the increasing regulatory requirements and also to cope with the normal development of Banif's commercial activity. Banif may be unable to implement the necessary updates in time and such updates may not result in improved efficiency or performance as previously planned.

Besides the costs which may be incurred as a result of the potential failure of its IT systems Banif may become subject to fines applied by regulatory entities in the banking sector in case its IT systems do not enable Banif to adequately comply with banking regulations or with reporting requirements. As a result, any significant interruption in the IT systems in place could have a material adverse effect in the activities, the results of operations and the financial condition of Banif.

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Unforeseen events

Unforeseen events such as severe natural catastrophes, terrorist attacks or other states of emergency can lead to an abrupt interruption of Banif's operations, which can cause substantial losses. Such losses can relate to property, financial assets, trading positions and key employees. Such unforeseen events can also lead to additional costs (such as relocation of employees affected) and increase Banif's costs (such as insurance premiums). Such events may also make insurance coverage for certain risks unavailable and thus increase Banif's risk which would adversely affect its financial condition and results of operation.

Risk factors relating to Banif Finance

Banif Finance is a funding vehicle of Banif. As such it raises funds for Banif by way of intra-group loans. In the event that Banif fails to make a payment under an intra-group loan, Banif Finance may not be able to meet its payment obligations under the issued Notes.

Risk factors relating to Banif Madeira

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

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

Risks related to the structure of a particular issue of Notes

A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of certain such features:

Notes subject to optional redemption by the Issuer

An optional redemption feature is likely to limit the market value of Notes. During any period when an Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.

An Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes may bear interest at a rate that an Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. An Issuer's ability to convert the interest rate will affect the secondary market and the market value of such Notes since the relevant Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If an Issuer converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If an Issuer converts from a floating rate to a fixed rate, the fixed rate may be lower than the prevailing rates on its Notes.

Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.

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Risks related to Notes generally

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

Modification and Waivers

The Terms and Conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

EU Savings Directive

Under EC Council Directive 2003/48/EC (the "Directive") on the taxation of savings income, each Member State is required to provide to the tax authorities of another Member State details of payments of interest (or other similar income) paid by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State. However, for a transitional period, Austria and Luxembourg may instead apply a withholding system in relation to such payments, deducting tax at a rate of 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.

A number of non-EU countries and certain dependent or associated territories of certain Member States have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories.

The European Commission has proposed certain amendments to the Directive, which may, if implemented, amend or broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers.

Change of law

The Terms and Conditions of the Notes (other than the Interbolsa Notes) are based on English law in effect as at the date of issue of the relevant Notes. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the relevant Notes.

Risks relating to Interbolsa Notes

Investments in Interbolsa Notes will be subject to Interbolsa procedures and Portuguese law. All payments on Interbolsa Notes (including without limitation the payment of accrued interest and principal) will be made by Banif. The Noteholders must rely on the procedures of Interbolsa to receive payment under the Interbolsa Notes. The records relating to payments made in respect of beneficial interests in the Interbolsa Notes are maintained by the Affiliate Members of Interbolsa and Banif accepts no responsibility for, and will not be liable in respect of, maintenance of such records.

Pursuant to Decree Law 193/2005, of 7 November 2005 (as amended from time to time), investment income paid to holders of Interbolsa Notes, and capital gains resulting from a sale or other disposal of such Notes, will be exempt from Portuguese income tax only if certain documentation requirements are duly complied with.

If the Interbolsa Notes are held in an account with an international clearing system (such as Euroclear or Clearstream, Luxembourg), the management entity of such clearing system may not provide the necessary registration services in respect of the Interbolsa Notes and therefore, in order to be eligible for the exemption, the holders of the Interbolsa Notes are required to submit to the management entity of the relevant clearing system, by courier, hand delivery or mail (there is no procedure for electronic filing), on an annual basis:

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(i) a certificate with the name of each beneficial owner, address, tax payer number (if applicable), identification of the securities, amount of securities held and reference to the relevant legislation supporting the exemption or waiver from Portuguese withholding tax; or

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

The forms of certificate and declaration are set out in "Taxation – Portugal" below.

The Issuer will not gross up payments in respect of any such withholding tax in any cases indicated in Condition 10 (Taxation) of the Interbolsa Notes, including failure to deliver or incorrect filing of the certificate or declaration referred to above. Accordingly, holders of Interbolsa Notes must seek their own advice to ensure that they comply with all procedures to ensure correct tax treatment of their Interbolsa Notes.

Risks related to the market generally

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

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.

Exchange rate risks and exchange controls

Each Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency- equivalent value of the principal payable on the Notes and (3) the Investor's Currency-equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

Interest rate risks

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of Fixed Rate Notes.

Credit ratings may not reflect all risks

Notes issued under the Programme may be rated by Moody's and/or Fitch. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.

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In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA Regulation (and such registration has not been withdrawn or suspended). Such general restriction will also apply in the case of credit ratings issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). Certain information with respect to Banif's ratings and the credit rating agencies which have assigned such ratings is set out on the front page of this Base Prospectus. Where a Tranche of Notes is rated, such rating will be specified in the relevant Final Terms and will not necessarily be the same as the rating assigned to the relevant Issuer.

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

The value of the Notes is expected to be affected, in part, by investors' general appraisal of the creditworthiness of the relevant Issuer. Such perceptions are generally influenced by the ratings accorded to the outstanding Notes of such Issuer by standard statistical rating services. A reduction in, or a placing on credit watch of the rating, if any, accorded to outstanding Notes of such Issuer by a rating agency could result in a reduction in the trading value of the Notes.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.

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INFORMATION INCORPORATED BY REFERENCE

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

1. Unaudited consolidated financial statements of the Banif Financial Group in respect of the 6 months ended 30 June 2012, including:

(a) Consolidated Balance Sheet (pages 2 to 3);

(b) Consolidated Income Statement (page 4);

(c) Consolidated Statement of changes in Shareholders' Funds (page 5);

(d) Cash flow statement as at 30 June 2012 and 30 June 2011 (page 6); and

(e) Notes to the consolidated financial statements (pages 7 to 69);

2. Audited consolidated financial statements and auditors' report of the Banif Financial Group in respect of the financial year ended 31 December 2011, including:

(a) Consolidated Balance Sheet (page 2);

(b) Consolidated Income Statement (page 3);

(c) Consolidated Statement of changes in Shareholders' Funds (page 4);

(d) Cash flow statement as at 31 December 2011 and 2010 (page 6);

(e) Notes to the consolidated financial statements (pages 7 to 126); and

(f) Report of the Statutory and Independent Auditor (pages 129 to 131);

3. Audited consolidated financial statements and auditors' reports of the Banif Financial Group in respect of the financial year ended 31 December 2010, including:

(a) Consolidated Balance Sheet (page 2);

(b) Consolidated Income Statement (page 3);

(c) Consolidated Statement of changes in Shareholders' Funds (page 4);

(d) Cash flow statement as at 31 December 2010 and 2009 (page 5);

(e) Notes to the consolidated financial statements (pages 6 to 100); and

(f) Report of the Statutory and Independent Auditor (pages 103 to 106);

4. Unaudited unconsolidated financial statements of Banif in respect of the 6 months ended 30 June 2012, including:

(a) Balance Sheet (page 2)

(b) Income statement (page 3)

(c) Statement of changes in equity (page 4); and

(d) Cash flow statement as at 30 June 2012 and 30 June 2011 (page 5); and

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(e) Notes to the financial statements (pages 6 to 62);

5. Audited unconsolidated financial statements and auditors' report of Banif in respect of the year ended 31 December 2011, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in equity (page 4);

(d) Cash flow statement as at 31 December 2011 and 31 December 2010 (page 5);

(e) Notes to the financial statements (pages 6 to 103); and

(f) Report of the Statutory and External Auditor (pages 104 to 107);

6. Audited unconsolidated financial statements and auditors' report of Banif in respect of the year ended 31 December 2010, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in equity (page 4);

(d) Cash flow statement as at 31 December 2010 and 31 December 2009 (page 5);

(e) Notes to the financial statements (pages 6 to 93); and

(f) Report of the Statutory and External Auditor (pages 94 to 95);

7. Half-yearly Financial Report of Banif Finance dated 30 June 2012 including unaudited unconsolidated financial statements of Banif Finance in respect of the 6 months ended 30 June 2012, including:

(a) Balance Sheet (page 3);

(b) Income Statement (page 4);

(c) Statement of changes in equity (page 6);

(d) Statement of Cash flow as at 30 June 2012 and 30 June 2011 (page 7); and

(e) Notes to the interim financial statements (pages 8 to 23);

8. Audited unconsolidated financial statements and auditors' report of Banif Finance in respect of the year ended 31 December 2011, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in equity (page 4);

(d) Statement of Cash flow as at 31 December 2011 and 31 December 2010 (page 5);

(e) Notes to the financial statements (pages 6 to 23); and

(f) Independent Auditors' report (page 24);

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9. Audited unconsolidated financial statements and auditors' report of Banif Finance in respect of the year ended 31 December 2010, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in equity (page 4);

(d) Statement of Cash flow as at 31 December 2010 and 31 December 2009 (page 5);

(e) Notes to the financial statements (page 6 to 24); and

(f) Independent Auditors' report (page 25);

10. Unaudited unconsolidated financial statements of Banif Madeira in respect of the 6 months ended 30 June 2012, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in shareholders' funds (page 4); and

(d) Cash flow statement as at 30 June 2012 and 30 June 2011 (page 5);

11. Unaudited unconsolidated financial statements of Banif Madeira in respect of the year ended 31 December 2011, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in shareholders' funds (page 4); and

(d) Cash flow statement as at 31 December 2011 and 31 December 2010 (page 5);

12. Unaudited unconsolidated financial statements of Banif Madeira in respect of the year ended 31 December 2010, including:

(a) Balance Sheet (page 2);

(b) Income Statement (page 3);

(c) Statement of changes in shareholders' funds (page 4); and

(d) Cash flow statement as at 31 December 2010 and 31 December 2009 (page 5);

13. The terms and conditions set out on pages 25 to 55 of the base prospectus dated 8 August 2008 relating to the Programme under the heading "Terms and Conditions of the Notes" (the "2008 Conditions");

14. The terms and conditions set out on pages 25 to 60 of the base prospectus dated 16 December 2009 relating to the Programme under the heading "Terms and Conditions of the Notes" (the "2009 Conditions"); and

15. The terms and conditions set out on pages 31 to 66 of the base prospectus dated 22 February 2011 relating to the Programme under the heading "Terms and Conditions of the Notes" (the "2011 Conditions"),

provided, however, that any statement contained in this Base Prospectus or in any of the documents incorporated by reference in, and forming part of, this Base Prospectus shall be deemed to be modified or

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superseded for the purpose of this Base Prospectus to the extent that a statement contained in any document subsequently incorporated by reference modifies or supersedes such statement.

Any non incorporated parts in any of the documents incorporated by reference are not relevant for the investor or are covered elsewhere in this Base Prospectus.

The Issuers will, at the specified offices of the Paying Agents, provide, free of charge, upon oral or written request, a copy of this Base Prospectus (or any document incorporated by reference in this Base Prospectus unless such documents have been modified or superseded). Written or telephone requests for such documents should be directed to the specified office of any Paying Agent or the specified office of the Listing Agent in Luxembourg.

This Base Prospectus and the documents incorporated by reference are available for viewing at www.bourse.lu.

Any information not listed in the cross-reference list but included in the documents incorporated by reference is given for information purposes only.

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GENERAL DESCRIPTION OF THE PROGRAMME

Under the Programme, Banif and Banif Finance may from time to time issue Notes to one or more of the Dealers. The maximum aggregate principal amount of all Notes any time outstanding under the Programme will not exceed €2,500,000,000 (or its equivalent in any other currency). The Issuers may increase the amount of the Programme in accordance with the terms of the Dealer Agreement (as defined below) from time to time.

Notes issued by Banif Finance may have the benefit of a Guarantee given by Banif Madeira. The Guarantee constitutes an unconditional, unsecured and unsubordinated obligation of Banif Madeira and ranks pari passu with all other unsecured and unsubordinated obligations of Banif Madeira.

The Notes may be issued on a continuing basis to one or more of the Dealers and any additional Dealer appointed under the Programme from time to time by the Issuer(s), which appointment may be for a specific issue or on an ongoing basis. Notes may be distributed by way of public offer or private placements and, in each case, on a syndicated or non-syndicated basis. The method of distribution of each tranche of Notes will be stated in the Final Terms.

The Notes will be issued in series (each, a "Series"). Each Series may comprise one or more tranches issued on different dates. The specific terms of each tranche of Notes will be set forth in the Final Terms.

Notes will be issued in such denominations as may be agreed between the relevant Issuer and the relevant Dealer(s) and as indicated in the Final Terms save that the minimum denomination of the Notes will be, if in euro, EUR 1,000, or, if in any currency other than euro, an amount in such other currency equal to or exceeding the equivalent of EUR 1,000 at the time of the issue of Notes.

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

Application has been made to list Notes on the official list of the Luxembourg Stock Exchange and to trade Notes on the Luxembourg Stock Exchange's regulated market ("Bourse de Luxembourg"). The Programme provides that Notes may also be listed on other or further stock exchanges, as may be agreed between the relevant Issuer and the relevant Dealer(s) in relation to each issue. Notes may further be issued under the Programme which will not be listed on any stock exchange.

Notes will be accepted for clearing through one or more Clearing Systems as specified in the Final Terms. These systems will include those operated by Clearstream Banking, société anonyme and Euroclear Bank S.A./N.V. and, for Interbolsa Notes, Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A. ("Interbolsa").

Banque Internationale à Luxembourg, société anonyme will act as paying agent.

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

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SUPPLEMENT TO THE BASE PROSPECTUS

The Issuers and the Guarantor have undertaken, in connection with the listing of the Notes on the official list of the Luxembourg Stock Exchange, that if at any time during the duration of the Programme there is a significant new factor, mistake or material inaccuracy relating to information contained in this Base Prospectus whose inclusion would reasonably be required by investors and their professional advisers, and would reasonably be expected by them to be found in this Base Prospectus for the purpose of making an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuers and the Guarantor or any change in the information set out under "Terms and Conditions of the Notes", the Issuers and the Guarantor will prepare or procure the preparation of a supplement to this Base Prospectus or, as the case may be, publish a new Base Prospectus, for use in connection with any subsequent issue by an Issuer of Notes to be listed on the official list of the Luxembourg Stock Exchange and to be admitted to trading on the Luxembourg Stock Exchange's regulated market or to be listed and admitted to trading on any other regulated market for the purposes of Directive 2004/39/EC.

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FORMS OF THE NOTES

1. Bearer Notes

Each Tranche of Notes (except Interbolsa Notes) will initially be in the form of either a temporary global note (the "Temporary Global Note"), without interest coupons, or a permanent global note (the "Permanent Global Note"), without interest coupons, in each case as specified in the relevant Final Terms or Drawdown Prospectus. Each Temporary Global Note or, as the case may be, Permanent Global Note (each a "Global Note") which is not intended to be issued in new global note ("NGN") form, as specified in the relevant Final Terms, will be deposited on or around the issue date of the relevant Tranche of the Notes with a depositary or a common depositary for Euroclear Bank S.A./N.V. ("Euroclear") and/or Clearstream Banking, société anonyme ("Clearstream, Luxembourg") and/or any other relevant clearing system and each Global Note which is intended to be issued in NGN form, as specified in the relevant Final Terms, will be deposited on or around the issue date of the relevant Tranche of the Notes with a common safekeeper for Euroclear and/or Clearstream, Luxembourg.

On 13 June 2006 the ECB announced that Notes in NGN form are in compliance with the "Standards for the use of EU securities settlement systems in ESCB credit operations" of the central banking system for the euro (the "Eurosystem"), provided that certain other criteria are fulfilled. At the same time the ECB also announced that arrangements for Notes in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2006 and that debt securities in global bearer form issued through Euroclear and Clearstream, Luxembourg after 31 December 2006 will only be eligible as collateral for Eurosystem operations if the NGN form is used.

The relevant Final Terms will also specify whether United States Treasury Regulation §1.163-5(c)(2)(i)(C) (the "TEFRA C Rules") or United States Treasury Regulation §1.163-5(c)(2)(i)(D) (the "TEFRA D Rules") are applicable in relation to the Notes or, if the Notes do not have a maturity of more than 365 days, that neither the TEFRA C Rules nor the TEFRA D Rules are applicable.

Temporary Global Note exchangeable for Permanent Global Note

If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note exchangeable for a Permanent Global Note", then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, for interests in a Permanent Global Note, without interest coupons, not earlier than 40 days after the issue date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership. No payments will be made under the Temporary Global Note unless exchange for interests in the Permanent Global Note is improperly withheld or refused. In addition, interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership.

Whenever any interest in the Temporary Global Note is to be exchanged for an interest in a Permanent Global Note, the relevant Issuer shall procure (in the case of first exchange) the prompt delivery (free of charge to the bearer) of such Permanent Global Note to the bearer of the Temporary Global Note or (in the case of any subsequent exchange) an increase in the principal amount of the Permanent Global Note in accordance with its terms against:

(i) presentation and (in the case of final exchange) surrender of the Temporary Global Note to or to the order of the Principal Paying Agent; and

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

within 7 days of the bearer requesting such exchange.

The principal amount of the Permanent Global Note shall be equal to the aggregate of the principal amounts specified in the certificates of non-U.S. beneficial ownership; provided, however, that in no circumstances

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shall the principal amount of the Permanent Global Note exceed the initial principal amount of the Temporary Global Note.

The Permanent Global Note will be exchangeable in whole, but not in part, for Notes in definitive form ("Definitive Notes"):

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

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

(iii) if the relevant Final Terms specifies "in the limited circumstances described in the Permanent Global Note", then if (a) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business and has in fact done so and no successor clearing system satisfactory to the Trustee is available or (b) any of the circumstances described in Condition 12 (Events of Default) occurs.

Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Principal Paying Agent within 30 days of the bearer requesting such exchange.

Temporary Global Note exchangeable for Definitive Notes

If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note exchangeable for Definitive Notes" and also specifies that the TEFRA C Rules are applicable or that neither the TEFRA C Rules or the TEFRA D Rules are applicable, then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole but not in part, for Definitive Notes not earlier than 40 days after the issue date of the relevant Tranche of the Notes.

If the relevant Final Terms specifies the form of Notes as being "Temporary Global Note exchangeable for Definitive Notes" and also specifies that the TEFRA D Rules are applicable, then the Notes will initially be in the form of a Temporary Global Note which will be exchangeable, in whole or in part, for Definitive Notes not earlier than 40 days after the issue date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership.

Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Temporary Global Note to the bearer of the Temporary Global Note against the surrender of the Temporary Global Note to or to the order of the Principal Paying Agent within 30 days of the bearer requesting such exchange.

Permanent Global Note exchangeable for Definitive Notes

If the relevant Final Terms specifies the form of Notes as being "Permanent Global Note exchangeable for Definitive Notes", then the Notes will initially be in the form of a Permanent Global Note which will be exchangeable in whole, but not in part, for Definitive Notes:

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

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

(iii) if the relevant Final Terms specifies "in the limited circumstances described in the Permanent Global Note", then if (a) Euroclear or Clearstream, Luxembourg or any other relevant clearing

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system is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (b) any of the circumstances described in Condition 12 (Events of Default) occurs.

Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Principal Paying Agent within 30 days of the bearer requesting such exchange.

Terms and Conditions applicable to the Notes

The terms and conditions applicable to any Definitive Note will be endorsed on that Note and will consist of the terms and conditions set out under "Terms and Conditions of the Notes" below and the provisions of the relevant Final Terms which supplement, amend and/or replace those terms and conditions.

The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to the Note were it in definitive form to the extent described under "Summary of Provisions Relating to the Notes while in Global Form" below.

Legend concerning United States persons

In the case of any Tranche of Notes having a maturity of more than 365 days, the Notes in global form, the Notes in definitive form and any Coupons and Talons appertaining thereto will bear a legend to the following effect:

"Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code."

The sections referred to in such legend provide that a United States person who holds a Note, Coupon or Talon will generally not be allowed to deduct any loss realised on the sale, exchange or redemption of such Note, Coupon or Talon and any gain (which might otherwise be characterised as capital gain) recognised on such sale, exchange or redemption will be treated as ordinary income.

2. Interbolsa Notes

Notes held through Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A. ("Interbolsa") (each an "Interbolsa Note") will be represented in dematerialised book-entry (escriturais) registered (nominativas) form. Interbolsa Notes shall not be issued in bearer form (ao portador), whether in definitive form or otherwise.

Title to Interbolsa Notes will be evidenced by book-entries in accordance with the Portuguese Securities Code and the regulations issued by the CMVM, by Interbolsa or otherwise applicable thereto. Each person shown in the book-entry records of a financial institution which is licensed to act as a financial intermediary and which is entitled to hold control accounts with Interbolsa on behalf of their customers and which includes any depositary banks appointed by Euroclear and Clearstream, Luxembourg for the purpose of holding accounts on behalf of Euroclear and Clearstream, Luxembourg (each such institution an "Affiliate Member of Interbolsa") as having an interest in the Interbolsa Notes shall be the holder of the principal amount of Interbolsa Notes recorded.

Title to the Interbolsa Notes is subject to compliance with all rules, restrictions and requirements applicable to the activities of Interbolsa and to Portuguese law.

One or more certificates in relation to the Interbolsa Notes (each a "Certificate") will be delivered by the relevant Affiliate Member of Interbolsa in respect of a registered holding of Interbolsa Notes upon the

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request by the relevant Noteholder and in accordance with that Affiliate Member of Interbolsa's procedures pursuant to Article 78 of the Portuguese Securities Code.

The Interbolsa Notes will be registered in the relevant control issue account of the Issuer with Interbolsa and will be held in control accounts held by each Affiliate Member of Interbolsa on behalf of the Noteholders. Such control accounts will reflect at all times the aggregate number of Interbolsa Notes held in individual securities accounts opened with the Affiliate Members of Interbolsa by Noteholders, which are clients of the Affiliate Members of Interbolsa and include Euroclear and Clearstream, Luxembourg.

The person or entity registered in the relevant individual securities accounts of an Affiliate Member of Interbolsa (the "Book-Entry Registry" and each such entry a "Book Entry") as the holder of any Interbolsa Note shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein).

The Issuer and the Paying Agents may (to the fullest extent permitted by applicable law) deem and treat the person or entity registered in the Book-Entry Registry as the holder of any Interbolsa Note and the absolute owner for all purposes. Proof of such registration is made by means of a Certificate issued by the relevant Affiliate Member of Interbolsa pursuant to Article 78 of the Portuguese Securities Code.

No Noteholder will be able to transfer Interbolsa Notes, or any interest therein, except in accordance with Portuguese law and regulations. The transfer of Interbolsa Notes and their beneficial interests will be made through Interbolsa. Interbolsa Notes may only be transferred in accordance with the applicable procedures established by the Portuguese Securities Code and the regulations issued by the CMVM and Interbolsa.

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TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions which, as completed by the relevant Final Terms, will be incorporated by reference into each Note settled by LCH Clearnet, S.A., the clearing system operated by Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A., each Global Note (as defined below) and endorsed on each Note in definitive form issued under the Programme. In the case of any Tranche of Notes which are being (a) offered to the public in a Member State (other than pursuant to one or more of the exemptions set out in Article 3.2 of the Prospectus Directive) or (b) admitted to trading on a regulated market in a Member State, the relevant Final Terms shall not amend or replace any information in this Base Prospectus. Subject to this, to the extent permitted by applicable law and/or regulation, the Final Terms in respect of any Tranche of Notes may supplement, amend or replace any information in this Base Prospectus.

The terms and conditions applicable to any Note in global form will differ from those terms and conditions which would apply to the Note were it in definitive form to the extent described under "Summary of Provisions Relating to the Notes while in Global Form" below.

1. Introduction

(a) Programme: Banif – Banco Internacional do Funchal, S.A. ("Banif") and Banif Finance, Ltd. ("Banif Finance") (each an "Issuer" and together, the "Issuers") have established a Euro Medium Term Note Programme (the "Programme") for the issuance of up to EUR 2,500,000,000 in aggregate principal amount of notes (the "Notes"), with Notes issued by Banif Finance having the option of being guaranteed by Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) ("Banif Madeira") (the "Guarantor").

(b) Final Terms: Notes issued under the Programme are issued in series (each a "Series") and each Series may comprise one or more tranches (each a "Tranche") of Notes. Each Tranche of Notes is the subject of a final terms (the "Final Terms") which completes these terms and conditions (the "Conditions"). The terms and conditions applicable to any particular Tranche of Notes are these Conditions as completed by the relevant Final Terms. In the event of any inconsistency between these Conditions and/or, for Notes other than Interbolsa Notes, the Trust Deed and/or the relevant Final Terms, the relevant Final Terms shall prevail.

Copies of the relevant Final Terms are available for inspection and may be obtained by holders of the Notes (the "Noteholders") during normal business hours at the Specified Office of the Trustee, the Specified Office of the Principal Paying Agent, the Specified Office of the Paying Agent in Luxembourg and on the website of the Luxembourg Stock Exchange at www.bourse.lu, and for Interbolsa Notes, the Specified Office of the Portuguese Paying Agent, the initial Specified Offices of which are set out below.

(c) Trust Deed: The Notes (except for Interbolsa Notes) are constituted by, are subject to, and have the benefit of, an amended and restated trust deed dated 4 October 2012 (the "Trust Deed") made between the Issuers, the Guarantor and Citicorp Trustee Company Limited as trustee (the "Trustee" which expression shall include all persons for the time being the trustee or trustees appointed under the Trust Deed). Interbolsa Notes are constituted by entries in individual securities accounts opened by Noteholders with the Affiliate Members of Interbolsa (as defined below).

(d) Agency Agreement: The Notes are the subject of an amended and restated issue and paying agency agreement dated 4 October 2012 (the "Agency Agreement") between the Issuers, the Guarantor, the Trustee, Citibank, N.A. as principal paying agent (the "Principal Paying Agent", which expression includes any successor principal paying agent appointed from time to time in connection with the Notes) and the paying agents named therein (together with the Principal Paying Agent, the "Paying Agents", which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes). The Interbolsa Notes have the benefit of the Agency Agreement as amended by an amendment agreement (the "Interbolsa Notes Agency Agreement") dated 4 October 2012 and made between the Issuers, the Guarantor, the Trustee, the Principal Paying Agent, Citibank International plc, Sucursal em Portugal acting as paying agent in Portugal (the "Portuguese Paying Agent" which expression shall include any successor Portuguese Paying Agent) and the other paying agents named therein (together with the Principal Paying Agent, the Portuguese Paying Agent and the other paying agents named in the

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Agency Agreement, the "Agents", which expression shall include any additional or successor paying agents).

(e) The Notes: All subsequent references in these Conditions to "Notes" shall mean:

(i) in relation to any Notes represented by a global Note (a "Global Note"), units of the lowest Specified Denomination in the Specified Currency;

(ii) definitive Notes issued in exchange for a Global Note (the "Definitive Notes");

(iii) any Global Note; and

(iv) Notes held through Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A. ("Interbolsa") (each an "Interbolsa Note"). Interbolsa Notes will only be issued by Banif acting through its head office and will not be issued by Banif Finance.

All subsequent references in these Conditions to the "Issuer" or, as the case may be, the "Guarantor" are to the Issuer, or as the case may be, the Guarantor, of the relevant Notes.

(f) Noteholders: Any reference to "Noteholders" or "holders" in relation to any Notes shall mean (i) in the case of bearer Notes, the holders of the Global Notes and Definitive Notes and shall, in relation any Notes represented by a Global Note, be construed as provided below, or (ii) in the case of Interbolsa Notes, each person shown in the book-entry records of a financial institution which is licensed to act as a financial intermediary under the Portuguese Securities Code (Código dos Valores Mobiliários, the "Portuguese Securities Code") and which is entitled to hold control accounts with Interbolsa on behalf of their customers (and includes any depositary banks appointed by Euroclear and/or Clearstream, Luxembourg) (each such institution an "Affiliate Member of Interbolsa") as having an interest in the principal amount of the Interbolsa Notes. Any reference herein to "Couponholders" shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons.

(g) Common Representative: The holders of Interbolsa Notes shall at all times be entitled, by means of an Extraordinary Resolution, to appoint and dismiss a Common Representative to act as their common representative, as further described in Condition 22 (Common Representatives).

(h) Summaries: Certain provisions of these Conditions are summaries of the Trust Deed, the Agency Agreement and the Interbolsa Notes Agency Agreement 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, the Agency Agreement and the Interbolsa Notes Agency Agreement applicable to them. Copies of the Trust Deed, Agency Agreement and the Interbolsa Notes Agency Agreement are available for inspection by Noteholders during normal business hours at the registered office of the Trustee and the Specified Offices of each of the Paying Agents.

2. Interpretation

(a) Definitions: In these Conditions the following expressions have the following meanings:

"Accrual Yield" has the meaning given in the relevant Final Terms;

"Additional Business Centre(s)" means the city or cities specified as such in the relevant Final Terms;

"Additional Financial Centre(s)" means the city or cities specified as such in the relevant Final Terms;

"Affiliate Member of Interbolsa" means any authorised financial intermediary institution entitled to hold control accounts with Interbolsa on behalf of their customers and which includes any depository banks appointed by Euroclear and Clearstream Luxembourg for the purpose of holding accounts on behalf of Euroclear and Clearstream Luxembourg, respectively;

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"Book Entry Registry" means the book entry securities registry system applicable to the Interbolsa Notes, which is subject to the rules, regulations and procedures under which Interbolsa operates in respect of book entry securities;

"Business Day" means:

(i) in relation to any sum payable in euro, a TARGET Settlement Day and a day on which commercial banks and foreign exchange markets settle payments generally in each (if any) Additional Business Centre; and

(ii) in relation to any sum payable in a currency other than euro, a day on which commercial banks and foreign exchange markets settle payments generally in London, in the Principal Financial Centre of the relevant currency and in each (if any) Additional Business Centre;

"Business Day Convention", in relation to any particular date, has the meaning given in the relevant Final Terms and, if so specified in the relevant Final Terms, may have different meanings in relation to different dates and, in this context, the following expressions shall have the following meanings:

(i) "Following Business Day Convention" means that the relevant date shall be postponed to the first following day that is a Business Day;

(ii) "Modified Following Business Day Convention" or "Modified Business Day Convention" means that the relevant date shall be postponed to the first following day that is a Business Day unless that day falls in the next calendar month in which case that date will be the first preceding day that is a Business Day;

(iii) "Preceding Business Day Convention" means that the relevant date shall be brought forward to the first preceding day that is a Business Day;

(iv) "FRN Convention", "Floating Rate Convention" or "Eurodollar Convention" means that each relevant date shall be the date which numerically corresponds to the preceding such date in the calendar month which is the number of months specified in the relevant Final Terms as the Specified Period after the calendar month in which the preceding such date occurred provided, however, that:

(A) if there is no such numerically corresponding day in the calendar month in which any such date should occur, then such date will be the last day which is a Business Day in that calendar month;

(B) if any such date would otherwise fall on a day which is not a Business Day, then such date will be the first following day which is a Business Day unless that day falls in the next calendar month, in which case it will be the first preceding day which is a Business Day; and

(C) if the preceding such date occurred on the last day in a calendar month which was a Business Day, then all subsequent such dates will be the last day which is a Business Day in the calendar month which is the specified number of months after the calendar month in which the preceding such date occurred; and

(v) "No Adjustment" means that the relevant date shall not be adjusted in accordance with any Business Day Convention;

"Calculation Agent" means the Principal Paying Agent or such other Person specified in the relevant Final Terms as the party responsible for calculating the Rate(s) of Interest and Interest Amount(s) and/or such other amount(s) as may be specified in the relevant Final Terms;

"Calculation Amount" has the meaning given in the relevant Final Terms;

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"CMVM" means the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários);

"Common Representative" means a law firm, an accountant's firm or an individual person (which is not a Noteholder), which may be appointed by the Noteholders under Article 358 of the Portuguese Companies Code and pursuant to Condition 22 (Common Representatives);

"CVM" means the Portuguese centralised system of registration of securities (Central de Valores Mobiliários) composed of interconnected securities accounts, through which securities (and inherent rights) are created, held and transferred, and which allows Interbolsa to control the amount of securities so created, held and transferred;

"Coupon Sheet" means, in respect of a Note in definitive form, a coupon sheet relating to the Note;

"Day Count Fraction" means, in respect of the calculation of an amount for any period of time (the "Calculation Period"), such day count fraction as may be specified in these Conditions or the relevant Final Terms and:

(i) if "Actual/Actual (ICMA)" is so specified, means:

(A) where the Calculation Period is equal to or shorter than the Regular Period during which it falls, the actual number of days in the Calculation Period divided by the product of (1) the actual number of days in such Regular Period and (2) the number of Regular Periods in any year; and

(B) where the Calculation Period is longer than one Regular Period, the sum of:

(1) the actual number of days in such Calculation Period falling in the Regular Period in which it begins divided by the product of (1) the actual number of days in such Regular Period and (2) the number of Regular Periods in any year; and

(2) the actual number of days in such Calculation Period falling in the next Regular Period divided by the product of (1) the actual number of days in such Regular Period and (2) the number of Regular Periods in any year;

(ii) if "Actual/365" or "Actual/Actual (ISDA)" is so specified, means the actual number of days in the Calculation Period divided by 365 (or, if any portion of the Calculation Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Calculation Period falling in a non leap year divided by 365);

(iii) if "Actual/365 (Fixed)" is so specified, means the actual number of days in the Calculation Period divided by 365;

(iv) if "Actual/360" is so specified, means the actual number of days in the Calculation Period divided by 360;

(v) if "30/360" is so specified, means the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30 day months (unless (i) the last day of the Calculation Period is the 31st day of a month but the first day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30 day month, or (ii) the last day of the Calculation Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30 day month)); and

(vi) if "30E/360" or "Eurobond Basis" is so specified means, the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30 day months, without regard to the date of the first day or last day of the Calculation Period

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unless, in the case of the final Calculation Period, the date of final maturity is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30 day month);

"Early Redemption Amount (Tax)" means, in respect of any Note, its principal amount or such other amount as may be specified in the relevant Final Terms;

"EURIBOR" means, in respect of any specified currency and any specified period, the interest rate benchmark known as the Euro zone interbank offered rate which is calculated and published by a designated distributor (currently Thomson Reuters) in accordance with the requirements from time to time of the European Banking Federation based on estimated interbank borrowing rates for a number of designated currencies and maturities which are provided, in respect of each such currency, by a panel of contributor banks (details of historic EURIBOR rates can be obtained from the designated distributor);

"Extraordinary Resolution" has the meaning given in the Trust Deed;

"Final Redemption Amount" has the meaning given in the relevant Final Terms;

"First Interest Payment Date" means the date specified in the relevant Final Terms;

"Fixed Coupon Amount" has the meaning given in the relevant Final Terms;

"Guarantee" means, in relation to any Indebtedness of any Person, any obligation of another Person to pay such Indebtedness including (without limitation):

(i) any obligation to purchase such Indebtedness;

(ii) any obligation to lend money, to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such Indebtedness;

(iii) any indemnity against the consequences of a default in the payment of such Indebtedness; and

(iv) any other agreement to be responsible for such Indebtedness;

"Guarantee of the Notes" means the guarantee of certain Notes issued by Banif Finance given by the Guarantor in the Trust Deed;

"Indebtedness" means any indebtedness of any Person for money borrowed or raised including (without limitation) any indebtedness for or in respect of:

(i) amounts raised by acceptance under any acceptance credit facility;

(ii) amounts raised under any note purchase facility;

(iii) the amount of any liability in respect of leases or hire purchase contracts which would, in accordance with applicable law and generally accepted accounting principles, be treated as finance or capital leases;

(iv) the amount of any liability in respect of any purchase price for assets or services the payment of which is deferred for a period in excess of 60 days; and

(v) amounts raised under any other transaction (including, without limitation, any forward sale or purchase agreement) having the commercial effect of a borrowing;

"Interbolsa" means Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A., as management entity of the CVM;

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"Interest Amount" means, in relation to a Note and an Interest Period, the amount of interest payable in respect of that Note for that Interest Period;

"Interest Commencement Date" means the Issue Date of the Notes or such other date as may be specified as the Interest Commencement Date in the relevant Final Terms;

"Interest Determination Date" has the meaning given in the relevant Final Terms;

"Interest Payment Date" means the First Interest Payment Date and any other date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business Day Convention is specified in the relevant Final Terms:

(i) as the same may be adjusted in accordance with the relevant Business Day Convention; or

(ii) if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention and an interval of a number of calendar months is specified in the relevant Final Terms as being the Specified Period, each of such dates as may occur in accordance with the FRN Convention, Floating Rate Convention or Eurodollar Convention at such Specified Period of calendar months following the Interest Commencement Date (in the case of the First Interest Payment Date) or the previous Interest Payment Date (in any other case);

"Interest Period" means each period beginning on (and including) the Interest Commencement Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment Date;

"ISDA Definitions" means the 2000 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.) or, if so specified in the relevant Final Terms, the 2006 ISDA Definitions (as amended and updated as at the date of issue of the first Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published by the International Swaps and Derivatives Association, Inc.);

"Issue Date" has the meaning given in the relevant Final Terms;

"LIBOR" means, in respect of any specified currency and any specified period, the interest rate benchmark known as the London interbank offered rate which is calculated and published by a designated distributor (currently Thomson Reuters) in accordance with the requirements from time to time of the British Bankers' Association based on estimated interbank borrowing rates for a number of designated currencies and maturities which are provided, in respect of each such currency, by a panel of contributor banks (details of historic LIBOR rates can be obtained from the designated distributor);

"Margin" has the meaning given in the relevant Final Terms;

"Maturity Date" has the meaning given in the relevant Final Terms;

"Maximum Redemption Amount" has the meaning given in the relevant Final Terms;

"Minimum Redemption Amount" has the meaning given in the relevant Final Terms;

"Optional Redemption Amount (Call)" has the meaning given in the relevant Final Terms;

"Optional Redemption Amount (Put)" has the meaning given in the relevant Final Terms;

"Optional Redemption Date (Call)" has the meaning given in the relevant Final Terms;

"Optional Redemption Date (Put)" has the meaning given in the relevant Final Terms;

"Participating Member State" means a Member State of the European Communities which adopts the euro as its lawful currency in accordance with the Treaty;

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"Payment Business Day" means:

(A) if the currency of payment is euro, any day which is, (i) a day on which banks in the relevant place of presentation are open for presentation and payment of bearer debt securities and for dealings in foreign currencies; and (ii) in the case of payment by transfer to an account, a TARGET Settlement Day and a day on which dealings in foreign currencies may be carried on in each (if any) Additional Financial Centre; or

(B) if the currency of payment is not euro, any day which is (i) a day on which banks in the relevant place of presentation are open for presentation and payment of bearer debt securities and for dealings in foreign currencies; and (ii) in the case of payment by transfer to an account, a day on which dealings in foreign currencies may be carried on in the Principal Financial Centre of the currency of payment and in each (if any) Additional Financial Centre;

"Permitted Indebtedness" means any Indebtedness which does not exceed, in aggregate, 20 per cent. of Banif's consolidated total assets calculated at the time of creation of the relevant Security Interest by reference to Banif's most recently published financial statements.

"Person" means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality;

"Portuguese Companies Code" means the Portuguese Código das Sociedades Comerciais, approved by Decree-Law 262/86, dated 2 September, as amended from time to time;

"Portuguese Paying Agent" means Citibank International plc, Sucursal em Portugal;

"Portuguese Securities Code" means the Portuguese Código dos Valores Mobiliários, approved by Decree-Law 486/99, dated 13 November, as amended from time to time;

"Principal Financial Centre" means, in relation to any currency, the principal financial centre for that currency provided, however, that:

(i) in relation to euro, it means the principal financial centre of such Member State of the European Communities as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent; and

(ii) in relation to New Zealand dollars, it means either Wellington or Auckland as is selected (in the case of a payment) by the payee or (in the case of a calculation) by the Calculation Agent;

"Put Option Notice" means a notice which must be delivered to a Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder;

"Put Option Receipt" means a receipt issued by a Paying Agent to a depositing Noteholder upon deposit of a Note with such Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder;

"Rate of Interest" means the rate or rates (expressed as a percentage per annum) of interest payable in respect of the Notes specified in the relevant Final Terms or calculated or determined in accordance with the provisions of these Conditions and/or the relevant Final Terms;

"Redemption Amount" means, as appropriate, the Final Redemption Amount, the Early Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption Amount (Put) or such other amount in the nature of a redemption amount as may be specified in the relevant Final Terms;

"Reference Banks" has the meaning given in the relevant Final Terms or, if none, four major banks selected by the Calculation Agent in the market that is most closely connected with the Reference Rate;

"Reference Price" has the meaning given in the relevant Final Terms;

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"Reference Rate" means EURIBOR or LIBOR as specified in the relevant Final Terms in respect of the currency and period specified in the relevant Final Terms;

"Regular Period" means:

(i) in the case of Notes where interest is scheduled to be paid only by means of regular payments, each period from and including the Interest Commencement Date to but excluding the first Interest Payment Date and each successive period from and including one Interest Payment Date to but excluding the next Interest Payment Date;

(ii) in the case of Notes where, apart from the first Interest Period, interest is scheduled to be paid only by means of regular payments, each period from and including a Regular Date falling in any year to but excluding the next Regular Date, where "Regular Date" means the day and month (but not the year) on which any Interest Payment Date falls; and

(iii) in the case of Notes where, apart from one Interest Period other than the first Interest Period, interest is scheduled to be paid only by means of regular payments, each period from and including a Regular Date falling in any year to but excluding the next Regular Date, where "Regular Date" means the day and month (but not the year) on which any Interest Payment Date falls other than the Interest Payment Date falling at the end of the irregular Interest Period;

"Relevant Date" means, in relation to any payment, whichever is the later of (a) the date on which the payment in question first becomes due and (b) if the full amount payable has not been received in the Principal Financial Centre of the currency of payment by the Principal Paying Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Noteholders;

"Relevant Financial Centre" has the meaning given in the relevant Final Terms;

"Relevant Screen Page" means the page, section or other part of a particular information service (including, without limitation, Reuters) specified as the Relevant Screen Page in the relevant Final Terms, or such other page, section or other part as may replace it on that information service or such other information service, in each case, as may be nominated by the Person providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Reference Rate;

"Relevant Time" has the meaning given in the relevant Final Terms;

"Reserved Matter" has the meaning given in Schedule 3 (Provisions for Meetings of Noteholders) 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;

"Specified Currency" has the meaning given in the relevant Final Terms;

"Specified Denomination(s)" has the meaning given in the relevant Final Terms;

"Specified Office" has the meaning given in the Agency Agreement;

"Specified Period" has the meaning given in the relevant Final Terms;

"Subsidiary" means, in relation to any Person (the "first Person") at any particular time, any other Person (the "second Person"):

(i) whose affairs and policies the first Person controls or has the power to control, whether by ownership of share capital, contract, the power to appoint or remove members of the governing body of the second Person or otherwise; or

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(ii) whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first Person;

"Talon" means a talon for further Coupons;

"TARGET2" means the Trans-European Automated Real-Time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007;

"TARGET Settlement Day" means any day on which TARGET2 is open for the settlement of payments in euro;

"Treaty" means the Treaty establishing the European Communities, as amended;

"Zero Coupon Note" means a Note specified as such in the relevant Final Terms.

(b) Interpretation: In these Conditions:

(i) if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are not applicable;

(ii) if Talons are specified in the relevant Final Terms as being attached to the Notes at the time of issue, references to Coupons shall be deemed to include references to Talons;

(iii) if Talons are not specified in the relevant Final Terms as being attached to the Notes at the time of issue, references to Talons are not applicable;

(iv) any reference to principal shall be deemed to include the Redemption Amount, any additional amounts in respect of principal which may be payable under Condition 11 (Taxation) or any undertakings given in addition to or in substitution for that Condition, any premium payable in respect of a Note and any other amount in the nature of principal payable pursuant to these Conditions;

(v) any reference to interest shall be deemed to include any additional amounts in respect of interest which may be payable under Condition 11 (Taxation) or any undertakings given in addition to or in substitution for that Condition and any other amount in the nature of interest payable pursuant to these Conditions;

(vi) references to Notes being "outstanding" shall be construed in accordance with the Trust Deed;

(vii) if an expression is stated in Condition 2(a) (Definitions) to have the meaning given in the relevant Final Terms, but the relevant Final Terms gives no such meaning or specifies that such expression is "not applicable" then such expression is not applicable to the Notes;

(viii) any reference to the Agency Agreement or the Trust Deed shall be construed as a reference to the Agency Agreement or the Trust Deed as the case may be, as amended and or supplemented up to and including the Issue Date of the Notes; and

(ix) any reference to a person includes a reference to that persons successors and permitted assigns.

3. Form Denomination and Title

The Notes (other than the Interbolsa Notes) are in bearer form, in the Specified Denomination(s) with Coupons and, if specified in the relevant Final Terms, Talons attached at the time of issue or, in the case of Interbolsa Notes, represented by dematerialised book-entry ("escriturais") registered ("nominativas") form as specified in the applicable Final Terms.

In the case of a Series of Notes with more than one Specified Denomination, Notes of one Specified Denomination will not be exchangeable for Notes of another Specified Denomination.

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Title to the Notes (other than Interbolsa Notes) and the Coupons will pass by delivery. The holder of any Note or Coupon shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing thereon or any notice of any previous loss or theft thereof) and no Person shall be liable for so treating such holder. No person shall have any right to enforce any term or condition of any Note (other than Interbolsa Notes) or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.

Title to the Interbolsa Notes will be evidenced by book-entries in accordance with the Portuguese Securities Code and the regulations issued by the CMVM, by Interbolsa or otherwise applicable thereto. Each person shown in the book-entry records of a financial institution which is licensed to act as a financial intermediary and which is an Affiliate Member of Interbolsa as having an interest in the Interbolsa Notes shall be the holder of the principal amount of the Interbolsa Notes recorded.

Title to the Interbolsa Notes is subject to compliance with all rules, restrictions and requirements applicable to the activities of Interbolsa.

One or more certificates in relation to the Interbolsa Notes (each a "Certificate") will be delivered by the relevant Affiliate Member of Interbolsa in respect of a registered holding of Interbolsa Notes upon the request by the relevant Noteholder and in accordance with such Affiliate Member of Interbolsa's procedures pursuant to Article 78 of the Portuguese Securities Code.

The Interbolsa Notes will be registered in the relevant control issue account of the Issuer with Interbolsa and will be held in control accounts held by each Affiliate Member of Interbolsa on behalf of the Noteholders. Such control accounts will reflect at all times the aggregate number of Interbolsa Notes held in individual securities accounts opened with the Affiliate Members of Interbolsa by Noteholders which are clients of the Affiliate Members of Interbolsa and include Euroclear and Clearstream, Luxembourg.

The person or entity registered in the relevant individual securities accounts of an Affiliate Member of Interbolsa book-entry registry of the Central de Valores Mobiliários (the "Book-Entry Registry" and each such entry therein a "Book Entry") as the holder of any Interbolsa Note shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein).

The Issuer and the Paying Agents may (to the fullest extent permitted by applicable law) deem and treat the person or entity registered in the Book-Entry Registry as the holder of any Interbolsa Note and the absolute owner for all purposes. Proof of such registration is made by means of Certificate issued by the relevant Affiliate Member of Interbolsa pursuant to Article 78 of the Portuguese Securities Code.

No Noteholder will be able to transfer Interbolsa Notes, or any interest therein, except in accordance with Portuguese law and regulations. Interbolsa Notes may only be transferred in accordance with the applicable procedures established by the Portuguese Securities Code and the regulations issued by the CMVM and Interbolsa.

4. Status and Guarantee

(a) Status of the Notes: The Notes constitute direct, general, unsubordinated and unconditional obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.

(b) Guarantee of the Notes: Where the relevant Issuer is Banif Finance, the Guarantor has in the Trust Deed the option to unconditionally and irrevocably guarantee the due and punctual payment of all principal and interest and other sums from time to time payable by the Issuer in respect of the Notes. This Guarantee of the Notes constitutes direct, general, unsubordinated and unconditional obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured obligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application.

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5. Negative Pledge

So long as any Note remains outstanding (as defined in the Trust Deed or, in respect of Interbolsa Notes, as defined in the Agency Agreement as amended by the Interbolsa Notes Agency Agreement), neither the Issuer nor, if applicable, the Guarantor shall, and the Issuer and, if applicable, the Guarantor shall procure that none of their respective Subsidiaries will, create or permit to subsist any Security Interest upon the whole or any part of its present or future undertaking, assets or revenues (including uncalled capital) to secure any Indebtedness (except where this is Permitted Indebtedness) or Guarantee of Indebtedness (except where this is Permitted Indebtedness) without (a) (except in the case of Interbolsa Notes) at the same time or prior thereto securing the Notes equally and rateably therewith to the satisfaction of the Trustee, (b) (except in the case of Interbolsa Notes) providing such other security for the Notes as the Trustee may in its absolute discretion consider to be not materially less beneficial to the interests of the Noteholders or (c) (in the case of any Notes, including Interbolsa Notes) as may be approved by an Extraordinary Resolution of Noteholders (as described in Condition 16 (Meetings of Noteholders; Modification and Waiver) and in the Trust Deed or, in respect of Interbolsa Notes, in the Agency Agreement as amended by the Interbolsa Notes Agency Agreement), save that the Issuer or, if applicable, the Guarantor, may create or permit to subsist a Security Interest to secure Indebtedness and/or any Guarantee of Indebtedness, (but without the obligation to accord or provide to the Noteholders, an equal and rateable interest in the same or such other security as aforesaid) where such security interest:

(a) is only over such part of the undertaking or assets, present or future, of the Issuer or, if applicable, of the Guarantor, that belonged to a company whose assets or undertaking have become part of the assets or undertakings of the Issuer or, if applicable, of the Guarantor, pursuant to an amalgamation or merger of such company with the Issuer or, if applicable, the Guarantor, which Security Interest exists at the time of such amalgamation or merger and was not created in contemplation thereof or in connection therewith and the principal, nominal or capital amount secured at the time of such amalgamation or merger is not thereafter increased; or

(b) is created over an asset or assets specifically to secure Indebtedness that was granted to the Issuer or, if applicable, the Guarantor for the specific purposes of the Issuer or, if applicable, the Guarantor to acquire the asset or assets that are the subject of the Security Interest in question; or

(c) is created pursuant to any securitisation, asset-backed financing or like arrangement in accordance with normal market practice and whereby the amount of Indebtedness secured by such Security Interest or in respect of which any guarantee or indemnity is secured by such Security Interest is limited to the value of the assets secured; or

(d) is granted in relation to mortgage-backed bonds and/or covered bonds ("Obrigações hipotecárias") and/or public sector covered bonds ("Obrigações sobre o setor público") issued by Banif under Portuguese law.

6. Fixed Rate Note Provisions

(a) Application: This Condition 6 is applicable to the Notes only if the Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable.

(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payable in arrear on each Interest Payment Date, subject as provided in Condition 10 (Payments). Each Note will cease to bear interest from the due date for final redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest in accordance with this Condition 6 (as well after as before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Principal Paying Agent or as the case may be the Trustee has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).

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(c) Fixed Coupon Amount: The amount of interest payable in respect of each Note for any Interest Period shall be the relevant Fixed Coupon Amount and, if the Notes are in more than one Specified Denomination, shall be the relevant Fixed Coupon Amount in respect of the relevant Specified Denomination.

(d) Calculation of interest amount: The amount of interest payable in respect of each Note for any period for which a Fixed Coupon Amount is not specified shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction and rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of such Note divided by the Calculation Amount. For this purpose a "sub-unit" means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent. Interest on Interbolsa Notes will be calculated on the full nominal amount outstanding of the Fixed Rate Notes and will be paid to the Affiliate Members of Interbolsa for distribution by them to the accounts of entitled Noteholders in accordance with Interbolsa's usual rules and operating procedures.

7. Floating Rate Note Provisions

(a) Application: This Condition 7 is applicable to the Notes only if the Floating Rate Note Provisions are specified in the relevant Final Terms as being applicable.

(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payable in arrear on each Interest Payment Date, subject as provided in Condition 10 (Payments). Each Note will cease to bear interest from the due date for final redemption unless, upon due presentation, payment of the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest in accordance with this Condition 7 (as well after as before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after the Principal Paying Agent or as the case may be the Trustee has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).

(c) Screen Rate Determination: If Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each Interest Period will be determined by the Calculation Agent on the following basis:

(i) if the Reference Rate is a composite quotation or customarily supplied by one entity, the Calculation Agent will determine the Reference Rate which appears on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date;

(ii) in any other case, the Calculation Agent will determine the arithmetic mean of the Reference Rates which appear on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date;

(iii) if, in the case of (i) above, such rate does not appear on that page or, in the case of (ii) above, fewer than two such rates appear on that page or if, in either case, the Relevant Screen Page is unavailable, the Calculation Agent will:

(A) request the principal Relevant Financial Centre office of each of the Reference Banks to provide a quotation of the Reference Rate at approximately the Relevant Time on the Interest Determination Date to prime banks in the Relevant Financial Centre interbank market in an amount that is representative for a single transaction in that market at that time; and

(B) determine the arithmetic mean of such quotations; and

(iv) if fewer than two such quotations are provided as requested, the Calculation Agent will determine the arithmetic mean of the rates (being the nearest to the Reference Rate, as determined by the

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Calculation Agent) quoted by major banks in the Principal Financial Centre of the Specified Currency, selected by the Calculation Agent, at approximately 11.00 a.m. (local time in the Principal Financial Centre of the Specified Currency) on the first day of the relevant Interest Period for loans in the Specified Currency to leading European banks for a period equal to the relevant Interest Period and in an amount that is representative for a single transaction in that market at that time,

and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as the case may be) the arithmetic mean so determined; provided, however, that if the Calculation Agent is unable to determine a rate or (as the case may be) an arithmetic mean in accordance with the above provisions in relation to any Interest Period, the Rate of Interest applicable to the Notes during such Interest Period will be the sum of the Margin and the rate or (as the case may be) the arithmetic mean last determined in relation to the Notes in respect of a preceding Interest Period.

(d) ISDA Determination: If ISDA Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each Interest Period will be the sum of the Margin and the relevant ISDA Rate where "ISDA Rate" in relation to any Interest Period means a rate equal to the Floating Rate (as defined in the ISDA Definitions) that would be determined by the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting as Calculation Agent for that interest rate swap transaction under the terms of an agreement incorporating the ISDA Definitions and under which:

(i) the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the relevant Final Terms;

(ii) the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the relevant Final Terms; and

(iii) the relevant Reset Date (as defined in the ISDA Definitions) is either (A) if the relevant Floating Rate Option is based on the London inter-bank offered rate (LIBOR) for a currency, the first day of that Interest Period or (B) in any other case, as specified in the relevant Final Terms.

(e) Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of Interest is specified in the relevant Final Terms, then the Rate of Interest shall in no event be greater than the maximum or be less than the minimum so specified.

(f) Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time at which the Rate of Interest is to be determined in relation to each Interest Period, calculate the Interest Amount payable in respect of each Note for such Interest Period. The Interest Amount will be calculated by applying the Rate of Interest for such Interest Period to the Calculation Amount during such Interest Period, multiplying the product by the relevant Day Count Fraction rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination of the relevant Note divided by the Calculation Amount. For this purpose a "sub-unit" means, in the case of any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, in the case of euro, means one cent. Interest on Interbolsa Notes will be calculated on the full nominal amount outstanding of the relevant Notes and will be paid to the Affiliate Members of Interbolsa for distribution by them to the accounts of entitled Noteholders in accordance with Interbolsa's usual rules and operating procedures.

(g) Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount determined by it, together with the relevant Interest Payment Date, and any other amount(s) required to be determined by it together with any relevant payment date(s) to be notified to the Paying Agents and each competent authority, stock exchange and/or quotation system (if any) by which the Notes have then been admitted to listing, trading and/or quotation as soon as practicable after such determination but (in the case of each Rate of Interest, Interest Amount and Interest Payment Date) in any event not later than the first day of the relevant Interest Period. Notice thereof shall also promptly be given to the Noteholders. The Calculation Agent will

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be entitled to recalculate any Interest Amount (on the basis of the foregoing provisions) without notice in the event of an extension or shortening of the relevant Interest Period. If the Calculation Amount is less than the minimum Specified Denomination the Calculation Agent shall not be obliged to publish each Interest Amount but instead may publish only the Calculation Amount and the Interest Amount in respect of a Note having the minimum Specified Denomination.

(h) Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of this Condition 7 by the Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the Guarantor (if the Notes are guaranteed), the Trustee, the Common Representative, the Paying Agents, the Noteholders and the Couponholders and (subject as aforesaid) no liability to any such Person will attach to the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions for such purposes.

(i) Determination or Calculation by Trustee: If the Calculation Agent fails at any time to determine a Rate of Interest or to calculate an Interest Amount or Additional Interest Amount, the Trustee (except for Interbolsa Notes) or in respect of Interbolsa Notes, any bank designated by the Common Representative for such purpose or, if no such bank is designated, a meeting of the Noteholders by Extraordinary Resolution will determine such Rate of Interest and make such determination or calculation which shall be deemed to have been made by the Calculation Agent. In doing so, the Trustee or the designated bank on the meeting of Noteholders (as the case may be) shall apply all of the provisions of these conditions with any necessary consequential amendments to the extent that, in its sole opinion and with absolute discretion, it can do so and in all other respects it shall do so in such manner as it shall deem fair and reasonable in all the circumstances and will not be liable for any loss, liability, cost, charge or expense which may arise as a result thereof. Any such determination or calculation made by the Trustee or the designated bank on the meeting of Noteholders (as the case may be) shall be binding on the Issuer, the Guarantor (if the Notes are guaranteed), the Paying Agents, the Noteholders and the Couponholders.

8. Zero Coupon Note Provisions

(a) Application: This Condition 8 is applicable to the Notes only if the Zero Coupon Note Provisions are specified in the relevant Final Terms as being applicable.

(b) Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero Coupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be an amount equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price on the basis of the relevant Day Count Fraction from (and including) the Issue Date to (but excluding) whichever is the earlier of (A) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder and (B) the day which is seven days after the Principal Paying Agent, or as the case may be, the Trustee, has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment).

9. Redemption and Purchase

(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their Final Redemption Amount on the Maturity Date, subject as provided in Condition 10 (Payments).

(b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part:

(i) at any time (if the Floating Rate Note Provisions are not specified in the relevant Final Terms as being applicable); or

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(ii) on any Interest Payment Date (if the Floating Rate Note Provisions are specified in the relevant Final Terms as being applicable), on giving not less than 30 nor more than 60 days' notice to the Noteholders (which notice shall be irrevocable), at their Early Redemption Amount (Tax), together with interest accrued (if any) to the date fixed for redemption, if:

(A) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 11 (Taxation) as a result of any change in, or amendment to, the laws or regulations of the country of incorporation of the Issuer, or if different, the country of tax residence of the Issuer, or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date of issue of the first Tranche of the Notes; and

(B) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided, however, that no such notice of redemption shall be given earlier than:

(1) where the Notes may be redeemed at any time, 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due; or

(2) where the Notes may be redeemed only on an Interest Payment Date, 60 days prior to the Interest Payment Date occurring immediately before the earliest date on which the Issuer would be obliged to pay such additional amounts if a payment in respect of the Notes were then due.

Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Agent and the Common Representative (in respect of Interbolsa Notes) or to the Trustee (in respect of Notes other than Interbolsa Notes) (A) a certificate satisfactory to the Agent and the Common Representative (in case of Interbolsa Notes) or the Trustee (in case of Notes other than Interbolsa Notes) signed by two directors of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred of and (B) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment (and the Trustee or, as the case may be, the Agent and the Common Representative, shall be entitled to accept the certificate as sufficient evidence of the satisfaction of the conditions precedent set out above in which event it shall be conclusive and binding on the Noteholders and the Couponholders). Upon the expiry of any such notice as is referred to in this Condition 9(b), the Issuer shall be bound to redeem the Notes in accordance with this Condition 9(b).

(c) Redemption at the option of the Issuer: If the Call Option is specified in the relevant Final Terms as being applicable, the Notes may be redeemed at the option of the Issuer in whole or, if so specified in the relevant Final Terms, in part on any Optional Redemption Date (Call) at the relevant Optional Redemption Amount (Call) on the Issuer's giving not less than 30 nor more than 60 days' notice to the Noteholders and having notified the Agent and the Common Representative (in respect of Interbolsa Notes) or the Trustee (in respect of Notes other than Interbolsa Notes) prior to the provision of such notice (which notice shall be irrevocable and shall oblige the Issuer to redeem the Notes or, as the case may be, the Notes specified in such notice on the relevant Optional Redemption Date (Call) at the Optional Redemption Amount (Call) plus accrued interest (if any) to such date).

(d) Partial redemption: If the Notes are to be redeemed in part only on any date in accordance with Condition 9(c) (Redemption at the option of the Issuer), the Notes to be redeemed shall be selected by the drawing of lots in such place as the Trustee (in respect of Notes other than Interbolsa Notes), or, as the case may be, the Common Representative (in respect of Interbolsa Notes), approves and in such manner as the Trustee or, as the case may be, the Common Representative considers appropriate, subject to compliance with applicable law and the rules of each competent authority, stock exchange and/or quotation system (if any) by which the

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Notes have then been admitted to listing, trading and/or quotation and in accordance with the rules of Interbolsa, in the case of redeemed Notes that are Interbolsa Notes, and the notice to Noteholders referred to in Condition 9(c) (Redemption at the option of the Issuer) shall specify the serial numbers of the Notes so to be redeemed. If any Maximum Redemption Amount or Minimum Redemption Amount is specified in the relevant Final Terms, then the Optional Redemption Amount (Call) shall in no event be greater than the maximum or be less than the minimum so specified.

(e) Redemption at the option of Noteholders: If the Put Option is specified in the relevant Final Terms as being applicable, the Issuer shall, at the option of the holder of any Note redeem such Note on the Optional Redemption Date (Put) specified in the relevant Put Option Notice at the relevant Optional Redemption Amount (Put) together with interest (if any) accrued to such date. In order to exercise the option contained in this Condition 9(e), the holder of a Note must, not less than 30 nor more than 60 days before the relevant Optional Redemption Date (Put), deposit with any Paying Agent such Note together with all unmatured Coupons relating thereto and a duly completed Put Option Notice in the form obtainable from any Paying Agent. The Paying Agent with which a Note is so deposited shall deliver a duly completed Put Option Receipt to the depositing Noteholder. No Note, once deposited with a duly completed Put Option Notice in accordance with this Condition 9(e), may be withdrawn; provided, however, that if, prior to the relevant Optional Redemption Date (Put), any such Note becomes immediately due and payable or, upon due presentation of any such Note on the relevant Optional Redemption Date (Put), payment of the redemption moneys is improperly withheld or refused, the relevant Paying Agent shall mail notification thereof to the depositing Noteholder at such address as may have been given by such Noteholder in the relevant Put Option Notice and shall hold such Note at its Specified Office for collection by the depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any outstanding Note is held by a Paying Agent in accordance with this Condition 9(e), the depositor of such Note and not such Paying Agent shall be deemed to be the holder of such Note for all purposes. If the Note is an Interbolsa Note, in order to exercise the right to require redemption of this Note the holder of this Note must, during normal business hours on a day falling within the notice period, deliver to the Portuguese Paying Agent a Certificate and a duly completed and signed notice of exercise in the form obtainable from the specified office of the Portuguese Paying Agent (an "Interbolsa Notes Put Option Notice", each Interbolsa Notes Put Option Notice or Put Option Notice being a "Put Notice") and in which the holder of the Notes must specify a bank account or, if payment is required to be made by cheque, an address to which payment is to be made under this Condition.

(f) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided in paragraphs (a) to (e) above.

(g) Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant Final Terms, the Redemption Amount payable on redemption of a Zero Coupon Note at any time before the Maturity Date shall be an amount equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price from (and including) the Issue Date to (but excluding) the date fixed for redemption or (as the case may be) the date upon which the Note becomes due and payable.

Where such calculation is to be made for a period which is not a whole number of years, the calculation in respect of the period of less than a full year shall be made on the basis of such Day Count Fraction as may be specified in the Final Terms for the purposes of this Condition 9(g) or, if none is so specified, a Day Count Fraction of 30E/360.

(h) Purchase: The Issuer, the Guarantor or any of their respective Subsidiaries may at any time purchase Notes in the open market or otherwise and at any price, provided that all unmatured Coupons are purchased therewith.

(i) Cancellation: All unmatured Notes so redeemed or purchased in accordance with this Condition 9 by the Issuer, the Guarantor or any of their respective Subsidiaries and any unmatured Coupons attached to or

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surrendered with them may be held, resold or cancelled, as relevant. All unmatured Interbolsa Notes so redeemed or purchased in accordance with this Condition 9 by or on behalf of the Issuer or the Guarantor or any of their respective Subsidiaries may be held, resold or cancelled, as relevant. Any Interbolsa Notes which are cancelled will forthwith be cancelled by Interbolsa following receipt by Interbolsa of notice thereof by the Portuguese Paying Agent, and accordingly such Interbolsa Notes may not be held, reissued or resold and shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Condition 16 (Meetings of Noteholders; Modification and Waiver) or the Agency Agreement, as amended by the Interbolsa Notes Agency Agreement.

10. Payments

(a) Principal: Payments of principal shall be made only against presentation and (provided that payment is made in full) surrender of Notes at the Specified Office of any Paying Agent outside the United States by cheque drawn in the currency in which the payment is due on, or by transfer to an account denominated in that currency (or, if that currency is euro, any other account to which euro may be credited or transferred) and maintained by the payee with, a bank in the Principal Financial Centre of that currency.

(b) Interest: Payments of interest shall, subject to paragraph (i) below, be made only against presentation and (provided that payment is made in full) surrender of the appropriate Coupons at the Specified Office of any Paying Agent outside the United States in the manner described in paragraph (a) above.

(c) Payments in New York City: Payments of principal or interest may be made at the Specified Office of a Paying Agent in New York City if (i) the Issuer has appointed Paying Agents outside the United States with the reasonable expectation that such Paying Agents will be able to make payment of the full amount of the interest on the Notes in the currency in which the payment is due when due, (ii) payment of the full amount of such interest at the offices of all such Paying Agents is illegal or effectively precluded by exchange controls or other similar restrictions and (iii) payment is permitted by applicable United States law.

(d) Payments in respect of Interbolsa Notes: Payment of principal and interest in respect of Interbolsa Notes will be:

(i) made by Banif through its payment current account held with TARGET2 (or if such payments are made in a currency other than euro, such account held by Banif with the payment system of Caixa Geral de Depósitos, S.A.); and

(ii) if made in euro, (A) transferred, on the payment date and according to the applicable procedures and regulations of Interbolsa, from the payment current account held by Banif with the Bank of Portugal to the payment current accounts held by the Affiliate Members of Interbolsa with the Bank of Portugal, and thereafter (B) transferred by such Affiliate Members of Interbolsa from the respective payment current accounts held with the Bank of Portugal to the accounts of the Noteholders or of Euroclear or Clearstream, Luxembourg with such Affiliate Members of Interbolsa, in accordance with the rules and procedures of Interbolsa, Euroclear or Clearstream, Luxembourg, as the case may be; and

(iii) if made in currencies other than euro, (A) transferred, on the payment date and according to the applicable procedures and regulations of Interbolsa, from the account held by Banif in the Sistema de Liquidação de Moeda Estrangeira (Foreign Currency Settlement System) managed by Caixa Geral de Depósitos, S.A. to the relevant accounts of the relevant Affiliate Members of Interbolsa, and thereafter (B) transferred by such Affiliate Members of Interbolsa from the such relevant accounts to the accounts of the Noteholders or of Euroclear or Clearstream, Luxembourg with such Affiliate Members of Interbolsa, in accordance with the rules and procedures of Interbolsa, Euroclear or Clearstream, Luxembourg, as the case may be.

(e) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the

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provisions of Condition 11 (Taxation). No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of such payments.

(f) Deductions for unmatured Coupons: If the relevant Final Terms specifies that the Fixed Rate Note Provisions are applicable and a Note is presented without all unmatured Coupons relating thereto:

(i) if the aggregate amount of the missing Coupons is less than or equal to the amount of principal due for payment, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amount of principal due for payment; provided, however, that if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of such missing Coupons which the gross amount actually available for payment bears to the amount of principal due for payment;

(ii) if the aggregate amount of the missing Coupons is greater than the amount of principal due for payment:

(A) so many of such missing Coupons shall become void (in inverse order of maturity) as will result in the aggregate amount of the remainder of such missing Coupons (the "Relevant Coupons") being equal to the amount of principal due for payment; provided, however, that where this sub-paragraph would otherwise require a fraction of a missing Coupon to become void, such missing Coupon shall become void in its entirety; and

(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount of principal due for payment) will be deducted from the amount of principal due for payment; provided, however, that, if the gross amount available for payment is less than the amount of principal due for payment, the sum deducted will be that proportion of the aggregate amount of the Relevant Coupons (or, as the case may be, the amount of principal due for payment) which the gross amount actually available for payment bears to the amount of principal due for payment.

Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) above against presentation and (provided that payment is made in full) surrender of the relevant missing Coupons.

(g) Unmatured Coupons void: If the relevant Final Terms specifies that this Condition 10(g) is applicable or that the Floating Rate Note Provisions are applicable, on the due date for final redemption in whole of any Note or early redemption of such Note pursuant to Condition 9(b) (Redemption for tax reasons), Condition 9(c) (Redemption at the option of the Issuer), Condition 9(e) (Redemption at the option of Noteholders) or Condition 12 (Events of Default), all unmatured Coupons relating thereto (whether or not still attached) shall become void and no payment will be made in respect thereof.

(h) Payments on business days: If the due date for payment of any amount in respect of any Note or Coupon is not a Payment Business Day in the place of presentation, the holder shall not be entitled to payment in such place of the amount due until the next succeeding Payment Business Day in such place and shall not be entitled to any further interest or other payment in respect of any such delay.

(i) Payments other than in respect of matured Coupons: Payments of interest other than in respect of matured Coupons shall be made only against presentation of the relevant Notes at the Specified Office of any Paying Agent outside the United States (or in New York City if permitted by paragraph (c) above).

(j) Partial payments: If a Paying Agent makes a partial payment in respect of any Note or Coupon presented to it for payment, such Paying Agent will endorse thereon a statement indicating the amount and date of such payment.

(k) Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the time of issue) part of a Coupon Sheet relating to the Notes, the Talon forming part of such Coupon Sheet may be exchanged at the Specified Office of the Principal Paying Agent for a further Coupon Sheet (including, if appropriate, a further Talon but excluding any Coupons in respect of which claims have already become

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void pursuant to Condition 13 (Prescription)). Upon the due date for redemption of any Note, any unexchanged Talon relating to such Note shall become void and no Coupon will be delivered in respect of such Talon.

11. Taxation

(a) Gross up: All payments of principal and interest in respect of the Notes and the Coupons by or on behalf of the Issuer or, if applicable, the Guarantor shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the country of incorporation of the Issuer, or, if applicable, the Guarantor, or if different, the country of tax residence of the Issuer, or, if applicable, the Guarantor (in the case of the Issuer, the "Issuer Taxing Jurisdiction" and, in the case of the Guarantor, the "Guarantor Taxing Jurisdiction") or any political subdivision therein or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments, or governmental charges is required by law. In that event, the Issuer or (as the case may be) the Guarantor shall pay such additional amounts as will result in receipt by the Noteholders and the Couponholders after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note or Coupon presented for payment:

(i) in the Republic of Portugal; or

(ii) by or on behalf of a holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note or Coupon by reason of its having some connection with the jurisdiction by which such taxes, duties, assessments or charges have been imposed, levied, collected, withheld or assessed other than the mere holding of the Note or Coupon; or

(iii) by or on behalf of a holder which is able to avoid such withholding or deduction by making a declaration of non-residence or other claim for exemption to the relevant tax authority; or

(iv) in the case of Interbolsa Notes, by or to a third party on behalf of, a Noteholder or Couponholder in respect of whom the information and documentation (which may include certificates) required in order to comply with Portuguese Decree-Law 193/2005 of 7 November 2005, and any implementing legislation, is not received before the date on which payments are due or which does not comply with the formalities in order to benefit from tax treaty benefits, where applicable; or

(v) in the case of Interbolsa Notes, by or to a third party on behalf of, a Noteholder or Couponholder resident for tax purposes in the Republic of Portugal or any political subdivision or any authority thereof or therein having power to tax or a resident in a tax haven jurisdiction as defined in Order 150/2004, of 13 February 2004 (Portaria do Ministro das Finanças e da Administração Pública no 150/2004) as amended from time to time, issued by the Portuguese Minister of Finance and Public Administration, with the exception of central banks and governmental agencies of those blacklisted jurisdictions, or a non-resident legal entity held, directly or indirectly, in more than 20 per cent. by entities resident in the Republic of Portugal; or

(vi) in the case of Interbolsa Notes, by or to a third party on behalf of, (i) a Portuguese resident legal entity subject to Portuguese corporation tax with the exception of entities that benefit from a Portuguese withholding tax waiver or from Portuguese income tax exemptions, or (ii) a legal entity not resident in Portugal acting with respect to the holding of the Notes through a permanent establishment in Portugal; or

(vii) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or

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(viii) in case of Notes (other than Interbolsa Notes), by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the EU; or

(ix) in case of Notes (other than Interbolsa Notes), more than 30 days after the Relevant Date except to the extent that the holder of such Note or Coupon would have been entitled to such additional amounts on presenting such Note or Coupon for payment on the last day of such period of 30 days.

(b) Taxing jurisdiction: If the Issuer or, if applicable, the Guarantor becomes subject at any time to any taxing jurisdiction other than the Issuer Taxing Jurisdiction or the Guarantor Taxing Jurisdiction respectively, references in these Conditions to the Issuer Taxing Jurisdiction or the Guarantor Taxing Jurisdiction shall be construed as references to the Issuer Taxing Jurisdiction or (as the case may be) the Guarantor Taxing Jurisdiction and/or such other jurisdiction.

12. Events of Default

If any of the following events occurs and is continuing (i) in respect of Notes (other than Interbolsa Notes), the Trustee at its discretion may and, if so requested in writing by holders of at least one quarter in principal amount of the outstanding Notes or, if so directed by an Extraordinary Resolution of the holders, shall (subject, in the case of the happening of any of the events mentioned in sub paragraph (b), below and, in relation only to a Subsidiary of the Issuer or, if applicable, a Subsidiary of the Guarantor, sub paragraphs (c), (d), (e), (f), (g), or (h) below, to the Trustee having certified in writing that the happening of such events is in its opinion materially prejudicial to the interests of the Noteholders and, in all cases to the Trustee having been indemnified and/or provided with security to its satisfaction) give written notice to the Issuer declaring the Notes to be immediately due and payable, whereupon they shall become immediately due and payable at their principal amount together with accrued interest without further action or formality; or (ii) in respect of Interbolsa Notes, the Common Representative shall, if so requested in writing by means of a request addressed to it and to Banif by the holders of not less than 20 per cent. of the nominal amount of the Interbolsa Notes then outstanding, or if so directed by an Extraordinary Resolution of the Noteholders, give notice to the Issuer (the "Acceleration Notice") and the Portuguese Paying Agent at the respective specified office, effective upon the date of receipt thereof by the Portuguese Paying Agent, that the Interbolsa Notes are, and they shall accordingly thereby forthwith become, immediately due and repayable at their Early Redemption Amount together with accrued interest (if any) to the date of repayment, without demand, protest or other notice of any kind:

(a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes on the due date for payment thereof or fails to pay any amount of interest in respect of the Notes within ten days of the due date for payment thereof; or

(b) Breach of other obligations: the Issuer or, if applicable, the Guarantor defaults in the performance or observance of any of its other obligations under or in respect of the Notes of such Series and, in respect of Notes other than Interbolsa Notes, the Trust Deed or the Guarantee of the Notes and (except where, (i) for Notes other than Interbolsa Notes, in the opinion of the Trustee, or (ii) for Interbolsa Notes, in the opinion of the Common Representative, such default is incapable of remedy where no such continuation or notice as is hereinafter mentioned will be required) such default remains unremedied for 30 days after the Trustee or, as the case may be, the Common Representative, has given written notice thereof to the Issuer and, if applicable, the Guarantor; or

(c) Cross-default of Issuer, Guarantor or Subsidiary:

(i) any Indebtedness of the Issuer, or if applicable, the Guarantor, or any of its or their respective Subsidiaries is not paid when due or (as the case may be) within any originally applicable grace period;

(ii) any such Indebtedness becomes (or becomes capable of being declared) due and payable prior to its stated maturity otherwise than at the option of the Issuer, or if applicable, the Guarantor or the

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relevant Subsidiary, as the case may be, or (provided that no event of default, howsoever described, has occurred) any Person entitled to such Indebtedness; or

(iii) the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries fails to pay when due any amount payable by it under any Guarantee of any Indebtedness;

provided that no such event referred to above shall constitute an Event of Default unless the indebtedness, whether alone or when aggregated with other indebtedness relating to all (if any) other such events which shall have occurred, shall exceed EUR 15,000,000 (or its equivalent in any other currency);

(d) Unsatisfied judgment: one or more judgment(s) or order(s) for the payment is rendered against the Issuer or if applicable, the Guarantor or any of its or their respective Subsidiaries and continue(s) unsatisfied and unstayed for a period of 30 days after the date(s) thereof or, if later, the date therein specified for payment; or

(e) Security enforced: a secured party takes possession, or a receiver, manager or other similar officer is appointed, of the whole or a substantial (in respect of Notes other than Interbolsa Notes, in the sole opinion of the Trustee or, in respect of Interbolsa Notes, in the opinion of the Common Representative) part of the assets of the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries and in any of the foregoing cases it or he is not discharged within 60 days; or

(f) Insolvency etc: (i) the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries becomes insolvent or is unable to pay its debts as they fall due, (ii) an administrator or liquidator of the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries or the whole or a substantial (in respect of Notes other than Interbolsa Notes, in the sole opinion of the Trustee or, in respect of Interbolsa Notes, in the opinion of the Common Representative) part of the assets of the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries is appointed (or application for any such appointment is made), (iii) the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries takes any action for a readjustment or deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or declares a moratorium in respect of any of its Indebtedness or any Guarantee of any Indebtedness given by it or (iv) the Issuer, or if applicable, the Guarantor or any of its or their respective Subsidiaries ceases or threatens to cease to carry on all or any substantial part of its business; or

(g) Winding up etc: an order is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer or if applicable, the Guarantor or any of its or their respective Subsidiaries (other than for the purpose of an amalgamation, merger or reconstruction approved by (i) the Trustee or an Extraordinary Resolution in the case of Notes other than Interbolsa Notes or (ii) an Extraordinary Resolution of the Noteholders (as described in Condition 16 (Meetings of Noteholders; Modification and Waiver)) in the case of Interbolsa Notes), except a winding up, liquidation or dissolution for the purposes of or pursuant to a reorganisation, merger, consolidation or amalgamation whereby the continuing entity or entity formed as a result of the reorganisation, merger, consolidation or amalgamation effectively assumes the entire obligations of the Issuer under the Notes or, if applicable, of the Guarantor under the Guarantee of the Notes; or

(h) Analogous event: any event occurs which under the laws of the country of incorporation of the Issuer, or if applicable, the country of incorporation of the Guarantor, has an analogous effect to any of the events referred to in sub paragraphs (d) to (g) above; or

(i) Failure to take action etc: any action, condition or thing at any time required to be taken, fulfilled or done in order (i) to enable the Issuer and the Guarantor lawfully to enter into, exercise their respective rights and perform and comply with their respective obligations under and in respect of the Notes and, in respect of Notes other than Interbolsa Notes, the Trust Deed, (ii) to ensure that those obligations are legal, valid, binding and enforceable and (iii) to make the Notes, the Coupons and, in respect of Notes other than Interbolsa Notes, the Trust Deed admissible in evidence in the courts of the country of incorporation of the Issuer, or if applicable, the country of incorporation of the Guarantor, is not taken, fulfilled or done; or

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(j) Unlawfulness: it is or will become unlawful for the Issuer, or if applicable, the Guarantor to perform or comply with any of its obligations under or in respect of the Notes, the Guarantee of the Notes, or in respect of Notes other than Interbolsa Notes, the Trust Deed; or

(k) Guarantee not in force: the Guarantee of the Notes, if applicable, is not (or is claimed by the Guarantor not to be) in full force and effect; or

(l) Change of control: where the Issuer is Banif Finance, it ceases to be a subsidiary wholly owned and controlled, directly or indirectly, by Banif, except if Banif effectively assumes the entire obligations of Banif Finance under the Notes.

13. Prescription

Claims for principal shall become void unless the relevant Notes (other than Interbolsa Notes) are presented for payment within ten years of the appropriate Relevant Date. Claims for interest shall become void unless the relevant Coupons are presented for payment within five years of the appropriate Relevant Date.

Claims for principal in respect of Interbolsa Notes shall become void unless the relevant Interbolsa Notes are surrendered within 20 years of the appropriate Relevant Date. Claims for interest in respect of Interbolsa Notes shall become void unless the relevant Certificates are surrendered within five years of the appropriate Relevant Date.

14. Replacement of Notes and Coupons

If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Principal Paying Agent (and, if the Notes are then admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system which requires the appointment of a Paying Agent in any particular place, the Paying Agent having its Specified Office in the place required by such competent authority, stock exchange and/or quotation system), subject to all applicable laws and competent authority, stock exchange and/or quotation system requirements, upon payment by the claimant of the costs and expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued.

15. Trustee and Agents

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce payment unless indemnified and/or secured to its satisfaction, and to be paid its costs and expenses in priority to the claims of Noteholders and Couponholders. The Trustee is entitled to enter into business transactions with any Issuer, the Guarantor and any entity related to any Issuer or the Guarantor without accounting for any profit.

In the exercise of its powers and discretions under these Conditions and the Trust Deed, the Trustee will have regard to the interests of the Noteholders as a class and will not be responsible for any consequences for individual holders of Notes, Coupons or Talons as a result of such holders being connected in any way with a particular territory or taxing jurisdiction.

In acting under the Agency Agreement and in connection with the Notes and the Coupons, the Paying Agents and the Calculation Agent act solely as agents of the Issuer and, if applicable the Guarantor, or following the occurrence of an Event of Default, the Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders or Couponholders.

The initial Paying Agents and their initial Specified Offices are listed below. The initial Calculation Agent (if any) is specified in the relevant Final Terms. The Issuer and, if applicable the Guarantor, reserves the right (with the prior written approval of the Trustee and save that such prior written approval will not be required in respect of the Portuguese Paying Agent) at any time to vary or terminate the appointment of any

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Paying Agent or the Calculation Agent and to appoint a successor principal paying agent or calculation agent and additional or successor paying agents; provided, however, that:

(a) the Issuer and, if applicable, the Guarantor shall at all times maintain a Principal Paying Agent; and

(b) the Issuers undertake that they will ensure that they maintain a Paying Agent in an EU member state that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to such Directive; and

(c) if a Calculation Agent is specified in the relevant Final Terms, the Issuer and, if applicable the Guarantor, shall at all times maintain a Calculation Agent;

(d) if and for so long as the Notes are admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system which requires the appointment of a Paying Agent in any particular place, the Issuer and, if applicable the Guarantor, shall maintain a Paying Agent having its Specified Office in the place required by such competent authority, stock exchange and/or quotation system;

(e) in the circumstances described in Condition 10(c) (Payments in New York City), a Paying Agent with a specified office in New York City; and

(f) there will at all times be a Paying Agent in Portugal capable of making payments in respect of the Interbolsa Notes as contemplated by these Conditions, the Agency Agreement as amended by the Interbolsa Notes Agency Agreement and applicable Portuguese law and regulations.

Notice of any change in any of the Paying Agents or in their Specified Offices shall promptly be given by the Issuer to the Noteholders.

16. Meetings of Noteholders; Modification and Waiver

16.1 Notes other than Interbolsa Notes

This Condition 16.1 does not apply to Interbolsa Notes.

(a) Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of Noteholders to consider matters relating to the Notes, including the modification of any provision of these Conditions or the provisions of the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by them upon the request in writing of Noteholders holding not less than one-tenth of the aggregate principal amount of the outstanding Notes. The quorum at any meeting convened to vote on an Extraordinary Resolution will be two or more Persons holding or representing one more than half of the aggregate principal amount of the outstanding Notes or, at any adjourned meeting, two or more Persons being or representing Noteholders whatever the principal amount of the Notes held or represented; provided, however, that Reserved Matters may only be sanctioned by an Extraordinary Resolution passed at a meeting of Noteholders at which two or more Persons holding or representing not less than three-quarters or, at any adjourned meeting, one quarter of the aggregate principal amount of the outstanding Notes form a quorum. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders and Couponholders, whether present or not.

In addition, a resolution in writing signed by or on behalf of all Noteholders who for the time being are entitled to receive notice of a meeting of Noteholders will take effect as if it were an Extraordinary Resolution. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders.

(b) Modification and Waiver: The Trustee may agree without the consent of the Noteholders or the Couponholders to (i) any modification of any provision of these Conditions or the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any other modification (other than in respect of a Reserved Matter) and any waiver or authorisation of any breach or proposed

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breach of any provision of these Conditions or the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. In addition, the parties to the Agency Agreement may agree to modify any provision thereof, save the Trustee shall only agree, without the consent of the Noteholders, to such modification if, in the opinion of the Trustee, such modification is not materially prejudicial to the interests of the Noteholders. Any such modification, authorisation or waiver shall be binding on the Noteholders and Couponholders.

(c) Substitution: The Trustee may agree without the consent of the Noteholders or the Couponholders to the substitution of a Subsidiary of the Issuer in place of the Issuer as principal debtor under the Trust Deed, the Notes and the Coupons provided that certain conditions specified in the Trust Deed are fulfilled, including, in the case of a substitution of Banif Finance by a company other than the Guarantor, a requirement that the Guarantee of the Notes is fully effective in relation to the obligations of the new principal debtor under the Trust Deed and the Notes.

(d) No Noteholder or Couponholder shall, in connection with any substitution, be entitled to claim any indemnification or payment in respect of any tax consequence thereof for such Noteholder or (as the case may be) Couponholder except to the extent provided for in Condition 11 (Taxation) (or any undertaking given in addition to or substitution for such Condition).

16.2 Interbolsa Notes

This Condition 16.2 applies only to Interbolsa Notes.

(a) Meetings

Meetings of the holders of Interbolsa Notes may be convened to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the terms and conditions of the Notes and the appointment or dismissal of the Common Representative and are governed by the Portuguese Companies Code.

Such meetings may be convened by the Common Representative (if any) or, if no Common Representative has been appointed, or an appointed Common Representative fails to convene a meeting, by the chairman of the general meeting of shareholders of the Issuer, and shall be convened if requested by Noteholders holding not less than 5 per cent. of the principal amount of the Notes for the time being outstanding.

The quorum required for a meeting convened to pass a resolution other than an Extraordinary Resolution will be any person or persons holding or representing Notes then outstanding regardless of the principal amount thereof. The quorum required for a meeting convened to pass an Extraordinary Resolution will be a person or persons holding or representing at least 50 per cent. of the principal amount of the Notes then outstanding or, at any adjourned meeting, any person or persons holding or representing any of the Notes then outstanding, regardless of the principal amount thereof.

The number of votes required to pass a resolution other than an Extraordinary Resolution is a majority of the votes cast at the relevant meeting. The majority required to pass an Extraordinary Resolution is at least 50 per cent. of the principal amount of the Notes then outstanding or, at any adjourned meeting, two-thirds of the votes cast at the relevant meeting.

Resolutions passed at any meeting of the Noteholders will be binding on all the Noteholders, whether or not they are present at the meeting or have voted against the approved resolutions.

(b) Dismissal and substitution of the Common Representative

The Noteholders may dismiss and substitute the Common Representative (if any) by means of an Extraordinary Resolution passed for such purpose.

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(c) Notification

Any modification, abrogation, waiver or authorisation in accordance with this Condition 16.2 shall be binding on the Noteholders and shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 19 (Notices).

(d) Matters required to be approved by Extraordinary Resolution

An Extraordinary Resolution will be required to effect any of the following:

(i) to change any date fixed for payment of principal or interest in respect of the Notes, reduction of the amount of principal or interest due on any date in respect of the Notes or variation of the method for calculating the amount of any payment in respect of the Notes on redemption or maturity;

(ii) to approve the modification or abrogation of any of the provisions of these Conditions;

(iii) to approve any amendment to this definition;

(iv) to waive or authorise any breach or proposed beach of any of these Conditions; and

(v) to approve any other matter in respect of which these Conditions require an Extraordinary Resolution to be passed.

(e) Matters in the discretion of the Agent and the Issuer

Except for those matters required to be approved by Extraordinary Resolution, the Agent, the Common Representative and the Issuer may agree, without the consent of the Noteholders, to:

(i) any modification of the Notes which is not materially prejudicial to the interests of the Noteholders; or

(ii) any modification of the Notes which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of the law of the jurisdiction in which the Issuer is incorporated.

Any such modification shall be binding on the Noteholders and shall be notified to the Noteholders in accordance with Condition 19 (Notices) as soon as practicable thereafter.

17. Enforcement

In the case of Notes other than Interbolsa Notes, the Trustee may at any time, at its discretion and without notice, institute such proceedings as it thinks fit to enforce its rights under the Trust Deed in respect of the Notes, but it shall not be bound to do so unless:

(a) it has been so requested in writing by the holders of at least one quarter in principal amount of the outstanding Notes or has been so directed by an Extraordinary Resolution; and

(b) it has been indemnified and/or provided with security to its satisfaction.

No Noteholder may proceed directly against the Issuer or, if applicable, the Guarantor.

In the case of Interbolsa Notes, the Common Representative may at any time, or, if so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least 20 per cent. of the nominal amount of the Notes then outstanding, shall, take such proceedings against the Issuer as it may think fit to enforce the provisions of the Notes.

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18. Further Issues

The Issuer may from time to time, without the consent of the Noteholders or the Couponholders, and in accordance with the Trust Deed create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes.

19. Notices

Notices to the Noteholders shall be valid if published in a leading English language daily newspaper published in London (which is expected to be the Financial Times), (i) if the Notes are admitted to trading on the regulated market of the Luxembourg Stock Exchange and the rules of that exchange so require, a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or published on the website of the Luxembourg Stock Exchange (www.bourse.lu) or in either case, if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe, or (ii) if the Notes are Interbolsa Notes, by registered mail, by publication in a leading newspaper having general circulation in Portugal (which is expected to be Diário de Notícias) or by any other way which complies with the Portuguese Securities Code and Interbolsa's rules on notices to investors, including the disclosure of information through the official website of the CMVM (www.cmvm.pt). Any such notice shall be deemed to have been given on the date of first publication (or if required to be published in more than one newspaper, on the first date on which publication shall have been made in all the required newspapers). Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Noteholders.

20. Rounding

For the purposes of any calculations referred to in these Conditions (unless otherwise specified in these Conditions or the relevant Final Terms), (a) all percentages resulting from such calculations will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with 0.000005 per cent. being rounded up to 0.00001 per cent.), (b) all United States dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one half cent being rounded up), (c) all Japanese Yen amounts used in or resulting from such calculations will be rounded downwards to the next lower whole Japanese Yen amount, and (d) all amounts denominated in any other currency used in or resulting from such calculations will be rounded to the nearest two decimal places in such currency, with 0.005 being rounded upwards.

21. Governing Law and Jurisdiction

(a) Governing law: The Notes (other than Interbolsa Notes) and the Trust Deed and any non-contractual obligations arising out of or in connection with them are governed by English law. The Interbolsa Notes and the Agency Agreement, in respect of Interbolsa Notes, to the extent amended by the Interbolsa Notes Agency Agreement, are governed by, and shall be construed in accordance with Portuguese law. In each case, the application of such governing law shall be without prejudice to the applicability, under the conflict rules applicable in the relevant forum, in the light of such submission, of Cayman Islands law (in relation to matters concerning Banif Finance) or Portuguese law (in relation to matters concerning Banif as an Issuer or Banif Madeira as Guarantor, as the case may be).

(b) Jurisdiction: In respect of Notes other than Interbolsa Notes, the Issuer has in the Trust Deed: (i) agreed for the exclusive benefit of the Trustee and the Noteholders that the courts of England have exclusive jurisdiction to settle any dispute (a "Dispute"), arising out of or in connection with the Notes (other than Interbolsa Notes) (including a dispute relating to the existence, validity or termination of the Notes (other than Interbolsa Notes) or any non-contractual obligation arising out of or in connection with the Notes (other than Interbolsa Notes)) or the consequences of its nullity; (ii) agreed that those courts are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue that any other courts are more appropriate or convenient; (iii) designated a person in England to accept service of any process on its behalf; and (iv) consented to the enforcement of any judgment. The Trust Deed also states that nothing contained in the Trust Deed prevents the Trustee or any of the Noteholders from taking

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proceedings relating to a Dispute ("Proceedings") in any other courts with jurisdiction and that, to the extent allowed by law, the Trustee or any of the Noteholders may take concurrent Proceedings in any number of jurisdictions. In respect of Interbolsa Notes, the Issuer has (i) agreed for the exclusive benefit of Noteholders that the courts of Portugal shall have exclusive jurisdiction to settle any Dispute arising from or connected with the Interbolsa Notes; (ii) agreed that those courts are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue that any other courts are more appropriate or convenient; and (iii) consented to the enforcement of any judgment.

22. Common Representatives

In the case of Interbolsa Notes, the holders of the Notes shall at all times be entitled to appoint and dismiss a Common Representative by means of an Extraordinary Resolution. Upon the appointment of a new Common Representative by the holders of the Notes pursuant to this Condition 22, any previously appointed and dismissed Common Representative will immediately cease its engagement and will be under the obligation to immediately transfer to the new Common Representative all documents and information then held by such Common Representative in relation to the Notes.

For these purposes, "Common Representative" means a law firm, an accountants' firm or an individual person (who is not a holder of Notes), which may be appointed by the holders of Notes in accordance with Article 358 of the Portuguese Companies Code.

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FORM OF FINAL TERMS

The Final Terms in respect of each Tranche of Notes will be substantially in the following form, duly completed to reflect the particular terms of the relevant Notes and their issue. Text in this section appearing in italics does not form part of the form of the Final Terms but denotes directions for completing the Final Terms.

Final Terms dated [•]

[Banif – Banco Internacional do Funchal, S.A./Banif Finance, Ltd.] Issue of [Aggregate Nominal Amount of Tranche [Title of Notes]

[Guaranteed by Banif – Banco Internacional do Funchal S.A., acting through its Sucursal Financeira Exterior (External Financial Branch)]

under the Euro 2,500,000,000 Euro Medium Term Note Programme

[The Base Prospectus referred to below (as completed by these Final Terms) has been prepared on the basis that, except as provided in sub-paragraph (ii) below, any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Member State, from the requirement to publish a prospectus for offers of the Notes. Accordingly any person making or intending to make an offer of the Notes may only do so:

(i) in circumstances in which no obligation arises for the Issuer, the Guarantor or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer; or

(ii) in those Public Offer Jurisdictions mentioned in Paragraph 9 of Part B below, provided such person is one of the persons described in Paragraph 9 of Part B below [and which satisfies conditions set out therein] and that such offer is made during the Offer Period specified for such purpose therein.

The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive and the expression "2010 PD Amending Directive" means Directive 2010/73/EU provided, however, that all references in this document to the "Prospectus Directive" in relation to any Member State of the European Economic Area refer to Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant Member State), and include any relevant implementing measure in the relevant Member State.]1

[The Base Prospectus referred to below (as completed by these Final Terms) has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Member State, from the requirement to publish a prospectus for offers of the Notes. Accordingly any person making or intending to make an offer in that Member State of the Notes may only do so in circumstances in which no obligation arises for the Issuer [, the Guarantor] or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Issuer [nor the Guarantor] nor any Dealer has authorised, nor do they authorise, the making of any offer of Notes in any other circumstances.

The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive and the expression "2010 PD Amending Directive" means Directive 2010/73/EU provided, however, that all references in this document to the "Prospectus Directive" in relation to any Member State of the European Economic Area refer to Directive 2003/71/EC (and amendments thereto, including the 2010

1 Include this legend where a non-exempt offer of Notes is anticipated.

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PD Amending Directive, to the extent implemented in the relevant Member State), and include any relevant implementing measure in the relevant Member State.]2

PART A – CONTRACTUAL TERMS

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Base Prospectus dated 4 October 2012 [and the Base Prospectus Supplement dated [•]] which [together] constitute[s] a base prospectus (the "Base Prospectus") for the purposes of the Prospectus Directive. This document constitutes the Final Terms relating to the issue of Notes described herein for the purposes of Article 5.4 of the Prospectus Directive. These Final Terms contain the final terms of the Notes and must be read in conjunction with the Base Prospectus [as so supplemented].

Full information on the Issuer[, the Guarantor] and the Notes described herein is only available on the basis of a combination of these Final Terms and the Base Prospectus [as so supplemented]. The Base Prospectus [and the Base Prospectus Supplement] [is] [are] available for viewing at [•] and on the website of the Luxembourg Stock Exchange at www.bourse.lu and copies may be obtained from the Specified Office of the Principal Paying Agent.

The following alternative language applies if the first tranche of an issue which is being increased was issued under a base prospectus with an earlier date and the relevant terms and conditions from that base prospectus with an earlier date were incorporated by reference in this Base Prospectus.

Terms used herein shall be deemed to be defined as such for the purposes of the [date] Conditions (the "Conditions") incorporated by reference in the Base Prospectus dated [original date][and the Base Prospectus Supplement dated [•]]. These Final Terms contain the final terms of the Notes and must be read in conjunction with the Base Prospectus dated 4 October 2012 [and the Base Prospectus Supplement dated [date]] which [together] constitute[s] a base prospectus (the "Base Prospectus") for the purposes of the Prospectus Directive, save in respect of the Conditions which are set forth in the base prospectus dated [original date] and are incorporated by reference in the Base Prospectus. This document constitutes the Final Terms relating to the issue of Notes described herein for the purposes of Article 5.4 of the Prospectus Directive.

Full information on the Issuer[, the Guarantor] and the Notes described herein is only available on the basis of a combination of these Final Terms and the Base Prospectus [as so supplemented]. However, a summary of the issue of the Notes is annexed to these Final Terms. The Base Prospectus [and the Base Prospectus Supplement] [is] [are] available for viewing at [•] and on the website of the Luxembourg Stock Exchange at www.bourse.lu and copies may be obtained from the Specified Office of the Principal Paying Agent.

[Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or sub-paragraphs. Italics denote directions for completing the Final Terms.]

[When completing any final terms, or adding any other final terms or information, consideration should be given as to whether such terms or information constitute "significant new factors" and consequently trigger the need for a supplement to the Prospectus under Article 16 of the Prospectus Directive.]

1. [(i) [Series Number:] [ ]

[(ii) [Tranche Number:] [ ]

[(iii) Date on which the Notes become [Not Applicable/The Notes shall be consolidated, form a fungible: single series and be interchangeable for trading purposes with the [insert description of the Series] on [insert date/the Issue Date/exchange of the Temporary Global Note for interests in

2 Include this legend where a non-exempt offer of Notes is NOT anticipated.

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the Permanent Global Note, as referred to in paragraph 20 below [which is expected to occur on or about [insert date]]].]

2. Specified Currency or Currencies: [ ]

3. Aggregate Nominal Amount:

[(i)] [Series:] [ ]

[(ii) [Tranche:] [ ]]

4. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (in the case of fungible issues only, if applicable)]

5. (i) Specified Denominations [ ]

No Notes may be issued which have a minimum denomination of less than EUR 1,000 (or nearly equivalent in another currency).

(N.B. If a Global Note is exchangeable for Definitive Notes at the option of noteholders, the Notes may only be issued in other denominations equal to, or greater than, EUR 100,000 (or equivalent) and multiples thereof).

(N.B. The following wording should be followed where multiple denominations above EUR 100,000 (or equivalent) are being used and Global Notes are not exchangeable for Definitive Notes at the option of Noteholders):

So long as the Notes are represented by a Temporary Global Note or a Permanent Global Note and the relevant clearing system so permits, the Notes will be tradeable only in the minimum authorised denomination of EUR 100,000 and higher integral multiples of EUR 1,000 notwithstanding that no definitive notes will be issued with a denomination above EUR 199,000.

(ii) Calculation Amount: [ ]

[The applicable Calculation Amount (which is used for the calculation of interest and redemption amounts) will be (i) if there is only one Specified Denomination, the Specified Denomination of the relevant Notes or (ii) if there are several Specified Denomination or the circumstances referred to in paragraph 5 above apply, the highest common factor of those Specified Denominations (note: there must be a common factor in the case of two or more Specified Denominations).]

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6. [(i)] Issue Date: [ ]

[(ii) Interest Commencement [Specify/Issue Date/Not Applicable]] Date:

7. Maturity Date: [specify date or (for Floating Rate Notes) Interest Payment Date falling in or nearest to the relevant month and year]

[If the Maturity Date is less than one year from the Issue Date and either (a) the issue proceeds are received by the Issuer in the United Kingdom or (b) the activity of issuing the Notes is carried on from an establishment maintained by the Issuer in the United Kingdom, (i) the Notes must have a minimum redemption value of £100,000 (or its equivalent in other currencies) and be sold only to "professional investors" or (ii) another applicable exemption from section 19 of the FSMA must be available.]

8. Interest Basis: [• per cent. Fixed Rate] [•] month [EURIBOR]/[LIBOR]] +/– [•] per cent. Floating Rate] [Zero Coupon] (further particulars specified below)

9. Redemption/Payment Basis: Subject to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at 100 per cent. of their nominal amount.

10. Change of Interest or [Applicable/Not applicable] [Specify the date when any fixed Redemption/Payment Basis: to floating rate change occurs or refer to paragraphs 13 and 14 below and identify there]

11. Put/Call Options: [Investor Put] [Issuer Call] [(further particulars specified below)]

12. (i) Status of the Notes: Senior

(ii) Status of the Guarantee: Senior

[(iii)] [Date [Board] approval for [ ] and [ ], respectively]] issuance of Notes [and Guarantee] obtained: (N.B Only relevant where Board (or similar) authorisation is required for the particular tranche of Notes or related Guarantee)]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

13. Fixed Rate Note Provisions [Applicable/Not Applicable]

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(If not applicable, delete the remaining subparagraphs of this paragraph)

(i) Rate[(s)] of Interest: [ ] per cent. per annum [payable [annually/semi-annually/quarterly/monthly] in arrear]

(ii) Interest Payment Date(s): [ ] in each year

(iii) Fixed Coupon Amount[(s)]: [ ] [per Calculation Amount]

(iv) Broken Amount(s): [ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ]

[Insert particulars of any initial or final broken interest amounts which do not correspond with the Fixed Coupon Amount[(s)]]

(v) Day Count Fraction: [30/360 / Actual/Actual (ICMA/ISDA) / other]

[Set out the full definition of the relevant day count fraction if "other" is specified]

14. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph.)

(i) Specified Period: [ ] (Specified Period and Specified Interest Payment Dates are alternatives. A Specified Period, rather than Specified Interest Payment Dates, will only be relevant if the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention. Otherwise, insert "Not Applicable")

(ii) Specified Interest Payment Dates: [Not Applicable/[•], subject to adjustment in accordance with the Business Day Convention set out in (iv) below]

(Specified Period and Specified Interest Payment Dates are alternatives. If the Business Day Convention is the FRN Convention, Floating Rate Convention or Eurodollar Convention, insert "Not Applicable)

(iii) [First Interest Payment Date]: [ ]

(iv) Business Day Convention: [Floating Rate Convention/ Following Business Day Convention/ Modified Following Business Day Convention/ Preceding Business Day Convention/ other (give details)]

(v) Additional Business Centre(s): [Not Applicable/give details]

(vi) Manner in which the Rate(s) of [Screen Rate Determination/ISDA Interest is/are to be determined: Determination/other (give details)]

(vii) Party responsible for calculating [[Name] shall be the Calculation Agent (no need to specify if the Rate(s) of Interest and

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Interest Amount(s) (if not the the Fiscal Agent is to perform this function)] Agent):

(viii) Screen Rate Determination:

 Reference Rate: [•] month [EURIBOR]/[LIBOR]]

 Interest [ ] Determination Date(s):

 Relevant [For example, Reuters LIBOR 01/EURIBOR 01] Screen Page:

 Relevant Time: [For example, 11.00 a.m. London time/Brussels time]

 Relevant [For example, London/Euro-zone (where Euro-zone means the Financial region comprised of the countries whose lawful currency is the Centre: euro)]

(ix) ISDA Determination:

 Floating Rate [ ] Option:

 Designated [ ] Maturity:

 Reset Date: [ ]

(x) Margin(s): [+/-][ ] per cent. per annum

(xi) Minimum Rate of Interest: [ ] per cent. per annum

(xii) Maximum Rate of Interest: [ ] per cent. per annum

(xiii) Day Count Fraction: [ ]

15. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(i) [Amortisation/Accrual] Yield: [ ] per cent. per annum

(ii) Reference Price: [ ]

(iii) [Day Count Fraction in relation [30/360 / Actual/360 / Actual/365] to Early Redemption Amount: [Consider whether it is necessary to specify a Day Count Fraction for the purposes of Condition 9(g)]

PROVISIONS RELATING TO REDEMPTION

16. Call Option [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this

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paragraph)

(i) Optional Redemption Date(s): [ ]

(ii) Optional Redemption Amount(s): [ ] per Calculation Amount

(iii) If redeemable in part:

(a) Minimum Redemption [ ] per Calculation Amount Amount:

(b) Maximum Redemption [ ] per Calculation Amount Amount:

(iv) Notice period: [ ]

17. Put Option [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph)

(i) Optional Redemption Date(s): [ ]

(ii) Optional Redemption Amount(s): [ ] per Calculation Amount

(iii) Notice period: [ ]

18. Final Redemption Amount of each Note Par

19. Early Redemption Amount

Early Redemption Amount(s) per [ ] per Calculation Amount Calculation Amount payable on redemption for taxation reasons or on event of default:

GENERAL PROVISIONS APPLICABLE TO THE NOTES

20. Form of Notes: Bearer Notes:

[Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes on [ ] days' notice/at any time/in the limited circumstances specified in the Permanent Global Note.]

[Temporary Global Note exchangeable for Definitive Notes on [ ] days' notice.]

[Permanent Global Note exchangeable for Definitive Notes on [ ] days' notice/at any time/in the limited circumstances specified in the Permanent Global Note].

Interbolsa Notes:

[Dematerialised book-entry registered form (Interbolsa Notes)]

21. New Global Note Form: [Applicable/Not Applicable]

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22. Additional Financial Centre(s) or other [Not Applicable/give details] special provisions relating to Payment Dates:

23. Talons for future Coupons or Receipts to [Yes/No. If yes, give details] be attached to Definitive Notes (and dates on which such Talons mature):

THIRD PARTY INFORMATION

[[•] has been extracted from [•]. [Each of the] [The] Issuer [and the Guarantor] confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by [•], no facts have been omitted which would render the reproduced inaccurate or misleading.].

Signed on behalf of the Issuer:

By: ...... Duly authorised

[Signed on behalf of the Guarantor:

By: ...... Duly authorised]

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PART B – OTHER INFORMATION

1. LISTING AND ADMISSION TO [Application has been made for the Notes to be admitted to TRADING trading on the regulated market of the Luxembourg Stock Exchange and to the official list of the Luxembourg Stock Exchange]/[other] with effect from [ ].] [Application is expected to be made for the Notes to be admitted to trading on [specify relevant regulated market] with effect from [ ].] [Not Applicable.]

(Where documenting a fungible issue need to indicate that original securities are already admitted to trading.)

2. RATINGS

Ratings: [Not Applicable] / [The Notes to be issued [have been rated/are expected to be] assigned the following rating:

[ ] by Moody's Investors Service España S.A. [ ] by Fitch Ratings España S.A.U.]

3. [NOTIFICATION

The Commission de Surveillance du Secteur Financier [has been requested to provide/has provided – include first alternative for an issue which is contemporaneous with the establishment or update of the Programme and the second alternative for subsequent issues] the [include names of competent authorities of host Member States] with a certificate of approval attesting that the Base Prospectus has been drawn up in accordance with the Prospectus Directive.]

4. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE [ISSUE/OFFER]

"Save as discussed in ["Subscription and Sale"], so far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer."]/[•]/[Not Applicable]

5. REASONS FOR THE OFFER, ESTIMATED NET PROCEEDS AND TOTAL EXPENSES

(i) Reasons for the offer [ ] (See ["Use of Proceeds"] wording in Base Prospectus – if reasons for offer different from making profit and/or hedging certain risks will need to include those reasons here.)]

([(ii)] Estimated net proceeds: [ ] (If proceeds are intended for more than one use will need to split out and present in order of priority. If proceeds insufficient to fund all proposed uses state amount and sources of other funding.)

[(iii)] Estimated total expenses: [ ]. [Include breakdown of expenses.]

(Only necessary to include disclosure of net proceeds and total expenses at (ii) above where disclosure is included at (i) above.)]

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6. [Fixed Rate Notes Only -YIELD

Indication of yield: [ ].

The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.]

7. [Floating Rate Notes Only – HISTORIC INTEREST RATES

Details of historic [LIBOR/EURIBOR] rates can be obtained from [Reuters].]

8. OPERATIONAL INFORMATION

ISIN Code: [ ]

Common Code: [ ]

Any clearing system(s) other than [Not Applicable/give name(s) and number(s)/LCH Clearnet, Euroclear Bank S.A./N.V. and S.A., identification number [•]*] Clearstream Banking société anonyme and the relevant identification number(s):

Delivery: Delivery [against/free of] payment

Names and addresses of additional [ ] Paying Agent(s) (if any):

New Global Note intended to be held in [Not Applicable/Yes/No]. a manner which would allow Eurosystem eligibility: [Note that the designation "Yes" simply means that the Notes are intended upon issue to be deposited with Euroclear or Clearstream, Luxembourg as common safekeeper and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.

The Notes will be deposited initially upon issue with [one of the ICSDS acting as common safekeeper/ [a non-ICSD] common safekeeper.]][Include this text if "Yes" selected in which case the Notes must be issued in NGN form]

9. DISTRIBUTION

(i) Method of distribution: [Syndicated/Non-syndicated]

(ii) If syndicated: [Not Applicable/give names, addresses and underwriting commitments]

(a) names and addresses (Include names and addresses of entities agreeing to of Managers and underwrite the issue on a firm commitment basis and names

* For Interbolsa Notes only.

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underwriting and addresses of the entities agreeing to place the issue commitments: without a firm commitment or on a "best efforts" basis if such entities are not the same as the Managers.)

(b) Date of [Subscription] [•] Agreement:

(iii) If non-syndicated, name and [Not Applicable/give name and address] address of Dealer:

(iv) Indication of the overall [•] per cent. of the Aggregate Nominal Amount amount of the underwriting commission and of the placing commission:

(v) U.S. Selling Restrictions: [Regulation S Category 2; TEFRA C/TEFRA D/ TEFRA not applicable]

(vi) Public Offer: [Not Applicable] [An offer of the Notes may be made by the Managers [and [specify, if applicable names of other financial intermediaries/placers making public offers, to the extent known (ties into individual consent granted in Base Prospectus) OR include a generic description of other parties involved in public offers (e.g. "other parties authorised by [the managers]") ]] other than pursuant to Article 3(2) of the Prospectus Directive in [specify relevant Member State(s) – which must be jurisdictions where the Base Prospectus and any supplements have been passported] ("Public Offer Jurisdictions") during the period from [specify date] until [specify date] ("Offer Period").]

10. TERMS AND CONDITIONS OF THE OFFER

Offer Price: [Issue Price][Specify]

Conditions to which the offer is [Not Applicable/give details] subject:

Description of the application process: [Not Applicable/give details]

Description of possibility to reduce [Not Applicable/give details] subscriptions and manner for refunding excess amount paid by applicants:

Details of the minimum and/or [Not Applicable/give details] maximum amount of application:

Details of the method and time limits [Not Applicable/give details] for paying up and delivering the Notes:

Manner in and date on which results of [Not Applicable/give details] the offer are to be made public:

Procedure for exercise of any right of [Not Applicable/give details] pre-emption, negotiability of subscription rights and treatment of subscription rights not exercised:

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Categories of potential investors to [Not Applicable/give details] which the Notes are offered and whether tranche(s) have been reserved for certain countries:

Process for notification to applicants of [Not Applicable/give details] the amount allotted and the indication whether dealing may begin before notification is made:

Amount of any expenses and taxes [Not Applicable/give details] specifically charged to the subscriber or purchaser:

Name(s) and address(es), to the extent [None/give details] known to the Issuer, of the placers in the various countries where the offer takes place.

SUMMARY OF THE ISSUE

This summary relates to [insert description of Notes] described in the final terms (the "Final Terms") to which this summary is annexed. This summary contains that information from the summary set out in the Base Prospectus which is relevant to the Notes together with the relevant information from the Final Terms. Words and expressions defined in the Final Terms and the Base Prospectus have the same meanings in this summary.

[Insert completed summary by completing the summary of the base prospectus as appropriate to the terms of the specific issue].

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OVERVIEW OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM

This overview and the provisions contained therein apply only to Notes other than Interbolsa Notes.

Clearing System Accountholders

Each Global Note will be in bearer form. Consequently, in relation to any Tranche of Notes represented by a Global Note, references in the Terms and Conditions of the Notes to "Noteholder" are references to the bearer of the relevant Global Note which, for so long as the Global Note is held by a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, will be that depositary or common depositary, in the case of a CGN, or a common safekeeper, in the case of an NGN for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, will be that depositary or common depositary or, as the case may be, common safekeeper.

Each of the persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system as being entitled to an interest in a Global Note (each an "Accountholder") must look solely to Euroclear and/or Clearstream, Luxembourg and/or such other relevant clearing system (as the case may be) for such Accountholder's share of each payment made by the relevant Issuer or, if applicable, the Guarantor to the bearer of such Global Note and in relation to all other rights arising under the Global Note. The extent to which, and the manner in which, Accountholders may exercise any rights arising under the Global Note will be determined by the respective rules and procedures of Euroclear and Clearstream, Luxembourg and any other relevant clearing system from time to time. For so long as the relevant Notes are represented by the Global Note, Accountholders shall have no claim directly against the relevant Issuer or, if applicable, the Guarantor in respect of payments due under the Notes and such obligations of the relevant Issuer and, if applicable, the Guarantor will be discharged by payment to the bearer of the Global Note.

Exchange of Temporary Global Notes

Whenever any interest in a Temporary Global Note is to be exchanged for an interest in a Permanent Global Note, the Issuer shall procure:

(a) in the case of first exchange, the prompt delivery (free of charge to the bearer) of such Permanent Global Note, duly authenticated, and, in the case of an NGN, effectuated to the bearer of the Temporary Global Note; or

(b) in the case of any subsequent exchange, an increase in the principal amount of such Permanent Global Note in accordance with its terms, in each case in an aggregate principal amount equal to the aggregate of the principal amounts specified in the certificates issued by Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and received by the Principal Paying Agent against presentation and (in the case of final exchange) surrender of the Temporary Global Note to or to the order of the Principal Paying Agent within 7 days of the bearer requesting such exchange.

Whenever a Temporary Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Temporary Global Note to the bearer of the Temporary Global Note against the surrender of the Temporary Global Note to or to the order of the Principal Paying Agent within 30 days of the bearer requesting such exchange.

If:

(a) a Permanent Global Note has not been delivered or the principal amount thereof increased by 5.00 p.m. (London time) on the seventh day after the bearer of a Temporary Global Note has requested exchange of an interest in the Temporary Global Note for an interest in a Permanent Global Note; or

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(b) Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer of a Temporary Global Note has requested exchange of the Temporary Global Note for Definitive Notes; or

(c) a Temporary Global Note (or any part thereof) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of a Temporary Global Note has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer of the Temporary Global Note in accordance with the terms of the Temporary Global Note on the due date for payment, then the Temporary Global Note (including the obligation to deliver a Permanent Global Note or increase the principal amount thereof or deliver Definitive Notes, as the case may be) will become void at 5.00 p.m. (London time) on such seventh day (in the case of (a) above) or at 5.00 p.m. (London time) on such thirtieth day (in the case of (b) above) or at 5.00 p.m. (London time) on such due date (in the case of (c) above) and the bearer of the Temporary Global Note will have no further rights thereunder.

Exchange of Permanent Global Notes

Whenever a Permanent Global Note is to be exchanged for Definitive Notes, the relevant Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Principal Paying Agent within 30 days of the bearer requesting such exchange.

If:

(a) Definitive Notes have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer of a Permanent Global Note has duly requested exchange of the Permanent Global Note for Definitive Notes; or

(b) a Permanent Global Note (or any part of it) has become due and payable in accordance with the Terms and Conditions of the Notes or the date for final redemption of the Notes has occurred and, in either case, payment in full of the amount of principal falling due with all accrued interest thereon has not been made to the bearer of the Permanent Global Note in accordance with the terms of the Permanent Global Note on the due date for payment, then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in the case of (b) above) and the bearer of the Permanent Global Note will have no further rights thereunder.

Conditions applicable to Global Notes

Each Global Note will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Global Note. The following is a summary of certain of those provisions:

Payments: All payments in respect of the Global Note will be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the Global Note to or to the order of any Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the relevant Issuer in respect of the Notes. On each occasion on which a payment of principal or interest is made in respect of the Global Note, the relevant Issuer shall procure that in respect of a CGN the payment is noted in a schedule thereto and in respect of an NGN the payment is entered pro rata in the records of Euroclear and Clearstream, Luxembourg.

Exercise of put option: In order to exercise the option contained in Condition 9(e) (Redemption at the option of Noteholders) the bearer of the Permanent Global Note must, within the period specified in the Conditions for the deposit of the relevant Note and put notice, give written notice of such exercise to the Principal Paying Agent specifying the principal amount of Notes in respect of which such option is being exercised. Any such notice will be irrevocable and may not be withdrawn.

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Partial exercise of call option: In connection with an exercise of the option contained in Condition 9(c) (Redemption at the option of the Issuer) in relation to some only of the Notes, the Permanent Global Note may be redeemed in part in the principal amount specified by the relevant Issuer in accordance with the Conditions and the Notes to be redeemed will not be selected as provided in the Conditions but in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in principal amount, at their discretion).

Notices: Notwithstanding Condition 19 (Notices), while all the Notes are represented by a Permanent Global Note (or by a Permanent Global Note and/or a Temporary Global Note) and the Permanent Global Note is (or the Permanent Global Note and/or the Temporary Global Note are) deposited with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system or a common safekeeper, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and, in any case, such notices shall be deemed to have been given to the Noteholders in accordance with Condition 19 (Notices) on the date of delivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, except that, for so long as such Notes are admitted to trading on the Luxembourg Stock Exchange and it is a requirement of applicable law or regulations, such notices shall be published in a leading newspaper having general circulation in Luxembourg (which is expected to be Luxemburger Wort) or published on the website of the Luxembourg Stock Exchange (www.bourse.lu).

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DESCRIPTION OF THE ISSUERS AND THE GUARANTOR

Banif – Banco Internacional do Funchal, S.A.

Banif – Banco Internacional do Funchal, S.A. ("Banif" or the "Bank") was incorporated for an unlimited duration as a public company with limited liability (Sociedade Anónima) on 1 April 2002 in Funchal, Madeira, Portugal (registration number: 8945) and is organised under the laws of Portugal. Its registered office is at Rua João Tavira, no. 30, 9004-509 Funchal, Portugal and its telephone number is +351 291 222 162.

Banif emerged from the restructuring of the Banif Financial Group (the "Group") in 2002, which was carried out in order to concentrate the Group companies according to their business activity.

The impact of the restructuring process was merely organisational, since the business activities of the Group remained unchanged.

The Group changed its financial structure, as Banif – SGPS, S.A. became the holding company of the Group with its business interests distributed between two sub-holdings, Banif Comercial SGPS, S.A. and Banif Investimentos, SGPS, S.A., while maintaining a direct interest in Companhia de Seguros Açoreana, S.A. ("CSA"), which is responsible for all of the Group’s insurance business.

 Banif Comercial SGPS, S.A. controls companies geared towards the commercial banking business, including Banif – Banco Internacional do Funchal, S.A. and Banif – Banco Internacional do Funchal (Brasil), S.A., operating in Brazil, and others engaged in specialist lending activities – Banif Go, Instituição Financeira de Crédito, S.A., and Banif Rent – Aluguer, Gestão e Comércio de Veículos Automóveis, S.A..

 Banif Investimentos SGPS, S.A. controls companies geared towards investment banking, including Banif - Banco de Investimento, S.A., which positions itself as a specialist operator in private banking, asset management, brokerage, capital markets, private equity, corporate finance and project finance activities and Banif – Banco de Investimento (Brasil), S.A..

On 1 January 2009, Banco Banif e Comercial dos Açores, S.A., a commercial bank also controlled by Banif Comercial SGPS, S.A., was merged into Banif.

In July 2009, Banif – SGPS, S.A. entered into an agreement with the controlling shareholders of Tecnicrédito – SGPS, S.A., holding company of the financial group that comprises, among other entities, Banco Mais, S.A., which specialises in the motor car finance area, for the acquisition by Banif – SGPS, S.A. of shares representing 100 per cent. of the share capital of Tecnicrédito – SGPS, S.A.. Tecnicrédito – SGPS, S.A. has now become a third sub- holding of the Group, directly dependent of Banif – SGPS, S.A. and its operations consist solely of management of its financial holdings involved in specialist lending and cross-selling of associated products.

In keeping with the policy of growth pursued by the Group in both the financial sector and the insurance sector, the structure of holdings in CSA has been organised in order to position Rentipar Seguros as the holding company for the insurance industry and the direct owner of 100 per cent. of the share capital in CSA. Following the reorganisation, Rentipar Seguros acquired 83.52 per cent. in the share capital and voting rights of Global – Companhia de Seguros, S.A. and 83.57 per cent. in the share capital and voting rights of Global Vida – Companhia de Seguros de Vida, S.A. in March 2010. Banif – SGPS, S.A. and Banif have direct interests in the share capital of Rentipar Seguros, proportionally equal to their former holdings in CSA (33.62 per cent. and 14.07 per cent. respectively), meaning that they maintain the same level of interest in the insurance company, albeit indirectly.

The organisational structure of the Group is set out below (as at 31 August 2012):

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BANIF FINANCIAL GROUP (August 2012)

Banif SGPS, SA Share capital: 570,000,000 €

100% 85.91% 47.69% 100% 99.7%

Banif Bankco Internacional Rentipar Banif – Banco de Banif Banif Mais – SGPS, SA Seguros, SGPS, SA Investimento, SA Brasil (Holdings), SA do Funchal SA Share capital: 20,369.095 Eur Share capital: 794,500.000 Eur Share capital: €135,570.000,00 Share capital: 85,000.000 Euros Share capital: R$1,000.00

40% Banco Caboverdiano Banif Gestão de Banif 99.01% Banco Banif Mais, SA 0.99% 51.69% Companhia de Seguros 100% 44% de Negócios 100% Activos Imobiliária, SA Share capital: 101,000,000 Eur Açoreana, SA Share capital: 900,000,000$00 Share capital: 2,000,000 € Banif Financial Share capital: 200,000,000 Eur 16% Share capital: € 107,500,000.00 100% Services Inc. Share capital: USD 371,000 100% Banif Bank Giga – Grupo Integrado de MCO2 – Soc. Gestora de 100% Banif Plus Bank ZRT 72.00% 60% 25% (Malta) Gestão de Acidentes, SA Fundos de Inv. Mobiliário 100% SIP – Sociedade Share capital: HUF 3,000,000,000 Share capital: 25,000,000.00€ Share capital: € 700,000.00 Share capital: 450,000 € 100% Banif Imobiliária Piedade, SA Banif (Cayman), Ltd c) Finance (USA) Corp. Share capital: 50,000 EUR Share capital: USD 42,000,000 Share capital: USD 6,280,105.09

TCC 99.9% Banif Holding CRIA – Centro de Reabilitação 90% 0.1% 70% 50% Banif Ecoprogresso Trading, SA Investments Luxembourg (Malta), Ltd Integrada de Acidentes 10% Share capital: 250,020 € 85% Share capital: 125,000.00 Eur Share capital: 10,002,000.00€ Share capital: €320,000.00 Banif Fortaiting Banif International Holdings, Ltd 100% Company 100% Banif Açores, Inc Share capital: USD 17,657,498 San Joséa) 25.85% Share capital: USD 250,000 Share capital: USD 1,000,000 100% Margem Centaurus Realty group 7.60% 29.19% 56.48% Banif Mediaçao de Seguros, Lda Invest. Imobiliários, SA Açor Pensões Share capital: 6,234.97 Eur Share capital: R$ 33,365,081.00 10.81% Share capital: 1,850,000 € 100% Banif Açores, Inc Fall River Share capital: USD 100,000 11.75%

100% Banieuropa 100% Banif Capital – Soc. Holding, SL de Capital de Risco Share capital: 100,000 € Share capital: 750,000 € Numberone Banif Securities 100% 100% 100% Banif Securities Inc SGPS, Lda Holdings, Ltd Share capital: USD 8,532,707 Share capital: 5,000 EUR Share capital: USD 2,108,000 33.32% Banca Pueyo, SA 100% Gamma – Soc. (Espanha) Titularizaçã de Créditos Share capital: 4,800,000 € Share capital: 250,000 € 80% Banif (Brasil), Ltda) 99% 20% 100% Econofinance, SA Share capital: R $ 150,000 Share capital: BRL: 2,817,750 1% Banif Finance, Ltd 28.66% Bankpime 100% Banif International Share capital: b) (Espanha) Asset Management Share capital: 24,851,374.78 € Share capital: USD 50,000 100.0% Banif International e) 100% 100% Bank, Ltd Komodo Share capital: 25,000,100 € Banif 33.33% Inmobiliaria Vegas Atlas d) (Espanha) Multi Fund Share capital: USD 50,000 Share capital: 60,330.42 € Banif Banco de Genius 75% 25% 100% Investimento (Brasil), SA Mediadora de Seguros, SA Share capital: R $ 90,785,158.21 Share capital: 50,000 Eur

100% Banif Gestão de Ativos (Brasil) S.A. Share capital: R $ 10,787,073.00

100% Banif Rent, SA Share capital: 300,000 €

a) Paid-up share capital of USD 100 59-195% Investaçor, SGPS b) % of controlling voting capital is 100%. Share capital is comprised of: 100,000 ordinary shares with nominal value of USD 1 and non-voting preference shares: 50,000 shares of USD 0.01 and 155,000 shares of EUR 0.01. Share capital: 10,000,000 Eur c) % of controlling voting capital is 100%. Shares capital is comprised of: 26,000,000 ordinary shares with nominal value of USD 1 and 16,000,000 non-voting preference shares with nominal value of USD 1 d) Paid-up share capital USD100 e) % of controlling voting capital is 100%. Shares capital is comprised of:25,000,000 ordinary shares with nominal value of EUR 1 and 10,000 preference shares with nominal value EUR 0,01 10%

90% Banif-Banco Internacional do Funchal (Brasil), SA Share capital: R $ 200,357,555.09

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History and Ownership

The company, formerly known as Banif – Banco Internacional do Funchal, S.A., was transformed into Banif – SGPS, S.A. (the holding company of the Banif Financial Group) during the restructure in 2002, and a new bank with the same name, "Banif – Banco Internacional do Funchal, S.A." was created by the transfer of the whole banking activity of the former company and of the holding company of the Group to Banif. As a result, Banif now operates only as a commercial bank and no longer as a holding company of the Group.

On 1 January 2009, Banco Banif e Comercial dos Açores, S.A., a commercial bank operating in Portugal, mainly in the Azores region, was merged into Banif.

Banif is directly 100 per cent. owned by Banif – SPGS, S.A., which has its shares listed on the regulated market Euronext Lisbon, managed by Euronext Lisbon — Sociedade Gestora de Mercados Regulamentados, S.A. ("Euronext Lisbon").

Regulatory Status

Banif qualifies as a credit institution within the meaning of EU Directive 2000/12/EC. Banif is authorised by the Bank of Portugal (Banco de Portugal) to pursue the business of a credit institution in Portugal. Pursuant to Article 3 of the Articles of Association of Banif, its corporate object is the exercise of the banking activity, which is pursued by carrying out all acts and transactions permitted by law with regard to retail banks.

Main Activities and Recent Developments

Incorporated on 1 April 2002, Banif is a well established bank in the Portuguese financial sector, with a nationwide network of branches, organised in accordance with the concept of modern points of sale, and an e-banking system which is increasingly being taken up by customers and potential customers. The Bank offers a comprehensive range of products and services, for both personal and corporate clients, and constantly adjusts those products and services to meet market needs. Firmly committed to a financial partnership with its customers, the Bank is currently the market leader in Madeira and is well established with Portuguese residents in Venezuela and South Africa, providing a personalised service of increasing quality and a full range of products.

Banif operates in mainland Portugal, in the Madeira Autonomous Region and in the Azores Autonomous Region.

Madeira region

The business activity of the Madeira commercial department is focused on pursuing the strategic aim of consolidating Banif’s leadership in the regional market. As at 30 June 2012, Banif operated through a distribution network of 36 branches (12 of which are in Funchal). Banif concentrates on relationship banking in Madeira through three commercial divisions:

(i) retail banking, which offers a wide range of banking products and services (such as mortgage and consumer loans, credit and debit cards, deposit and investment products, commercial lending and bank assurance);

(ii) corporate and small and medium sized corporations, which provides services (including corporate lending and project lending) to medium and large sized corporations in Madeira; and

(iii) private banking to high net worth individuals and institutional clients, offering tailor-made products and services.

As at 30 June 2012, Banif had 92,102 active clients in Madeira.

Banif benefits from a close relationship with the regional government and the local administrations as it is the main financial institution in managing public offices accounts, where most of civil servants' wages are paid, as well as in the financing of the main projects and public works that take place in Madeira. Banif's operations in Madeira during 2011 continued to be carried out in an environment dominated by the

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difficulties resulting from the economic situation at home and abroad and by the already fierce competition experienced in the region’s banking sector.

As at 30 June 2012 and 31 December 2011, the loan portfolio of Banif in Madeira was approximately EUR 1,395 million and EUR 1,480 million respectively and the total deposits from customers amounted to over EUR 2,122 million and EUR 2,192 million respectively.

Azores region

With the merger of Banco Banif e Comercial dos Açores, S.A. into Banif in January 2009, Banif has also positioned itself in the Azores region as the "reference bank" for corporates and individuals. As at 30 June 2012, Banif had a total number of 47 points of sale in the Azores region. The commercial activity of the Bank in the Azores region is divided into five different networks:

(i) Branch network: provides investment options and credit products to individuals;

(ii) Private banking: offers different financial products to middle income individuals;

(iii) Corporate Centres Network: delivers banking products and financial advice to companies;

(iv) Non Residents Network: provides financial services to the Azorean community abroad, through its international network; and

(v) Brokers Network: offers origination of mortgage loans and consumer loans.

As at 30 June 2012 and 31 December 2011, the loan portfolio of Banif in the Azores region was approximately EUR 1,562 million and EUR 1,554 million respectively and the total deposits from customers amounted to EUR 934 million and EUR 955 million respectively. As at 30 June 2012, Banif had approximately 75,806 active clients in the Azores region.

Mainland Portugal In mainland Portugal, Banif supports two main market segments:

(i) retail banking for individuals and small businesses; and

(ii) corporate and private banking, which provides services to small and medium sized corporations (with turnovers between EUR 1 million and EUR 4 million per annum).

The Retail Banking Division was created in 1998 and it currently serves approximately 313,130 active clients. Its 287 branches in mainland Portugal have been organised into "Sales Centres" aimed at marketing the Banif Financial Group’s products and services. Front and back office operations within the branches are limited to the provision of basic cash transaction services, thereby enabling approximately 80 per cent. of the staff to support marketing and customer service.

Alongside these "Sales Centres", the distribution channels of the retail banking of Banif in mainland Portugal also include:

 a private banking unit named "Banif Privado" specialised in providing services to high net worth individuals and institutional investors (with 14 high net worth individuals centres);

 a call centre located in Oporto (with 37 call centre operators);

 a network of promoters who promote and sell Banif products and services to their clients (with 1,383 individuals); and

 online banking (internet banking).

The Corporate and Private Banking Division was created in 1993 and it currently serves 5,120 active customers from a network of 13 corporate centres and six extensions. The unit had 37 business managers as at 30 June 2012. Credit analysts are centralised and report to the global risk management division and

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integrate credit committees. The Corporate and Private Banking Division is responsible for coordinating and developing business with medium and large companies, institutional clients and middle-to-high income private customers. In addition, it also comprises a unit focused on factoring and reverse factoring operations.

Since late 2008, following the organisational restructuring of this division, every corporate centre has a private manager in order to facilitate the provision of a comprehensive corporate client service and to meet the specific needs of private customers (from middle-to-high income customers to affluent and high net worth individuals).

The corporate loan portfolio, managed by the Corporate Banking Division, amounted to approximately EUR 2,765 million, while total deposits taken by this unit amounted to approximately EUR 312 million, as at 31 December 2011.

The loan portfolio, managed by the Private Banking Division, amounted to approximately EUR 130 million, while total deposits taken by this unit amounted to approximately EUR 902 million, as at 31 December 2011.

As at 30 June 2012, the corporate loan portfolio managed by the Corporate and Private Banking Division amounted to approximately EUR 3,311 million whilst total deposits amounted to approximately EUR 1,420 million.

The branch network division (Direcção de Rede de Agências) ("Branch Network Division") has 253 branches in mainland Portugal and is primarily focused on bringing in deposits and placing products and services in its target segment: individual customers, small businesses and independent professionals. In view of its size, the Branch Network Division is primarily responsible for marketing Banif’s strategic products: home loans, personal loans, cash management accounts, credit and debit cards. It also assumes a leading role in attracting deposits and in the development of cross selling and placing the Banif Financial Group’s products including leasing products, investment funds and insurance.

As at the end of 2011, the Branch Network Division had a network of 260 branches, after closing 12 points of sale (including 10 branches, one corporate centre and one representative office) during the course of the year. As at the end of June 2012, the Branch Network Division had 253 branches. As at 31 December 2011, the Branch Network Division had 993 commercial agents and 390 Assurfinance agents.

The total loan portfolio managed by the Branch Network Division (Direcção de Rede de Agências) as at 30 June 2012 and 31 December 2011 was approximately EUR 2,917 million and EUR 3,180 million respectively and total customer deposits amounted to approximately EUR 3,671 million and EUR 3,381 million respectively.

In August 2012, Banif defined a new business model for the commercial division. The Branch Network Division and the Corporate and Private Banking Division will be merged but separated by region into four divisions (North, South, Madeira and the Azores region). Each division will be responsible for privates network (either retail and private banking) and small and medium sized corporates. A new division will also be created to support large corporates (with annual turnover of at least EUR 50 million).

The development in technology and the growing demand for alternative distribution channels, coupled with Banif’s desire to continue meeting the needs and expectations of its clients led Banif to launch an internet banking service – Banif@st – in 2001. Banif’s clients can access Banif@st through four channels: (i) Internet (from any computer with an internet connection); (ii) Telephone ("Banifone"); (iii) SMS (from any mobile phone enabled for text messages); and (iv) WAP (from any mobile phone with WAP configuration).

By the end of June 2012, 90 per cent. of Banif’s clients had access to Banif@st and 23 per cent. of Banif’s clients were using the service frequently.

Points of Sale

As at 30 June 2012, the Banif Financial Group had a countrywide geographical coverage, with 541 points of sale worldwide and is in leading positions in Madeira and the Azores region (compared to 561 points of sale worldwide as at 31 December 2011).

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Employees

As at 31 December 2011, Banif had a total number of 2,548 employees, which corresponded to a 4.5 per cent. decrease against the number of employees at 31 December 2010. As at 30 June 2012, Banif had a total number of 2,520 employees.

Boards and Officers of Banif

(a) Management Team

All members of the Management Team of Banif have their business address at the registered office of Banif.

(i) Board of Directors

Chairman Luís Filipe Marques Amado Vice Chairman Jorge Humberto Correia Tomé Full Members Diogo António Rodrigues da Silveira Vitor Manuel Farinha Nunes Nuno José Roquette Teixeira João Paulo Pereira Marques de Almeida Manuel Carlos de Carvalho Fernandes Carlos Eduardo Pais e Jorge João José Gonçalves de Sousa Gonçalo Vaz Gago da Câmara de Medeiros Botelho

(ii) Executive Committee

Chairman Jorge Humberto Correia Tomé Members Vitor Manuel Farinha Nunes Nuno José Roquette Teixeira João Paulo Pereira Marques de Almeida Carlos Eduardo Pais e Jorge João José Gonçalves de Sousa Gonçalo Vaz Gago da Câmara de Medeiros Botelho

(b) Audit Board

Chairman Fernando Mário Teixeira de Almeida Effective Full Members António Ernesto Neto da Silva Tomás de Mello Paes de Vasconcellos Alternate Full Member José Pedro Lopes Trindade

(c) Official Auditors

Ernst & Young & Associados – S.R.O.C., S.A., represented by Ana Rosa Ribeiro Salcedas Montes Pinto (ROC nr. 1230)

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Below is a list of the offices held in other companies by members of the Board of Directors and of the executive committee of Banif (to whom the Board of Directors have delegated the day-to-day management responsibilities) as above mentioned which are significant with respect to Banif:

Board of Directors

Luís Filipe Marques Amado

(i) Chairman of the Board of Directors

Banif – SGPS, S.A.

Banif – Banco Internacional do Funchal, S.A.

Banif – Banco de Investimento, S.A.

Jorge Humberto Correia Tomé

(i) Vice-Chairman of the Board of Directors and Chief Executive Officer

Banif – Banco Internacional do Funchal, S.A.

Banif – Banco de Investimento, S.A.

(ii) Member of the Board of Directors and Chief Executive Officer

Banif - SGPS, SA

Banco Banif Mais, SA

(iii) Chairman of the Board of Directors

Banif – Banco de Investimento (Brasil), SA

Banif Imobiliária, SA

Banif – Banco Internacional do Funchal (Brasil), SA

(iv) Chairman and Chief Executive Officer

Banif Finance, Ltd.

(v) Member of the Corporate Superior Council

Banif - SGPS, SA

Carlos Eduardo Pais e Jorge

(i) Member of the Board of Directors

Banif Rent – Aluguer, Gestão e Comércio de Veículos Automóveis, SA

Banif – Banco de Investimento (Brasil), SA

Banif - Banco Internacional do Funchal (Brasil), S.A.

Banif Securities Inc.

Banif Multifund, Ltd.

Banif International Asset Management, Ltd.

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Banif Securities Holdings, Ltd.

Banif Ecoprogresso Trading, SA

Diogo António Rodrigues da Silveira

(i) Chief Executive Officer

Companhia de Seguros Açoreana, S.A.

(ii) Member of the Board of Directors

Banif – SGPS, S.A.

Banif Imobiliária, SA

Gonçalo Vaz Gago da Câmara de Medeiros Botelho

(i) Member of the Board of Directors

Banif – Banco de Investimento, S.A.

Banif (Açores) - Sociedade Gestora de Participações Sociais, SA

João José Gonçalves de Sousa

None.

João Paulo Pereira Marques de Almeida

(i) Member of the Board of Directors

Banif – SGPS, S.A.

Banif – Banco de Investimento, S.A.

Banif Finance, Ltd.

Manuel Carlos de Carvalho Fernandes

(i) Member of the Board of Directors

Banif – SGPS, S.A.

Nuno José Roquette Teixeira

(i) Member of the Board of Directors

Banif – SGPS, S.A.

Banif – Banco de Investimento, S.A.

Companhia de Seguros Açoreana, S.A.

Banieuropa Holding, S.L.

Banif – Banco Internacional do Funchal (Brasil), S.A.

Banif – Banco de Investimento (Brasil), S.A.

Banif International Bank, Ltd

Banif - Banco Internacional do Funchal (Cayman), Ltd

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Banif Finance, Ltd.

Banif Securities, Inc

(ii) Chairman of the Board of Directors

Gamma – Sociedade de Titularização de Créditos, S.A.

(iii) Member of the Remuneration Committee

Banif Imobiliária, SA

Banif Capital – Sociedade de Capital de Risco, SA

Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliário, SA

Vitor Manuel Farinha Nunes

(i) Member of the Board of Directors

Banif – SGPS, S.A.

Banif Mais SGPS, S.A.

Banif – Banco Internacional do Funchal, S.A.

Banco Banif Mais, S.A.

Banif – Banco de Investimento, S.A.

Tecnicrédito ALD, Aluguer de Automóveis, S.A.

Banif Plus Bank Company, Ltd.

TCC Investments Luxembourg, SARL

(ii) Manager

Margem - Mediação de Seguros, Lda

Audit Board

Fernando Mário Teixeira de Almeida

(i) Chairman of the Audit Board

Banif - SGPS, S.A.

Banif Comercial SGPS, S.A.

Banif – Banco de Investimento, S.A.

António Ernesto Neto da Silva

(i) Member of the Audit Board

Banif - SGPS, S.A.

Tomás de Mello Paes de Vasconcellos

(i) Member of the Audit Board

Banif - SGPS, S.A.

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José Pedro Lopes Trindade

(i) Member of the Board of Directors

Investaçor - SGPS, SA

Investaçor Hóteis, SA

Açortur, SA

Turotel, SA

(ii) Alternate Member of the Audit Board

Banif - SGPS, S.A.

Conflicts of Interest

To the best of its knowledge, there are no potential conflicts of interest between the private interests or other duties of the above Directors and any of their duties to Banif, and there are no potential conflicts of interest between the private interests or other duties of the members of the Audit Board and any of their duties to Banif.

Audit Board

Supervision of Banif is entrusted to its Audit Board comprised of three members elected for a three-year mandate period. The Audit Board communicates with statutory auditors, senior staff and Directors on a regular basis to enable it to carry out its supervisory duties appropriately and to ensure that appropriate risk management and internal control systems are in place, and makes recommendation where necessary.

Audit Functions

Audit responsibilities within Banif are exercised by the Audit and Inspection Department, which plays an important role in assessing and validating the internal control instituted within the Bank. The Audit and Inspection Department is responsible for independently verifying compliance with the regulations in force by:

 striving to ensure compliance with internal rules and legal provisions, reporting facts and situations which represent a deviation from these rules;

 checking the quality of controls and security levels established in systems and information technology, focusing in particular on the e-banking service (Banif@st), with regard to both quality and security of services rendered; and

 regular audits of operations involving business risks.

In the context of its functions, the Audit and Inspection Department verifies and assesses the internal control system in place, prioritising the work programmes for operational audit and continuous audit aimed at the business units. It carries out a review of the Bank's internal control through a series of measures undertaken by the Operational Audit and Inspection Office ("OAIO") and the Information Systems Audit Office ("ISAO").

The evolving perspective of the Bank of Portugal on the effectiveness and adequacy of the internal control system and requirements recognised and accepted internationally, as reflected in the publication of Bank of Portugal Notice no. 5/2008, has led to a continuous review by Banif's Audit and Inspection Department of the analysis processes previously implemented for internal fraud prevention, and to specialisation of continuing audit activities as part of the review of internal control.

As a result of the experience accrued, work has been stepped up on planning and structuring internal audit activities, with the focus on the aim of performance, information and compliance, taking advantage of the synergies offered by the implementation of the "Matrix of Relevant Risks and Control by Functional Areas" in terms of internal control. In addition to this, checks have been structured by type of risk, in an

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effort to rationalise the available human resources, in order to maintain audit actions throughout the Portuguese territory.

The ISAO assists in controlling and analysing the functioning of the Banif IT systems, focusing in particular on the electronic payment means service, electronic banking and reporting of liabilities to the Bank of Portugal’s Credit Risk Centre. This office comprises two working teams, one connected to the Central Section for the Investigation of High Technology Criminality (Secção Central de Investigação de Criminalidade de Alta Tecnologia) of the Portuguese police authorities, and the other an interbank working team, both linked to the fight against electronic fraud.

The OAIO conducts hands-on, remote and ongoing audits to support the monitoring of the operating risk of commercial structures, contributing to the measurement of internal control and verifying compliance with internal rules.

All audit work is duly planned, with review of working papers and reports. In keeping with the reporting circuit instituted, all reports are approved by the Executive Board and are monitored by the bodies being audited or involved in the recommendations. Reports are then filed, once action has been taken to correct the anomalies identified.

Banif also organises training sessions in bank auditing in accordance with the annual training plan in order to develop the professional skills of the relevant personnel.

Ernst & Young Audit & Associados – SROC, S.A. are the external auditors of Banif.

Management of Business Risks

Risk management within Banif is based on identifying, analysing and monitoring exposure to the various risks involved in business, according to their materiality and significance (credit risk, liquidity risk, market risk, structural risk and operating risk, among others) and on control through the adoption of strategies and policies to ensure prevention and mitigation thereof, so that they can be kept within the previously established limits.

The policies adopted for each of the main risks identified are the responsibility of the executive committee and are defined and revised whenever warranted. On the basis of those policies, preventive action is taken to safeguard the Bank’s solvency and sustainability in the long term.

The Bank’s risk management is carried out according to strategies and policies set forth by the Executive Board. These measures are implemented by the Global Risk Management Department (the "DGR"), to which this function is specifically assigned.

The DGR is supervised by the executive committee through the director responsible for risk management who, therefore, does not hold any supervision duties in the bank departments. Moreover, DGR reports directly to the Board of Directors on all matters deemed relevant, thus ensuring that the board is aware of DGR’s activity and has access to all pertinent information.

The DGR is a centralised and independent unit, responsible for analysing and controlling risks. It acts independently from the other risk-generating functional areas. Nevertheless, all bank departments are fully aware of their responsibilities under the applicable risk management system.

In exercising its functions, the DGR participates in the following committees consisting of members from the various business units:

Committee Frequency Description Credit Committee Daily / Weekly Collegial participation in the decision-making process of non- standard operations for both loan approvals and renewals. Credit Monitoring Committee Monthly As part of measures to prevent non-performing loans, DGR participates in monthly Monitoring Committees held by the various commercial departments, These meetings assess actions designed to improve credit risk management in relation to implemented alert systems. Executive Committee for Non- Monthly Analysis for the more significant non-performing loans to assess Performing Loans the situation and to decide on the respective credit recovery strategies.

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Actions taken in the context of producing prudential information have also helped improve information systems, providing an additional benefit to management and control of business risk.

In 2011, the Bank continued to carry out a number of exercises on an individual basis, but with a view to consolidated integration, in several areas and including various types of risks:

 Management information – this was updated periodically for internal reporting, thus providing management bodies with a more comprehensive and effective vision of risk management. The resulting information is applied to regularly assess the performance of the main risks, their suitability to the stipulated limits and also to implement actions to correct or diminish identified risks;

 Stress tests – much emphasis was placed on performing stress tests and analysing the results thereof, particularly in unexpected situations and under unusual situations in the markets where the institutions operate, as in the current economic scenario. The stress tests are a good means of detecting risk situations that may have substantial impacts on the Bank’s financial conditions and allow contingency plans and adequate support to be set up; and

 Internal Capital Adequacy (ICAAP) – the Banif Financial Group has an internal model for assessing its available financial resources – the Risk-Taking Capacity Model. This model ensures that adequate equity levels and financial resources are available to meet current and future risks without affecting its solvency in compliance with the Group's strategic objectives. The current model considers the main business risks to which the Banif Financial Group is exposed, with emphasis on credit risk, liquidity risk, exchange rate risk, business/strategy risk, real estate risk, operating risk, information systems risk, compliance risk and reputational risk.

The Banif Financial Group also participated in the Special Inspections Programme (the "SIP") in 2011, which was carried out as part of the measures and actions agreed in May 2011 by the Portuguese government with the IMF, EU and ECB and applicable to the financial system under the Economic and Financial Assistance Programme (the "PAEF"). The SIP covered the eight largest Portuguese banking groups, including the Banif Financial Group, and aimed to validate: (i) credit risk data for assessing the financial solvency of the groups through an independent assessment of their credit portfolios and the suitability of their risk management policies and procedures, (ii) calculation of capital requirements for the credit risk and (iii) the suitability of parameters and methods used for financial forecasts forming the basis for their future solvency according to the stress test exercises. Although the valuation concluded that there was a need to reinforce the value of the impairment registered in the Group’s consolidated financial statements account by EUR 90 million, the aggregate impact of these results on the Group’s solvency, as of 30 June 2011, was null, and therefore the Tier 1 ratio would be maintained at 7.2 per cent..

Credit Risk

Credit risk is the probability of the occurrence of negative impacts on earnings or capital, due to the inability of a counterparty to honour its financial commitments to the Bank, including possible restrictions on the transfer of payments from abroad.

Credit risk is managed and monitored according to the principles and rules for granting and maintaining credit to clients as set out in the Bank’s Credit Manual. This Manual sets out a series of general rules, complemented by specific procedures and regulations applicable to each specific business area and their commercial networks, together with rules for preparing, analysing and supervising credit granted to clients.

During the course of 2011, in line with the Bank’s quality and efficiency policy, all credit regulations applicable to the business areas were reviewed and updated mainly to reflect new credit approval criteria and also to adapt the regulations to the Bank’s new credit segment for real estate leasing operations.

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Credit risk management

Credit risk management at Banif is based on permanent monitoring and ongoing supervision of lending portfolios in compliance with its annual qualitative targets and management continuously assesses whether the defined risk indicators remain consistent with the lending strategy.

Objectives are set for the Bank’s risk management in terms of: (i) portfolio’s risk scoring; (ii) concentration of exposure, in terms of geographical locations, sectors and major risks; and (iii) the degree to which operations are covered by guarantees.

Portfolios are monitored to assess whether they remain aligned with the stipulated policies during the year. At the same time, the Bank has in place an Alert Management System that enables the entire commercial structure to identify which clients and/or operations show signs of default. The alerts are classified as moderate, severe and very severe and eventually may lead to – and, in some cases, determine – the triggering of preventive actions to anticipate and mitigate the impact of default situations, particularly by decreasing liabilities, reinforcing guarantees or by maintaining stricter monitoring.

For exposures of higher amounts, the Credit Surveillance Committee, with representatives from the Bank’s different areas (risk, credit recovery, legal and commercial), meets at frequent intervals to discuss a global approach to the credit vigilance process and to ensure that all proper measures would be taken in case of a legal action.

Internal Risk Scoring Systems

Considering the particular features of Banif’s portfolios, the internal risk scoring systems look at specific customer characteristics, historical and relationship variables and the qualitative and quantitative characteristics of the operations.

The internal risk scoring systems are divided in the following categories:

Moment of Use Segments Acceptance Monitoring Retail Home Loans ...... Acceptance scoring HL Behavioural scoring HL Personal Loans ...... Acceptance scoring PL Behavioural scoring PL Small Business ...... Acceptance scoring SB Behavioural scoring SB Credit Cards ...... Acceptance scoring CC — Corporate SME's...... Rating of SMEs

Internal scoring models – Acceptance and Behavioural

The scoring models for granting credit allow each credit application to be assigned a probability of default, which are used when credit is granted. These models also make it possible to classify a given operation, in terms of exposure to risk, until the operation is one year old.

The behavioural scoring models are used to measure the risk on lending operations over their lifetime, in light of the irregular behaviour or otherwise of the counterparty in operations that are more than one year old.

Internal rating

Models for Corporate Lending

The rating model assigns to each (corporate) customer a risk classification in line with the probability of default, thereby measuring the risk of default by the counterparty. Banif has a statistical rating model for portfolios of small and medium sized businesses, which combines financial information with qualitative data, including relationship variables and commercial interaction.

The risk profile of the Bank’s credit portfolio as per Banif’s statistical rating model, as at 31 December 2011, is as follows:

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Distribution of the Companies Credit Portolio according to its Credit Rating

25%

20%

15% Dec- 10 Jun - 11 10% Dec- 11

5%

0% 1 2 3 4 5 6 7 8 9

- risk + risk

Risk Factors Models

Banif has implemented a calculation methodology for credit impairment losses, which establishes the evaluation of the credit portfolio according to individual analysis and collective analysis.

The credit loans which are not subject to an individual analysis will be assessed in a collective manner, and therefore will be incorporated into segments that gather homogenous conditions, and will be grouped with assets with similar risks and characteristics in order to implement an impairment analysis model based on the analysis of the historical impairment (probability of default) and total historical losses and estimated losses (Loss Given Default ("LGD")).

The update of the risk parameters applicable to the estimation of the losses in the collective analysis is done on an annual basis and based on internal data that reflect the recent performance of the credit portfolio as well as the Bank’s performance.

The Bank’s portfolios in its main business segments, as at 31 December 2011, have the following structure, in terms of credit quality:

Companies Consumer Credit

60% 60% 45% 45% Dec-10 Dec-10 30% 30% Dec-11 Dec-11 15% 15% 0% 0% Superior Quality Standard Quality Sub-standard Superior Quality Standard Quality Sub-standard Quality Quality

Housing Credit Other Credit

60% 60% 45% 45% Dec-10 Dec-10 30% 30% Dec-11 Dec-11 15% 15% 0% 0% Superior Quality Standard Quality Sub-standard Superior Quality Standard Quality Sub-standard Quality Quality

The global amount of credit in default at the end of 2011, considering capital and interest (including securitised credit), amounted to EUR 500.52 million, of which EUR 445.78 million had been overdue for more than 90 days (versus EUR 355.84 million at the end of 2010).

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The distribution of balances of credit overdue across the various segments is shown below:

6-12 2011 <3 months 3-6 months months 1-3 years >3 years Total (Thousand Euros) Companies ...... 43,836 63,667 89,393 117,176 49,885 363,957 Individuals Consumption ...... 5,379 946 3,645 22,869 11,473 44,313 Individuals Real Estate ...... 2,570 1,144 2,782 11,510 4,085 22,091 Individuals Others ...... 2,952 2,506 8,969 35,139 20,592 70,158

Total ...... 54,737 68,263 104,789 186,694 86,035 500,518

6-12 2010 <3 months 3-6 months months 1-3 years >3 years Total (Thousand Euros) Companies ...... 15,884 22,456 77,572 127,287 43,877 287,075 Individuals Consumption ...... 1,331 379 2,188 18,005 2,793 24,697 Individuals Real Estate ...... 10,228 284 685 3,257 542 14,997 Individuals Others ...... 2,066 2,333 13,489 29,488 11,205 58,581

Total ...... 29,509 25,453 143,649 128,322 58,418 385,350

As far as credit quality is concerned, indicators of non-performing loans and provisioning efforts, as at 31 December 2011, were as follows: 2011 2010 (Thousand Euros) Credit to Clients ...... 9,380,916 9,948,391 Overdue Credit and Interest ...... 500,519 385,350 Overdue Credit + Interest > 90 days ...... 445,781 355,841

Total Credit ...... 9,881,435 10,333,741 Provisions for Overdue Credit and Interest ...... 371,676 305,829 Variation in Provisions for Overdue Credit ...... 65,842 108,851

Indicators (%) Overdue Credit + Interest /Total Credit ...... 5.1% 3.7% Overdue Credit + Interest > 90 days / Total Credit ...... 4.5% 3.4% Non-Performing Loans / Total Credit ...... 4.9% 4.0% Non-Performing Loans (net) / Total Credit (net) ...... 1.2% 1.1% Credit at Risk / Total Credit (net)...... 10.3% 6.8% Credit at Risk (net) / Total Credit (net) ...... 6.8% 3.9% Provisions for Overdue Credit and Interest / Overdue Credit and Interest ...... 74.3% 79.4% Provisions for Overdue Credit and Interest / Overdue Credit and Interest > 90 days ...... 83.4% 85.9% Provisions for Overdue Credit and Interest / Total Credit ...... 3.8% 3.0% Variation Provisions for Overdue Credit and Interest / Overdue Credit and Interest...... 13.2% 28.2% Provisions for Overdue Credit and Interest / Total Credit ...... 0.7% 1.1%

Credit risk assessment process

The risk of non-standard credit is assessed by Risk Analysis Units as part of the Risk Management Division.

Non-standard operations and the respective customers are assessed by experienced teams using methods and procedures established by the Bank and designed to provide adequate security in acceptance, monitoring and control of portfolio risk. These procedures involve strict criteria, comprising analysis of:

 quality of the financial information provided by customers;

 assessment of the experience of the customer as manager, in the business sector in question, repayment capacity and his relationship with the financial market;

 quality of the proposed operation;

 the existing relationship with the Bank;

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 external commercial information; and

 assessment of the results obtained, namely through use of the rating model and the yield for the business banking sector.

Standardised lending, such as home loans, personal loans and small business credit, is assessed regularly on a collective basis, and each portfolio is monitored with regards to credit risk and quality.

Banif assesses the aggregate exposures of customers, considering for the purposes of credit risk assessment the overall exposure of the business group. In assessing the risk of corporate groups, the following criteria are also considered for risk assessment purposes:

 external risk ratings, if any;

 the credit risk of the different entities making up the corporate group; and

 the regulatory limitations on major risks, the scale of these in relation to equity and weighting of these risks for Banif's solvency ratio.

Also with regards to credit risk, once operations have been contracted, there is regular and periodic follow-up, in particular with regards to the renewal of credit lines and the particular terms involved.

With the aim of making the credit risk management model more robust, Banif has also put in place various initiatives, including:  revision of the operating model for loans;

 implementation of an operation rating model, to be applied to non-standardised credit proposals from companies and sole traders, so as to provide the various parties involved in the lending process with a greater amount of relevant information for correct decision-taking;

 development of an application that will make it possible to simulate consumption of regulatory capital for new credit operations, in light of the growing importance of careful use of resources as strategic to the Bank’s business; and

 revision of the Model for Credit Impairment.

Monitoring of credit risk

Credit risk is monitored by following through and controlling the evolution of exposure to credit risk on the portfolios, regular preparation of indicators of credit quality and of the respective segmented portfolios, implementing mitigation measures designed to preserve the credit quality and the pre-defined risk limits, and assessing the effectiveness of the policies in place, the risk adjusted yields and the need for possible corrective measures.

In 2009, the Bank proceeded with a project to implement and update alert signals. This initiative provides the various entities involved in credit management with a set of management tools which, as a general rule, allows them to anticipate recovery measures and take preventive steps to manage default. The Bank also overhauled and reviewed its Overdue Credit Regulations, adjusting powers and the timeframe for action, in order to enable a swifter response in line with the adverse conditions in the market and with the Bank’s objectives.

Analysis of Credit Risk

Exposure to credit risk, as at 31 December 2011, framed within the various accounting items, compared with the previous year, is shown below:

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2011 2010 Maximum Net Maximum Net * ** * ** Exposure Exposure Exposure Exposure (Thousand Euros) Financial assets held for trading ...... 8,140 8,140 3,911 3,911 Other financial assets at fair value through profit or loss ...... 69,198 69,198 293,126 293,126 Financial assets available for sale ...... 3,918,021 3,918,021 3,154,997 3,154,997 Credit to clients ...... 9,509,759 4,396,843 10,027,912 4,881,292 Investments held to maturity ...... — — — — Non-current assets held for sale ...... 223,192 223,192 96,161 96,161 Other assets ...... 2,997,549 2,997,549 1,484,947 1,484,947 Sub-total ...... 16,725,859 11,612,943 15,061,054 9,914,434 Contingent liabilities ...... 5,568,393 5,568,393 4,093,020 4,093,020 Commitments accepted ...... 898,201 898,201 1,299,935 1,299,935 Sub-total ...... 6,466,594 6,466,594 5,392,955 5,392,955

Total exposure to credit risk ...... 23,192,453 18,079,537 20,454,009 15,307,389 ______* Max. exposure: refers to net balance sheet value. ** Net exposure: Refers to maximum minus the effect of mitigation considered effectively to reduce risk, not considering sureties/guarantees and other weak collateral as such.

As regards exposure to credit risk by segment, in accordance with Basel II, the figures as at 31 December 2011 show the following distribution:

2011 2010 Segment Exposure Exposure (Thousand Euros) Regional administration or local authorities ...... 200,211 137,242 Central administration and central banks ...... 515,926 288,617 Retail portfolio ...... 1,366,258 1,667,914 Companies ...... Corporate 414,515 457,550 SMEs 2,505,333 3,161,045 Institutions ...... 2,236,775 1,710,254 OIC ...... 75,805 220,637 Administrative entities and non-profit companies ...... 8,234 151,645 Others ...... 927,377 584,905 Positions guaranteed by real estate property ...... Commercial 328,739 27,959 Residential 3,300,504 3,278,031 Elements overdue* ...... 1,178,097 776,340

Total Gross Exposure to Credit Risk ...... 13,057,774 12,462,140 ______Note: Reflects the exposure, from a prudential point of view, of the asset's elements. In order to assure comparability between the two periods, the 2010's values include the real estate portfolio of Banif Go, which was integrated into Banif in 2011. * In accordance with the definition of Basel II, considering the total amount of operations total or partially overdue for more than 90 days.

The segments "SMEs" and "Positions guaranteed by real estate property" are the most significant, representing 19 per cent. and 25 per cent. respectively of total exposure to credit risk.

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The figure shown for the segment "Institutions" includes approximately 91 per cent. of credit granted to entities of the Banif Financial Group.

(a) Structure of lending portfolio

Considering the policy of portfolio diversification, as at 31 December 2011 the breakdown of credit to clients by sector was as follows:

2011 2010 Maximum Exposure Net Exposure Maximum Exposure Net Exposure (Thousand Euros) Services ...... 2,124,346 22% 1,310,001 30% 2,282,125 23% 1,376,575 28% Construction ...... 1,015,217 11% 545,112 12% 1,160,171 12% 705,082 14% Financial institutions and insurers ... 813,252 9% 804,555 18% 882,465 9% 873,678 18% Industry ...... 590,684 6% 417,418 9% 666,671 7% 506,139 10% Retail sales ...... 425,884 4% 239,403 5% 424,482 4% 265,887 5% Public sector ...... 240,818 3% 222,269 5% 158,061 2% 155,760 3% Other sectors ...... 531,962 6% 356,517 8% 561,288 6% 398,759 8% Private individuals ...... 3,767,596 40% 501,568 11% 3,892,649 39% 599,412 12%

Total exposure to credit risk ...... 9,509,759 4,396,843 10,027,912 4,881,292 ______Note: Services include real estate activities and other services provided to companies.

Collateral Management

The Bank has internal procedures for the acceptance of particular types of collateral, with specific assessment criteria.

The value and nature of collaterals – security for lending – and also the degree of coverage depend on the outcome of the assessment of the counterparty’s credit risk. The Bank assesses in the first place the counterparty’s repayment capacity and its probability of default, considering collateral as a second form of payment, and therefore not necessarily as a main factor in the assessment criteria.

There are certain types of collateral which are by nature associated with particular types of lending:

 In medium-long term lending to private customers, such as home loans, the collateral normally takes the form of a real guarantee, specifically mortgage of the property and/or pledge of deposits or securities;

 In short term lending to private customers, namely consumer credit, only personal guarantees are normally sought;

 In the case of lending to companies, and specifically revolving credit, personal guarantees are sought from the partners/shareholders, and in some cases real guarantees are required, such as the mortgage of property or the deposit of securities. These situations vary depending on the risk assigned to the customer, the nature of the operation and the maturity of the credit granted.

Whenever the credit risk of a lending deteriorates, customers are asked to provide additional guarantees. In the case of lending to companies belonging to business groups, it is current practice for the Bank to mitigate the credit risk with collateral provided by the parent company.

Collateral which is executed due to default by the customer, and passes into the ownership of the Bank, is generally sold for full or partial discharge of the debt.

Collateral is managed on an ongoing basis, so as to ensure that it continues to cover the loans made.

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As at 31 December 2011, the covering effect of mitigation measures is as shown below:

Degree of coverage of credit by mitigating measures

5,000 4,500 4,000 3,500 38% 3,000 2,500 2,000 99%

Exposure (million1,500 euros) 62% 1,000

500 3% 39% 1% 0 97% 61% Companies Consumer Credit Housing Credit Other Loans

Non - Collateralised Collateralised

(b) Exposure to Markets

As at 31 December 2011, exposure to credit risk by geographical area was as shown on the chart below. Exposure was greatest in the Portuguese market, which represented 93 per cent. of exposure:

2011 2010 Maximum Exposure Net Exposure Maximum Exposure Net Exposure (Thousand Euros) Mainland Portugal ...... 5,936,680 62% 3,023,566 69% 6,346,264 63% 3,353,097 69% Autonomous Regions ...... 2,966,267 31% 1,221,823 28% 3,059,266 31% 1,354,097 28% European Union ...... 444,481 5% 81,337 2% 486,991 5% 121,465 2% Rest of Europe ...... 25,724 <1% 8,478 <1% 30,933 <1% 15,408 <1% North America ...... 74,246 <1% 48,608 1% 41,942 <1% 16,897 <1% Latin America ...... 44,076 <1% 11,376 <1% 41,078 <1% 15,839 <1% Rest of the World...... 18,285 <1% 1,655 <1% 21,438 <1% 4,489 <1%

Total Exposure to Credit Risk .... 9,509,759 4,396,843 10,027,912 4,881,292

(c) Market Exposure by sector breakdown

As at 31 December 2011, the European market accounted for almost all credit granted to private individuals and financial institutions and insurance companies. 2011 Rest of European the North Latin Rest of Portugal Union Europe America America World Total (Thousand Euros) Services...... 2,063,822 50,948 1,173 7,806 2 595 2,124,346 Construction ...... 991,738 21,236 6 1,721 516 0 1,015,217 Financial Institutions and Insurers ...... 775,136 403 6,611 31,102 0 0 813,252 Industry ...... 581,725 0 0 211 8,748 0 590,684 Retail Sales ...... 421,826 0 20 30 4,008 0 425,884 Public Sector ...... 240,818 0 0 0 0 0 240,818 Others ...... 526,946 481 625 2,962 585 363 531,962 Private Individuals (excluding STS) ...... 3,300,936 371,413 17,289 30,414 30,217 17,327 3,767,596 Total Exposure by Business Sector / Geographical Area ...... 8,902,947 444,481 25,724 74,246 44,076 18,285 9,509,759 % of each geographical area .. 94% 5% <1% <1% <1% <1%

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Market Risk

Market risk is understood as the probability of the occurrence of negative impacts on results or capital, due to unfavourable movements in the market price of instruments in the trading book, caused by fluctuations in interest rates, exchange rates, listed share prices or commodity prices.

Management of Banif’s market risk is considered prudent and is monitored on an ongoing basis. The limits for involvement in markets are systematically reviewed by management and adjusted when necessary. Decisions are taken on the basis of procedural and internal control rules and of the standards issued by the regulatory authorities.

Management of market risk

Banif’s market risk management policy consists of hedging risk on more volatile assets, in particular on fixed rate products and on the exchange rate operations contracted with customers. Positions recorded in Banif’s trading book include foreign exchange, fixed rate and floating rate risks where the respective fluctuations are entered in the accounts at market prices.

Interest rate sensitivity analysis

The purpose of interest rate sensitivity analysis is to assess the Bank’s exposure to this risk and infer its capacity to absorb adverse variations in the rates to which it is exposed.

Interest rate sensitivity analysis are conducted periodically, using scenarios to measure the impact of rate variations on interest rate margins and capital, in keeping with the recommendations of the supervisory authority. Interest rate risk is systematically analysed in accordance with the repricing periods for assets and liabilities.

The sensitivity analysis for the interest rate risk on financial instruments is based on the analysis conducted for the purposes of reporting to the supervisory bodies. The analysis considers a standard shock, positive or negative, of 200 basis points in the interest rate and the respective impact on equity and on the financial margin (over 12 months); however, the Bank also assesses the impact on its indicators of other magnitudes of shock. The magnitude of the impacts simulated is not considered as significant.

All financial instruments, on and off the balance sheet, which are by definition not affected by interest rate variations are excluded from this analysis.

Sensitivity analysis – Impact of a variation of 200 basis points in interest rate curve by relevant currencies

Dec-2011 EUR USD TOTAL (Thousand Euros) Up to 1 m 612 -163 448 1 -3 m -3,795 34 -3,761 3-6 m -5,816 204 -5,611 6- 12 m 4,152 -75 4,078 1 -5 Y 40,112 -367 39,745 >5 Y -51,657 -3,710 -55,367 Impact on Net Worth ...... -16,392 -4,077 -20,469 Impact on Net Worth as a % of Own Funds ...... -2% 0% -2%

EUR USD TOTAL (Thousand Euros) Up to 1 m -14,236 3,921 -10,315 1 - 3 m 19,927 -170 19,757 3-6 m 6,253 -351 5,902 6- 12 m -1,965 52 -1,913 Impact on Net Interest Margin at 12 months ...... 9,978 3,452 13,430 Impact on Annual Net Interest Margin, as a % ...... 5% 2% 7% Own Funds ...... 921,150 Net Interest Margin ...... 197,437

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Dec-2010 EUR USD TOTAL (Thousand Euros) Up to 1 m 1,730 -92 1,638 1 -3 m -8,156 388 -7,768 3-6 m -6,968 536 -6,432 6- 12 m -386 995 609 1 -5 Y 32,469 -112 32,356 >5 Y -56,057 -3,853 -59,910 Impact on Net Worth ...... -37,368 -2,138 -39,506 Impact on Net Worth, as a % of Own Funds ...... -3% 0% -3%

EUR USD TOTAL (Thousand Euros) Up to 1 m -41,444 2,210 -39,234 1 -3 m 39,290 -1,996 37,294 3-6 m 8,631 -938 7,693 6- 12 m -2,067 -394 -2,460 Impact on Net Interest Margin, at 12 months ...... 4,410 -1,118 3,292 Impact on Annual Net Interest Margin, as a % ...... 2% -1% 2% Net Worth ...... 1,203,910 Net Interest Margin ...... 214,628

The sensitivity analysis shows that a higher level in the market interest rates will have a negative impact on equity and a positive impact on the financial margin. The main variation on the interest rate sensitivity compared with the previous year, with impact on the financial margin, was due to the increase in the amount of deposits expressed in Euros and to the decrease in the amount of deposits expressed in U.S.$.

Exchange rate sensitivity analysis

Exchange rate risk represents the risk that the value of financial positions expressed in foreign currency will fluctuate due to changes in interest rates. Banif monitors its exposure to exchange rate risk by means of daily checks on the global exposure of the open positions taken in various currencies, and adopts global hedging strategies to ensure that those positions remain within the limits defined at a higher level. The greatest exposure is on the portfolio of credit granted to clients and is centered on GBP Sterling and US dollar, as shown in the table below, which sets out exposures to exchange rate risk by currency: 2011 Currency Credit (Thousand Euros) EUR ...... 9,356,420 GBP ...... 89,392 USD ...... 59,520 JPY ...... 2,296 CHF ...... 2,128 DKK ...... 2 SEK ...... 0 CAD...... 0

Total ...... 9,509,759

Price risk sensitivity analysis

Price risk is not very relevant in the context of the Bank’s overall activities, so sensitivity analysis is not conducted. In view of the relative unimportance of this risk, the Bank makes use of the provision contained in the Bank of Portugal regulations (cf. Decree-Law 103/2007) allowing capital requirements relating to the trading book to be calculated in accordance with capital requirements for credit risk, if all the following conditions are met: (i) trading book activity normally accounts for no more than 5 per cent. of total operations; (ii) total exposure on the trading book is normally less than EUR 15 million; and (iii) trading book activities account for no more than 6 per cent. of total trading and a sum of no more than EUR 20 million.

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Liquidity Risk

Liquidity risk is defined as the probability of the occurrence of negative impacts on results or capital resulting from the institution’s inability, especially in the short term, to dispose of liquid funds to honour its financial obligations, as and when they mature. This risk is managed centrally for the Group as a whole.

During 2011, the treasury management policy and the financing policy for financial institutions of the Group focused on the need to overcome extraordinary conditions arising from scarce liquidity in the financial markets. This situation was worsened by the sovereign debt crisis and the consecutive downgrades of countries and institutions by rating agencies, which created a bigger obstacle in obtaining financing.

Liquidity risk management

The Portuguese economy’s complex situation in 2011, which called for the PAEF, had very concrete implications for the Bank’s funding management, as the capital markets remained inactive, thus crippling the roll-over of debt instruments. This situation was also worsened by successive rating reviews of the Republic of Portugal and consequently, of banks, to levels below investment grade, which depreciated the assets held by the Bank which are part of the pool of refinancing operations with the ECB, particularly securitisation instruments, loans with a rating equivalent to sovereign debt and bonds issued by other banks.

Consequently, in May 2011, the Bank faced the early repayment of syndicated loans in the total amount of EUR 428 million, through the trigger of rating clauses in the respective contracts after the lower debt rating assigned by Fitch in early April.

In order to manage the liquidity risk, the Bank took steps to increase its deposit holding and reduce its credit portfolio. The Bank also placed securitisation instruments issued by it and originally held in the balance sheet into the secondary market with international investors, and made greater utilisation of financing operations with repurchase agreements with local counterparties. Further, the Bank launched a programme to issue covered bonds, with certain issues having the benefit of a guarantee from the Portuguese state, to enable it to obtain financing from the ECB. Lastly, the Bank participated actively in auctions for treasury bills (TBs) throughout the year, which were also used as collateral at the ECB.

Analysis of liquidity risk

The Bank’s liquidity risk assessment is based on calculating and analysing indicators regularly defined by the supervision authorities and other internal metrics for which exposure limits are laid out. Therefore, changes in the Bank’s liquidity position are determined on a regular basis by identifying all factors justifying the variations. This control is boosted through stress tests to characterise the Bank’s risk profile and to ensure that its obligations may be met within a scenario of a deteriorating liquidity crisis.

The internal liquidity management policy attributes great relevance to the constant monitoring and review of exposure limits so that they always reflect market conditions. In the context of current liquidity management and as part of Banif’s short-term financing plan, regular quantitative and qualitative analyses have been performed to re-establish minimum liquidity reserves whenever deemed necessary.

In compliance with prudential rules issued by the Bank of Portugal, the Bank must maintain a suitable equilibrium between financial flows associated to the balance sheet items, as a means of ensuring that it has net funds to meet, under reasonable conditions, its financial obligations as they mature.

Concentration of Risk by Maturity Date

By analysing gaps between maturities for refixing or revising interest rates on the financial instruments considered, it is also possible to determine concentrations of interest rate risk at the various maturities.

2011 Up to 1 m 1-3m 3-6m 6-12m 1-5 Y >5 Y Total (Thousand Euros) Liabilities ...... 3,642,005 2,545,418 2,076,174 940,116 2,823,929 3,878,762 15,906,404 Funds from Central Banks and CIs . 1,502,187 590,558 37,552 10,226 845,300 0 2,985,823 Debts to Clients ...... 1,972,947 1,859,371 1,498,605 869,761 1,717,470 2 7,918,156 Debts represented by securities 24,790 43,649 529,845 9,496 3,581 0 611,361

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2011 Up to 1 m 1-3m 3-6m 6-12m 1-5 Y >5 Y Total (Thousand Euros) Subordinated Liabilities ...... 0 19,400 0 27,158 130,439 185,231 362,228 Other Liabilities ...... 142,081 32,440 10,172 23,475 50,351 3,693,529 3,952,048 Provisions ...... 0 0 0 0 76,788 0 76,788 Equity and Reserves ...... 0 0 0 0 0 819,455 819,455 Total ...... 3,642,005 2,545,418 2,076,174 940,116 2,823,929 4,698,217 16,725,859

Assets Claims on CIs ...... 1,200,215 113,056 117,610 96,311 0 15,059 1,542,251 Claims on Clients ...... 494,676 1,096,909 1,051,135 1,234,976 2,687,399 2,944,664 9,509,759 Fixed and Variable Yield Securities 179,806 7,125 83,650 46,980 66,948 3,610,850 3,995,359 Shareholdings and Long-Term Assets ...... 0 0 0 0 0 147,940 147,940 Other Assets ...... 303,042 2,457 317,071 391,365 0 516,615 1,530,550 Total ...... 2,177,739 1,219,547 1,569,466 1,769,632 2,754,347 7,235,128 16,725,859

2010 Up to 1 m 1-3m 3-6m 6-12m 1-5 Y >5 Y Total (Thousand Euros) Liabilities ...... 3,191,429 2,410,565 1,518,689 1,146,430 2,688,502 3,286,793 14,242,408 Funds from Central Banks and CIs . 1,300,477 510,045 295 275,244 577,398 46 2,663,505 Debts to Clients ...... 1,800,063 1,870,390 1,361,300 834,757 1,291,783 2 7,158,295 Debts represented by securities 34 118 151,733 16,924 578,929 7,602 755,340 Subordinated Liabilities ...... 0 0 0 553 150,540 277,850 428,943 Other Liabilities ...... 90,855 30,012 5,361 18,952 0 3,001,293 3,146,473 Provisions ...... 0 0 0 0 89,852 0 89,852 Equity and Reserves ...... 0 0 0 0 0 818,646 818,646 Total ...... 3,191,429 2,410,565 1,518,689 1,146,430 2,688,502 4,105,439 15,061,054

Assets Claims on CIs ...... 918,468 64,330 51,473 31,814 0 15,046 1,081,131 Claims on Clients ...... 349,933 1,194,398 1,257,924 1,381,865 2,588,261 3,255,531 10,027,912 Fixed and Variable Yield Securities 0 0 18,718 191,109 70,365 3,171,842 3,452,034 Shareholdings and Long-Term Assets ...... 0 0 0 0 0 64,103 64,103 Other Assets ...... 264,244 0 0 171,630 0 0 435,874 Total ...... 1,532,645 1,258,728 1,328,115 1,776,418 2,658,626 6,506,522 15,061,054

The gap analysis on the various maturities of future cash-flows also allows the determination of the risk concentration level at the various maturities:

% Cumulative Cumulative % Gap/ Total Gap / Total 2011 Gap Gap Assets Assets (Thousand Euros) Up to 1m ...... (1,464,266) (1,464,266) -8.8% -8.8% 1-3m...... (1,325,871) (2,790,137) -7.9% -16.7% 3-6m...... (506,708) (3,296,845) -3.0% -19.7% 6-12m ...... 829,516 (2,467,329) 5.0% -14.8% 1-5 Y ...... (69,582) (2,536,911) -0.4% -15.2% >5 Y ...... 2,536,911 — 15.2% 0.0%

% Cumulative Cumulative % Gap/ Total Gap / Total 2010 Gap Gap Assets Assets (Thousand Euros) Up to 1m ...... (1,658,784) (1,658,784) -9.9% -9.9% 1-3m...... (1,151,837) (2,810,621) -6.9% -16.8% 3-6m...... (190,574) (3,001,195) -1.1% -17.9% 6-12m ...... 629,988 (2,371,207) 3.8% -14.2% 1-5 Y ...... (29,876) (2,401,083) -0.2% -14.4% >5 Y ...... 2,401,083 — 14.4% 0.0%

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In 2011, the Bank undertook a project for developing an ALM (Asset and Liability Management) model to effectively improve the Bank’s asset and liability management activities. This project will allow the Bank to enhance its methods of measuring and managing the various balance sheet risks and, as such, align procedures and the organisational structure according to the best market practices.

In 2011 the Treasury Committee was created for the Group in which Banif, as the main entity, plays a leading role. This committee regularly monitors the liquidity positions and main risk metrics of the various business units with the explicit objective of diminishing the contingent liquidity risk.

Operating Risk

Operating risk is the risk of losses resulting from the inadequacy or shortcomings of procedures, personnel or internal systems, or from external events, including legal risks.

Day-to-day management of the operating risk is performed by business units and the Bank’s other departments and bodies, which are important in this process. Operating risk management however, is performed by the DGR which ensures the interdepartmental interaction of the risk and guarantees a coherent application of the operating risk management strategy throughout the Bank. This interdepartmental "cooperation" model ensures close monitoring and a suitable awareness about the operating risk at the Bank.

During 2011 the Bank focussed on the following to manage this risk:

 continuously enhancing the events database, maintaining relevant and complete information about events;

 holding workshops to survey the risks and process controls, immediately identifying the quality of controls and the necessary and suitable mitigation actions;

 preparing the Bank’s risk information portal to provide easier access to information by the various bodies, thus promoting greater awareness in identifying improvements to be included in the processes; and

 developing specific activities to prepare the candidature to the standard method for managing the operating risk.

In 2011, the Bank was subject to the following distribution of operating risk events:

2011 Operating Risk Events Distribution

Systems 19%

External Factors 34%

Human Resources 22%

Processes 25%

The Bank is also maintaining the process to systematise the operating risk principles and practices, defining and documenting them in order to endow the whole structure with increasingly more precise guidelines to ensure more efficient risk management.

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Other Risks

In the context of reinforcing and improving its risk management function, Banif has been incorporating in its management the monitoring of other types of risk. Although these are not of the same magnitude as the more "traditional" types, by following them it is possible to gain a fuller and more inclusive appreciation of the Bank’s risk profile. In this manner, various assessment indicators to keep track of "reputational risk" and "strategic risk" are incorporated in existing information reporting structures for risk management.

Analysis of the selected financial information

The financial statements of Banif for the financial years in question have been drawn up in accordance with the Adjusted Accounting Standards (English abbreviation: AAS and Portuguese abbreviation: NCA), under the terms of Bank of Portugal Notice no. 1/2005. However, for the purposes of analysing economic performance, for the sake of international comparability and also to demonstrate the contribution that Banif makes to the Banif Financial Group, it was considered more appropriate to use accounting data in accordance with the International Financial Reporting Standards (IAS/IFRS), the rules adopted by Banif – SGPS, S.A., the Group’s parent company, in preparing and presenting its consolidated financial statements.

The 2010 accounting data correspond to restated balances in order to assure comparability with the policies and criterias adopted in 2011.

By the end of 2011, the real estate leasing business activity of Banif Go – Instituição Financeira de Crédito, S.A. was integrated into Banif, and the net assets and profits (in accordance with the IAS/IFRS) of Banif registered an increase of EUR 16.95 million and a negative impact of EUR 11.70 million, respectively, as a result of this integration.

The following key aspects of Banif’s performance in 2011 can be identified: - Net loss amounted to EUR 86.65 million at the end of 2011, compared to a net profit of EUR 37.11 million achieved in 2010; - The cost-to-income ratio improved from 60.6 per cent. in 2010 to 57.1 per cent. in 2011, due to a combination of a 4.8 per cent. increase in business product and a 1.2 per cent. reduction in operating costs; - The Loan to Deposit Ratio has decreased from 140.7 per cent. to 119.5 per cent. as a consequence of the decrease of the Total Net Loans and the increase of the Clients Deposits and therefore achieving the indicative ratio in accordance with the PAEF; - The Core Tier I ratio stood at 10.1 per cent., above the minimum of 9.0 per cent. required by the Bank of Portugal to be reached by the end of December 2011. The solvency ratio, calculated in accordance with Bank of Portugal regulations, stood at 11.40 per cent.

Income Statement

In 2011 the prevailing economic and financial conditions worsened with the sovereign debt crisis, which affected Portugal and made the difficult situation on the financial markets, namely the general scarcity of funds, even more acute.

Throughout 2011, the sovereign debt crisis has made the capital markets even less accessible to Portuguese banks. In fact, and considering the inability to access the public markets for short or medium- long term funding, Portuguese banks continue to be limited to liquidity operations with the ECB and to new deposits from clients, with an increase in cost due to aggressive competition. This situation together with the deterioration of the loan portfolio quality, had a relevant impact on the 2011 activity and results of Banif.

Net interest margin, including income on capital instruments, decreased by 3.5 per cent. compared with the end of 2010, to EUR 223.7 million. The income on capital instruments includes interim dividends distributed by the company Numberone SGPS, Lda, the vehicle that manages shareholdings and the issue of debt of companies of the Banif Financial Group, which rose from EUR 16.8 million in 2010 to EUR 26.0 million in 2011. The behaviour of net interest margin was in itself negative, mainly because of the rise in lending interest rates, which offset the positive evolution of the interest rates on deposits. In this

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context, the financial intermediation margin is estimated to have deteriorated by approximately 29 basis points compared with 2010.

Losses on financial operations in 2011 amounted to EUR 7.25 million, against EUR 0.53 million in 2010. This increase can be attributed mainly to the results on financial assets and liabilities at fair value through profit and loss, which were negative in the amount of EUR 8.16 million, mainly due to devaluation of participation units in investment funds. Results on financial assets available for sale showed a negative contribution of EUR 0.064 million, compared to a positive output of EUR 7.51 million in 2010 (primarily due to disposal of a stake in Rentipar Seguros, which generated a gain of EUR 7.5 million).

Results from exchange rate revaluation came to EUR 0.97 million, compared to EUR 0.78 million in 2010.

Other net income, which includes fees for provision of services, results from disposal of other assets and other operating results, rose by 32.7 per cent., from EUR 96.5 million in 2010, to EUR 128.1 million in 2011. The increase of 15.1 per cent. observed under the heading of fees for provisions of services attests to the deepening of commercial relationships with the Bank’s customer base and revision of the price tariff. The results from disposal of other assets amounted to losses of EUR 1.81 million mainly from the losses arising from the sale of tangible assets (in comparison to gains of EUR 2.29 million at the end of 2010). The other operational results came to EUR 47.9 million in 2011, 108.2 per cent. more than in 2010, mainly from the gains obtained from the repurchase of subordinated notes in 2011 (approximately EUR 25.6 million).

As a result of developments within the items referred to above, business product, which comprises net interest margin, profits on financial operations and fees and other net results, grew by 4.8 per cent., to a total of EUR 344.5 million.

Banif’s operating costs, which include staff costs, general administrative costs and depreciation, came to EUR 196.7 million, 1.2 per cent. less than in 2010, as efficiency gains were achieved in the use of resources. Staff costs rose by 3.0 per cent. as a result of the partial transfer of the pension liabilities for social security (by approximately EUR 6.83 million). Wage expenses decreased by 3.2 per cent. in 2011. General administrative costs decreased by 7.2 per cent., or EUR 5.25 million compared to 2010. The biggest savings were made under the headings of investments in IT, communications, training, rentals and leasing. Savings were also made in the area of amortisation and depreciation, which decreased by EUR 0.5 million, or 3.5 per cent.. The divesture in the network of business units in 2011 with the closure of 17 branches and subsequent reduction of 121 employees had a positive impact on operating costs savings.

As a result of lower operating costs and of higher business product, the cost-to-income ratio showed an increase in efficiency, falling from 60.6 per cent. at the end of 2010 to 57.1 per cent. a year on.

Operating cash flow was EUR 161.7 million, representing an increase of 12.2 per cent. when compared with the end of the previous year.

Net impairment provisions, calculated in accordance with IAS/IFRS, amounted to EUR 265.8 million in 2011, an increase of EUR 180.2 million when compared with the figure recorded in the previous year, as it continues to reflect the prevailing adverse economic situation.

Tax for the year in 2010 and 2011 was influenced by the specific fiscal regime applicable to dividends received from overseas subsidiaries. Current taxes include the impact of the extraordinary tax on financial sector, which amounted to EUR 3.28 million.

As a result of the current adverse conjuncture, Banif obtained a loss of EUR 86.65 million on an IAS/IFRS basis, against EUR 37.11 million at the end of 2010.

As regards the annual result on the basis of the NCA, which recorded a net loss of EUR 15.7 million in 2011, the main reason for the difference has to do with the difference in criteria between provisions set up within the terms of Bank of Portugal Notice no. 3/95, which amounted to EUR 167.8 million (EUR 138.7 million at the end of 2010), and credit impairment on an IAS/IFRS basis, which totalled EUR 265.3 million (EUR 85.6 million in 2010); net of deferred tax, this difference amounted to EUR 72.9 million.

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Balance Sheet

At the end of 2011, the main changes in Banif’s balance sheet were as follows:

 Net assets increased 11.1 per cent.;

 Gross credit to clients decreased 4.5 per cent.;

 Clients' funds rose 10.6 per cent.;

 Equity decreased by EUR 75.1 million (-8.3 per cent.).

As already stated, net assets increased by 11.1 per cent. relative to the end of 2010, reaching EUR 16,754 million.

This result is mainly due to an increase in the assets available for sale, due to bond acquisitions, through the securitisation operations made by the Bank. Not considering this effect, the variation on the net assets would be 6.8 per cent..

At the end of 2011, the gross balance of credit to clients was EUR 9,953 million, 4.5 per cent. lower than in the previous year. Approximately 42.8 per cent. of total credit is granted to private individuals, of which 74.9 per cent. is housing credit. As at 31 December 2011, housing loans amounted to EUR 3,192 million, of which EUR 2,661 million were securitised. Compared with 2010, the overall balance of housing credit decreased 1.0 per cent., while the balance of securitised housing credit grew by 4.1 per cent..

Consumer credit totalled EUR 345 million at the end of 2011, versus EUR 375 million a year earlier, i.e. a decrease of 8.1 per cent. The overall balance of securitised consumer credit increased by 18.6 per cent. due in part to a new consumer credit securitisation operation, Atlantes Finance 4 carried out in the end of 2011, covering EUR 110 million of loans. Other individual loans amounted to EUR 724 million by the end of 2011, 3.9 per cent. less than at the end of 2010.

Credit to companies, which at the end of 2011 represented approximately 56.4 per cent. of total credit, amounted to EUR 5,611 million, 6.7 per cent less than at the end of 2010.

The following table compares the balance of credit granted to clients at the end of the years in question:

2011 2010 % € Thousand Private Individuals Housing Credit ...... 3,192 3,223 -1.0% of which securitised ...... 2,661 2,774 -4.1% Consumer Credit ...... 345 375 -8.1% of which securitised ...... 232 195 -18.6% Other ...... 724 754 -3.9% Total Private Individuals ...... 4,261 4,352 -2.1% Companies Discount ...... 193 293 -34.3% Loans ...... 2,717 2,706 0.4% of which securitised ...... 863 0 Current Accounts ...... 1,913 2,260 -15.3% Other ...... 788 755 4.4% Total Companies ...... 5,611 6,014 -6.7% Interest Receivables and due ...... 81 54 51.8% Total Gross Credit ...... 9,953 10,419 -4.5% Credit Impairment ...... 488 347 40.8% Total Net Credit ...... 9,465 10,072 -6.0%

In April 2011 an amount of EUR 1,128 million of credit to companies was securitised under a new securitisation operation Atlantes SME 1.

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In addition to the securitisation operations referred to above, in 2011 Banif carried out transfers of credit which was derecognised from the balance sheet, in a total amount of EUR 142 million, for the price of EUR 133 million.

The impairment/total credit ratio increased from 3.33 per cent. at the end of 2010 to 4.91 per cent. at the end of 2011, reflecting the current adverse economic situation and subsequent deterioration of the credit quality.

Financial assets available for sale amounted to EUR 3,979 million as at 31 December 2011, EUR 800 million more than in 2010. Within this increase, approximately EUR 501 million correspond to variations in bonds acquired in the context of the securitisation operations, namely through acquisition of all the bonds deriving from the operations carried out in 2011, Atlantes SME 1 and Atlantes Finance 4. The remainder of the increase corresponds to acquisitions of sundry bonds and treasury bonds.

As regards the portfolio of financial assets at fair value through profit or loss, there was a decrease of EUR 224 million. This was due mainly to the sale of participation units of real estate funds and from bonds reimbursement. As far as liabilities are concerned, Banif’s funding structure changed slightly over the period under analysis. This alteration is beneficial in the current financial context and was achieved by capturing more funds from clients.

Total funding increased by EUR 858 million between December 2010 and December 2011, a rise of 7.8 per cent..

2011 STR. 2010 STR. % € Million Funds from Central Banks ...... 2,127 17.9% 1,651 15.0% 28.8% Funds from Other Credit Institutions ...... 859 7.2% 1,013 9.2% -15.2% Funds from Clients...... 8,530 71.8% 7,919 71.8% 7.7% Financial Liabilities ...... 8 0.1% 17 0.2% -50.8% Subordinated Liabilities ...... 362 3.0% 429 3.9% -15.6% Total Funding ...... 11,886 100.0% 11,028 100.0% 7.8%

The clients' funds registered a significant increase of approximately EUR 611 million, plus 7.7 per cent., to account for 71.8 per cent. of total funding.

The increase in the balance of funds from central banks, namely the ECB, was EUR 476 million, up 28.8 per cent. on the figure shown as at 31 December 2010, and such funds made up 17.9 per cent. of total funding in 2011, as against 15.0 per cent. in the previous year. The increase in funds of this nature was made possible by the greater collateral available as a result of the securitisation operations carried out during the course of the year.

The funds from other credit institutions moved in the opposite direction, decreasing by EUR 154 million compared with December 2010, a fall of 15.2 per cent.. This reduced the proportion of such funds within total funding to approximately 7.2 per cent. at the end of 2011, in comparison with 9.2 per cent. at the end of 2010.

The make-up of clients' funds, which include customer deposits, liabilities represented by securities and financial liabilities at fair value, evolved as follows in the period between end of 2010 and end of 2011:

2011 2010 % € Million Customer Deposits ...... 7,918 7,158 10.6% Demand Deposits ...... 2,445 1,311 86.4% Term Deposits ...... 4,892 5,304 -7.8% Saving Deposits ...... 512 503 1.7% Others ...... 69 40 72.8% Liabilities represented by securities ...... 611 755 -19.1% Liabilities at fair value ...... 0 5 -100.0% Clients' Funds...... 8,530 7,919 7.70%

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Customer deposits increased by EUR 760 million during the period in question, representing an increase of 10.6 per cent. Term deposits registered a decrease of EUR 411 million, less 7.8 per cent. compared with 2010, and demand deposits grew by EUR 1,134 million, an increase of 86.4 per cent. These variations have also been affected by product reclassification, with an estimated value of approximately EUR 975 million. Without this effect, the evolution of term deposits and demand deposits would be 10.6 and 12.1 per cent. respectively. Other types of deposit, namely savings accounts and other accounts, increased by EUR 8 million and EUR 29 million, respectively.

The performance on the customer deposits determined the favourable evolution on the Loans to Deposits Ratio, which decreased from 140.7 per cent. in 2010 to 119.5 per cent. in 2011.

At the end of 2011, the balance of liabilities represented by securities compared with 2010 amounted to EUR 144 million. This variation was mainly due to the redemption of the floating rate notes issued by Banif in June 2010 under the Programme, in the amount of EUR 150 million. Also in October 2011, Banif issued floating rate notes under the Programme in the amount of EUR 20 million, with maturity in January 2012.

In 2011, Banif increased its share capital by EUR 14.5 million, as a result from the integration of the real estate leasing activity of Banif Go into Banif.

The Bank’s equity, on an IAS/IFRS basis, stood at EUR 833.8 million at the end of 2011, a decrease of EUR 75.1 million since the end of 2010 (EUR 908.9 million by the end of 2010) due to the negative net income in 2011.

The solvency ratio, calculated within the regulatory terms of the Bank of Portugal, shrank from 14.1 per cent. at the end of 2010, to 11.4 per cent. at the end of 2011. The Core Tier I ratio was 10.1 per cent. in 2011 (which stood at the same level at the end of 2010).

31-12-2010 Variation Balance Sheet 31-12-2011 Restated Absolute % € Thousand Net Assets ...... 16,753,823 15,079,100 1,674,723 1.1% Credit to Clients (gross) ...... 9,953,083 10,419,117 -466,034 -4.5% Deposits from Clients ...... 7,918,156 7,158,295 759,861 10.6% Client's funds (including income from equity instruments) ...... 8,529,517 7,918,592 610,925 7.7% Equity ...... 833,778 908,918 -75,139 -8.3%

31-12-2010 Variation Income Statement 31-12-2011 Restated Absolute % € Thousand Net interest Income (including income from equity instruments) 223,710 231,818 -8,108 -3.5% Profits on financial operations (net) ...... -7,251 527 -7,778 -1475.9% Other income (net) ...... 128,071 96,477 31,594 32.7% Operating Income ...... 344,530 328,822 15,708 4.8% Administrative costs ...... 182,804 184,739 -1,935 -1.0% Cash Flow ...... 161,726 144,083 17,643 12.2% Depreciation ...... 13,922 14,434 -512 -3.5% Provisions / impairment (net) ...... 265,767 85,604 180,163 210.5% Pre-tax Profits ...... -117,963 44,045 -162,008 -367.8% Taxes (current and deferred) ...... -31,309 6,937 -38,246 -551.3% Net Profit ...... -86,654 37,108 -123,762 -333.5%

31-12-2010 Variation Other Indicators 31-12-2011 Restated Absolute % € Thousand Credit impairment / Total Credit ...... 4.91% 3.33% — — Profit before Taxes / Average net assets ...... — 0.30% — — Operating Income / Average net assets ...... 2.12% 2.23% — — Profit before Taxes / Average equity ...... — 5.98% — — Cost-to-income ...... 57.10% 60.60% — — Personnel Costs / Operating Income ...... 33.50% 34.10% — — ROE ...... — 5.04% — — ROA...... — 0.25% — — Solvency Ratio (Bank of Portugal) Total ...... 11.40% 14.10% — — Tier 1 ...... 10.40% 10.10% — —

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31-12-2010 Variation Other Indicators 31-12-2011 Restated Absolute % € Thousand Core Tier 1 ...... 10.10% 10.10% — — Loans (net) / Deposits ...... 119.50% 140.70% — — No. Employees ...... 2,548 2,669 -121 -4.5% No. Branches ...... 343 360 -17 -4.7%

Interim period ended 30 June 2012

Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Net Assets ...... 15,959,757 16,753,823 -794,066 -4.74% Credit to Clients (gross) ...... 9,445,346 9,953,083 -507,737 -5.10% Client's deposits ...... 7,694,683 7,918,156 -223,473 -2.82% Client's funds ...... 7,849,124 8,529,517 -680,393 -7.98% Equity ...... 835,220 833,778 1,442 0.17%

Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Net interest Income (including income from equity instruments) ...... 90,224 99,590 -9,366 -9.4% Profits on financial operations (net) ...... 960 2,505 -1,545 -61.7% Other income (net) ...... 46,100 43,530 2,570 5.9% Operating Income ...... 137,284 145,625 -8,341 -5.7% Administrative costs ...... 87,956 88,038 -82 -0.09% Cash Flow ...... 49,328 57,587 -8,259 -14.3% Depreciation ...... 6,800 7,053 -253 -3.6% Provisions / impairment (net) ...... 81,640 51,614 30,026 58.2% Pre-tax Profits ...... -39,112 -1,080 -38,032 -3,521.5% Taxes (current and deferred) ...... -35,488 1,456 -36,944 -2,537.3% Net Profit ...... -3,624 -2,536 -1,088 42.9%

Other Indicators 30-06-2012 30-06-2011 Variation % Absolute Profit before Taxes / Average net assets ...... — — — — Operating Income / Average net assets ...... 1.7% 1.8% — — Profit before Taxes / Average equity ...... — — — — Administrative Costs + Depreciation / Operating Income ...... 69.0% 65.3% — — Personnel Costs / Operating Income ...... 40.5% 39.0% — — ROE (*) ...... — — — — ROA (*) ...... — — — —

Capital and Shares

Banif is a public company with limited liability under Portuguese law, 100 per cent. owned by Banif – SGPS, S.A..

As at the date of this Base Prospectus, the share capital of Banif is EUR 794.5 million, comprised of 794,500,000 ordinary shares with no nominal value and is fully paid up.

Corporate Governance

Pursuant to Regulation 1/2010 of the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários, the "CMVM"), as amended from time to time (the "Corporate Governance Regulation"), only companies which have its shares admitted to trading in a regulated market must issue a statement regarding compliance with the corporate governance regime set out in the Corporate Governance Regulation. Given the fact that Banif is not a company with shares admitted to trading in a regulated market, there is no such requirement for Banif to comply with such corporate governance regime and as such Banif does not comply with the Corporate Governance Regulation.

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Indebtedness

In May 2009, Banif issued guaranteed unsubordinated notes with the value of EUR 500 million, guaranteed by the Republic of Portugal in the terms set forth in Law no. 60-A/2008, of 20 October 2008 and in the Ministerial Order no. 1219-A/2008, of 23 October 2008.

Also during the first half of 2009, Banif issued subordinated notes in the amount of EUR 100 million and redeemed two subordinated loans in the amount of EUR 23.4 million, which were granted by Banif Finance, Ltd..

In September 2009, Banif issued perpetual subordinated bonds in the amount of EUR 20 million. This issue was cancelled in December 2009. In December 2009, Banif issued subordinated bonds in the amount of EUR 40 million.

During 2010, Banif repaid two issues of cash bonds – Banif 2005-2010 and Banif Euro Multi-Activos, with a value of EUR 10 million each. In June 2010, Banif issued senior notes with a tenure of one year in the amount of EUR 150 million.

In April 2011, Banif issued senior notes in the amount of EUR 20 million which were redeemed on July 2011. Also in July 2011, Banif issued unsubordinated notes in the amount of EUR 200 million for a three year tenure, guaranteed by the Republic of Portugual in the terms set forth in Law no. 60-A/2008, of 20 October 2008 and in the Ministerial Order no. 1219-A/2008, of 23 October 2008. In October 2011, Banif issued senior notes in the amount of EUR 20 million under the Programme with maturity in January 2012.

In December 2011, Banif issued guaranteed unsubordinated notes in the amount of EUR 500 million for a three year tenure, guaranteed by the Republic of Portugal in the terms set forth in Law no. 60-A/2008, of 20 October 2008 and in the Ministerial Order no. 1219-A/2008, of 23 October 2008. Also during December 2011, Banif launched a general and voluntary public tender offer (the "Exchange Offer") in respect of the EUR 100 million subordinated bonds issued by Banif under the Programme on 30 June 2009, with scheduled maturity date on 30 December 2019, in denominations of EUR 1,000 each. Each old subordinated note was exchanged into one new subordinated note on the issue date (9 January 2012) and the reference exchange value of the Exchange Offer was 70 per cent. of the nominal amount of the old subordinated bonds.

In January 2012, Banif issued EUR 87.698 million subordinated bonds under the Programme, with maturity on 2019.

In April 2012, Banif issued senior notes in the amount of EUR 20 million under the Programme, with maturity in July 2012.

In May 2012, Banif issued unsubordinated notes in the amount of EUR 300 million for a five year tenure, guaranteed by the Republic of Portugal in the terms set forth in Law no. 60-A/2008, of 20 October 2008 and in the Ministerial Order no. 1219-A/2008, of 23 October 2008, as amended by the Ministerial Order no. 946/2010, of 22 September 2010 and by the Ministerial Order no. 80/2012, of 27 March 2012.

In May 2012, Banif issued senior cash bonds in the amount of EUR 50 million and in the amount of U.S.$ 13 million for a three year tenure and in June 2012 the Bank issued a fungible senior cash bond in the amount of EUR 63 million with the senior cash bond issued in May 2012.

Banif Financial Group (the "Group")

History and Organisation

Banif Financial Group was established in Madeira in January 1988, by incorporating the assets and liabilities of Caixa Económica do Funchal, which was founded in 1897.

In the first three years of its existence, the Group focused on consolidating its position in Madeira and on improving its financial condition. It also extended its business portfolio by establishing a pension fund management company (SGM – Sociedade Gestora de Fundos de Pensões Mundial, S.A.), a leasing company (Mundileasing – Sociedade de Locação Financeira, S.A.) and a consumer credit company (Mundicre - Sociedade Financeira para Aquisições a Crédito, S.A.). In addition, the Group established

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two asset management subsidiaries (incorporation of Banifundos – Sociedade Gestora de Fundos de Investimento Mobiliário, S.A. and acquisition of Invesfreiras – Investimentos Imobiliários, S.A.) and acquired a brokerage company (Ascor Dealer – Sociedade Financeira de Corretagem, S.A.) in 1994.

In 1993, the Group took the first steps towards international expansion with the founding of Banif – Banco Internacional do Funchal (Cayman), Ltd., a wholly owned subsidiary in the Cayman Islands.

Banif Financial Group became the largest financial group in the Autonomous Region of the Azores when, in 1996, it acquired a controlling interest in Banco Comercial dos Açores, S.A., the largest commercial bank in the Azores region, and a controlling interest in an insurance company, Companhia de Seguros Açoreana, S.A. ("CSA"). In 1997, the insurance business of the Group was strengthened with the acquisition of another insurance company, Oceânica – Companhia de Seguros, S.A. In September 1999, Oceânica – Companhia de Seguros, S.A. was merged with CSA and in the first quarter of 2000, CSA acquired another insurance company, O Trabalho – Companhia de Seguros, S.A., which was then merged with CSA in December 2002.

In the Azores region, Banco Comercial dos Açores, S.A. (afterwards named Banco Banif e Comercial dos Açores, S.A.) ("BBCA") has positioned itself as the "reference bank" for corporate and individual customers, for domestic and offshore investors and for the Regional Government of Azores. With a total of 52 branches and corporate centres and 405 employees, BBCA is the second largest bank of the Banif Financial Group.

In order to strengthen its investment activity, the Banif Financial Group acquired, on 15 June 1999, a 51 per cent. stake in a Brazilian investment bank, Banco Primus, which was then renamed Banco Banif Primus. The Group became the sole shareholder of Banco Banif Primus on 13 February 2004. On 28 January 2005, Banco Banif Primus was renamed Banif – Banco Internacional do Funchal (Brasil), S.A. and started acting as the Group’s retail bank in Brazil. On 30 June 2005, the brokerage company Banif Primus Corretora de Valores e Câmbio, S.A., 75 per cent. owned by Banco Banif Primus, was converted into an investment bank named Banif Primus – Banco de Investimento, S.A. (75 per cent. owned by Banif – Banco Internacional do Funchal (Brasil), S.A.).

Today, Banif Financial Group has the control of a retail bank and an investment bank in Brazil (Banif – Banco Internacional do Funchal (Brasil), S.A. and Banif – Banco de Investimento (Brasil), S.A., respectively), offering to its clients a full range of products and services.

In December 2000, the spin-off of the brokerage company of the Banif Financial Group (Ascor Dealer – Sociedade Financeira de Corretagem, S.A.) led to the establishment of Banif – Banco de Investimento, S.A. The principal aim of Banif – Banco de Investimento, S.A. is to conduct the Group’s investment banking business, taking responsibility for corporate finance, capital markets, as well as asset management and brokerage services, through its subsidiaries. This investment bank was incorporated with a share capital of EUR 20 million. Further to a share capital increase in November 2005, the current share capital is EUR 30 million.

In 2001, Banif Financial Group expanded its international presence by opening an office in Miami and purchasing a securities broker dealer in New York.

In 2002, the company formerly known as Banif – Banco Internacional do Funchal, S.A. was transformed into Banif – SGPS, S.A. (the current holding company of Banif Financial Group), and a new bank with the same name, "Banif – Banco Internacional do Funchal, S.A.", was created by the transfer of the whole banking activity of the former company.

With a view to extending the international business of the Banif Financial Group, a subsidiary bank was opened in Nassau, Bahamas, on 21 June 2005. This bank, named Banif International Bank, Ltd, aims mainly to offer the Group’s banking products and services to its clients in America.

The shares of Banif – SGPS, S.A. have been listed on Euronext Lisbon since November 1992. Since October 2007, the shares of Banif – SGPS, S.A. have been integrated on NEXT 150 index of Euronext Lisbon.

In the first quarter of 2007, Banif Financial Group increased its international presence, through partnerships and acquisitions: Banif – SGPS, S.A. acquired 46 per cent. stake of Banco Caboverdiano de

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Negócios, assuming the effective management control of the Bank, and started up a retail bank in Malta – Banif Bank (Malta), Plc., together with local partners.

Additionally, Banif Financial Group has entered in the Spanish market, through the acquisition of a significant participation in two banks. With the acquisition of 33.32 per cent. of Banca Pueyo in 2007 the Group is entitled to participate in the management of the bank through its board of directors. Due to the strong commercial relationship between Portugal and Extremadura, the Spanish region where Banca Pueyo has an important presence, this acquisition also created significant synergies. With the acquisition of 27.5 per cent. of Bankpime in 2007, the Group has become the major individual shareholder of the bank. Through this acquisition, the Group has ensured its presence in the asset management business in Cataluña, where Bankpime manages a total of EUR 443.9 million in investment funds.

In September 2007, a new company, Banif Go, Instituição Financeira de Crédito, S.A., was created, resulting from the merger of Banif Crédito – Sociedade Financeira para Aquisições a Crédito, S.A. with Banif Leasing, S.A..

In 2008, Banif Financial Group acquired a 25 per cent. stake of Banif – Banco de Investimento (Brasil), S.A. and as a result, the Group now holds, directly and indirectly, 100 per cent. of its share capital. Moreover, Banif – SGPS, S.A. also reinforced its presence in Banco Caboverdiano de Negócios’s share capital, in which it reinforced its control percentage to 52 per cent..

In December 2008, the merger of Banco Banif e Comercial dos Açores, S.A. with Banif was concluded, with effect from 1 January 2009 onwards.

In September 2009, Banif – SGPS, S.A. acquired 100 per cent. of the share capital of Tecnicrédito SGPS, S.A., a Portuguese group specialised in car and consumer finance and in October, Banif – SGPS, S.A. increased its share capital from EUR 350 million to EUR 490 million.

In keeping with the policy of growth pursued by the Banif Financial Group in both the financial sector and the insurance sector, the structure of holdings in CSA has been organised in order to position Rentipar Seguros as the holding company for the insurance industry and the direct owner of 100 per cent. of the share capital in CSA. Under the new arrangement, Banif – SGPS, S.A. and Banif have direct interests in the share capital of Rentipar Seguros, proportionally equal to their former holdings in CSA (33.62 per cent. and 14.07 per cent., respectively), meaning that they maintain the same level of interest in the insurance company, albeit indirectly.

After this reorganisation, Rentipar Seguros concluded a contract in November 2009 for the purchase from CNP Assurances of a holding of 83.52 per cent. in the share capital and voting rights of Global – Companhia de Seguros, S.A. and 83.57 per cent. in the share capital and voting rights of Global Vida – Companhia de Segurosde Vida, S.A.. This operation was effected in early March 2010 and represented an investment of approximately EUR 114.58 million.

In February 2010, Tecnicrédito SGPS, S.A. sold the 30 per cent. share it owned in Banco Pecúnia, S.A. (a Brazilian financial institution). This participation was sold to Banco Societé Generale Brasil, S.A. which controlled the remainding 70 per cent. of Banco Pecúnia, S.A..

In June 2010, Banif Financial Group established an agreement with Grupo Caixa Geral de Depósitos to sell a 70 per cent. stake of Banif Corretora de Câmbio e Valores. The deal was formally concluded during the third quarter of 2011, for a total amount of EUR 51.66 million, after being granted approval by Brazilian authorities. Banif Financial Group achieved a pre-tax gain of EUR 46.8 million (after-tax gain of EUR 37.7 million).

Banif Financial Group also sold a 9.84 per cent. stake in Finibanco Holding, SGPS, S.A. which has been subject to an acquisition offer from Montepio Geral – Associação Mutualista. This operation is expected to achieve an after-tax gain of EUR 8.86 million.

On January 2011, the merger between Global – Companhia de Seguros, S.A. and Global Vida into Companhia de Seguros de Vida, S.A., Companhia de Seguros Açoreana, S.A. was formally concluded.

Also during 2011, the business concerning consumer credit and leasing of Banif Go were integrated into Banif Mais and its real estate leasing was integrated into Banif. The transaction was formally completed in December 2011 and will be fully reflected in the individual accounts of Banif and Banif Mais.

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Also in the above mentioned period, the Banif Financial Group sold 51 per cent. of Centro Venture – Soc. Capital de Risco, S.A. for the amount of EUR 165,000, therefore achieving a loss of EUR 107,000.

In September 2011, the Banif Financial Group established an agreement with Caixa Bank, S.A., in order to sell Bankpime for a total amount of EUR 16 million.

During the fourth quarter of 2011, Banif Financial Group participated in the SIP, carried out by the Bank of Portugal in the context of the PAEF. The SIP covered the eight largest Portuguese banking groups, including Rentipar Financeira Group, the entity that consolidates Banif Financial Group, and had the objective of validating, as of 30 June 2011, credit risk data used in the valuation of these groups' financial strength, through an independent valuation of their loan portfolios, and the adequacy of their risk management policies and procedures, as well as confirming the calculation of their capital requirements for credit risk. Although the valuation concluded that there was a need to reinforce the value of the impairment registered in the Group’s consolidated financial statements account by EUR 90 million, the aggregate impact of these results on the Group’s solvency, as of 30 June 2011, was null, and therefore the Tier 1 ratio was maintained at 7.2 per cent..

On 22 March 2012, an Extraordinary General Meeting of Shareholders of Banif – SGPS, S.A. elected a new Board of Directors as the previous Board mandate had come to an end, and on 23 March 2012, the General Meeting of Shareholders of Banif elected its new Board of Directors.

The recently elected Board Member Teams encompass relevant changes, as the Chaiman and Vice- Chairman of Banif – SGPS, S.A. and of Banif were replaced. Moreover, several members of the Board of Directors of Banif – SGPS, S.A. and of Banif are common to both institutions (including its Chaiman and Vice-Chairman).

Banif has already announced that it will propose a capitalisation plan, developed in accordance with the Recapitalisation Programme for Credit Institutions established by Law no. 63-A/2008, of 24 November, and the assessment of its main terms by the Bank of Portugal and the Portuguese state. The recapitalisation plan of Banif is subject to discussion and negotiation with the public and private entities involved, and will need to be formally submitted for the Bank of Portugal and Portuguese state’s approval. According to the scheduled recapitalisation plan, the decision on the Banif Financial Group’s request for access to the Portuguese state’s funds, namely concerning the amount of funds and its composition, is expected to be made by the end of September 2012. The global investment amount, the financial instruments of the investment and the confirmation that the state is available to proceed with public investment in the Banif’s capitalisation programme is yet to be defined.

In June 2012, under a previous agreement established with Grupo Caixa Geral de Depósitos, Banif – Banco de Investimento (Brasil), S.A. sold the remaining 30 per cent. stake of Banif Corretora de Valores e Câmbio, S.A for a total amount of 55.7 million reais.

Currently, the main business activities of Banif Financial Group are carried out through more than 40 companies in the following areas:

Banking

 Banif – Banco Internacional do Funchal, S.A.

 Banif – Banco Internacional do Funchal (Brasil), S.A.

 Banif - Banco Internacional do Funchal (Cayman), Ltd.

 Banca Pueyo, S.A.

 Banco Caboverdiano de Negócios, S.A.

 Banif Bank (Malta), Ltd.

 Banif International Bank, Ltd.

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 Banif – Banco de Investimento, S.A.

 Banif – Banco de Investimento (Brasil), S.A.

Insurance

 Companhia de Seguros Açoreana, S.A.

 Giga – Grupo Integrado de Gestão de Acidentes, S.A.

 Margem Mediação de Seguros, Lda.

 CRIA – Centro de Reabilitação Integrada de Acidentes

Leasing and Consumer Credit

 Banif Rent – Aluguer, Gestão e Comércio de Veículos Automóveis, S.A.

 Banco Banif Mais, S.A.

 Banif Plus Bank, Zrt

 TCC Investments Luxembourg

 Tecnicrédito, ALD

Brokerage

 Banif Corretora de Valores e Câmbio, S.A. (brokerage in Brazil)

 Banif Securities, Inc. (brokerage in USA)

Asset Management

 Banif Gestão de Activos – Sociedade Gestora de Fundos de Investimento Mobiliário, S.A. (mutual fund management in Portugal)

 Banif Açor Pensões - Sociedade Gestora de Fundos de Pensões, S.A. (pension fund management in Portugal)

 Banif International Asset Management, Ltd. (offshore wealth management)

 Banif Multifund, Ltd. (offshore mutual fund management)

 Banif Gestão de Activos (Brasil), S.A.

 Centaurus Realty Group Invest. Imobiliários, S.A.

Real Estate

 Banif Imobiliária, S.A.

 Sociedade Imobiliária Piedade, S.A.

Venture Capital

 Banif Capital - Sociedade de Capital de Risco, S.A.

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Trade Finance

 Banif Forfaiting Company, Ltd

Other Activities

 Inmobiliaria Vegas Altas (Spain)

 Banif Holding (Malta), Ltd.

 Numberone – SGPS, Lda.

 Banif Finance, Ltd. (issuer vehicle)

 Banif Financial Services, Inc. (personal services – Miami)

 Banif Finance (USA) Corp. (mortgage financing in USA)

 Banif Açores Inc, San José

 Banif Açores Inc, Fall River

 Banif (Açores) SGPS, S.A.

 Investaçor, SGPS, S.A.

 Banif International Holdings Ltd.

 MCO2 – Sociedade Gestora de Fundos de Investimento Mobiliário

 Banif Ecoprogresso Trading, S.A.

 Banif Securities Holdings, Ltd.

 Banif (Brasil), Ltda (advisory services in Brazil)

 Econofinance, S.A. (financial portal in Brazil)

 Gamma – Sociedade de Titularização de Créditos, S.A. (securitisation vehicle)

 Banieuropa Holding, SL

Banif Financial Group is strongly involved in "cross-selling" among its companies in order to better serve clients' needs and take advantage of the relevant synergies.

The Group develops its activities in several countries including Portugal, Brazil, United Kingdom, United States of America, Cayman, Bahamas, South Africa, Venezuela, Spain, Malta and Cape Verde.

As at the end of June 2012, Banif Financial Group had approximately 4,794 employees and 541 points of sale (including branches, business and corporate centres and representative offices abroad).

In January 2003, ratings were assigned to Banif – Banco International do Funchal, S.A. by Moody’s (Baa1/P-2) and by Fitch (BBB+/F2). These ratings were confirmed in December 2005 with a Stable outlook. As a result of the negative events affecting the financial markets globally, as well as the Euro zone and sovereign debt crisis, each of Moody's and Fitch have downgraded Banif's credit ratings consecutively since 2009. As at the date of this Base Prospectus, Banif has a long term and short term debt rating of B1/Not Prime, with a negative outlook from Moody's, and a long term and short term debt rating of BB/B, with a negative outlook from Fitch.

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These credit ratings has been issued by Moody’s and Fitch, each of which is established in the European Economic Area and registered under the CRA Regulation. The latest update of the list of credit rating agencies registered under the CRA Regulation is published on the European Securities and Markets Authority’s website.

Shareholder Structure of Banif – SGPS, S.A.

Shareholder Structure of Banif – SGPS, S.A. (as at 30 June 2012 ) % Share Capital No. of Shares Rentipar Financeira, SGPS, S.A...... 53.871% 307,063,133 Auto Industrial SGPS, S.A...... 13.4% 76,377,857

As at the date of the this Base Prospectus, the issued share capital of Banif - SGPS, S.A. is EUR 570 million, comprised of 570 million shares with no nominal value and fully paid up.

Stock Market Evolution

Banif – SGPS, S.A.'s market capitalisation in 31 December 2011 was approximately EUR 193.8 million (EUR 0.34 per share and 570 million shares outstanding), compared with a capitalisation of EUR 495.9 million as of December 2010 (EUR 0.87 per share and 570 million shares outstanding).

Since 2000, Banif – SGPS, S.A.’s shares have been included in the BVL 30 Index (Euronext Lisbon Index). Due to the termination of this index at the end of June 2002, Banif – SGPS, S.A. shares became included in the "PSI Geral" Index.

In September 2007, the shares of Banif – SGPS, S.A. were integrated on NEXT 150 index of Euronext Lisbon.

Analysis of the selected financial information – Banif Financial Group (Banif – SGPS, S.A., consolidated accounts)

The 2011 consolidated accounts of Banif – SGPS, SA, the holding company of the Banif Financial Group, were drawn up under the International Financial Reporting Standards (IAS/IFRS).

The following leading indicators may be highlighted for operations in the 2011 fiscal year:

 Consolidated net loss of Banif – SGPS, SA, as the holding of Banif Financial Group, totalled EUR 161.6 million at the end of 2011, compared to consolidated net profit of EUR 34.4 million recorded for the same period last year.

 Net assets, at 31 December 2011, totalled EUR 15,823.1 million, representing growth of 0.8 per cent. compared to the end of 2010.

 Customer lending (gross), less securities classified under loans and accounts receivable, reached EUR 11,948.8 million, declining by around 6.7 per cent. year-on-year. Over the same period, the ratio for "Impairment of lending/Total lending" rose from 4.73 per cent. to 6.81 per cent.;

 The Group’s Equity (Tier 1), on an IAS/IFRS and Basel basis, totalled EUR 803.6 million, Risk Weighted Assets stood at EUR 11,862.1 million, corresponding to a Tier 1 ratio at the end of 2011 of 6.77 per cent. (compared to 7.75 per cent. at the end of the previous year). The Core Tier 1 of the Group, also on an IAS/IFRS and Basel basis, stood at the end of 2011 at 6.78 per cent. compared to 6.60 per cent. at the end of 2010;

 Total Equity, deducted from minority interest decreased 18.3 per cent., from EUR 1,018.3 million in 2010 to EUR 831.8 million in 2011, mainly due to:

- Decrease of EUR 161.6 million in net income;

- Decrease of EUR 20.7 million in the revaluation reserves;

- Decrease of EUR 20.7 million in foreign exchange variation;

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- Increase in gains from preference shares repurchase in an amount of EUR 16.1 million.

 The solvency ratio, calculated strictly in accordance with the Basel Core Criteria, stood at 8.02 per cent. at the end of 2011, compared to 9.24 per cent. at the end of the previous year.

The following table provides further detail on the financial statements at 31 December 2011, together with 2010 comparative data.

31-12-2010 Variation Balance Sheet 31-12-2011 (Restated) Absolute % € Thousand Net Assets ...... 15,823,114 15,700,135 122,979 0.8% Loans granted (gross) ...... 11,948,846 12,801,111 -852,265 -6.7% Deposits from Clients ...... 8,030,692 7,840,050 190,642 2.4% Equity ...... 831,812 1,018,336 -186,524 -18.3%

31-12-2010 Variation Income Statement 31-12-2011 (Restated) Absolute % € Thousand Net Interest Income ...... 277,275 348,132 -70,857 -20.4% Profits on financial operations (net) ...... -1,132 24,360 -25,492 -104.6% Other income (net) ...... 174,329 55,831 118,498 212.2% Operating Income ...... 561,589 551,303 10,286 1.9% Personnel Costs and Overheads ...... 184,133 183,974 159 0.1% Cash Flow ...... 235,508 223,153 12,355 5.5% Depreciation ...... 35,546 37,327 -1,781 -4.8% Provisions and impairment (net) ...... 377,759 123,941 253,818 204.8% Equity Method Income ...... -2,426 -4,039 1,613 39.9% Pre-tax Profits ...... -180,223 57,846 -238,069 -411.6% Taxes (current and deferred) ...... -26,922 13,904 -40,826 -293.6% Minority Interests ...... 8,282 9,584 -1,302 -13.6% Consolidated Net Profit ...... -161,583 34,358 -195,941 -570.3%

31-12-2010 Variation Other Indicators 31-12-2011 (Restated) Absolute % € Thousand Insurance Premiums (Total) ...... 475,349 509,868 -34,519 -6.8% Life Premiums ...... 187,630 235,850 -48,220 -20.4% Non-Life Premiums ...... 287,719 274,018 13,701 5.0% Assets under Management (€ Million) ...... 2,962 3,800 -838 -22.1% Credit Impairment / Total Credit ...... 6.81% 4.73% — — ROE ...... — 3.5% — — ROA...... — 0.22% — — Profit before taxes and minority interests /Average net assets ...... — 0.38% — — Operating Income / Average net assets ...... 3.46% 3.64% — — Profit before Taxes and minority interests /Average equity (including minority interests) ...... — 4.9% — — Operating costs + Depreciation / Operating Income ...... 66.4% 66.3% — — Personnel Costs / Operating Income ...... 32.8% 33.4% — —

The Group’s operating revenues were EUR 561.6 million for the 2011 financial year, representing growth of 1.9 per cent. in relation to the previous year, explained by the following factors:

 Net interest income decreased by 20.4 per cent. to EUR 277.3 million, mainly due to a deterioration of the cost of funding of the Group’s holdings, which increased in an amount of EUR 21.7 million and to the consolidation of new entities (essentially Banif Imopredial) which had funding costs of EUR 6.4 million. The decrease in net interest income is also due to the increase in the cost of deposits and to the decrease in credit during 2011. Despite the increase in credit spreads in the corporate segment, this effect did not compensate the increase in the cost of clients' funds.

 Other income increased 212.2 per cent. to an amount of EUR 174.3 million. This value includes a pre-tax gain of EUR 46.8 million (EUR 37.7 million after tax) from the sale

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of Banif Corretora de Valores e Câmbios and also an amount of EUR 52.9 million (EUR 14.8 million in 2010) obtained with the repurchase of financial liabilities.

Profits on financial operations slipped to a negative value of EUR 1.1 million, a decrease of 104.6 per cent. comparing to 2010. In the 2010 financial year, the Banif Financial Group recorded a gain of EUR 12.1 million on the disposal of its holdings in Finibanco – Holding SGPS, S.A. as a result of the takeover bid launched by Montepio – Associação Mutualista. Operating costs, which include overheads and personnel costs, totalled EUR 326.0 million, a slight decrease of 0.6 per cent. in relation to 2010, explained by rationalisation and optimisation measures adopted by the Banif Financial Group. Cost-to- income ratio has decreased from 66.3 per cent. in 2010 to 64.4 per cent. in 2011.

The consolidated operating cash flow of the Banif Financial Group stood at EUR 235.5 million (up 5.5 per cent. in relation to 2010).

As for net provisions and impairment for 2011, an increase of 204.8 per cent. to EUR 377.8 million was recorded in relation to the same period last year. Due to the economic environment, Banif Financial Group has adopted a conservative approach in the credit portfolio impairment assessment, which resulted in the constitution of impairment in a total amount of EUR 342.3 million at the end of 2011 (EUR 107.9 million in 2010). In 2011, an impairment of EUR 7.1 million has been created to cover the goodwill for the participation in Bankpime and an impairment of EUR 10.2 million in relation to real estate assets included in non-current available for sale assets. Results evolved as follows in each of the Group’s main business areas:

(a) Commercial Banking had a negative net income of approximately EUR 92.5 million in 2011, which compares to a positive net income of EUR 35.1 million in 2010. Banif – Banco Internacional do Funchal, S.A. recorded, on an IAS basis, a negative net income of EUR 86.7 million, due to a significant increase in impairment to an amount of EUR 245.8 million (206 per cent. increase as compared to 2010). The international units reached a global positive net income of EUR 2.2 million;

(b) Specialised credit, with losses of EUR 10.4 million for the whole year of 2011 compared with a positive income of EUR 19.3 million achieved in 2010. Despite the positive performance of operating units that make up the sub-holding Banif Mais SGPS, S.A. with a profit of EUR 23.3 million in 2011 (not including Banif Go, Instituição Financeira de Crédito, S.A.), the merger of Banif Go, Instituição Financeira de Crédito, S.A. into Banco Mais, S.A. with a subsequent decrease in the production together with increasing funding costs has led to negative performance of Banif Go, Instituição Financeira de Crédito, S.A. that recorded a negative result of EUR 21.8 million, on an IAS basis;

(c) Investment Banking, with a positive income of EUR 2.0 million in 2011, compared to a loss of EUR 11.4 million in 2010;

(d) Insurance, with a contribution to consolidated profits of EUR 0.4 million in 2011, compared to EUR 2.1 million in 2010;

(e) Impact of the consolidation of Group holdings, with a negative contribution of EUR 61.1 million in 2011, compared to a negative contribution of EUR 10.9 million in 2010, mainly reflecting the increase in financing costs associated with the holdings debts.

Interim period ended 30 June 2012

Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Net Assets ...... 15,373,002 15,823,114 -450,112 -2.84% Loans granted (gross) ...... 11,497,716 11,948,846 -451,130 -3.78% Deposits from Clients ...... 8,097,387 8,030,692 66,695 0.83% Equity ...... 822,880 934,916 -112,036 -11.98%

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Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Net Interest Income ...... 92,319 147,825 -55,506 -37.55% Profits on financial operations (net) ...... 43,219 54,353 -11,134 -20.48% Other income (net) ...... -4,537 75,169 -79,706 -106.04% Operating Income ...... 131,001 277,347 -146,346 -52.77% Personnel Costs and Overheads ...... 144,253 160,668 -16,415 -10.22% Cash Flow ...... — — — — Depreciation ...... 16,181 18,097 -1,916 -10.59% Provisions and impairment (net) ...... 110,806 80,835 29,971 37.08% Equity Method Income ...... 1,630 1,292 338 26.16% Pre-tax Profits ...... -138,609 19,039 -157,648 -828.03% Taxes (current and deferred) ...... 16,822 -4,675 21,497 -459.83% Minority Interests ...... -2,824 -5,864 3,040 -51.84% Consolidated Net Profit ...... -124,611 8,500 -133,111 -1,566.01%

Variation Other Indicators 30-06-2012 30-06-2011 Absolute % € Thousand Insurance Premiums (Total) ...... 196,412 220,971 -24,559 -11.11% Life Premiums ...... 49,401 90,455 -41,504 -45.39% Non-Life Premiums ...... 147,011 130,516 16,495 12.64% Assets under Management (€ Million) ...... 3,047 3,836 -789 -20.57% Operating Income / Average net assets ...... 1.68% 3.45% — — Operating costs + Depreciation / Operating Income ...... 122.50% 64.50% — — Personnel Costs / Operating Income ...... 64.20% 32.90% — —

Corporate Governance

Banif – SGPS, S.A., complies with the Corporate Governance rules as set forth in Regulation 1/ 2010 of the CMVM and article 245-A of the Portuguese Securities Code. Banif – SGPS, S.A. is not subject to any specific corporate governance codes or codes of conduct with which it has voluntarily undertaken to comply.

In terms of governance, Banif – SGPS, S.A. is structured according to the Lating Model (Reinforced), as per paragraph a) of no. 1 of article 278 of the Portuguese Companies Code. Management of the company is entrusted to a Board of Directors (cf. article 20 and following of the articles of association of Banif – SGPS, S.A.) composed of a minimum of three and a maximum of 11 members, elected by the general meeting of shareholders for three-year mandates.

In a meeting on 23 March 2012, the Board of Directors delegated the duties of day-to-day management of the company to an executive committee, under the terms of article 24 of the articles of association.

Supervision of the company is entrusted to an audit board (cf. article 27 and following of the articles of association) composed of a minimum of three members elected by the general meeting of shareholders for three-year mandates and a statutory auditor, in accordance with paragraph b) of no. 1 of article 413 of the Portuguese Companies Code. The only special committee, within the Board of Directors, is the executive committee.

In 2007, concerned as to the need to adjust the Group’s governance model to enable it to respond to the new challenges of business growth and development, the directors of Banif – SGPS, S.A. reviewed and redesigned the allocation of responsibilities and management procedures within the Group, with a view to effective and efficient coordination of its business portfolio.

The company’s Board of Directors, as part of a reorganisation process that began in 2007 and continues to the present time, has set up a governance model designed to meet six main objectives:

 to create ideal conditions for sustained development of the Banif Financial Group as per the approved strategic guidelines: sustained growth and risk control;

 to maintain each company’s autonomy, flexibility and the capacity to innovate, making this the responsibility of their professional managers;

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 to strengthen the role of the Group CEO, supporting this role with the solutions required to handle growth and the increasing complexity of the business portfolio;

 to give the holding company its own structure, with the necessary competence and size to develop its group support functions;

 to bring the model into line with capital market recommendations and good conduct codes, reinforcing the Group’s reputation for transparency, thoroughness and risk control;

 to strengthen the ability to take advantage of income and cost synergies, through mechanisms that operate across businesses.

With a view to these desired aims, a governance model has been designed with the following features:

(i) The Board of Directors of Banif – SGPS, S.A. is the highest executive body in the Group. It has a specifically defined organisation and function and its work comprises being actively involved in the supervision of the various businesses and the definition of strategies for the whole Group;

(ii) The Board of Directors of Banif – SGPS, S.A. is supported by a corporate centre made up of ten corporate offices, with a light structure but high standard of expertise, each area reporting to a member of the Board of Directors;

(iii) The integrating role of these corporate centres is strengthened by the transversal committees, each responsible for a key issue affecting the Group’s competitiveness and management of risk. Committee members are drawn from the various business units, and where necessary, the implementation of proposed measures is ratified by the Board of Directors of Banif – SGPS, S.A.;

(iv) The governance model as implemented requires and has in place a specific matrix to guide the relationship between the holding company and the business units, at both the corporate office and committee level.

Since the general meeting of shareholders of 22 March 2012, the Board of Directors elected at that meeting have implemented a number of significant changes to the Group's governance model, namely:

(i) The set up of an executive committee, to which the Board of Directors delegated the necessary powers for the day-to-day running of the company, in light of the increase in the amount of work being done by the corporate centre and the increased need to develop a management process that operates across the Group.

(ii) A management team was set up for the whole Group. This team has a significant number of directors in common with Banif – SGPS, S.A. and the Group’s three banking units in Portugal. This guarantees a management strategy for the Group which is both transversal and unified and which, in turn, will allow a much more efficient application of internally generated resources, a global and integrated management of risk and a standardised value offer for the Group to provide its customers.

(iii) Substantial changes were made to the corporate centre and the various units in the Group have been encouraged to share services and structure, as part of a rationalisation and optimisation process that will continue to be implemented throughout 2012 and beyond.

The powers of the Board of Directors are established in Article 22 of the Articles of Association. Under the terms of this article the Board of Directors is responsible for "managing company related business", and has the power to decide on any company-related issue that does not, for legal reasons or under the Articles of Association, fall within the remit of any body and namely:

(a) Carry out any operations relating to its business purpose;

(b) Represent the company, actively and passively, both before the law and elsewhere, propose and follow through on judicial procedures, confess, desist, settle and commit to arbitration;

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(c) Acquire, sell, lease or by any other means, encumber assets or rights, fixed or non-fixed, including its own shares or bonds, as well as holdings in other companies, even where the business purpose of these is different;

(d) Appoint representatives;

(e) Decide on the opportunity and conditions for the issuance of company bonds and other debt instruments;

(f) Appoint members of the executive committee;

(g) Draw up the Annual Management Report, the Balance Sheet and Accounts, submitting these to the general meeting of shareholders for approval;

(h) Decide on advances on profit that may be made to shareholders, whilst complying with the provisions of article 297 of the Commercial Companies Code.

The regulations governing the Board of Directors of Banif – SGPS, S.A. stipulate the manner in which this body should manage company-related business, namely:

 Decide on the Group’s strategic options in terms of business activity sectors and geographic expansion;

 Establish general Group policies (such as on compliance or human resources);

 Define Group-wide processes (such as planning, management control or risk control);

 Establish the structure of the Group’s business units; and

 Analyse strategic, operational and investment plans for the business units, such as increases or decreases in business activity, mergers, acquisitions, strategic partnerships and increases in capital.

The Board of Directors consists of no less than three and no more than 11 directors, as resolved by the General Meeting. Supplementary directors may be elected, in a number up to a third of the existing number of elected permanent directors.

Members of the Board of Directors are appointed by the General Meeting for a three-year mandate and may be re-elected. In the first meeting of each term of office, the Board of Directors should appoint a chair and one or more vice-chairs from amongst its members. The Articles of Association stipulate that should a director miss three Board meetings, whether consecutive or not, without due justification, the director in question may be declared to have definitely quit the position.

The Articles of Association do not specify the means of replacing members of the Board of Directors, such replacement taking place in accordance with the terms of no. 3 of article 393 of the Portuguese Companies Code. In the same way, and in compliance with the final part of paragraph h) of no. 1 article 245-A of the Portuguese Securities Code, there are no specific rules relating to any changes made to the Articles of Association.

There is no formal policy for rotating responsibilities within the Board of Directors.

Trends

During the first half of 2012, the Portuguese economy has been affected by an unfavourable external environment, characterised by the sharp slowdown in major trading partners' economy, the deleveraging process of domestic economic agents, the absence of external funding sources and a contractionary fiscal policy, arising from the need to comply with the objectives of fiscal consolidation agreed in the PAEF signed with the IMF, the EU and ECB.

In this unfavourable context, the economic recession deepened and unemployment levels reached a maximum of 15 per cent. at the end of the first half of the year, which led to a deterioration in the quality

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of loan portfolios and a sharp increase in funding costs, which penalised significantly the profitability of the banking sector.

Moreover, the Banif Financial Group needed to resort to the Recapitalisation Fund established under the PAEF to achieve the required capital ratio by the end of 2012 and consequently, Banif – Banco Internacional do Funchal, S.A. submitted in July 2012, the request for recapitalisation to national authorities.

The new management team of the Banif Financial Group, which started their term at the end of the first quarter, has designed and is implementing an ambitious strategic plan, which is concomitant with the objectives established with the Portuguese state under the recapitalisation plan that was submitted together with the application for access to the Recapitalisation Fund which, broadly speaking, is characterised by: (i) changing the governance of the Banif Financial Group, through a simplification of the structure of companies that compose it; (ii) the improvement of operational efficiency; and (iii) the balance sheet deleveraging, by reviewing the composition of geographic presence, optimising the risk- weighted assets and capital consumption.

From the point of view of the governance of the Banif Financial Group, the main measures relate to reducing the number of instrumental companies in the organisation chart, simplifying it, and giving a greater role to Banif – Banco Internacional do Funchal, S.A., given the fact that this is the entity eligible for recapitalisation. From the viewpoint of improving operational efficiency, the measures relate to the improvement of the structural components of net operating revenue (net interest income and commissions), with significant cost reduction, with credit recovery process improvement and with increased productivity. From the point of view of deleveraging the balance sheet, there is an ongoing review of business portfolio, with the aim to define which financial assets and non-financial assets may be subject to alienation. The set of measures that comprise the plan is being implemented and most of those are expected to be implemented in the second half of 2012 and during 2013.

Finally, the risks and volatility of the current situation, with impacts on liquidity, reduction in net interest income and deteriorating asset quality, pose additional challenges to the financial sector and require constant monitoring, which will be made without losing sight of the strategic objectives.

The future development and the prospects of Banif – Banco Internacional do Funchal, S.A., Banif Finance Ltd. Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) and Banif Financial Group substantially depend on Portuguese and international economic development as well as the evolution of international capital markets.

Recent Developments

A merger process of Banif – SGPS, S.A. into Banif has been registered in the beginning of September 2012. The merger is a key step in the restructuring and recapitalisation plan of the Banif Financial Group.

The current structure of the Banif Financial Group is based on the existence of a top holding company, Banif – SGPS, S.A., which holds Banif, the owner of all assets and liabilities (including participations in other entities) related to banking, which carries on the business of commercial banking at the group level.

Presently, the Banif Financial Group is comprised of companies based in Portugal and abroad, which are active in the financial sector, particularly in retail banking and investment banking, insurance, acquisition finance credit, leasing, brokerage, asset management, fund management and ancillary services. The Group currently has presence in various countries and regions, particularly in Brazil, Spain, United States, Bahamas, United Kingdom, Cayman Islands, Cape Verde and Malta, where several financial institutions integrated in the group have been developing their business.

However, after a period of domestic and international expansion, in which the Banif Financial Group has strengthened its presence in various regions and in several sectors of financial activity, it is now necessary to reorganise the Banif Financial Group, so as to make it less dispersed and more efficient, enhancing the optimisation of its assets.

During negotiation of the PAEF to Portugal, it was established that one of the requirements was to strengthen the capitalisation levels of the national banking system in an effort to strengthen the resilience of the banking system to adverse shocks.

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In this context, the Bank of Portugal has determined, through the Notice of Bank of Portugal no. 3/2011, that financial groups subject to its supervision should strengthen their Core Tier 1 ratios on a consolidated basis, to not less than 10 per cent. until 31 December 2012. The requirement of 10 per cent. of Core Tier 1 ratio at 31 December 2012 would be applicable to Banif – SGPS, S.A. whilst being holding company of the Group.

Banif Financial Group has undertaken several measures to increase its Core Tier 1 ratio at the consolidated level, in particular, in divesting certain assets and reorganising its corporate structure in order to reduce the capital consumption and seeking to increase their equity. Nevertheless, the current situation of financial markets has imposed significant difficulties in attracting private investment, so the process of recapitalisation needs to be made (like other national financial groups) through recourse to public investment.

Funds for recapitalisation can only be applied to banks, and therefore it is not possible for Banif – SGPS, S.A. to access these funds in order to ensure compliance on a consolidated basis, with the ratios required under Notice of Bank of Portugal no. 3/2011, as it is not itself a credit institution. Thus, the Banif Financial Group has proceeded with the implementation of several measures aiming to simplify the organisational and operational structure and to also provide access to available financial recapitalisation fund for credit institutions.

Among these reorganisation measures, the merger of Banif – SGPS, S.A. into Banif is of greater importance, because of the transfer of assets and liabilities that the transaction entails, and the fact that Banif – SGPS, S.A. is an issuer of shares admitted to trading on a regulated market.

After the reorganisation and approval of the merger, Banif will become the "head" or the holding company of the Banif Financial Group and Banif – SGPS, S.A. will cease to exist. The financial condition of Banif will be similar to the current financial condition of Banif – SGPS, S.A., on a consolidated basis.

Banif Finance Ltd. ("Banif Finance")

Incorporation and Main Activities

Banif Finance is an exempted limited liability company registered and incorporated in the Cayman Islands (acting under its laws) on 6 August 2003 for an unlimited duration and has its registered office at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1- 1104, Cayman Islands (telephone number: + 1 345 949 8066). It is entered in the register maintained for such purpose by the Registrar of Companies in the Cayman Islands under registration number 127987.

Main Activities

Banif Finance has unrestricted objects pursuant to clause 3 of its Amended and Restated Memorandum and Articles of Association (as amended and restated on 30 December 2009). Banif Finance's sole business activity is to participate in capital markets transactions to provide Banif Financial Group funding.

Capital and Shares

On 29 December 2008, Banif Finance issued 20,000 preference shares of EUR 0.01 par value each, at an issue price of EUR 1,000 per share and an aggregate price of EUR 20,000,000 and 20,000 preference shares of U.S.$0.01 par value each, at an issue price of U.S.$ 1,000 per share and an aggregate price of U.S.$20,000,000.

On 31 December 2008, Banif Finance issued 25,000 preference shares of EUR 0.01 par value each, at an issue price of EUR 1,000 per share and an aggregate price of EUR 25,000,000.

On 30 June 2009, Banif Finance issued 10,000 preference shares of EUR 0.01 par value each, at an issue price of EUR 1,000 per share and an aggregate price of EUR 10,000,000 and 15,000 preference shares of U.S.$0.01 par value each, at an issue price of U.S.$1,000 per share and an aggregate price of U.S.$15,000,000.

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The share capital of Banif Finance is U.S.$100,500 and EUR 1,550 divided into 100,000 ordinary shares of a par value of US$1.00 each, 155,000 preference shares of a par value of EUR 0.01 each and 50,000 preference shares of a par value of US$0.01 each and is fully paid up.

Banif holds 1 per cent. of the issued ordinary shares of Banif Finance and Numberone SGPS, Lda. holds 99 per cent. of the issued ordinary shares of Banif Finance. Numberone SGPS, Lda. is a subsidiary of Banif.

Citivic Nominees Limited, acting as registered holder of the 205,000 preference shares, holds 100 per cent. of Banif Finance's preference shares.

Selected Financial Information

Variation Balance Sheet 31-12-2011 31-12-2010 Absolute % € Thousand Net Assets ...... 551,801 648,318 -96,517 -14.89% Loans Portfolio ...... 333,058 553,209 -220,151 -39.80% Debt Securities Issued ...... 357,044 358,563 -1,519 -0.42% Equity ...... 113,804 153,627 -39,823 -25.92%

Variation Income Statement 31-12-2011 31-12-2010 Absolute % € Thousand Net interest Income ...... 7,140 7,574 -434 -5.73% Other income (net) ...... 17,827 14,845 2,982 20.09% Operating Income ...... 18,729 22,670 -3,941 -17.38% Personnel Costs and Overheads (including Depreciation) ...... -38 -322 284 88.20% Pre-tax Profits ...... 18,691 22,348 -3,657 -16.36% Net Profit ...... 18,691 22,348 -3,657 -16.36%

Net Interest Income decreased by 5.7 per cent. over the end of 2011, standing at EUR 7,140 million. Other operating results have registered an increase in the year 2011 and stood at EUR 17,393 million as a result of the gains obtained from the repurchase of bonds in 2011 relating to the following issues:  Banif Finance 2007-2012: EUR 2,484,000;

 Banif Finance 2004-2014: EUR 1,314,000;

 Banif Finance 2006-2016: EUR 35,000;

 Banif Finance 2006-perpetual: EUR 11,597,000; and

 Banif Finance 2009-2019: EUR 1,963,000.

31-12-2011 31-12-2010 Nominal Issue Value Repurchasing Gain Repurchasing Gain Banif Finance 2007-2012 ...... 300,000 16,103 2,484 — — Banif Finance 2004-2014 ...... 50,000 5,284 1,314 5,023 1,661 Banif Finance 2006-2016 ...... 50,000 100 35 26,900 7,047 Banif Finance 2006-perpetual ...... 125,000 22,989 11,597 15,615 6,137 Banif Finance 2009-2019 ...... 100,000 69,313 1,963 — — 17,393 14,845

Operating revenues, comprising net interest income, commissions and other operating results, totalled EUR 18.73 million.

As a result, the net profits recorded by Banif Finance, Ltd. stood at EUR 18.69 million, on an IAS/IFRS basis, presenting a decrease of 16.4 per cent. on the result recorded in 2010 of EUR 22.35 million.

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Total assets, which stood at EUR 551.8 million at the end of 2011, fell by 14.9 per cent. in relation to the previous period.

The financial assets, which include the liquid funds in other credit institutions and applications in credit institutions, stood at EUR 531.8 million, which represented a decrease of 10.6 per cent.. This was the result of the decrease in the applications in credit institutions of 37.3 per cent., which stood at EUR 333.1 million as at the end of 2011. These applications comprise the financial pledge to the Madeira Offshore Branch of Banif (Banif – Banco Internacional do Funchal, S.A. – Sucursal Financeira Exterior) as collateral to the guarantee given by Madeira Offshore Branch to debt issues of Banif Finance, which amounts to EUR 0.33 million.

The liquid funds in other credit institutions, which includes on demand deposits in domestic and foreign institutions, stood at EUR 198.7 million and represented an increase of 213.2 per cent. in 2011 as compared with year-end 2010.

In 2011, the portfolio of financial assets at a fair value through profit or loss decreased to EUR 20.00 million, due to reduction in debt instruments (Banif SA 2005-2015).

By the end of 2011, Banif Finance’s equity was EUR 113.80 million, a 25.9 per cent. decrease in relation to the figure recorded at year-end 2010, due to the decrease in the company’s net profits, with a total value of EUR 18.7 million, issue premiums in the amount of EUR 112.98 million and interim dividends in the amount of EUR 35 million.

Total shareholders’ funds also include the issue premiums representing the issue value above the nominal value of the preferential shares issued by Banif Finance. During the period the main changes were:

31-12-2011 31-12-2010 Nominal Issue Value Repurchase Reserves Reissue Reserves Repurchase Reserves Banif Finance 2004-perpetual ..... 75,000 14,978 8,538 — — 2,883 1,328 Banif Finance 2007-perpetual ..... 25,000 14,905 6,853 — — — — Banif Finance 2009-perpetual ..... 10,000 1,413 707 — — — — Banif Finance 2008-perpetual ..... 20,000 20,000 8,000 -20,000 -8,000 — — Banif Finance 2008-perpetual ..... 35,000 20,000 8,000 -20,000 -8,000 — —

Interim period ended 30 June 2012

Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Total Assets ...... 273,324 551,801 -278,477 -50.47% Loan Portfolio ...... 178,397 333,058 -154,661 -46.44% Debt Securities Issued ...... 82,554 357,044 -274,490 -76.88% Total Shareholders' Equity ...... 112,926 113,804 -878 -0.77%

Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Net Interest Income ...... 4,160 3,995 165 4.13% Dividend Income ...... — — — — Other income (net) ...... 332 4,053 -3,721 -91.81% Operating Income ...... 4,492 8,048 -3,556 -44.18% Personnel Costs and Overheads (including depreciation) ...... -10 -34 24 70.59% Pre-Tax Profits ...... 4,482 8,014 -3,532 -44.07% Net Profits ...... 4,482 8,014 -3,532 -44.07%

Investments

Banif Finance has not carried out any investments since the date of the last published financial statements.

Directors

The Directors of Banif Finance are:

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 Jorge Humberto Correia Tomé (Director and CEO)

 João Paulo Pereira Marques de Almeida

 Nuno José Roquette Teixeira.

The above Directors have their business address at the registered office of Banif.

A list of the offices held in other companies by the above Directors are set out at pages 91 to 93.

Conflicts of Interest

To the knowledge of Banif Finance there are no potential conflicts of interest between the private interests or other duties of the above Directors and any of their duties to Banif Finance.

Audit Committee

Banif Finance does not have an internal audit committee.

Employees

Banif Finance has no employees.

Indebtedness

Banif Finance has issued six series of notes under the Programme, from which four are still outstanding, in an aggregate amount of EUR 325 million. These series of notes issued by Banif Finance under the Programme include: two series of Low Tier II subordinated notes in an aggregate amount of EUR 50 million (December 2004) and EUR 50 million (December 2006), one series of Upper Tier II subordinated notes in an aggregate amount of EUR 125 million (December 2006) and one series of Low Tier II subordinated notes in an aggregate amount of EUR 100 million (December 2009).

In November 2010, Banif Finance issued two standalone senior notes in the amount of EUR 40 million and U.S.$50 million and in July 2012, Banif Finance issued two standalone senior notes in the amount of EUR 55 million and U.S.$55 million.

Financial Year

The financial year-end of Banif Finance is 31 December.

Accounts

Banif Finance prepares annual audited accounts. The first accounts were prepared in respect of the period from 23 October 2003 to 31 December 2003.

No Material Adverse Change

Since 31 December 2011, the date of Banif Finance's last published audited financial statements, there has been no material adverse change or any development reasonably likely to involve any material adverse change in the condition, financial or otherwise, of Banif Finance.

Corporate Governance

There is no specific corporate governance regime in Cayman, save that the Directors of the Issuer are required to observe their fiduciary duties of Banif Finance, principally of good faith in the interests of the Issuer, not acting for a collateral purpose and not to make a secret profit.

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Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) ("Banif Madeira")

Establishment and Main Activities

Banif Madeira is a branch of Banif established in the Zona Franca da Madeira (the Madeira International Business Centre). As a branch of Banif, Banif Madeira is not a separate legal entity from Banif and accordingly Banif will be ultimately responsible for actions of Banif Madeira carried out by Banif Madeira's duly authorised representatives.

Banif Madeira was established in Madeira on 3 April 1989 (registered under number 00111/1990.09.21- CIPC-911005005) and acts under the laws of Portugal. Its registered office is at Rua João Tavira, no. 30, 9004-509 Funchal, Madeira, Portugal and its registered telephone number is +351 291 222 162.

Banif Madeira does not have a supervisory board, its own memorandum and articles of association or its own share capital, as it is a full branch of Banif.

The object of Banif Madeira is the carrying out of international banking and finance operations with non- residents of Portugal.

Board of Directors

Banif Madeira is a full branch of Banif and therefore Banif's directors are also directors of Banif Madeira. They have their business address at the registered office of Banif. Please see "– Banif – Banco Internacional do Funchal, S.A. – Board and Officers of Banif" above.

Conflicts of Interest

To the knowledge of Banif Madeira there are no potential conflicts of interest between the private interests or other duties of the above Directors and any of their duties to Banif Madeira.

Audit Committee

Banif Madeira does not have an internal audit committee.

Corporate Governance

Pursuant to the Corporate Governance Regulation, only companies which have its shares admitted to trading in a regulated market must issue a statement regarding compliance with the corporate governance regime set out in the Regulation. Given the fact that Banif Madeira is a full branch of Banif and Banif is not a company with shares admitted to trading in a regulated market, there is no such requirement for Banif Madeira to comply with such corporate governance regime.

Selected Financial Information

Variation Balance Sheet 31-12-2011 31-12-2010 Absolute % € Thousand Total Assets ...... 1,607,655 2,059,258 -451,603 -21.93% Loan Portfolio ...... 23,609 14,116 9,493 67.25% Customers' Funds ...... 1,266,250 1,301,023 -34,773 -2.67% Total Shareholders' Equity ...... 38,984 31,385 7,599 24.21%

Variation Income Statement 31-12-2011 31-12-2010 Absolute % € Thousand Financial margin ...... 8,459 657 7,802 1,187.52% Net Profit on Financial Operations ...... 280 257 23 8.95% Other income ...... -36 1,904 -1,940 -101.89% Gross Margin ...... 8,703 2,818 5,885 208.84% Personnel Costs and Overheads (including depreciation) ...... -344 -11 -333 -3,027.27% Provisions and impairment...... -760 -427 -333 -77.99% Income Tax ...... — — — —

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Variation Income Statement 31-12-2011 31-12-2010 Absolute % € Thousand Net Profits ...... 7,599 2,380 5,219 219.29%

Interim period ended 30 June 2012

Variation Balance Sheet 30-06-2012 31-12-2011 Absolute % € Thousand Total Assets ...... 875,690 1,607,655 -731,965 -45.53% Loan Portfolio ...... 20,419 23,609 -3,190 -13.51% Customers' Funds ...... 770,529 1,266,250 -495,721 -39.15% Total Shareholders' Equity ...... 36,010 38,983 -2,973 -7.63%

Variation Income Statement 30-06-2012 30-06-2011 Absolute % € Thousand Financial margin ...... — 3,008 -3,008 -100.00% Net Profit on Financial Operations ...... -32 58 -90 -155.17% Other income ...... 542 -207 749 -361.84% Gross Margin ...... 510 2,859 -2,349 -82.16% Personnel Costs and Overheads (including depreciation) ...... -167 -155 -12 7.74% Provisions and impairment...... -3,489 -489 -3,000 613.50% Income Tax ...... — — — — Net Profits ...... -3,146 2,215 -5,361 -242.03%

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TAXATION

The following is a general description of certain Cayman Islands, Portugal, Luxembourg and EU tax considerations relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in those countries or elsewhere. Prospective purchasers of Notes should consult their own tax advisers as to which countries' tax laws could be relevant to acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes and the consequences of such actions under the tax laws of those countries. This summary is based upon the law as in effect on the date of this Base Prospectus and is subject to any change in law that may take effect after such date.

Cayman Islands

The following discussion of certain Cayman Islands tax consequences of an investment in the Notes is based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a general summary of present law, which is subject to prospective and retroactive change. It assumes that Banif Finance will conduct its affairs in accordance with assumptions made by, and representations made to, counsel. It is not intended as tax advice, does not consider any investor's particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.

Under existing Cayman Islands law:

(a) payments of principal and interest in respect of the Notes will not be subject to taxation in the Cayman Islands and no withholding will be required on such payment to any holder of a Note and gains derived from the sale of Notes will not be subject to Cayman Islands income or corporate tax. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax; and

(b) the holder of any Note (or the legal personal representative of such holder) whose Note is brought into the Cayman Islands may in certain circumstances be liable to pay stamp duty imposed under the laws of the Cayman Islands in respect of such Note. In addition, an instrument transferring title to a Note, if brought into or executed in the Cayman Islands, would be subject to Cayman Islands stamp duty.

Banif Finance has been incorporated under the laws of the Cayman Islands as an exempted company and, as such, has obtained an undertaking from the Governor in Cabinet of the Cayman Islands in the following form:

The Tax Concessions Law (1999 Revision) Undertaking as to Tax Concessions

In accordance with Section 6 of the Tax Concessions Law (1999 Revision) the Governor In Cabinet undertakes with Banif Finance Ltd. (the "Company"):

(a) that no law which is hereinafter enacted in the Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable

(i) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or in part of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (1999 Revision).

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These concessions shall be for a period of twenty years from 19 August 2003.

Acting Governor in Cabinet.

Portugal

Notes issued by Banif and if it is the case, Notes guaranteed by Banif Madeira

The following is a summary of the material Portuguese tax consequences with respect to the Notes. The summary does not purport to be a comprehensive description of all the tax consequences that may be relevant to any particular Noteholder, including tax considerations that arise from rules of general application or that are generally assumed to be known to Noteholders. This discussion is based on Portuguese law as it stands at the date of this Base Prospectus and is subject to any change in law that may take effect after such date. Prospective investors in the Notes should consult their professional advisers with respect to particular circumstances and the effects of state, local or foreign laws to which they may be subject. Noteholders who are in doubt as to their tax position should consult their professional advisers.

Portuguese Taxation

Economic benefits derived from interest, amortisation, reimbursement premiums and other instances of remuneration arising from the Notes are designated as investment income for Portuguese tax purposes.

General tax regime applicable to debt securities

Resident holders

Interest and other types of investment income obtained on Notes by a Portuguese resident individual is subject to individual income tax. If the payment of interest or other investment income is made available to Portuguese resident individuals, withholding tax applies at a rate of 25 per cent., which is the final tax on that income unless the individual elects to include such income in his taxable income, subject to tax at progressive rates of up to 46.5 per cent. An additional income tax rate of 2.5 per cent. that will be due on the part of the taxable income exceeding EUR 153.300. In this case, the tax withheld is deemed a payment on account of the final tax due.

Investment income paid or made available to accounts opened in the name of one or more account holders acting on behalf of one or more unidentified third parties is subject to a final withholding tax rate of 30 per cent., unless the relevant beneficial owner(s) of the income is/are identified and as a consequence the tax rates applicable to such beneficial owner(s) will apply.

Capital gains obtained by Portuguese resident individuals on the transfer of Notes are taxed at a special tax rate of 25 per cent. levied on the positive difference between the capital gains and capital losses of each year. In this respect, an income tax exemption applies if the annual positive difference obtained with the disposal of shares, bonds and other debt securities does not exceed EUR 500. Accrued interest qualifies as interest, rather than as capital gains, for tax purposes.

In addition, the positive difference between the capital gains and capital losses resulting from the disposal of Notes and other debt securities obtained by investment funds incorporated and operating under the laws of Portugal is exempt from tax, except in the case of mixed or closed ended investment funds of private subscription to which the rules established in the Personal Income Tax Code (Código do Imposto sobre o Rendimento das Pessoas Singulares or "CIRS") apply.

Interest and other investment income derived from Notes and capital gains obtained with the transfer of Notes by legal persons resident for tax purposes in Portugal and by non-resident legal persons with a permanent establishment in Portugal to which the income or gains are attributable are included in their taxable income and are subject to corporate income tax rate of 25 per cent., to which may be added a municipal surcharge ("derrama municipal") of up to 1.5 per cent. of its taxable income. A State Surcharge ("derrama estadual") rate will be 3 per cent. due on the part of the taxable profits exceeding EUR 1.500.000 up to EUR 10.000.000 and 5 per cent. on the part of the taxable profits exceeding EUR 10.000.000.

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As a general rule, withholding tax at a rate of 25 per cent. applies on interest and other investment income, which is deemed a payment on account of the final tax due. Financial institutions subject to corporate income tax in Portugal, pension funds, retirement and/or education savings funds, share savings funds, venture capital funds incorporated and operating under the laws in Portugal and some exempt entities are not subject to Portuguese withholding tax.

Investment income paid or made available to accounts opened in the name of one or more account holders acting on behalf of one or more unidentified third parties is subject to a final withholding tax rate of 30 per cent., unless the relevant beneficial owner(s) of the income is/are identified and as a consequence the tax rates applicable to such beneficial owner(s) will apply.

Without prejudice to the special debt securities tax regime as described below, the general tax regime on debt securities applicable to non-resident holders is the following:

Non-resident holders

Interest and other types of investment income obtained by non-resident beneficial owners (individuals or legal persons) without a Portuguese permanent establishment to which the income is attributable is subject to withholding tax at a rate of 25 per cent. which is the final tax on that income.

Investment income paid or made available to accounts opened in the name of one or more account holders acting on behalf of one or more unidentified third parties is subject to a final withholding tax rate of 30 per cent., unless the relevant beneficial owner(s) of the income is/are identified and as a consequence the tax rates applicable to such beneficial owner(s) will apply.

A withholding tax rate of 30 per cent. applies in case of investment income payments to individuals or companies domiciled in a country, territory or region subject to a clearly more favourable tax regime included in the "low tax jurisdictions" list approved by Ministerial Order (Portaria) no. 150/2004 of 13 February 2004, amended by Ministerial Order (Portaria) no. 292/2011, of 8 November 2011 (lista dos países, territórios e regiões de tributação privilegiada, claramente mais favorável).

Under the tax treaties entered into by Portugal which are in full force and effect on the date of this Base Prospectus, the withholding tax rate may be reduced to 15, 12, 10 or 5 per cent., depending on the applicable treaty and provided that the relevant formalities (including certification of residence by the tax authorities of the beneficial owners of the interest and other investment income) are met. The reduction may apply at source or through the refund of the excess tax. The forms currently applicable for these purposes may be available for viewing and downloading at www.portaldasfinancas.gov.pt.

Capital gains obtained on the transfer of Notes by non-resident individuals without a permanent establishment in Portugal to which gains are attributable are exempt from Portuguese capital gains taxation unless the individual is resident in a country, territory or region subject to a clearly more favourable tax regime included in the "low tax jurisdictions" list approved by Ministerial Order no. 150/2004 of 13 February 2004 (Lista dos países, territórios e regiões com regimes de tributação privilegiada, claramente mais favoráveis) amended by Ministerial Order (Portaria) no. 292/2011, of 8 November 2011. Capital gains obtained by individuals that are not entitled to said exemption will be subject to taxation at a 25 per cent. flat rate. Under the tax treaties entered into by Portugal, such gains are usually not subject to Portuguese corporate income tax, but the applicable rules should be confirmed on a case by case basis. Accrued interest does not qualify as capital gains for tax purposes.

Capital gains obtained on the transfer of Notes by a legal person non-resident in Portugal for tax purposes and without a permanent establishment in Portugal to which gains are attributable are exempt from Portuguese capital gains taxation, unless the share capital of the non-resident entity is more than 25 per cent. directly or indirectly held by Portuguese resident entities or if the beneficial owner is resident in a country, territory or region subject to a clearly more favourable tax regime included in the "low tax jurisdictions" list approved by Ministerial Order no. 150/2004 of 13 February 2004 (Lista dos países, territórios e regiões com regimes de tributação privilegiada, claramente mais favoráveis) amended by Ministerial Order (Portaria) no. 292/2011, of 8 November 2011. If the exemption does not apply, the gains will be subject to corporate income tax at a rate of 25 per cent. Under the tax treaties entered into by Portugal, such gains are usually not subject to Portuguese corporate income tax, but the applicable rules should be confirmed on a case by case basis.

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Special debt securities tax regime

Pursuant to Decree-Law no. 193/2005, of 7 November 2005 ("Decree-Law 193/2005"), as amended from time to time, investment income paid to non-Portuguese resident Noteholders in respect of debt securities registered with a centralised system recognised by the Portuguese Securities' Code and complementary legislation (such as the Central de Valores Mobiliários, managed by Interbolsa), as well as capital gains derived from a sale or other disposition of such Notes, will be exempt from Portuguese income tax provided the following requirements are met.

For the above-mentioned tax exemption to apply, Decree-Law 193/2005 requires that the Noteholders are: (i) neither residents in the Portuguese territory (or have any registered or deemed permanent establishment therein to which interest is imputable); (ii) nor residents in the countries and territories included in the Portuguese "blacklist" (countries and territories listed in Ministerial Order (Portaria) no. 150/2004, of 13 February 2004, amended by Ministerial Order (Portaria) no. 292/2011, of 8 November 2011), with the exception of central banks and governmental agencies located in those blacklisted jurisdictions, and (iii) in the case of being legal entities, provided that not more than 20 per cent. of its share capital is held, whether directly or indirectly, by Portuguese residents.

For the purposes of application at source of this tax exemption regime, Decree-Law 193/2005 requires completion of certain procedures and certifications. Under these procedures (which are aimed at verifying the non-resident status of the Noteholder), the Noteholder is required to hold the Notes through an account with one of the following entities: (i) a direct registered entity, which is an entity affiliated with the clearing system recognised by the Portuguese Securities Code; (ii) an indirect registered entity, which, although not assuming the role of the direct registered entities, is a client of the latter; or (iii) entities managing an international clearing system, which are entities operating with the international market to clear and settle securities' transactions. For purposes of the exemption granted under Decree-Law 193/2005, the Portuguese Government has recognised both Euroclear and Clearstream as entities managing an international clearing system.

1. Domestic Cleared Notes held through a direct or indirect registered entity

Direct registered entities are required, for the purposes of Decree-Law 193/2005, to register the Noteholders in one of two accounts: (i) an exempt account or (ii) a non-exempt account.

Registration of the Notes in the exempt account is crucial for the exemption to apply. For this purpose, the registration of the non-resident Noteholders in an exempt account, allowing application of the exemption upfront, requires evidence of the non-resident status to be provided by the Noteholder to the direct registered entity prior to the Income Payment date, as follows:

(a) if the Noteholder is a central bank, public institution, international body, credit or financial institution, a pension fund or an insurance company, with its head office in any OECD country or in a country with which the Republic of Portugal has entered into a double tax treaty, the Noteholder will be required to prove its non resident status by providing: (i) its tax identification; or (ii) a certificate issued by the entity responsible for its supervision or registration, confirming the legal existence of the Noteholder and its head office; or (iii) a declaration of tax residence issued by the Noteholder itself, duly signed and authenticated, if the Noteholder is a central bank, a public law entity taking part in the public administration (either central, regional or peripheral, indirect or autonomous of the relevant country) or an international body; or (iv) proof of non residence pursuant to the terms of paragraph (c) below;

(b) if the Noteholder is an investment fund or other collective investment scheme domiciled in any OECD country or in a country with which the Republic of Portugal has entered into a double tax treaty, it shall provide evidence of its non resident status by providing any of the following documents: (i) a declaration issued by the entity responsible for its supervision or registration or by the relevant tax authority confirming its legal existence, domicile and law of incorporation; or (ii) evidence of non residence pursuant to the terms of paragraph (c) below;

(c) other investors will be required to provide evidence of their non resident status by way of: (i) a certificate of residence or equivalent document issued by the relevant tax

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authorities; (ii) a document issued by the relevant Portuguese Consulate certifying residence abroad; or (iii) a document specifically issued by an official entity which forms part of the public administration (either central, regional or peripheral, indirect or autonomous) of the relevant country. The Noteholder must provide an original or a certified copy of such documents and, as a rule, if such documents do not refer to a specific year and do not expire, they must have been issued within the three years period prior to the relevant payment or maturity dates or, if issued after the relevant payment or maturity dates, within the following three months.

"Income Payment Date" means any date on which the Noteholders are entitled to receive interest or other investment income, either in the form of accrued interest or coupon.

2. Internationally Cleared Notes – held through an entity managing an international clearing system

If the Notes are registered in an account with an international clearing system (either with Euroclear and Clearstream) and the management entity of such international clearing system undertakes not to provide registration services in respect of the Notes to (i) Portuguese tax residents that do not benefit from either an exemption or waiver of Portuguese withholding tax, and (ii) to non-resident entities for tax purposes which do not benefit from the above Portuguese income tax exemption, the evidence required to benefit from the exemption will be made prior to the Income Payment Date as follows:

(a) Through the presentation of a certificate, on an annual basis, with the name of each beneficial owner, address, tax payer number (if applicable), the identity of the securities, the quantity held and also the reference to the legislation supporting the exemption from, or the waiver of Portuguese withholding tax. The form of the certificate is set out in Annex 1 to this "Taxation" section which corresponds to the wording and contents of the form of certificate for exemption from Portuguese withholding tax on income from debt securities, as contained in Order (Despacho) no. 4980/2006 published in the Portuguese official diary, second series, no. 45, of 3 March 2006 and issued by the Portuguese Minister of Finance and Public Administration (currently Ministro das Finanças e da Administração Pública; or

(b) Alternatively, through an annual declaration which states that the beneficial owners are exempt or not subject to withholding tax. This declaration is complemented by a disclosure list, on each coupon payment date, of each beneficial owner's identification, with the name of each beneficial owner, address, tax payer number (if applicable), the identity of the securities, the quantity held and also the reference to the legislation supporting the exemption or the waiver of Portuguese withholding tax. The form of the certificate set out in Annex 2 to this "Taxation" section corresponds to the wording and contents of the form of statement for exemption from Portuguese withholding tax on income from debt securities, as contained in Regulatory Notice (Aviso) no. 3714/2006 published in the Portuguese official diary, second series, no. 59, of 23 March 2006 and issued by the Portuguese Secretary of State for Fiscal Affairs, currently, Secretário de Estado dos Assuntos Fiscais).

The two documents referred to in (a) or (b) above, shall be provided by the participants (i.e. the entities that operate in the international clearing system) to the direct registering entities through the international clearing system managing entity and must take into account the total accounts under their management relating to each Noteholder that is tax exempt or benefits from the waiver of Portuguese withholding tax.

The international clearing system managing entities shall inform the direct registering entity of the income paid to each participant for each security payment.

If the conditions for the exemption to apply are met, but, due to inaccurate or insufficient information, tax was withheld, a special refund procedure is available under the special regime approved by Decree-Law no. 193/2005. The refund claim is to be submitted to the direct or indirect register entity of the Notes within 90 days from the date the withholding took place. A special tax form for these purposes was approved by Order ("Despacho") no. 4980/2006 (2nd

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series), published in the Portuguese official gazette, second series, n. 45, of 3 March 2006 issued by the Portuguese Minister of Finance and Public Administration (currently "Ministro das Finanças e da Administração Pública") and may be available at www.portaldasfinancas.gov.pt.

The refund of withholding tax in other circumstances, or after the above 90-day period, is to be claimed from the Portuguese tax authorities under the general procedures and within the general deadlines.

The absence of evidence of non-residence in respect of any non-resident entity which benefits from the abovementioned tax exemption regime shall result in the loss of the tax exemption and consequent submission to the above applicable Portuguese general tax provisions.

Luxembourg Taxation

The following is a general description of certain Luxembourg tax considerations relating to the Notes. It specifically contains information on taxes on the income from the Notes withheld at source and provides an indication as to whether the issuer assumes responsibility for the withholding of taxes at the source. It does not purport to be a complete analysis of all tax considerations relating to the Notes, whether in Luxembourg or elsewhere. Prospective purchasers of the Notes should consult their own tax advisers as to which countries' tax laws could be relevant to acquiring, holding and disposing of the Notes, payments of interest, principal and/or other amounts under the Notes and the consequences of such actions under the tax laws of Luxembourg. This summary is based upon the law as in effect on the date of this Base Prospectus. The information contained within this section is limited to withholding taxation issues, and prospective investors should not apply any information set out below to other areas, including (but not limited to) the legality of transactions involving the Notes.

Withholding Tax

(i) Non-resident holders of Notes

Under Luxembourg general tax laws currently in force and subject to the laws of 21 June 2005 (the "Laws") mentioned below, there is no withholding tax on payments of principal, premium or interest made to non-resident holders of Notes, nor on accrued but unpaid interest in respect of the Notes, nor is any Luxembourg withholding tax payable upon redemption or repurchase of the Notes held by non-resident holders of Notes, which are not profit sharing. Under the Laws implementing the Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments (the "EU Savings Directive") and ratifying the treaties entered into by Luxembourg and certain dependent and associated territories of EU Member States (the "Territories"), payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner or a residual entity, as defined by Article 4(2) of the Laws, which are resident of, or established in, an EU Member State (other than Luxembourg) or one of the Territories will be subject to a withholding tax unless the relevant recipient has adequately instructed the relevant paying agent to provide details of the relevant payments of interest or similar income to the fiscal authorities of his/her/its country of residence or establishment, or, in the case of an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of his/her country of residence in the required format to the relevant paying agent. Payments of interest under the Notes coming within the scope of the Laws would at present be subject to withholding tax of 35 per cent. (unless the beneficiary has opted for the disclosure of information described above). Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent.

(ii) Resident holders of Notes

Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005 (the "Law") mentioned below, there is no withholding tax on payments of principal, premium or interest made to Luxembourg resident holders of Notes, nor on accrued but unpaid interest in respect of Notes, nor is any Luxembourg withholding tax

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payable upon redemption or repurchase of Notes held by Luxembourg resident holders of Notes. Under the Law payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to or for the immediate benefit of an individual beneficial owner who is resident of Luxembourg will be subject to a withholding tax of 10 per cent.. Such withholding tax will be in full discharge of income tax if the beneficial owner is an individual acting in the course of the management of his/her private wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of interest under the Notes coming within the scope of the Law would be subject to withholding tax of 10 per cent..

In addition, pursuant to the Law as amended by the law of 17 July 2008, Luxembourg resident individuals who are the beneficial owners of savings income paid by a paying agent within the meaning of the EU Savings Directive established outside Luxembourg, in a Member State of either the EU or the European Economic Area, or in a jurisdiction having concluded an agreement with Luxembourg in connection with the EU Savings Directive, can opt to self declare and pay a 10 per cent. tax on these savings income. This 10 per cent. tax is final when Luxembourg resident individuals are acting in the context of the management of their private wealth.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State; however, for a transitional period, Austria and Luxembourg may instead apply a withholding system in relation to such payments, deducting tax at a rate of 35 per cent. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments.

A number of non-EU countries, have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories.

The European Commission has proposed certain amendments to the Directive, which may, if implemented, amend or broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers.

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Annex 1

CERTIFICATE FOR EXEMPTION FROM PORTUGUESE WITHHOLDING TAX ON INCOME ARISING FROM DEBT SECURITIES (PARAGRAPH 1 OF ARTICLE 17 OF THE SPECIAL TAX REGIME APPROVED BY DECREE-LAW 193/2005 OF 7 NOVEMBER 2005)

The undersigned Participant hereby declares that he holds debt securities covered by the special tax regime approved by Decree-Law 193/2005 of 7 November 2005 (the "Securities"), in the following securities account number...... (the "Account") with ……...... (name and complete address of the international clearing system managing entity).

We will hold these Securities in our capacity of beneficial owner or in our capacity of intermediary, holding Securities on behalf of one or more beneficial owners, including ourselves, if applicable, all of whom are eligible for exemption at source from Portuguese withholding tax according to Portuguese legislation.

1. We are:

Name:…...... ……………………………………………………………………………………….

Residence for tax purposes (full address):...... ………………………………...………………….

Tax ID Number:...... ……………………………………………….…………………

2. We hereby certify that, from the date hereof until the expiry date of this certificate:

A. We are the Beneficial Owner of the following Securities:

Security ISIN or Common Code Security description Nominal position

And we hereby declare that we are not liable to Portuguese withholding tax, in accordance with the applicable legislation, indicated hereafter:

 Special Tax Regime approved by Decree Law no. 193/2005 of 7 November

 Art. 97 of CIRC (Corporate Income Tax Code) — Exemption from withholding tax

B. We are intermediaries of the following Securities:

Security ISIN or Common Code Security description Nominal position

3. We hereby undertake to provide the...... (name of the international clearing system managing entity) with a document proving the exemption of personal or corporate income tax referred in the attached statement of beneficial ownership, whenever the beneficial owner is not a central bank, public institution, international body, credit institution, financing company,

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pension fund and insurance company resident in any OECD country or in a country with which Portugal has concluded a Convention for the Avoidance of International Double Taxation, on behalf of which we hold Portuguese debt securities in the Account.

4. We hereby undertake to notify the...... (name of the international clearing system managing entity) promptly in the event that any information contained in this certificate becomes untrue or incomplete.

5. We acknowledge that certification is required in connection with Portuguese law and we irrevocably authorise...... (name of the international clearing system managing entity) and its Depositary to collect and forward this certificate or a copy hereof, any attachments and any information relating to it, to the Portuguese authorities, including tax authorities.

6. This certificate is valid for a period of twelve months as from the date of signature:

Place: ...... Date: ......

...... Authorised Signatory Name Title/Position

...... Authorised Signatory Name Title/Position

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APPENDIX

STATEMENT OF BENEFICIAL OWNERSHIP

The undersigned beneficiary:

Name:……………………………………………………………………………………………………..…

Address:…………………………………………………………………………………………………..…

……………………………………………………………………………………………………………....

Tax identification number:………………………………………………………………………………….

Holding via the following financial intermediary:

Name of the financial intermediary:………………………………………………………………………..

Account number:...... ………..

The following securities:

Common/ISIN code:………………………………………………………………………………………..

Security name:………………………………………………………………………………………………

Payment date:……………………………………………………………………………………………….

Nominal position:……………………………………………………………………………………………

Hereby declares that he/she/it is the beneficial owner of the above-mentioned securities and nominal position at the payment date ______/ ______/ ______; and

Hereby declares that he/she/it is not liable to withholding tax, in accordance with the applicable legislation, indicated hereinafter (tick where applicable):

 Special Tax Regime approved by Decree Law 193/2005, of 7 November 2005 ………………….

 Art. 97 of CIRC (Corporate Income Tax Code) — Exemption from withholding tax …………...

 Art. 9 of CIRC — State, Autonomous Regions, local authorities, their associations governed by public law and social security federations and institutions ……………………………

 Art. 10 of CIRC — general public interest companies, charities and other non-governmental social entities; exemption by the Ministerial Regulation no...... , published in Diário da República......

 Art. 16 of EBF (Tax Incentives Statute) — pension funds and assimilated funds …………….

 Art. 21 of EBF — retirement savings funds (FPR), education savings funds (FPE), retirement and education savings funds (FPR/E) ………………..

 Art. 23 of EBF — venture capital investment funds ………………

 Art. 26 of EBF — stock savings funds (FPA) Other legislation (indicate which) ………………

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This document is to be provided to the Portuguese tax authorities, if requested by the latter, as foreseen in the Article 17 of the Special Tax Regime approved by Decree Law 193/2005, of 7 November 2005. Authorised signatory:

Name: ......

Function: ......

Signature: ......

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Annex 2

STATEMENT FOR EXEMPTION FROM PORTUGUESE WITHHOLDING TAX ON INCOME ARISING FROM DEBT SECURITIES (PARAGRAPH 2 OF ARTICLE 17 OF THE SPECIAL TAX REGIME APPROVED BY DECREE LAW NO. 193/2005, OF 7 NOVEMBER 2005)

The undersigned Participant hereby declares that he holds or will hold debt securities covered by the special tax regime approved by Decree Law no. 193/2005, of 7 November 2005 (the "Securities"), in the following securities account number...... (the "Account") with...... (name and complete address of the international clearing system managing entity).

We hold or will hold these Securities in our capacity of beneficial owner or in our capacity of intermediary, holding Securities on behalf of one or more beneficial owners, including ourselves, if applicable, all of whom are eligible for exemption at source from Portuguese withholding tax according to Portuguese legislation. 1. We are:

Name:……………………………………………………………………………………………….

Residence for tax purposes (full address):…………………………...……………………………..

Tax ID Number:……………………………………………………………………………………

2. We hereby undertake to provide the...... (name of the international clearing system management entity) with a list of beneficial owners at each relevant record date containing the name, residence for tax purposes, tax identification number and nominal position of Portuguese debt Securities for each beneficial owner, including ourselves if relevant, on behalf of which we hold or will hold Portuguese debt securities in the Account.

3. We hereby undertake to notify the...... (name of the international clearing system managing entity) promptly in the event that any information contained in this certificate becomes untrue or incomplete.

4. We acknowledge that certification is required in connection with Portuguese law and we irrevocably authorise...... (name of the international clearing system managing entity) and its Depositary to collect and forward this certificate or a copy hereof, any attachments and any information relating to it, to the Portuguese authorities, including tax authorities.

5. This certificate is valid for a period of twelve months as from the date of signature:

Place: ...... Date: ......

...... Authorised Signatory Name Title/Position

...... Authorised Signatory Name Title/Position

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APPENDIX

LIST OF BENEFICIAL OWNERS

For:

Interest due __/___/____

Security code (ISIN or Common Code): ______

Security description: ______

Securities Clearance Account Number: ______

We certify that the above Portuguese debt securities are held on behalf of the following Beneficial Owners:

Legal basis of the exemption from Tax Identification Residence for Quantity of withholding tax Name Number Tax purposes Securities Code(*) Legislation (**)

(*) Indicate the legal basis of the exemption from withholding tax in accordance with the following table:

Code Legal basis of the exemption

1 Special tax Regime approved by Decree-Law no. 193/2005, of 7 November 2005

2 Art. 97 of CIRC (Corporate Income Tax Code) — Exemption from withholding tax

3 Art. 9 of CIRC — State, Autonomous Regions, local authorities, their associations governed by public law and social security federations and institutions

4 Art. 10 of CIRC — general public interest companies, charities and other non-governmental social entities

5 Art. 16 of EBF (Tax Incentives Statute) — pension funds and assimilated funds

6 Art. 21 of EBF — retirement savings funds (FPR), education savings funds (FPE), retirement and education savings funds (FPR/E)

7 Art. 23 of EBF — venture capital investments funds

8 Art. 26 of EBF — stock savings funds (FPA)

9 Other legislation

(**) The fulfilment of this column is mandatory when the code ''9'' is indicated in the previous column.

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SUBSCRIPTION AND SALE

Notes may be issued from time to time by an Issuer to any one or more of Banif – Banco de Investimento, S.A., Caixa – Banco de Investimento, S.A., Citigroup Global Markets Limited, Barclays Bank PLC, BNP Paribas, Credit Suisse Securities (Europe) Limited, Deutsche Bank AG, London Branch and Merrill Lynch International (the "Dealers"). The arrangements under which Notes may from time to time be agreed to be issued by an Issuer to, and subscribed by, Dealers are set out in an Amended and Restated Dealer Agreement dated 4 October 2012 (the "Dealer Agreement") and made between the Issuers, the Guarantor and the Dealers. Any such agreement will, inter alia, make provision for the form and terms and conditions of the relevant Notes, the price at which such Notes will be subscribed by the Dealers and the commissions or other agreed deductibles (if any) payable or allowable by the Issuer in respect of such subscription. The Dealer Agreement makes provision for the resignation or termination of appointment of existing Dealers and for the appointment of additional or other Dealers either generally in respect of the Programme or in relation to a particular Tranche of Notes.

United States of America: Regulation S Category 2; TEFRA D or TEFRA C as specified in the relevant Final Terms or neither if TEFRA is specified as not applicable in the relevant Final Terms.

The Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S of the Securities Act ("Regulation S").

The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code and regulations thereunder.

Each Dealer has agreed that, except as permitted by the Dealer Agreement, it will not offer, sell or deliver Notes, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of the Notes comprising the relevant Tranche, as certified to the Agent or the Issuer by such Dealer (or, in the case of a sale of a Tranche of Notes to or through more than one Dealer, by each of such Dealers as to the Notes of such Tranche purchased by or through it, in which case the Agent or the relevant Issuer shall notify each such Dealer when all such Dealers have so certified) within the United States or to, or for the account or benefit of, U.S. persons, and such Dealer will have sent to each dealer to which it sells Notes during the distribution compliance period relating thereto a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.

In addition, until 40 days after the commencement of the offering of Notes comprising any Tranche, any offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.

Selling restrictions addressing additional United Kingdom Security Laws

Each Dealer has represented, warranted and agreed that:

(a) No deposit-taking: in relation to any Notes having a maturity of less than one year:

(i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business; and:

(ii) it has not offered or sold and will not offer or sell any Notes other than to persons:

(A) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses; or

(B) who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses,

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where the issue of the Notes would otherwise constitute a contravention of section 19 of the FSMA by the relevant Issuer;

(b) Financial promotion: it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the relevant Issuer or if applicable, the Guarantor; and

(c) General compliance: it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, each Dealer has undertaken that it will not offer or sell any Notes directly or indirectly, in Japan or to, or for the benefit of, any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any Japanese Person except under circumstances which will result in compliance with all applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities and in effect at the relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan, including any corporation or other entity organised under the laws of Japan.

Cayman Islands

Each Dealer has agreed that it has not made and will not make any invitation to the public in the Cayman Islands to subscribe for any of the Notes.

Portugal (including Madeira)

Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that:

(i) no document, circular, advertisement or any offering material in relation to the Notes has been or will be subject to approval by the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários, the "CMVM");

(ii) it has not, without the prior approval of the CMVM, directly or indirectly advertised, offered, submitted to an investment gathering procedure or sold and will not, without the prior approval of the CMVM, directly or indirectly advertise, offer, submit to an investment gathering procedure, sell, re-sell, re-offer or deliver any Notes in circumstances which could qualify as a public offer (oferta pública) of securities pursuant to the Portuguese Securities Code (Código dos Valores Mobiliários, the "CVM");

(iii) it has not, directly or indirectly, distributed or caused to be distributed and will not, directly or indirectly, distribute or cause to be distributed to the public in the Republic of Portugal the Base Prospectus or any document, circular, advertisements or any offering material in relation to the Notes, without the prior approval of the CMVM;

(iv) all offers, sales and distributions of the Notes have been and will only be made in Portugal in circumstances that, pursuant to the CVM, do not qualify as a public offer of Notes ("oferta pública");

(v) pursuant to the CMVM Regulation no. 3/2006 and the CVM, a private placement of Notes in the Republic of Portugal or to Portuguese residents by public companies ("sociedades abertas") or by companies that are issuers of securities listed on a market needs to be notified to the CMVM for statistical purposes;

(vi) all applicable provisions of the CVM and of the CMVM Regulations and all relevant laws and regulations have been complied with regarding the Notes, in any matters involving Portugal and the placement or distribution of Notes in the Portuguese market and all applicable provisions of

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the CVM and of the CMVM Regulations and all relevant Portuguese laws and regulations will be complied with, in any such case that may be applicable to it in respect of any offer or sales of Notes by it in the Republic of Portugal.

Each Dealer has represented and agreed and each further Dealer appointed under the Programme will be required to represent and agree that it shall comply with all applicable laws and regulations in force in the Republic of Portugal and with the Prospectus Directive regarding the placement of any Notes in the Portuguese jurisdiction or to any entities which are resident in the Republic of Portugal, including the publication of a Prospectus, when applicable, and that such placement shall only be authorised and performed to the extent that there is full compliance with such laws and regulations.

For the avoidance of doubt, Madeira falls within the jurisdiction of the Republic of Portugal.

Without prejudice to the above, on 4 May 2012 CMVM launched a public consultation (consulta pública) on the preliminary draft of the decree-law that will transpose Directive 2010/73/EU (the "2010 PD Amending Directive") into the Portuguese legal framework. Accordingly, rules in respect of public offerings of securities are likely to change in the near future, although at this stage it is uncertain what the exact scope of the changes will be and when will the same enter into force.

On 13 July 2012 CMVM released a generic opinion on the application of the 2010 PD Amending Directive in Portugal as from 1 July 2012. Although not yet implemented in Portugal, a directive has vertical direct effect after its implementation deadline and therefore the CMVM shall be deemed to apply the 2010 PD Amending Directive in Portugal from 1 July 2012 while the implementation of that Directive is pending in Portugal. The above public consultation documents and the generic opinion may be found at http://www.cmvm.pt/EN/Consultas%20Publicas/CMVM/Pages/20120504.aspx and http://www.cmvm.pt/EN/Recomendacao/Opinions/Pages/20120713.aspx.

Public Offer Selling Restriction under the Prospectus Directive

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Dealer has represented, warranted and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of Notes which are the subject of the offering contemplated by the Base Prospectus as completed by the Final Terms in relation thereto (or are the subject of the offering contemplated by a Drawdown Prospectus, as the case may be) to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:

(a) Approved Prospectus: if the Final Terms or Drawdown Prospectus in relation to the Notes specify that an offer of those Notes may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a "Non-exempt Offer"), following the date of publication of a prospectus in relation to such Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus which is not a Drawdown Prospectus has subsequently been completed by the Final Terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or final terms, as applicable and the Issuer has consented in writing to its use for the purpose of that Non-exempt Offer;

(b) Qualified investors: at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(c) Fewer than 100 offerees: at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the relevant Issuer for any such offer; or

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(d) Other exempt offers: at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (b) to (d) above shall require the relevant Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an "offer of Notes to the public" in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

General

Other than with respect to the admission to listing, trading and/or quotation by such one or more competent authorities, stock exchanges and/or quotation systems as may be specified in the Final Terms, no action has been or will be taken in any country or jurisdiction by the relevant Issuer, if applicable, the Guarantor or the Dealers that would permit a public offering of Notes, or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Persons into whose hands the Base Prospectus or any Final Terms comes are required by the relevant Issuer, if applicable, the Guarantor and the Dealers to comply with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or have in their possession or distribute such offering material, in all cases at their own expense.

The Dealer Agreement provides that the Dealers shall not be bound by any of the restrictions relating to any specific jurisdiction (set out above) to the extent that such restrictions shall, as a result of change(s) or change(s) in official interpretation, after the date hereof, of applicable laws and regulations, no longer be applicable but without prejudice to the obligations of the Dealers described in the paragraph headed "General" above.

Selling restrictions may be supplemented or modified with the agreement of the relevant Issuer.

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GENERAL INFORMATION

Listing and Admission to Trading

Application has been made for Notes issued under the Programme to be admitted to listing on the official list of the Luxembourg Stock Exchange and to trading on the Regulated Market of the Luxembourg Stock Exchange.

However, Notes may be issued pursuant to the Programme which will not be admitted to listing, trading and/or quotation by the Luxembourg Stock Exchange or any other stock exchange or which will be listed on such stock exchange as the relevant Issuer and the relevant Dealer(s) may agree.

Authorisations

The establishment and update of the Programme was authorised by board resolutions of Banif Finance dated 23 October 2003, 16 February 2011 and 25 September 2012, and by the board resolutions of Banif dated 25 September 2012, and the establishment of the Programme and the giving of the guarantee contained in the Trust Deed was authorised by board resolutions of Banif (in relation to Banif Madeira as Guarantor) dated 29 September 2003, 16 February 2011 and 25 September 2012. Each Issuer and the Guarantor has obtained or will obtain from time to time all necessary consents, approvals and authorisations in connection with the issue and performance of the Notes and the giving of the guarantee relating to them.

Clearing of the Notes

The Notes (other than Interbolsa Notes) have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate common code and the International Securities Identification Number in relation to the Notes of each Series will be specified in the Final Terms relating thereto. The Interbolsa Notes will be cleared through LCH Clearnet, S.A., the clearing system operated by Interbolsa; the appropriate identification reference for a Tranche of Interbolsa Notes will be specified in the applicable Final Terms. At the date hereof Interbolsa only accepts to clear notes denominated in euros. The relevant Final Terms shall specify any other clearing system as shall have accepted the relevant Notes for clearance together with any further appropriate information.

Use of proceeds

The net proceeds of the issue of each Tranche of Notes will be applied by the relevant Issuer and/or the Guarantor to meet part of their general financing requirements.

Legal and arbitration proceedings

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuers or the Guarantor are aware), during a period covering at least the previous 12 months which may have, or have had in the recent past, significant effects on the Issuers', the Banif Financial Group's or the Guarantor's financial position or profitability.

No significant or material adverse change

Since 30 June 2012, being the last day of the financial period in respect of which the most recent unaudited unconsolidated financial statements of Banif and Banif Finance, the most recent unaudited consolidated financial statements of Banif SGPS, S.A. (holding company of the Banif Financial Group) and the most recent unaudited unconsolidated financial statements of Banif Madeira have been prepared, there has been no significant change in the financial or trading position of either Issuer or any of its Subsidiaries or, as the case may be, the Guarantor or any of its Subsidiaries.

There has been no material adverse change in the prospects of each Issuer or any of its Subsidiaries since 31 December 2011, being the date of its last established audited financial statements. There has been no material adverse change in the prospects of the Guarantor since 31 December 2011, being the date of its last annual unaudited financial statements.

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Change of Control

Neither Issuer is aware of any circumstance or event that would result in a change of control in that Issuer.

Auditors

Ernst & Young Audit and Associados – SROC, S.A., registered with the Stock Market Board under no. 9011, Associates, a member of Ordem dos Revisores Oficiais de Contas under nr. 178, have been appointed as auditors of Banif and Banif Finance for the years ended 31 December 2011 and 31 December 2010. Their registered office is in Avenida de Republica 90-60, 1600-206 Lisbon, Portugal. Ernst & Young Audit and Associados – SROC, S.A. audited the accounts of Banif and Banif Finance without qualification for the financial years ended on 31 December 2011 and 31 December 2010.

Post-issuance information

Neither Issuer intends to provide post-issuance information, if not otherwise required by any applicable laws and regulations.

Documents available for inspection

For so long as the Programme remains in effect or any Notes shall be outstanding, copies and, where appropriate, English translations of the following documents may be inspected during normal business hours at the specified office of the Principal Paying Agent and the Paying Agent in Luxembourg, namely:

(i) the Agency Agreement;

(ii) the Trust Deed (which contains the forms of the Notes in global and definitive form and the form of guarantee);

(iii) the Programme Manual;

(iv) the Interbolsa Notes Agency Agreement;

(v) any Final Terms relating to Notes which are admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system. (In the case of any Notes which are not admitted to listing, trading and/or quotation by any competent authority, stock exchange and/or quotation system, copies of the relevant Final Terms will only be available for inspection by the relevant Noteholders); and

(vi) the memorandum and articles of association of each Issuer.

Financial statements available

For so long as the Programme remains in effect or any Notes shall be outstanding, copies and, where appropriate, English translations of the following documents may be obtained during normal business hours at the specified office of the Principal Paying Agent and the Paying Agent in Luxembourg, namely the most recent publicly available audited unconsolidated financial statements of Banif for the years ended 2011 and 2010, the most recent publicly available audited consolidated financial statements of Banif SGPS, S.A. (holding company of Banif Financial Group) for the years ended 2011 and 2010, the most recent audited statutory financial statements of Banif Finance for the years ended 2011 and 2010 and the most recent unaudited financial statements of Banif Madeira for the years ended 2011 and 2010.

Each of Banif, Banif Finance and Banif Madeira also produces unaudited semi-annual financial statements, as incorporated by reference herein.

Existing and future Dealer transactions

Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions and may perform services for the Issuers and their respective affiliates in the ordinary course of business.

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In addition, in the ordinary course of their business activities, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of an Issuer or such Issuer’s affiliates. Certain of the Dealers or their affiliates that have a lending relationship with an Issuer routinely hedge their credit exposure to the relevant Issuer consistent with their customary risk management policies. Typically, such Dealers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes issued under the Programme. Any such short positions could adversely affect future trading prices of Notes issued under the Programme. The Dealers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Yield

The yield of each Tranche of Notes issued under the Programme will be calculated on an annual or semi- annual basis using the relevant Issue Price at the relevant Issue Date.

Maturities

Notes issued under the Programme may have any maturity, subject, in relation to specific currencies, to compliance with all applicable legal and/or regulatory and/or central bank requirements.

Where Notes have a maturity of less than one year and either (a) the issue proceeds are received by the Issuer in the United Kingdom or (b) the activity of issuing the Notes is carried on from an establishment maintained by the relevant Issuer in the United Kingdom, such Notes must: (i) have a minimum redemption value of £100,000 (or its equivalent in other currencies) and be issued only to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses; or (ii) be issued in other circumstances which do not constitute a contravention of section 19 of the FMSA by the relevant Issuer.

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REGISTERED OFFICE OF THE ISSUERS Banif – Banco Internacional do Funchal, S.A. Banif Finance, Ltd. Rua de João Tavira, no. 30 Maples Corporate Services Limited 9004-509 Funchal PO Box 309 Portugal Ugland House Grand Cayman KY1-1104 Cayman Islands

REGISTERED OFFICE OF THE GUARANTOR Banif – Banco Internacional do Funchal, S.A., acting through its Sucursal Financeira Exterior (External Financial Branch) Rua de João Tavira, no. 30 9004-509 Funchal Portugal

ARRANGERS Banif – Banco de Investimento, S.A. Rua Tierno Galvan, Torre 3-14 piso 1070-274 Lisboa Portugal

Caixa – Banco de Investimento, S.A. Rua Barata Salgueiro, no 33 1269-057 Lisboa Portugal

Citigroup Global Markets Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

DEALERS Banif – Banco de Investimento, S.A. Barclays Bank PLC Rua Tierno Galvan, Torre 3-14 piso 5 The North Colonnade 1070-274 Lisboa Canary Wharf Portugal London E14 4BB United Kingdom

BNP Paribas Caixa – Banco de Investimento, S.A. 10 Harewood Avenue Rua Barata Salgueiro, no 33 London NW1 6AA 1269-057 Lisboa United Kingdom Portugal

Citigroup Global Markets Limited Credit Suisse Securities (Europe) Limited Citigroup Centre One Cabot Square Canada Square Canary Wharf Canary Wharf London E14 4QJ London E14 5LB United Kingdom United Kingdom

Deutsche Bank AG, London Branch Merrill Lynch International Winchester House 2 King Edward Street 1 Great Winchester Street London EC1A 1HQ London EC2N 2DB United Kingdom United Kingdom

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PRINCIPAL PAYING AGENT Citibank, N.A. 21st Floor, Citigroup Centre. Canary Wharf London E14 5LB United Kingdom

LUXEMBOURG PAYING AND LISTING PORTUGUESE PAYING AGENT AGENT Citibank International plc, Sucursal em Banque Internationale à Luxembourg, société Portugal anonyme Rua Barata Salgueiro, 30-4º 69, route d'Esch 1269-056 Lisbon L – 2953 Luxembourg Portugal TRUSTEE Citicorp Trustee Company Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

LEGAL ADVISERS To the Issuers and the Guarantor as to To the Issuers and the Guarantor as to Portuguese law Cayman Islands law:

Vieira de Almeida & Associados, Sociedade de Maples and Calder Advogados RL PO Box 309 Av. Duarte Pacheco, 26 Ugland House 1070 – 110 Lisboa Grand Cayman Portugal KY1-1104 Cayman Islands

To the Dealers and Trustee as to English law:

Clifford Chance LLP 10 Upper Bank Street London E14 5JJ United Kingdom

AUDITORS TO BANIF AND BANIF FINANCE

Ernst & Young Audit & Associados – SROC, S.A. Av. da República, 90-60 1600-206 Lisboa Portugal

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