CaixaBI R&C 2011_EN.docx

ANNUAL REPORT

Separate and Consolidated Operations, 2011

Annual Report – 2011

2

Index

Board of Directors’ Report ......................................................................... 4

1 Statutory bodies...............................................................................................................5

2 Organogram ....................................................................................................................6

3 Key consolidated financial indicators ...............................................................................7

4 Overview of CaixaBI ........................................................................................................8

4.1 Prizes and rankings................................................................................................................................... 8

4.2 Main operations ...................................................................................................................................... 10

5 Macroeconomic environment.........................................................................................13

5.1 International............................................................................................................................................ 13

5.2 Domestic ................................................................................................................................................ 16

5.3 Capital markets....................................................................................................................................... 17

6 Strategy and business model.........................................................................................19

6.1 Project finance ........................................................................................................................................ 20

6.2 Structured finance................................................................................................................................... 22

6.3 Corporate finance – advisory ................................................................................................................... 24

6.4 Debt capital market ................................................................................................................................. 28

6.5 Equity capital market ............................................................................................................................... 30

6.6 Financial brokerage................................................................................................................................. 32

6.7 Research ................................................................................................................................................ 32

6.8 Financing and structuring area................................................................................................................. 33

6.9 Syndication and sales ............................................................................................................................. 35

6.10 Venture capital ........................................................................................................................................ 35

6.11 Outlook for 2012 ..................................................................................................................................... 41

7 Results ..........................................................................................................................44

8 Human resources ..........................................................................................................47

9 Qualified equity investors...............................................................................................49

10 Acknowledgments .........................................................................................................50

11 Proposal for the appropriation of net income .................................................................51

Financial statements, notes and opinions ............................................... 52

1 Consolidated and separate financial statements............................................................53

2 Notes to the consolidated financial statements ..............................................................64

3 Notes to the separate financial statements ..................................................................126


3

4 Reports and opinions...................................................................................................185

Report on corporate governance........................................................... 197

I Corporate governance ..................................................................... 198

1 Assessment of compliance with good governance principles.......................................199

2 Management guidelines, mission, objectives and policies ...........................................201

3 General operating principles........................................................................................204

4 Relevant transactions with related parties....................................................................205

5 Corporate model..........................................................................................................208

5.1 Statutory bodies .................................................................................................................................... 209

5.2 Specialised committees......................................................................................................................... 222

6 Remuneration of members of statutory bodies ............................................................226

7 Control system ............................................................................................................227

7.1 Internal control system .......................................................................................................................... 227

7.2 Control system on the protection of the company’s investments and its assets........................................ 230

7.3 Control system for safeguarding customers’ assets held under CaixaBI’s custodian services................... 230

8 Disclosure of relevant information................................................................................232

8.1 Market relations representative.............................................................................................................. 232

8.2 Disclosure of relevant information .......................................................................................................... 232

8.3 Diagramme of CaixaBI investments ....................................................................................................... 232

8.4 Share capital and dividends policy ......................................................................................................... 233

9 Analysis of economic, social and environmental sustainability.....................................234

9.1 Economic considerations....................................................................................................................... 237

9.2 Environmental considerations................................................................................................................ 238

9.3 Social considerations ............................................................................................................................ 238

II Compliance with legal guidelines ....................................................... 240


4

Board of Directors’ Report


5

1 Statutory bodies

Shareholders’ meeting

Chairman

José Lourenço Soares

Secretaries

Salomão Jorge Barbosa Ribeiro

António Pereira Grada Ferreira

Board of directors

Chairman of the board of directors

Jorge Humberto Correia Tomé

Chairman of executive committee

Jorge Telmo Maria Freire Cardoso

Members of executive committee

Gonçalo Vaz Gago da Câmara de Medeiros Botelho

Francisco José Pedreiro Rangel

Members of the board of directors

Rui Manuel do Vale Jordão Gonçalves Soares

José Pedro Cabral dos Santos

José Manuel Carreiras Carrilho

Fiscal board

Chairman

Miguel José Pereira Athayde Marques

Members

Pedro António Felício

Maria Rosa Tobias Sá

Deputising

João Barata da Silva

Statutory auditors

Acting

Deloitte & Associados, SROC represented by João Carlos Henriques Gomes Ferreira

Deputising

Carlos Luís Oliveira de Melo Loureiro


6

2 Organogram

Board of Directors

ExecutiveBoard

Compliance Office

Ália Silva

CorporateDebt FinanceDivision

Paulo Serpa Pinto

Primary Equities MarketDivision

Ana Santos Martins

Corporate Advisory Division

Paulo Oliveira Silva

Syndicationand Sales

Leonor Canedo

Project FinanceDivision

Daniel Santos

Structured FinanceDivision

Paulo Henriques

Finance and StructuringDivision

Francisco Santos

Research Office

João Miguel Lourenço

Internal Audit Office

Fernando Oliveira

Financial BrokerageDivision

Valentim Martins

Legal Affairs Office

Ana Andrade

Strategic Planning andOrganisationDivision

Rita Lourenço

Human and AdministrativeResources

António Carlos Alves

OperationsDivision

Miguel Freire

Marketing andCommunicationOffice

António Gregório

AccountsDivision

João Gonçalves

InformationSystems

Ema Campos

Business Areas

Support Areas


7

3 Key consolidated financial indicators

Results indicators

(EUR thousand) 2010 2011

Net interest income 33,313 29,052

Net commissions 73,712 61,793

Income from financial assets (16,688) (31,283)

Other operating income 1,609 (519)

Net operating income 91,946 59,043

Net operating income – adjusted (1)

94,247 86,729

Provisions and impairment (9,656) (31,896)

Structural costs (29,018) (24,774)

Income before tax 53,272 2,373

Tax (13,611) 6,220

Non-controlling interests 492 (40)

Net income 40,153 8,553

Performance ratios

Cost-to-income - adjusted (1)

30.5% 28.1%

(1) Adjusted for impairment on financial assets

Balance sheet indicators


Credit portfolio 787,912 699,133

Securities portfolio 671,516 537,241

Derivatives portfolio (active position) 428,578 715,196

Derivatives portfolio (passive position) (418,469) (735,111)

Customer resources 104,996 114,069

Net assets 2,000,188 2,161,679

Share capital 81,250 81,250

Shareholders’ equity 275,520 213,816

Performance ratios

ROE 15.0% 3.5%

ROA 2.0% 0.4%


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4 Overview of CaixaBI

4.1 Prizes and rankings

Caixa - Banco de Investimento, S.A. (CaixaBI or Bank) in performing its operations, in 2011, furthered

the internationalisation strategy it has been implementing over the last few years. The Bank’s good

performance in terms of its core business has continued to merit the recognition of its customers and

partners and has been rewarded by the distinctions afforded by international analysts and in its

leading positions in the main sector rankings.

Best investment bankin Portugal

Global Finance


EMEA Finance

Best debt housein Portugal

Euromoney Award for Excellence


Global Finance

Americas transport deal of the year

Project Finance International

Latin America transport deal of the year

Euromoney Project Finance

Best Investment Bank

In Portugal

2011

Best Investment Bank

In Portugal

2010

Best Debt House

In Portugal

2011

Nº 1 Corporate

Bond House

2011

Americas TransportDeal of the Year 2011

MANDATED LEAD ARRANGER | 2011

IDB (B LOAN): USD 330,000,000IDB (A LOAN): USD 100,000,000

Latin America Transport Deal of the Year 2011




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According to Dealogic data for 2011, CaixaBI/CGD led the domestic ranking as the mandated

lead arranger (MLA) for project finance operations. According to the same entity, CaixaBI/CGD

was the best positioned Portuguese bank in all geographies.

Project finance ranking - Portugal

Pos. Mandated ArrangerAmount(USD M)

No. operations

Share

(%)

1 CaixaBI/Caixa Geral de Depósitos 195 3 26.2

2 Espirito Santo Financial Group SA 194 4 26.0

3 Banco Comercial Português SA - Millenniumbcp 186 3 25.0

4 Banco Santander SA 167 1 22.4

5 Banco Bilbao Vizcaya Argentaria SA - BBVA 3 1 0.5

Source: Dealogic

According to the Bloomberg ranking, CaixaBI was the leading bookrunner for euro-denominated

bond issues issued by domestic entities for the 5th consecutive year.

Bookrunner ranking - Portugal

Pos. Bookrunner Amount(€M)

No.

issues

Share

(%)

1 CaixaBI 6,906 7 33.2

2 Banco Santander 2,916 7 14.0

3 Banco Comercial Português 1,817 6 8.7

4 Deutsche Bank 1,702 4 8.2

5 BES Investimento 1,607 6 7.7

Source: Bloomberg

According to Bloomberg data, CaixaBI came 1st in the Portuguese mergers and acquisitions

(M&A) ranking in 2011 and 13th in the respective Brazilian ranking and was the best positioned

Portuguese bank.

Mergers & acquisitions ranking - Portugal

Pos. Advisor Amount (€M)No.

operations

1 CaixaBI 9,893 12

2 UBS 6,181 2

3 Citi 6,181 2

4 BES Investimento 5,459 17

5 Morgan Stanley 4,683 5

Source: Bloomberg (2 January 2012)

CGD Group was the MLA for the A/B Loan of the Inter-American Development Bank for the

Embraport project, which was recognised by the prestigious Project Finance International and

Euromoney Project Finance magazines as the Transport Deal of the Year on the South American

continent.


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4.2 Main operations

CaixaBI was involved in various emblematic business deals, strengthening its leading position as an

investment bank. Reference should be made to the following highlights in terms of its main business

areas.

Project finance

CGD Group, through CaixaBI, was involved in operations for a global amount of close to €389 million,

of which around €231 million in Portugal. CaixaBI came 1st in the Dealogic ranking for its role as an

MLA in project finance operations in Portugal and was the best positioned Portuguese bank in all

geographies.

On an international level, reference should be made to the progressive geographical expansion of the

Bank’s operations, associated with operations in Angola and Mozambique and, together with Banco

Caixa Geral – Brasil, S.A. (BCG Brasil), on structuring and/or financial advisory operations for a

diverse series of projects in Brazil. These prize-winning endeavours are exemplified by the award of

the highly ranked Project Finance International and Euromoney Project Finance magazines’ Transport

Deal of the Year prize for the Embraport operation in which CGD Group was the MLA.

Structured finance

In the sphere of structured operations on a corporate basis, CaixaBI geared its operations to

identifying mandates guaranteeing it MLA status of which special reference should be made to its

financial advisory services to Secil for funding the acquisition of an equity stake in Betecna from the

Lafarge Group.

Corporate finance – advisory

Notwithstanding the unfavourable macroeconomic environment and reduced level of M&A operations

activity on a global level, CaixaBI’s work and endeavours have been reflected in the Bloomberg

ranking in which the Bank came 1st, in Portugal, based on its involvement in 12 M&A operations for an

aggregate amount of around €10 billion.

In Brazil, according to the same ranking, CaixaBI, together with BCG Brasil and following only two full

years of activity in the country, came 13th in the investment banks’ ranking in terms of volume of

announced/completed M&A operations and is the best positioned Portuguese bank with an aggregate

amount of around R$17.8 billion.

During the course of 2011, reference should be made to the financial advisory operation for

Parpública’s disposal of a 21.35% equity investment in EDP, as part of the company’s highly

successful 8th reprivatisation stage. Reference should also be made to the financial advisory services

on Galp Energia’s disposal of a 30% equity investment in Petrogal Brasil, for around USD 4.8 billion.

Reference should, lastly, be made to the financial advisory operations for Portugal Telecom’s equity

investment in the Brazilian Oi Group, following the disposal of its equity investment in Vivo, in which


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CaixaBI was also involved in a financial advisory capacity. This was one of the biggest operations

involving Portuguese companies over the last few years and represents yet another success for

CaixaBI’s Portugal – Brazil cross-border activities.

Debt capital market

CaixaBI’s leading position in the debt capital market and structured asset financing operations, in

2011, won another important international recognition with Euromoney’s Award of Excellence for the

Best Debt House in Portugal for the second time running.

Reference should also be made to the NYSE Euronext Lisbon Awards, awarded for the first time in

2011, with the main objective of promoting and recognising the activities of capital market players,

which distinguished CaixaBI with its No. 1 Corporate Bond House prize.

Notwithstanding the extraordinarily challenging environment in the debt markets, notably in the bond

sector, CaixaBI, over the course of 2011, led seven primary market bond issues. This performance,

according to the Bloomberg ranking, positioned the Bank as the number one bookrunner for euro-

denominated domestic bond issues for the fifth year running.

Activity in the commercial paper segment was strongly conditioned by the growing balance sheet

restrictions faced by domestic financial institutions, in 2011. However, despite the unfavourable

environment, CaixaBI retained a leading position in this market in Portugal, having organised and led

thirteen new commercial programmes1, totalling around €2.5 billion, last year.

Equity capital market

CaixaBI developed and successfully completed four capital market operations in 2011.

In the international sphere, it was involved as co-lead for the Bankia international public offering (IPO)

as the only Portuguese bank in the banking syndicate for one of the biggest offerings in Europe in

2011, and as co-manager for the international tranche of the Sonae Sierra Brasil IPO and secondary

public subscription for EDP Energias do Brasil, strengthening its international presence in the capital

market area.

In Portugal and notwithstanding the low level of activity in the primary share market, CaixaBI was

responsible for organising and structuring the Inapa rights issue, through the issue of non-voting

preference shares as one of the main capital market operations in 2011.

Financial brokerage

The performance of the share segment of the capital market over the course of 2011 was extremely

negative, reflecting current uncertainty over fundamental variables for the evolution of share markets.

The domestic share market was particularly penalised by this environment, owing to greater investor

risk aversion to Portuguese assets which fuelled a decline of the volumes brokered in the market.

1

Includes fully or partly renewed programmes maturing in 2011.


12

According to CMVM data, market turnover to the end of August was down 34% over the same period

of 2010, naturally affecting the Bank’s financial brokerage activity.

There were no primary market operations, in Portugal, in 2011. CaixaBI was, however, actively

involved in the Bankia IPO in Spain and as co-manager for the Sonae Sierra Brasil IPO and for the

EDP offer for its EDP Energias do Brasil subsidiary.

Financing and structuring area

Public debt market-making activity in the secondary market, in 2011, was characterised by extremely

difficult conditions with low liquidity levels, historically high bid-offer spreads and major volatility.

Notwithstanding such market constraints, CaixaBI came 1st out of all the primary dealers in IGCP’s

general performance ranking.

In its activity as a liquidity provider, CaixaBI is a benchmark operator and Euronext has awarded its

maximum “A” ratings on all securities and categories in which it operates.

Syndication and sales

CaixaBI was involved, in 2011, as joint lead manager, for the issue of €600 million in Portugal

Telecom bonds and a Portuguese Treasury Bond issue for the amount of €3.5 billion. It was also

responsible for 341 commercial paper issues totalling €12 billion, with €4.8 billion in placements.

Venture capital

CaixaBI’s venture capital area has five venture capital funds, enabling it to provide a transversal level

of cover for different target segments over the course of the corporate life cycle and which, in one

specific case, was geared to a sectoral focus:

Caixa Empreender+

Caixa Mezzanine

CGD Group

Energias Renováveis and

Desenvolvimento e Reorganização Empresarial, set up in 2011.

During the course of 2011, 210 investment opportunities were analysed, with 32 operations totalling

€60 million having been approved, of which 21 were completed, involving an investment of €17 million.

There were also 8 disinvestments at a realisation price of €15 million.

Of total assets under direct Caixa Capital management, the amount invested in subsidiaries totalled

€344 million, at the end of 2011, invested in 75 companies of which 40% over the last three years

period.


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5 Macroeconomic environment

5.1 International

2011 was characterised by the heightening of the sovereign debt crisis, started in 2010, and

particularly affecting the eurozone’s more peripheral countries such as Greece, Ireland and Portugal,

which were provided by financial assistance programmes from the IMF, ECB and European

Commission (Troika), but which, at certain times also penalised Spain and Italy.

The main rating agencies successively downgraded their ratings on countries with the greatest fiscal

difficulties, in 2011, keeping open the possibility of new short/medium term downgrades in the event of

failure to comply with the adjustment programmes and/or worsening economic outlook. This

environment led investors to reduce their exposure to such countries’ debt securities, with a highly

negative impact on the evolution of the respective yields spreads in relation to German public debt

securities with an identical maturity, pursuant to its role as a safe currency in periods of the greatest

turmoil, leading to historically low yields on these securities.

The Troika accordingly announced support measures to European countries experiencing difficulties

in accessing the markets, complemented by their commitment to strengthening and accelerating the

fiscal consolidation process as well as carrying out structural reforms designed to improve their

competitiveness and fuel their future growth. Countries with bailouts ceased to issue debt in the longer

maturity markets, performing only short term operations (treasury bills or similar securities) with the

aim of satisfying their short term liquidity requirements. The ECB also endeavoured to dampen the

yields on sovereign debt based on market acquisition of public debt securities of member states under

the greatest pressure.

On an economic level, the austerity programmes submitted by governments to guarantee compliance

with the respective adjustment programmes ended up by fuelling pessimism over the growth of

short/medium term economic activity, not only in the countries directly involved but also on a global

level.

The indicators of other non EU countries also showed imbalances in their public finance indicators.

This had a penalising effect, at certain times, on the performance of financial markets, such as in the

US, with an impact on an increase in the intrinsic risk on their public debt securities.

Growing concerns over the significant slowdown of growth in the main economies led the central

banks in the main economic zones to opt for clearly more expansionary monetary policies. This was

the case with the ECB which, at its November and December meetings, lowered its key rates by 0.5%

to 1.0%. At the end of the year, the ECB also announced two three year liquidity injection operations

to meet the needs of the financial system which was greatly penalised by the virtual closure of credit

markets, particularly in the case of southern European institutions.


14

FED, ECB, BoE and BoJ intervention rates

Source: Bloomberg, CaixaBI

The start of 2012 is likely to continue to be characterised by investors’ risk aversion to the financial

assets of the eurozone’s more peripheral countries, reflected in the continuation of relatively high risk

premiums on such countries. An improvement in the global assessment of the risks associated with

these countries will essentially depend on their capacity to evidence effective improvements in their

current fiscal consolidation processes, by complying with the objectives defined in the respective

financial assistance or stability programmes, pursuant to which investors are likely to attach great

importance to the main fiscal performance indicators achieved in the first few months of 2012.

In mid January, the IMF published an update to its World Economic Outlook which reflected a high

level of uncertainty regarding world economic performance, incorporating the risks associated with the

sovereign debt crisis and banking sector problems in the eurozone. According to the data published,

the world economy is thought to have grown by an average of 3.8% over 2011 against an estimate of

4.0% in the September report and 5.2% in 2010.

The IMF has reduced its growth estimates for the world economy, in 2012, indicating GDP growth of

around 3.3%. This will be a two tier growth, with the most developed economies recording more

moderate growth in activity and with unemployment remaining high. The more peripheral eurozone

countries will be penalised by pressure on their credit spreads and fiscal consolidation measures. The

IMF has downgraded the growth prospects for the countries by an amplitude of -0.7% for 2012, with

an estimate of GDP changes of 1.2.

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15

Developing economies are likely to post more significant growth rates, albeit with an increase of

inflationary pressures owing to higher commodity prices, particularly in first half 2011. China, India and

Brazil are likely to be highly dynamic notwithstanding the IMF’s downwards revisions of GDP growth.

GDP growth in the main world economies

2008 2009 2010 2011e 2012e

Eurozone 0.5% -4.2% 1.9% 1.5% 0.3%

Germany 1.0% -4.7% 3.7% 3.0% 0.6%

France 3.0% -2.4% 1.5% 1.7% 0.4%

Spain 0.9% -3.7% -0.1% 0.7% -1.0%

Portugal 0.0% -2.5% 1.4% -1.5% -3.1%

Italy -1.3% -5.0% 1.5% 0.4% -1.3%

United Kingdom -1.0% -4.9% 1.8% 0.9% 0.6%

US 0.0% -2.6% 3.0% 1.7% 1.8%

Japan -1.2% -6.3% 4.1% -0.9% 1.7%

Brazil 5.1% -0.7% 7.5% 3.0% 3.0%

World economy 2.8% -0.6% 5.0% 3.8% 3.3%

Source: IMF, EC, ESN, OECD, CaixaBI

According to the IMF, financial markets are likely to continue to be characterised by high levels of

volatility, reflecting investors’ concerns over sovereign risk, particularly in the eurozone. The

progressive stabilisation of financial markets may support a gradual acceleration of the rate of growth

of economic activity on an international level.

Other incentives for economic growth will, however, continue to be necessary and may, in the current

European context, be restricted to monetary-like instruments for which key reference rates are likely to

remain low for a relatively long period. In general, the reduction of inflationary pressures, owing to the

decline in the prices of the main commodities and contraction of consumption with economic

deleveraging and high unemployment rates will favour the maintenance of expansionary monetary

policies in the main economic blocs.

Various risk factors on the main economies, however, remain and may lead to a lower level of

economic activity. They include, inter alia:

Expectation of continued high unemployment for a relatively long period, owing to the gap

between the positive change in GDP and a shift towards job creation, which, if occurring, could

lead to less dynamic domestic demand in different countries.

Continuing credit restrictions, reflecting the banks’ needs to deleverage their balance sheets and

continue to increase their capital to comply with the new regulatory requirements.

Greater unwillingness by financial institutions to assume uncollateralised risks, having opted to

invest cash surpluses in short term investments with central banks at relatively low rates.

Danger of contagion of the sovereign debt crisis to other countries which will continue to

condition fiscal policies for a relatively long period.


16

5.2 Domestic

Notwithstanding the fact that the Portuguese Republic’s borrowing requirements up to 2013 are largely

guaranteed by the financial assistance programme signed in May 2011, funding restrictions on the

domestic economy and deleveraging requirements remain. This will have a negative impact on GDP

over the last few months of 2011 and predictably over a large part of 2012.

The Portuguese economy contracted by 1.5% in 2011, according to the snapshot estimates disclosed

by the INE, against growth of 1.0% in 2010. Reference should be made to negative quarter-on-quarter

changes over the last five quarters. This performance derived from the negative contribution of private

and public consumption and a huge drop in investment, notwithstanding the good performance of net

exports.

Up to third quarter 2011, net external demand made a positive contribution to GDP, with exports up

7.8%, notwithstanding the world economic slowdown. The 2.8% decline in imports particularly derived

from lower domestic demand.

The fiscal deficit reduction objective, which led to the implementation of austerity measures under the

financial assistance programme for Portugal, caused a retraction of domestic demand and investment,

with a downturn of 3.0% in private consumption, 2.5% in public consumption and 9.8% in gross fixed

capital formation in the first nine months of the year.

GDP and main components

Source: INE, CaixaBI Equity Research

The Harmonised Index of Consumer Prices (HICP) in Portugal, for December 2011 posted average

year-on-year growth of 3.6%, reflecting the changes in VAT rates and increase in the prices of the

main commodities in the international markets in the first half of the year.

The unemployment rate in fourth quarter 2011 was 14.0%, in comparison to the preceding quarter’s

12.4% and 11.1% at the end of 2010 (values not adjusted for INE’s new methodology).

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GDP Investment Domestic Demand Exports Imports


17

5.3 Capital markets

Money market

Interest rates in the eurozone money market tended to increase slightly over the course of the first half

year followed by stabilisation up to November, which witnessed the start of a downwards movement

as a reaction to the fall in the ECB’s refinancing rate.

Overnight and Euribor 3, 6 and 12 month rates

Source: Thomson Reuters, CaixaBI

Foreign exchange market

The performance of the single European currency against the dollar, in 2011, was heterogeneous,

appreciating significantly in the first quarter followed by a period of stabilisation up to September and

then depreciating, to a rate of less than 1.30 at the end of December. Performance against the yen

followed the same trend up to May after which the drop in the value of the euro was more pronounced

and lasting, ending the year close to 99.50 yen. The euro’s performance against sterling was more

stable as shown in the following chart.

EUR/USD, EUR/GBP and EUR/JPY (base100)


0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11

Euribor 3M Euribor 6M Euribor 12M EONIA

90

95

100

105

110

115


EUR/USD EUR/GBP EUR/JPY


18

Share market

The euro crisis, which took the form of a broad rating downgrades movement in several eurozone

countries and external interventions in Ireland, Greece and Portugal, had economic and financial

repercussions which translated into a significant increase of risk premiums in most European share

markets.

A comparative analysis shows that US share benchmarks posted a more positive level of performance

than their European counterparties. Movements on the Bovespa were similar to those of European

indices but recorded the highest fall between January and August, as a consequence of the contagion

of the euro crisis. In 2011, the PSI20 was down 28.2%, Bovespa down 18.1%, the EuroStoxx50 down

17.5%, the Dax down 14.5%, the IBEX35 down 13.1% with the S&P500 recording a nil change and

the Dow Jones Industrial up 5.5%.

Main stock markets


Bond market

Investors’ flight to such quality assets as German sovereign debt, led to a fall in long term yields in the

eurozone, although the yields on the peripheral euro countries increased significantly. As shown in the

following chart, the downwards movement in euro core yields was relatively parallel along the curve.

Yield curve at start and end 2011


60

70

80

90

100

110

120


PSI20

DJ Ind

S&P 500

IBEX

BovespaStoxx50

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 30Y

Dec-11

Jan-11


19

6 Strategy and business model

CaixaBI is the autonomous unit within CGD Group that concentrates all of its investment banking

activity, operating in tandem with CGD’s commercial structures to maximise the opportunity for cross-

selling with commercial banking activity.

The Bank develops products and services for customers operating in its target market segments of

large and medium sized companies, public institutes and local councils, institutional investors and

major domestic and regional project developers, as well as private individual investors in the trading

area.

CaixaBI has concentrated on markets targeted by Portuguese companies. In line with this strategy it

has carved out a highly competitive position in the Portugal – Spain – Brazil - Lusophone Africa

perimeter, without losing sight of other geographies of interest to its customers. The Bank’s

commercial organisation, with the aim of applying the referred to strategic model, is based on a

product divisions approach, involving both domestic and international aspects. CaixaBI’s high level of

specialisation is reflected in its provision of a comprehensive portfolio of premium financial services

including all relevant investment banking areas activity:

Project finance

Structured finance

Corporate finance - advisory

Debt capital market

Equity capital market

Financial brokerage

Research

Financing and structuring area

Syndication and sales

Venture capital.


20

6.1 Project finance

Notwithstanding the difficult economic-financial context felt over the course of 2011, CaixaBI was

responsible for structuring several operations giving it first place, in Portugal, in Dealogic’s MLA

ranking for project finance operations in 2011. The same organisation classified CaixaBI as the best

positioned Portuguese bank in all geographies.

CaixaBI was involved in various project finance operations, entailing global CGD Group investment of

approximately €389 million2, in 2011, most of which allocated to operations in Portugal.

Reference should be made to the following successfully completed operations in 2011:

Embraport: construction of a port terminal which, at a first stage

will be capable of handling 1.2 million TEU and will have the

capacity to handle bulk liquids, improving the capacity of the Port of

Santos (Brazil) to receive new generation deep keel cargo vessels.

The project’s promoters are Odebrecht Transport, Dubai Port

World and Coimex. The project was financed by an A/B Loan of the

Inter-American Development Bank (USD 430 million) and by a loan

from the Caixa Económica Federal (in Brazilian reais equivalent to

around USD 330 million).

CGD Group was the MLA for the A/B Loan of the Inter-American

Development Bank, in an operation in which only four commercial

banks participated, based on an invitation from the promoters and which was singled out by the

prestigious Project Finance International and Euromoney Project Finance magazines as the

Transport Deal of the Year on the South American continent.

ELOS Poceirão – Caia: CaixaBI was the MLA in the concession

contract for the design, construction, financing, maintenance and

supply of rail infrastructures (excluding signalling and

telecommunications systems) on the section between the Poceirão

and Caia zones as an integral part of the high speed Lisbon –

Madrid rail link. It was also MLA for the concession for the rail

infrastructures on the section of standard line east of the current

station in Évora and the border between Portugal and Spain, in the

Caia zone, which is an integral part of the standard Sines-Elvas-

Caia line, referred to as the “RAV Poceirão-Caia”.

2

Not all of the completed operations were eligible for the Dealogic ranking.

Latin America Transport Deal of the Year 2011



ELOS – Ligações de Alta Velocidade, S.A.

Phase I – High Speed Railway

Line linking Portugal and Spain

(Poceirão-Caia)

Portugal

€1,088,384,493

MANDATED LEAD ARRANGER 2| 2011


21

Indáqua Santo Tirso: refinancing of the water and sewage

concession in the municipalities of Santo Tirso and Trofa, as

part of the process for restoring the concession’s economic-

financial balance. All of the original financing was taken out with

CGD.

On an international level, reference should be made to the Bank’s commitment to its geographical

expansion, focusing on Brazil, Mozambique and Angola, which endeavours continued to bear fruit in

2011, exemplified by its involvement in the referred to Embraport operation as well as financial

advisory services to EDP Energias do Brasil in the auction for a licence for the construction of a

combined 500 MW natural gas power station in Brasil.

Water and Sewage

Concession – Economic and

Financial Rebalancing

Portugal

€17,500,000

MANDATED LEAD ARRANGER 9 | 2011


22

6.2 Structured finance

In terms of operations financed and structured on a corporate basis, in 2011, reference should be

made to CaixaBI’s ongoing involvement in the identification of mandates giving it MLA status both in

Portugal and overseas.

In Portugal, reference should be made to the signing of the

promissory financing contract with SECIL, for an equity investment

in Betecna from the Lafarge Group, signed in July.

The Bank also played a highly active role in structuring various operations, particularly:

Ascendi: involvement in financing the Ascendi Group, reimbursed by the dividend flow received

by Ascendi Group SGPS.

José de Mello Saúde: structuring of short term finance for José de Mello Saúde for the

reimbursement of a tranche of the loan made by CGD Group to Escala Braga – Entidade

Gestora do Edifício, S.A. This financing operation was fully provided for by CaixaBI.

Also on an international level, CaixaBI endeavoured to be actively involved in advisory, structuring and

financial organisation on a typically corporate basis exemplified by the structured operation with

Rodovias do Tietê. In this operation, CGD Group, through BCG Brasil, was a member of a banking

syndicate which, in December 2010, arranged for a bridging loan with the Rodovias do Tietê

concessionaire, through the issue of promissory notes with a maturity of 6 months, latterly renewed in

June 2011, in the form of a new promissory notes issue with a maturity of 6 months.

The slow economic recovery and limited capacity of several companies to resolve their commitments,

vis-à-vis a scenario of liquidity restrictions maintained the trend noted in liabilities refinancing

operations, in which CaixaBI remained active in providing advisory services on several liabilities

refinancing operations.

Leveraged Buy -Out

Betecna(Grupo Lafarge)

€75,000,000

MANDATED LEAD ARRANGER 2 | 2011


23

As regards activity in the medium-sized enterprises segment, the environment of major restrictions on

access to liquidity, requirements for a reduction in leveraging imposed on the domestic economy and

significant increase in spreads were the reasons for greater concentration in accompanying

commercial paper programmes and the development and finalising of financial advisory mandates in

progress, particularly:

Eu-Steel Group: final closing stage of financial advisory services on refinancing liabilities,

involving negotiations with each of the lending banks.

Piedade Group: advisory service on refinancing the group’s liabilities, performed in collaboration

with PricewaterhouseCoopers, consisting of redefining the financing and negotiation structure

with each of the lending banks.


24

6.3 Corporate finance – advisory

M&A activity, in 2011, was down both worldwide and in Europe in comparison to 2010 (by 2.5% and

5.0% respectively), with very much lower amounts than in the last decade.

M&A activity

(€billion ) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

World market 1,656 1,168 1,020 1,564 1,947 2,774 3,126 1,722 1,211 1,427 1,391

Growth rate. -51.6% -29.5% -12.7% 53.5% 24.5% 42.5% 12.7% -44.9% -29.7% 17.9% -2.5%

European market 683 619 451 636 863 1.331 1.573 890 404 533 507

Growth rate -51.2% -9.4% -27.2% 41.0% 35.7% 54.2% 18.2% -43.4% -54.6% 32.0% -5.0%

Source: Bloomberg

The world financial crisis, the major fiscal crisis affecting several countries in Western Europe,

uncertainty deriving from interbank market liquidity problems and rating downgrades on the sovereign

debt of a series of European countries are highly conditioning factors on M&A activities.

Notwithstanding the unfavourable macroeconomic context and reduced level of global mergers and

acquisitions activity CaixaBI’s endeavours over the course of 2011, namely its main M&A operations

on domestic entities are reflected in its current ranking in international benchmark league tables.

According to Bloomberg, CaixaBI came first in the domestic M&A ranking, in 2011, having been

involved in 12 operations for an aggregate amount of around €10 billion.

In Brazil, according to the same ranking, CaixaBI, in conjunction with BCG Brasil and following only

two full years of activity in this country, came 13th in terms of the announced/completed volume of

M&A operations and was the best positioned Portuguese bank with an aggregate amount of around

R$17.8 billion.

Special reference should be made to the following projects in 2011:

EDP: financial advisory services for Parpública’s disposal of an equity investment of 21.35% in

EDP, as part of the company’s 8th remarkably successful reprivatisation stage at a price of €3.45

per share corresponding to a premium of 53.6% over the company’s listed price. This

reprivatisation process was extremely competitive, and allowed

the Portuguese state and EDP to maximise their objectives.

The strategic partnership between EDP and China Three

Gorges represents a high level of value added for the company,

particularly as regards growth in new geographies with the

objective of achieving worldwide leadership in renewable

energies areas and obtaining new funding sources. The

operation will also make it possible to achieve high value offset

operations for the Portuguese economy in terms of potential

direct investment by Chinese companies in the industrial area

and R&D centres as well as financial support for Portuguese

Advisory in the sale of a

21.35% stake in

regarding the 8th Phase of

the Privatisation Process

FINANCIAL ADVISOR| 2011

Advisory in the sale of a

21.35% stake in

regarding the 8th Phase of




25

companies and financial institutions.

Galp Energia: financial advisory services for Galp Energia’s

disposal of a 30% equity investment in Petrogal Brasil, through a

capital increase of around USD 4.8 billion in Sinopec. This

operation enabled Galp Energia to meet the borrowing

requirements associated with its exploration & production

activities in Brazil, resulting in direct proceeds from the

reimbursement of 30% of partners´ loans in Petrogal Brasil

(around USD 390 million). Reference should be made to the fact

that the capital increase announced is significantly higher than

the initial objectives indicated to the market by Galp Energia.

This strategic partnership with Sinopec, which still requires the

approval of the competent authorities is geared to the joint

development of Galp Energia’s current assets in Brazil, although there is a possibility that both

parties will continue to expand in the region.

Portugal Telecom: financial advisory services for Portugal

Telecom’s equity investment in the Brazilian Oi Group,

translating into an important level of support by CaixaBI to

enable Portugal Telecom to strengthen its internationalisation

and maintain a presence in a market with good growth prospects

following the disposal of its equity investment in Vivo, in which

CaixaBI also acted as the financial advisor.

The financial advisory operation for Portugal Telecom’s equity

investment in Oi was one of the largest operations involving

Portuguese companies over the last few years and represents

another example of CaixaBI’s successful Portugal – Brazil cross-

border operations.

SAG: financial advisory services for SAG’s disposal of an

investment of around 47% in Unidas, to the investment funds

managed by Gávea, Kinea and Vinci, in the form of a capital

increase of R$ 300 million. CaixaBI played a highly important role

in identifying suitable financial partners for the operation and in its

permanent involvement, enhancing the project’s value. This

operation was one of the largest private placements in Brazil, in

2011, in the case of Brazilian private equities.

Advisory in the sale of a stake in

FINANCIAL ADVISOR | 2011

Advisory in the sale of a 30% stake in

Petrogal Brasil


Advisory in the acquisition ofa stake in



26

CaixaBI successfully developed and completed other projects, in 2011, particularly:

Financial advisory services to DGTF for an economic-financial assessment and disposal of the

share capital of BPN, pursuant to the bank’s reprivatisation process.

Financial advisory services to Portugal Telecom for an equity investment in Contax and latter

merger with Dedic/GPTI.

Financial advisory services to EDP Energias do Brasil for the assessment and acquisition of

exploration rights to the Santo Antônio do Jari power plant.

Financial advisory services to DGTF for an economic and financial assessment of its equity

investment in Investment Opportunities.

Financial advisory to CGD for an economic and financial assessment of IHRU.

Financial advisory services to Parcaixa for an economic and financial assessment of Águas de

Portugal.

Financial advisory services to Parpública for an economic and financial assessment of TAP,

pursuant to its respective reprivatisation process.

Financial advisory services to Parpública for an economic and financial assessment of REN, as

part of the 2nd stage of its reprivatisation process.

Financial advisory services to A. Silva & Silva for the iZi/Mestre Maco disposal process.

Financial advisory services to REN for an economic and financial assessment of EDM –

Telefibra.

Financial advisory services to Parpública for an economic and financial assessment of

Hidroeléctrica de Cahora Bassa.

Financial advisory services to Caixa Seguros e Saúde for an economic and financial assessment

of HPP Saúde.


27

Advisory in thesale of theshare capital of

regarding the PrivatisationProcess


Advisory in theacquisition of a stake in


Advisory in theacquisitionof the

exploitationrightsin

Usina Hidroeléctrica

Santo António do Jari


Economicand Financial Valuationof

InvestmentOpportunities


Economic and Financial Valuation of




PARCAIXA SGPS, SA

Economicand Financial Valuation of

regarding thePrivatisation Process

| 2011FINANCIAL ADVISOR


regarding the 2nd Phase of


| 2011FINANCIAL ADVISOR

Advisory in the sale of theshare capital of



EDM TELEFIBRA




CAIXA SEGUROS E SAÚDE, SGPS, SA




28

6.4 Debt capital market

CaixaBI’s leading position in the debt capital market and structured assets financing in Portugal, was

afforded yet another important international recognition, in 2011, with the Award of Excellence for the

Best Debt House in Portugal from Euromoney, for the second year running. Reference should also be

made to the No. 1 Corporate Bond House prize from the NYSE Euronext Lisbon Awards.

Bond loans

The worsening crisis situation in Europe’s debt markets, major constraints which, since first quarter

2010 have restricted Portuguese issuers’ access to the market, various rating downgrades on the

Portuguese Republic and the main domestic banks and companies, in addition to the growing balance

sheet restrictions faced by Portuguese financial institutions, are factors which, in 2011, severely

limited the development of the Bank’s activity in these aspects of its operations.

Notwithstanding this environment, CaixaBI, in 2011, continued to be the Portuguese market

benchmark operator in the debt component of the capital market, particularly in the bonds and

commercial paper segments. CaixaBI’s performance in leading seven primary bond market issues

continued to position the Bank, according to the Bloomberg ranking as the leading bookrunner for

euro-denominated bonds issued by domestic entities for the fifth year running.

Its proactive management of opportunities enabled CaixaBI to operate as the bookrunner in two of the

three bond issues organised by domestic issuers in 2011. These operations, both of which took place

in the very limited window of opportunity available to several Portuguese issuers between end January

and early February, involved the issue of new benchmarks with a maturity of 5 years by Portugal

Telecom (€600 million) and the Portuguese Republic (€3.5 billion).

CaixaBI was also dealer manager in a CGD exchange offer, involving an exchange of securities for

four subordinated issues in circulation (two Tier I and two Upper Tier II issues) for securities pertaining

to a new senior issue maturing in 2015, for the amount of €367.3 million.

5,625% Notes due 2016

€600,000,000

01| 2011

PT International Finance B.V.

JOINT LEAD MANAGER & BOOKRUNNER

6,4% Obrigações do

Tesouro Benchmarkdue

2016

€3,500,000,000

JOINT LEAD MANAGER & BOOKRUNNER 02|2011

Change

of 2 Issues Upper Tier II

and of 2 Issues Tier I

for 8% Notes due 2015

€367,310,000

09| 2011J OINT DEALER MANAGER

8% Notes due 2015

€367,310,000

09| 2011JOINT LEAD MANAGER & BOOKRUNNER


29

CaixaBI also led four new CGD bond issues, two of which for covered bonds and two Portuguese

state-backed issues totalling €6.1 billion.

Commercial paper

Activity in the commercial paper segment was strongly conditioned by the growing balance sheet

restrictions faced by domestic financial institutions in 2011. However, notwithstanding the

unfavourable environment, CaixaBI retained a leading position in this market in Portugal having in the

last year, organised and led thirteen new commercial paper programmes3, totalling around €2.5 billion,

particularly:

3

Includes fully or partly renewed programmes maturing in 2011.

Floating Rate Mortgage

Covered Bonds due 2021

# 12

€750,000,000

04| 2011LEAD MANAGER & BOOKRUNNER

Floating Rate Mortgage

Covered Bonds due 2021

# 13

€750,000,000


Guaranteed Floating

Rates Notes

€1,800,000,000


Guaranteed Floating

Rates Notes

€2,800,000,000


Commercial Paper

Programme

€ 200,000,000

04| 2011SOLE ARRANGER

Commercial Paper

Programme

€ 620,000,000


Commercial Paper

Programme

€ 1,000,000,000

06| 2011JOINT ARRANGER

Commercial Paper

Programme

€ 70,000,000


SONAE INVESTIMENTOS, SGPS, S.A.

Commercial Paper

Programme

€ 300,000,000

10| 2011JOINT ARRANGER

Commercial Paper

Programme

€ 100,000,000


Commercial Paper

Programme

€ 50,000,000



30

6.5 Equity capital market

A significant slowdown of activity in primary share markets was witnessed over the course of 2011

with a decline of 30.3% in the number of offers and 42.6% in terms of funds secured in comparison to

2010. This slowdown was more sharply felt in the second half of the year, with 3rd quarter 2011

having been the least active period in terms of new issues since 2009.

In Portugal and in light of the negative macroeconomic environment, 2011 was characterised by an

absence of new issues and relevant capital increases, with only two exceptions in the financial sector.

International investors continued to display major risk aversion. The effective recovery of the capital

market is dependent upon the general evolution of the economic situation and investor sentiment.

Capital market activity in Spain was also limited on account of the poor performance of the economy in

general, except for banking sector offerings in the sphere of the reorganisation and recapitalisation

process of the Spanish cajas. These included the Bankia IPO, which was one of the biggest offers this

year in Europe.

As regards the Brazilian market, in 2011, although there is still a relevant pipeline of offers, only

several of the smaller offers proceeded, with a significant number of offers having been postponed

owing to high interest rates, downwards revisions of the economy’s growth rate estimates and the

situation of instability in the main world stock markets.

In 2011, CaixaBI successfully achieved four capital market operations: the Bankia IPO, Sonae Sierra

Brasil IPO, the secondary public subscription for EDP – Energias do Brasil and Inapa’s capital

increase.

As part of its internationalisation strategy, CaixaBI was involved as

co-lead in the Bankia IPO as the only Portuguese bank in the banking

syndicate for one of the largest offerings in Europe, in 2011. Bankia is

the entity resulting from the aggregation of a series of Spanish cajas

(Caja Madrid, Bancaja, Caja Canarias, Caja de Ávila, Caixa Laietana,

Caja Segovia and Caja Rioja).

Notwithstanding the highly unfavourable environment in Europe in

general and the banking sector in Spain, in particular, it was possible

to successfully organise a major offering of €3.09 billion, in which

CaixaBI played an important role in promoting the Bankia offer and

investment case to a broad range of institutional investors in the

European market, notably in less obvious markets such Scandinavia.

CaixaBI also continued to carve out a position in Brazil, in partnership with BCG Brasil. Reference

should be made to CaixaBI´s involvement as co-manager for the Sonae Sierra Brasil IPO and the

EDP - Energias do Brasil secondary public offering, strengthening its international presence in the

capital market area. CaixaBI, as co-manager, contributed to the geographical diversification of the

placement in promoting contacts with a large number of institutional investors in the European market.

Initial Public Offering

€ 3,092,145,949

CO-LEAD | 2011


31

In Portugal, notwithstanding the reduced level of primary share market activity, CaixaBI was

responsible for organising and structuring the Inapa rights issue through its issue of non-voting

preference shares, as one of the main capital market operations in Portugal, in 2011.

SecondaryPublic Offering

R$ 810.724.020

CO-MANAGER | 2011

Initial Public Offering

R$ 465,020,860

CO-MANAGER | 2011

Share Capital Increase

through the issue of non-

voting preference shares

€ 54,176,479.38

ARRANGER | 2011


32

6.6 Financial brokerage

The highly negative performance of the share segment of the capital market over the course of 2011

reflected uncertainty over fundamental variables for the evolution of share markets, the slowdown of

the main world economies, the Europe-wide sovereign debt crisis and the main central banks’ needs

to adjust monetary policies. This framework led to a reduction of exposure to share risk by asset

managers, with negative repercussions on stockmarket turnover. The Portuguese share market was

particularly penalised by this environment, reflecting investors’ greater aversion to Portuguese assets

which is also reflected in a drop in brokerage volumes in the market, down 34% over 2010, according

to CMVM data.

CaixaBI was actively involved in the Bankia IPO and was co-manager for the Sonae Sierra Brasil IPO

and the EDP share offering on its EDP Energias do Brasil subsidiary, in 2011.

6.7 Research

CaixaBI’s equity research area aims to independently monitor the evolution of financial markets, with

the objective of assisting investors’ decision-making processes associated with the management of

equity investments in their financial assets portfolios.

Operating on a sell-side approach, the research area monitors the companies listed on the main

NYSE Euronext Lisbon (PSI20) index as well as other Portuguese mid and small caps selected on the

basis of their interest to investors.

CaixaBI is part of the ESN (European Securities Network), which is a pan European investment banks

and/or brokerage houses network working together in the capital markets in a wide range of areas

ranging from corporate equities and debt to the brokerage business (sales and trading) and equity

research areas.

Underlying the collaboration in the research area is a pan European approach whose methodology is

based on equity analysis standards to provide investors with local expertise while simultaneously

ensuring a more focused coverage of each company’s specific circumstances.

Reference should also be made to the fact that the ESN’s equity research teams are divided up into

various sectors based on the Footsie methodology, of which around 10 include Portuguese

companies, making it possible to supply research reports on European companies to domestic

investors while simultaneously providing information about domestic companies to a large number of

foreign investors on the same network, without the need for a global structure. Membership of the

ESN therefore allows CaixaBI’s analysts to form a consequently broader European perspective of the

evolution of capital markets, which is all the more important taking the current level of financial market

globalisation into account.


33

6.8 Financing and structuring area

Public debt

Market-making activity on public debt in the secondary market, in 2011, was characterised by

extremely difficult conditions, poor liquidity, historically high bid-offer spreads and major volatility. The

widening of spreads to historical maximums – above 1500 basis points on maturities of 5 years and

more than 1000 basis points on 10 year maturities in comparison to German bonds – also increased

the Bank’s difficulty in managing its positions.

Notwithstanding such market constraints, CaixaBI came top out of all of the primary dealers in IGCP’s

general performance ranking. The Bank’s strategy for this distinction was based on its best effort

compliance with obligations and in achieving relatively higher performance levels than in 2010, both in

terms of compliance and market share.

Liquidity providing

CaixaBI’s liquidity providing activities for various securities listed on Euronext Lisbon, such as Cofina,

Orey Antunes, Altri, Inapa, Ibersol and SAG Gest remained dynamic in 2011. This is a business area

in which CaixaBI was a pioneer and continues to be a benchmark operator with Euronext having

awarded its maximum “A” rating on all securities and categories.

CaixaBI continued to expand its contracts base in diversifying the type of instruments for which it is a

liquidity provider, maintaining its market-making activity on the Fundiestamo property fund and several

Tier I deeply subordinated perpetual issues, such as Finibanco, Millenniumbcp, BES and BESI.

Own portfolios

Access to wholesale funding by Portuguese issuers continues to be constrained, particularly for

financial issuers and only alleviated at the end of the year with the ECB’s three year maturity auction.

Owing to such constraints, CaixaBI has concentrated its trading activity in futures or shares. The

interaction between shares and credit teams has increased, implementing various models which have

been maintained, perfected or discontinued in line with market conditions or performance.

Corporate risk management advisory services

Instability in capital markets has geared the Bank’s activity to identifying new business opportunities

and intensifying customer contacts in order to minimise interest risk and mark-to-market variability.

With the decline of lending to companies, in a scenario of rates at historical minimums and strong

limitations on the taking of new risks, the positive performance noted essentially derives from

endeavours to find and secure new opportunities, particularly:

The extracting of some value from live structures, particularly through the identification of

operations for restructuring opportunities proposed to customers, owing to the stability/increase of

interest rates at the start of 2011.


34

Performance of hedge operations, essentially interest rate risk.

The performance of a series of highly profitable derivatives operations, leaving credit exposure

unchanged.

Deposit-taking operations, with a higher level of expression in second half 2011.


35

6.9 Syndication and sales

Syndication and sales activities, in 2011, were performed in a context of an extreme drop in secondary

market activity and the virtual non-existence of primary market operations.

Notwithstanding, CaixaBI succeeded in operating as joint lead manager in the following issues:

Portugal Telecom 5 years (January 2011): placement of a Portugal Telecom bond issue, for

the amount of €600 million, at a coupon rate of 5.625% maturing on 8 February 2016.

Benchmark 5 year Treasury Bonds (February 2011): placement of a Portuguese Republic

Treasury Bond Issue for the amount of €3.5 billion, at a coupon rate of 6.40% maturing on 15

February 2016.

Caixa Geral de Depósitos Exchange Offer (September 2011): exchange offer proposing an

exchange of secondary market subordinated debt in the institutional segment for a senior debt

bond maturing on 28 September 2015 at a coupon rate of 8%. The objective of this operation

was the strategic management of CGD’s financing and own funds structure and was very

successful in achieving a highly positive impact on investors holding such assets.

CaixaBI, as a specialised treasury securities operator was involved in Portuguese public debt auctions

in 2011:

January: treasury bonds auction (3.60%) – October 2014 and treasury bonds auction (4.80%)

January 2020;

March: treasury bonds auction (5.5%) – September 2013;

April: treasury bonds auction (5%) – June 2012 – extraordinary auction.

Treasury bills have been the Portuguese Republic’s main source of market funding, insofar as it

ceased to enjoy access to the medium and long term markets since its bailout application. CaixaBI, in

collaboration with CGD and IGCP, in order to promote treasury bill auctions secured orders for the

successful execution of all of the auctions occurring during the year.

CaixaBI performed 341 commercial paper issues, totalling €12 billion, in 2011, having placed €4.8

billion in coordination with CGD, particularly in the 4th quarter, at the time of the normalisation of the

treasury bills placement rates and restrictions raised by the Bank of Portugal (BdP) on banks’ interest

rates on deposits, with commercial paper having a good credit risk as an alternative for investors.

6.10 Venture capital

CaixaBI’s venture capital area is geared to strengthening the competitive capacity of domestic

companies in wider markets, promoting the appearance and development of well structured business

projects with high appreciation potential and a return on invested capital.

Activity in 2011 was naturally highly constrained by the recessionary context and uncertain business

environment. In general and together with companies’ reluctance to assume aggressive growth

strategies, a drop in the level of economic performance and depreciation of assets was witnessed.


36

The strategy adopted was therefore to fuel the development of industry in Portugal, consolidating CGD

Group’s leading position in the sector and fundamentally providing companies with capital instruments

adjusted to their development stage.

CGD Group has allocated around €700 million to venture capital resources in its twofold capacity as

an investor in highly specialised funds under third party management or with a suitable aptitude and

fundamentally as a direct operator using its own vehicles managed by Caixa Capital.

During the course of the year a fresh boost was given to the network operating model, comprising a

vast range of partnerships with different types of entities for securing, examining, and assessing

business projects, which, in addition to giving Caixa Capital a central role in its “ecosystem”, made it

possible to support a vast range of communicational initiatives in conjunction with CGD.

Caixa Capital has five venture capital funds enabling it to employ a transversal approach to covering

the different target segments over the course of the corporate life cycle and in a specific case

assuming a sectoral focus: Caixa Empreender+, Caixa Mezzanine, CGD Group, Energias Renováveis

and, formed in 2011, the fund Desenvolvimento e Reorganização Empresarial. It also includes Caixa

Desenvolvimento, SGPS, S.A., which vehicle currently owns a portfolio of residual assets.

Caixa Capital investment vehicles

FCR Energias Renováveis

• Stake :

CaixaBI (91%)

FEI CaixagestEnergias Renováveis (9%)

• Formed in 2006

FCR Grupo CGD

• Stake:

CGD (94%)

Caixa Capital (6%)

• Formed in 1995

FCR Empreender+

• Stake :

CGD (100%)

• Formed in 2009

FCR Mezzanine

• Stake :

CGD (100%)

• Formed in 2009

Fundo de Desenvolvimento e Reorganização Empresarial, FCR

• Stake:

CGD (100%)

• Formed in 2011

Caixa Desenvolvimento


37

Investments

The investment volume, in terms of total assets under direct Caixa Capital management, at the end of

2011 totalled €344 million in 75 companies. It should be noted that 40% of the portfolio comprised

investments made over the last three years.

210 investment opportunities were analysed during the course of the year, mainly in the form of seed

capital/start-ups. 32 operations totalling €60 million were approved and 21, involving investment of €17

million, completed. Industry (25%), services (23%) and information technology projects (22%)

predominated in sectoral terms.

Projects analysed in 2011

Status Type

By sector

210

21

11

130

48

Total

Implemented

Approved but not implemented

Filed

Under analysis

210

109

15

75

11

Total

Seed / Start-Up

Acquisition

Expansion

Reorganisation

Information Techonology

22%

PrivateEquity

1%

Industry25%

Services23%

Commerce10%

Agro industry4%

Tourism1%

Others3%

Energy11%


38

The referred to investments are split up into €3 million on 18 new investments and €14 million on

additional investment in 14 subsidiary companies, as follows:

CGD Group FCR

FCR Turismo Inovação (Tourism Innovation): 10% equity capital investment in the Turismo

Inovação – FCR, venture capital fund managed by Turismo Capital – SCR, S.A. with the

corporate objective of “contributing to the innovation, modernisation and internationalisation of

tourism SMEs and tourism projects enhancing the value of supply”. The fund has a capital of €20

million and its investors have paid up 30% of the subscribed capital, signifying a €600,000

investment for FCR CGD Group.

Mota-Engil and AICEP: partnership with Mota-Engil Indústria e Inovação, SGPS, S.A. and

AICEP Capital Global – Sociedade de Capital de Risco, S.A., with the corporate aim of promoting

joint participation in innovative, differentiated, industry based projects with high growth and value

creation potential, upon which work has still to start or is at its start-up stage, predominantly

outside domestic territory and preferably in external markets in which the companies belonging to

CGD and Mota-Engil groups and their respective subsidiaries operate.

ME3I: subscription for 19.4% of the equity capital of ME3I, SGPS, S.A., a company formed on

the basis of the above referred to agreement, as a corporate vehicle to which smaller

investments will be allocated. In 2011, this company approved a 49% equity investment in the

Solargus company’s internationalisation project for the Peruvian market, to set up a metalworking

area plant, starting 2012.

Capital increases: additional investment in portfolio companies totalled €11.32 million and

involved A. Silva & Silva – Imobiliário e Serviços, S.A., Logoplaste Latam, SGPS, S.A., Onyria

Internacional, S.A., Logoplaste Investimento, SGPS, S.A., Artlant PTA, S.A. and Eurofrozen –

Indústria e Comércio de Produtos Alimentares, S.A.

FCR Energias Renováveis (Renewable energies)

Pinewells: a €526 000 investment in Pinewells, S.A., following its October capital increase, in

which the Fund increased its investment from 20% to 22.69%.

FCR Empreender+ (entrepreneurialism)

Biosurfit: payment of the last investment tranche in Biosurfit, S.A., for the amount of €333,000,

comprising approximately 9.4% of the respective capital increase. The Biosurfit investment was

part of a global capital increase aimed at completing the SpinIT technology industrialisation

process and supporting the company’s growth and internationalisation strategy.

FCR Critical Ventures I: participation in the formation of the Critical Ventures I Venture Capital

Fund, involving the subscription for investment units comprising an investment of approximately

25%. The Critical Ventures I Venture Fund is geared to investment in seed and start-up projects

in the information technologies, communication and electronics areas.


39

BIPS: participation in the capital increase of Around Knowledge - Consultoria Informática, Lda.

(BIPS), to support the company’s commercial roll-out and internationalisation, in its capacity as

the global winning project in the 2010 edition of the ISCTE-IUL MIT Portugal Venture

Competition.

Waydip: participation in the capital increase of Waydip – Energia e Ambiente, Lda., on an

investment to support the company’s commercial roll-out and internationalisation, in its capacity

as project winner in the Sustainable Systems category of Energy and Transport areas of the

2010 edition of the ISCTE-IUL MIT Portugal Venture Competition.

WeAdapt: participation in the capital increase of WeAdapt – Inclusive Design and Engineering,

Lda., on an investment to support the company’s commercial roll-out and internationalisation, in

its capacity as the global winning project in the Products and Services category of the 2010

edition of the ISCTE-IUL MIT Portugal Venture Competition.

Acellera: participation in the capital increase of Acellera Therapeutics, Lda., on an investment

designed to support the completion of the validation and certification process for cellular

therapies applied in immunosuppressant therapy and liver transplants in its capacity as the global

winning project in the Life Sciences category of the 2010 edition of the ISCTE-IUL MIT Portugal

Venture Competition.

Stemmatters: participation in the capital increase of Stemmatters - Biotecnologia e Medicina

Regenerativa, S.A., designed to support the company’s commercial start-up in the cell banks and

biomedical services area and completion of development work on new cellular therapies in the

human cartilage regeneration area.

PLUX: participation in the capital increase of PLUX – Wireless Biosensors, S.A., to support the

company’s commercial roll-out and internationalisation of its BioPLUX Clinical product as a

physiotherapy recovery system using wireless biosensors and biofeedback techniques.

Digital Luxury: additional investment in Digital Luxury, S.A., as part of an additional fund

injection to support the company’s entry to the Brazilian market .

Smart Cartridge: payment of the last two investment tranches in Fotonesga, S.A. (Smart

Cartridge), to support the launch of a network of inkjet printers, refill/recycling kiosks in Portugal

and Spain.

isGReen: participation in the capital increase of isGreen II, Lda. (isGreen), in an investment to

support the company’s commercial roll-out and internationalisation, in its capacity as the project

winner in the Sustainable Systems category of Energy and Transport areas of the 2011 edition of

the ISCTE-IUL MIT Portugal Venture Competition.

AllDesk: participation in the capital increase of All Desk, Lda. (AllDesk), for the completion of the

development of the All_Desk.com platform and to support the company’s commercial roll-out in

its capacity as the project winner in the Web & IT category of the 2011 edition of the ISCTE-IUL

MIT Portugal Venture Competition.

Nonius: participation in the capital increase of Noniussoft, S.A. (Nonius), designed to support the

consolidation of its position in the domestic market and promote the internationalisation (Brazil) of

its Interactive TV, high speed internet access and VoIP services for the hotel sector.


40

FCR Universitas: participation in the formation of the Inovcapital Universitas Venture Capital

Fund, involving an investment of approximately 6%. The Universitas Venture Capital Fund is

geared to investment in early stage projects and mobilises around a dozen higher educational

institutions led by AUDAX (ISCTE).

FCR ISTart: participation in the formation of the ISTart Venture Capital Fund, involving an

investment of approximately 6%. The ISTart Venture Capital Fund is geared to investment in

seed projects centred on opportunities generated by Instituto Superior Técnico.

Disinvestments

Eight disinvestments with a realisation price of €15 million were made in 2011 in the following

companies:

Bem Comum, S.C.R., S.A.: transfer of the nominal investment in this venture capital company to

CGD.

Convento de Belmonte – Investimentos Turísticos S.A.: total disposal of the investment

based on the sales option contained in the shareholders’ agreement.

Critical Health, S.A.: disposal of share capital and transfer of loans (accessory capital payments

and partners’ loans), at their nominal value and pari-passu with the Critical Group, of a part of the

investment made by FCR Empreender+ in this company.

EDP Renováveis, S.A.: partial disinvestment comprising the stockmarket disposal of 1,005,000

shares.

FCR AICEP Capital Global FIEP: reduction of fund capital comprising the distribution of surplus

liquidity resulting from proceeds of €595,000 for FCR CGD Group, which now holds 1,734

investment units.

Grupo Pestana Pousadas – Investimentos Turísticos, S.A.: liquidation of another payment as

set out in the payments schedule for the share purchase/sale, transfer of accessory capital

payments and partners’ loans agreement.

Logoplaste LatAm, SGPS, S.A.: disposal of the full amount of the share capital and transfer of

partners’ loans held by FCR CGD Group to Logoplaste Group (Newpak, S.A.).

MWH – Gestão de Recursos Naturais, S.A.: disposal of full amount of the share capital and

transfer of partners’ loans held by the FCR Energias Renováveis to Fomentinvest, SGPS, S.A.


41

6.11 Outlook for 2012

The evolution of the Portuguese economy, in 2012, will be strongly conditioned by the fiscal

consolidation process and consequent austerity measures announced and implemented, namely as

regards the higher tax burden and reduction of public investment.

The Bank of Portugal, in its Winter Economic Bulletin revised its estimates on the performance of the

Portuguese economy for 2011 and 2012, incorporating the most recent indicators and measures

announced by the government to correct the imbalances in public finance indicators. These are now

characterised by a more significant contraction of economic activity in 2012 than in 2011, reflecting a

slowdown of the world economy, starting second half 2011. For 2011 the Bank of Portugal has,

accordingly, estimated GDP contraction of 1.6% in comparison to -1.9% in the Autumn Economic

Bulletin, indicating GDP contraction of 3.1% for 2012 in comparison to a contraction of 2.2% in the

Autumn Economic Bulletin.

This revision reflects the negative performance of all components associated with domestic demand,

penalised by the continuing fiscal consolidation process which is likely to tighten in 2012: private

consumption will be down 6.0%, public consumption down 2.9% with an estimated downturn of 12.8%

in investment. The negative performance of domestic demand will continue to be partly offset by an

improvement in net external demand, with estimates of export growth of 4.1% and a reduction of 6.3%

in imports.

Implicit in the Bank of Portugal’s forecasts is a trend towards an improvement of the current and

capital accounts as a percentage of GDP, reflecting a reduction of the Portuguese economy’s external

imbalances through the progressive reduction of the public sector deficit and private sector

deleveraging, including the financial sector which will help to reduce the economy’s borrowing

requirements.

In the document upon which the State Budget for 2012 is based, the government submitted its

estimates on the evolution of the Portuguese economy which point to a 2.8% contraction of GDP in

2012, reflecting a sharp drop in all domestic demand components, a 4.8% reduction of private

consumption, 6.2% in the case of public consumption and 9.5% for investment. This contraction is

only partially offset by the positive contribution of net external demand, with a growth of 4.8% in the

exports of goods and services and a 4.3% decline in the imports of goods and services.

The unemployment rate is likely to remain relatively high up to mid 2013, owing to the adjustment

process on the productive structures of many companies to the new circumstances, pressuring private

consumption and helping to reduce domestic economy leveraging levels.

The inflation rate is likely to be higher than in the rest of the eurozone, incorporating changes in the

VAT rate on several products, although a reduction of pressure from domestic demand may help to

dampen price growth.


42

Main indicators on the Portuguese economy

2008 2009 2010 2011e 2012e

GDP 0.0% -2.5% 1.4% -1.6% -3.1%

Private consumption 1.3% -1.1% 2.3% -4.0% -6.0%

Public consumption 0.4% 3.7% 1.3% -3.2% -2.9%

Investment -0.3% -11.3% -4.9% -11.2% -12.8%

Domestic demand 0.9% -2.6% 0.8% -5.3% -6.5%

Imports 2.3% -10.6% 5.1% -4.5% -6.3%

Exports -0.1% -11.6% 8.8% 7.3% 4.1%

CPI (Y-o-Y) 2.4% -1.0% 1.4% 3.6% 3.2%

Unemployment rate 7.7% 9.6% 10.8% 12.7% 13.4%

Budget deficit (% GDP) -3.6% -10.1% -9.8% -5.9% -4.5%

Public debt (% GDP) 71.6% 83.0% 93.3% 101.6% 111.0%

Source: EC, IMF, BdP, CaixaBI Equity Research

CaixaBI’s activity, in 2012, should continue to be governed by the internationalisation strategy which

has been furthered over the last few years, adapting to the highly demanding circumstances likely to

occur in the future.

One of the objectives over the course of 2012 will therefore be to deleverage balance sheets. This will

involve a reduction of the size of credit and securities portfolios without prejudicing the performance of

operations fuelling the Bank’s returns.

The outlook for acquisition finance is particularly one of a major slowdown, especially on account of

the difficulty in funding this type of operation. This will be offset by an expected increase in the number

of advisory mandates as part of the reorganisation of financial liabilities.

Notwithstanding, strong constraints are expected to continue, in 2012, on the development of the debt

capital and structured assets financing markets. CaixaBI will maintain its commitment to the

Portuguese market in which it will continue to operate as a benchmark institution in the bond and

commercial paper sectors. On a parallel level and as part of the Bank’s internationalisation strategy,

the priority in this segment of activity will also include the internationalisation of activity in these two

business areas, providing for customers’ needs in the various jurisdictions in which it already operates.

M&A activity in Portugal must necessarily be affected by the unfavourable macroeconomic

environment expected in 2012, which is likely to penalise economic agents’ investment decisions and

business projects, although this will be counterbalanced by the boost given by the Portuguese State’s

privatisations programme resulting from the commitments assumed under the financial assistance

programme.

In the case of Spain, in structural terms and following the fiscal consolidation programme submitted by

the government, the European Commission estimates economic contraction of 1.0%, which indicator,

in 2013, may be marginally positive, with good prospects for the gradual recovery of CaixaBI’s activity

in Spain.


43

According to IMF estimates, the Brazilian economy is likely to grow 3.0%, in 2012, sustained by the

growth of domestic demand (private consumption and private and public investment) and external

demand (commodity exports). Reference should also be made to the fact that Brazil will be organising

the World Cup in 2014 and Olympic Games, in 2016, while, at the same time, pursuing a public

investment policy designed to provide economic stimulus, namely in the oil and gas, electricity,

logistics and residential construction sectors. This macroeconomic environment is likely to translate

into growth of CaixaBI’s advisory services to this geography in 2012.

IMF estimates for Angola indicate economic growth of 10.8% in 2012. One of the major challenges

facing the Angolan economy is the development of non-oil sectors, namely sectors such as

construction and transport which are related with basic infrastructures. If successful, this market could

be increasingly important to CaixaBI.

IMF estimates for Mozambique indicate GDP growth of 7.5%, in 2012, sustained by investment in

transport and energy infrastructures which may also fuel an increase in advisory activities in this

market.

In short, the outlook for the evolution of CaixaBI’s activity, in 2012, is strongly dependent on: (i)

sustained market recoveries; (ii) the impact of the austerity and fiscal consolidation measures

announced by the Portuguese and Spanish governments on economic growth in the two Iberian

countries; (iii) fulfilment of the conditions defined by the Troika following the request for external

assistance made by Portugal and (iv) maintenance of the sustained growth of the Brazilian, Angolan

and Mozambican markets and business penetration by CaixaBI and local CGD Group banks in these

markets.


44

7 Results

Investment banking activity is naturally sensitive to the current economic environment and is directly

affected by the negative performance of the capital markets and investors’ risk aversion to the assets

of countries on the periphery of the eurozone, particularly Portugal and Spain.

Notwithstanding the less favourable environment, CaixaBI had a positive year in terms of activity,

coming in the leading positions in most league tables and having been involved in the largest

operations in its target markets.

CaixaBI’s internationalisation strategy for the Brazilian and Lusophone African markets, in addition to

strengthening its focus on advisory and brokerage activities which are less demanding in terms of

capital allocation and liquidity, enabled it to achieve a good level of commissions income, even in a

year with a significant slowdown in economic activity in the Iberian Peninsula.

Net commissions of €62 million, for the year were therefore generated by the following activities:

advisory services for project and structured finance operations,

advisory services for M&A operations and related services,

advisory services for primary equity market operations,

advisory services for primary debt market operations,

brokerage services for the secondary equity market,

intermediation in the secondary debt market, and

advisory services for venture capital.


45

Notwithstanding the good performance of its core activity, CaixaBI’s net operating income was down

by around 36% over 2010, to €59 million. This evolution largely derived from the impact of the

recognition of impairment on financial assets and non-recurring costs related with the contributions

made to the Investors’ Indemnity System (IIS). Disregarding such effects, CaixaBI’s recurring net

operating income at €90 million, was in line with 2010.

Net operating income

CaixaBI’s cost-to-income ratio was 28.1%, when adjusted for impairment of financial assets, but

remained clearly lower than that of its peers and less than the 30.5% achieved in 2010.

Notwithstanding CaixaBI’s already referred to high efficiency level, it succeeded in reducing its

structural costs by around 15%, in 2011, even in a scenario marked by its international expansion,

deriving from significant cost containment efforts.

Structural costs

The Bank’s net income of €8.6 million was highly impacted by increased impairment, both on a level of

financial assets and the credit portfolio, totalling €60 million.

29

62

(31)

(1)

59

(3)

90 92

(28)

Net interest income

Net commissions

Income from financial assets

Other operating income

Net operating income (2011)

Adjust. in financial

assets and IIS

Pro-forma net

operating Income (2011)

Net operating income (2010)

(€m

illio

n)

(2%)

1715

11

9

2010 2011

(€m

illio

n)

Amortisation

General administrative expenses

Employee costs(12%)

(20%)

(15%)29 25


46

In 2011, CaixaBI increased its impairment and provisions as part of a prudent balance sheet risk

hedging process in a particularly difficult scenario in terms of the Portuguese and Spanish economies,

in which markets CaixaBI’s credit and guarantees portfolio is concentrated.

Impairment, provisions and adjustments to financial assets

Reference should be made to deleveraging endeavours over the course of the year which translated

into a reduction of around 15% in the Bank’s credit and securities portfolios, with a €223 million

reduction of net assets.

Evolution of credit and securities portfolios

CaixaBI’s solvency ratio, measured on a separate basis, remains at a solid 11.2%.

28

26

42

60

12

Financial assets Credit portfolio Securities portfolio

Other provisions

Provisions and impairment

(2011)

Provisions and impairment

(2010)

(€m

illio

n)

5,1x

788 699

672

537

2010 2011

(€m

illio

n)

Securities portfolio

Credit portfolio

(11%)

(20%)

(15%)1,459 1,236


47

8 Human resources

CaixaBI’s human resources management aims to build a solid, motivated team capable of meeting all

of the Bank’s customers’ needs, market demands and challenges, ensuring the capacity to innovate

and pioneer to achieve its defined strategic objectives.

Talent retention and stability are resident concerns in terms of the Bank’s personnel policy, which

provides workers with opportunities to achieve professional advancement either by taking masters and

postgraduate courses in the financial area or language courses given at the Bank or based on their

participation in various seminars or one-off training events both in Portugal and abroad.

The Bank continued to develop curricular placement programmes, in 2011, providing trainees with

their first contact with working environments and, in several cases, a career opportunity in investment

banking.

CaixaBI also has a family-friendly corporate culture, having, over the course of time, implemented a

series of support measures for its workers and their families, to achieve better balance between

professional, family or personal lives, particularly:

Mortgage and personal loans, at special rates and maturities.

A healthcare insurance policy, including close family members.

Protocols with various entities providing workers and their families with special terms.

Access to CGD’s Cultural, Sports and Leisure Centre which includes socio-cultural and sporting

activities open to workers’ families, particularly the organisation of holiday camps for their

children.

The Bank, at the end of 2011, had 187 workers on a consolidated basis of whom 94 in business

areas, 43 in operational support areas, 30 in management support areas, 21 in venture capital

subsidiaries and 3 executive committee members.

Distribution by functional areas

3

3

29

45

107

2%

2%

16%

24%

57%

CaixaBI Executive Board

Caixa Capital Executive Board

Management Support

Operational Support

Product and Commercial Areas


48

The Bank continues to commit to its younger employees, with workers under the age of 39 already

accounting for 47% of its human capital. CaixaBI’s workers were distributed among the following age

brackets at 31 December.

Distribution by age bracket

The Bank has a highly qualified level of human capital with around 75% of its workers having higher

level academic qualifications at the end of 2011.

Distribution by academic qualifications

5

32

28

34

37

27

24

3%

17%

15%

18%

20%

14%

13%

+ 60

50-59

45-49

40-44

35-39

30-34

<29

6

40

141

3%

21%

75%

Primary

Secondary

Higher


49

9 Qualified equity investors

Gerbanca, SGPS, S.A.

81,016,231 shares

99.71% of voting rights


50

10 Acknowledgments

In light of the highly uncertain and demanding context in which CaixaBI operated, in 2011, overriding

guidelines in terms of the Bank’s management included the protection of its liquidity and solvency

indices, consolidation of its customer base and enhancement of its reputation in all operating markets.

To achieve this result in a particularly difficult year, special recognition should be afforded to the

competent and committed contribution of its workers, the constant support of its shareholders and the

trust and loyalty of its customers who, once again confirmed the Bank’s benchmark status on the

domestic banking scene.

The board is also grateful for the cooperation of the supervisory authorities – Bank of Portugal and

Securities Market Commission – members of its shareholders’ meeting, fiscal board and statutory

auditor.


51

11 Proposal for the appropriation of net income

The board of directors, considering the adequacy of the levels of shareholders’ equity needed to

enable CaixaBI to perform its activities, hereby submits the following proposal on the appropriation of

the total amount of €1,464,516.24 of net income for 2011 to the general meeting.

Legal reserve (10% of net income for year) €146,451.62

Other reserves €1,318,064.62

Lisbon, 20 February 2012









52

Financial statements, notes and opinions


53

1 Consolidated and separate financial statements


54

Consolidated financial position

2011 2010 2011 2010

(amounts in euros) NotesAmount before impairment and

amortisation1

Impairment and amortisation

2

Net amount

3=1-2

Net amount Notes

ASSETS LIABILITIES

Cash and cash equivalents with central banks 5 2,924,679 2,924,679 8,894,162 Credit institutions’ and central banks’ resources 16 995,491,052 1,129,143,842

Cash assets with other credit institutions 6 1,443,656 1,443,656 5,440,368 Customer resources and other loans 17 114,069,415 104,996,362

Investments in credit institutions 7 33,483,543 120,600 33,362,943 7,477,072 Debt securities

Financial liabilities at fair value through profit or loss 10 733,589,348 416,869,550

Securities and derivatives portfolio: Negative revision of hedge derivatives 10 1,521,387 1,599,779

Financial assets at fair value through profit or loss 8 800,571,724 800,571,724 615,331,283 Non-current liabilities held for sale

Available for sale financial assets 9 450,406,157 450,406,157 483,512,357 Provisions for other risks 18 5,137,583 3,211,635

Positive revaluation of hedge derivatives 10 1,459,895 1,459,895 1,250,849 Current tax liabilities 14 2,150,156 257,589

Held to maturity investments Deferred tax liabilities 14 2,831,370 2,700,360

Loans and advances to customers 11 767,313,626 68,180,997 699,132,629 787,912,373 Other subordinated liabilities

Non-current assets held for sale Other liabilities 19 93,072,434 65,888,116

Investment properties Total liabilities 1,947,862,746 1,724,667,232

Other tangible assets 12 22,794,203 10,571,641 12,222,561 12,730,810 CAPITAL

Intangible assets 13 5,162,625 4,372,728 789,897 519,656 Capital 20 81,250,000 81,250,000

Investments in associated companies Share premium

Current tax assets 14 23,534,398 23,534,398 9,597,046 Other equity instruments

Deferred tax assets 14 60,383,503 60,383,503 29,036,888 Treasury shares

Other assets 15 83,979,017 8,532,316 75,446,700 38,484,823 Fair value reserves 21 (73,626,045) (18,328,780)

Other reserves and retained earnings 21 193,754,412 168,601,131

Income for period 21 8,552,996 40,153,282

Advance of dividends

Non-controlling interests 22 3,884,634 3,844,823

Total capital 213,815,997 275,520,455

Total assets 2,253,457,025 91,778,282 2,161,678,743 2,000,187,687 Total liabilities and shareholders’ equity 2,161,678,743 2,000,187,687

Certified Accountant Board of Directors

João Gonçalves Jorge Humberto Correia Tomé








55

Consolidated income statements

(amounts in euros)Notes 2011 2010

Interest and similar income 23 336,268,601 273,408,934

Interest and similar costs 23 (307,216,678) (240,096,121)

Income from equity instruments 458,717 402,353

NET INTEREST INCOME INCLUDING INCOME FROM EQUITY INSTRUMENTS 29,510,640 33,715,167

Income from services and commissions 24 67,625,939 85,955,502

Costs of services and commissions 24 (5,832,923) (12,243,258)

Income from financial operations 25 (31,741,783) (17,090,524)

Other operating income 26 (518,972) 1,608,690

NET OPERATING INCOME 59,042,902 91,945,577

Employee costs 27 (15,252,830) (17,375,285)

Other administrative expenditure 28 (8,516,892) (10,624,140)

Depreciation and amortisation 12 and 13 (1,004,292) (1,018,112)

Provisions net of recoveries and cancellations 18 (1,964,235) 8,334,930

Credit impairment net of reversals and recoveries 29 (24,153,856) (7,282,901)

Impairment of other assets net of reversals and recoveries 29 (5,778,062) (10,708,264)

Income from associated companies

INCOME BEFORE TAX AND NON-CONTROLLING INTERESTS 2,372,734 53,271,806

Income tax:

Current 14 (2,444,590) (13,691,199)

Deferred 14 8,664,663 80,520

6,220,073 (13,610,679)

CONSOLIDATED INCOME PRIOR TO NON-CONTROLLING INTERESTS 8,592,807 39,661,127

Of which: Income after tax on discontinued operations

Non-controlling interests 22 (39,811) 492,155

NET INCOME FOR PERIOD 8,552,996 40,153,282

Shares in circulation 81,250,000 79,208,137

Earnings per share 0.11 0.51










56

Consolidated cash flow statements

(amounts in euros)2011 2010

Cash flows generated by operating activities

Interest and commissions received 401,471,935 359.862.374

Interest and commissions paid (318,932,982) (252.010.974)

Payments to employees and suppliers (24,393,368) (28.348.426)

Payment of income tax (14,489,374) (46.920.264)

Other income (1,111,089) 1.898.703

Operating income prior to changes in operating assets 42.545.122 34,481,414

(Increases) decreases in operating assets

Financial assets at fair value through profit or loss (220,444,281) 91.550.032

Available for sale financial assets (22,162,011) (276.975.854)

Investments in credit institutions (25,985,291) 16.871.019

Loans and advances to customers 65,441,714 82.539.055

Other assets (47,586,618) (5.951.072)

(250,736,488) (91.966.820)

Increases (decreases) in operating liabilities

Financial liabilities held for trading 316,641,406 116.493.833

Other credit institutions’ resources (141,059,787) 20.325.679

Customer resources 9,343,524 (34.631.700)

Other liabilities 28,604,755 (32.330.621)

213,529,898 69.857.191

Net cash from operating activities 5.338.532 12,371,784

Cash flows generated by investing activities

Acquisition of tangible and intangible assets (779,713) (482.930)

Disposal of tangible and intangible assets 15,409 70.650

Disposal of investments in subsidiaries, associated companies and joint enterprises - -

Dividends received 458,717 402.353

Net cash from investing activities (305.587) (9,927)

Cash flows generated by financing activities

Payment of dividends (15,000,000) (23.590.336)

Disposal of treasury shares - 23.290.000

Net cash of financing activities (15.000.000) (300,336)

Increase (decrease) net of cash and equivalents (9.967.055) 12,061,521

Cash and equivalents at start of period 14.334.530 2,273,009

Cash and equivalents at end of period 4.367.475 14,334,530









Relatório e Contas – 2011

57

Statement of changes to consolidated shareholders’ equity

(amounts in euros) Other reserves and retained earnings

Capital Treasury sharesFair value reserves

ReservesRetained earnings

Total Profit for periodNon-controlling

interestsTotal

Balances at 31 December 2009 81,250,000 (5,999,453) 171,472 84,691,798 48,515,598 133,207,396 45,606,639 4,336,978 258,573,031

Distribution of profit for 2009:

Distribution of dividends by the bank - - - - 1,434,664 1,434,664 (25,025,000) - (23,590,336)

Transfer to reserves and retained earnings - - - 22,216,454 (1,634,815) 20,581,639 (20,581,639) - -

Disposal of treasury shares (net of fiscal effect) - 5,999,453 - - 13,377,432 13,377,432 - - 19,376,885

Consolidated comprehensive income for 2010 - - (18,500,252) - - - 40,153,282 (492,155) 21,160,874

Balances at 31 December 2010 81,250,000 - (18,328,780) 106,908,252 61,692,879 168,601,131 40,153,282 3,844,823 275,520,455

Distribution of profit for 2010:

Distribution of dividends by the bank - - - - - - (15,000,000) - (15,000,000)

Transfer to reserves and retained earnings - - - 32,003,075 (6,849,794) 25,153,282 (25,153,282) - -

Consolidated comprehensive income for 2011 - - (55,297,265) - - - 8,552,996 39,811 (46,704,458)

Balances at 31 December 2011 81,250,000 - (73,626,045) 138,911,327 54,843,086 193,754,413 8,552,996 3,884,634 213,815,997










58

Statements of comprehensive consolidated income

((amounts in euros)

2011 2010

Attributable to bank’s

shareholders

Attributable to non-controlling

interestsTotal

Attributable to bank’s

shareholders

Attributable to non-controlling

interestsTotal

Consolidated income 8,552,996 39,811 8,592,807 40,153,282 (492,155) 39,661,127

Exchange rate differences

Revaluation reserves on available for sale financial assets:

Revaluation of available for sale financial assets (77,849,109) (54,689) (77,903,798) (33,010,507) (663,762) (33,674,269)

Fiscal impact 22,849,587 - 22,849,587 8,191,902 - 8,191,902

Transfer to income on disposal (3,846,444) (82,524) (3,928,969) (2,970,365) 106,001 (2,864,364)

Fiscal impact 873,490 - 873,490 719,488 - 719,488

Transfer to income through recognition of impairment in period 3,961,159 - 3,961,159 9,544,581 337,202 9,881,783

Fiscal impact (1,148,734) - (1,148,734) (754,792) - (754,792)

Unrecognised income in income statement (55,160,052) (137,213) (55,297,265) (18,279,693) (220,559) (18,500,252)

Consolidated comprehensive income (46,607,056) (97,402) (46,704,458) 21,873,589 (712,714) 21,160,874










59

Statement of separate financial position

2011 2010 2011 2010

(amounts in euros) Notes

Amount before provisions,

impairment and amortisation

1

Provisions, impairment and

amortisation

2

Net amount

3=1-2

Net amount Notes

ASSETS LIABILITIES

Cash and cash equivalents with central banks 4 2,923,679 2,923,679 8,893,162 Central banks’ resources 16 232,136,123 330,157,222

Cash assets with other credit institutions 5 1,103,350 1,103,350 5,420,784 Financial liabilities held for trading 7 733,589,348 416,869,550

Financial assets held for trading 6 789,285,121 789,285,121 600,020,313 Other credit institutions’ resources 17 763,354,930 798,986,619

Other financial assets at fair value through profit or loss 6 11,286,603 11,286,603 14,964,047 Customer resources and other loans 18 134,850,201 115,114,269

Available for sale financial assets 8 405,827,103 405,827,103 436,057,098 Debt securities

Investments in credit institutions 9 26,081,619 26,081,619 6,661,937 Financial liabilities associated with asset transfers

Loans and advances to customers 10 767,313,626 64,789,921 702,523,705 793,666,823 Hedge derivatives 7 1,521,387 1,599,779

Held to maturity investments Non-current liabilities held for sale

Assets with repurchase agreements Provisions 19 11,044,883 9,755,693

Hedge derivatives 7 1,459,895 1,459,895 1,250,849 Current tax liabilities 14 1,887,009 158,570

Non-current assets held for sale Deferred tax liabilities 14 1,990,720 2,166,083

Investment properties Equity capital instruments

Other tangible assets 11 22,659,435 10,482,927 12,176,508 12,673,195 Other subordinated liabilities

Intangible assets 12 4,874,780 4,316,779 558,001 388,823 Other liabilities 20 110,556,856 82,851,326Investments in subsidiary, associated companies and joint enterprises 13 62,623,869 62,623,869 62,598,445

Total liabilities 1,990,931,456 1,757,659,111

Current tax assets 14 22,984,243 22,984,243 8,987,537 CAPITAL

Deferred tax assets 14 58,383,503 58,383,503 27,146,888 Capital 21 81,250,000 81,250,000

Other assets 15 76,848,774 4,867,950 71,980,825 26,796,740 Share premiums

Other equity instruments

(Treasury shares)

Revaluation reserves 22 (78,290,723) (22,225,246)

Other reserves and retained earnings 22 173,842,775 143,239,646

Income for period 22 1,464,516 45,603,129

(Advance of dividends)

Total shareholders’ equity 178,266,568 247,867,529

Total assets 2,253,655,600 84,457,576 2,169,198,024 2,005,526,640 Total liabilities and shareholders’ equity 2,169,198,024 2,005,526,640










60

Separate income statements

(amounts in euros)Notes 2011 2010

Interest and similar income 23 336,018,051 273,127,353

Interest and similar costs 23 (307,561,621) (240,170,456)

Net interest income 28,456,430 32,956,897

Income from equity instruments 24 2,958,717 7,324,643

Income from services and commissions 25 58,499,506 80,187,402

Costs of services and commissions 25 (5,825,207) (12,233,718)

Income from assets and liabilities at fair value through profit or loss (net) 26 (34,994,794) (20,222,477)

Income from available for sale financial assets (net) 27 3,012,033 2,480,992

Income from foreign exchange revaluations (net) 28 285,392 259,434

Income from the disposal of other assets 29 (958,753) (397)

Other operating income 30 (1,081,066) 951,119

Net operating income 50,352,257 91,703,894

Employee costs 31 (13,626,803) (15,309,819)

General administrative expenditure 32 (7,875,099) (9,796,380)

Depreciation and amortisation 11 and 12 (932,296) (997,781)

Provisions net of recoveries and cancellations 19 (1,289,190) 15,961,025

Value adjustments on loans and advances to customers and amounts

receivable from other debtors (net of recoveries and cancellations) 19 (26,396,630) (14,757,923)

Impairment of other financial assets net of reversals and recoveries 19 (4,520,152) (6,913,262)

Impairment of other assets net of reversals and recoveries 19 (1,412,830) (882,528)

Income before tax (5,700,742) 59,007,227

Tax

Current 14 (1,695,777) (12,565,387)

Deferred 14 8,861,035 (838,711)

Income after tax 1,464,516 45,603,129

Of which: Income after tax on discontinued operations

Net income for period 1,464,516 45,603,129

Shares in circulation 81,250,000 79,208,137

Earnings per share 0.02 0.58










61

Separate cash flow statements

(amounts in euros)2011 2010

Cash flows generated by operating activities

Interest and commissions received 392,097,635 353.816.649

Interest and commissions paid (319,270,990) (251.994.120)

Payments to employees and suppliers (21,986,806) (25.387.840)

Payment of income tax (13,964,044) (42.536.056)

Other income (1,670,545) 1.241.577

Operating income prior to changes in operating assets 35.205.250 35,140,211

(Increases) decreases in operating assets

Financial assets at fair value through profit or loss (220,791,205) 71.105.568

Available for sale financial assets (26,723,356) (282.151.572)

Investments in credit institutions (19,408,981) 15.594.019

Loans and advances to customers 65,441,714 82.539.055

Other assets (56,102,229) (8.063.011)

(257,584,056) (120.975.941)

Increases (decreases) in operating liabilities

Financial liabilities held for trading 316,641,406 116.493.833

Other credit institutions’ resources (141,059,788) 20.325.679

Customer resources 19,967,570 (31.833.922)

Other liabilities 29,208,532 (26.796.305)

224,757,720 78.189.285

Net cash from operating activities 2.378.914 (7,646,445)

Cash flows generated by investing activities

Acquisitions of tangible and intangible assets (618,105) (347.728)

Disposals of tangible and intangible assets 15,254 44.313Acquisitions of Investments in subsidiaries, associated companies and jointly controlled entities (21,698) (22.721)Disposals of Investments in subsidiaries, associated companies and jointly controlled entities - 13.000.000

Dividends received 2,958,717 7.324.643

Net cash from investing activities 2.334.169 19,998,507

Cash flows generated by financing activities

Payment of dividends (15,000,000) (23.590.336)

Disposal of treasury shares - 23.290.000

Net cash from financing activities (15.000.000) (300,336)

Increase (decrease) net of cash and equivalents (10.286.918) 12,051,726

Cash and equivalents at start of period 14.313.946 2,262,220

Cash and equivalents at end of period 4.027.029 14,313,946










62

Statement of changes to separate shareholders’ equity

(amounts in euros) Other reserves and retained earnings

Notes Capital Treasury sharesRevaluation

reservesLegal reserve Free reserve

Retained earnings

Total Profit for period Total

Balances at 31 December 2009 81,250,000 (5,999,453) (2,265,827) 36,586,946 30,734,189 44,162,389 111.483.524 41.969.026 226.437.269

Distribution of profit for 2009: - -

Distribution of dividends 21 - - - - - 1,434,664 1.434.664 (25.025.000) (23.590.336)

Transfer to reserves and retained earnings - - - 4,196,903 12,660,117 87,006 16.944.026 (16.944.026) -

Disposal of treasury shares (net of fiscal effect) 21 - 5,999,453 - - - 13,377,432 13.377.432 - 19.376.886

Comprehensive income for 2010 8 - - (19,959,420) - - - - 45.603.129 25.643.710

Balances at 31 December 2010 81,250,000 - (22,225,246) 40,783,849 43,394,306 59,061,491 143.239.646 45.603.129 247.867.529

Distribution of profit for 2010: - -

Distribution of dividends 21 - - - - - - - (15.000.000) (15.000.000)

Transfer to reserves and retained earnings - - - 4,560,313 26,553,811 (510,995) 30.603.129 (30.603.129) -

Comprehensive income for 2011 8 - - (56,065,477) - - - - 1.464.516 (54.600.961)

Balances at 31 December 2011 81,250,000 - (78,290,723) 45,344,162 69,948,117 58,550,496 173.842.775 1.464.516 178.266.568










63

Statements of separate comprehensive income

(amounts in euros) 2011 2010

Separate income 1,464,516 45,603,129

Revaluation reserves on available for sale financial assets:

Revaluation of available for sale financial assets (79,588,938) (31,768,388)

Fiscal impact 22,849,587 8,191,901

Transfer to income on disposal (3,012,033) (2,480,992)

Fiscal impact 873,490 719,488

Transfer to income through recognition of impairment in period 3,961,150 6,133,363

Fiscal impact (1,148,734) (754,792)

Unrecognised income in income statement (56,065,477) (19,959,420)

Separate consolidated income (54,600,961) 25,643,710










64

2 Notes to the consolidated financial statements

1. INTRODUCTORY NOTE

Caixa - Banco de Investimento, S.A. (“Bank”) was formed by a public deed of 12 November 1987, having

absorbed all assets and liabilities of the Portuguese branch of Manufacturers Hanover Trust Company, in

conformity with the terms of Ministerial Order no. 865-A/87 of 6 November, jointly issued by the Presidency of the

Council of Ministers and Ministry of Finance.

The Bank is Caixa Geral de Depósitos Group’s specialised investment banking business arm, which includes

activities such as fixed and variable corporate debt finance, equity finance, financial advisory, structured finance,

project finance, brokerage, research and venture capital operations. Its operations are performed by a branch

office in Lisbon and another in Porto, an offshore branch in Madeira and a branch in Spain.

The Bank also has direct and indirect investments in the share capital of several companies in which it has

majority shareholdings. These companies comprise Group Caixa – Banco de Investimento (Group).

As referred to in Note 20, the majority of the Bank’s share capital is owned by Caixa Geral de Depósitos Group

company Gerbanca, SGPS, S.A.

The consolidated financial statements, at 31 December 2011, were approved by the board of directors on 20

February 2012.

The Bank’s and its subsidiaries’ companies’ financial statements at 31 December 2011 still require the approval of

their respective shareholders’ meetings. The board of directors considers, however, that the said financial

statements will be approved without significant changes.

2. ACCOUNTING POLICIES

2.1. Presentation bases

The consolidated financial statements at 31 December 2011 were prepared on the basis of the

International Financial Reporting Standards (IFRS) as adopted in the European Union, in line with

European Parliament and Council Regulation (EC) 1606/2002 of 19 July and the dispositions of

Decree Law 35/2005 of 17 February.

2.2. Consolidation principles

The consolidated financial statements include the accounts of the Bank and the entities directly and

indirectly controlled by the group (Note 4).

In terms of associated companies, “subsidiaries” are companies over whose current management the

Bank has effective control with the aim of obtaining economic benefit from their operations. Control

usually takes the form of more than 50% of the share capital or voting rights. In addition, as a result

of the application of the IAS 27 Standard – “Consolidated and Separate Financial Statements”, the

group has included venture capital funds managed by the group which is exposed to most of the risks

and enjoys most of the benefits associated with the respective activity.


65

Subsidiaries’ accounts were consolidated by the global integration method. Transactions and

significant balances between the consolidated companies have been eliminated. Consolidation

adjustments are also made, when applicable, to ensure the consistency of the application of the

Group’s accounting principles.

Third party equity investments in subsidiary companies have been recognised in "non-controlling

shareholders’ interests" in shareholders’ equity.

Consolidated income derives from the net income of the Bank and its subsidiaries, in proportion to

their respective effective equity investments, after consolidation adjustments, including the

elimination of dividends received and capital gains and losses generated between companies

included in the consolidation perimeter.

2.3. Combinations of business activities and goodwill

Acquisitions of subsidiaries are recognised according to the purchase method. The cost of the

acquisitions comprises the aggregate fair value of the assets delivered and liabilities incurred or

assumed for achieving control over the acquired entity plus the costs directly attributable to the

operation. On the acquisition date, identifiable assets, liabilities and contingent liabilities satisfying the

recognition requirements of the IFRS 3 Standard - “Combinations of business activities” are

recognised at their respective fair value.

Goodwill comprises the positive difference between a subsidiary’s cost price and the effective

percentage acquired by the group in terms of the fair value of its respective assets, liabilities and

contingent liabilities. Goodwill is recognised as an asset and is not amortised. Impairment tests are,

however, performed at least once a year.

Up to 01 January 2004, as permitted by the accounting policies defined by the Bank of Portugal,

goodwill was fully deducted from shareholders’ equity in the year of the acquisition of the

subsidiaries. As permitted by the IFRS 1 Standard, the group did not make any changes to this entry,

for which the goodwill generated on operations occurring up to 01 January 2004 continues to be

recognised in reserves.

2.4. Investments in associated companies

“Associated” companies are those over which the Bank has a significant influence but over whose

management it does not enjoy effective control. Significant influence is considered to exist whenever

the group has a direct or indirect investment of 20% - 50% in a company’s share capital or voting

rights.

Investments in associated companies are valued by the equity accounting method. According to this

method, investments are initially valued at their respective cost price and the value is subsequently

adjusted on the basis of the group’s effective percentage of changes in associated companies’

shareholders’ equity (including income).

If there are any materially relevant divergences, the shareholders’ equity used for the equity

equivalence calculation of associated companies is adjusted to reflect the use of the group’s

accounting principles.

Goodwill, comprising the positive difference between an associated company’s cost price and the

effective percentage acquired by the group in terms of the fair value of its respective assets, liabilities


66

and contingent liabilities continues to be recognised in the value of the investment whose total book

value is subject to annual impairment tests.

Unrealised income on transactions with associated companies is eliminated in proportion to the

group’s effective percentage investment in the said entities.

2.5. Translation of balances and transactions in foreign currency

The separate accounts of each group entity included in the consolidation are prepared in accordance

with the currency used in the economic context in which they operate (referred to as the “operating

currency”). All group companies, at 31 December 2011 and 2010, used the euro as their operating

currency, except for CaixaBI Brasil – Serviços de Assessoria Financeira, LTDA, which used the

Brazilian real.

Foreign currency transactions are recognised on the basis of the reference rates in force at the

transaction date. At each balance sheet date, monetary assets and liabilities denominated in foreign

currency are translated into euros on the basis of the foreign exchange rate in force. Non-monetary

assets, recognised at fair value, are translated on the basis of the exchange rate in force on the last

valuation date. Non-monetary assets, recognised at their historical cost, continue to be recognised at

the original exchange rate.

Exchange rate differences assessed upon exchange translation are recognised in income for the

year, except for differences originated by non-monetary financial instruments, such as shares,

classified as available for sale and recognised in a specific shareholders’ equity account heading until

disposal.

2.6. Financial instruments

a) Financial assets

Financial assets are recognised at the agreement data at their respective fair value, plus the

costs directly attributable to the transaction. Financial assets are classified at their time of initial

recognition in one of the following categories defined in IAS 39:

i) Financial assets at fair value through profit or loss

This category includes:

Financial assets held for trading, which essentially include the acquisition of securities

with the objective of realising gains on the basis of short term market price fluctuations.

This category also includes derivative financial instruments, excluding derivative financial

instruments complying with hedge accounting requirements; and,

Financial assets recognised at fair value through profit or loss.

The use of the “fair value option” implies the irrevocable recognition, in this category, of the

financial instruments at the time of initial recognition and is restricted to situations in which

the application results in the production of more relevant financial information, i.e.:

a) If their application eliminates or significantly reduces an accounting mismatch that would

otherwise occur as a result of the inconsistent measurement of assets and liabilities or

recognition of gains and losses;


67

b) Groups of financial assets, financial liabilities or both which are managed and when the

performance thereof is assessed on a fair value basis, in accordance with formally

documented risk and investment management strategies; and when information on the

group is distributed internally to management bodies;

c) It is also possible to classify financial instruments containing one or more embedded

derivatives in this category, unless:

The embedded derivatives do not significantly modify the cash flows which would,

otherwise, be required under the contract;

It is evident, with little or no analysis, that the implicit derivatives should not be

separated out.

The group recognises the equity instruments relating to venture capital operations in this

category whenever the instruments have associated derivatives, notably the right or

contractual obligation to dispose of the subsidiary companies under the terms of

shareholders’ agreements entered into on the date upon which the equity investments were

made and the securities classifiable in sub-paragraph b) above.

Financial assets classified in this category are recognised at fair value whose gains and

losses generated by their subsequent valuation are recognised in the income statement in

the “income from financial operations” account heading. Interest is recognised in the

appropriate “interest and similar income” account headings.

ii) Loans and accounts receivable

These are financial assets with fixed or determinable payments, not listed on an active

market and not included in any of the other previously referred to financial asset categories.

This category includes loans and advances to the group’s customers, amounts receivable

from other financial institutions and from the provision of services or disposal of assets.

These assets are initially recognised at fair value, less any commissions included in the

effective rate, plus all incremental costs directly attributable to the transaction. The assets

are subsequently recognised in the balance sheet at their amortised cost less impairment

losses.

Interest is recognised on the basis of the effective rate method which enables the amortised

cost to be calculated and the interest split over the period of the operations. The effective

rate is the rate that, being used to discount the estimated future cash flows associated with

the financial instrument, enables its present value to be matched with the value of the

financial instrument at the date of initial recognition.

iii) Available for sale financial assets

This category includes variable-income securities not classified as assets at fair value

through profit or loss, including stable financial investments and investments without

associated options in the group’s venture capital area and other financial instruments initially

recognised herein and not classifiable in the other categories of the above referred to IAS 39

Standard.

Available for sale financial assets are measured at fair value, with the exception of

shareholders’ equity instruments not listed on an active market and whose fair value cannot


68

be reliably measured, which continue to be recognised at cost. Revaluation gains or losses

are recognised directly in shareholders’ equity in the “fair value reserve”. At the time of sale

or if impairment is assessed, the accumulated fair value changes are transferred to income

or costs for the year.

Interest on debt instruments classified in this category is assessed on the basis of the

effective tax method and recognised in the income statement.

Dividends on equity capital instruments classified in this category are recognised as income

in the income statement when the group’s right to receive them has been established.

Reclassification of financial assets

With the entry into force of the change to the IAS 39 Standard on 13 October 2008, the Bank

was in a position to reclassify several of its financial assets classified as financial assets held for

trading or available for sale to other financial assets categories. No reclassifications to financial

assets categories at fair value through profit or loss, are, however, permitted.

Fair value

As referred to above, financial assets classified in financial assets categories recognised at fair

value through profit or loss and available for sale financial assets are recognised at their fair

value.

The fair value of a financial instrument comprises the amount at which an asset or financial

liability can be sold or liquidated between independent, informed parties, interested in realising

the transaction under normal market conditions.

The fair value of financial assets is, for most assets, assessed by a CGD Group body which is

independent from the trading function, based on the following criteria:

Closing price at the balance sheet date, for instruments traded on active markets;

The following valuation methods and techniques are, inter alia, used for debt instruments not

traded on active markets (including unlisted securities or securities with low liquidity levels):

i) Bid prices published by financial information services such as Bloomberg and Reuters,

including market prices available on recent transactions;

ii) Reference bid prices obtained from financial institutions operating as market-makers;

iii) Internal valuation models based on market data used to define a price for the financial

instrument, reflecting market interest rates and volatility, in addition to liquidity and the

credit risk associated with the instrument.

Unlisted shareholders’ equity instruments held as part of venture capital operations are

valued on the basis of the following criteria:

i) Prices charged by independent entities on materially relevant transactions during the

last six months;

ii) Multiples of comparable companies in terms of operating sector, dimension and

profitability;

iii) Discounted cash flows;


69

iv) Settlement price comprising the subsidiary company’s net worth;

v) Cost price (only for investments made in the twelve months preceding the valuation).

If there is a right or contractual obligation to alienate the subsidiaries under the terms of

shareholders’ agreements entered into when the investments are made, the respective

accounting valuation may not exceed the current amount of the sales price.

A discount factor reflecting the securities’ lack of liquidity and/or counterparty credit risk in

the agreements entered into is, if justified, applied to the amounts obtained from the above

referred to valuation methodologies.

Other unlisted shareholders’ equity instruments whose fair value cannot be reliably

measured (e.g. owing to the lack of recent transactions) continue to be recognised at cost,

less any impairment losses.

b) Financial liabilities

Financial liabilities are recognised at the agreement date at their respective fair value, less the

costs directly attributable to the transaction. Liabilities are classified in the following categories:

i) Financial liabilities held for trading

Financial liabilities held for trading comprise the negative revaluation of derivative financial

instruments recognised at their fair value.

ii) Other financial liabilities

This category includes other credit institutions’ and customers’ resources and liabilities

incurred on payments of services or purchases of assets.

These financial liabilities are valued at their amortised cost.

c) Derivatives and hedge accounting

The Bank performs derivative operations as part of its activity to provide for its customers’

requirements and reduce its exposure to foreign exchange, interest rate and price fluctuations.

Derivative financial instruments are recognised at their fair value at the date of the agreement.

They are also recognised in off-balance sheet accounts at their respective notional value.

Derivative financial instruments are subsequently measured at their respective fair value. Fair

value is assessed:

On the basis of prices obtained in active markets (e.g. futures trading in organised markets);

On the basis of models incorporating valuation techniques accepted in the market, including

discounted cash flows and options valuation models.


70

Embedded derivatives

Derivative financial instruments embedded in other financial instruments are separated from the

base agreement and processed as autonomous derivatives under the IAS 39 Standard,

whenever:

The embedded derivative’s economic characteristics and risks are not closely related with

the base agreement defined in the IAS 39 Standard; and

The full amount of the combined financial instrument is not recognised at fair value, with fair

value changes being reflected in the income statement.

Hedge derivatives

These derivatives are designed to protect the group from exposure to a specific risk attached to

its operations. Reclassification as hedge derivatives and use of the hedge accounting concept,

as described below, are subject to compliance with the rules of the IAS 39 Standard.

The group, at 31 December 2011 and 2010, only used hedges on the changes in the fair value

of financial instruments recognised in the balance sheet as “fair value hedges”.

The group prepares formal documentation, for all hedge operations, at the beginning of the

operation, to include the following aspects:

Risk and strategy management objectives associated with the realisation of the hedge

operation, in accordance with the hedge policies defined by the group;

Description of hedged risk(s);

Identification and description of hedged and hedge financial instruments;

Hedge operation effectiveness appraisal method and respective periodicity.

Hedge effectiveness tests are periodically performed and documented, using a comparison

between the change in fair value of the hedge instrument and hedged item (part attributable to

hedged risk). With the aim of enabling the use of hedge accounting under IAS 39, the ratio

should be between a range of 80% and 125%. Prospective effectiveness tests are also

performed in order to demonstrate the hedges’ expected future effectiveness.

Hedge derivatives are recognised at fair value, with the results being assessed daily and

recognised in income and costs for the year. If the hedge is seen to be effective, the Bank will

also recognise the change in fair value of the hedged item, attributable to the hedged risk, in

income for the year. The impact of such valuations is recognised in “income from financial

operations” account headings. For derivatives, such as interest rate swaps, with an associated

interest component, the periodisation of interest for the period in progress and liquidated flows

are recognised in “interest and similar income” and “interest and similar costs" in the income

statement.

Positive and negative revaluations of hedge derivatives are recognised in specific assets and

liabilities account headings.

Valuations of hedged items are recognised in the account headings in which such assets and

liabilities are recognised.


71

Trading derivatives

Trading derivatives are all derivative financial instruments that are not associated with effective

hedge operations in accordance with the IAS 39 Standard, including:

Derivatives taken out to hedge assets or liabilities risks recognised at fair value through

profit or loss, thus rendering hedge accounting unnecessary;

Derivatives taken out to hedge risk which does not comprise effective cover under the IAS

39 Standard;

Derivatives taken out for trading purposes.

Trading derivatives are recognised at fair value, with the results being assessed daily and

recognised in income and costs for the year. The impact of such valuations is recognised in

“income from financial operations” account headings. For derivatives, such as interest rate

swaps, with an associated interest component, the periodisation of interest for the period in

progress and liquidated flows are recognised in “interest and similar income” and “interest and

similar costs" in the income statement.

d) Impairment of financial assets

Financial assets at amortised cost

The group periodically analyses impairment on its financial assets recognised at amortised cost,

notably loans and advances to customers, Investments in credit institutions and other assets.

Signs of impairment are identified on an individual basis on financial assets with a significant

level of exposure and on a collective basis as regards like-for-like assets, whose debtor

balances are not separately relevant.

The following events may comprise signs of impairment:

Failure to comply with contractual clauses, i.e. arrears of interest or capital;

Debtor or debt issuing entities’ significant financial difficulties;

Existence of a strong probability of a declaration of bankruptcy by the debtor or debt issuing

entity;

Granting of facilities to a debtor in financial difficulties which would not be granted under

normal circumstances;

Historical records of collections suggesting that the nominal value will never be fully

recovered;

Data indicating a measurable reduction of the estimated value of the future cash flows of a

group of financial assets since original recognition, although such a reduction cannot be

identified in the group’s separate financial assets.

Whenever signs of impairment on separately analysed assets are identified, the eventual

impairment loss comprises the difference between the book value at the time of analysis and

current value of projected future cash flows expected to be received (recoverable value),

discounted on the basis of the asset’s original effective interest rate.

Assets upon which specific analyses have not been performed have been included in a

collective impairment analysis and classified for this purpose into homogenous groups with


72

similar risk characteristics. Separately analysed assets on which no objective signs of

impairment have been noted were also subject to collective impairment analyses, as referred to

in the preceding paragraph.

Owing to the non-existence of a relevant track record in terms of the Bank, impairment losses

calculated on the collective analysis were assessed on the basis of Caixa Geral de Depósitos

Group parameters for comparable types of credit.

The amount of impairment assessed is recognised in costs for the year and separately in the

balance sheet as a deduction from the amount of the respective credit.

The group, whenever applicable, writes off unrecoverable credit from assets through its use of

the respective accumulated impairment with the board of directors’ approval. Eventual

recoveries of credit written off from assets are recognised as a deduction from the impairment

losses balance recognised in the income statement.

Available for sale financial assets

As referred to in Note 2.6, a) available for sale financial assets are recognised at their fair value,

with changes in their fair value being reflected in “fair value reserves” in shareholders’ equity.

Whenever any objective evidence of impairment exists, accumulated capital losses recognised

in reserves, are transferred to costs for the year in the form of impairment losses and

recognised in the “impairment of other assets, net of reversals and recoveries” heading.

In addition to the signs of impairment on financial assets recognised at amortised cost, IAS 39

also provides for the following specific signs of impairment on equity instruments:

Information on significant changes having an adverse impact on the technological, market,

economic or legal environment in which the issuing entity operates, indicating that the cost

of the investment may not be recovered;

A prolonged or significant decline in market value at below cost.

The Bank, on each of its financial statement’s reference dates performs an analysis of the

existence of any impairment losses on available for sale financial assets, considering, for the

said purpose, the nature and specific, individual characteristics of the assets being valued. In

addition to the results of the analysis, the following events were considered to comprise

objective evidence of impairment on equity instruments:

Existence of potential capital losses of more than 50% of the respective cost price;

Situations in which the fair value of the equity instrument remains below its respective cost

price for a period of more than 24 months.

The existence of potential capital losses of more than 30% of the cost price, for more than 9

months, was also considered to comprise objective signs of impairment.

Impairment losses on equity instruments cannot be reversed and any potential capital gains

originated after the recognition of impairment losses are, therefore, recognised in the “fair value

reserve”. Impairment is always considered to exist if additional capital losses are assessed at a

later stage and are recognised in income for the year.

Criteria identical to debt instruments are applied for the analysis of “Tier 1” securities.


73

The group also periodically performs impairment analyses on financial assets recognised at

cost, notably unlisted equity instruments whose fair value cannot be accurately measured. The

recoverable value, in this case, comprises the best estimate of future flows receivable from the

asset, discounted at a rate which adequately reflects the risk associated with holding the asset.

The amount of the impairment loss is directly recognised in income for the period. Impairment

losses on such assets cannot be reversed.

2.7. Non-current assets held for sale and groups of assets and liabilities for disposal

In accordance with the IFRS 5 Standard – “non-current assets held for sale and discontinued

operations”, non-current assets, or groups of assets and liabilities for disposal are classified as being

held for sale whenever their book value is expected to be recovered from their sale and not their

continued use. For an asset (or group of assets and liabilities) to be classified in this account heading

the following requirements must be met:

There should be a strong probability of the sale’s occurrence;

The asset should be immediately available for sale in its current condition;

The sale is expected to take place up to a year from the asset's classification in the account

heading.

Assets recognised in this account heading are valued at their cost price or fair value whichever the

lower, less the costs incurred on the sale.

2.8. Other tangible assets

Except for assets acquired up to 1998, these are recognised at cost, less depreciation and

accumulated impairment losses. The costs of repair, maintenance and other expenses associated

with their use are recognised as a cost for the year, in the “other administrative expenses” account

heading.

The Bank revalued its fixed assets in 1998, under Decree Law 31/98 of 11 February. As permitted

under the IFRS 1 Standard, the book value, incorporating the effect of the referred to revaluation was

considered as a cost in the transition to the IFRS, as the proceeds, at the time in question, generally

comprised cost, or amortised cost, in accordance with the IFRS, adjusted to take changes to price

indices into account.

Depreciation is calculated and recognised as a cost for the year, on a systematic basis, during the

asset’s estimated useful life, comprising the period in which it is expected to be available for use, i.e.

Years of useful life

Property 10 - 50

Equipment:

Furniture and materials 4 - 10

Transport material 4

IT equipment 3 - 4

Interior installations 3 - 10

Security equipment 4 - 10

Plant and machinery 5 - 10

Land is not depreciated.


74

The works being carried out by the Bank on its headquarters building over the period 2008-2009 are

being depreciated over a period of ten years.

Under the IAS 36 Standard “Impairment of Assets”, an impairment loss is recognised in the income

statement for the period whenever the net book value of tangible assets exceeds their recoverable

value. Impairment losses can be reversed and also have an impact on income for the period if there

is an increase in the asset’s recoverable value in the following periods.

The group periodically assesses the adequacy of the estimated useful life of its tangible assets.

2.9. Financial leases

Lease operations are recognised as follows:

As lessee

Leased assets are recognised at fair value in assets and liabilities, in line with the processing of the

respective payments of instalments.

The instalments relating to lease agreements are split up in accordance with the respective financial

schedule, whose liability is reduced by the part corresponding to the payment of the capital. Interest

paid is recognised as a financial cost.

As lessor

Leased assets are recognised in the balance sheet as loans, repaid by capital instalments set out in

the financial agreement’s schedule. Interest included in the instalments is recognised as financial

income.

2.10. Intangible assets

This account heading essentially comprises the costs of the acquisition, development or preparation

for use of software used for the performance of the group’s operations. Intangible assets are

recognised at cost, less amortisation and accumulated impairment losses.

Depreciation is recognised as a cost, on a systematic basis, throughout the assets’ estimated useful

life for a period of between 3 - 6 years.

Expenses on software maintenance are recognised as a cost for the year in which they are incurred.

2.11. Income tax

All group companies are taxed separately and companies headquartered in Portugal pay IRC (“Tax

on the Income of Collective Bodies”). The accounts of the Bank’s branches are included in the

accounts of its registered office in order to assess the fiscal income resulting from its global activity

under IRC. The results of its branches must also pay local tax in the countries/territories in which they

are established. Local tax is deductible from global IRC under the terms of article 91 of the respective

tax code and double taxation agreements entered into with Portugal.

In 2011 and 2010, group companies paid IRC (corporate tax) and its corresponding municipal

surcharge at an aggregate rate of 26.5%. Starting 1 January 2009, the aggregate tax rate was 14%

on amounts of less than €12,500 and 26.5% on amounts exceeding this value.


75

With the publication of Law 12 – A/2010 of 30 June, a state tax was introduced, payable by all

taxpayers who, in 2010 and in future years have taxable income of more than €2,000,000 which is

not exempt from IRC. The state surcharge comprises 2.5% on the part of the taxable income, subject

to and not exempt from IRC, in excess of the referred to limit of €2,000,000. This disposition implies

that the tax rate used in 2010 and 2011 for the calculation of deferred tax and recognition of income

tax for the period was 29% (Note 14).

Law 64-B/2011 of 30 December (State Budget Law for 2012), temporarily increased the limits and

rates of the state tax on taxpayers in 2012 and 2013, who make taxable profit subject to and not

exempt from IRC of more than €1,500,000. It should therefore be noted that, for 2012 and 2013, the

state surcharge rate on taxable profit of between €1,500,000 and €10,000,000 will increase to 3%,

with the rate applicable on taxable profit subject to and not exempt from IRC of more than

€10,000,000 therefore being 5%. Given the temporal/transitory nature of the new calculation rules on

the state surcharge (only applicable in 2012 and 2013), the deferred tax recorded by group

companies in 2011 did not take the referred to increase in the State Budget for 2012 into account.

The Bank’s Madeira Offshore Branch, however, is exempt from IRC up until 31 December 2011

under article 33 of the Statute of Fiscal Benefits. For the purposes of the application of this

exemption, in accordance with the dispositions of article 34 of the Statute of Fiscal Benefits, at least

85% of the profit attributable to the entity’s global activity should derive from the performance of

operations outside the institutional scope of the Madeira Free Zone.

Caixa Desenvolvimento, SGPS, S.A. (Caixa Desenvolvimento) is subject to the general regime of the

elimination of distributed profit provided for in article 51 of the IRC Code, under which profits are

exempt from tax in cases in which (i) the company distributing the income is resident in Portugal or

the European Union and is subject to IRC (or similar tax), (ii) the income derives from effectively

taxed profits and (iii) the entity benefiting from the dividends has for at least one year retained an

investment of more than 10% in the company distributing the dividends.

Caixa Desenvolvimento also applied the deferred taxation regime, established in the IRC Code, on

capital gains and losses realised in 1999 and 2000 on its exchange or sale of investments or shares.

Based on the regime in force on 01 January 2002, the capital gains made in the referred to years on

investments disposed of by 31 December 2004, are being taxed over a ten year period, with the

group having recognised the respective deferred tax liability.

Under article 32 of the Statute of Fiscal Benefits, the capital gains and losses made by Caixa Capital

– Sociedade de Capital de Risco, S.A.’s (Caixa Capital) and Caixa Desenvolvimento’s sale of equity

investments, provided that such investments are held for not less than one year, and the financial

costs paid on the acquisition, are not considered as taxable material. This regime does not apply to

the capital gains made and financial costs paid when the equity investments have been acquired (i)

from entities with which a special relationship exists, as defined in no. 4 of article 63 of the IRC Code,

(ii) to entities which are domiciled, headquartered or effectively managed in a territory with a more

favourable tax regime or (iii) to entities resident in Portuguese territory, subject to a special tax

regime and when held for a period of less than three years.

Under the terms of no. 4 of article 32 of the Statute of Fiscal Benefits, Caixa Capital is also entitled to

deduct from its IRC taxable income and up to the amount thereof, as a fiscal benefit, an amount

equal to the sum of its IRC tax bills for the five years preceding the year of the respective benefit,

provided that the amount of the deduction is invested in companies with growth and appreciation

potential. Amounts not deducted under the previously referred to terms may be deducted at a later

stage, subject to the same terms, from its tax bill for the following five years.


76

Income made by venture capital funds is exempt from IRC under the dispositions of article 23 of the

Statute of Fiscal Benefits.

Total income tax recognised in the income statement includes current and deferred taxes.

Current tax is calculated on the basis of taxable profit for the year, which is different from accounting

income owing to adjustments to taxable profit resulting from costs or income which are not relevant

for fiscal purposes or only considered in other periods.

Deferred tax comprises the impact of temporary deductible or taxable differences between the

balance sheet value of assets and liabilities and their fiscal basis, used to assess taxable profit on tax

recoverable or payable in future periods.

Deferred tax liabilities are normally recognised for all temporary taxable differences, whereas

deferred tax assets are only recognised up to the amount by which the existence of future taxable

profit, permitting the use of the corresponding deductible tax differences or fiscal losses, is probable.

Deferred taxes are not, however, recorded in the following situations:

Temporary differences resulting from goodwill;

Temporary differences originating from the initial recognition of assets and liabilities in

transactions which do not affect accounting income or taxable profit;

Temporary differences resulting from non-distributed profit by subsidiaries and associated

companies, to the extent that the group is able to control their reversal and which is not likely to

occur in the foreseeable future.

The principal situations originating temporary differences in group terms comprise provisions and

impairment not accepted for fiscal purposes, revaluations of equity investments registered as

available for sale financial assets, deferred commissions, statutory revaluations of tangible assets,

capital gains on the disposal of investments (see above) and fiscal benefits granted to venture capital

activities.

Deferred taxes are calculated on the basis of the tax rates expected to be in force on the date of

reversal of the temporary differences, comprising the approved or substantially approved rates, at the

date of the balance sheet.

Income tax (current or deferred) is recognised in the income statement for the year, except for cases

in which the originating transactions have been recognised in other shareholders’ equity account

headings such as in the case of revaluations of available for sale financial assets. In such cases the

corresponding tax is also recognised as a charge to shareholders’ equity and does not affect income

for the year.

2.12. Provisions and contingent liabilities

A provision is set up when there is a current (legal or constructive) obligation, resulting from past

events, involving the probable future expenditure of resources and when this may be reliably

assessed. The amount of the provision comprises the best estimate of the amount to be paid to

liquidate the liability at the date of the balance sheet.

When not probable, the future expenditure of resources is considered to be a contingent liability.

Contingent liabilities require no more than a disclosure procedure, unless the possibility of their

payment is remote.


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This account heading reflects the provisions required for liabilities incurred on guarantees and other

off-balance sheet liabilities and is assessed on the basis of a risk assessment on the operations and

respective customers. It also includes other provisions for fiscal, legal and other contingencies.

2.13. Employee benefits

The Bank does not have any retirement pensions liabilities to its employees, who are covered by the

national social security regime, owing to the fact that it is not a signatory to the Collective Wage

Bargaining Agreement for the Banking Sector.

However, with the objective of providing its employees with a retirement subsidy to the standard

social security regime, the Bank, at its own initiative has made contributions with the objective of

paying old age retirement and survivors’ pensions to its employees, in accordance with the terms set

out in the contract.

The Bank pays a percentage of 3.5% of each employee’s annual wages into the fund. Pension costs,

in 2011 and 2010 were €290,391 and €436,464 respectively (Note 27).

The contributions are made in the form of joint membership of the Caixa Reforma Prudente Open

Pension Fund, managed by CGD Pensões – Sociedade Gestora de Fundos de Pensões, S.A..

The Bank does not have any liabilities other than the above referred to contributions owing to the fact

that this is a defined contribution plan.

The other group companies do not have pensions liabilities.

Short term benefits, including productivity bonuses paid to employees, are recognised in “employee

costs” for the respective period, on an accrual basis.

2.14. Commissions

As referred to in Note 2.6, commissions received on credit operations and other financial instruments,

i.e. commissions charged for originating operations, are included in amortised costs and recognised

as costs or income over the period of the operation.

Commissions for services performed are usually recognised as income for the period of performance

of the service or as a lump sum if resulting from single acts.

The estimate of the commissions the Bank expects to pay to other credit institutions for the

syndicating of credit operations in which it is involved as lead and in which CGD Group’s initial

exposure is higher than the defined objective, is recognised as accrued costs as a charge to the

“costs of services and commissions” account heading for the year in which the Bank recognises the

income relating to the corresponding commission.

2.15. Securities and other items held under custody

Securities and other items held under custody, notably customers' securities, are recognised in off-

balance sheet account headings at their nominal value.


78

2.16. Cash and cash equivalents

For the purposes of the preparation of cash flow statements, the group considers “cash and cash

equivalents” to be the total amount of the “cash and cash equivalents with central banks” and “cash

equivalents with other credit institutions” account headings.

2.17. Critical accounting estimates and most relevant judgemental aspects in the

application of accounting policies

The main accounting policies applied by the group are described in Note 2. In the application of these

policies the Bank’s and group’s board of directors must make estimates. The estimates with the

greatest effect on the consolidated financial statements include those set out below.

ASSESSMENT OF IMPAIRMENT LOSSES ON LOANS AND ACCOUNTS RECEIVABLE

Impairment losses on loans and receivables are assessed in accordance with the methodology

defined in Note 2.6. d). Accordingly, the assessment of impairment on separately analysed assets

derives from the Bank’s specific valuation based on its specific knowledge of its customers’ status

and the guarantees associated with the operations in question.

The assessment of impairment on collectively analysed assets was based on Caixa Geral de

Depósitos Group parameters for comparable types of credit.

The Bank considers that the assessment of impairment on the basis of this methodology permits the

adequate recognition of the risk associated with its credit portfolio, based on the rules defined in IAS

39.

VALUATION OF FINANCIAL INSTRUMENTS NOT TRADED IN ACTIVE MARKETS

In accordance with the IAS 39 Standard, the group values all financial instruments at fair value,

except for those recognised at amortised cost. The valuation models and techniques described in

Note 2.6. a) are used to value financial instruments not traded on liquid markets, including equity

instruments allocated to venture capital operations. The valuations obtained comprise the best

estimate of the fair value of the referred to instruments at the date of the balance sheet. The

determining of fair value on equity instruments allocated to venture capital operations, may, however,

be subjective.

As referred to in Note 2.6. a), to guarantee an adequate separation between functions, the valuation

of most such financial instruments, except for equity instruments allocated to venture capital

operations, is assessed by a body that is independent from the trading function.

A summary of the sources used by the group to assess the fair value of financial instruments is

provided in Note 31 – Disclosures on financial instruments, in the “fair value" section.

ASSESSMENT OF IMPAIRMENT LOSSES ON AVAILABLE FOR SALE FINANCIAL ASSETS

As described in Note 2.6. d), capital losses deriving from the valuation of such assets are recognised

as a charge to the fair value reserve. Whenever objective evidence of impairment exists, the

accumulated capital losses recognised in the fair value reserve should be transferred to costs for the

year.

For equity instruments, including those allocated to venture capital, determination of the existence of

impairment losses may be subjective. The group assesses whether or not impairment exists on such

assets through a specific analysis at each balance sheet date, taking into consideration the


79

definitions provided in the IAS 39 Standard (see Note 2.6. d)). As a general criterion, impairment is

always assessed when it is considered, that, owing to the size of the capital loss assessed, the full

recovery of the amount invested by the group is highly improbable.

In the case of debt instruments classified in this category, including “Tier I” classified as equity

instruments, the capital losses are transferred from the fair value reserve to income, whenever there

is any indication of the possible future occurrence of failure to comply with contractually agreed cash

flows, notably on account of the issuer’s financial difficulties, defaults on other financial liabilities, or a

significant downgrade of the issuing entity’s rating.

ASSESSMENT OF TAX ON PROFIT

Tax on profits (current and deferred) is assessed by group companies on the basis of the rules

defined by the current fiscal framework. In several cases, however, fiscal legislation may not be

sufficiently clear and objective and may give rise to different interpretations. The amounts recognised

in such cases represent the best understanding of the responsible Bank bodies and subsidiaries on

the correctness of the operations although this may be queried by the fiscal authorities.

2.18. Adoption of new standards (IAS/IFRS) or revision of already issued standards

The following standards, interpretations, amendments and revisions endorsed by the European

Union and mandatory for financial years beginning on or after 1 January 2011, were adopted for the

first time, in the year ended 31 December 2011:

IFRS 8 and IAS 24 (amendment) – “Operating segments” and “Related Party Disclosures” – This

revision simplifies the definition of «related party», simultaneously eliminating certain internal

incoherencies and providing exemptions for entities associated with public administration as

regards the amount of information such entities must provide regarding transactions with related

parties.

IFRIC 14 (amendment) – “Prepayment of a minimum funding requirement” - These changes

eliminate an unintentional consequence of IFRIC 14 in cases in which an entity subject to a

minimum funding requirement makes a prepayment of contributions when, in certain

circumstances, the entity making such a prepayment would be obliged to recognise expenditure.

If a specific defined benefits plan is subject to a minimum funding requirement, the amendment to

IFRIC 14 determines that such a payment be processed as any other prepayment, as if it were an

asset.

IFRIC 19 – Extinguishing financial liabilities with equity instruments - this interpretation deals with

the following issues:

(a) Classification of own equity instruments issued to fully or partly extinguish a financial liability

are “considerations paid” according to paragraph 41 of IAS 39;

(b) how an entity should initially measure own equity instruments issued to extinguish this

financial liability;

(c) how an entity should process any difference between the amount of the financial liabilities

extinguished and the initial measured amounts of own equity instruments issued.

Improvements to the various IFRS: IFRS 1, IFRS 3 and IFRS 7, IAS 1, 32, 34, 39 and IFRIC 13 –

improvements made to the international financial reporting standards with the aim of simplifying

and clarifying the international accounting standards.


80

IAS 32 – “Financial Instruments ” – the presentation was changed under the terms of the annex to

Regulation (EC) No.1293/2009.

The application of these standards and interpretations did not have any materially relevant impacts

on the group’s financial statements at 31 December 2011.

New, amended or revised standards and interpretations not adopted

The following amendments, mandatory from 1 July 2011, have at the date of the approval of these

financial statements been endorsed by the European Union:

IFRS 7 (amendment) – “Financial instruments - “disclosures” – This revision increases the

disclosure requirements on transactions involving the transfer of financial assets. It aims to

guarantee greater transparency regarding exposure to risks when financial assets are transferred

and the transferring entity retains some involvement (exposure) thereto.

The standards, although having been endorsed by the European Union, were not adopted by the

group for the year ended 31 December 2011, owing to the fact that their application was still not

mandatory. No significant impacts on the financial statements deriving from their adoption have been

estimated.

3. OPERATING SEGMENTS

The board of directors receives and analyses the group’s financial information every month, split up into business

segments representing its areas of activity by type of origination, designed, as a whole, to ensure a dynamic

investment banking business platform i.e.

Corporate finance - including debt and equity financial advisory and project finance activities.

Trading and sales including trading and asset and liabilities treasury management operations.

Brokerage - brokerage operations.

Commercial banking - including domestic and international transversal business origination.

Venture capital - CGD group’s venture capital operations are performed by Caixa Capital - Capital de Risco,

S.A. (which, in addition to concentrating all operating activity also manages four venture capital funds) and

Caixa Desenvolvimento, SGPS, S.A. (principally geared to strategic operations with the highest potential

appreciation).

Other – Other activities outside the scope of the above referred to categories.


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The following tables summarises the information on the group’s operating segments at 31 December 2011 and

2010:

2011

(amounts in euros)Corporate

financeTrading and

salesBrokerage

Commercial banking

Venture capital

Other Total

Interest and similar income 17,381,927 306,742,499 46,535 11,757,728 245,270 94,642 336,268,601

Interest and similar costs (10,181,137) (291,137,945) (46,033) (5,764,925) - (86,637) (307,216,678)

Income from equity instruments - 335,155 - - - 123,562 458,717Net interest income including incomefrom equity instruments I. 7,200,790 15,939,710 502 5,992,802 245,270 131,567 29,510,640

Income from services and commissions 49,970,597 991,507 5,228,495 4,679,202 6,728,036 28,102 67,625,939

Costs of services and commissions (4,471,991) (253,395) (1,090,134) (8,220) (7,715) (1,467) (5,832,923)

Income from financial operations (8,024,988) (24,208,779) (21,112) (403,841) 916,936 1 (31,741,783)

Other operating income (9,424) (30,377) (42,790) 17,362 802,656 (1,256,399) (518,972)

II. 37,464,194 (23,501,045) 4,074,460 4,284,504 8,439,912 (1,229,763) 29,532,262

Net operating income 44,664,983 (7,561,335) 4,074,961 10,277,306 8,685,182 (1,098,196) 59,042,902Provisions net of recoveries and cancellations (430,661) - - 6,017 - (1,539,591) (1,964,235)Credit impairment net of reversals and recoveries (9,084,194) - 8,577 (15,102,594) 24,355 (24,153,856)Impairment of other assets net of reversals and recoveries (1,222,389) (4,049,472) 2,769 (664,572) 154,919 683 (5,778,062)

III. (10,737,244) (4,049,472) 11,346 (15,761,149) 154,919 (1,514,553) (31,896,154)

Total 33,927,739 (11,610,807) 4,086,307 (5,483,842) 8,840,101 (2,612,749) 27,146,748

Other costs and income (18,593,752)

Consolidated net income 8,552,996

Financial assets at fair value through profit or loss - 789,567,956 8 11,003,760 - - 800,571,724

Available for sale financial assets - 352,786,431 - 41,112,525 44,579,054 11,928,147 450,406,157

Positive revaluation of hedge derivatives - 1,459,895 - - - - 1,459,895

Loans and advances to customers 465,106,098 - 2,392,989 221,393,823 - 10,239,719 699,132,629Credit institutions’ and central banks’ resources 237,249,426 583,456,729 1,220,661 139,516,804 22,739,661 11,307,772 995,491,052

Customer resources and other loans 4,876,964 - 28,660,869 80,531,582 - - 114,069,415Financial liabilities at fair value through profit or loss - 733,589,348 - - - - 733,589,348

Negative revision of hedge derivatives - 1,521,387 - - - - 1,521,387

2010


financeTrading and

salesBrokerage

Commercial banking

Venture capital

Other Total

Interest and similar income 13,361,944 250,879,876 38,402 8,771,387 281,581 75,744 273,408,934

Interest and similar costs (4,040,140) (233,336,994) (20,276) (2,627,109) (94) (71,508) (240,096,121)

Income from equity instruments - 242,762 - - 77,710 81,881 402,353Net interest income including incomefrom equity instruments I. 9,321,804 17,785,644 18,126 6,144,278 359,197 86,117 33,715,166

Income from services and commissions 60,859,871 3,379,550 5,452,918 10,431,827 5,786,910 44,426 85,955,502

Costs of services and commissions (8,655,161) (3,538,992) - (6,563) (9,540) (33,002) (12,243,258)

Income from financial operations 75,718 (16,678,593) (162,514) (716,662) 391,528 - (17,090,523)

Other operating income 799,524 84,556 136,243 (71,989) 924,274 (263,918) 1,608,690

II. 53,079,952 (16,753,479) 5,426,647 9,636,613 7,093,172 (252,494) 58,230,411

Net operating income 62,401,756 1,032,165 5,444,773 15,780,891 7,452,369 (166,377) 91,945,577

Provisions net of recoveries and cancellations (60,869) 1,961,882 - - (199,743) 6,633,660 8,334,930Credit impairment net of reversals and recoveries (6,236,596) (31) (3,745) (1,061,841) - 19,312 (7,282,901)Impairment of other assets net of reversals and recoveries (1,132,090) (5,781,770) 1,183 (916,555) (2,912,474) 33,442 (10,708,264)

III. (7,429,555) (3,819,919) (2,562) (1,978,396) (3,112,217) 6,686,414 (9,656,235)

Total 54,972,201 (2,787,754) 5,442,211 13,802,495 4,340,152 6,520,037 82,289,342



Financial assets at fair value through profit or loss - 601,761,270 5 13,223,085 346,924 - 615,331,283

Available for sale financial assets - 382,845,740 - 42,768,213 47,455,259 10,443,146 483,512,357

Positive revaluation of hedge derivatives - 1,250,849 - - - - 1,250,849

Loans and advances to customers 513,845,379 - 2,639,001 261,560,978 - 9,867,016 787,912,373Credit institutions’ and central banks’ resources 307,311,036 589,603,434 1,578,287 189,915,727 28,588,635 12,146,722 1,129,143,842

Customer resources and other loans 4,829,715 183,755 22,428,969 77,553,922 - - 104,996,362Financial liabilities at fair value through profit or loss - 416,869,550 - - - - 416,869,550

Negative revision of hedge derivatives - 1,599,779 - - - - 1,599,779


82

Interest and similar costs were split up over the various business lines on the basis of the average value of the

respective asset allocations to the said operating segments.

Income distribution by principal balance sheet headings and countries in which the group performs its activities in

2010 and 2011 is set out below:

2011

(amounts in euros) Portugal Spain Total

Interest and similar income 318,451,105 17,817,495 336,268,601

Interest and similar costs (289,521,109) (17,695,569) (307,216,678)

Income from equity instruments 458,717 - 458,717

Net interest income including income from equity instruments I. 29,388,713 121,927 29,510,640

Income from services and commissions 67,542,377 83,562 67,625,939

Costs of services and commissions (5,824,893) (8,030) (5,832,923)

Income from financial operations (31,510,546) (231,236) (31,741,783)

Other operating income (519,166) 194 (518,972)

II. 29,687,772 (155,510) 29,532,262

Net operating income 59,076,485 (33,584) 59,042,902

Provisions net of recoveries and cancellations (1,964,235) - (1,964,235)

Credit impairment net of reversals and recoveries (17.976.645) (6,177,211) (24,153,856)

Impairment of other assets net of

reversals and recoveries (5,778,062) - (5,778,062)

III. (25,718,942) (6,177,211) (31,896,154)

Total 33,357,543 (6,210,795) 27,146,748



Financial assets at fair value through profit or loss 799,588,969 982,755 800,571,724

Available for sale financial assets 450,406,157 - 450,406,157

Positive revaluation of hedge derivatives 1,459,895 - 1,459,895

Loans and advances to customers 688,677,437 10,455,192 699,132,629

Credit institutions’ and central banks’ resources 976,916,483 18,574,570 995,491,052

Customer resources and other loans 114,069,415 - 114,069,415

Financial liabilities at fair value through profit or loss 733,589,348 - 733,589,348

Negative revision of hedge derivatives 1,521,387 - 1,521,387

2010

(amounts in euros) Portugal Spain Total



Income from equity instruments 402,353 - 402,353

Net interest income including income from equity instruments I. 32,942,699 772,467 33,715,166




Other operating income 1,596,872 11,818 1,608,690

II. 58,551,404 (320,994) 58,230,410

Net operating income 91,494,103 451,473 91,945,576

Provisions net of recoveries and cancellations 8,283,307 51,622 8,334,930

Credit impairment net of reversals and recoveries (5.361.392) (1,921,509) (7,282,901)

Impairment of other assets net of

reversals and recoveries (10,708,264) - (10,708,264)

III. (7,786,349) (1,869,886) (9,656,235)

Total 83,707,754 (1,418,413) 82,289,341



Financial assets at fair value through profit or loss 614,117,292 1,213,991 615,331,283


Positive revaluation of hedge derivatives 1,250,849 - 1,250,849


Credit institutions’ and central banks’ resources 1,109,775,915 19,367,927 1,129,143,842


Financial liabilities at fair value through profit or loss 416,869,550 - 416,869,550

Negative revision of hedge derivatives 1,599,779 - 1,599,779


83

The information set out in the preceding tables comprises the balance sheet and income statements of all group

entities headquartered in Portugal (“Portugal” column) and the Madrid branch (“Spain” column). Each of the group

entities performs its activity mainly with customers or resident counterparties domiciled in the same countries in

which they are headquartered.

4. GROUP COMPANIES AND TRANSACTIONS IN PERIOD

The following is a summary of the financial data extracted from the provisional accounts of the entities included in

the consolidation perimeter in the last financial year, using the global integration method:

(amounts in euros) Registered office

CurrencyPercentage

equity investment

Date AssetsProfit / (Loss)

Shareholders’ equity

Entity

Caixa - Banco de Investimento, S.A. Lisbon Euros 100.00% 31-12-2011 2,169,198,024 1,464,516 178,266,568

Caixa Desenvolvimento, SGPS, S.A. Lisbon Euros 100.00% 31-12-2011 4,285,174 31,433 4,127,360

Caixa Capital - Sociedade de Capital de Risco, S.A. Lisbon Euros 100.00% 31-12-2011 39,571,414 5,148,225 38,103,120

Fundo de Capital de Risco Energias Renováveis - Caixa Capital Lisbon Euros 91.00% 31-12-2011 33,212,331 1,966,929 33,042,135

CaixaBI Brasil - Serviços de Assessoria Financeira Ltda São PauloReais

100.00% 31-12-20116,019,000 5,162,365 5,162,365

Euros 2,491,411 2,136,829 2,136,829

Caixa Desenvolvimento, SGPS, S.A. formed in 1998, has its registered office in Portugal. Its corporate object is to

operate as a holding company, as an indirect form of performing economic activities.

Caixa Capital - Sociedade de Capital de Risco, S.A. (Caixa Capital) has its registered office in Lisbon and was

formed at 31 December 1990 under Decree Law 17/86 of 5 February. The company’s corporate object is to

support and promote investment and technological innovation by making temporary equity investments in projects

or companies. It is also authorised to provide assistance to the financial, technical, administrative and commercial

management of its subsidiary companies. At 31 December 2011 it managed five venture capital funds.

Fundo de Capital de Risco para Investidores Qualificados Energias Renováveis – Caixa Capital (FCR Energias

Renováveis) was formed in January 2006, with a subscribed capital of €50,000,000 comprising 2,000 investment

units. The fund’s objective is to invest its assets in equity investments in companies with high growth and

appreciation potential, operating in the field of generating electricity from renewable energy sources. The Bank

subscribed for 1,820 investment units with a nominal value of €45,500,000, of which €18,900,000 was

outstanding at 31 December 2011 and 2010.

On 16 December 2011, the Investors’ meeting of Fundo de Capital de Risco Energias Renováveis – Caixa

Capital, decided to liquidate the fund, preferably by the end of first quarter 2012.

In November 2011, the Bank formed the company CaixaBI Brasil – Serviços de Assessoria Financeira Ltda., in

Brazil with the corporate object of providing consultancy services to companies on capital structuring issues,

business strategy and connected matters, in addition to consultancy and services for mergers and the buying and

selling of companies and Bank financing structuring from other entities. The company is 90% owned by the Bank

and 10% owned by Caixa Desenvolvimento SGPS, S.A..

5. CASH AND CASH EQUIVALENTS WITH CENTRAL BANKS

This account heading comprises the following:


Cash 2,897 2,897

Sight deposits with central banks 2,921,782 8,891,265

2,924,679 8,894,162


84

The “sight deposits with Bank of Portugal” account heading includes the deposits providing for the demands of the

“Minimum Reserve Requirements of the System of European Central Banks” (SEBC). Interest is paid on these

deposits which comprise 2% of the deposits and debt securities with a maturity of up to two years, excluding the

deposits and public debt securities subject to SEBC minimum reserve requirements.

6. CASH ASSETS WITH OTHER CREDIT INSTITUTIONS

This account heading comprises the following


Sight deposits

In Portugal 1,037,917 5,254,421

Abroad 404,879 185,947

Interest receivable 860 -

1,443,656 5,440,368

7. INVESTMENTS IN CREDIT INSTITUTIONS


(amount in euros) 2011 2010

Short term loans

Abroad 20,000,000 -

Term deposits

In Portugal 10,904,581 7,410,600

Abroad 2,491,310 -

Interest receivable 87,652 66,472

33,483,543 7,477,072

Impairment (Note 29) ( 120,600 ) -

33,362,943 7,477,072

At 31 December 2011 and 2010, the “term deposits” account heading comprised operations with CGD Group

financial institutions.

At 31 December 2011 and 2010, the “loans” heading was for loans made to Caixa Geral de Depósitos, S.A. –

Sucursal de France maturing in January 2012.


85

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

These headings comprise the following:

2011 2010

(amount in euros)

Held for tradingAt fair value

through profit or loss

Total Held for tradingAt fair value

through profit or loss

Total

Debt instruments

- Issued by public entities:

. Bonds - 2 2 11,135,157 2 11,135,159

- Issued by other entities:

. Bonds and other securities:

Issued by resident entities 72,523,243 10,021,006 82,544,250 84,170,709 12,950,363 97,121,072

Issued by non-resident entities 9,272 1,265,595 1,274,868 76,048,737 2,013,682 78,062,419

72,532,516 11,286,603 83,819,119 171,354,603 14,964,047 186,318,650

Equity instruments

Issued by resident entities 1,045,069 - 1,045,069 41,197 346,923 388,120

Issued by non-resident entities 1,970,932 - 1,970,932 1,297,184 - 1,297,184

3,016,001 - 3,016,001 1,338,381 346,923 1,685,304

Derivatives with positive fair value(Note 10) 713,736,603 - 713,736,603 427,327,329 - 427,327,329

789,285,121 11,286,603 800,571,724 600,020,313 15,310,970 615,331,283

The “debt instruments issued by other resident entities - held for trading” account heading at 31 December 2011

and 2010, included €70,890,370 and €81,124,157 in bonds convertible into EDP shares issued by Parpública –

SGPS, S.A. respectively.

At 31 December 2010, the “financial assets at fair value through profit or loss – equity instruments” account

heading included €346,923 for the equity investment in MWH - Gestão Recursos Naturais, S.A.

In December 2009, the group acquired 337,926 MWH – Gestão de Recursos Naturais, S.A. shares from FCR

Energias Renováveis, comprising 10% of the equity capital at a nominal unit price of €1. By 31 December 2010

the group had paid up 251,305 shares, with the rest outstanding. Partners’ loans for the amount of €621,804 were

also made. At 31 December 2010 the equity investment in MWH – Gestão de Recursos Naturais, S.A. was

recognised on the basis of the sales price defined in the shares purchase/sales contract and transfer of partners´

loans entered into on 4 January 2011 for the amounts of €260,303 and €644,445, respectively. In January 2011,

the group disposed of its investment in the company.

The group recognises equity instruments for venture capital in this category, whenever there are associated

derivatives (i.e. the right or contractual obligation to dispose of the subsidiary companies under shareholders’

agreements entered into when the equity investments were made).

Collateralised debt securities with a nominal value of €1,550,000 and €75,591,000 respectively (Note 18) were

recognised in this account heading at 31 December 2011 and 2010.


86

9. AVAILABLE FOR SALE FINANCIAL ASSETS



Debt instruments

Issued by resident entities

Portuguese public debt 258,560,239 256,848,797

Issued by other entities 94,078,927 95,182,837

Issued by non-resident entities

Public debt 5,177,739 3,570,611


390,749,949 410,843,857

Impairment (Note 29) ( 3,961,150 ) -

386,788,799 410,843,857

Equity instruments

Shares

Gross amount


At fair value 1,066,341 740,905

At historical cost 153,127 153,127


At fair value 30,041,251 52,594,270

At historical cost 7,350,841 927,903

38,611,560 54,416,205

Impairment (Note 29) ( 3,524,528 ) ( 11,755,144 )

35,087,032 42,661,061

Investment units

Gross amount 21,573,296 22,329,670


Gross amount 6,957,030 7,677,768

63,617,357 72,668,500

450,406,157 483,512,357

Information on the value of share and investment units at 31 December 2011 and 2010, is set out below:

2011 2010

(amount in euros) %

investmentCost price Impairment

Fair value reserve

Book value%

investmentBook value

(Note 29) (Note 21)

Venture capital investments:

CGD Group Venture Capital Fund 6.46% 21,349,747 - 223,549 21,573,296 6.46% 22,329,670

SICAR NovEnergia II 4.61% 11,907,582 - 9,015,263 20,922,845 6.53% 19,093,482

Pinewells, S.A. 22.65% 1,426,341 - (360,000) 1,066,341 20.00% 740,905

EDP Renováveis, S.A. 0.025% 1,552,526 (660,276) 124,270 1,016,520 0.32% 12,230,340

La Seda Barcelona 0.00% 1,795 (1,744) - 51 0.13% 60

Other less than €100,000 1 - - 1 1

36,237,993 (662,020) 9,003,081 44,579,054 54,394,458

Other investments:

SEIF - South Europe Infrastructure Equity Finance 8.33% 4,883,721 - 1,539,217 6,422,938 8.33% 5,442,832Corporación Interamericana para el Financiamiento de Infraestructura 9.26% 3,995,672 (1,934,605) 3,444,142 5,505,209 9.26% 5,000,314

MTS Portugal, SGMR, S.A. 4.67% 153,127 - - 153,127 4.67% 153,127

Other 927,903 (927,903) - - -

9,960,423 (2,862,508) 4,983,359 12,081,274 10,596,273

46,198,416 (3,524,528) 13,986,441 56,660,328 64,990,731


87

Information on movements in this account, for 2011 and 2010 was as follows:

(amount in euros) Balance at31.12.2009

Purchases / sales

Change in fair value reserve

Impairment (Note 29)

Exchange differences

Balance at 31.12.2010

Purchases / sales


Impairment(Note 29)


Balance at31.12.2011

Venture capital investments:

CGD Group Venture Capital Fund 21,761,702 - 567,968 - - 22,329,670 - (756,374) - - 21,573,296

SICAR NovEnergia II 17,712,326 - 1,381,156 - - 19,093,482 - 1,829,363 - - 20,922,845

EDP Renováveis, S.A. 14,612,268 3,373,062 3,197,155 (8,952,145) - 12,230,340 (10,810,750) (403,070) - 1,016,520

Pinewells, S.A. 1,096,941 - (356,036) - - 740,905 526,341 (200,905) - - 1,066,341

La Seda Barcelona 100 - 1,695 (1,735) - 60 - - (9) - 51

Fomentinvest, SGPS, S.A. 5,138,081 (3,576,923) (1,561,158) - - - - - - - -

Martifer, SGPS, S.A. 2,595,508 (2,595,508) - - - - - - - - -

Other less than €100,000 - 1 - - - 1 - - - - 1

62,916,926 (2,799,368) 3,230,780 (8,953,880) - 54,394,457 (10,284,409) 469,014 (9) - 44,579,054

Other investments:SEIF - South Europe InfrastructureEquity Finance 4,052,818 555,000 835,014 - - 5,442,832 640,000 340,106 - - 6,422,938Corporación Interamericana para el Financiamiento de Infrastructure 1,992,123 - 2,852,542 - 155,649 5,000,314 - 337,901 - 166,994 5,505,209

MTS Portugal, SGMR, S.A. 153,127 - - - - 153,127 - - - - 153,127

Other - 927,903 - (927,903) - - - - - - -

6,198,068 1,482,903 3,687,557 (927,903) 155,649 10,596,274 640,000 678,007 - 166,994 12,081,274

69,114,994 (1,316,465) 6,918,337 (9,881,783) 155,649 64,990,731 (9,644,409) 1,147,021 (9) 166,994 56,660,328

The “other equity instruments” account heading comprises non-voting preference shares issued by Caixa Geral

Finance Limited, giving a right to a quarterly preferential dividend, at the company’s discretion, equivalent to

annual interest at the Euribor rate plus a spread. Caixa Geral Finance may redeem the preferential shares

starting from the tenth year after their issue (June 2014 and September 2015) with a 1% increase in spread if

failing to do so.

At 31 December 2011 and 2010, the potential capital losses on “debt instruments” registered in the fair value

reserve, totalled €113,764,751 and €35,385,271 respectively of which €100,203,706 and €27,137,908,

respectively, on Portuguese public debt bonds.

The investment in Corporación Interamericana para el Financiamento de Infraestructuras was made in 2001 for

USD 4,000,000 US dollars. In August 2008, the Bank purchased €1,000,000 for the total amount of USD

1,170,000 US dollars. Exposure to foreign exchange risk is hedged by funding in US dollars with the change in

fair value in 2011 and 2010 resulting from the recognition of the foreign exchange component in results.

At 31 December 2011 and 2010 the investment in La Seda de Barcelona, S.A. (La Seda) was accepted for

trading on the Madrid stock exchange.

The following were the principal movements in equity capital instruments recognised in “available for sale financial

assets” in 2011 and 2010:

EDP Renováveis, S.A.

In 2010 and 2011 the group sold EDP Renováveis, S.A. shares on the stock exchange. These operations

generated capital gains of €2,121,661 in 2011 and €94,668 euros in 2010 (Note 25).

The group recognised impairment of €8,952,145 on its investment in EDP Renováveis in 2010.

Pinewells, S.A.

In October 2011 the group was involved in the share capital increase of Pinewells, S.A., having subscribed for

175,447 shares with a nominal value of €3 each. This operation increased the investment in the fund to 22.65%.


88

Fomentinvest, SGPS, S.A.

In February 2010, as part of a restructuring of the investments held by Caixa Geral de Depósitos Group’s venture

capital operations, the group disposed of its investment in Fomentiveste to the CGD Group Venture Capital Fund

– Caixa Capital (FCR CGD) at its book value at 31 December 2009 making capital losses of €1,561,158 (Note

25).

Martifer, SGPS, S.A.

In May and June 2010 the Fund disposed of the whole of its investment in Martifer, SGPS, S.A. The sale was

made on the stock market at various times for the total amount of €1,417,722, originating capital losses of

€1,177,787 (Note 25).

South Europe Infrastructure Equity Finance

The Bank was involved in the South Europe Infrastructure Equity Finance (SEIEF) capital increases in 2011 and

2010, investing amounts of €640,000 and €555,000 respectively. The Bank has undertaken to provide a total of

up to €10,000,000 in equity funding at the fund’s request, whenever a new operation is realised.

Reclassification of securities

The Bank reclassified its financial assets held for trading category securities to the available for sales financial

assets category on 1 July 2008, in conformity with the change to the IAS 39 Standard approved on 13 October

2008. Owing to the turbulence in the financial markets in 2008, the fact that the Bank does not expect to dispose

of these securities over the short term explains the reason for the transfer between categories

Information on the impact of the reclassification of these securities, in income and fair value reserves account

headings is set out below:


Fair value 5,652,174 7,424,229

Accrued interest 4,399 3,471

Book value 5,656,573 7,427,700

Fair value reserve (5,865,860) 4,093,805

Capital gains/losses in income for period - 329,758

Impact in income for period if the reclassification had not been made (1,772,055) (1,602,996)

The fiscal effect is not reflected in the amounts.

Collateralised debt securities with a nominal value of €404,470,000 and €351,180,000 respectively (Note 18)

were recognised in this account heading at 31 December 2011 and 2010.


89

10. DERIVATIVE FINANCIAL INSTRUMENTS

These operations were valued in conformity with the criteria set out in Note 2.6. c), at 31 December 2011 and

2010. Information on the respective notional and balance sheet value, at the said dates, is set out below:

2011

Notional amount Book value

Trading derivatives

Hedge derivatives

TotalAssets held for trading

Liabilitiesheld for trading

Hedge derivatives

Total

(Note 8)

Derivative financial instruments

OTC

. Swaps

Interest rate 11,162,654,957 14,917,906 11,177,572,863 634,798,840 (654,658,328) (61,492) (19,920,979)

. Caps & Floors 1,940,651,040 - 1,940,651,040 33,343,537 (33,324,740) - 18,796

. Options

On interest rate 600,000,500 - 600,000,500 45,594,226 (45,606,280) - (12,054)

13,703,306,497 14,917,906 13,718,224,403 713,736,603 (733,589,348) (61,492) (19,914,237)

Stock exchange trading

. Futures

Interest rate 30,768,886 - 30,768,886 - - - -

Market value 3,667,000 - 3,667,000 - - - -

13,737,742,383 14,917,906 13,752,660,289 713,736,603 (733,589,348) (61,492) (19,914,237)

2010


Trading derivatives

Hedge derivatives

TotalAssets held for trading

Liabilities held for trading

Hedge derivatives

Total

(Note 8)


OTC

. Swaps

Interest rate 10,609,327,929 15,815,750 10,625,143,679 370,958,733 (360,533,298) (348,930) 10,076,505

. Caps & Floors 2,703,102,260 - 2,703,102,260 37,246,105 (37,205,261) - 40,844

. Options

On interest rate 600,000,500 - 600,000,500 19,068,510 (19,079,533) - (11,023)

On currency 18,205,928 - 18,205,928 53,981 (51,458) - 2,523

13,930,636,618 15,815,750 13,946,452,368 427,327,329 (416,869,550) (348,930) 10,108,849


. Futures

Interest rate 9,870,977 - 9,870,977 - - - -

Market value 3,618,000 - 3,618,000 - - - -

13,944,125,595 15,815,750 13,959,941,345 427,327,329 (416,869,550) (348,930) 10,108,849

The book value of the assets classified as hedged items, at 31 December 2011 and 2010, totalled €11,502,767

and €12,460,591 respectively, including €1,442,632 and €1,491,606 (Note 11), respectively, in respect of value

adjustments.

The book value of the liabilities classified as hedged items, at 31 December 2011 and 2010, also totalled

€6,559,757 and €6,328,521 respectively, including €345,377 and €331,207 (Note 17), respectively, in respect of

value adjustments.


90

Information on the distribution of derivative financial instruments operations, at 31 December 2011 and 2010 by

periods to maturity (notional amounts) is set out below:

2011

> 3 months > 6 months > 1 year

<= 3 months <= 6 months <= 1 year <= 5 years > 5 years Total


OTC

. Swaps

Interest rate

Trading 684,687,165 488,815,517 295,149,777 2,711,564,625 6,982,437,872 11,162,654,957

Hedge - - - 14,917,906 - 14,917,906

684,687,165 488,815,517 295,149,777 2,726,482,531 6,982,437,872 11,177,572,863

. Caps & Floors

Trading - - - 1,596,877,847 343,773,193 1,940,651,040

. Options

On interest rate - - - - 600,000,500 600,000,500

684,687,165 488,815,517 295,149,777 4,323,360,379 7,926,211,565 13,718,224,403


. Futures

Interest rate

Trading 30,768,886 - - - - 30,768,886

Market value 3,667,000 - - - - 3,667,000

719,123,051 488,815,517 295,149,777 4,323,360,379 7,926,211,565 13,752,660,289

2010


<= 3 months <= 6 months <= 1 year <= 5 years > 5 years Total


OTC

. Swaps

Interest rate

Trading 150,015,131 49,651,922 992,298,873 3,842,407,285 5,574,954,718 10,609,327,929

Hedge - - - 5,000,000 10,815,750 15,815,750

150,015,131 49,651,922 992,298,873 3,847,407,285 5,585,770,468 10,625,143,679

. Caps & Floors

Trading - 114,300,000 608,551,286 925,714,080 1,054,536,894 2,703,102,260

. Options

On interest rate - - - - 600,000,500 600,000,500

On currency 18,205,929 - - - - 18,205,929

168,221,060 163,951,922 1,600,850,159 4,773,121,365 7,240,307,862 13,946,452,368


. Futures

Interest rate

Trading - 9,870,977 - - - 9,870,977

Market value - 3,618,000 - - - 3,618,000

168,221,060 177,440,899 1,600,850,159 4,773,121,365 7,240,307,862 13,959,941,345


91

Information on the distribution of derivative financial instruments operations, by counterparty type, at 31

December 2011 and 2010, is set out below:

2011 2010

Notional amount Book value Notional amount Book value

Contracts on interest rate

Interest rate swaps

Financial institutions 5,712,202,279 (619,470,494) 5,426,720,004 (319,733,434)

Customers 5,465,370,584 599,549,515 5,198,423,675 329,809,938

11,177,572,863 (19,920,979) 10,625,143,679 10,076,504

Caps & Floors

Financial institutions 977,755,520 (29,192,508) 1,351,551,130 (25,977,495)

Customers 962,895,520 29,211,304 1,351,551,130 26,018,339

1,940,651,040 18,796 2,703,102,260 40,844

Options on interest rate

Financial institutions 300,000,000 (45,606,280) 300,000,000 (19,079,533)

General government 300,000,000 45,594,226 300,000,000 19,068,510

Customers 500 - 500 -

600,000,500 (12,054) 600,000,500 (11,023)

Options on currency

Financial institutions - - 9,102,964 44,388

Customers - - 9,102,964 (41,864)

- - 18,205,928 2,524

Futures

Stock exchange 34,435,886 - 13,488,977 -

13,752,660,289 (19,914,237) 13,959,941,345 10,108,849

11. LOANS AND ADVANCES TO CUSTOMERS



Domestic credit

Loans 419,484,876 417,661,099

Sight deposit overdrafts 5,693,494 6,002,978

Other credit 10,229,736 9,901,847

Securitised domestic credit

Commercial paper 15,300,000 11,350,000

Foreign loans

Loans 307,963,193 376,082,487

Current account credit 358,573 2,835,682

Sight deposit overdrafts - 1

Other credit 70,773 48,302

Value adjustments related to hedged assets (Note 10) 1,442,632 1,491,606

760,543,277 825,374,002

Interest receivable 3,917,068 2,563,840

Deferred income

Commissions associated with amortised cost ( 2,523,847 ) ( 3,334,398 )

Interest ( 64,427 ) ( 8,704 )

761,872,071 824,594,740

Overdue credit and interest 5,441,555 9,068,087

767,313,626 833,662,827

Impairment (Note 29) ( 68,180,997 ) ( 45,750,454 )

699,132,629 787,912,373

Information on impairment movements for 2011 and 2010, is set out in Note 29.


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This account was broken down as follows, by periods to maturity at 31 December 2011 and 2010:


Up to three months 26,150,000 12,198,917

Three months to one year 20,744,913 12,792,890

One to five years 214,788,278 241,250,807

More than five years 492,808,019 550,292,726

Current account overdrafts 6,052,067 8,838,662

760,543,277 825,374,002

Impairment, recognised at 31 December 2011 and 2010, was assessed as follows:


Separate analysis 64,789,921 39,996,004

Collective analysis 3,391,076 5,754,450

68,180,997 45,750,454

The total nominal value of credit suffering from specific impairment at 31 December 2011 and 2010 was

€148,082,791 and €113,382,404 respectively, including the amounts recognised in outstanding and overdue

credit.

The sectoral distribution of loans and advances to customers (nominal value), excluding overdue credit, at 31

December 2011 and 2010, was as follows:


Sector of activity Amount % Amount %

Manufacturing

Electricity, water and gas generation and distribution 120,823,388 15.9 135,765,101 16.4

Food, beverages and tobacco industries 10,427,577 1.4 11,199,835 1.4

Base metallurgical and metal industries 5,607,273 0.7 5,617,275 0.7

Textiles industry 7,729,834 1.0 7,619,182 0.9

Chemicals and synthetic or artificial fibres manufacturing 9,528,062 1.3 9,881,345 1.2

Paper pulp, card and publishing and printing thereof 552,626 0.1 631,574 0.1

Manufacture of electrical and optical equipment 740,016 0.1 791,294 0.1

Manufacturing 23,101,876 3.0 1,279,848 0.2

Manufacture of articles of rubber and plastics 238,464 0.0 343,083 0.0

Properties, rentals and corporate services

Property activities 56,542,359 7.4 59,433,875 7.2

Other 105,630,199 13.9 138,192,391 16.7

Transport, warehousing and communications 224,330,893 29.5 241,036,829 29.2

Construction 98,798,795 13.0 100,070,640 12.1

Wholesale/retail 2,750,584 0.4 20,510,887 2.5

Health and social security 16,983,095 2.2 17,627,511 2.1

Financial activities 15,857,647 2.1 15,667,970 1.9

Hotels and restaurants 3,875,118 0.5 5,036,398 0.6

Other collective, social and personal activities and services 44,327,976 5.8 42,068,562 5.1

Loans and advances to individual customers 12,697,493 1.7 12,600,402 1.5

760,543,277 100 825,374,002 100

The Bank, in 2011, disposed of global credit operations for the amount of €22,456,571, for a book value of

€23,417,261, making capital losses of €960,690 (Note 25).


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12. OTHER TANGIBLE ASSETS

Information on movements in the “other tangible assets” account headings for the years 2011 and 2010 is set out

below:

2011

Balance at 31.12.10 Net

Gross amount Accumulated Depreciation Write-offs amount at

(amount in euros) depreciation Acquisitions for period (net)31 December

2011

Property:

For own use 16,200,020 (4,135,759) 135,095 (492,937) - 11,706,419

Other property 77,843 (77,843) - - - -

Equipment:

IT equipment 1,979,288 (1,818,630) 149,452 (157,679) (112) 152,318

Interior installations 1,810,123 (1,767,463) - (11,320) - 31,339

Furniture and materials 1,544,802 (1,204,499) 1,651 (75,156) - 266,798

Plant and machinery 572,867 (503,396) 1,458 (25,714) - 45,215

Transport material 148,836 (107,690) - (13,914) (13,317) 13,916

Other equipment 1,214 (412) - - - 802

Security equipment 240,087 (240,087) - - - -

Property leases:

IT equipment 17,262 (5,754) - (5,754) - 5,754

22,592,342 (9,861,532) 287,655 (782,475) (13,429) 12,222,561

2010

Balance at 31.12.09 Net

Gross amount Accumulated Depreciation Write-offs amount at

(amount in euros) depreciation Acquisitions for period (net) 31.12.10

Property:

For own use 16,200,020 (3,656,331) - (479,428) - 12,064,261

Other property 77,843 (77,843) - - - -

Equipment:

IT equipment 1,775,535 (1,623,691) 223,232 (213,721) (697) 160,658



Plant and machinery 573,069 (477,571) - (26,027) - 69,471

Transport material 148,836 (77,124) - (30,565) - 41,147

Other equipment 1,214 (412) - - - 802


Property leases:

Transport material 351,750 (281,400) - - (70,350) -

IT equipment - - 17,262 (5,754) - 11,508

22,723,790 (9,317,030) 241,608 (846,510) (71,047) 12,730,810

13. INTANGIBLE ASSETS

Information on movements in the “intangible assets” account headings for the years 2011 and 2010 is set out

below:

(amount in euros)

2011

Balance at 31.12.10Acquisitions Transfers Adjustments

Depreciation for period

Net amount at31 December

2011Gross

amountAccumulated depreciation

Automatic data processing systems 4,233,175 (4,150,911) 335,954 332,200 - (221,817) 528,602

Intangible assets in progress 437,392 - 161,556 (332,200) (5,452) - 261,296

4,670,567 (4,150,911) 497,510 - (5,452) (221,817) 789,897

(amount in euros)

2010

Balance at 31.12.09Acquisitions


Net amount at31.12.10Gross

amountAccumulated depreciation

Automatic data processing systems 4.171.052 (3.979.309) 62.123 (171.602) 82.265

Intangible assets in progress 258.193 - 179.199 - 437.392

4.429.245 (3.979.309) 241.322 (171.602) 519.656


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Intangible assets in progress, at 31 December 2011 and 2010, comprised expenses incurred on the acquisition of

software not yet in use at the said dates.

14. INCOME TAX

Deferred tax assets and liabilities balances, at 31 December 2011 and 2010, were:


Current tax assets

Income tax to be recovered

Current year 15,134,689 9,939,146

Past years 8,399,709 657,900

23,534,398 9,597,046

Current tax liabilities

Income tax payable (2,150,156) (257,589)

21,384,242 9,339,457

Deferred tax assets 60,383,503 29,036,888

Deferred tax liabilities (2,831,370) (2,700,360)

57,552,133 26,336,528

At 31 December 2011, the “Income tax to be recovered” heading included €951,974 in respect of a claim made by

the Bank on its IRC for 1999, which was received in January 2012.

The “income tax to be recovered” account heading, at 31 December 2010, included €657,900 in respect of a

claim made by the Bank on its IRC for 2000 which was received in December 2011.

The following table provides details and information on deferred tax movements in 2011 and 2010:

2011

(amounts in euros) Balance at

31.12.10Change in income

Change in shareholders’

equity


Commissions 9,095,196 (3,902,877) - 5,192,320

Valuation of available for sale financial assets 8,419,308 - 22,550,943 30,970,251

Impairment and provisions not accepted for fiscal purposes 7,096,433 12,293,889 - 19,390,321

Fiscal benefits - venture capital (Note 2.11) 1,890,001 110,000 - 2,000,001

Impairment of available for sale financial assets 271,636 8,880 - 280,516

Deferral of capital gains tax on the disposal of financial investments (Note 2.11) (247,290) 148,269 - (99,022)

Property revaluations not accepted for fiscal purposes (188,755) 6,502 - (182,253)

26,336,528 8,664,663 22,550,943 57,552,134


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2010

Change Rate change


31.12.09Income

Shareholders’ equity

IncomeShareholdes’

equityBalance at31.12.2010

Commissions 8,071,278 385,143 - 638,775 - 9,095,196

Valuation of available for sale financial assets 445,030 - 7,330,747 - 643,531 8,419,308

Impairment and provisions not accepted for fiscal purposes 9,011,701 (2,748,808) - 833,540 - 7,096,433

Fiscal benefits - Venture capital (Note 2.11) 1,081,401 808,600 - - - 1,890,001

Impairment of available for sale financial assets 230,231 18,479 - 22,926 - 271,636

Deferral of capital gains tax on the disposal of financial investments (Note 2.11) (395,559) 148,269 - - - (247,290)

Property revaluations not accepted for fiscal purposes (178,423) 6,080 - (16,412) - (188,755)

Revaluation of derivative financial instruments 150,185 (150,185) - - - -

Valuation of other assets at fair value through profit or loss (10,863) 10,863 - - - -

Value adjustments to hedged assets (123,250) 123,250 - - - -

18,281,730 (1,398,309) 7,330,747 1,478,829 643,531 26,336,528

The group does not recognise deferred tax assets whenever the existence of future taxable income allowing their

respective use is not probable. Accordingly and taking future taxable profit and the limit defined by article 92 of

the IRC Code into account, at 31 December 2011 and 2010 the deferred tax assets not registered by Caixa

Capital totalled €1,186,732 and €892,695, respectively.

Information on tax on profit recognised in the income statement and the tax burden, measured by the ratio

between the appropriation for tax on profit and net profit for the year before tax is set out below:


With an impact on Income for period

Current year tax

IRC for period 2,674,129 13,659,346

Banking sector contribution 677,236 -

Adjustments for past years ( 906,775 ) 31,853

2,444,590 13,691,199

Deferred tax

Registration and reversal of temporary differences ( 8,664,663 ) ( 80,520 )

Total tax in income statement ( 6,220,073 ) 13,610,679

Income before tax and non-controlling interests 2,372,734 53,271,806

Fiscal burden ( 262,19% ) 25,55%

With an impact in reserves

Deferred tax – fair value reserve 22,550,943 7,974,278

Current year tax – Capital gains on treasury shares (Note 21) - 3,913,114

Current year tax 23,400 182,320

Total tax in reserves 22,574,343 12,069,712

Total tax in shareholders’ equity 16,354,270 25,680,391

Current tax reflected in reserves for the amount of €23,400 and €182,320 in 2011 and 2010, refers to the tax

associated with the revaluation of debt securities sold in 2011 and 2010 and classified as available for sale

financial assets in the year, for the purposes of assessing tax income for past years. The deferred tax recognised

in the same account heading refers to the revaluation during the year of equity investments and debt securities

which are also classified as available for sale financial assets, whose fiscal effects will only be produced at the

time of disposal.


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The following is an analysis of the reconciliation between the nominal tax rates in 2011 and 2010:

2011 2010

(amounts in euros) Rate Amount Rate Amount

Income before tax and non-controlling interests 2.372.734 53.271.806

Tax assessment based on nominal rate 26.50% 628,775 26.50% 14,117,029

State surcharge 4.14% 98,204 2.41% 1,281,795

Total tax 726,979 15,398,824

Fiscal loss allocated by Economic Interest Grouping (10.13%) (240,330) (0.51%) (272,561)

Impact of tax regime on the activity of

Madeira Offshore Branch (Note 2.11) (3.95%) (93,834) (5.85%) (3,118,987)

Elimination of double taxation 44.25% 1,050,037 (0.33%) (177,827)

Fiscal benefits (2.75%) (65,258) (0.02%) (9,182)

Capital gains on investments - tax regime applicable to

Caixa Capital and Caixa Desenvolvimento (64.72%) (1,535,714) (2.97%) (1,582,304)

Fiscal regime of FCR Energias Renováveis (4.94%) (117,221) 2.72% 1,449,122

Change in nominal tax rate - - (2.78%) (1,478,829)

Banking sector contribution 28.54% 677,236 - -

Fiscal capital gains (15.02%) (356,498) (0.95%) (504,552)

Provisions and impairment not relevant for fiscal purposes 25.49% 604,828 7.13% 3,800,172

Separate source-based taxation 4.42% 104,990 0.20% 105,693

Recognition of deferred tax on Madeira Offshore Branch (249.71%) (5,924,937) - -

Adjustments for past years (38.22%) (906,775) 0.20% 31,853

Other (6.05%) (143,578) 0.00% (30,742)

(262.15%) (6,220,073) 25.75% 13,610,679

For the year ended 31 December 2011, the Bank recognised deferred tax on provisions temporarily not accepted

for fiscal purposes on loans made by the offshore branch given the end of the fiscal benefit for this branch starting

1 January 2012.

In conformity with current legislation, tax returns are subject to review and correction by the tax authorities for a

period of four years. The Bank’s tax returns for 2008 - 2011 are therefore still subject to review and the possibility

of correction.

The board of directors considers that any correction is unlikely to have a significant impact on the financial

statements, at 31 December 2011.

Banking sector contribution

With the publication of Law 55 - A/2010, of 31 December, the Bank was covered by the banking sector

contribution regime. The banking sector contribution is levied on:

a) The liabilities assessed and approved by the taxpayers less basis (Tier 1) and complementary (Tier 2) own

funds and the deposits covered by the Deposit Guarantee Fund. The following are deducted from liabilities:

Elements which, according to the applicable accounting standards are recognised as shareholders’ equity;

Liabilities associated with the recognition of responsibilities for defined benefits plans;

Liabilities for provisions;

Liabilities resulting from the revaluation of derivative financial instruments;

Deferred income, without considering income related to borrowing operations and;

Liabilities for non-derecognised assets in securitisation operations.


97

b) The notional amount of the off-balance sheet derivative financial instruments assessed by the taxpayers

except for financial hedge derivatives or whose risk positions balance each other out.

The rates applicable to the bases defined in the preceding sub-paragraphs a) and b) are 0.05% and 0.00015%,

respectively, based on the amount assessed.

The Bank has posted the banking sector contribution to the “current year tax” account heading in the income

statement.

15. OTHER ASSETS

This account heading comprises the following:(amounts in euros) 2011 2010

Debtors and other investments

Debtors - futures trading 5,786,015 2,878,717

Other debtor balances acquired as part of the liquidation of FCR PME (Note 19) 2,066,139 2,460,889

Acquisition of investments – Banif CVC 44,419 22,721

Amount receivable on the sale of Manuel Inácio & Filhos, S.A. - 11,629,371

Amount receivable on the sale of Barraqueiro:

Capital - 3,563,606

Interest receivable - 54,899

Other partners’ loans (Note 8) - 621,804

Miscellaneous debtors

Interest pending settlement 3,566,294 1,619,240

Other 14,185,244 8,250,313

25,648,111 31,101,560

Other assets 48,846 48,846

Income receivable

Other income receivable 251,184 92,845

Deferred expenses

Insurance 29,779 31,003

Operational leasing instalments 3,812 3,812

Other deferred expenses 628,454 875,569

662,045 910,384

Prepayments and accrued income

Securities operations pending settlement 51,649,724 17,129,822

Other lending operations pending settlement 524,551 1,386,505

52,174,276 18,516,327


83,979,017 55,650,300

Impairment (Note 29) ( 8,532,316 ) ( 17,165,477 )

75,446,700 38,484,823

The “debtors - futures trading” account heading at 31 December 2011 and 2010 comprises the futures margin

account.

In July 2010 the Bank acquired 50% of the capital of CGD – Participações em Instituições Financeiras, Ltda.

(CGD Participações), for the amount of €22,721 with the remaining 50% of the capital being held by Banco Caixa

Geral Brasil. This vehicle was set up to acquire 70% of the share capital of Banif Corretora de Valores e Câmbio,

S.A. (Banif CVC) for the amount of 123.9 million reais (€51.3 million at 31 December 2011), as provided for in the

agreement entered into on 2 June 2010. The Bank, in 2011, paid up the capital increase agreed in 2010 for the

amount of 50,000 reais (€21,698), with 65,013,200 reais (€26,910,551) of capital to be paid by CGD

Participações remaining. In February 2012 23,750,000 reais (€10,409,818) was paid up.

The definitive contract for the acquisition of Banif CVC was signed on 6 February 2012.


98

The shareholders’ agreement of Banif Corretora de Valores e Câmbio entered into on the same date considers

the following options:

Put option on Banif Banco de Investimento (Brasil), S.A. (Banif) to CGD Participações, at the exclusive

discretion of Banif, in the period between the 12th and 60th month from the date of the signing of the shares

sales/purchase contract of 2 June 2010. The price will vary on the basis of the net profit for the period up to

the date upon which the option is realised.

Call option on Banif by CGD Participações at the exclusive discretion of CGD Participações, starting from

the 60th month after the signing of the shares sales/purchase contract of 2 June 2010. The price will vary on

the basis of the net profit for the period up to the date upon which the option is realised.

At 31 December 2011, the “miscellaneous debtors – other” account heading refers to the amount of the

cancellation of a swap taken out with the Bank and the already processed costs incurred thereon for the amount

of €7,580,458. The risk of this operation was fully assumed by Banco Caixa Geral Brasil, S.A. (BCG Brasil) under

a “Risk Investment Agreement”. At 31 December 2011, the Bank posted a liability on behalf of BCG Brasil for the

same amount (Note 19).

The “miscellaneous debtors - other” account heading at 31 December 2011 and 2010 includes €3,337,675 and

€3,305,441 in amounts receivable from customers for the invoicing of services provided by the Bank.

The “other deferred expenses” account heading, at 31 December 2011 and 2010 includes €395,040 and

€542,104, respectively, made on account of the investment in Agrupamento Complementar de Companies TREM

II – Aluguer de Material Circulante, ACE (TREM II).

In April 2009, the group exercised its sales option on Manuel Inácio & Filhos, S.A. shares as provided for by the

shareholders’ agreement. The amount receivable, calculated using the methodology provided for in this

agreement totalled €11,629,371. As a result of this operation, the company (i) transferred potential capital losses

of €1,875,000 which had been recognised in the investment to impairment on debtors and other investments and

(ii) recognised capital gains of €7,878,971 over the cost price in the “income from assets and liabilities at fair

value through profit or loss” account heading which was fully offset by the same amount of impairment recognised

in accounts receivable. It was agreed with the promoting shareholders of Manuel Inácio & Filhos in December

2010 that an amount of €1,666,667 would be received. At the same date an addendum to the contract for the

purchase and sale of shares under which the company sold the investment to the Fundo de Recuperação was

signed. In 31 December 2010, the group adjusted the impairment on the basis of the amount receivable from the

proceeds of such operations. The amount was liquidated in February 2012.

At 31 December 2010, the amount of €3,563,606 refers to the amount receivable as part of the disposal in June

2002 of Caixa Desenvolvimento’s investment in Barraqueiro, SGPS, S.A. Based on the initial agreement and

subsequent addenda, an amount of €3,563,606 was liquidated in 2010 and 2011, with the whole amount of the

debt having been paid off at 31 December 2011.

At 31 December 2010, the “partners’ loans” account heading comprised partners’ loans to MWH – Gestão de

Recursos Naturais, S.A., with interest payable at a Euribor-indexed rate.

The “securities operations pending settlement” account heading, at 31 December 2011 and 2010, comprises the

value of the operations for the sale of securities at the end of the year and settled in the first few days of the

following year.

At 31 December 2011 and 2010, the “overdue credit and interest” account heading included overdue loans of

€3,551,441, originated in Caixa Valores and deriving from securities trading operations in 1992 by a group of

customers. Impairment for the same amount has been allocated to this credit.


99

Caixa Valores took legal action against the group of customers in September 1994, accusing them of

responsibility for realising the referred to operations and claiming an amount of €6,003,180 plus interest accruing

since June 1993. As the action is still in progress, the Bank has not recorded any asset related with this situation.

Information on “impairment” at 31 December 2011 and 2010, is set out below:


Debtors

Caixa Valores 3,551,441 3,551,441


Overdue interest on Interest rate swaps 664,701 757,507

Amount receivable on the sale of Manuel Inácio & Filhos, S.A. - 8,829,371

Other 2,093,826 2,629,963

8,532,316 17,165,477

Impairment on overdue invoices and bad and doubtful debts at 31 December 2011 is recognised in the

“impairment of credit” account heading (Note 11).

16. OTHER CREDIT INSTITUTIONS’ AND CENTRAL BANKS’ RESOURCES



Central banks’ resources

Term deposits 232,000,000 330,000,000

Credit institutions’ resources in Portugal

Very short term resources 435,916,145 470,228,074

Term deposits 318,900,000 327,390,000

Sight deposits 282,710 136,228

Credit institutions’ resources abroad

Sight deposits 1,230 405,571

987,100,085 1,128,159,873

Interest payable 8,390,967 983,969

995,491,052 1,129,143,842

Information on the periods to maturity of other credit institutions’ resources is set out below:


Sight deposits and overdrafts 283,940 541,799

Up to three months 804,516,145 1,101,818,074

Three months to three years 7,300,000 25,800,000

More than three years 175,000,000 -

987,100,085 1,128,159,873

The “central banks’ resources” account heading at 31 December 2011 comprises term deposits with the Bank of

Portugal, as collateral for European Central Bank funding. These deposits are collateralised by a pledge on

securities with a nominal value of €399,275,000 and €377,321,000 respectively at 31 December 2011 and 2010

(Note 18) with interest at the rate fixed by the European Central Bank.


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17. CUSTOMER RESOURCES AND OTHER LOANS



Deposits

Sight 37,843,824 54,613,176

Term 73,967,420 47,868,716

111,811,244 102,481,892

Value adjustments related to hedged liabilities (Note 10) 345,377 331,207

112,156,621 102,813,099

Interest payable on deposits 1,912,794 2,183,263

114,069,415 104,996,362

The following information is provided on deposits at 31 December 2011 and 2010 in accordance with their

respective period to maturity:


Repayable on demand 37,843,824 54,613,176



One to five years 5,000,000 5,000,000


111,811,244 102,481,892

18. PROVISIONS AND CONTINGENT LIABILITIES

Provisions

Information on “provisions for other risks” movements in 2011 and 2010 is set out below:

2011


31.12.10

Net provisions in income

statementUse

Balance at31.12.11

For other risks and liabilities:

Guarantees and commitments 581,456 424,644 - 1,006,100

Other risks 2,630,179 1,539,591 (38,287) 4,131,483

3,211,635 1,964,235 (38,287) 5,137,583

2010


31.12.09


statementUse

Balance at31.12.10

For other risks and liabilities:

Guarantees and commitments 520,587 60,869 - 581,456

Other risks 13,609,267 (8,395,799) (2,583,290) 2,630,179

14,129,854 (8,334,930) (2,583,290) 3,211,635

Provisions for guarantees and commitments are calculated on the basis of the estimated losses associated

with operations in progress, in accordance with a separate analysis and Caixa Geral de Depósitos group

parameters.

Provisions for other risks and liabilities comprise the group’s best estimate of eventual amounts to be

expended on settling legal, fiscal and other contingencies.


101

Contingent liabilities and commitments

Contingent liabilities associated with banking activity are recognised in off-balance sheet account headings

as follows:


Contingent liabilities:

Guarantees and sureties 54,478,484 55,471,419

Asset-backed guarantees

Available for sale financial assets (Note 9) 404,470,000 351,180,000

Financial assets at fair value through profit or loss (Note 8) 1,550,000 75,591,000

460,498,484 482,242,419

Commitments:

Revocable lines of credit 75,066,972 94,521,902

Securities subscriptions 7,921,679 62,511,679

Potential liability to Investors’ Indemnity System 4,188,207 1,722,312

Term liabilities to Deposit Guarantee Fund 162,182 162,182

87,339,040 158,918,075


Liabilities for the provision of services:

Deposit and custody of securities 6,529,834,056 7,794,428,153

Amounts under bank management 418,551,972 394,732,086

6,948,386,028 8,189,160,239

The “assets-backed guarantee” account heading, at 31 December 2011 and 2010 comprises the nominal

value of debt securities pledged, by the Bank (Notes 8 and 9), in respect of the following situations:


Pledge on securities in the “ECB assets pool” (Note 16) 399,275,000 377,321,000

Investors’ Indemnity System (SII) 3,830,000 2,500,000

Caixa Geral de Depósitos, S.A. – Euronext 2,500,000 2,500,000

Large transactions processing system (SPGT) - 44,200,000

Deposit Guarantee Fund 415,000 250,000

406,020,000 426,771,000

The object of the Deposit Guarantee Fund is to guarantee customers’ deposits in conformity with the limits

defined by the General Credit Institutions Regime. This takes the form of regular annual contributions. A part

of the said contributions takes the form of an irrevocable commitment to realise the respective contributions

when requested by the Fund. These amounts are not recognised in costs. The total value of commitments

assumed since 1996 totals €162,182.

The balance on the “amounts under bank management” account heading, at 31 December 2011 and 2010

comprises the value of the following venture capital funds managed by Caixa Capital, excluding outstanding

capital:


Fund Value of Fund Net income Value of Fund Net income

FCR CGD Group – Caixa Capital 333,872,457 ( 11,705,789 ) 327,115,412 9,794,290

FCR Energias Renováveis - Caixa Capital 33,042,135 1,966,929 31,075,206 ( 3,017,725 )

FCR Mezzanine 29,337,161 ( 18,463 ) 29,355,624 ( 371,187 )

FCR FDR 14,320,712 ( 679,288 ) - -

FCR Empreender + 7,979,507 ( 1,706,338 ) 7,185,844 ( 169,845 )

418,551,972 394,732,086


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19. OTHER LIABILITIES



Creditors and other resources

General government

Deduction of tax at source 4,306,577 4,963,292

Value added tax 711,335 689,183

Social security contributions 248,602 234,618

Interest and dividends payable 215,895 203,886

Outstanding capital (Note 9) - 86,621

Miscellaneous creditors

Banco Caixa Geral Brasil, S.A. (Note 15) 7,580,458 -

Investors’ Indemnity System (Note 26) 2,850,940 -

Cost price of assets acquired on liquidation of FCR PME 596,953 728,199

Creditors - securities operations 184,538 695,417

Suppliers of leased assets 7,812 12,356

Other suppliers 385,816 594,944

Other 1,202,453 418,526

18,291,379 8,627,042

Costs payable

Other costs payable

Additional remuneration 2,694,000 2,536,227

Holiday and holiday subsidies 916,492 1,692,290

Pension fund 339,097 432,954

Other 1,641,902 1,002,984

5,591,491 5,664,454

Deferred income

Agencying commissions 870,816 1,057,182

Commissions on the provision of guarantees and other contingent liabilities 3,612 6,315

874,428 1,063,497

Other accruals and deferred income accounts


Lending operations pending settlement

Commissions payable - syndicated credit operations 17,904,545 32,381,592

Other 496,371 1,067,146

68,315,136 50,533,123

93,072,434 65,888,116

The balance on the “creditors - securities operations” account heading at 31 December 2011 and 2010, refers to

the current accounts of brokerage operations customers.

The “securities operations pending settlement” account heading at 31 December 2011 and 2010, comprises the

value of securities purchase operations at the end of the year and settled in the first few days of the following

year.

The “commissions payable - syndicated loan operations” account heading at 31 December 2011 and 2010,

comprises amounts charged to customers for the structuring of syndicated loan operations in which CGD Group

supplies all or a significant part of the loan with the latter objective of placing it with other credit institutions. As

described in Note 2.14, the Bank recognises the part of the commissions received in proportion to the total

amount of credit the group intends to syndicate in this account heading.


103

Information is provided below on the value of the assets acquired from the winding up and liquidation of FCR

PME at 31 December 2011 and 2010:


Other assets (Note 15):

Debtors 2,099,459 2,460,729

Amounts received but still not transferred 50,000 7,476

2,149,459 2,468,205

Impairment ( 1,552,506 ) ( 1,740,006 )

596,953 728,199

The amount spent on the acquisition of assets will be settled as the corresponding assets are received. According

to the contracts entered into, the differences between the amounts of the disposal of investments and the debtor

balances and those realised by the group should be paid or retuned by the fund’s investors.

20. SUBSCRIBED CAPITAL AND TREASURY SHARES

Subscribed capital comprises 81,250,000 shares with a nominal value of €1 each.

Information on the Bank’s equity structure, at 31 December 2011 and 2010, is set out below:

No. Shares %

Gerbanca, SGPS, S.A. 81,016,231 99.7

Other 233,769 0.3

81,250,000 100.0

The Bank owned 4,658,000 of its own shares at a cost price of €5,999,453, at 31 December 2009.

The Bank disposed of its treasury shares in June 2010 at €5 each, for €23,290,000 making accounting gains of

€13,377,432, net of tax of €3,913,114 (Note 14), recognised in retained earnings.

21. RESERVES, RETAINED EARNINGS AND PROFIT FOR YEAR

The composition of the reserves and retained earnings account headings at 31 December 2011 and 2010, was as

follows:


Fair value reserves

Potential gains

Debt instruments ( 113,764,751 ) ( 35,385,271 )

Shares and investment units 13,986,441 12,757,830

Other equity instruments ( 6,160,983 ) ( 5,440,244 )

( 105,939,293 ) ( 28,067,685 )

Fiscal effect

Current year tax 1,342,997 1,319,597

Deferred tax 30,970,251 8,419,308

( 73,626,045 ) ( 18,328,780 )

Other reserves and retained earnings

Legal reserve 46,758,852 42,198,539

Free reserve 87,814,071 60,371,309

Legal revaluation reserve 4,338,403 4,338,403

Retained earnings 54,843,086 61,692,880

193,754,412 168,601,131

Profit for period 8,552,996 40,153,282

128,681,363 190,425,632


104

Legal reserve

In conformity with Decree Law 298/92 of 31 December, changed by Decree Law 201/2002 of 26 September, the

Bank is required to set up a legal reserve fund until equal to its share capital or sum of free reserves and retained

earnings, if higher, annually transferring an amount of not less than 10% of net profits to the reserve.

The reserve may only be used to cover accrued losses or for share capital increases. The above referred to

amount comprises the full amount of the legal reserve registered by the group. The value of the legal reserve

registered by the Bank at 31 December 2011 and 2010 totalled €45,344,162 and €40,783,849 respectively.

Legal revaluation reserve

The Bank revalued its fixed assets in 1998, under Decree Law 31/98 of 11 February. The increase of €4,338,403,

in the net value of the fixed assets was recognised in the “revaluation reserves” account heading in the separate

accounts.

Revaluation reserves may only be used to cover accrued losses or for share capital increases.

Fair value reserves

The fair value reserve recognises potential capital gains and losses on available for sale financial assets, net of

the corresponding fiscal effect.

Dividends

A resolution was passed at the shareholders’ meeting of 20 May 2011, to distribute €15,000,000 in dividends for

2010.

Profit for year

Information on the Bank’s consolidated net income for 2011 and 2010 is set out below:


Bank’s separate net income (statutory accounts) 1,464,516 45,603,129

Subsidiaries’ contribution (statutory accounts)

Caixa Capital 5,148,225 4,862,655

Caixa Desenvolvimento 31,433 661,202

FCR Energias Renováveis – Caixa Capital 1,789,905 ( 2,746,130 )

CaixaBI Brasil – Serviços de Assessoria Financeira, Ltda. 2,136,829 -

9,106,392 2,777,727

Cancellation of dividends paid by the Bank to Caixa Desenvolvimento ( 2,500,000 ) ( 7,000,000 )

Impact of conversion of separate accounts to IFRS:

Valuation of subsidiaries by Caixa Capital 756,374 991,495

Valuation of subsidiaries by FCR Energias Renováveis - Caixa Capital ( 1,387,374 ) ( 2,230,101 )

Impairment on lending 1,113,087 11,032

Consolidated net income 8,552,996 40,153,282

According to the accounting policies applicable to the sector, Caixa Capital and FCR Energias Renováveis

recognise the valuation of all of their investments in the income statement. These valuations are recognised in the

fair value reserve in the case of “available for sale financial assets” in the group’s consolidated accounts.

22. NON-CONTROLLING INTERESTS

At 31 December 2011 and 2010, this account heading was fully made up of the non-controlling interests

comprising 9% of the investment units of FCR Energias Renováveis. In 2011 and 2010, the part of the profit/(loss)

assessed by FCR Energias Renováveis attributed to non-controlling interests totalled €39,811 and (€492,155),

respectively.


105

23. INTEREST AND INCOME AND INTEREST AND SIMILAR CHARGES



Interest and similar income:

Interest on investments in credit institutions In Portugal 582,566 374,217

Interest on investments in credit institutions abroad 484,230 -

Interest on domestic loans 14,532,803 10,726,478

Interest on foreign loans 11,595,666 9,330,670

Interest on financial assets held for trading:

Securities 4,058,409 9,688,399

Derivative instruments – swaps 284,819,060 231,859,582

Interest rate guarantee contracts 554,735 21,292

Interest on other financial assets at fair value through profit or loss

Securities 419,709 631,198

Interest on available for sale financial assets 17,441,519 9,282,190

Interest on hedge derivatives 379,974 335,694

Interest on debtors and other investments

Debtors 175,005 251,755

Partners’ loans 411 22,231

Interest on liquid assets 44,861 33,234

Other Interest 179,019 30,356

335,267,967 272,587,296

Commissions received associated with amortised cost 1,000,634 821,638

336,268,601 273,408,934

Interest and similar costs:

Interest on deposits

General government 163,631 131,687

Other resident entities 2,475,582 927,879

Other non-resident entities - 166,242

2,639,213 1,225,808

Interest on central banks’ resources 2,948,338 1,233,861

Interest on credit institutions’ resources in Portugal 18,962,890 8,391,933

Interest on credit institutions’ resources abroad 3,030 251,212

Interest on financial liabilities held for trading

Swaps 281,708,242 228,230,808


Other interest and similar costs 241,732 16,702

304,577,465 238,870,313

307,216,678 240,096,121


106

24. INCOME AND COSTS ON SERVICES AND COMMISSIONS



Income from services and commissions

For services provided

Structuring of operations 21,714,993 25,800,539

Venture capital funds management (Caixa Capital) 6,749,445 5,806,566

Deposit and custody of securities 892,816 976,608

Other 14,466,677 15,885,668

For operations realised on behalf of third parties 4,098,679 5,994,485

For guarantees provided 801,924 777,247

For commitments to third parties 141,102 135,927

Other 18,760,303 30,578,462

67,625,939 85,955,502

Costs of services and commissions

For banking services provided by third parties 3,505,162 10,577,365

For operations performed by third parties 1,254,360 1,600,952

Commissions for operations on financial instruments 66,452 50,549

For guarantees received 1,047 5,101

Other 1,005,902 9,291

5,832,923 12,243,258

The “income from services and commissions – other ” account heading for 2011 and 2010, essentially includes

financial advisory commissions. The “costs of services and commissions – for banking services provided by third

parties” account heading included €3,461,662 and €8,634,475, respectively, relating to commissions to be passed

on to other credit institutions in future syndications in accordance with the policy described in Note 2.14.


107

25. INCOME FROM FINANCIAL OPERATIONS



Foreign exchange income

Revaluation of foreign exchange position 285,391 259,434

Income from the disposal of loans and advances to customers

Loans and advances to customers (Note 11) ( 960,690 ) -

Income from assets and liabilities held for trading

Equity instruments ( 664,224 ) 16,774,887


Derivative instruments

Equity swaps - ( 17,101,307 )

Futures ( 2,760,516 ) ( 9,152,905 )

Interest rate swaps ( 26,691,885 ) 141,252

Options ( 3,560 ) 26,898


Other - 21,989

( 34,251,583 ) ( 19,738,765 )

Income from other financial assets at fair value through profit or loss

Debt instruments ( 755,371 ) ( 508,214 )

Equity instruments - 8,998

( 755,371 ) ( 499,216 )

Income from available for sale financial assets

Debt instruments 2,460,085 2,398,651

Equity instruments 1,468,884 465,712

3,928,969 2,864,363

Income from hedge operations

Interest rate swaps 75,306 171,965

Income from other financial operations

Value adjustments to hedged assets and liabilities ( 63,144 ) ( 147,462 )

Other ( 661 ) ( 843 )

( 63,805 ) ( 148,305 )

( 31,741,783 ) ( 17,090,524 )

Information on income from equity instruments classified as available for sale financial assets in 2011 and 2010 is

set out below (Note 9):



EDP Renováveis, S.A. 2,121,661 94,668

Fomentinvest SGPS, S.A. - 1,561,158

2,121,661 1,655,826

Losses on available for sale financial assets

Banco Espírito Santo, S.A. ( 652,777 ) -

Martifer SGPS, S.A - ( 1,177,787 )

Caixa Geral Finance Limited - ( 12,327 )

( 652,777 ) ( 1,190,114 )

1,468,884 465,712


108

26. OTHER OPERATING INCOME




Staff on loan – CGD Group 907,236 1,073,416

Provision of miscellaneous services 519,818 541,811

Reimbursement of expenses 273,713 331,446

Income from non-financial assets:

Other tangible assets 1,980 -

Other 1,859,556 415,827

3,562,303 2,362,500

Other operating costs

Tax

Indirect taxes

Rates 84,901 84,464

Stamp duty 213 1,771

Tax on road transport 614 1,072

Other 34 -

Direct taxes

Other tax 503,700 233,938

589,462 321,245

Contributions to Investors’ Indemnity System (Note 19) 2,850,940 -

Staff on loan – CGD Group 403,857 -

TREM II 147,064 166,787

Donations and subscriptions 33,036 32,496

Contributions to Deposit Guarantee Fund 27,096 17,500

Losses on tangible assets - 397

Other 29,820 215,385

3,491,813 432,565

4,081,275 753,810

Other operating income (net) ( 518,972 ) 1,608,690

The Bank, in 2011, posted €2,850,940 relative to an extraordinary contribution to the Investors’ Indemnity System.

At 31 December 2011, this amount had still not been liquidated (Note 19) and was liquidated in January 2012.

CaixaBI took special administrative proceedings against the Investors’ Indemnity System, pursuant to which it

applied for the cancellation of the resolution of the Management Committee of the Investors’ Indemnity System,

and consequent return of amounts paid plus interest starting from the time of effective payment, or subsidiarily, a

partial cancellation of the referred to resolution and consequent return of the excess amount paid plus interest

starting from the time of the respective payment.

27. EMPLOYEE COSTS



Remuneration paid to board of directors and inspection bodies 1,041,362 1,892,376

Remuneration paid to employees 11,000,308 12,318,320

12,041,670 14,210,696

Mandatory social costs:

Costs of remuneration 2,042,061 2,184,873

Pension costs (Note 2.13) 290,391 436,464

Other mandatory social costs 90,548 110,958

2,423,000 2,732,295

Other employee costs 788,160 432,294

15,252,830 17,375,285


109

The average number of staff employed by the Bank and its subsidiaries in 2011 and 2010, excluding the board of

directors and inspection bodies was 178 and 181, respectively, distributed as follows:

2011 2010

Senior management 79 81

Technical and line management 77 79

Administrative and auxiliary staff 22 21

178 181

28. OTHER ADMINISTRATIVE EXPENSES



Specialised services 4,109,365 6,157,395

Maintenance and repairs 1,148,440 1,085,209

Rents and leases 991,669 1,016,275

Travel and expenses 835,931 747,205

Communications 488,057 444,954

Advertising and publications 467,975 608,310

Water, power and fuel 125,402 127,852

Consumables 101,875 103,905

Publications 57,915 53,315

Staff training 52,876 75,750

Insurance 5,750 31,878

Other third party services 86,636 124,514

Other third party supplies 45,091 47,578

8,516,892 10,624,140

Information on the minimum payments of operational leases on transport and computer equipment at 31

December 2011 and 2010 is set out below:


Up to 1 year 634,453 744,261

Between 1 and 5 years 787,141 897,405

29. IMPAIRMENT

Information on impairment movements in 2011 and 2010 is set out below:

2011

(amounts in euros) Balance at31.12.10

Net provisions in income statement

UseExchange differences

TransfersBalance at31.12.11

Investments in credit institutions (Note 7) - - - 120.600 120.600

Loans and advances to customers (Note 11) 45,750,454 24,153,856 (3,065,581) 50,039 1,292,229 68,180,997

Debtors and other investments (Note 15) 17,165,477 1,816,903 (9,037,235) - (1,412,829) 8,532,316

Available for sale assets (Note 9)

Debt instruments - 3,961,150 - - - 3,961,150

Equity instruments 11,755,144 9 (8,291,869) 61,244 - 3,524,528

11,755,144 3,961,159 (8,291,869) 61,244 - 7,485,678

74,671,074 29,931,918 (20,394,685) 111,283 - 84,319,590

2010

(amounts in euros) Balance at31.12.09

Net provisions in income statement

UseExchange differences

Transfers OtherBalance at31.12.10

Loans and advances to customers (Note 11) 37,938,559 7,282,901 (1,251,345) 110,925 1,669,414 - 45,750,454

Debtors and other investments (Note 15) 17,956,869 826,481 - - (1,669,414) 51,541 17,165,477

Available for sale assets (Note 9) 5,438,408 9,881,783 (3,700,809) 135,762 - - 11,755,144

61,333,835 17,991,165 (4,952,154) 246,687 - 51,541 74,671,074


110

30. RELATED ENTITIES

All companies controlled by CGD Group, associated companies and management bodies are considered to be

entities related with the Bank.

Balances with group companies

The principal balances with Caixa Geral de Depósitos group companies not included in the consolidation

perimeter at 31 December 2011 and 2010 were as follows:


Assets

Loans to credit institutions - Repayable on demand

Caixa Geral de Depósitos, S.A. 903,739 5,088,631

Banco Caixa Geral, S.A. 61,114 24,787

Banco Caixa Geral - Brasil S. A. 93 -

Investments in credit institutions

Caixa Geral de Depósitos, S.A. 30,992,232 7,477,072

Banco Caixa Geral - Brasil S. A. 2,486,030 -

Financial assets held for trading

Caixa Geral de Depósitos, S.A.

- of which: trading derivatives 55,171,047 31,779,923

Locarent 1,546,091 1,612,394

Caixa Geral Finance Limited - 83,188


Caixa Geral Finance Limited 6,957,030 7,677,769

CGD Finance Limited 5,251,767 4,007,348


Loans and advances to customers

Caixa Seguros, SGPS, S.A. 110,700 90,750

Caixa Geral de Depósitos, S.A. 100,000 55,537

BCI Moçambique, S.A. 7,006 6,784

Other assets

FCR CGD Group - Caixa Capital 1,445,680 1,637,690


FCR Mezzanine - Caixa Capital 154,345 159,260

FCR Empreender Mais 61,997 64,335

Mesquita ETVIA 18,558 18,005

Sogrupo IV - Gestão de Imóveis, ACE 13,880 13,901

Sogrupo - Serviços Administrativos, ACE 9,046 9,086

Caixagest - Técnicas de Gestão de Fundos, S.A. 1,635 1,635

Liabilities

Financial liabilities held for trading - derivatives


Locarent - 313,834

Hedge derivatives with negative fair value


Other credit institutions’ resources


CREDIP - Instituição Financeira de Crédito, S.A. 11,758,822 1,598,860

Caixa Leasing e Factoring - Instituição Financeira de Crédito, S.A. 122,271 122,271

Customer resources

FCR Mezzanine - Caixa Capital 29,496,419 29,514,891

Parcaixa SGPS, S.A. 20,296,562 183,755

Mesquita ETVIA 3,299,539 629,122

FCR Empreender Mais 1,493,192 2,379,870


FCR CGD Group - Caixa Capital 174,912 829

Locarent 1 1

Other liabilities

Banco Caixa Geral - Brasil S. A. 8,454,558 -


Caixa Leasing e Factoring - Instituição Financeira de Crédito, S.A. 6,351 10,211


111

Transactions with group companies

The principal balances in Caixa Geral de Depósitos, S.A.’s income statement for group companies not included in

the consolidation perimeter, at 2011 and 2010, are set out below:


Net interest income

Caixa Geral de Depósitos, S.A. (114,851,412) (107,793,303)

- of which: financial assets held for trading 88,824,055 (99,543,138)

- of which: available for sale financial assets 107,256 204,142

- of which: hedge derivatives (460,722) (555,511)

FCR CGD Group - Caixa Capital (1,468) (19,116)

CGD Finance Limited 149,724 117,349

Caixa Geral Finance Limited 26,626 -

Caixa Leasing e Factoring - Instituição Financeira de Crédito, S.A. (148) (288)

Banco Caixa Geral, S.A. (2,744) (5,455)

CREDIP - Instituição Financeira de Crédito, S.A. (113,000) (6,438)

Caixa Seguros, SGPS, S.A. -

Parcaixa SGPS, SA (86,860) (11,799)

Locarent 1,492,513 4,231,752

FCR Empreender Mais (26,110) (37,280)

FCR Mezzanine - Caixa Capital (597,404) (254,415)

Mesquita ETVIA (42,844) (2,389)

Income from equity instruments

Caixa Geral Finance Limited 335,155 242,762

Net commissions

FCR CGD Group - Caixa Capital 5,136,488 4,976,627

FCR Empreender Mais 222,679 221,869

FCR Mezzanine - Caixa Capital 604,220 607,472

Caixa Geral de Depósitos, S.A. 1,509,320 75,848


CREDIP - Instituição Financeira de Crédito, S.A. 1,135,387 -

Parcaixa SGPS, SA 234,303 71,730

Banco Caixa Geral - Brasil, SA (606,594) (1,869,521)

Banco Caixa Geral, S.A. - 400,000


Income from financial operations

Caixa Geral de Depósitos, S.A. (334,112,947) (76,110,432)

- of which: financial assets held for trading (334,170,443) (76,698,278)

- of which: available for sale financial assets - 501,212

- of which: hedge derivatives 57,496 86,634

Locarent 996,074 (2,301,206)



Sogrupo IV - Gestão de Imóveis, ACE 160,429 176,603

Sogrupo - Serviços Administrativos, ACE 107,423 168,431

Caixagest - Técnicas de Gestão de Fundos, S.A. 21,931 23,266

CREDIP - Instituição Financeira de Crédito, S.A. 18,000 18,375


Banco Caixa Geral Brasil 19,254 -

Other administrative expenditure

Caixa Geral de Depósitos, S.A. (463,955) (995,931)

Banco Caixa Geral, S.A. (73,816) (77,495)

Locarent (565,218) (547,310)

Banco Caixa Geral Brasil (45,000) -

Caixa Leasing e Factoring - Instituição Financeira de Crédito, S.A. - (14)

The Bank also had a guarantee of €7,127,030 provided to Caixa Geral de Depósitos at 31 December 2011

(€7,171,724 in 2010).

Transactions with related entities are generally made on the basis of market values on the respective dates.

Bank’s management bodies

The costs incurred on the remuneration of the Bank’s board of directors, in 2011, totalled €1,034,299 of which

amount €12,940 in respect of contributions to the pension fund, as described in Note 2.13 (€1,724,086 and

€14,024 respectively in 2010).


112

No bonuses were paid to board members in 2011 and 2010.

Two of the board members have mortgage lending agreements with the Bank for the amount of €257,041

(€189,369 in 2010). This is a standard loan for Bank employees which were taken out prior to the appointment as

board members. The Bank has no additional liability or granted any long term benefit to the board of directors,

other than those referred to above.

Information on the amounts paid to the members of boards of directors and inspection bodies, in 2011, is set out

in the management report.

Information on the fees charged by the statutory auditors, in 2011, is set out in the management report.

31. FINANCIAL INSTRUMENTS

Management policies on financial risks pertaining to the group’s activity

CGD Group adopted a centralised risk management model, in 2001. This encompasses the assessment and

control of all of the group’s credit, market and liquidity risks, based on the principle of the separation of functions

between commercial and risk areas. CaixaBI group’s risk management and control are, accordingly, centralised

by CGD’s Risk Management Division. The Bank also has risk management regulations defining the limits and

operating procedures on the management of various risks.

The following disclosures on the principal types of risks pertaining to the group’s activity are required under IFRS

7.

Foreign exchange risk

Foreign exchange risk is controlled and assessed on a daily individual basis for Caixa – Banco de Investimento,

S.A.’s operations. VaR amounts and limits are calculated on total open and currency positions.


113

Financial instruments were broken down into the following currencies at 31 December 2011 and 2010:

2011

Euros USD Sterling Real Other Total

Assets

Cash and cash equivalents with central banks 2,924,679 - - - - 2,924,679

Cash assets with other credit institutions 1,254,422 43,859 4,183 101 141,092 1,443,656

Investments in credit institutions 30,992,233 - - 2,491,310 - 33,483,543

Securities and derivatives portfolio:

Financial assets at fair value through profit or loss

Securities 75,548,510 8 - - - 75,548,517

Derivative financial instruments (notional) 10,704,665,762 453,187,672 - 4,801,523 - 11,162,654,957

Derivative financial instruments (book value) 634,943,238 78,254,101 - 539,264 - 713,736,603

Available for sale financial assets 437,715,022 12,691,135 - - - 450,406,157

Hedge derivatives (notional) 15,815,750 - - - - 15,815,750

Loans and advances to customers 765,720,207 1,593,419 - - - 767,313,626

Other assets 76,077,326 7,800,294 70,111 - 31,286 83,979,017

Provisions and impairment (75,132,643) (1,580,670) - - - (76,713,313)

12,670,524,504 551,989,817 74,294 7,832,199 172,378 13,230,593,192

Liabilities

Credit institutions’ and central banks’ resources (980,573,540) (14,917,512) - - - (995,491,052)

Customer resources and other loans (112,711,518) (1,357,897) - - - (114,069,415)

Financial liabilities at fair value through profit or loss

Derivative financial instruments (notional) (10,704,665,762) (453,187,672) - (4,801,523) - (11,162,654,957)

Derivative financial instruments (book value) (578,117,176) (76,001,887) - (539,264) - (654,658,328)

Hedge derivatives (notional) (15,815,750) - - - - (15,815,750)

Other liabilities (85,746,483) (7,629,347) (51,186) 354,582 - (93,072,434)

(12,477,630,229) (553,094,316) (51,186) (4,986,206) - (13,035,761,937)

Net exposure (1,104,499) 23,108 2,845,993 172,378 1,936,980

2010

Euros USD Sterling Other Total

Assets

Cash and cash equivalents with central banks 8,894,162 - - - 8,894,162

Cash assets with other credit institutions 5,310,762 15,519 31,367 82,719 5,440,368

Investments in credit institutions 7,477,072 - - - 7,477,072



Securities 180,613,787 7,390,167 - - 188,003,954

Derivative financial instruments (notional) 9,968,348,991 635,748,294 - 5,230,644 10,609,327,929

Derivative financial instruments (book value) 326,475,073 44,460,471 - 23,189 370,958,733

Available for sale financial assets 470,906,116 5,666,587 6,939,654 - 483,512,357

Hedge derivatives (notional) 15,815,750 - - - 15,815,750

Loans and advances to customers 786,587,377 27,195,654 19,879,795 - 833,662,827

Other assets 53,994,208 1,627,484 28,552 57 55,650,300

Provisions and impairment (61,385,300) (1,530,631) - - (62,915,931)

11,763,037,999 720,573,545 26,879,368 5,336,610 12,515,827,521

Liabilities

Credit institutions’ and central banks’ resources (1,060,506,890) (42,206,513) (26,430,439) - (1,129,143,842)

Customer resources and other loans (103,438,220) (1,558,142) - - (104,996,362)

Financial liabilities at fair value through profit or loss

Derivative financial instruments (notional) (9,968,348,991) (635,748,294) - (5,230,644) (10,609,327,929)

Derivative financial instruments (book value) (319,786,830) (40,723,279) - (23,189) (360,533,298)

Hedge derivatives (notional) (15,815,750) - - - (15,815,750)

Other liabilities (65,779,534) (107,351) (1,231) - (65,888,116)

(11,533,676,215) (720,343,579) (26,431,670) (5,253,834) (12,285,705,297)

Net exposure 229,966 447,698 82,776 760,440


114

The amounts relating to derivatives in the above tables, comprise the notional amount of interest rate swaps.

Liquidity risk

Liquidity risk comprises the group’s risk of difficulties in securing funds to meet its commitments. An example of

liquidity risk may be the Bank’s incapacity to dispose of a financial asset quickly at close to its fair value.

An analysis of the group’s liquidity risk is part of the consolidated liquidity analysis of CGD Group’s Asset-Liability

Committee. The Bank has an irrevocable line of credit from CGD, for liquidity requirements of up to one year.

CGD group policy, on the other hand, does not advise direct access to the capital market for securing medium

and long term funding, which is the consolidated liability of CGD group with CGD having a global management

commitment and eventual coverage of the liquidity gaps of its various subsidiaries as a whole.

Under IFRS 7 requirements, the full amount of non-discounted contractual cash flows for the various time bands,

based on the following premises, is set out below:

Customers’ sight deposits, recognised in the “customer resources and other loans” account heading are

“repayable on demand”;

Sight deposits overdrafts are recognised in the “loans and advances to customers” account headings in

“repayable on demand”;

The “other” column comprises amounts already received or paid which are being deferred;

The amount for derivative financial instruments set out in this table comprises their book value;

Shares and customers’ overdue credit have been classified for unspecified periods;

For operations whose income is not fixed such as on operations indexed to Euribor, the future cash flows

have been estimated at the reference value at 31 December 2011 and 2010.

2011

Contractual periods to maturity

(amounts in euros) Repayable

on demand

Up to 3 months

3 months - 1 year

1 - 3 years 3 - 5 yearsMore than 5

yearsUndetermined Other Total

Assets

Cash and cash equivalents with central banks 2,924,679 - - - - - - - 2,924,679

Cash assets with other credit institutions 1,443,656 - - - - - - - 1,443,656

Investments in credit institutions - 31,070,383 - 2,491,310 - - - - 33,561,693


Other financial assets at fair value through profit or loss

- 162,954 5,476,471 514,008 7,866,014 2 - - 14,019,449

Available for sale financial assets (gross balances)

- 95,696,127 71,242,069 108,060,904 84,645,051 263,406,759 63,617,358 - 686,668,268


- Securities - 1,280,943 2,769,988 90,515,045 - - 3,016,001 - 97,581,977

- Derivative financial instruments - 284,960,765 2,805,935 28,534,333 41,634,586 355,800,984 - - 713,736,603

Loans and advances to customers (positive balances)

5,693,494 54,798,082 123,383,941 191,528,508 150,034,453 383,218,243 5,441,556 (2,588,274) 911,510,003

Positive revaluation of hedge derivatives - - - 1,459,895 - - - - 1,459,895

Other assets 70,541,959 - 7,580,458 - - - 5,194,556 662,045 83,979,017

80,603,788 467,969,255 213,258,862 423,104,003 284,180,104 1,002,425,988 77,269,471 (1,926,230) 2,546,885,240

Liabilities

Credit institutions’ and central banks’ resources

283,940 813,699,370 7,491,256 - 180,512,500 - - - 1,001,987,066

Customer resources and other loans 30,062,683 68,379,777 3,122,000 7,084,877 - 8,088,032 - - 116,737,369

Financial liabilities held for trading


Negative revision of hedge derivatives - - - - 1,521,387 - - - 1,521,387

Other liabilities 50,101,185 14,760,816 27,336,005 - - - - 874,428 93,072,434

80,447,808 1,201,019,934 40,763,129 36,907,525 227,205,885 359,688,895 - 874,428 1,946,907,604

Liquidity gap 155,980 (733,050,680) 172,495,732 386,196,478 56,974,219 642,737,093 77,269,471 (2,800,658) 599,977,636


115

2010


(amounts in euros) Repayable on demand

Up to 3 months

3 months -1 year



Assets



Investments in credit institutions - 7,531,563 - - - - - - 7,531,563

Securities and derivatives portfolio:Other financial assets at fair value through profit or loss

- 78,906 2,222,627 5,606,083 2,887,912 6,130,797 346,924 - 17,273,248

Available for sale financial assets (gross balances)

- 13,200,274 44,030,890 149,868,859 106,090,420 236,112,286 72,668,500 - 621,971,229


- Securities - 12,197,343 10,487,574 28,521,781 108,898,767 53,269,413 1,338,381 - 214,713,260

- Derivative financial instruments - 660,845 11,276,389 42,754,557 29,559,904 343,075,634 - - 427,327,329

Loans and advances to customers (gross balances)

6,002,978 38,816,737 101,613,640 238,286,778 173,845,172 394,206,470 9,068,090 (3,343,102) 958,496,763

Positive revaluation of hedge derivatives - - - - 1,250,849 - - - 1,250,849

Other assets 40,441,012 644,034 4,852,079 - - - 8,856,795 910,384 55,704,304

60,778,520 73,129,702 174,483,200 465,038,059 422,533,024 1,032,794,599 92,278,689 (2,432,718) 2,318,603,074

Liabilities

Credit institutions’ and central banks’ resources

541,799 1,129,367,502 - - - - - - 1,129,909,302

Customer resources and other loans 33,443,693 34,430,005 24,240,671 - 7,046,860 9,839,166 - - 109,000,395



Negative revision of hedge derivatives - - - - - 1,599,779 - - 1,599,779

Other liabilities 17,788,373 11,857,743 35,178,502 - - - - 1,063,498 65,888,116

51,773,866 1,176,309,493 70,614,100 43,601,034 36,561,408 343,343,743 - 1,063,498 1,723,267,142

Liquidity gap 9,004,654 (1,103,179,792) 103,869,100 421,437,025 385,971,615 689,450,856 92,278,689 (3,496,216) 595,335,932

As already referred to, the Bank benefits from an irrevocable line of credit from CGD, permitting the adequate

management of liquidity gaps of up to one year.


116

Interest rate risk

Interest rate risk comprises the fair value or cash flow risks associated with a specific financial instrument, if

changed on the basis of changes in market interest rates.

The following is a summary of the type of exposure to interest rate risk at 31 December 2011 and 2010:

2011

(amounts in euros) Not subject to interest

rateFixed rate Variable rate Total

Assets

Cash assets with other credit institutions - - 1,443,656 1,443,656

Investments in credit institutions - - 33,483,543 33,483,543


- Securities 3,016,001 72,281,165 251,351 75,548,517

- Derivative financial instruments - 5,579,185,621 5,583,469,336 11,162,654,957

Other financial assets at fair value through profit or loss - 2 11,286,602 11,286,603

Hedge derivatives - 5,000,000 9,917,906 14,917,906

Available for sale financial assets 63,617,358 274,834,888 111,953,912 450,406,157

Loans and advances to customers 2,853,282 11,502,767 752,957,577 767,313,626

Other assets 83,979,017 - - 83,979,017

153,465,658 5,942,804,441 6,504,763,883 12,601,033,982

Liabilities



Credit institutions’ and central banks’ resources - 283,940 995,207,112 995,491,052

Customer resources and other loans - 42,642,886 71,426,529 114,069,415

Hedge derivatives 9,917,906 5,000,000 14,917,906

Other liabilities 93,072,434 - - 93,072,434

93,072,434 5,660,512,585 6,626,620,746 12,380,205,765

Net exposure 60,393,224 282,291,857 (121,856,863) 220,828,218

2010

(amounts in euros) Not subject to interest

rateFixed rate Variable rate Total

Assets




- Securities 1,338,381 152,590,009 18,764,594 172,692,984


Other financial assets at fair value through profit or loss 346,924 2 14,964,045 15,310,970




Other assets 51,387,760 - 4,262,540 55,650,300

131,466,552 5,719,613,292 6,347,810,714 12,198,890,558

Liabilities


- Derivative financial instruments 5,311,592,900 5,297,735,030 10,609,327,929

Credit institutions’ and central banks’ resources - 541,799 1,128,602,042 1,129,143,842


Hedge derivatives 10,815,750 5,000,000 15,815,750

Other liabilities 65,888,116 65,888,116

65,888,116 5,369,366,017 6,489,917,866 11,925,171,999

Net exposure 65,578,436 350,247,275 (142,107,152) 273,718,559

The “financial assets held for trading - shares” account heading at 31 December 2011 and 2010, included

€70,890,370 and €81,124,157 for a portfolio bond whose interest included a fixed-rate component and an optional

component indexed to the stock market performance of a Portuguese share.


117

Exposure to interest rate risk, at 31 December 2011 and 2010 can be broken down into the following maturity

periods:

2011

Rate refixing / contractual periods to maturity

(amounts in euros) Repayable on

demandUp to 3 months

3 – 12 months



AssetsCash assets with other credit institutions 1,443,656 - - - - - - - 1,443,656

Investments in credit institutions - 30,992,233 - 2,491,310 - - - - 33,483,543


- Securities - 1,520,344 - 71,012,172 - - 3,016,001 - 75,548,517

- Derivative financial instruments - 2,045,458,968 4,007,664,882 918,004,402 696,483,618 3,495,043,088 - - 11,162,654,957Other financial assets at fair value through profit or loss - 6,097,330 5,189,272 2 - - - - 11,286,603

Hedge derivatives - - 9,917,906 5,000,000 - - - - 14,917,906

Available for sale financial assets - 161,678,925 71,449,308 31,066,087 11,452,268 111,142,211 63,617,358 - 450,406,157

Loans and advances to customers 2,396,824 456,068,938 293,296,850 1,194,966 11,502,767 - 5,441,556 (2,588,274) 767,313,626

Other assets 70,541,959 - 7,580,458 - - - 5,194,556 662,045 83,979,017

74,382,439 2,701,816,736 4,395,098,675 1,028,768,939 719,438,653 3,606,185,299 77,269,471 (1,926,230) 12,601,033,982

Liabilities


- Derivative financial instruments - 2,031,939,994 3,992,471,606 929,539,089 698,816,800 3,509,887,467 - - 11,162,654,957Credit institutions’ and central banks’ resources 283,940 812,775,937 7,382,564 - 175,048,611 - - - 995,491,052


Hedge derivatives - - 5,000,000 - 9,917,906 - - - 14,917,906


80,447,808 2,920,461,063 4,042,632,389 936,098,846 883,783,317 3,515,907,913 - 874,428 12,380,205,765

Net exposure (6,065,369) (218,644,326) 352,466,285 92,670,093 (164,344,664) 90,277,385 77,269,471 (2,800,658) 220,828,218

2010


(amounts in euros) Repayable on demand

Up to 3 months

3 - 12 months 1 - 3 years 3 - 5 yearsMore than 5


AssetsCash assets with other credit institutions 5,440,368 - - - - - - - 5,440,368



- Securities - 18,764,594 4,749,672 11,149,370 93,008,533 43,682,434 1,338,381 - 172,692,984

- Derivative financial instruments - 1,857,206,264 3,761,202,878 1,575,642,477 599,041,529 2,816,234,781 - - 10,609,327,929Other financial assets at fair value through profit or loss - 10,137,956 4,826,089 2 - - 346,924 - 15,310,970



Loans and advances to customers 6,002,978 435,031,977 374,442,293 - - 12,460,591 9,068,090 (3,343,102) 833,662,827

Other assets 40,441,012 644,034 4,798,075 - - - 8,856,795 910,384 55,650,300

51,884,358 2,457,716,047 4,204,133,726 1,629,378,093 732,241,526 3,033,690,837 92,278,689 (2,432,718) 12,198,890,558

Liabilities


- Derivative financial instruments - 1,848,694,819 3,746,332,175 1,589,183,200 601,053,574 2,824,064,160 - - 10,609,327,929Credit institutions’ and central banks’ resources 541,799 1,128,602,042 - - - - - - 1,129,143,842


Hedge derivatives - - 5,000,000 - - 10,815,750 - - 15,815,750

Other liabilities 17,788,373 11,857,743 35,178,502 - - - - 1,063,498 65,888,116

51,773,866 3,023,520,416 3,810,725,660 1,589,183,200 607,382,095 2,841,523,264 - 1,063,498 11,925,171,999

Net exposure 110,492 (565,804,368) 393,408,066 40,194,893 124,859,431 192,167,573 92,278,689 (3,496,216) 273,718,559

The contents of the above referred to table were based on the following premises:

the book value of fixed-rate instruments was classified in accordance with their respective period to

maturity;


118

the book value of variable-rate instruments (e.g. indexed to Euribor), was classified in accordance with the

respective maturity until the next refixing of the rate;

the balance sheet value of instruments not subject to interest rate risk (e.g. shares) was included in the

"undetermined" column;

the balance sheet value included in the “other” column comprises amounts which have already been

received or paid which are being deferred;

information is provided on notional purchase amounts (as assets) and sales (as liabilities) on interest rate

and equity swaps;

overdue loans to customers are not considered to be subject to interest rate risk, and;

customers’ sight deposits, when no interest is paid, are considered to be fixed-rate and are classified as

“repayable on demand”.

Credit risk

Credit risk comprises financial losses on the defaults of counterparties with which agreements on financial

instruments have been entered into.

Maximum exposure to credit risk

The following is a summary of the maximum exposure to credit risk, by financial instrument, at 31 December 2011

and 2010:


Type of Financial Instrument Book value (gross)

Provisions / Impairment

Book value(net)

Book value (gross)

Provisions / Impairment

Book value (net)

Assets:

Cash assets with other credit institutions 1,443,656 - 1,443,656 5,440,368 - 5,440,368

Investments in credit institutions 33,483,543 120,600 33,362,943 7,477,072 - 7,477,072

Financial assets at fair value through profit or loss 797,555,722 - 797,555,722 613,645,979 - 613,645,979

Available for sale financial assets 386,788,799 - 386,788,799 410,843,857 - 410,843,857

Loans and advances to customers 767,313,626 68,180,997 699,132,629 833,662,827 45,750,453 787,912,373

Hedge derivatives 1,459,895 - 1,459,895 1,250,849 - 1,250,849

Other assets (excluding deferred costs) 83,316,972 8,532,316 74,784,656 54,739,916 17,165,477 37,574,439

2,071,362,214 76,833,913 1,994,528,300 1,927,060,868 62,915,931 1,864,144,937

Off-balance sheet:

Guarantees provided 54,478,484 1,006,100 53,472,383 55,471,419 581,456 54,889,963

2,125,840,697 77,840,014 2,048,000,683 1,982,532,287 63,497,387 1,919,034,900

Credit quality of financial assets

The Bank does not have an internal rating system. The principal procedures in force in terms of the approval and

monitoring of credit operations designed to ensure an adequate risk level for the Bank’s strategy, are set out

below:

The Bank has a Credit Committee, comprising members of the Executive Committee and managers of the

structural organs with any form of involvement in lending. The Bank’s Credit Committee meets once a week

with a minimum of two directors and managers of the structural organs involved in the lending process.


119

The production of commercial proposals for submission to the Credit Committee is the responsibility of

structural organs (business/product divisions), which require the risk opinion of CGD’s Risk Management

Division, in advance. The proposals approved by the Bank’s Credit Committee are recorded in minutes and

are signed by all present, for later submission to and the final resolution of CGD’s Credit Boards.

A part of credit operations with customers is, inter alia, guaranteed by the following types of collateral:

A pledge on securities;

Bank guarantees;

State-backed;

Mortgage loans for employees; and

Personal guarantees.

Credit quality of debt securities and derivative financial instruments

The following table provides information on the balance sheet value of portfolio debt securities net of impairment

(excluding matured securities) according to the Standard & Poor’s or equivalent rating, by type of guarantor or

issuing entity and by the guarantor’s or issuing entity’s geography, at 31 December 2011 and 2010:

2011

(amounts in euros) Portugal

Rest of European Union

North America Other Total


BB- up to BB+ 71,132,449 - - - 71,132,449

B+ 1,390,795 - - - 1,390,795

Not rated 9,272 - - - 9,272

72,532,516 - - - 72,532,516

Issued by:

Corporates - - - - -

Governments and other local authorities 70,890,370 - - - 70,890,370

Financial institutions 1,642,146 - - - 1,642,146

72,532,516 - - - 72,532,516Financial assets at fair value through profit or loss (Fair Value Option)

BB- up to BB+ 2 - - - 2

B+ 0 - - - -

Not rated 10,021,006 - - 1,265,595 11,286,601

10,021,008 - - 1,265,595 11,286,603

Issued by:

Corporates 10,021,005 - - - 10,021,005

Governments and other local authorities 2 - - - 2

Financial institutions 1 - - 1,265,595 1,265,597

10,021,008 - - 1,265,595 11,286,603

Available for sale financial assets (net of impairment)

BBB - 10,220,304 886,626 - 11,106,931

BB- up to BB+ 278,087,343 - - - 278,087,343

CCC- up to CCC+ 3,607,431 962,078 - - 4,569,509

D - 1.216.589 - - 1.216.589

Not rated 76.366.775 15.441.652 - - 91.808.427

358.061.549 27.840.624 886.626 - 386.788.799

Issued by:

Corporates 65,778,541 6,621,546 886,626 - 73,286,713

Governments and other local authorities 259,952,398 1,216,589 - - 261,168,987

Financial institutions 32,330,611 20,002,489 - - 52,333,100

358,061,549 27,840,624 886,626 - 386,788,799


120

2010

(amounts in euros) Portugal




AAA - - - - -

AA- up to AA+ - 2,959,121 1,950,103 - 4,909,224

A- up to A+ 18,941,806 10,206,097 6,547,954 2,991,545 38,687,401

Less than A- 89,606,291 25,701,924 843,987 11,605,776 127,757,978

Not rated - - - - -

108,548,096 38,867,142 9,342,044 14,597,321 171,354,603

Issued by:

Corporates 1,438,145 25,994,492 - 7,969,055 35,401,692

Governments and other local authorities 92,259,314 - - 3,635,263 95,894,576

Financial institutions 14,850,638 12,872,649 9,342,044 2,993,003 40,058,334

108,548,096 38,867,142 9,342,044 14,597,321 171,354,603Financial assets at fair value through profit or loss (Fair Value Option)

AA- up to AA+ 3 - - - 3

Not rated 12,950,361 - - 2,013,682 14,964,044

12,950,365 - - 2,013,682 14,964,047

Issued by:

Corporates 12,950,361 - - - 12,950,361



12,950,365 - - 2,013,682 14,964,047

Available for sale financial assets (net of impairment)

AAA - - - - -

AA- up to AA+ - 1,990,343 865,334 - 2,855,676

A- up to A+ 277,877,471 22,370,126 8,758,272 2,079,738 311,085,607

Less than A- 15,786,884 14,619,754 - - 30,406,638

Not rated 66,495,935 - - - 66,495,935

360,160,291 38,980,222 9,623,606 2,079,738 410,843,857

Issued by:

Corporates 68,518,138 - - - 68,518,138

Governments and other local authorities 258,003,150 3,570,611 - 2,079,738 263,653,499

Financial institutions 33,639,003 35,409,612 9,623,606 - 78,672,220

360,160,291 38,980,222 9,623,606 2,079,738 410,843,857

The Bank, at 31 December 2011 recognised in “debtors - other” an amount of €2,116,198 relating to interest on

derivative financial instruments in arrears on which impairment of €664,701 was recognised. The book value

recognised in “financial assets held for trading” relating to the said operations totalled €15,555,313.

The Bank, at 31 December 2011 also recognised in “debtors - other” an amount of €1,619,240 relating to interest

on derivative financial instruments in arrears on which impairment of €757,507 was recognised. The book value


At 31 December 2011 debt securities issued by “governments and other local authorities” in the rest of the

European Union included bonds issued by the Republic of Greece for a book value of €1,216,589, net of

impairment (impairment recognised on this security was €3,961,150 – Note 29). At 31 December 2010 the book

value of these bonds was €3,570,611.

Credit quality of Investments in credit institutions

The counterparties with which the Bank had contracted “Investments in credit institutions ”at 31 December 2011,

comprised CGD Group bodies (€33,362,943), with an external rating of BB-.


121

Quality of loans and advances to customers

Information on non-performing credit operations and/or separate impairment at 31 December 2011 and 2010, is

set out in the following table:

2011 2010

(amounts in euros) Collectively

impaired loansSeparately

impaired loansTotal

Collectively impaired loans

Separately impaired loans

Total

Lending to companies

Collective analysis

Outstanding 606,158,901 142,641,235 748,800,136 709,617,930 104,314,318 813,932,247

Overdue - 5,441,556 5,441,556 - 9,068,090 9,068,090

Impairment (3,328,964) (64,789,921) (68,118,885) (5,667,983) (39,996,004) (45,663,987)

602,829,937 83,292,870 686,122,807 703,949,946 73,386,403 777,336,350

Mortgage loans

Outstanding 9,960,647 - 9,960,647 9,578,472 - 9,578,472

Impairment (61,685) - (61,685) (83,237) - (83,237)

9,898,962 - 9,898,962 9,495,235 - 9,495,235

Consumer loans

Outstanding 339,861 - 339,861 371,675 - 371,675

Impairment (427) - (427) (3,230) - (3,230)

339,434 - 339,861 368,445 - 368,445

Total outstanding loans 616,459,409 142,641,235 759,100,645 719,568,076 104,314,318 823,882,394

Total overdue loans - 5,441,556 5,441,556 - 9,068,090 9,068,090

Total impairment (3,391,076) (64,789,921) (68,180,997) (5,754,449) (39,996,004) (45,750,453)

Total loans 613,068,333 83,292,870 696,361,203 713,813,627 73,386,403 787,200,030

Market risk

Market risk comprises the risk of a change in fair value or the cash flows of financial instruments deriving from

changes in market prices, including foreign exchange, interest rate and price risks.

Market risk is assessed on the basis of the following methodologies:

Value-at-Risk” (VaR) on the trading portfolio. This portfolio includes the following elements: securities and

derivative financial instruments portfolio.

A sensitivity analysis on the Bank’s other assets and liabilities recognised in the Bank’s separate financial

statements. This sensitivity analysis is calculated on the bases of the premises defined in Bank of Portugal

Instruction 19/2005.

The group does not have qualitative information for the sensitivity analysis on the remaining assets and liabilities

of its subsidiaries.

Trading portfolio

VaR comprises an estimate of the maximum potential loss on a specific assets portfolio, over a specific period

with a given confidence level, assuming normal market operation.

The calculation methodology used is that of historical simulation i.e. future events are fully explained by past

events, based on the following premises:

asset held for: 10 days;

confidence level: 99%;

price sampling period: 720 calendar days;

decay factor = 1, i.e. all observations carry the same weight.


122

For options, the theoretical price is calculated by the use of adequate models and the use of implicit volatility. No

calculation for correlations is made, owing to the methodology applied; i.e. the correlations are empirical.

The following is a breakdown of VaR at 31 December 2011 and 2010 (thousand euros):


Market VaR :

Interest rate 142 269

Exchange rate 23 76

Price 20 66

Diversification effect (50) (167)

135 244

The diversification effect is calculated implicitly. Total VaR refers to the combined effect of interest rate, price,

foreign exchange and volatility risks.

Bpvs (basis point values), changes in the market value of interest rate positions owing to the parallel movement of

1 basis point on the yield curves are calculated for the trading portfolio and treasury positions. Other sensitivity

indices commonly applicable to options portfolios are also calculated.

Impact assessment on income of extreme changes in market risk factors (stress testing) assessments are

performed monthly.

Theoretical backtesting (comparison of the VaR measure with technical results) is performed daily and real

backtesting (comparison of the VaR measure with the real result) monthly. The number of exceptions obtained i.e.

the number of times theoretical or real losses exceed VaR, enable the method’s accuracy to be assessed and any

necessary adjustments made.

Non-trading portfolio

The sensitivity analysis on the non-trading portfolio was carried out to assess the potential impact on the Bank’s

net interest income in 2012 (excluding the other companies within the consolidation perimeter), considering a fall

of 50 basis points (bps) in reference interest rates and assuming a parallel movement of the interest rate curve.

The Bank’s separate financial assets and liabilities in its financial statements were considered for this purpose,

excluding:

derivative financial instruments; and

commercial paper.

The principal premises related with the pricing of operations were:

variable-rate operations: market rate plus respective contractual spread;

new fixed-rate operations: market rate plus respective spread equivalent to the difference between the

average rate on live transactions at 31 December 2011 and respective market rate;

new variable-rate operations: market rate plus average contractual spread on live transactions at 31

December 2011.

Based on the above referred to premises, the potential positive impact of a 50 basis points fall in reference

interest rates on net interest income for 2012 totals €201,699 (€1,993,466 at 31 December 2010). In the event of

a 50 basis points increase in reference interest rates, the potential negative impact on net interest income

forecast for 2012 totals €194,941 (€2,003,045 at 31 December 2010).


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Fair value

The group maintained a significant part of its assets, notably its securities and derivatives portfolio, at fair value

through profit or loss, at 31 December 2011.

Reference should be made to the following aspects as regards the principal financial assets and liabilities

recognised at cost:

Interest is paid on almost all loans in the case of investments in and resources with other credit institutions

at indexed rates and short refixing periods;

As shown above, in the section on interest rate risk, the payment of interest on almost all customer deposits

is indexed to Euribor, with short refixing periods. A long term operation at fixed interest rates has been

covered by a hedge derivative for which reason the change in the fair value attributable to the interest rate

risk has already been recognised in the deposit’s book value (see Note 17).

In light of the above, the Bank considers that the book value of its financial assets, net of provisions and its

financial liabilities comprises a reliable approximation of their respective fair value.

The form of assessing the fair value of financial instruments at 31 December 2011 and 2010, is summarised

below:

(amounts in euros) 2011

Assets valued at cost price

Financial instruments at fair value

Prices in an active market

Valuation techniques based on:

Type of financial instruments Market data Other Total

Assets

Financial assets held for trading - 4,406,796 713,987,955 70,890,370 789,285,121

Other financial assets at fair value through profit or loss - 2 - 11,286,602 11,286,603

Available for sale financial assets 153.127 317,833,191 29,029,452 103,390,387 450,406,157

Hedge derivatives - - 1,459,895 - 1,459,895

153.127 322,239,989 744,477,302 185,567,358 1,252,437,776

Liabilities

Financial liabilities held for trading - - 733,589,348 - 733,589,348


- - 735,110,735 - 735,110,735


Assets valued at Cost price


Prices in an active market

Valuation techniques based on :

Type of financial instruments Market data Other Total

Assets

Financial assets held for trading - 79,727,563 437,749,249 82,543,502 600,020,313

Other financial assets at fair value through profit or loss - 2 941,268 14,369,701 15,310,970

Available for sale financial assets 153.127 343,847,866 42,608,044 96,903,321 483,512,357


153.127 423,575,430 482,549,409 193,816,523 1,100,094,489

Liabilities



- - 418,469,329 - 418,469,329


Prices on active markets correspond to equity instruments listed on a stock market and high liquidity bonds

(Level 1);

Prices of derivative financial instruments are calculated using valuation techniques based on market date

(Level 2);


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Portfolio shares valued by indicative bids supplied by contributors external to the group were recognised in

“Valuation techniques - market date (Level 2)”;

Shares valued by internal CGD Group models are presented in “Valuation techniques – Other (Level 3)”;

This column includes:

- At 31 December 2011, €70,890,370 in bonds convertible into EDP shares issued by Parpública SGPS,

S.A., which were being valued in accordance with an internal model defined by the Bank.

- At 31 December 2011 and 2010, €80,759,654 and €82,067,907, respectively, relating to fixed or

variable-rate bonds issued by Portuguese financial and non-financial companies, in respect of which

there are no active market nor indicative prices supplied by external counterparties. These securities

were valued using a projected cash flow updating model, at market interest rates plus a spread the Bank

considers adequate to the issuing entity’s credit risk as a discount rate.

Assets valued at cost are stable financial investments held by the Bank for which no active market exists;

The following values refer to subsidiary companies held under venture capital operations:

- Cost price: in the case of acquisitions made in the twelve months preceding the valuation date;

- Prices in an active market: for stock market listed companies; and

- Other: for other subsidiaries.

The following table provides information on the movements occurring in 2011 and 2010 on securities valued by

“valuation techniques - other” (Level 3):

(amounts in euros) Balance

31.12.2010

Changes to valuation method

Acquisitions/ disposals

Gains recognised in :Exchange

rate changesBalance

31.12.2011Fair value reserve

Income for period

Potential Effective

Financial assets held for trading 82,543,502 - (4,320,144) - (7,368,457) 35,470 - 70,890,370

Other financial assets at fair value through profit or loss 14,369,701 - (2,329,969) - (753,130) - 11,286,601

Available for sale financial assets 96,903,321 3,607,431 2,106,500 595,388 - 10,752 166,995 103,390,387

193,816,523 3,607,431 (4,543,613) 595,388 (8,121,588) 46,222 166,995 185,567,359

(amounts in euros)

Balance 31.12.2009


Acquisitions/ disposals

Income recognised in :

Exchange rate changes

Balance31.12.2010Fair value

reserve

Income for period

Potential Effective

Financial assets held for trading - 92,659,873 (3,530,712) - (6,641,192) 55,533 - 82,543,502

Other financial assets at fair value through profit or loss 49,541,938 1 (34,694,086) - (478,153) - - 14,369,701

Available for sale financial assets 95,343,234 (16,318,869) 12,622,084 5,099,423 - 1800 155,649 96,903,321

144,885,172 76,341,005 (25,602,714) 5,099,423 (7,119,345) 57,333 155,649 193,816,523

32. CAPITAL MANAGEMENT

In capital management terms, the Bank is under the Bank of Portugal supervision, both in its separated accounts

and in Group CGD’s consolidated accounts.

The solvency ratio on the Bank’s separate financial statements, at 31 December 2011 and 2010, was 11.20% and

10.26% respectively.


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(amounts in euros) Separate basis Individual 2011 2010

Eligible own funds (Base+Complementary-Deductions) (1) 255,416,292 228,373,810

Basis own funds 248,872,093 218,208,798

Paid up capital 81,250,000 81,250,000

(-) Treasury shares - -

Legal, statutory and other reserves 115,292,278 84,178,154

Retained earnings from past years 58,550,496 59,061,492

(-) Intangible assets (558,001) (388,823)

(-) Adjustment - TREM II (395,040) (542,104)

(-) Deferred tax assets associated with provisions for general credit risks - (698,512)

(-) Revaluation differences on available for sale assets - negative fair value (net of tax) (6,160,983) (5,440,244)

(-) Reserves for deferred tax liabilities resulting from the revaluation of available for sale assets 893,343 788,835

Complementary own funds 6,544,199 10,165,012

Revaluation reserves for fixed assets 4,338,403 4,338,403

Revaluation differences on available for sale assets - positive fair value (45%) 2,205,796 2,035,333

Provisions for general credit risks - 3,791,275

Own funds requirements (2) 182,397,595 178,081,849

Credit and counterparty credit risk 139,034,241 126,872,463

(-) 8% Provisions for general credit risks - part not eligible for own funds (502,545) (262,499)

Position risks - debt instruments 30,293,059 36,151,196

Position risks - equity securities 301,886 510,166

Commodity risks - -

Operational risk - standard method 13,270,954 14,810,523

Solvency ratio 11,20% 10,26%

Legend:

(1) According to Official Notice 12/92

(2) According to current legislation: Official Notices 5/07, 8/07, 9/07


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3 Notes to the separate financial statements

1. INTRODUCTORY NOTE

Caixa - Banco de Investimento, S.A. (“Bank”) was formed by a public deed of 12 November 1987, having

absorbed all assets and liabilities of the Portuguese branch of Manufacturers Hanover Trust Company, in

conformity with the terms of Ministerial Order no. 865-A/87 of 6 November, jointly issued by the Presidency of the

Council of Ministers and Ministry of Finance.

The Bank is Caixa Geral de Depósitos Group’s specialised investment banking business arm, which includes

activities such as fixed and variable corporate debt finance, equity finance, financial advisory, structured finance,

project finance, brokerage, research and venture capital operations. Its operations are performed by a branch

office in Lisbon and another in Porto, an offshore branch in Madeira and a branch in Spain.

As referred to in Note 21, the majority of the Bank’s share capital is owned by Caixa Geral de Depósitos Group

company Gerbanca, SGPS, S.A.

The financial statements at 31 December 2011 were approved by the board of directors on 20 February 2012.

The Bank’s financial statements, at 31 December 2011, still require the approval of its shareholders’ meeting. The

board of directors considers, however, that the said financial statements will be approved without significant

alterations.

2. ACCOUNTING POLICIES

The separate financial statements of the Bank’s registered office have been combined with those of its branches

and represent the Bank’s global activities. All balances and trading between the Bank’s headquarters and branch

offices in this process have been eliminated.

2.1. Presentation bases

The Bank’s financial statements have been prepared on the going concern principle, based on books

and accounting records, kept in conformity with the accounting principles set out in the Adjusted

Accounting Standards under the terms of Bank of Portugal Official Notice 1/2005 of 21 February and

Instructions 9/2005 and 23/2004, in accordance with the competence afforded by no. 3 of Article 115

of the General Credit and Financial Institutions Regime, approved by Decree Law 298/92 of 31

December.

The Adjusted Accounting Standards generally correspond to the International Financial Reporting

Standards (IFRS), as adopted by the European Union under European Parliament and Council

Regulation (EC) 1606/2002 of 19 July, transposed into national legislation by Decree Law 35/2005 of

17 February and Bank of Portugal Official Notice 1/2005 of 21 February. Under the terms of Official

Notice 1/2005, however, the following exceptions have an impact on the Bank’s financial statements:

i) Valuation criteria on loans and advances to customers and amounts receivable from other

debtors (credit and accounts receivable) – credit is recognised at its nominal value and may not

be reclassified in other categories and, as such, recognised at fair value;


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ii) Provisioning of credit and accounts receivable - minimum provisioning levels are defined in

accordance with the dispositions of Bank of Portugal Official Notice 3/95, with the changes

made by Bank of Portugal Official Notices 8/03 of 30 June and 3/2005 of 21 February (Note 2.3.

a)). The regime also includes liabilities comprising acceptances, guarantees and other similar

instruments;

iii) Tangible assets must be maintained at cost and cannot, therefore, be recognised at fair value,

as permitted by the IAS 16 Standard – Tangible Fixed Assets. The recognition of legally

authorised revaluations is, however, permitted, as an exception, in which case the resulting

capital gains are recognised in “revaluation reserves”.

2.2. Translation of balances and transactions in foreign currency

The Bank’s accounts have been prepared in accordance with the currency used in the economic

context in which it operates (referred to as “operating currency”), i.e. the euro.

Foreign currency transactions are recognised on the basis of the reference rates in force at the

transaction date. At each balance sheet date, monetary assets and liabilities denominated in foreign

currency are translated into euros on the basis of the foreign exchange rate in force. Non-monetary

assets, recognised at fair value, are translated on the basis of the exchange rate in force on the last

valuation date. Non-monetary assets, recognised at their historical cost, continue to be recognised at

the original exchange rate.

Exchange rate differences assessed upon exchange translation are recognised in income for the

year, except for differences originated by non-monetary financial instruments, such as shares,

classified as available for sale and recognised in a specific shareholders’ equity account heading until

disposal.

2.3. Financial instruments

a) Loans and advances to customers and amounts receivable from other debtors

As described in Note 2.1, these assets are registered according to the dispositions of Bank of

Portugal Official Notice 1/2005. They are therefore registered at their nominal value and the

respective proceeds i.e. interest and commissions, are recognised over the course of the period

of the operations by the pro rata temporis method, in the case of operations with residual flows

over a period of more than one month. Whenever applicable, commissions and external costs

allocated to contracts for similar operations underlying the assets included in this category are

also periodised over the course of the loan’s period of application.

The provisioning regime is defined in Bank of Portugal Official Notice 3/95 and includes the

following:

Provision for overdue credit and interest

This provision is used to cover the risks on lending with overdue payments of principal or

interest. The provision percentages for overdue credit and interest are increased in

proportion to the period having elapsed since their respective maturity and whether they

are collateralised.


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Provision for doubtful loans

This provision caters for the risks of outstanding principal on loans to customers with

unpaid principal or interest or customers with other unpaid liabilities.

Official Notice no. 3/95 provides the following classifications for doubtful loans:

- outstanding payments on a single credit operation in which at least one of the following

conditions applies to the respective unpaid principal and interest:

(i) when exceeding 25% of the unpaid principal, plus accrued interest;

(ii) when in default for more than:

• six months in the case of operations with a maturity of less than five years;

• twelve months in the case of operations with a maturity of five or more and

less than ten years;

• twenty four months in the case of operations with a maturity of ten years or

more.

These doubtful loans are provisioned in accordance with the provisioning percentage for

overdue credit.

- Outstanding credit on a single customer, if the overdue credit and interest on all of the

operations in respect of the said customer, plus the outstanding credit described in the

preceding sub-paragraph, exceed 25% of the total credit, plus overdue interest. These

doubtful debts are provisioned on the basis of 50% of the average percentage of

provisions for overdue credit.

Provisions for bad and doubtful debts at 31 December 2011 and 2010, were higher than

the minimum amounts defined by the Bank of Portugal.

Provision for general credit risks

This provision is recognised in liabilities and covers the risks of non payment of loans and

other risks, such as the provision of guarantees and securities, deriving from the Bank’s

activity. The amount of the provision is calculated on the application of the following

general percentages on the full amount of the value of unmatured credit, including

guarantees and acceptances:

- 1.5% on consumer credit and unspecified loans and advances to customers;

- 0.5% on collateralised mortgage lending or property leasing operations, in both cases

when the property is for the borrower’s residence;

- 1% for other credit.

Provisions for general credit risks at 31 December 2011 and 2010, were higher than the

minimum amounts defined by the Bank of Portugal.

Provisions increases ceased to be accepted as a tax deductible cost from 1 January 2003.

The effect in the income statement is recognised in the “provisions net of recoveries and

cancellations” account heading in the income statement.


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b) Other financial assets

Other financial assets are recognised at fair value at the agreement date, plus the costs directly

attributable to the transaction. These assets are initially recognised in one of the following

categories defined in the IAS 39 Standard:

i) Financial assets at fair value through profit or loss

This category includes:

Financial assets held for trading, which essentially include the acquisition of securities

with the objective of realising gains on the basis of short term market price fluctuations.

This category also includes derivative financial instruments, excluding derivative financial

instruments complying with hedge accounting requirements; and,

Financial assets recognised at fair value through profit or loss (“fair value option”).

The use of the “fair value option” implies the irrevocable recognition, in this category, of the

financial instruments at the time of initial recognition and is restricted to situations in which

the application results in the production of more relevant financial information, i.e.

a) If its application eliminates or significantly reduces an accounting mismatch that would

otherwise occur as a result of the inconsistent measurement of assets and liabilities or

recognition of gains and losses;

b) Groups of financial assets, financial liabilities or both which are managed and when the

performance thereof is assessed on a fair value basis, in accordance with formally

documented risk and investment management strategies; and when information on the

group is distributed internally to management bodies.

c) It is also possible to classify financial instruments containing one or more embedded

derivatives in this category, unless:

- The embedded derivatives do not significantly modify the cash flows which would,

otherwise, be required under the contract;

- It is evident, with little or no analysis, that the implicit derivatives should not be

separated out.

Financial assets classified in this category are recognised at fair value whose gains and

losses generated by their subsequent valuation are recognised in the income statement in

the “income from assets and liabilities measured at fair value through profit or loss” account

headings. Interest is recognised in the appropriate “interest and similar income” account

headings.

ii) Loans and accounts receivable

These are financial assets with fixed or determinable payments, not listed on an active

market and not included in any of the other financial asset categories. This category

essentially includes amounts receivable from other financial institutions.

These assets are initially recognised at fair value, less any commissions included in the

effective rate, plus all incremental costs directly attributable to the transaction. The assets

are subsequently recognised in the balance sheet at their amortised cost less impairment

losses.


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Interest recognition

Interest is recognised on the basis of the effective rate method which makes it possible to

calculate the amortised cost and split up the interest over the course of the period of the

operations. The effective rate is the rate that, being used to discount the estimated future

cash flows associated with the financial instrument, enables its present value to be matched

with the value of the financial instrument at the date of initial recognition.

iii) Available for sale financial assets

This category includes variable-income securities not classified as assets recognised at fair

value through profit or loss, including stable financial investments and other financial

instruments initially recognised herein and not classifiable in the other categories of the

above referred to IAS 39 Standard.

Available for sale financial assets are measured at fair value, with the exception of

shareholders’ equity instruments not listed on an active market and whose fair value cannot

be reliably measured, which continue to be recognised at cost. Revaluation gains or losses

are recognised directly in shareholders’ equity in the “fair value reserve”. At the time of sale

or if impairment is assessed, the accumulated fair value changes are transferred to income

or costs for the year.

Dividends on equity capital instruments classified in this category are recognised as income

in the income statement when the Bank’s right to receive them has been established.

Reclassification of financial assets

With the entry into force of the amendment to the IAS 39 Standard on 1 October 2008, the Bank

is in a position to reclassify several of its financial assets classified as financial assets held for

trading or available for sale to other financial assets categories. No reclassifications to financial

assets categories at fair value through profit or loss, are, however, permitted.

Fair value

As referred to above, financial assets classified in financial assets categories recognised at fair

value through profit or loss and available for sale financial assets are recognised at their fair

value.

The fair value of a financial instrument comprises the amount at which an asset or financial

liability can be sold or liquidated between independent, informed parties, interested in realising

the transaction under normal market conditions.

The fair value of financial assets is, for most assets, determined by a CGD group body which is

independent from the trading function, based on the following criteria:

Closing price at the balance sheet date, for instruments traded on active markets;

The following valuation methods and techniques are, inter alia, used for debt instruments not

traded on active markets (including unlisted securities or securities with low liquidity levels):

i) Bid prices published by financial information services such as Bloomberg and Reuters,

including market prices available on recent transactions;

ii) Reference bid prices obtained from financial institutions operating as market-makers;


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iii) Internal valuation models based on market date used to define a price for the financial

instrument, reflecting market interest rates and volatility, in addition to liquidity and the

credit risk associated with the instrument.

c) Financial liabilities

Financial liabilities are recognised at the agreement date at their respective fair value, less the

costs directly attributable to the transaction. Liabilities are classified in the following categories:

i) Financial liabilities held for trading

Financial liabilities held for trading comprise the negative revaluation of derivative financial

instruments recognised at their fair value.

ii) Other financial liabilities

This category includes other credit institutions’ and customers’ resources and liabilities

incurred on payments of services.

These financial liabilities are valued at their amortised cost.

d) Derivatives and hedge accounting

The Bank performs derivative operations as part of its activity to provide for its customers’

requirements and reduce its exposure to foreign exchange, interest rate and price fluctuations.

Derivative financial instruments are recognised at their fair value at the date of the agreement.

They are also recognised in off-balance sheet accounts at their respective notional value

Derivative financial instruments are subsequently measured at their respective fair value. Fair

value is assessed:

On the basis of prices obtained in active markets (e.g. futures trading in organised

markets);

On the basis of models incorporating valuation techniques accepted in the market,

including discounted cash flows and options valuation models.

Embedded derivatives

Financial instruments embedded in other financial instruments are separated from the base

agreement and processed autonomously under the IAS 39 Standard, whenever:

The embedded derivative’s economic characteristics and risks are not closely related with

the base agreement defined in the IAS 39 Standard; and

The full amount of the combined financial instrument is not recognised at fair value, with

fair value changes being reflected in the income statement.

Hedge derivatives

These derivatives are designed to protect the group from exposure to a specific risk attached to

its operations. Classification as hedge derivatives and use of the hedge accounting concept, as

described below, are subject to compliance with the rules of the IAS 39 Standard.


132

The Bank, at 31 December 2011 and 2010, only used hedges on the changes in the fair value

of financial instruments recognised in the balance sheet as “fair value hedges”.

The Bank prepares formal documentation, for all hedge operations, at the beginning of the

operation, to include the following aspects:

Risk and strategy management objectives associated with the realisation of the hedge

operation, in accordance with the hedge policies defined by the Bank;

Description of hedged risk(s);

Identification and description of hedged and hedge financial instruments;

Hedge operation effectiveness appraisal method and respective periodicity.

Hedge effectiveness tests are periodically performed and documented, using a comparison

between the change in fair value of the hedge instrument and hedged item (part attributable to

hedged risk). To enable the use of hedge accounting under the IAS 39 Standard, this ratio

should be within a range of 80% - 125%. Prospective effectiveness tests are also performed in

order to demonstrate the hedges’ expected future effectiveness.

Hedge derivatives are recognised at fair value, with the results being assessed daily and

recognised in income and costs for the year. If the hedge is seen to be effective, the Bank will

also recognise the change in fair value of the hedged item, attributable to the hedged risk, in

income for the year. The impact of these valuations is recognised in the “income from assets

and liabilities measured at fair value through profit or loss” account headings. For derivatives,

such as interest rate swaps, with an associated interest component, the periodisation of interest

for the period in progress and liquidated flows are recognised in “interest and similar income”

and “interest and similar costs" in the income statement.

Positive and negative revaluations of hedge derivatives are recognised in specific assets and

liabilities account headings.

Valuations of hedged items are recognised in the account headings in which such assets and

liabilities are recognised.

Trading derivatives

Trading derivatives are all derivative financial instruments that are not associated with effective

hedge operations in accordance with the IAS 39 Standard, including:

Derivatives taken out to hedge assets or liabilities risks recognised at fair value through

profit or loss, thus rendering hedge accounting unnecessary;

Derivatives taken out to hedge risk which does not comprise effective cover under the IAS

39 Standard;

Derivatives taken out for trading purposes.

Trading derivatives are recognised at fair value, with the results being assessed daily and

recognised in income and costs for the year. The impact of these valuations is recognised in the

“income from assets and liabilities measured at fair value through profit or loss” account

headings. For derivatives, such as interest rate swaps, with an associated interest component,

the periodisation of interest for the period in progress and liquidated flows are recognised in

“interest and similar income” and “interest and similar costs" in the income statement.


133

Positive and negative revaluations are recognised in the “financial assets at fair value through

profit or loss” and “financial liabilities at fair value through profit or loss” account headings,

respectively.

e) Impairment of financial assets

Financial assets at amortised cost

The Bank periodically analyses the impairment of its financial assets recognised at amortised

cost, notably investments in credit institutions.

Signs of impairment are identified on an individual basis.

The following events may comprise signs of impairment:

Failure to comply with contractual clauses, i.e. arrears of interest or capital;

Debtor or debt issuing entities’ significant financial difficulties;

Existence of a strong probability of a declaration of bankruptcy by the debtor or debt

issuing entity;

Granting of facilities to a debtor in financial difficulties which would not be granted under

normal circumstances;

Historical records of collections suggesting that the nominal value will never be fully

recovered;

Data indicating a measurable reduction of the estimated value of the future cash flows of a

group of financial assets since original recognition, although such a reduction cannot be

identified in the group’s separate financial assets.

Whenever signs of impairment on separately analysed assets are identified, the eventual

impairment loss comprises the difference between the book value at the time of analysis and

current value of projected future cash flows expected to be received (recoverable value),

discounted on the basis of the asset’s original effective interest rate.


As referred to in Note 2.3. b), available for sale financial assets are recognised at fair value, with

fair value changes being recognised in the “fair value reserve” in shareholders’ equity.

Whenever any objective evidence of impairment exists, accumulated capital losses recognised

in reserves, are transferred to costs for the year in the form of impairment losses and

recognised in the “impairment of other assets, net of reversals and recoveries” heading.

In addition to the signs of impairment on financial assets recognised at amortised cost, IAS 39

also provides for the following specific signs of impairment on equity instruments:

Information on significant changes having an adverse impact on the technological, market,

economic or legal environment in which the issuing entity operates, indicating that the cost

of the investment may not be recovered;

A prolonged or significant decline in market value at below cost.


134

The Bank, on each of its financial statement’s reference dates performs an analysis of the

existence of any impairment losses on available for sale financial assets, considering, for the

said purpose, the nature and specific, individual characteristics of the assets being valued. In

addition to the results of the analysis, the following events were considered to comprise

objective evidence of impairment on equity instruments:

Existence of potential capital losses of more than 50% of the respective cost price;

Situations in which the fair value of the equity instrument remains below its respective cost

price for a period of more than 24 months.

The existence of potential capital losses of more than 30% of the cost price, for more than 9

months, was also considered to comprise objective signs of impairment.

Impairment losses on equity instruments cannot be reversed and any potential capital gains

originated after the recognition of impairment losses are, therefore, recognised in the “fair value

reserve”. Impairment is always considered to exist if additional capital losses are assessed at a

later stage and are recognised in income for the year.

Criteria identical to that of debt instruments are applied for the analysis of impairment on “Tier 1”

securities.

The group also periodically performs impairment analyses on financial assets recognised at

cost, notably unlisted equity instruments whose fair value cannot be accurately measured. The

recoverable value, in this case, comprises the best estimate of future flows receivable from the

asset, discounted at a rate which adequately reflects the risk associated with holding the asset.

The amount of an impairment loss is recognised directly in the income statement for the period.

Impairment losses on such assets cannot be reversed.

2.4. Other tangible assets

Except for assets acquired up to 1998, these are recognised at cost, less depreciation and

accumulated impairment losses. The costs of repair, maintenance and other expenses associated

with their use are recognised as a cost for the year, in the “other administrative expenses” account

heading.

The Bank revalued its fixed assets in 1998, under Decree Law 31/98 of 11 February. As permitted

under the IFRS 1 Standard, the book value, incorporating the effect of the referred to revaluation was

considered as a cost in the transition to the IFRS, as the proceeds, at the time in question, generally

comprised cost, or amortised cost, in accordance with the IFRS, adjusted to take changes to price

indices into account.

Depreciation is calculated and recognised as a cost for the year, on a systematic basis, during the

asset’s estimated useful life, comprising the period in which it is expected to be available for use, i.e.:

Years of useful life

Property 10 - 50

Equipment:

Furniture and materials 4 - 10

Transport material 4

IT equipment 3 - 4

Interior installations 3 - 10

Security equipment 4 - 10

Plant and machinery 5 - 10


135

Land is not depreciated.

The works carried out by the Bank on its headquarters building over the period 2008-2009 are being

depreciated over a period of ten years.

According to the IAS 36 Standard an impairment loss is recognised in the income statement for the

period whenever the net book value of tangible assets exceeds their recoverable value. Impairment

losses can be reversed and also have an impact on income for the period if there is an increase in

the asset’s recoverable value in the following periods.

The Bank periodically assesses the adequacy of the estimated useful life of its tangible assets.

2.5. Financial leases

Lease operations are recognised as follows:

As lessee

Leased assets are recognised at fair value in assets and liabilities, in line with the processing of the

respective payments of instalments.

The instalments relating to lease agreements are split up in accordance with the respective financial

schedule, whose liability is reduced by the part corresponding to the payment of the capital. Interest

paid is recognised as a financial cost.

As lessor

Leased assets are recognised in the balance sheet as loans, repaid by capital instalments set out in

the financial agreement’s schedule. Interest included in the instalments is recognised as financial

income.

2.6. Intangible assets

This account heading essentially comprises the costs, development or preparation for use of software

used for the development of the Bank’s operations. Intangible assets are recognised at cost, less

amortisation and accumulated impairment losses.

Depreciation is recognised as a cost, on a systematic basis, throughout the assets’ estimated useful

lives for a period of between 3 - 6 years.

Expenses on software maintenance are recognised as a cost for the year in which they are incurred.

2.7. Investments in subsidiaries, associated companies and jointly controlled entities

This account heading includes investments in entities over whose current management the Bank has

effective control with the aim of obtaining economic benefit from their operations, referred to as

subsidiaries. Control usually takes the form of more than 50% of share capital or voting rights.

These assets are recognised at cost and periodic impairment analyses are realised.

Dividends are recognised as income for the year in which they are distributed by subsidiaries.


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2.8. Income tax

The Bank, in 2011 and 2010, was subject to IRC (corporate tax) and its corresponding municipal

surcharge with an aggregate tax rate of 26.5%. Starting 1 January 2009, the aggregate tax rate

increased to 14% on amounts of less than €12,500 and 26.5% for amounts in excess of this figure.

With the publication of Law 12 – A/2010 of 30 June, a state tax was introduced, to be paid by all

taxpayers who, in 2010 and in future years have taxable income not exempt from IRC of more than

€2,000,000. The state surcharge comprises 2.5% on the part of the taxable income, subject to and

not exempt from IRC, in excess of the referred to limit of €2,000,000. This disposition implies that the

tax rate used in 2010 and 2011 for the calculation of deferred tax and recognition of income tax for

the period was 29% (Note 14).

Law 64-B/2011 of 30 December (State Budget Law for 2012), temporarily increased the limits and

rates of the state tax on taxpayers in 2012 and 2013, who make taxable profit subject to and not

exempt from IRC of more than €1,500,000. It should therefore be noted that, for 2012 and 2013, the

state surcharge rate on taxable profit of between €1,500,000 and €10,000,000 will increase to 3%,

with the rate applicable on taxable profit subject to and not exempt from IRC of more than

€10,000,000 therefore being 5%. Given the temporal/transitory nature of the new calculation rules on

the state surcharge (only applicable in 2012 and 2013), the deferred tax recorded by the Bank in

2011 did not take the referred to increase in the State Budget for 2012 into account.

The Bank’s Madeira Offshore Branch, however, was exempt from IRC up until 31 December 2011

under article 33 of the Statute of Fiscal Benefits. For the purposes of the application of this

exemption, in accordance with the dispositions of article 34 of the Statute of Fiscal Benefits, at least

85% of the profit attributable to the entity’s global activity should derive from the performance of

operations outside the institutional scope of the Madeira Free Zone.

Total income tax recognised in the income statement includes current and deferred taxes.

Current tax is calculated on the basis of taxable profit for the year, which is different from accounting

income owing to adjustments to taxable profit resulting from costs or income which are not relevant

for fiscal purposes or only considered in other periods.

Deferred tax comprises the impact of temporary deductible or taxable differences between the

balance sheet value of assets and liabilities and their fiscal basis, used to assess taxable profit on tax

recoverable or payable in future periods.

Deferred tax liabilities are normally recognised for all temporary taxable differences, whereas

deferred tax assets are only recognised up to the amount by which the existence of future taxable

profit, permitting the use of the corresponding deductible tax differences or fiscal losses, is probable.

Deferred taxes are not, however, recorded in the following situations:

Temporary differences resulting from goodwill;

Temporary differences originating from the initial recognition of assets and liabilities in

transactions which do not affect accounting income or taxable profit;

Temporary differences resulting from non-distributed profit by subsidiaries and associated

companies, to the extent that the Bank is able to control their reversal and which is not likely to

occur in the foreseeable future.


137

The principal situations originating temporary differences on a bank level, comprise provisions and

revaluations not accepted for fiscal purposes, deferred commissions and depreciation not accepted

on legal revaluations of tangible assets.

Deferred taxes are calculated on the basis of the tax rates expected to be in force on the date of

reversal of the temporary differences, comprising the approved or substantially approved rates, at the

date of the balance sheet.

Income tax (current or deferred) is recognised in the income statement for the period, except for

cases in which the originating transactions have been recognised in other shareholders’ equity

accounts. In such cases the corresponding tax is also recognised as a charge to shareholders’ equity

and does not affect income for the year.

2.9. Provisions and contingent liabilities

A provision is set up when there is a current (legal or constructive) obligation, resulting from past

events, involving the probable future expenditure of resources and when this may be reliably

assessed. The amount of the provision comprises the best estimate of the amount to be paid to

liquidate the liability at the date of the balance sheet.

When not probable, the future expenditure of resources is considered to be a contingent liability.

Contingent liabilities require no more than a disclosure procedure, unless the possibility of their

payment is remote.

Provisions for other risks are for fiscal, legal and other contingencies.

2.10. Employee benefits

The Bank does not have any retirement pensions liabilities to its employees, who are covered by the

national social security regime, owing to the fact that it is not a signatory to the Collective Wage

Bargaining Agreement for the Banking Sector.

However, with the objective of providing its employees with a retirement subsidy to the standard

social security regime, the Bank, at its own initiative has made contributions with the objective of

paying old age retirement and survivors’ pensions to its employees, in accordance with the terms set

out in the contract.

The Bank pays a percentage of 3.5% of each employee’s annual wages into the fund. Pension costs,

in 2011 and 2010 were €290,391 and €434,464 respectively (Note 31).

The contributions are made in the form of joint membership of the Caixa Reforma Prudente Open

Pension Fund, managed by CGD Pensões – Sociedade Gestora de Fundos de Pensões, S.A..

The Bank does not have any liabilities other than the above referred to contributions owing to the fact

that this is a defined contribution plan.

Short term benefits, including productivity bonuses paid to employees, are recognised in “employee

costs” for the respective period, on an accrual basis.


138

2.11. Commissions

As referred to in Note 2.3, commissions received on credit operations and other financial instruments,

i.e. commissions charged for originating operations, are recognised as income over the period of the

operation.

Commissions for services performed are usually recognised as income for the period of performance

of the service or as a lump sum if resulting from single acts.

The estimate of the commissions the Bank expects to pay to other credit institutions for the

syndicating of credit operations in which it is involved as lead and in which CGD Group’s initial

exposure is higher than the defined objective, is recognised as accrued costs as a charge to the

“costs of services and commissions” account heading for the year in which the Bank recognises the

income relating to the corresponding commission.

2.12. Securities and other items held under custody

Securities and other items held under custody, notably customers' securities, are recognised in off-

balance sheet account headings at their nominal value.

2.13. Cash and cash equivalents

For the purposes of the preparation of cash flow statements, the Bank considers “cash and cash

equivalents” to be the total amount of the “cash and cash equivalents with central banks” and the

“cash equivalents in other credit institutions” account headings.

2.14. Critical accounting estimates and most relevant judgemental aspects in the

application of accounting policies

In the application of the above referred to accounting policies, the Bank’s board of directors must

produce estimates. The estimates with the greatest impact in the Bank’s separate financial

statements include those set out below.

ASSESSMENT OF IMPAIRMENT LOSSES ON LOANS AND ACCOUNTS RECEIVABLE

As regards provisions for loans and advances to customers, accounts receivable and guarantees and

acceptances given, the Bank complies with the minimum limits defined by the Bank of Portugal (Note

2.3). However, whenever considered necessary, such provisions are complemented to reflect the

Bank’s estimate of the risk of non-recoverability associated with customers. The assessment is

produced on a separate basis by the Bank, using its specific knowledge of its customers’ status and

the guarantees associated with the operations in question.

ASSESSMENT OF IMPAIRMENT LOSSES ON AVAILABLE FOR SALE FINANCIAL ASSETS

As described in Note 2.3. e), capital losses deriving from the valuation of such assets are recognised

as a charge to the fair value reserve. Whenever objective evidence of impairment exists, the

accumulated capital losses recognised in the fair value reserve should be transferred to costs for the

year.

In the case of equity instruments, the assessment of the existence of impairment losses may be

subjective. The Bank determines whether or not impairment exists on such assets through a specific


139

analysis at each balance sheet date, taking into consideration the definitions provided in the IAS 39

Standard (see Note 2.3. e)). As a general criterion, impairment is always determined when it is

considered, that, owing to the size of the assessment of the capital loss, the full recovery of the

amount invested by the Bank is highly improbable.

In the case of debt instruments classified in this category, including “Tier I” shares classified as equity

instruments, the capital losses are transferred from the fair value reserve to income, whenever there

is any indication of the possible future occurrence of failure to comply with contractually agreed cash

flows, notably on account of financial difficulties, defaults on other financial liabilities, or a significant

deterioration in the issuing entity’s rating.

VALUATION OF FINANCIAL INSTRUMENTS NOT TRADED IN ACTIVE MARKETS

In accordance with the IAS 39 Standard, the Bank values all financial instruments at fair value,

except for those recognised at amortised cost. The valuation models and techniques described in

Note 2.3 are used for the valuation of financial instruments not traded on liquid markets. The

valuations obtained comprise the best estimate of the fair value of the referred to instruments, at the

date of the balance sheet. As referred to in Note 2.3. to guarantee an adequate separation between

functions, the valuation of most such financial instruments is determined by a body that is

independent from the trading function.

A summary of the sources used by the Bank to determine the fair value on financial instruments is

provided in Note 35 – Disclosures on financial instruments, in the “fair value" section.

ASSESSMENT OF TAX ON PROFIT

Tax on profit (current and deferred) is assessed by the Bank on the basis of the rules defined by the

current fiscal environment. In several cases, however, fiscal legislation may not be sufficiently clear

and objective and may give rise to different interpretations. The amounts recognised in such cases

represent the best understanding of the responsible Bank bodies and subsidiaries on the correctness

of the operations although this may be queried by the fiscal authorities.

2.15. Adoption of new standards (IAS/IFRS) or revision of already issued standards

Except for subject matters regulated by the Bank of Portugal, such as those referred to in Note 2.1,

the Bank, in 2011, used the standards and interpretations issued by the International Accounting

Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC)

which are relevant to its operations and effective for the periods starting 1 January 2011, provided

that they have been approved by the European Union.

The following standards, interpretations, amendments and revisions endorsed by the European

Union and mandatory for financial years beginning on or after 1 January 2011, were adopted for the

first time, in the year ended 31 December 2011:

IFRS 8 and IAS 24 (amendment) – “Operating segments” and “Related Party Disclosures” – This

revision simplifies the definition of «related party», simultaneously eliminating certain internal

incoherencies and providing exemptions for entities associated with public administration as

regards the amount of information such entities must provide regarding transactions with related

parties.


140

IFRIC 14 (amendment) – “Prepayment of a minimum funding requirement” - These changes

eliminate an unintentional consequence of IFRIC 14 in cases in which an entity subject to a

minimum funding requirement makes a prepayment of contributions when, in certain

circumstances, the entity making such a prepayment would be obliged to recognise expenditure.

If a specific defined benefits plan is subject to a minimum funding requirement, the amendment to

IFRIC 14 determines that such a payment be processed as any other prepayment, as if it were an

asset.

IFRIC 19 – Extinguishing financial liabilities with equity instruments – this interpretation deals with

the following issues:

(a) Classification of own equity instruments issued to fully or partly extinguish a financial liability

are “considerations paid” according to paragraph 41 of IAS 39;

(b) how an entity should initially measure own equity instruments issued to extinguish this

financial liability;

(c) how an entity should process any difference between the amount of the financial liabilities

extinguished and the initial measured amounts of own equity instruments issued.

Improvements to the various IFRS: IFRS 1, IFRS 3 and IFRS 7, IAS 1, 32, 34, 39 and IFRIC 13 –

improvements made to the international financial reporting standards with the aim of simplifying

and clarifying the international accounting standards.

IAS 32 – “Financial Instruments ” – the presentation was changed under the terms of the annex to

Regulation (EC) No.1293/2009.

The application of these standards and interpretations did not have any materially relevant impacts

on the Bank’s financial statements at 31 December 2011.

New, amended or revised standards and interpretations not adopted

The following amendments, mandatory from 1 July 2011, have at the date of the approval of these

financial statements been endorsed by the European Union:

IFRS 7 (amendment) – “Financial instruments - “disclosures” – This revision increases the

disclosure requirements on transactions involving the transfer of financial assets. It aims to

guarantee greater transparency regarding exposure to risks when financial assets are transferred

and the transferring entity retains some involvement (exposure) thereto.

The standards, although having been endorsed by the European Union, were not adopted by the

Bank for the year ended 31 December 2011, owing to the fact that their application was still not

mandatory. No significant impacts on the financial statements deriving from their adoption have been

estimated.

3. OPERATING SEGMENTS

The board of directors receives and analyses the Bank’s financial information every month, split up into business

segments representing its areas of activity by type of origination, designed, as a whole, to ensure a dynamic

investment banking business platform i.e.:

Corporate finance - including debt and equity financial advisory and project finance activities.

Trading and sales including trading and asset and liabilities treasury management operations.


141

Brokerage - brokerage operations.

Commercial banking - including domestic and international transversal business origination.

Other – Other activities outside the scope of the above referred to categories.

The following tables provide information on operating segments used by the Bank at 31 December 2011 and

2010:

2011


financeTrading and

salesBrokerage

Commercial banking

Other Total

Interest and similar income 17,376,647 306,742,499 46,535 11,757,728 94,642 336,018,051

Interest and similar costs (10,181,137) (291,482,888) (46,033) (5,764,935) (86,628) (307,561,621)

Net interest income I. 7,195,510 15,259,612 502 5,992,793 8,014 28,456,430

Income from equity instruments - 335,155 - - 2,623,562 2,958,717

Income from services and commissions 47,550,692 991,507 5,233,583 4,679,202 44,522 58,499,506

Costs of services and commissions (4,471,991) (253,395) (1,090,134) (8,220) (1,467) (5,825,207)

Income from financial operations (7,248,297) (24,208,779) (21,112) (219,841) 659 (31,697,370)

Income from the disposal of other assets (776,690) - - (184,000) 1,937 (958,753)

Other operating income (9,424) (30,377) (42,790) 17,362 (1,015,837) (1,081,066)

II. 35,044,289 (23,165,889) 4,079,547 4,284,504 1,653,376 21,895,827

Net operating income 42,239,798 (7,906,277) 4,080,049 10,277,297 1,661,390 50,352,257

Provisions net of recoveries and cancellations 5,445,065 16 4,177 (5,195,545) (1,542,903) (1,289,190)

Value adjustments on loans and advances to customers and amounts receivable from other debtors (net of recoveries and cancellations) (15,835,369) - - (10,561,260) - (26,396,630)

Impairment of other financial assets net of reversals and recoveries 181,128 (4,049,472) - (651,808) - (4,520,152)

Impairment of other assets net of reversals and recoveries (1,403,517) - 2,769 (12,764) 683 (1,412,830)

III. (11,612,693) (4,049,456) 6,946 (16,421,377) (1,542,220) (33,618,801)

Total 30,627,105 (11,955,734) 4,086,995 (6,144,080) 119,170 16,733,456


Net income for period 1,464,516

Financial assets held for trading - 788,302,358 8 982,755 - 789,285,121

Other financial assets at fair value through profit or loss - 1,265,598 - 10,021,005 - 11,286,603

Available for sale financial assets - 352,786,431 - 41,112,525 11,928,147 405,827,103

Hedge derivatives - 1,459,895 - - - 1,459,895

Loans and advances to customers 467,594,750 - 2,407,443 222,219,681 10,301,831 702,523,705

Financial liabilities held for trading 733,589,348 733,589,348

Central banks’ resources 56,818,797 138,988,199 292,536 33,335,361 2,701,229 232,136,123

Other credit institutions’ resources 186,842,567 457,047,897 961,974 109,619,785 8,882,705 763,354,930

Customer resources and other loans 4,876,964 - 28,660,869 101,312,369 - 134,850,201



142

2010


financeTrading and

salesBrokerage

Commercial banking

Other Total

Interest and similar income 13,361,944 250,879,876 38,402 8,771,387 75,745 273,127,354

Interest and similar costs (4,040,140) (233,411,424) (20,276) (2,627,109) (71,508) (240,170,457)

Net interest income I. 9,321,804 17,468,452 18,126 6,144,278 4,237 32,956,897

Income from equity instruments - 242,762 - - 7,081,881 7,324,643

Income from services and commissions 60,859,871 3,379,551 5,452,918 10,450,636 44,426 80,187,402

Costs of services and commissions (8,655,161) (3,538,992) - (6,563) (33,002) (12,233,718)

Income from financial operations 75,718 (16,678,593) (162,514) (716,662) - (17,482,051)

Income from the disposal of other assets - - - - (397) (397)

Other operating income 908,069 98,101 157,517 (59,387) (153,181) 951,119

II. 53,188,495 (16,497,171) 5,447,921 9,668,024 6,939,727 58,746,997

Net operating income 62,510,299 971,281 5,466,047 15,812,302 6,943,964 91,703,893

Provisions net of recoveries and cancellations 319,090 1,961,850 (3,745) 7,030,857 6,652,973 15,961,025

Value adjustments on loans and advances to customers and amounts receivable from other debtors (net of recoveries and cancellations) (6,665,226) - - (8,092,697) - (14,757,923)

Impairment of other financial assets net of reversals and recoveries (181,128) (5,781,839) - (950,295) - (6,913,262)

Impairment of other assets net of reversals and recoveries (950,962) 70 1,183 33,740 33,442 (882,528)

III. (7,478,226) (3,819,919) (2,563) (1,978,395) 6,686,415 (6,592,688)

Total 55,032,074 (2,848,638) 5,463,484 13,833,907 13,630,379 85,111,206



Financial assets held for trading - 598,806,317 5 1,213,991 - 600,020,313

Other financial assets at fair value through profit or loss - 2,954,953 - 12,009,094 - 14,964,047

Available for sale financial assets - 382,845,740 - 42,768,213 10,443,146 436,057,098


Loans and advances to customers 518,116,799 - 2,662,031 262,934,510 9,953,483 793,666,823

Financial liabilities held for trading - 416,869,550 - - - 416,869,550

Central banks’ resources 92,667,276 176,324,647 476,116 57,041,165 3,648,019 330,157,222

Other credit institutions’ resources 224,256,531 426,708,926 1,152,209 138,040,679 8,828,274 798,986,619

Customer resources and other loans 4,829,715 183,755 22,428,969 87,671,829 - 115,114,269


Interest and similar costs were split up over the various business lines on the basis of the average value of the

respective asset allocations to the said segments.


143

Information on income distribution and the principal balance sheet headings by geographical markets in 2011 and

2010 is set out below:

2011

Portugal Spain Total

(amounts in euros)



Net interest income I. 28,334,504 121,927 28,456,430

Income from equity instruments 2,958,717 - 2,958,717




Income from the disposal of other assets (960,690) 1,937 (958,753)

Other operating income (1,079,323) (1,744) (1,081,066)

II. 22,051,337 (155,510) 21,895,827

Net operating income 50,385,841 (33,584) 50,352,257

Provisions net of recoveries and cancellations (1,346,640) 57,450 (1,289,190)

Value adjustments on loans and advances to customers and amounts receivable from other debtors (net of recoveries and cancellations) (20,161,968) (6,234,661) (26,396,630)

Impairment of other financial assets net of reversals and recoveries (4,520,152) - (4,520,152)

Impairment of other assets net of reversals and recoveries (1,412,830) - (1,412,830)

III. (27,441,590) (6,177,211) (33,618,801)

Total 22,944,251 (6,210,795) 16,733,456



Financial assets held for trading 788,302,366 982,755 789,285,121

Other financial assets at fair value through profit or loss 11,286,603 - 11,286,603


Hedge derivatives 1,459,895 - 1,459,895


Financial liabilities held for trading 733,589,348 - 733,589,348

Central banks’ resources 232,136,123 - 232,136,123

Other credit institutions’ resources 744,780,360 18,574,570 763,354,930




144

2010

Portugal Spain Total

(amounts in euros)



Net interest income I. 32,184,430 772,467 32,956,897

Income from equity instruments 7,324,643 - 7,324,643




Income from the disposal of other assets (397) - (397)

Other operating income 939,300 11,818 951,119

II. 59,067,989 (320,992) 58,746,997

Net operating income 91,252,419 451,475 91,703,894

Provisions net of recoveries and cancellations 15,909,403 51,622 15,961,025

Value adjustments on loans and advances to customers and amounts receivable from other debtors (net of recoveries and cancellations) (12,836,414) (1,921,509) (14,757,923)

Impairment of other financial assets net of reversals and recoveries (6,913,262) - (6,913,262)

Impairment of other assets net of reversals and recoveries (882,528) - (882,528)

III. (4,722,801) (1,869,886) (6,592,688)

Total 86,529,618 (1,418,412) 85,111,206



Financial assets held for trading 598,806,322 1,213,991 600,020,313

Other financial assets at fair value through profit or loss 14,964,047 - 14,964,047




Financial liabilities held for trading 416,869,550 - 416,869,550

Central banks’ resources 330,157,222 - 330,157,222

Other credit institutions’ resources 779,618,693 19,367,927 798,986,619



The information set out in the preceding tables comprises the balance sheet and income statements of all of the

Bank’s entities headquartered in Portugal (“Portugal” column) and the Madrid branch (“Spain” column). Each of

the entities performs its activity mainly with customers or resident counterparties domiciled in the same countries

in which they are headquartered.

4. CASH AND CASH EQUIVALENTS WITH CENTRAL BANKS



Cash 1,897 1,897

Sight deposits with central banks 2,921,782 8,891,265

2,923,679 8,893,162


145

The sight deposits with central banks account heading includes deposits with the Bank of Portugal providing for

the demands of the “Minimum Reserve Requirements of the System of European Central Banks” (SEBC). Interest

is paid on these deposits which comprise 2% of the deposits and debt securities with a maturity of up to two

years, excluding the deposits and public debt securities subject to SEBC minimum reserve requirements.

5. LIQUID ASSETS WITH CREDIT INSTITUTIONS



Cheques pending collection

In Portugal 3,000 -

Sight deposits

In Portugal 695,643 5,234,907

Abroad 404,707 185,877

Interest receivable 860 -

1,103,350 5,420,784

6. FINANCIAL ASSETS HELD FOR TRADING AND OTHER FINANCIAL ASSETS RECOGNISED

AT FAIR VALUE THROUGH PROFIT OR LOSS


2011 2010

(amounts in euros) Held for trading

At fair value through profit

or loss Total Held for trading

At fair value through profit

or loss Total

Debt instruments

- Issued by public entities:

. Bonds - 2 2 11,135,157 2 11,135,159

- Issued by other entities:

. Bonds and other securities:

Issued by resident entities 72,523,243 10,021,006 82,544,249 84,170,709 12,950,363 97,121,072 Issued by non-resident entities 9,272 1,265,595 1,274,867 76,048,737 2,013,682 78,062,419

72,532,516 11,286,603 83,819,119 171,354,603 14,964,047 186,318,650

Equity instruments

Issued by resident entities 1,045,069 - 1,045,069 41,197 - 41,197 Issued by non-resident entities 1,970,932 - 1,970,932 1,297,184 - 1,297,184

3,016,001 - 3,016,001 1,338,381 - 1,338,381

Derivatives with positive fair value (Note 7) 713,736,603 - 713,736,603 427,327,329 - 427,327,329

789,285,121 11,286,603 800,571,724 600,020,313 14,964,047 614,984,360

The “debt instruments - issued by other entities” account heading at 31 December 2011 and 2010, included

€70,890,370 and €81,124,157 in bonds convertible into EDP shares issued by Parpública – SGPS, S.A.

respectively.

Collateralised debt securities with a nominal value of €1,550,000 and €75,591,000 respectively (Note 33) were

recognised in this account heading at 31 December 2011 and 2010.


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7. DERIVATIVE FINANCIAL INSTRUMENTS

These operations were valued in conformity with the criteria set out in Note 2.3. d), at 31 December 2011 and

2010. Information on the notional and book value thereof, at the said dates, is set out below:

2011


(amounts in euros)Trading

derivativesHedge

derivativesTotal

Assets held for trading


Hedge derivatives

Total

Derivative financial instruments (Note 6)

OTC

. Swaps

Interest rate 11,162,654,957 14,917,906 11,177,572,863 634,798,840 (654,658,328) (61,492) (19,920,979)

. Caps & Floors 1,940,651,040 - 1,940,651,040 33,343,537 (33,324,740) - 18,796

. Options

on interest rate 600,000,500 - 600,000,500 45,594,226 (45,606,280) - (12,054)

13,703,306,497 14,917,906 13,718,224,403 713,736,603 (733,589,348) (61,492) (19,914,237)


. Futures

Interest rate 30,768,886 - 30,768,886 - - - -

Market value 3,667,000 - 3,667,000 - - - -

13,737,742,383 14,917,906 13,752,660,289 713,736,603 (733,589,348) (61,492) (19,914,237)

2010


(amounts in euros)Trading

derivativesHedge

derivativesTotal

Assets held for trading


Hedge derivatives

Total

Derivative financial instruments (Note 6)

OTC

. Swaps

Interest rate 10,609,327,929 15,815,750 10,625,143,679 370,958,733 (360,533,298) (348,930) 10,076,505

. Caps & Floors 2,703,102,260 - 2,703,102,260 37,246,105 (37,205,261) - 40,844

. Options

on interest rate 600,000,500 - 600,000,500 19,068,510 (19,079,533) - (11,023)

on currencies 18,205,928 - 18,205,928 53,981 (51,458) - 2,523

13,930,636,618 15,815,750 13,946,452,368 427,327,329 (416,869,550) (348,930) 10,108,849


. Futures

Interest rate 9,870,977 - 9,870,977 - - - -

Market value 3,618,000 - 3,618,000 - - - -

13,944,125,595 15,815,750 13,959,941,345 427,327,329 (416,869,550) (348,930) 10,108,849

The book value of the assets classified as hedged items, at 31 December 2011 and 2010, totalled €11,502,767

and €12,460,591 respectively, including €1,442,632 and €1,491,606 (Note 10), respectively, in respect of value

adjustments.

The book value of the liabilities classified as hedged items, at 31 December 2011 and 2010, also totalled

€6,559,757 and €6,328,521 respectively, including €345,377 and €331,207 (Note 18), respectively, in respect of

value adjustments.


147

Information on the distribution of derivative financial instruments operations, at 31 December 2011 and 2010 by

periods to maturity (notional amounts) is set out below:

2011

(amounts in euros)

<= 3 months

> 3 months<= 6 months

> 6 months<= 1 year

> 1 year<= 5 years

> 5 years Total


OTC

. Swaps

Interest rate

Trading 684,687,165 488,815,517 295,149,777 2,711,564,625 6,982,437,872 11,162,654,957

Hedge - - - 14,917,906 - 14,917,906

684,687,165 488,815,517 295,149,777 2,726,482,531 6,982,437,872 11,177,572,863

. Caps & Floors

Trading - - - 1,596,877,847 343,773,193 1,940,651,040

. Options

on interest rate - - - - 600,000,500 600,000,500

684,687,165 488,815,517 295,149,777 4,323,360,379 7,926,211,565 13,718,224,403


. Futures

Interest rate

Trading 30,768,886 - - - - 30,768,886

Market value 3,667,000 - - - - 3,667,000

719,123,051 488,815,517 295,149,777 4,323,360,379 7,926,211,565 13,752,660,289

2010

<= 3 months


(amounts in euros) <= 6 months <= 1 year <= 5 years > 5 years Total


OTC

. Swaps

Interest rate

Trading 150,015,131 49,651,922 992,298,873 3,842,407,285 5,574,954,718 10,609,327,929

Hedge - - - 5,000,000 10,815,750 15,815,750

150,015,131 49,651,922 992,298,873 3,847,407,285 5,585,770,468 10,625,143,679

. Caps & Floors

Trading - 114,300,000 608,551,286 925,714,080 1,054,536,894 2,703,102,260

. Options

on interest rate - - - - 600,000,500 600,000,500

on currencies 18,205,929 - - - - 18,205,929

168,221,060 163,951,922 1,600,850,159 4,773,121,365 7,240,307,862 13,946,452,368


. Futures

Interest rate

Trading - 9,870,977 - - - 9,870,977

Market value - 3,618,000 - - - 3,618,000

168,221,060 177,440,899 1,600,850,159 4,773,121,365 7,240,307,862 13,959,941,345


148

Information on the distribution of derivative financial instruments operations, by counterparty type, at 31


2011 2010

(amounts in euros) Notional amount Book valueCheques pending

settlement Book value

Contracts on interest rates

Interest rate swaps

Financial institutions 5,712,202,279 (619,470,494) 5,426,720,004 (319,733,434)

Customers 5,465,370,584 599,549,515 5,198,423,675 329,809,938

11,177,572,863 (19,920,979) 10,625,143,679 10,076,504

Caps & Floors

Financial institutions 977,755,520 (29,192,508) 1,351,551,130 (25,977,495)

Customers 962,895,520 29,211,304 1,351,551,130 26,018,339

1,940,651,040 18,796 2,703,102,260 40,844

Options on interest rates

Financial institutions 300,000,000 (45,606,280) 300,000,000 (19,079,533)

General government 300,000,000 45,594,226 300,000,000 19,068,510

Customers 500 - 500 -

600,000,500 (12,054) 600,000,500 (11,023)

Options on currencies

Financial institutions - - 9,102,964 44,388

Customers - - 9,102,964 (41,864)

- - 18,205,928 2,524

Futures

Stock exchange 34,435,886 - 13,488,977 -

13,752,660,289 (19,914,237) 13,959,941,344 10,108,849

8. AVAILABLE FOR SALE FINANCIAL ASSETS



Debt instruments


Portuguese public debt 258,560,239 256,848,797



Public debt 1,216,589 3,570,611


390,788,799 410,843,857

Equity instruments

Shares

Gross amount


At historical cost 153,127 153,127


At historical cost 11,928,147 17,382,346

12,081,274 17,535,473


Gross amount 6,957,030 7,677,768

19,038,304 25,213,241

405,827,103 436,057,098

At 31 December 2011, the “debt instruments – Issued by non-resident entities – public debt” account heading

refers to bonds issued by the Republic of Greece maturing in 2017. The Bank registered impairment of

€3,961,150 on these securities in 2011.


149

Information on the “equity instruments - shares” account heading at 31 December 2011 and 2010, is set out

below:

2011 2010

(amounts in euros)

% investment

Cost price

ImpairmentFair value

reserveBook value

% investment

Book value

SEIF - South Europe Infrastructure Equity Finance 8.33% 4,883,721 - 1,539,217 6,422,938 8.33% 5,442,832

Corporación Interamericana para el Financiamiento de Infraestructura 9.26% 3,995,672 (1,934,605) 3,444,142 5,505,209 9.26% 5,000,314

MTS Portugal, SGMR, S.A. 4.67% 153,127 - - 153,127 4.67% 153,127

EDP Renováveis, S.A. - - - - - 0.18% 6,939,200

Other 927,903 (927,903) - -

9,960,423 (2,862,508) 4,983,359 12,081,274 17,535,473

Information on movements in this account, for 2011 and 2010, was as follows:


SecurityBalance at 31.12.2010

Purchases/(Sales)




Cost pricePotential

gain

Equity instruments:

SEIF - South Europe Infrastructure Equity Finance 5,442,832 640,000 340,106 - 6,422,938 4,883,721 1,539,217

Corporación Interamericana para el Financiamiento de Infraestructura 5,000,314 - 337,901 166,994 5,505,209 3,995,672 1,509,537

MTS Portugal ,SGMR, S.A. 153,127 - - - 153,127 153,127 -

EDP Renováveis, S.A. 6,939,200 (6,640,000) (299,200) - - - -

Other - - - - - 927,903 (927,903)

17,535,473 (6,000,000) 378,807 166,994 12,081,274 9,960,423 2,120,851


SecurityBalance at 31.12.2009

Purchases/(Sales)


ImpairmentExchange

differencesBalance at 31.12.2010

Cost pricePotential

gain

Equity instruments:

EDP Renováveis, S.A. 8,380,068 1,992,977 1,771,615 (5,205,460) - 6,939,200 6,640,000 299,200

SEIF - South Europe Infrastructure Equity Finance 4,052,818 555,000 835,014 - - 5,442,832 4,243,721 1,199,111

Corporación Interamericana para el Financiamiento de Infraestructura 1,992,123 - 2,852,542 - 155,649 5,000,314 1,975,662 3,024,652

MTS Portugal ,SGMR, S.A. 153,127 - - - - 153,127 153,127 0

Other - 927,903 - (927,903) - - 927,903 (927,903)

14,578,136 3,475,880 5,459,171 (6,133,363) 155,649 17,535,473 13,940,413 3,595,060

The Bank was involved in the South Europe Infrastructure Equity Finance (SEIEF) capital increases in 2011 and

2010, investing an amount of €640,000 and €550,000 respectively. The Bank has undertaken to provide up to

€10,000,000 in equity funding at the fund’s request, whenever a new operation is realised.

In June 2008, the Bank acquired 1,263,962 EDP Renováveis, S.A. shares as part of the Initial Public Offering

(IPO) on Euronext Lisbon at a unit price of €8 per share. In 2010 the Bank made several stock market

acquisitions, pursuant to which, at 31 December 2010, investment corresponded to 0.18% of capital. In 2010, The

Bank also recorded impairment of €5,205,460 on these shares. During the course of 2011 the Bank disposed of

all of its investment realising capital gains of €1,204,725 (Note 27).

The “other equity instruments” account heading comprises non-voting preference shares issued by Caixa Geral

Finance Limited, giving a right to a quarterly preferential dividend, at the company’s discretion, equivalent to

annual interest at the Euribor rate plus a spread. Caixa Geral Finance may redeem the preference shares starting

from the tenth year after their issue (June 2014 and September 2015) with a 1% increase in spread if failing to do

so.


150

The potential capitals losses on shares classified in the “debt instruments” and “other equity capital” account

headings, recognised in the fair value reserve, at 31 December 2011 and 2010, totalled €120,144,029 and

€40,825,517 respectively, of which €100,203,706 and €27,137,908, respectively for government bonds.

The investment in Corporación Interamericana para el Financiamento de Infraestructura was made in 2001 for

USD 4,000,000 . In August 2008, the Bank acquired 1,000,000 shares for a total amount of USD 1,170,000.

Exposure to foreign exchange risk is hedged by funding in US dollars with the change in fair value in 2011 and

2010 resulting from the foreign exchange component being recognised in results.

The Bank reclassified its financial assets held for trading category securities to the available for sales financial

assets category on 1 July 2008, in conformity with the amendment to the IAS 39 Standard approved on 13

October 2008. Owing to the turbulence in the financial markets in 2008, the fact that the Bank does not expect to

dispose of these securities over the short term explains the reason for the transfer between categories.

Information on the impact of the reclassification of these securities, in income and fair value reserves account

headings, excluding their fiscal effect, is set out below:

Amount Amount

(amounts in euros) 31-12-2011 31-12-2010

Fair value 5,652,174 7,424,229

Accrued interest 4,399 3,471

Book value 5,656,573 7,427,700

Fair value reserve (5,865,860) (4,093,805)

Capital gains/losses in income for period - 329,758

Impact in income for period if the reclassification had not been made (1,772,055) (1,602,996)

The fiscal effect is not reflected in the amounts.

Collateralised debt securities with a nominal value of €404,470,000 and €351,180,000 respectively (Note 33)

were recognised in this account heading at 31 December 2011 and 2010.

9. INVESTMENTS IN CREDIT INSTITUTIONS



Loans

Branches of other domestic credit institutions 20,000,000 -

Term deposits

In Portugal 6,004,581 6,595,600

Interest receivable 77,038 66,337

26,081,619 6,661,937

At 31 December 2011, “loans” were made to Caixa Geral de Depósitos, S.A. – France Branch and matured in

January 2012.

At 31 December 2011 and 2010, “term deposits” were taken out with Caixa Geral de Depósitos, S.A. and matured

in the first quarter of the following year and were denominated in euros.


151

10. LOANS AND ADVANCES TO CUSTOMERS



Non-securitised domestic credit

Loans 419,484,876 417,661,099

Sight deposit overdrafts 5,693,494 6,002,978

Other credit 10,229,736 9,901,847

Securitised domestic credit

Commercial paper 15,300,000 11,350,000

Foreign loans

Loans 307,963,193 376,082,487

Current account credit 358,573 2,835,682

Sight deposit overdrafts - 1

Other credit 70,773 48,302

Value adjustments related to hedged assets (Note 10) 1,442,632 1,491,606

760,543,277 825,374,002

Interest receivable 3,917,068 2,563,840

Deferred income

Commissions associated with amortised cost ( 2,523,847 ) ( 3,334,398 )

Interest ( 64,427 ) ( 8,704 )

761,872,071 824,594,740


767,313,626 833,662,827

Provisions for bad debts (Note 19) ( 60,210,686 ) ( 36,795,958 )

Provisions for overdue loans (Note 19) ( 4,579,235 ) ( 3,200,046 )

( 64,789,921 ) ( 39,996,004 )

702,523,705 793,666,823

The Bank also set up a provision for general credit risks totalling €6,281,811 and €7,072,514 at 31 December

2011 and 2010, respectively (Note 19).

This account was broken down as follows, by periods to maturity at 31 December 2011 and 2010:




One to five years 214,788,278 241,250,807


Current account overdrafts 6,052,067 8,838,662

760,543,277 825,374,002


152

The sectoral distribution of loans and advances to customers, excluding overdue credit, at 31 December 2011

and 2010, was as follows:


Sector of activity Amount % Amount %

Manufacturing

Electricity, water and gas generation and distribution 120,823,388 15.9 135,765,101 16.4

Food beverages and tobacco industries 10,427,577 1.4 11,199,835 1.4

Base metallurgical and metal industries 5,607,273 0.7 5,617,275 0.7

Textiles industry 7,729,834 1.0 7,619,182 0.9

Chemicals and synthetic or artificial fibres manufacturing 9,528,062 1.3 9,881,345 1.2

Paper pulp, card and publishing and printing thereof 552,626 0.1 631,574 0.1

Manufacture of electrical and optical equipment 740,016 0.1 791,294 0.1

Manufacturing 23,101,876 3.0 1,279,848 0.2

Manufacture of articles of rubber and plastics 238,464 0.0 343,083 0.0

Properties, rentals and corporate services

Property activities 56,542,359 7.4 59,433,875 7.2

Other 105,630,199 13.9 138,192,391 16.7

Transport, warehousing and communications 224,330,893 29.5 241,036,829 29.2

Construction 98,798,795 13.0 100,070,640 12.1

Wholesale/retail 2,750,584 0.4 20,510,887 2.5

Health and social security 16,983,095 2.2 17,627,511 2.1

Financial activities 15,857,647 2.1 15,667,970 1.9

Hotels and restaurants 3,875,118 0.5 5,036,398 0.6

Other activities and collective, social and personal services 44,327,976 5.8 42,068,562 5.1

Loans and advances to individual customers 12,697,493 1.7 12,600,402 1.5

760,543,277 100 825,374,002 100

The Bank, in 2011, disposed of credit operations for a global amount of €22,456,571, with a book value of

€23,417,261, comprising capital losses of €960,690 (Note 29).

11. OTHER TANGIBLE ASSETS

Information on movements in the “other tangible assets” account headings for the years 2011 and 2010 is set out

below:

2011

Balance at 31.12.10 Depreciation for period

Write-offs (net) Net amount at 31.12.11

(amounts in euros) Gross amountAccumulated depreciation Acquisitions

Property:

For own use 16,200,020 (4,135,759) 135,095 (492,937) - 11,706,419

Other property 77,843 (77,843) - - - -

Equipment:


Transport material 148,836 (107,690) - (13,914) (13,317) 13,916

IT equipment 1,937,051 (1,780,923) 143,408 (153,859) - 145,677



Plant and machinery 567,813 (498,342) 1,458 (25,714) - 45,215

Property leases:

IT equipment 17,262 (5,754) - (5,754) - 5,754

22.460.849 (9.787.654) 281.611 (764.981) (13.317) 12.176.508


153

2010

Balance at 31.12.09 Depreciation for period

Write-offs (net) Net amount at 31.12.10

(amounts in euros) Gross amountAccumulated depreciation Acquisitions

Property:

For own use 16,200,020 (3,656,331) - (479,428) - 12,064,261

Other property 77,843 (77,843) - - - -

Equipment:


Transport material 148,836 (77,124) (30,565) - 41,147

IT equipment 1,733,031 (1,588,703) 218,864 (207,064) - 156,128



Plant and machinery 567,813 (472,315) - (26,027) - 69,471

Property leases:

Transport material 223,550 (178,840) - - (44,710) -

IT equipment - - 17,262 (5,754) - 11,508

22.462.003 (9.155.159) 237.240 (826.179) (44.710) 12.673.195

12. INTANGIBLE ASSETS

Information on movements in the “intangible assets” account headings for the years 2011 and 2010 is set out

below:

2011

Balance at 31.12.10Acquisitions Transfers

Depreciation forperiod

Net amount at 31.12.11

(amounts in euros)Gross amount

Accumulated depreciation

Automatic data processing systems 4,231,728 (4,149,464) 325,321 68,551 (167,315) 308,822

Intangible assets in progress 306,558 - 11,172 (68,551) - 249,180

4,538,286 (4,149,464) 336,494 - (167,315) 558,001

2010

Balance at 31.12.09Acquisitions


Net amount at 31 December 2010

(amounts in euros)Gross amount

Accumulated depreciation

Automatic data processing systems 4,169,605 (3,977,862) 62,123 (171,602) 82,265

Intangible assets in progress 258,192 - 48,366 - 306,559

4,427,797 (3,977,862) 110,489 (171,602) 388,823

At 31 December 2011 and 2010, intangible assets in progress comprised expenditure incurred on the

development of software which was still not in use at the said dates.


154

13. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINTLY

CONTROLLED ENTITIES

The balance on this account heading, at 31 December 2011 and 2010, comprised:


Caixa Desenvolvimento, SGPS, S.A. 2,500,000 2,500,000

Fundo de Capital de Risco Energias Renováveis – Caixa Capital 45,500,000 45,500,000

Caixa Capital – Capital de Risco, S.A. 14,575,724 14,575,724

CGD - Investimentos em Instituições Financeiras, Ltda. 44,419 22,721

CaixaBI – Brasil, Serviços de Assessoria Financeira, Ltda. 3,725 -

62,623,869 62,598,445

In November 2011, the Bank formed CaixaBI Brasil – Serviços de Assessoria Financeira Ltda., in Brazil with the

corporate object of providing consultancy services to companies on capital structuring issues, business strategy

and connected matters, in addition to consultancy and services for mergers and the buying and selling of

companies and Bank financing structuring from other entities. The company is 90% owned by the Bank and 10%

owned by Caixa Desenvolvimento SGPS, S.A..

In July 2010 the Bank acquired 50% of the capital of CGD – Participações em Instituições Financeiras, Ltda.

(CGD Participações), for the amount of €22,721 with the remaining 50% of the capital being held by Banco Caixa

Geral Brasil. This vehicle was set up to acquire 70% of the share capital of Banif Corretora de Valores e Câmbio,

S.A. (Banif CVC) for the amount of 123.9 million reais (€51.3 million at 31 December 2011), as provided for in the

agreement entered into on 2 June 2010. The Bank, in 2011, paid up the capital increase agreed in 2010 for the

amount of 50,000 reais (€21,698) with 65,013,200 reais (€26,910,551) of capital to be paid by CGD Participações

still outstanding. In February 2012 23,750,000 reais (€10,409,818) was paid up.

The definitive contract for the acquisition of Banif CVC was signed on 6 February 2012.

The shareholders’ agreement of Banif Corretora de Valores e Câmbio entered into on the same date considers

the following options:

Put option by Banif Banco de Investimento (Brasil), S.A. (Banif) to CGD Participações, at the exclusive

discretion of Banif, in the period between the 12th and 60th month from the date of the signing of the shares

sales/purchase contract of 2 June 2010. The price will vary on the basis of the net profit for the period up to

the date upon which the option is realised.

Call option on Banif by CGD Participações at the exclusive discretion of CGD Participações, starting from

the 60th month after the signing of the shares sales/purchase contract of 2 June 2010. The price will vary on

the basis of the net profit for the period up to the date upon which the option is realised.

On 16 December 2011, the Investors’ meeting of Fundo de Capital de Risco Energias Renováveis – Caixa

Capital, decided to liquidate the Fund, preferably by the end of first quarter 2012.

Caixa Desenvolvimento reimbursed accessory capital payments for the amount of €13,000,000, in 2010.


155

The financial data taken from the separate accounts of the subsidiaries for the last financial year can be

summarised as follows:

Percentage investment (%)

Entity(amounts in euros)

Registered office

Currency Direct Effective Date Assets Profit/ (Loss)Shareholders’

equity

Caixa Desenvolvimento, SGPS, S.A. Lisbon Euros 100,00% 100.00% 31-12-2011 4,285,174 31,433 4,127,360

Caixa Capital, S.A. Lisbon Euros 100,00% 100.00% 31-12-2011 39,571,414 5,148,225 38,103,120

FCR Energias Renováveis - Caixa Capital Lisbon Euros 91,00% 91.00% 31-12-2011 33,212,331 1,966,929 33,042,135

CGD - Investimentos em Instituições Financeiras, Ltda. (*)

São Paulo Reais 50,00% 50.00% - - - -

CaixaBI Brasil – Serviços de Assessoria Financeira Ltda São-PauloReais

90,00% 100.00% 31-12-20116,019,000 5,162,365 5,162,365

Euros 2,491,411 2,136,829 2,136,829

(*) No activity in 2011

Caixa Desenvolvimento, SGPS, S.A., formed in 1998, has its registered office in Portugal. Its corporate object is

to operate as a holding company as an indirect form of performing economic activities.

Caixa Capital - Capital de Risco, S.A. (Caixa Capital) has its registered office in Lisbon and was formed on 31

December 1990 under Decree Law 17/86 of 05 February. The company’s corporate object is to support and

promote investment and technological innovation by making temporary equity investments in projects or

companies. It is also authorised to provide assistance to the financial, technical, administrative and commercial

management of its subsidiary companies. It managed five venture capital funds at 31 December 2011.

Fundo de Capital de Risco para Investidores Qualificados Energias Renováveis – Caixa Capital (FCR Energias

Renováveis) was formed in January 2006, with a subscribed capital of €50,000,000 comprising 2,000 investment

units. The fund’s objective is to invest its assets in equity investments in companies with high growth and

appreciation potential, operating in the field of generating electricity from renewable energy sources. The Bank

subscribed for 1,820 investment units with a nominal value of €45,500,000, of which €18,900,000 (Note 20) was

outstanding at 31 December 2011 and 2010.

14. INCOME TAX

Tax assets and liabilities balances, at 31 December 2011 and 2010, were:


Current tax assets

Income tax to be recovered

Current year 14,584,534 8,987,537

Past years 8,399,709 -

22,984,243 8,987,537

Current tax liabilities

Income tax payable ( 1,887,009 ) ( 158,570 )

21,097,234 8,828,967

Deferred tax assets

Temporary differences 58,383,503 27,146,888

Deferred tax liabilities ( 1,990,720 ) ( 2,166,083 )

56,392,783 24,980,805

At 31 December 2011, the “Income tax to be recovered – for period” account heading included €951,974 based

on a complaint filed by the Bank relating to its IRC for 1999 and received in January 2012.


156

The “income tax to be recovered” account heading, at 31 December 2010, included €657,900 in respect of a

claim made by the Bank on its IRC for 2000 which was received in December 2011.

The following table provides details and information on deferred tax movements in 2011 and 2010:

2011


Change

Balance at31.12.2011(amounts in euros)

IncomeShareholders’

equity

Commissions 9,095,194 (3,902,877) - 5,192,318

Valuation of available for sale financial assets 8,419,310 - 22,550,943 30,970,253

Provisions not accepted for fiscal purposes 7,383,420 12,748,530 - 20,131,949

Impairment of available for sale financial assets 271,638 8,880 - 280,518

Property revaluations not accepted for fiscal purposes (188,756) 6,502 - (182,254)

24,980,805 8,861,035 22,550,943 56,392,783

(amounts in euros)

2010


Change Rate Change


IncomeShareholders’ equity

IncomeShareholders’

equity

Commissions 8,071,277 385,144 - 638,775 - 9,095,196

Valuation of available for sale financial assets 445,032 - 7,455,237 - 519,040 8,419,309

Provisions not accepted for fiscal purposes 9,261,050 (2,734,693) - 857,063 - 7,383,420

Impairment of available for sale financial assets 230,232 18,479 - 22,926 - 271,637

Property revaluations not accepted for fiscal purposes (178,425) 6,080 - ( 16,412 ) - (188,757)

Revaluation of financial hedge derivatives instruments 150,186 (150,186) - - - -

Valuation of other assets at fair value through profit or loss (10,863) 10,863 - - - -

Value adjustments to hedged assets (123,250) 123,250 - - - -

17,845,238 (2,341,063) 7,455,237 1,502,352 519,040 24,980,804

Information on tax on profit recognised in the income statement and the tax burden, measured by the ratio

between the appropriation for tax on profit and net profit for the year before tax is set out below:


With an impact in income for period

Current year tax

IRC for period 2,017,188 12,604,999

Banking sector contribution 677,236 -

Adjustments for past years ( 998,647 ) ( 39,612 )

1,695,777 12,565,387

Deferred tax

Registration and reversal of temporary differences ( 8,861,035 ) 838,711

Total tax in income statement ( 7,165,258 ) 13,404,098

Income before tax and non-controlling interests ( 5,700,742 ) 59,007,227

Fiscal burden in income statement 125,69% 22,72%

With an impact in reserves

Deferred tax – Fair value reserve 22,550,943 7,974,278

Current year tax – Capital gains on treasury shares (Note 21) - 3,913,114

Current year tax 23,400 182,320

Total tax in reserves 22,574,343 12,069,712

Total tax in shareholders’ equity 15,409,084 25,473,810

For the year ended 31 December 2011, the balance in the “adjustments for past years” balance sheet heading

included €951,974 from a complaint filed by the Bank on its IRC for 1999 which was received in January 2012.

Current tax reflected in reserves for the amount of €23,400 and €182,320 in 2011 and 2010, refers to the tax

associated with the revaluation of debt securities sold in 2011 and 2010 and classified as available for sale

financial assets in the year, for the purposes of assessing tax income for past years. The deferred tax recognised

in the same account heading refers to the revaluation during the year of equity investments and debt securities


157

which are also classified as available for sale financial assets, whose fiscal effects will only be produced at the

time of disposal.

In conformity with current legislation, tax returns are subject to review and correction by the tax authorities for a

period of four years. The Bank’s tax returns for 2008 to 2011 are therefore still subject to review and the

possibility of correction.

The board of directors considers that any correction is unlikely to have a significant impact on the financial

statements, at 31 December 2011.

The following is an analysis of the reconciliation between the nominal and effective tax rates in 2011 and 2010.

2011 2010

(amounts in euros) Rate Tax Rate Tax

Income before tax (5,700,742) 59,007,227

Tax assessment based on nominal rate 26.50% (1,510,697) 26.50% 15,636,915

State surcharge - - 2.42% 1,425,181

Total tax (1,510,697) 17,062,096

Impact of tax regime on the activity of

Madeira Offshore Branch (Note 2.8) 1.65% (93,834) -5.29% (3,118,987)

Provisions and impairment not relevant for fiscal purposes (10.53%) 600,362 6.73% 3,969,235

Fiscal loss allocated by Economic Interest Grouping 4.22% (240,330) -0.46% (272,561)

Separate source-based taxation (1.62%) 92,524 0.16% 93,793

Change of tax rate - - -2.55% (1,502,352)

Other costs not accepted (0.09%) 4,965 0.01% 4,642

Capital gains 6.25% (356,498) -0.86% (504,552)

Elimination of double taxation (12.01%) 684,617 -3.46% (2,039,182)

Fiscal benefits 0.03% (1,917) 0.00% (1,986)

Banking sector contribution (11.88%) 677,236 - -

Recognition of deferred tax for Madeira offshore branch 103.93% (5,924,937) - -

Other 1.72% (98,103) -0.42% (246,435)

Adjustments for past years 17.52% (998,647) -0.07% (39,612)

125.69% (7,165,258) 22.72% 13,404,098

For the year ended 31 December 2011, the Bank recognised deferred tax in provisions temporarily not accepted

for fiscal purposes for loans made by offshore branches given the end of fiscal benefit for the branch starting 1

January 2012.

Banking sector contribution

With the publication of Law 55 - A/2010, of 31 December, the Bank was covered by the banking sector

contribution regime. The banking sector contribution is levied on:

a) The liabilities assessed and approved by the taxpayers less basis (Tier 1) and complementary (Tier 2) own

funds and the deposits covered by the Deposit Guarantee Fund. The following are deducted from liabilities:

Elements which, according to the applicable accounting standards are recognised as shareholders’ equity;

Liabilities associated with the recognition of responsibilities for defined benefits plans;

Liabilities for provisions;

Liabilities resulting from the revaluation of derivative financial instruments;

Deferred income, without considering income related to borrowing operations and;

Liabilities for non-derecognised assets in securitisation operations.

b) The notional amount of the off-balance sheet derivative financial instruments assessed by the taxpayers

except for financial hedge derivatives or whose risk positions balance each other out.


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The rates applicable to the bases defined in the preceding sub-paragraphs a) and b) are 0.05% and 0.00015%,

respectively, based on the amount assessed.

The Bank has posted the banking sector contribution to the “current year tax” account heading in the income

statement.

15. OTHER ASSETS

This account heading comprised the following, at 31 December 2011 and 2010:


Debtors and other investments

Debtors - futures trading 5,786,015 2,878,717

Miscellaneous debtors

Interest pending settlement 3,566,294 1,619,240

Other 10,929,291 3,540,406

20,281,600 8,038,363

Other assets 48,846 48,846

Income receivable 185,712 73,616

Deferred expenses

Operational leasing instalments 3,812 3,812

Insurance - 1,987

Other deferred expenses 627,092 872,307

630,904 878,106

Prepayments and accrued income


Other lending operations pending settlement 523,773 1,385,494

52,150,271 18,515,316


79,848,774 31,105,688

Impairment of other assets (Note 19) ( 4,867,950 ) ( 4,308,948 )

71,980,825 26,796,740

At 31 December 2011, the “miscellaneous debtors – other” account heading refers to the amount of the

cancellation of a swap taken out with the Bank and the already processed costs incurred thereon for the amount

of €7,580,458. The risk of this operation was fully assumed by Banco Caixa Geral Brasil, S.A. (BCG Brasil) under

a “Risk Investment Agreement”. At 31 December 2011, the Bank posted a liability on behalf of BCG Brasil for the

same amount (Note 20).

The “miscellaneous debtors” account heading at 31 December 2011 and 2010 essentially comprises amounts

receivable from customers for the invoicing of services provided by the Bank.

At 31 December 2011 and 2010, the “other deferred expenses” account heading included €395,040 and

€542,104, respectively, for the amounts delivered on account of the investment in Agrupamento Complementar

de Empresas TREM II – Aluguer de Material Circulante, ACE (TREM II).

The “securities operations pending settlement” account heading, at 31 December 2011 and 2010, comprises the

value of the operations for the sale of securities at the end of the year and settled in the first few days of the

following year.

The “debtors - futures trading” account heading at 31 December 2011 and 2010 comprises the futures margin

account.

At 31 December 2011 and 2010, the “overdue credit and interest” account heading included overdue loans of

€3,551,441, originated in Caixa Valores and deriving from securities trading operations in 1992 by a group of

customers. The loan has been fully provisioned.


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Caixa Valores took legal action against the group of customers in September 1994, accusing them of

responsibility for realising the referred to operations and claiming an amount of €6,003,180 plus interest accruing

since June 1993. As the action is still in progress, the Bank has not recorded any asset related with this situation.

16. CENTRAL BANKS’ RESOURCES

The “central banks’ resources” at 31 December 2011 comprises term deposits with the Bank of Portugal, as

collateral for European Central Bank funding. These deposits are collateralised by securities with a nominal value

of €399,275,000 and €377,321,000 respectively in 2011 and 2010 (Note 33).


Term

Term deposits 232,000,000 330,000,000

Interest payable 136,123 157,222

232,136,123 330,157,222




Three months to three years 175,000,000 -

232,000,000 330,000,000

Fixed rate interest set by the European Central Bank is paid on these deposits.

17. OTHER CREDIT INSTITUTIONS’ RESOURCES



Repayable on demand

Sight deposits

Credit institutions In Portugal 282,710 133,661

Credit institutions abroad 1,230 1,230

Term

Very short term resources 435,916,145 470,228,074

Term deposits 318,900,000 327,390,000

Other resources – sight deposit overdrafts - 2,567

Credit institutions’ resources abroad

Other resources – sight deposit overdrafts - 404,341

755,100,085 798,159,873

Interest payable

Credit institutions’ resources in Portugal 8,254,845 826,746

763,354,930 798,986,619



Sight deposits and overdrafts 283,940 541,799


Three months to three years 7,300,000 25,800,000

755,100,085 798,159,873


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18. CUSTOMER RESOURCES AND OTHER LOANS:



Deposits

Sight 37,845,272 54,615,978

Term 94,705,920 57,981,816

132,551,192 112,597,794

Value adjustments related to hedged liabilities (Note 7) 345,377 331,207

132,896,569 112,929,001

Interest payable on deposits 1,953,632 2,185,268

134,850,201 115,114,269

Customers’ resources and other loans, at 31 December 2011 and 2010, had the following structure in accordance

with their respective periods to maturity:


Repayable on demand 37,845,272 54,615,978



One to five years 5,000,000 5,000,000


132,551,192 112,597,794

19. PROVISIONS AND IMPAIRMENT

Information on movements in the Bank’s provisions and impairment accounts for the years 2011 and 2010 is set out below:

2011

(amounts in euros)

Balance at31.12.10


statementUse Transfers


Balance at31.12.11

Provisions for loans and advances to customers (Note 10):

. Bad debts 36,795,958 26,076,018 (2,661,290) - - 60,210,686

. Overdue credit 3,200,046 320,611 (404,292) 1,412,831 50,039 4,579,235

39,996,004 26,396,630 (3,065,582) 1,412,831 50,039 64,789,922

Provisions for general credit risks (Note 10) 7,072,514 (790,703) - - - 6,281,811

Provisions for other risks and liabilities 2,683,179 2,079,893 - - - 4,763,072

9,755,693 1,289,190 - - - 11,044,883

Impairment of available for sale financial assets (Note 8) 8,006,724 4,520,152 (5,205,460) (559,002) 61,244 6,823,658

Impairment of other assets (Note 15) 4,308,948 1,412,830 - (853,829) - 4,867,950

12,315,672 5,932,982 (5,205,460) (1,412,831) 61,244 11,691,607

62,067,370 33,618,802 (8,271,042) - 111,283 87,526,413


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2010

(amounts in euros)

Balance at31.12.09


statementUse Transfers


Balance at31.12.10

Provisions for loans and advances to customers (Note 10):

. Bad debts 23,128,219 14,919,084 (1,251,345) - - 36,795,958

. Overdue credit 1,580,868 (161,161) - 1,669,415 110,925 3,200,046

24,709,087 14,757,923 (1,251,345) 1,669,415 110,925 39,996,004

Provisions for general credit risks (Note 10) 14,690,998 (7,618,484) - - - 7,072,514

Provisions for other risks and liabilities 11,387,267 (8,342,542) (361,546) - - 2,683,179

26,078,265 (15,961,025) (361,546) - - 9,755,693

Impairment of available for sale financial assets (Note 8) 1,737,599 6,913,262 - (779,899) 135,762 8,006,724

Impairment of other assets (Note 15) 4,315,936 882,528 - (889,516) - 4,308,948

6,053,535 7,795,790 - (1,669,415) 135,762 12,315,672

56,840,888 6,592,687 (1,612,892) - 246,687 62,067,370

The Bank ‘s provisions for bad debts and for general credit risks at 31 December 2011 and 2010 were higher than

the limits defined by the Bank of Portugal, to provide for the risk associated with a series of operations for loans

and advances to customers.

Provisions for other risks and liabilities comprise the Bank’s best estimate of eventual amounts to be spent on

settling legal, fiscal and other contingencies.


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20. OTHER LIABILITIES



Creditors and other resources

General government

Deduction of tax at source 4,156,247 4,964,300

Value added tax 661,604 605,840

Social security contributions 228,901 215,872

Interest and dividends payable 215,895 203,886

Creditors - securities operations 184,538 695,417

Miscellaneous creditors

FCR Energias Renováveis – outstanding capital (Note 13) 18,900,000 18,900,000

Banco Caixa Geral Brasil, S.A. (Note 15) 7,580,458 -

Investors’ Indemnity System (Note 30) 2,850,940 -

Suppliers of leased assets 7,812 12,356

Other 1,390,205 463,940

36,176,600 26,043,611

Costs payable

Additional remuneration 2,530,000 2,276,227

Holiday and holiday subsidies 796,211 1,575,500

Pension fund 339,097 432,954

Other 1,522,025 923,056

5,187,333 5,207,737

Deferred income

Commissions for credit operations (Note 2.3. a))

Agencying commissions 870,816 1,057,182

Rents 8,870 8,870

Commissions for guarantees provided 3,612 6,315

883,298 1,072,367

Other accruals and deferred income accounts


Lending operations pending settlement

Commissions payable – syndicated credit operations 17,904,545 32,381,592

Other 490,860 1,061,634

68,309,625 50,527,611

110,556,856 82,851,326

The balance of the “creditors - securities operations” account heading at 31 December 2011 and 2010, refers to

the current accounts of brokerage operations customers.

The “securities operations pending settlement” account heading at 31 December 2011 and 2010, comprises the

value of securities purchase operations at the end of the year and settled in the first few days of the following

year.

The “commissions payable - syndicated credit operations” account heading at 31 December 2011 and 2010,

comprises amounts charged to customers for the structuring of syndicated loan operations in which CGD Group

supplies all or a significant part of the loan with the latter objective of placing it with other credit institutions. As

described in Note 2.11, the Bank recognises a part of the commission received in proportion to the total amount of

credit the group intends to syndicate.


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21. SUBSCRIBED CAPITAL AND TREASURY SHARES

Subscribed capital comprises 81,250,000 shares with a nominal value of one euro each.

Information on the Bank’s equity structure, at 31 December 2011 and 2010 is set out below:

No. shares %

Gerbanca, SGPS, S.A. 81,016,231 99.7

Other 233,769 0.3

81,250,000 100.0

The Bank owned 4,658,000 of its treasury shares at a cost price of €5,999,453, at 31 December 2009.

The Bank disposed of its treasury shares in June 2010 at €5 each, for €23,290,000 making accounting gains of

€13,377,432, net of tax of €3,913,114 (Note 14), recognised in retained earnings.

22. RESERVES, RETAINED EARNINGS AND PROFIT FOR YEAR

The composition of the reserves and retained earnings account headings at 31 December 2011 and 2010 was as

follows:


Revaluation reserves

Revaluation reserve on fixed assets 4,338,403 4,338,403

Fair value reserve

Potential gains


Shares 4,983,359 4,522,963

Other equity instruments ( 6,160,983 ) ( 5,440,244 )

( 114,942,375 ) ( 36,302,554 )

Fiscal effect 32,313,249 9,738,905

( 78,290,723 ) ( 22,225,246 )

Other reserves and retained earnings

Legal reserve 45,344,162 40,783,849

Free reserve 69,948,116 43,394,305

Retained earnings 58,550,497 59,061,492

173,842,775 143,239,646

Profit for period 1,464,516 45,603,129

97,016,568 166,617,529

Revaluation reserves

Fixed assets revaluation reserves

The Bank revalued its fixed assets in 1998, under Decree Law 31/98 of 11 February. The increase of €4,338,403,

in the net value of the fixed assets was recognised in the “revaluation reserves” account heading.

Revaluation reserves may only be used to cover accrued losses or for share capital increases.

Fair value reserves

The fair value reserve recognises potential capital gains and losses on available for sale financial assets, net of

the corresponding fiscal effect.

Legal reserve

In conformity with Decree Law 298/92 of 31 December, changed by Decree Law 201/2002 of 26 September, the

Bank is required to set up a legal reserve fund until equal to its share capital or sum of free reserves and retained


164

earnings, if higher, annually transferring an amount of not Less than 10% of net profits to the reserve. The reserve

may only be used to cover accrued losses or for share capital increases.

Dividends

A resolution was passed at the shareholders’ meeting of 20 May 2011, to distribute €15,000,000 in dividends for

2010.

A resolution was passed at the general shareholders’ meeting of 19 February 2010, to distribute dividends of

€25,025,000 for 2009 of which amount €1,434,664 was allocated to treasury shares.

23. INTEREST AND INCOME AND INTEREST AND SIMILAR CHARGES



Interest and similar income:

Interest on liquid assets 38,530 33,234

Interest on investments in credit institutions In Portugal 519,043 366,615

Interest on investments in credit institutions abroad 478,950 -

Interest on loans and advances to customers

Domestic credit 14,532,802 10,726,478

Foreign loans 11,595,666 9,330,670

Interest on assets held for trading:

Securities 4,058,409 9,688,398

Interest rate swaps 284,819,060 231,859,582


Interest on other financial assets at fair value through profit or loss 419,709 631,198

Interest on available for sale financial assets 17,441,519 9,282,190


Interest on debtors and other investments 179,020 30,364

335,017,417 272,305,715

Commissions received associated with credit operations 1,000,634 821,638

336,018,051 273,127,353

Interest and similar costs:

Interest on central banks’ resources 2,948,338 1,233,861

Interest on credit institutions’ resources 18,965,920 8,643,116

Interest on customer deposits 2,984,155 1,300,238

Interest on financial liabilities held for trading

Interest rate swaps 281,708,242 228,230,808


Other Interest and costs

Interest on creditors and other resources 182 282

Other 241,551 16,354

307,561,621 240,170,456

Net interest income 28,456,430 32,956,897

24. INCOME FROM EQUITY INSTRUMENTS

This account heading, in 2011 and 2010 included €2,500,000 and €7,000,000 euros, respectively, on dividends

paid by Caixa – Desenvolvimento, SGPS, S.A. The remaining balance on this account heading for the years 2011

and 2010, comprises dividends relating to available for sale financial assets.


165

25. INCOME AND COSTS OF SERVICES AND COMMISSIONS



Income from services and commissions

Commissions for guarantees provided 801,924 777,247

Commissions for commitments to third parties 141,102 135,927

For services provided

Structuring of operations 21,714,993 25,800,539

Agencying 2,636,589 2,365,402

Custodian services 915,021 725,749

Deposit and custody of securities 892,816 976,608

Collections 57,892 70,165

Other services provided 10,895,005 12,760,020

Commissions for operations on behalf of third parties 4,103,767 5,997,283

Other commissions received 16,340,397 30,578,462

58,499,506 80,187,402

Costs of services and commissions

Commissions for banking services provided by third parties 3,505,128 10,577,331

Commissions for operations performed by third parties 1,254,203 1,600,737

Commissions for operations on financial instruments 66,452 50,549

Commissions for guarantees received 1,047 5,101

Other commissions paid 998,377 -

5,825,207 12,233,718

The “other commission received” account heading for 2011 and 2010, essentially includes financial advisory

commissions.

The “costs of services and commissions – for banking services provided by third parties ” account heading for the

years 2011 and 2010 included €3,461,662 and €8,634,475 respectively, relating to commissions to be passed on

to other credit institutions in future syndications in accordance with the policy described in Note 2.11.

26. INCOME FROM ASSETS AND LIABILITIES RECOGNISED AT FAIR VALUE THROUGH

PROFIT OR LOSS



Income from assets and liabilities held for trading

Equity instruments ( 664,224 ) 16,774,887


Derivative instruments

Interest rate swaps (26,691,885) 141,252

Futures ( 2,760,516 ) ( 9,152,905 )


Options ( 3,561 ) 26,898

Equity swaps (17,101,307)

Other - 21,989

( 34,251,584 ) ( 19,738,765 )

Income from other financial assets at fair value through profit or loss


Income from hedge operations 75,305 171,964

Value adjustments for hedged assets and liabilities operations ( 63,144 ) ( 147,462 )

( 34,994,794 ) ( 20,222,477 )


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27. INCOME FROM AVAILABLE FOR SALE FINANCIAL ASSETS

These account headings comprise the following:



Debt instruments 2,473,485 2,423,464

Equity instruments 1,204,725 96,403

3,678,210 2,519,867

Losses on available for sale financial assets

Equity instruments ( 652,777 ) ( 14,062 )


( 666,177 ) ( 38,875 )

3,012,033 2,480,992

For the year ended 31 December 2011, the balance sheet heading “income from available for sale financial

assets – equity instruments” referred to the capital gains made on the sale of EDP Renováveis, S.A. shares (Note

8).

28. INCOME FROM FOREIGN EXCHANGE REVALUATIONS



Revaluation of forward foreign exchange position 285,392 260,892

- ( 1,458 )

285,392 259,434

29. INCOME FROM THE DISPOSAL OF OTHER ASSETS

For the year ended 31 December 2011, the account heading “income from the disposal of other assets”, included

€960,690 in loan disposal losses (Note 10).


167

30. OTHER OPERATING INCOME




Other operating gains and losses

Reversal of provision for additional remuneration in past years 1,494,227 -

Staff on loan – CGD Group 962,191 1,154,682

Reimbursement of expenses 284,792 335,003

Other 238,907 190,037

2,980,117 1,679,722

Other operating costs

Other operating costs and expenses

Contribution to the Investors’ Indemnity System (Note 20) 2,850,940 -

Staff on loan – Caixa Geral de Depósitos, S.A. 403,857 -

TREM II 147,064 166,787

Donations and subscriptions 27,236 26,696

Contributions to Deposit Guarantee Fund 27,096 17,500

Other 14,815 195,707

Other operating losses 960 998

Other tax

Indirect taxes 85,515 86,978

Direct taxes 503,700 233,937

4,061,183 728,603

Other operating income (net) ( 1,081,066 ) 951,119

The Bank, in 2011, posted €2,850,940 relative to an extraordinary contribution to the Investors’ Indemnity System.

At 31 December 2011, this amount had still not been liquidated (Note 20), and was liquidated in January 2012.

CaixaBI took special administrative proceedings against the Investors’ Indemnity System, pursuant to which it

applied for the cancellation of the resolution of the Management Committee of the Investors’ Indemnity System,

and consequent return of amounts paid plus interest starting from the time of effective payment, or subsidiarily,

the partial cancellation of the referred to resolution and consequent return of the excess amount paid plus interest

starting from the time of the respective payment.

31. EMPLOYEE COSTS



Remuneration paid to board of directors and inspection bodies 487,401 982,763

Remuneration paid to employees 10,170,664 11,405,742

Mandatory social costs

Costs of remuneration 1,863,317 2,007,471

Pension fund (Note 2.10) 290,391 436,464

Other mandatory social costs 83,771 104,695

Other employee costs 731,259 372,684

13,626,803 15,309,819

The average number of staff employed by the Bank in 2011 and 2010, excluding the board of directors and

inspection bodies was 163 and 167, respectively and distributed as follows:

2011 2010

Senior management 74 77

Technical 69 71

Administrative 20 19

163 167


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32. GENERAL ADMINISTRATIVE EXPENDITURE


Specialised services 3,732,861 5,557,033

Maintenance and repairs 1,145,980 1,062,634

Rents and leases 910,038 935,501

Travel and expenses 783,230 707,905

Communications 475,807 429,521

Advertising and publications 379,417 578,459

Water, power and fuel 116,636 118,985

Consumables 98,854 99,825

Publications 57,418 50,436

Staff training 44,805 67,849

Other third party supplies 40,655 43,442

Insurance 4,447 28,942

Other third party services 84,951 115,848

7,875,099 9,796,380

Information on the minimum payments of operational leases on transport and computer equipment at 31



Up to 1 year 626,250 729,893

From 1 to 5 years 715,955 719,012

33. CONTINGENT LIABILITIES AND COMMITMENTS

Contingent liabilities associated with banking activity are recognised in off-balance sheet account headings as

follows:


Contingent liabilities:

Guarantees and sureties 52,629,393 53,136,289

Asset-backed guarantees

Available for sale financial assets (Note 8) 404,470,000 351,180,000

Financial assets at fair value through profit or loss (Note 6) 1,550,000 75,591,000

458,649,393 479,907,289

Commitments:

Revocable lines of credit 75,066,972 94,521,902

Securities subscriptions 7,921,679 62,511,679

Potential liability to Investors’ Indemnity System 4,188,207 1,722,312

Term liabilities to Deposit Guarantee Fund 162,181 162,182

87,339,039 158,918,075

Liabilities for the provision of services:

Deposit and custody of securities 6,529,834,056 7,794,428,153

The “assets-backed guarantee” account heading, at 31 December 2011 and 2010 comprises the nominal value of

public debt securities pledged, by the Bank, in respect of the following situations:


Pledge on securities in the “ECB assets pool” (Note 16) 399,275,000 377,321,000

Large transactions processing system (SPGT) - 44,200,000

Caixa Geral de Depósitos, S.A. – Euronext 2,500,000 2,500,000

Investors’ Indemnity System (SII) 3,830,000 2,500,000

Deposit Guarantee Fund 415,000 250,000

406,020,000 426,771,000

The object of the Deposit Guarantee Fund is to guarantee customers’ deposits in conformity with the limits

defined by the General Credit Institutions Regime. This takes the form of regular annual contributions. A part of

the said contributions takes the form of an irrevocable commitment to realise the respective contributions when


169

requested by the Fund. These amounts are not recognised in costs. The total value of commitments assumed

since 1996 totals €162,181.

34. RELATED ENTITIES

All companies controlled by CGD group, associated companies and the Bank’s management bodies are

considered to be entities related with the Bank.

The Bank’s financial statements, at 31 December 2011 and 2010, include the following balances and transactions

with related entities, excluding management bodies:

2011 2010

(amounts in euros)

SubsidiariesOther CGD Group

companiesSubsidiaries

Other CGD Group companies

Assets:

Loans and advances to customers - 217,706 - 153,071

Investments in credit institutions - 26,076,338 - 6,661,937

Financial assets held for trading - 56,717,138 - 33,475,505

Available for sale financial assets 9,477,047 13,914,073

Other assets 44,654 323,659 43,766 170,599

Liabilities:

Financial liabilities held for trading - (694,259,749) - (380,088,137)

Other credit institutions’ resources - (759,350,783) - (793,578,186)

Customer resources and other loans (20,780,786) (55,239,729) (10,117,907) (32,854,152)

Hedge derivatives - (1,521,387) - (1,599,779)

Other liabilities (8,870) (8,484,977) (8,870) (219,833)

Income and costs:

Net interest income (344,943) (114,149,607) (74,429) (103,788,901)

Income from financial operations - (333,116,873) - (78,411,638)

Income from equity instruments 2,500,000 - 7,000,000 242,762

Income from services and commissions (net) 21,508 1,820,624 18,809 (1,214,624)

Operating income 243,157 479,623 266,305 1,029,500

General administrative expenditure - (722,842) - (1,472,263)

Transactions with related entities are generally made on the basis of market values on the respective dates.

Management bodies

The costs incurred on the remuneration of the Bank’s board of directors, in 2011, totalled €480,338 of which

amount €12,940 in respect of contributions to the Caixa - Banco de Investimento pension fund, as described in

Note 2.10 (€923,623 and €14,024, respectively in 2009).

No bonuses were paid to board members in 2011 and 2010.

Two board members have mortgage lending agreements with the Bank for a global amount of €257,041 at 31

December 2011 (€189,369 in 2010 for one of the board members). This is a standard loan for Bank employees

which were taken out prior to the appointment as board members. The Bank has no additional liability or granted

any long term benefit to the board of directors, other than those referred to above.

Information on the amounts paid to the members of boards of directors and inspection bodies, in 2011, is set out

in the management report.

Information on the fees charged by the statutory auditors, in 2011, is set out in the management report.


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35. DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS

Management policies on financial risks pertaining to the Bank’s activity

Risk management and control are centralised by CGD’s Risk Management Division. The Bank also has risk

management regulations defining the limits and operating procedures on the management of various risks.

The disclosures required under IFRS 7 - Financial Instruments: Disclosures on the principal types of risks

pertaining to the Bank’s activity are set out below.

Foreign exchange risk

Financial instruments were broken down into the following currencies at 31 December 2011 and 2010:

2011

Currency


Assets


Cash assets with other credit institutions 914,217 43,859 4,183 141,092 1,103,350


Securities 75,548,510 8 - - 75,548,517

Derivatives (notional) 10,704,665,762 453,187,672 - 4,801,523 11,162,654,957

Derivatives (book value) 634,943,238 78,254,101 - 539,264 713,736,603

Other financial assets at fair value through profit or loss 11,286,603 - - - 11,286,603

Available for sale financial assets 393,132,968 12,691,135 - - 405,824,103



Loans and advances to customers 765,720,207 1,593,419 - - 767,313,626

Other assets 68,947,083 7,800,294 70,111 31,286 76,848,774


12,631,004,591 551,989,817 74,294 5,513,166 13,188,581,867

Liabilities


Derivatives (notional) (10,704,665,762) (453,187,672) - (4,801,523) (11,162,654,957)

Derivatives (book value) (578,117,176) (76,001,887) - (539,264) (654,658,328)

Central banks’ resources (232,136,123) - - - (232,136,123)

Other credit institutions’ resources (748,437,418) (14,917,512) - - (763,354,930)



Other liabilities (102,876,323) (7,629,347) (51,186) (0) (110,556,856)

(12,514,643,011) (553,094,316) (51,186) (5,340,788) (13,073,129,301)

Net exposure (1,104,499) 23,108 172,378 (909,013)


171

2010

Currency


Assets


Cash assets with other credit institutions 5,291,178 15,519 31,367 82,720 5,420,784


Securities 165,302,817 7,390,167 - - 172,692,984

Derivatives (notional) 9,968,348,991 635,748,294 - 5,230,644 10,609,327,929

Derivatives (book value) 326,475,073 44,460,471 - 23,189 370,958,733

Other financial assets at fair value through profit or loss 14,964,047 - - - 14,964,047

Available for sale financial assets 423,450,857 5,666,587 6,939,654 - 436,057,098



Loans and advances to customers 786,587,377 27,195,654 19,879,795 - 833,662,827

Other assets 29,449,596 1,627,484 28,552 57 31,105,688


11,708,466,464 720,573,545 26,879,368 5,336,610 12,461,255,987

Liabilities


Derivatives (notional) (9,968,348,991) (635,748,294) - (5,230,644) (10,609,327,929)

Derivatives (book value) (319,786,830) (40,723,279) - (23,189) (360,533,298)

Central banks’ resources (330,157,222) - - - (330,157,222)

Other credit institutions’ resources (730,349,667) (42,206,513) (26,430,439) - (798,986,619)



Other liabilities (82,742,744) (107,351) (1,231) - (82,851,326)

(11,560,757,331) (720,343,579) (26,431,670) (5,253,833) (12,312,786,412)

Net exposure 229,966 447,698 82,777 760,441

The amounts relating to derivatives in the above tables comprise interest rate swaps.

Liquidity risk

Liquidity risk comprises the Bank’s risk of difficulties in securing funds to meet its commitments. An example of

liquidity risk may be the Bank’s incapacity to dispose of a financial asset quickly at close to its fair value.

The analysis of the Bank’s liquidity risk is part of the consolidated liquidity analysis of CGD group’s Asset-Liability

Committee. The Bank has an irrevocable line of credit from CGD, for liquidity requirements of up to one year.

CGD group policy, on the other hand, does not advise direct access to the capital market for securing medium

and long term funding, which is the consolidated liability of CGD group with CGD having a global management

commitment and eventual coverage of the liquidity gaps of its various subsidiaries as a whole.

Under IFRS 7 requirements, the full amount of non-discounted contractual cash flows for the various time bands,

based on the following premises, is set out below:

Customers’ sight deposits are recognised in the “customer resources and other loans” account heading in

“Repayable on demand”;

Sight overdrafts are recognised in the “loans and advances to customers” account headings in “repayable

on demand”;

The “other” column comprises amounts already received or paid which are being deferred;

The amount for derivative financial instruments set out in this table comprises their book value;

Shares and customers’ overdue credit have been classified for unspecified periods.


172

For operations whose income is not fixed such as on operations indexed to Euribor, the future cash flows

have been estimated at the reference value at 31 December 2011 and 2010.

2011


(amounts in euros)Repayable on demand

Up to 3 months

3 months - 1 year



Assets




- Securities - 1,280,943 2,769,988 90,515,045 - - 3,016,001 - 97,581,977


Other financial assets at fair value through profit or loss - 162,954 5,476,471 514,008 7,866,014 2 - - 14,019,449



Loans and advances to customers 5,693,494 54,798,082 123,383,941 191,528,508 150,034,453 383,218,243 5,441,556 (2,588,274) 911,510,003

Hedge derivatives - - - 1,459,895 - - - - 1,459,895

Other assets 72,666,430 - - - - - 3,551,441 630,904 76,848,774

82,386,953 463,056,591 205,678,404 420,612,693 284,180,104 1,002,425,988 31,047,302 (1,957,370) 2,487,430,665

Liabilities

Central banks’ resources - 57,121,361 - - 180,512,500 - - 237,633,861



Other credit institutions’ resources 283,940 756,577,268 7,491,256 - - - - - 764,352,465


Hedge derivatives - - - - 1,521,387 - - - 1,521,387


80,449,256 1,246,871,497 33,182,672 36,907,525 227,205,885 359,688,895 - 883,298 1,985,189,027

Liquidity gap 1,937,697 (783,814,905) 172,495,732 383,705,168 56,974,219 642,737,093 31,047,302 (2,840,668) 502,241,638

2010



Up to 3 months3 months - 1

year1 - 3 years 3 - 5 years

More than 5 years

Undetermined Other Total

Assets




- Securities - 12,197,343 10,487,574 28,521,781 108,898,767 53,269,413 1,338,381 - 214,713,260


Other financial assets at fair value through profit or loss - 78,906 2,222,627 5,606,083 2,887,912 6,130,797 - - 16,926,325



Loans and advances to customers 6,002,978 38,816,737 101,613,640 238,286,778 173,845,172 394,206,470 9,068,090 (3,343,102) 958,496,763

Hedge derivatives - - - - 1,250,849 - - - 1,250,849

Other assets 26,676,141 - - - - - 3,551,441 878,106 31,105,688

46,993,065 71,670,455 169,631,121 465,038,059 422,533,024 1,032,794,599 39,171,153 (2,464,996) 2,245,366,480

Liabilities

Central banks’ resources - 330,684,444 - - - - - 330,684,444

Financial liabilities held for trading - - - - - - - -


Other credit institutions’ resources 541,799 798,683,024 - - - - - - 799,224,823


Hedge derivatives - - - - - 1,599,779 - - 1,599,779

Other liabilities 17,788,373 10,521,377 34,569,208 18,900,000 - - - 1,072,368 82,851,326

51,776,668 1,185,094,235 70,004,806 62,501,034 36,561,408 343,343,743 - 1,072,368 1,750,354,262

Liquidity gap (4,783,602) (1,113,423,780) 99,626,314 402,537,025 385,971,616 689,450,856 39,171,153 (3,537,364) 495,012,218

Interest rate risk

Interest rate risk comprises the fair value or cash flow risk associated with a specific financial instrument, if

changed on the basis of changes in market interest rates.


173

The following is a summary of the type of exposure to interest rate risk at 31 December 2011 and 2010:

2011

(amounts in euros)

Not subject to interest rate risk

Fixed rate Variable rate Total

Assets



- Securities 3,016,001 72,281,165 251,351 75,548,517







Other assets 76,848,774 - - 76,848,774

101,756,362 5,942,804,441 6,497,021,653 12,541,582,456

Liabilities



Central banks’ resources - - 232,136,123 232,136,123

Other credit institutions’ resources - 283,940 763,070,989 763,354,930




110,556,856 5,660,514,032 6,647,400,085 12,418,470,973

Net exposure (8,800,494) 282,290,409 (150,378,432) 123,111,483

2010

(amounts in euros)

Not subject to interest rate risk

Fixed rate Variable rate Total

Assets



- Securities 1,338,381 152,590,009 18,764,594 172,692,984







Other assets 31,105,688 - - 31,105,688

63,382,298 5,719,613,292 6,342,713,454 12,125,709,044

Liabilities



Central banks’ resources - - 330,157,222 330,157,222

Other credit institutions’ resources - 541,799 798,444,820 798,986,619




82,851,326 5,369,368,819 6,500,032,971 11,952,253,116

Net exposure (19,469,028) 350,244,473 (157,319,517) 173,455,928

The “financial assets held for trading - shares” account heading at 31 December 2011 and 2010, included

€70,890,370 and €81,124,157 for a portfolio bond whose interest included a fixed-rate component indexed to the

stock market performance of a Portuguese share.


174

Exposure to interest rate risk, at 31 December 2011 and 2010 can be broken down into the following maturity

periods:

2011



Up to 3 months 3 - 12 months 1 - 3 years 3 - 5 years

More than 5 years Undetermined Other Total

Assets



- Securities - 1,520,344 - 71,012,172 - - 3,016,001 - 75,548,517

- Derivative financial instruments - 2,045,458,968 4,007,664,882 918,004,402 696,483,618 3,495,043,088 - - 11,162,654,957

Other financial assets at fair value through profit or loss - 6,097,330 5,189,272 2 - - - - 11,286,603

Hedge derivatives - - 9,917,906 5,000,000 - - - - 14,917,906



Loans and advances to customers 5,693,494 452,772,268 293,296,850 1,194,966 11,502,767 - 5,441,556 (2,588,274) 767,313,626

Other assets 72,666,430 - - - - - 3,551,441 630,904 76,848,774

79,463,274 2,693,609,453 4,387,518,217 1,026,277,629 719,438,653 3,606,185,299 31,047,302 (1,957,370) 12,541,582,456

Liabilities


- Derivative financial instruments - 2,031,939,994 3,992,471,606 929,539,089 698,816,800 3,509,887,467 - - 11,162,654,957

Central banks’ resources - 57,087,512 - - 175,048,611 - - - 232,136,123

Other credit institutions’ resources 283,940 755,688,425 7,382,564 - - - - - 763,354,930




80,449,256 2,948,157,364 4,053,190,978 936,098,846 883,783,317 3,515,907,913 - 883,298 12,418,470,973

Net exposure (985,982) (254,547,912) 334,327,239 90,178,783 (164,344,664) 90,277,385 31,047,302 (2,840,668) 123,111,483


175

2010


Up to 3 months

3 - 12 months 1 - 3 years 3 - 5 yearsMore than 5


Assets



- Securities - 18,764,594 4,749,672 11,149,370 93,008,533 43,682,434 1,338,381 - 172,692,984

- Derivative financial instruments - 1,857,206,264 3,761,202,878 1,575,642,477 599,041,529 2,816,234,781 - - 10,609,327,929

Other financial assets at fair value through profit or loss - 10,137,956 4,826,089 2 - - - - 14,964,047




Loans and advances to customers 6,002,978 435,031,977 374,442,293 - - 12,460,591 9,068,090 (3,343,102) 833,662,827

Other assets 26,676,141 - - - - - 3,551,441 878,106 31,105,688

38,099,903 2,456,256,877 4,199,335,651 1,629,378,093 732,241,526 3,033,690,837 39,171,153 (2,464,996) 12,125,709,044

Liabilities


- Derivative financial instruments - 1,848,694,819 3,746,332,175 1,589,183,200 601,053,574 2,824,064,160 - - 10,609,327,929

Central banks’ resources - 330,157,222 - - - - - - 330,157,222

Other credit institutions’ resources 541,799 798,444,820 - - - - - - 798,986,619


Hedge derivatives - - 5,000,000 - - 10,815,750 - - 15,815,750

Other liabilities 17,788,373 10,521,377 34,569,208 18,900,000 - - - 1,072,368 82,851,326

51,636,598 3,032,439,225 3,810,116,366 1,608,083,200 607,382,095 2,841,523,264 - 1,072,368 11,952,253,116

Net exposure (13,536,695) (576,182,348) 389,219,285 21,294,893 124,859,431 192,167,573 39,171,153 (3,537,364) 173,455,928

The contents of the above tables were based on the following premises:

the book value of fixed-rate instruments was classified in accordance with their respective period to

maturity;

the book value of variable-rate instruments (e.g. indexed to Euribor), was classified in accordance with the

respective maturity until the next refixing of the rate;

the book value of instruments not subject to interest rate risk (e.g. shares) was included in the

"undetermined" column;

the book value included in the “other” column comprises amounts which have already been received or paid

which are being deferred;

information is provided on notional purchase amounts (as assets) and sales (as liabilities) on interest rate

swaps;

overdue loans to customers and amounts already received or paid were not considered subject to interest

rate risk, and;

customers’ sight deposits, when no interest is paid, are considered as fixed-rate and classified as

“repayable on demand”.

Credit risk

Credit risk comprises financial losses on the defaults of counterparties who have entered into agreements on

financial instruments.


176

Maximum exposure to credit risk

The following is a summary of the maximum exposure to credit risk, by financial instrument, at 31 December 2011

and 2010:


Type of financial instruments Book value (gross)Provisions/ impairment

Book value (net) Book value (gross)Provisions/ impairment

Book value (net)

Assets:

Cash assets with other credit institutions 1,103,350 - 1,103,350 5,420,784 - 5,420,784

Financial assets held for trading 789,285,121 - 789,285,121 598,681,931 - 598,681,931

Other financial assets at fair value through profit or loss 11,286,603 - 11,286,603 14,964,047 - 14,964,047

Available for sale financial assets 386,788,799 - 386,788,799 410,843,857 - 410,843,857

Investments in credit institutions 26,081,619 - 26,081,619 6,661,937 - 6,661,937

Loans and advances to customers 767,313,626 64,789,921 702,523,705 833,662,827 39,996,004 793,666,823

Hedge derivatives 1,459,895 - 1,459,895 1,250,849 - 1,250,849

Other assets (excluding deferred costs) 76,217,871 4,867,950 71,349,921 30,227,582 4,308,948 25,918,634

2,059,536,883 69,657,871 1,989,879,012 1,901,713,813 44,304,952 1,857,408,861

Off-balance sheet:

Guarantees provided 52,629,393 793,303 51,836,091 53,136,289 253,000 52,883,289

2,112,166,276 70,451,173 2,041,715,103 1,954,850,102 44,557,952 1,910,292,150

Credit quality of financial assets

The Bank does not have an internal rating system. The principal procedures in force in terms of the approval and

monitoring of credit operations designed to ensure an adequate risk level for the Bank’s strategy, are set out

below:

The Bank has a Credit Committee, comprising members of the Executive Committee and managers of

structural organs with any form of involvement in lending. The Bank’s Credit Committee meets once a week

with a minimum of two directors and managers of the structural organs involved in the lending process.

The production of commercial proposals for submission to the Credit Committee is the responsibility of

structural organs (business/product divisions), which require the risk opinion of CGD’s Risk Management

Division, in advance. The proposals approved by the Bank’s Credit Committee are recorded in minutes

which are signed by all present, for later submission to and the final resolution of CGD’s Credit Committees.

A part of credit operations with customers is, inter alia, guaranteed by the following types of collateral:

A pledge on securities;

Bank guarantees;

State-backed;

Mortgage loans for employees; and

Personal guarantees.


177

Credit quality of debt securities and derivative financial instruments

The following table provides information on the book value of portfolio debt securities net of impairment (excluding

matured securities) according to the Standard & Poor’s or equivalent rating, by type of guarantor or issuing entity

and by the guarantor‘s or issuing entity’s geography, at 31 December 2011 and 2010:

2011

(amounts in euros)

PortugalRest of European

UnionNorth America Other Total


BB- up to BB+ 71,132,449 - - - 71,132,449

B+ 1,390,795 - - - 1,390,795

Not rated 1,054,342 1,970,925 8 - 3,025,274

73,577,585 1,970,925 8 - 75,548,517

Issued by:

Corporates 1,045,069 1,970,925 8 - 3,016,001

Governments and other local authorities 70,890,370 - - - 70,890,370

Financial institutions 1,642,146 - - - 1,642,146

73,577,585 1,970,925 8 - 75,548,517


(Fair Value Option)

BB- up to BB+ 2 - - - 2

B+ 0

Not rated 10,021,006 - - 1,265,595 11,286,601

10,021,008 - - 1,265,595 11,286,603

Issued by:

Corporates 10,021,005 - - - 10,021,005



10,021,008 - - 1,265,595 11,286,603


(net of impairment)

BBB - 10,220,304 886,626 - 11,106,931

BB- up to BB+ 278,087,343 - - - 278,087,343

CCC- up to CCC+ 3,607,431 962,078 - - 4,569,509

D - 1,216,589 - - 1,216,589

Not rated 76,366,775 15,441,652 - - 91,808,427

358,061,549 27,840,624 886,626 - 386,788,799

Issued by:

Corporates 65.778.541 6.621.546 886.626 - 73.286.713

Governments and other local authorities 259.952.398 1.216.589 - - 261.168.987

Financial institutions 32.330.611 20.002.489 - - 52.333.100

358.061.549 27.840.624 886.626 - 386.788.799


178

2010

(amounts in euros)Portugal




AAA - - - - -

AA- up to AA+ - 2,959,121 1,950,103 - 4,909,224

A- up to A+ 18,941,806 10,206,097 6,547,954 2,991,545 38,687,401

Less than A- 89,606,291 25,701,924 843,987 11,605,776 127,757,978

Not rated - - - - -

108,548,097 38,867,142 9,342,044 14,597,321 171,354,603

Issued by:

Corporates 1,438,145 25,994,492 - 7,969,055 35,401,692

Governments and other local authorities 92,259,314 - - 3,635,263 95,894,576

Financial institutions 14,850,638 12,872,650 9,342,044 2,993,003 40,058,335

108,548,097 38,867,142 9,342,044 14,597,321 171,354,603


(Fair Value Option)

AA- up to AA+ 3 - - - 3

Not rated 12,950,361 - - 2,013,682 14,964,044

12,950,365 - - 2,013,682 14,964,047

Issued by:

Corporates 12,950,361 - - - 12,950,361



12,950,365 - - 2,013,682 14,964,047


(net of impairment)

AAA - - - - -

AA- Up to AA+ - 1,990,343 865,334 - 2,855,676

A- Up to A+ 277,877,471 22,370,126 8,758,272 2,079,738 311,085,607

Less than A- 15,786,884 14,619,754 - - 30,406,638

Not rated 66,495,936 - - - 66,495,936

360,160,291 38,980,222 9,623,606 2,079,738 410,843,857

Issued by:

Corporates 68,518,138 - - - 68,518,138

Governments and other local authorities 258,003,150 3,570,611 - 2,079,738 263,653,499

Financial institutions 33,639,003 35,409,612 9,623,606 - 78,672,220

360,160,291 38,980,222 9,623,606 2,079,738 410,843,857







At 31 December 2011 debt securities issued by “governments and other local authorities” in the rest of the

European Union included bonds issued by the Republic of Greece with a book value of €1,216,589, net of

impairment (impairment on this security was €3,961,150 – Note 19). At 31 December 2010 the book value of

these bonds was €3,570,611.

Credit quality of Investments in credit institutions

The counterparties with which the Bank had contracted “investments in credit institutions” at 31 December 2011,

comprised CGD Group bodies (€26,082,619), with an external rating of BB- (A- on 31 December 2010).


179

Quality of loans and advances to customers

Information on overdue credit operations at 31 December 2011 and 2010 is set out in the following table:

2011 2010

(amounts in euros)

Performing credit

Non-performing credit

Credit in default

Total CreditPerforming

credit

Non-performing

credit

Credit in default

Total Credit

Lending to companies

Outstanding 750,242,768 - - 750,242,768 815,423,853 - - 815,423,853

Overdue 641,223 410,355 4,389,979 5,441,556 - 3,810,319 5,257,770 9,068,090

750,883,991 410,355 4,389,979 755,684,324 815,423,853 3,810,319 5,257,770 824,491,942

Mortgage loans

Outstanding 9,960,646 - - 9,960,646 9,578,472 - - 9,578,472

9,960,646 - - 9,960,646 9,578,472 - - 9,578,472

Consumer loans

Outstanding 339,861 - - 339,861 371,675 - - 371,675

Total outstanding loans 760,543,275 - - 760,543,275 825,373,999 - - 825,373,999

Total overdue loans 641,223 410,355 4,389,979 5,441,556 - 3,810,319 5,257,770 9,068,090

Provisions for bad debts (60,210,687) - - (60,210,687) (36,795,958) - - (36,795,958)

Provisions for overdue credit (320,611) (4,104) (4,254,519) (4,579,234) - (38,103) (3,161,943) (3,200,046)

Total loans 700,653,200 406,251 135,459 701,194,911 788,578,041 3,772,216 2,095,828 794,446,085

The following classifications were used for the preparation of the above tables:

“Performing loans” – loans without any overdue payments or with balances overdue up to 30 days;

“Non-performing loans ” – loans balances overdue between 30-90 days;

“Loans in default” – loans with balances overdue more than 90 days. In the case of corporate loans, if a

customer has at least one operation with payments overdue for more than 90 days, the full amount of the

customer’s exposure to the group is reclassified to this category.

Market risk

Market risk comprises the risk of an adverse change in fair value or the cash flows of financial instruments

deriving from changes in market prices, including foreign exchange, interest rate and price risks.

The Bank’s market risk is assessed on the basis of the following methodologies:

Value-at-Risk” (VaR) on the trading portfolio, including the securities and derivative financial portfolios;

Sensitivity analysis on the Bank’s other assets and liabilities. This sensitivity analysis is calculated on the

bases of the premises defined in Bank of Portugal Instruction 19/2005.

Trading portfolio

VaR comprises an estimate of the maximum potential loss on a specific assets portfolio, over a specific period

with a given confidence level, assuming normal market operation.

The calculation methodology used is that of historical simulation i.e. future events are fully explained by past

events, based on the following premises:

asset held for: 10 days;

confidence level: 99%;

price sampling period: 720 calendar days;


180

decay factor = 1, i.e. all observations carry the same weight.

For options, the theoretical price is calculated by the use of adequate models and the use of implicit volatility. No

calculation for correlations is made, owing to the methodology applied; i.e. the correlations are empirical.

The following is a breakdown of VaR at 31 December 2011 and 2010 (thousand euros):

2011 2010

Market VaR :

Interest rate 142 269

Exchange rate 23 76

Price 20 66

Diversification effect (50) (167)

135 244

The diversification effect is calculated implicitly. Total VaR refers to the combined effect of interest rate, price,

foreign exchange and volatility risks.

Bpvs (basis point values), changes in the market value of interest rate positions owing to the parallel movement of

1 basis point on the yield curves are calculated for the trading portfolio and treasury positions. Other sensitivity

indices commonly applicable to options portfolios are also calculated.

Stress testing assessments are realised monthly.

Theoretical backtesting (comparison of the VaR measure with technical results) is performed daily and real

backtesting (comparison of the VaR measure with the real result) monthly. The number of exceptions obtained i.e.

the number of times theoretical or real losses exceed VaR, enable the method’s accuracy to be assessed and any

necessary adjustments made.

Non-trading portfolio

The sensitivity analysis on the non-trading portfolio was carried out to determine the potential impact on the

Bank’s net interest income in 2012, considering a fall of 50 basis points (bps) in reference interest rates and

assuming a parallel movement of the interest rate curve. The Bank’s financial assets and liabilities were

considered for this purpose, excluding:

derivative financial instruments; and

commercial paper.

The principal premises related with the pricing of operations were:

variable-rate operations: market rate plus respective contractual spread;

new fixed-rate operations: market rate plus respective spread equivalent to the difference between the

average rate on live transactions at 31 December 2011 and respective market rate;

new variable-rate operations: the market rate plus the average contractual spread on live transactions at 31

December 2011.

Based on the above referred to premises, the potential positive impact of a 50 basis points fall in reference

interest rates on net interest income for 2012 totals €201,699 (1,993,466 at 31 December 2010). In the event of a

50 basis points increase in reference interest rates, the potential negative impact on the net interest income

forecast for 2012 totals €191,941 (€2,003,045 at 31 December 2010).


181

Fair value

The Bank maintains a significant part of its assets, notably the whole of its securities and derivatives portfolio, at

fair value through profit or loss.

Reference should be made to the following aspects as regards the principal financial assets and liabilities

recognised at cost:

Interest is paid on almost all investments in and resources with other credit institutions at indexed rates and

short refixing periods;

As shown above, in the section on interest rate risk, the payment of interest on almost all customer deposits

is indexed to Euribor, with short refixing periods. A long term operation at fixed interest rates has been

covered by a hedge derivative for which reason the change in the fair value attributable to the interest rate

risk has already been recognised in the deposit’s book value (see Note 18).

In light of the above, the Bank considers that the book value of its financial assets, net of provisions and its

financial liabilities comprises a reliable approximation of their respective fair value.

The form of assessing the fair value of financial instruments at 31 December 2011 and 2010 is summarised

below:

2011



Type of financial instruments (amounts in euros)

Assets valued at cost price

Prices in an active market (Level 1)

Market data(Level 2)

Other (Level 3) Total

Assets

Financial assets held for trading - 4,406,796 713,987,955 70,890,370 789,285,121Other financial assets at fair value through profit or loss - 2 - 11,286,602 11,286,603

Available for sale financial assets 153,127 316,816,620 7,456,157 81,401,200 405,827,103


153,127 321,223,418 722,904,006 163,578,171 1,207,858,722

Liabilities



- - 735,110,735 - 735,110,735


182

2010



Type of financial instruments (amounts in euros)

Assets valued at Cost price

Prices in an active market (Level 1)

Market data(Level 2)

Other (Level 3) Total

Assets

Financial assets held for trading - 79,727,563 437,749,249 82,543,502 600,020,313Other financial assets at fair value through profit or loss - 2 941,268 14,022,777 14,964,047

Available for sale financial assets 153,127 316,226,996 42,608,044 77,068,931 436,057,098


153,127 395,954,561 482,549,409 173,635,210 1,052,292,307

Liabilities



- - 418,469,329 - 418,469,329


Prices on active markets correspond to equity instruments listed on a stock market and high liquidity bonds

(Level 1);

Prices of derivative financial instruments are calculated using valuation techniques based on market date

(Level 2);

Portfolio shares valued by indicative bids supplied by contributors external to the group were also

recognised in “Valuation techniques - market date (Level 2)”;

Shares valued by internal CGD Group models are presented in “Valuation techniques – Other (Level 3)”;

This column includes:

- At 31 December 2011, €70,890,370 in bonds convertible into EDP shares issued by Parpública SGPS,

S.A., which were being valued in accordance with an internal model defined by the Bank (€81,124,157 in

2010).

- At 31 December 2011 and 2010, €80,759,654 and €82,067,907, respectively, relating to fixed or

variable-rate bonds issued by Portuguese financial and non-financial companies, in respect of which

there are no active market nor indicative prices supplied by external counterparties. The Bank valued

these securities using a projected cash flow updating model at market interest rates plus a spread the

Bank considers adequate to the issuing entity’s credit risk as a discount rate.

Assets valued at cost are stable financial investments held by the Bank for which no active market exists.


183

The following is a summary, in 2011 and 2010, of the movements occurring in portfolio securities valued at 31

December 2011 and 2010 by “valuation techniques - other” in addition to the potential and realised capital gains

recognised in the fair value reserve and in income from financial operations:

2011

Income recognised in:

Income for period

(amounts in euros)



Acquisitions/ Disposals

Fair value reserve

Potential EffectiveChange in exchange

rate


Financial assets held for trading 82,543,502 - (4,320,144) - (7,368,457) 35,470 - 70,890,370

Other financial assets at fair value through profit or loss 14,022,777 - (1,983,046) - (753,130) - - 11,286,601

Available for sale financial assets 77,068,931 3,607,431 1,580,159 (1,033,069) - 10,752 166,995 81,401,200

173,635,211 3,607,431 (4,723,031) (1,033,069) (8,121,588) 46,222 166,995 163,578,172

2010

Income recognised in:

Income for period

(amounts in euros)



Acquisitions/ Disposals

Fair value reserve

Potential EffectiveChange in exchange

rate


Financial assets held for trading - 92,659,873 (3,530,712) - (6,641,192) 55,533 - 82,543,502

Other financial assets at fair value through profit or loss 28,759,548 1 (14,249,622) - (487,150) - - 14,022,777

Available for sale financial assets 49,634,184 5,442,832 17,760,165 4,074,303 - 1,800 155,649 77,068,931

78,393,732 98,102,706 (20,169) 4,074,303 (7,128,342) 57,333 155,649 173,635,211

36. CAPITAL MANAGEMENT

The Bank in performing its investment banking operations exercises strict control over the ratio between its assets

management needs and available capital. This management action on the Bank’s capital has been designed to

cater for any default in terms of capital requirements, exceeding reporting obligations and making it possible to

simulate the impacts of hypothetical management decisions on the diverse prudential ratios.

Capital management is designed to optimise the above referred to ratio, with a prudential margin providing for the

resolutions to be passed in terms of the Bank’s asset management.

The Bank’s administration receives periodic internal reports permitting not only the monitoring of the

consequences of the resolutions taken in asset management terms but also the monitoring of the gaps between

real positions and their minimum respective capital requirements.

The procedures used to calculate the Bank’s ratios and prudential limits are based on the dispositions issued by

the Bank of Portugal, as is the case for issues pertaining to the banking system’s supervisory functions. These

regulations represent the legal and regulatory framework governing various prudential matters.


184

The solvency ratio, at 31 December 2011 and 2010 was assessed as follows:

Separate Accounts(amounts in euros)

2011 2010

Eligible own funds (Base+Complementary-Deductions) (1) 255,416,292 228,373,810

Basis own funds 248,872,093 218,208,798

Paid up capital 81,250,000 81,250,000

(-) Treasury shares - -

Legal, statutory and other reserves 115,292,278 84,178,154

Retained earnings from past years 58,550,496 59,061,492

(-) Intangible assets (558,001) (388,823)

(-) Adjustment - TREM II (395,040) (542,104)

(-) Deferred tax assets associated with provisions for general credit risks - (698,512)

(-) Revaluation differences on available for sale assets - negative fair value (net of tax) (6,160,983) (5,440,244)

(-) Reserves for deferred tax liabilities resulting from the revaluation of available for sale assets 893,343 788,835

Complementary own funds 6,544,199 10,165,012

Revaluation reserves for fixed assets 4,338,403 4,338,403

Revaluation differences on available for sale assets - positive fair value (45%) 2,205,796 2,035,333

Provisions for general credit risks - 3,791,275

Own funds requirements (2) 182,397,595 178,081,849

Credit and counterparty credit risk 139,034,241 126,872,463

(-) 8% Provisions for general credit risks - part not eligible for own funds (502,545) (262,499)

Position risks - debt instruments 30,293,059 36,151,196

Position risks - equity securities 301,886 510,166

Commodity risks - -

Operational risk - Standard method 13,270,954 14,810,523

Solvency ratio 11.20% 10.26%

Legend:

(1) According to Official Notice 12/92

(2) According to current legislation: Official Notices 5/07, 8/07, 9/07


185

4 Reports and opinions


186

Report and Opinion of Fiscal Board

Caixa – Banco de Investimento, S.A.

Fiscal Board

REPORT AND OPINION OF FISCAL BOARD

To shareholders,

1. According to the dispositions of article 420 of the commercial companies code, the fiscal

board is responsible for issuing a report on its inspection of the company and an opinion on

the accounts and proposals submitted by the board of directors of CAIXA – Banco de

Investimento, S.A. (hereinafter referred to as CaixaBI), for the year ended 31 December

2011.

2. The inspection of CaixaBI is the responsibility of a fiscal board and a statutory auditor or

statutory audit company, which is not a member of the said body, as provided for in sub-

paragraph b) of no.1 of article 413 of the commercial companies code and CaixaBI’s articles

of association.

3. CaixaBI’s fiscal board for the three year period 2011-2013, was elected at the shareholders’

meeting of 20 May 2011. In light of the expiry of the mandate of one of the fiscal board’s

members, under the terms of article 414-A no. 2 of the commercial companies code and the

resignation of the deputy to the fiscal board, at the shareholders’ meeting of 6 January 2012, a

new chairman and new deputy member of the fiscal board were elected to complete the 2011-

2013 term of office.

4. Pursuant to its responsibilities and taking into consideration the governance model adopted in

CaixaBI and notwithstanding the natural disturbances raised by the facts referred to in the

preceding item, the fiscal board diligently endeavoured to monitor and inspect the

management acts of the board of directors, having, inter alia, scheduled regular meetings with

the board of directors and the statutory audit company, in addition to having been given

access to all documentation and clarifications requested to enable it to understand the basis

upon which decisions were taken.

5. The fiscal board, on 29 June 2011, under sub-paragraph a) of no. 5 of article 25 of Bank of

Portugal (BdP), Official Notice no. 5/2008 of 1 July, issued its opinion on the adequacy and

effectiveness of CaixaBI’s internal control system. Taking into account the limited availability

of time between the appointment of the fiscal board and the production of the referred to

opinion and the necessarily limited nature of the procedures which could be developed, the

fiscal board concluded, however, that it was not aware of any information which could lead it

to consider that CaixaBI’s internal control system did not effectively and adequately comply, in

all materially relevant aspects with the referred to BdP regulation. The fiscal board also

assumed that it would be improving its knowledge of CaixaBI’s operations and internal control

system.

6. The fiscal board analysed the report on corporate governance produced by the board of

directors and makes particular reference to CaixaBI’s high level of compliance with good

governance principles. The fiscal board also assessed the governance model in force in


Fiscal Board

CaixaBI and considers that it ensures effective separation between management and

inspection functions and is adequate to the activities performed by the Bank.

7. The fiscal board took note of CaixaBI’s high level of compliance with legal guidelines as

pointed out in the board of directors’ report on corporate governance, namely as regards the

management objectives, special disclosure requirements, compliance with the shareholder’s

recommendations, application of reductions to remuneration, public contracting activities and

compliance with the cost reduction plan.

8. The fiscal board took note of the report issued by the statutory auditor on the half yearly

financial statements.

9. The fiscal board also took note of the impairment reports on CaixaBI’s credit and securities

portfolios, produced half yearly by the external auditors, as established by the Bank of

Portugal’s circulars 17/2002/DSB of 14 February and 38/2008/DSB of 29 May.

10. In terms of the Bank’s activity in 2011, reference should be made to the fact that investment

banking operations were heavily penalised by the negative performance of the capital markets

and investors’ aversion to risk on the assets of peripheral eurozone countries. Notwithstanding

this unfavourable environment, CaixaBI had a positive 2011, in terms of its activity, having

been involved in the major operations in its operating market. Its internationalisation strategy

(Brazil and Lusophone Africa), in addition to the reinforcement of its advisory and

intermediation activities (less demanding in terms of liquidity and capital allocations), have

enabled it to achieve good results in terms of commissions (€62 million in comparison to €74

million in 2010), even in a year of a major slowdown of economic activity.

11. As regards CaixaBI’s consolidated accounts for the year ended 31 December 2011, the

following indicators characterised its respective operations:

(i) Net assets were up 8% by €162 million over the preceding year, to €2,162 million,

although deleveraging operations took place during the year with a reduction of 11% in

the loans and advances to customers portfolio (€89 million);

(ii) On the liabilities side, the 13% growth (from €1,725 million to €1,948 million) particularly

derived from the increases recorded in financial liabilities at fair value through profit or

loss (€317 million);

(iii) Shareholders’ equity was down €62 million euros over the preceding year to €214 million,

largely deriving from the €56 million increase in fair value reserves and decrease in

income for the year (from €40 million in 2010 to €8.6 million in 2011);

(iv) Net interest income, including income from equity instruments, was down 12% over the

preceding year (from €33.7 million in 2010 to €29.5 million in 2011), whereas net

operating income was down by around 35% by €32.9 million from €91.9 million in 2010 to

€59 million in 2011, largely on account of income from financial operations (down €31


Fiscal Board

million) which was heavily penalised by the depreciation of the assets portfolio,

particularly €26 million relating to an IRS taken out with by the Bank on a Greek PPP;

(v) Credit impairment was significantly up over 2010, from €7.3 million to €24.1 million, €20

million of which for loans to companies in the Spanish market. This increase derived from

a prudent balance sheet risk hedging policy in a particularly difficult scenario in terms of

the Portuguese and Spanish economies, in which markets CaixaBI’s credit and

guarantees portfolio is concentrated;

(vi) On a structural costs level reference should be made to the fact that 2011 witnessed a

decrease of €4.2 million over 2010 (down 15%), from €28 million to €23.8 million,

notwithstanding the reinforcement of CaixaBI’s international activity. Employee costs

were down €2.1 million (by 12% over 2010, from €17.4 million to €15.3 million), whereas

general and administrative expenditure was down 20% over the preceding year, from

€10.6 million to €8.5 million);

(vii) Consolidated net income was 79% down by EUR 31.6 million to EUR 8.6 million, over the preceding year, particularly on account of the significant decrease in net interest income and recognition of impairment on securities, as referred to in the preceding items.

12. In terms of CaixaBI’s separate accounts for the year ended 31 December 2011, reference

should be made to the following indicators:

(i) Net assets were up 8% by €163 million to €2,169 million over the preceding year,

notwithstanding deleveraging operations over the course of the year with an 11%

decrease of €91 million in the loans and advances to customers portfolio;

(ii) On the liabilities side, the 13% growth (from €1,758 million to €1,991 million) particularly

derived from increases in financial liabilities held for trading (€317 million);

(iii) Shareholders’ equity was down €70 million over the preceding year to €178 million,

largely on account of the €56 million increase in revaluation reserves and decrease in

income for the year (from €45.6 million in 2010 to €1.5 million in 2011);

(iv) CaixaBI’s separate net income for the year ended 31 December 2011 was down €44.1

million over 2010 to €1.5 million;

(v) CaixaBI’s solvency ratio of 11.2% measured on a separate basis remains solid, in line

with previous years’ figures.

13. In the period following the year end closing of the accounts and pursuant to the functions

provided for in the commercial companies code, the fiscal board analyased the separate and

consolidated annual report for 2011, submitted by the board of directors, which it has

articulated, in technical terms with the statutory auditor.

14. The fiscal board also considered the contents of the “Statutory Audit Certificates” issued by

the statutory auditor on the separate and consolidated accounts for the year ended 31


Fiscal Board

December 2011, which encompass the statements of financial position, income statements,

comprehensive income, changes to shareholders’ equity and cash flows for the year.

15. OPINION

Taking all of the above into consideration, it is the fiscal board’s opinion that the shareholders’

meeting should:

a) approve the management report and separate and consolidated accounts for 2011,

submitted by CaixaBI’s board of directors;

b) consider the proposal for the appropriation of net income which is an integral part of the

management report;

c) undertake a general assessment of the company’s management and inspection, drawing

the conclusions referred to in article 455 of the commercial companies code.

Lisbon, 12 March 2012

FISCAL BOARD

____________________________________


(Chairman)

_____________________________

Pedro António Pereira Rodrigues Felício

(Member)

____________________________________


(Member)


191

Statutory Audit Certificate – Consolidated Accounts

STATUTORY AUDIT CERTIFICATE

CONSOLIDATED ACCOUNTS

(amounts in euros)

Introduction

1. We have examined the attached consolidated financial statements of Caixa - Banco de

Investimento, S.A. (Bank) and its subsidiaries, comprising the statement of its consolidated

financial position at 31 December 2011, evidencing a total of €2,161,678,743 and shareholders’

equity of €213,815,997, including net income of €8,552,996, its consolidated statements of

results, comprehensive income, changes to shareholders’ equity and cash flows for the year

then ended and corresponding notes.

Responsibilities

2. The Bank’s board of directors is responsible for preparing the consolidated financial statements

with a view to presenting a true and appropriate description of the financial position of the

companies included in the consolidation, their results and consolidated comprehensive income

generated by their operations, changes to consolidated shareholders’ equity and consolidated

cash flows, in addition to using adequate accounting policies and criteria and maintaining

appropriate internal control systems. It is our responsibility to express a professional,

independent opinion thereon, based on our examination of the said financial statements.

Scope

3. Our examination was performed in conformity with the technical standards and revision/audit

directives of the Order of Statutory Auditors4

which require that the examination be planned and

performed with the objective of obtaining an acceptable degree of assurance as to whether the

consolidated financial statements contain any materially relevant distortions. The examination

included verification of specimens of the supporting documents upon which the amounts and

information disclosed in the financial statements have been based and an assessment of

estimates based on judgements and criteria defined by the board of directors and used for the

preparation thereof. The examination also included verification of the consolidation operations

and application of the equity accounting method and whether the financial statements of the

consolidated companies have been appropriately examined; an appraisal of the adequacy of

4Ordem dos Revisores Oficiais de Contas

the accounting policies used, their uniform application and disclosure, based on the

circumstances, verification of the applicability of the going-concern principle and whether the

global presentation of the consolidated financial statements is adequate. Our examination also

included verification of the concordance between the consolidated financial information

contained in the board of directors’ report and the consolidated financial statements. We

consider that our examination has provided us with an acceptable basis upon which to express

our opinion.

Opinion

4. In our opinion, the consolidated financial statements, referred to in paragraph 1 above, provide

a true and appropriate description, in all materially relevant aspects, of the consolidated

financial position of Caixa - Banco de Investimento, S.A. and its subsidiaries at 31 December

2011, the consolidated results and consolidated comprehensive income generated by their

operations, changes to consolidated shareholders’ equity and consolidated cash flows for the

year then ended, in conformity with the International Financial Reporting Standards, as adopted

by the European Union.

Report on other lawful requirements

5. It is also our opinion that the information contained in the board of directors’ report is in

conformity with the financial statements for 2011.


Deloitte & Associados, SROC S.A.

Represented by João Carlos Henriques Gomes Ferreira


194

Statutory Audit Certificate – Separate Accounts

STATUTORY AUDIT CERTIFICATE

SEPARATE ACCOUNTS

(amounts in euros)

Introduction

1. We have examined the attached financial statements of Caixa - Banco de Investimento, S.A.

(Bank) comprising the statement of its separate financial position at 31 December 2011,

evidencing total assets of €2,169,198,024 and shareholders’ equity of €178,266,568, including

net income of €1,465,516, separate statements of results, comprehensive income, changes to

shareholders’ equity and cash flows for the year then ended and corresponding notes.

Responsibilities

2. The Bank’s board of directors is responsible for preparing financial statements with a view to

presenting a true and appropriate description of the Bank’s financial position, the results and

comprehensive income generated by its operations, changes to its shareholders’ equity and cash

flows, in addition to using adequate accounting policies and criteria and maintaining an

appropriate internal control system. It is our responsibility to express a professional, independent

opinion thereon, based on our examination of the said financial statements.

Scope

3. Our examination was performed in conformity with the technical standards and revision/audit

directives of the Order of Statutory Auditors5, which require that the examination be planned and

performed with the objective of obtaining an acceptable degree of assurance as to whether the

financial statements contain any materially relevant distortions. The examination included

verification of specimens of the supporting documents upon which the amounts and information

disclosed in the financial statements have been based and an assessment of estimates, based

on judgements and criteria defined by the board of directors and used for the preparation thereof.

The examination also included verification of whether the accounting policies used are adequate

and their disclosure, based on the circumstances, verification of the applicability of the going-

concern principle and whether the global presentation of the financial statements is adequate.

Our examination also included verification of the concordance between the financial information

contained in the board of directors’ report and the financial statements. We consider that our

examination has provided us with an acceptable basis upon which to express our opinion.

5Ordem dos Revisores Oficiais de Contas

Opinion

4. In our opinion, the separate financial statements, referred to in paragraph 1 above, provide a true

and appropriate description, in all materially relevant aspects, for the purposes specified in

paragraph 5 below, of Caixa - Banco de Investimento, S.A.’s financial position at 31 December

2011, its results and comprehensive income generated by its operations, changes to its

shareholders’ equity and cash flows for the year then ended, in conformity with the Adjusted

Accounting Standards issued by the Bank of Portugal (Note 2).

Emphasis of Matters

5. The financial statements referred to in paragraph 1 above, refer to the Bank’s separate activity

and have been prepared for approval and publication under current legislation and the

requirements of the Bank of Portugal. As indicated in Note 2.7 of the notes to the financial

statements, investments in subsidiaries, associated companies and jointly controlled entities are

recognised at cost and the attached financial statements do not, therefore, include the integral

consolidation effect nor the application of the equity accounting method, which shall be performed

in the consolidated financial statements to be approved and published separately. Additional

information on subsidiaries and associated companies is set out in Note 13 to the notes to the

financial statements.

Report on other lawful requirements

6. It is also our opinion that the financial information contained in the board of directors’ report is in

conformity with the financial statements for 2011


Deloitte & Associados, SROC S.A.

Represented by João Carlos Henriques Gomes Ferreira


197

Report on corporate governance


198

I Corporate governance


199

1 Assessment of compliance with good governance principles

Mission, objectives and general operating principles

RecommendationsLevel of compliance*

Obligation of compliance, respect and disclosure, of mission, objectives and policies, established in an economically, financially, socially and environmentally efficient manner, based on demanding quality parameters, designed to safeguard and expand competitiveness, in due respect for established social responsibility, sustainable development and satisfying collective principles and needs;

Accomplished (item 2)

To produce adequate activity plans and budgets in accordance with available resources and sources of finance based on its mission and the established objectives;


Adoption of equality plans to achieve effective equality of treatment and opportunities between men and women, eliminating gender-based discrimination and permitting conciliation between employees’ personal, family and professional lives;


Reporting of annual information to the supervisor and the general public, on how its mission has been furthered, level of compliance with objectives, means of compliance with the social responsibility and sustainable development policy and means of safeguarding competitiveness (through research, innovation, development and integration of new technologies in the productive process);

Accomplished(item 2/9)

Compliance with legislation and regulations, adopting an ethically irreproachable approach to the application of fiscal regulations, anti-money laundering operations, competition, consumer protection, the environment and labour relationships;


Obligation to treat customers, suppliers and other lawfully entitled persons equally, establishing and disclosing the procedures adopted for the acquisition of goods and services, adopting adjudication criteria geared to principles of economy and efficacy, ensuring the efficiency of transactions made, guaranteeing equality of opportunities for all interested parties, providing annual information on all transactions which have not been made under market conditions and a list of suppliers representing more than 5% of external supplies and services;


To manage all of the company’s business affairs with integrity (having or subscribing to a code of ethics which entails demanding ethical and deontological behaviour and the disclosure thereof);


* Accomplished / accomplished in part / not accomplished / not applicable

Administration and inspection structures


Number of members should not exceed the number in private companies, of a similar dimension operating in the same sector;


The governance model should ensure effective separation between administration and inspection functions (with larger more complex companies spining off the supervisory function by creating an audit board or a board for financial issues);


Issue of a global assessment report on governance structures and mechanisms in force in the company, by members of the inspection body;


The accounts of the larger, more complex companies should be audited by external entities with identical standards to those used for companies admitted to trading in regulated markets, with the members of the inspection body being responsible for the selection, confirmation and contracting of the auditors, approval of any services outside the scope of the audit function and liaising between the company and auditors;


Implementation of control system, protecting the company’s investments and assets, including all relevant risks assumed by the company;


Promotion of the rotation and limiting of terms of offices of members of the inspection bodies; Accomplished (item 5)



200

Prevention of conflicts of interest


Obligation of members of statutory bodies not to be involved in decisions in which they have a personal interest;


Obligation of members of statutory bodies to declare any important financial investments they may have in the company;


Obligation of members of statutory bodies to declare any relevant relationships with suppliers, customers, credit institutions or other relationships which may create a conflict of interest.



Remuneration and other rights


Annual disclosure of total remuneration (fixed and variable) earned by each member of the board of directors;


Annual disclosure of information on remuneration earned by each member of the inspection body;Accomplished (item 6)

Annual disclosure of information on other benefits and incentives (healthcare insurance, use of vehicles and other benefits provided by the company);



Disclosure of relevant information


To publicly and immediately disclose all information off which they are aware, which may have a relevant effect on the company’s economic and financial situation and net worth;


To provide for the disclosure of information on the state’s corporate websites, in a clear, relevant and up-to-date manner, of all of the company’s above referred to financial, historical and current information and the identity and résumés of all members of its statutory bodies;


To include an item on corporate governance in the board of directors’ report (internal and external regulations binding on the company, information on relevant transactions with related entities, remuneration of members of statutory bodies, sustainability analysis and assessment of level of compliance with GGP);


Nomination of ombudsman, when justified. Not applicable



201

2 Management guidelines, mission, objectives and policies

Information on management guidelines applicable to CaixaBI, namely strategic guidelines

for the state’s business sector as a whole, general guidelines on the financial sector and

specific guidelines for CaixaBI

CaixaBI, as CGD Group’s investment Bank, complies with the strategic guidelines defined both for the

state’s business sector as a whole and CGD Group in particular.

Mission

CaixaBI’s principal mission is to dynamise the investment banking business platform between Portugal

Spain, Brazil and Lusophone Africa, in its different business areas, providing customers with an international

dimension in any of the above mentioned geographies with an integrated financial service.

This mission is horizontal to the different product areas: project finance, structured finance, corporate finance

– advisory, debt capital market, equity capital market, financial brokerage, research, financing and

structuring areas, syndication and sales and venture capital.

Key strategic objectives

The strategic objectives defined by CaixaBI include:

To operate as a benchmark services provider in a context of major liquidity restrictions.

To strengthen internationalisation with the core objective of developing its medium term operations, with

an approach to internationalisation in line with CGD Group strategy and geared to its natural markets

for the expansion of Portuguese companies: Spain, Brazil, Angola and Mozambique.

In Brazil, to focus on opportunities generated by strong economic growth potential, dynamism of its

capital market, intense cross-border activity and the internationalisation of Brazilian companies

including the target markets of Iberia and Lusophone Africa.

In Lusophone Africa, to exploit the opportunities afforded by the strong economic growth potential of

these geographies, based on the availability of significant natural resources and development of local

infrastructures, in addition to the major interest they attract in terms of foreign direct investment and

particularly for players in CaixaBI’s other target markets.

To consolidate its leading position in investment banking in Portugal.

To strengthen synergies with CGD Group, covering the areas of relationships with major companies,

SMEs and equity market investors (branch office network).

To invest in the Portuguese business relationship with any of the geographies – Portugal, Spain, Brazil,

Angola and Mozambique – as the development hub.

To maintain the lead of the debt area in Portugal and to exploit opportunities in the Brazilian, Angolan

and Mozambican markets, with the support of local CGD Group companies.

In the project finance area, to secure the services of a larger number of banks for the formation of

banking syndicates and increasingly commit to the provision of services in a context of major liquidity

restrictions.


202

In the structured finance area, to commit to the development of financial advisory business in liabilities

reorganisation processes.

To reposition the Bank in Spain as a services provider, actively endeavouring to increase its visibility

with Spanish companies and investors.

To leverage the Bank’s syndication capacity, expanding its presence to opportunities in the Bank’s

target geographies.

In the equity and mergers and acquisitions areas, to participate as a financial advisor in the privatisation

processes occurring in Portugal over the next few years in addition to exploiting the recovery of the

Portuguese and Spanish markets over time, and sustaining growth rates in the Brazilian and

Lusophone African markets.

To develop the financial brokerage area, in order to consolidate a market share commensurate with the

dimension of the CGD Group.

To implement cross-selling operations in venture capital and investment banking areas, coordinating

the processing of operations and providing customers with value added services.

To form commercial teams on a matrix and technically polyvalent basis (product and country) retaining

human resources with high quality and potential and promoting career development opportunities on an

international level.

Venture capital:

To affirm our leadership of the market, favouring the development of the venture capital industry,

entrepreneurialism, innovation and sustainability, encouraging new globalisation players and

strengthening national decision-making centres.

To reconfigure CGD Group’s venture capital area, ensuring an integrated approach to resources based

on a complementary approach, to anticipate opportunities, strengthen partnerships and mobilise

investors.

To provide a more comprehensive offer, less concentrated on investments of a relevant dimension,

geared to different types of business and economic agents, to respond to the challenges facing the

Portuguese economy which determine investments with greater requirements in terms of the use of

shareholders’ equity, in the business sphere.

To strengthen synergies within CGD Group, allying the advantages of belonging to the largest national

financial group to its specialised knowledge on the reality of companies and the risks incurred.

To reinforce operating standards, incorporating the general trends characterising the process of

sophistication recorded in the financial industry on a level of products, processes and governance.

Information on the annual production of an activities plan and a report providing information on

compliance with the company’s mission, objectives and policies, including social responsibility and

sustainable development polices and safeguarding competitiveness through research, innovation

and the integration of new technologies in terms of production.

CaixaBI develops an annual planning process as part of its activities and budget plan with the aim of

quantifying the strategic objectives applied to its business units over the medium term.


203

A management information system, comprising a vast range of periodic reports on the various areas of

activity, allows for the control of the execution of the approved plan.

In addition to the description of CaixaBI’s activities, an analysis of sustainability in the economic, social and

environmental domains is set out in the annual report.


204

3 General operating principles

Internal and external regulations binding upon the company

CaixaBI is governed by its articles of association and a series of internal standards and procedures, adapted

both to the evolution of national and European legislation on its activity, and the regulatory standards issued

by supervisors, i.e. Bank of Portugal (BdP) and Securities Market Commission (CMVM).

CaixaBI has a standards and procedures system, published on its intranet and accessible to all employees,

upon whom it is binding. It covers the most relevant aspects of the company’s operation and activities. The

standards and procedures system establishes the rules and competencies on production, management,

support media, disclosures and access to standards, notably organic structure, personnel policy,

characteristics of products and services and procedures or information of relevance to the performance of its

activity.

Code of conduct

As banking activities should be governed by strict principles of impartiality and transparency, to be complied

with by all employees, CaixaBI has introduced internal standards governing professional deontology, issuing

directives on these issues which have been compiled in a code of conduct published in September 2008 of

which all employees have been informed and which is available at (www.caixabi.pt). Reference should also

be made, in the ethical and deontological sphere, to standards relating to privileged information and

professional secrecy.

Compliance with legislation and regulations

All of CaixaBI’s activity is geared to strict compliance with legal, regulatory, ethical and deontological

standards and good practice. Its respective compliance is monitored by an internal control system.

CaixaBI has adopted an ethically irreproachable attitude to the application of fiscal, anti-money laundering,

competition, consumer protection, environmental and labour regulations.

The Bank has various regulations to which reference should be made on account of their importance. They

include its anti-money laundering handbook, conflicts of interest policy, counterparties and correspondents’

handbook, credit operations procedures handbook, compliance regulations handbook, opening and use of

accounts, prevention of market abuse policy, business continuity plan, global security of information policy,

research office conduct and procedures handbook – financial analysts, management handbook for

operational risk and social responsibility and sustainability.

Internal regulations on financial brokerage activities, defining standards and procedures to be complied with

in financial brokerage activities, prepared on the basis of the dispositions on this subject matter, namely the

securities code (CVM) and dispositions issued by supervisors (Bank of Portugal and Securities Market

Commission) have also been produced and issued and are binding upon employees.

The Bank’s regulations have also been designed to implement professional and personal advancement

policies for its workers, performance management, the performance of functions or activities outside the

Bank, treatment of all workers with dignity and respect, equality of treatment and equal opportunity between

men and women, reconciliation between personal, family and professional lives, employee loans and career

models.


205

4 Relevant transactions with related parties

All CGD Group companies are considered to be CaixaBI related parties.

Of the transactions with related parties, those deemed to be most relevant occurred with the following

entities:


Locarent – Companhia Portuguesa de Aluguer de Viaturas, S.A.

Banco Caixa Geral - Brasil, S.A.

Companhia de Seguros Fidelidade - Mundial, S.A.

At 31 December 2011, CaixaBI’s financial statements included the following balances and transactions with

related parties:

2011

(EUR thousand) Caixa Capital CGDOther CGD Group

companies

Assets

Investments in credit institutions 26,082

Securities and derivative financial instruments held for trading

55,168 1,546

Loans and advances to customers 100 118

Other assets 41 295 33

Liabilities

Customer resources and other loans 6,773 64,963

Debt securities

Subordinated liabilities

Other liabilities 9 24 27,361

Provision of guarantees 9,627 3,650

Income

Interest and similar income 90,093 4,107

Income from financial operations 231,048 4,013

Income from services and commissions 1,845 1,835

Other operating income 243 556 327

Costs

Interest and similar costs 130 205,014 3,500

Losses on financial operations 565,161 3,018

Commissions 336 848

Other operating costs 404


206

Procedures for the acquisition of goods and services

CaixaBI has transparent procedures in place for the acquisition of goods and services, based on adjudication

criteria geared to principles of economy and effectiveness, with internal regulations defining the procedures

to be used for the selection of and relationship with suppliers under an outsourcing regime. The procedures

are described below:

Market enquiries – at least three suppliers per product are normally consulted.

Selection of suppliers – based on a comparison of proposals received.

Authorisation of expenditure – in accordance with the appropriate delegation of competency.

Contracts with goods suppliers and/or service providers – in writing or through formal contract.

Reference should be made to the following as regards the selection of suppliers:

The number of competitors invited to bid should not be less than three unless this is justifiably

impossible or in a situation involving the evolution of already existing solutions and with active contracts

with suppliers.

The following factors, when related with the guarantees put up by competitors, are subject to the Bank’s

technical qualification and assessment:

- The quality of the service provided, from level of performance to availability of solution;

- The quality of the proposed products;

- Fulfilment of conditions and requirements identified and respective performance, which should be set

out in tender documents to be supplied by CaixaBI to the propecting suppliers;

- The functional transversal nature of the current or potential solution;

- Compliance with the agreed schedule.

Based on the same approach, the following factors should be assessed and qualified:

- Adequacy vis-à-vis technical criteria;

- The capacity to integrate with solutions already existing within CaixaBI or CGD Group;

- The existence of success indices in similar projects;

- Commitment to levels of service;

- Commercial and financial terms proposed.

Lastly, differentiating factors should be considered, such as:

- Track record of relationship with CaixaBI;

- Track record of relationship with CGD Group companies;

- Effective independence vis-à-vis CGD Group’s direct competitors;

- Financial stability and seniority;

- Possession of ISO certifications;

- The supplier’s technical qualification, experience and professionalism;

- Ethical behaviour attuned to the principles of social responsibility and sustainability defended by

CaixaBI;

- Customer references (projects and customer portfolios);


207

- Benefits accruing from the establishing of a medium/long term relationship.

The safeguarding of the correct implementation and maintenance of projects and applications systems

should be set out in a CaixaBI tender document. The contracting process implies a supplier’s acceptance of

and automatic agreement to the Bank’s monitoring and/or inspection activities, at the implementation and/or

maintenance stages and the tender documents should therefore be binding, using general terminology

revised by the Legal Affairs Office but notably covering:

Definition of levels of quality of service;

Definition of adequate monitoring mechanisms for the effective control of the levels of quality of service;

Secrecy undertaking relative to information obtained as part of the provision of services;

Functionality/operationality and, if appropriate, transversal tests.

Transactions which have not been made under market conditions

Contracts usually entered into with CGD Group companies, without consulting the market refer to:

Insurance – with Companhia de Seguros Fidelidade-Mundial;

Vehicles renting – with Locarent - Companhia Portuguesa de Aluguer de Viaturas, S.A.

List of suppliers representing more than 5% of external supplies and services on a separate

basis

The following suppliers represented more than 5% of the external supplies and services, on a separate

basis, in 2011;

Thomson Reuters (Markets) Europe, S.A. (Portugal branch)

Locarent – Companhia Portuguesa de Aluguer de Viaturas, S.A.


Bloomberg L.P.

Osíris – Viagens e Turismo, Lda.

Evolution of average payment period to suppliers

The evolution of the average payment period to suppliers, in 2011, was as follows:

1st quarter 2nd quarter 3rd quarter 4th quarter

22 days 43 days 39 days 6 days


208

5 Corporate model

CaixaBI´s governance model, which ensures effective separation between executive and inspection

functions, comprises its shareholders’ meeting, board of directors, fiscal board and statutory auditor other

than a member of the audit board.

CaixaBI Organogram

Board of Directors

ExecutiveBoard

Business Committee Credit Committee InvestmentsCommitteeSteering CommitteeBusiness Continuity

Plan

Operational Risk andInternalControl

Managment Committee

Committees

Shareholders’ Meeting

Fiscal Board andStatutoryAuditor

RemunerationCommittee

Compliance Office

Ália Silva

CorporateDebtFinanceDivision

Paulo Serpa Pinto

Primary Equities MarketDivision

Ana Santos Martins

Corporate Advisory Division

Paulo Oliveira Silva

Syndication and Sales

Leonor Canedo

Project Finance Division

Daniel Santos

Structured Finance Division

Paulo Henriques

Finance and StructuringDivision

Francisco Santos

Research Office

João Miguel Lourenço

Internal Audit Office

Fernando Oliveira

Financial Brokerage Division

Valentim Martins

Legal Affairs Office

Ana Andrade

Strategic PlanningandOrganisation Division

Rita Lourenço

Human and AdministrativeResources

António Carlos Alves

OperationsDivision

Miguel Freire

Marketing andCommunication Office

António Gregório

AccountsDivision

João Gonçalves

Information Systems

Ema Campos

Business Areas

Support Areas


209

5.1 Statutory bodies

Shareholders’ meeting

The shareholders’ meeting shall comprise a chairman and two secretaries, elected for three year terms of

office by the shareholders’ meeting and who may be re-elected on one or more occasions.

Article 10 of CaixaBI’s articles of association states that all shareholders with one thousand or more shares

registered in their name in the company’s share ledgers are entitled to be present at shareholders’ meetings,

with each block of one thousand shares being entitled to one vote in accordance with no. 2 of article 14.

Shareholders with less than one thousand shares may form groups to make up this number and arrange to

be represented by any group member, to be indicated in a letter to the chairman of the shareholders’

meeting. In the case of the joint ownership of shares, only one of the owners may participate in shareholders’

meetings, and must be given a power of attorney by the others.

Shareholders may arrange to be represented at shareholders’ meetings by informing the chairman of the

meeting, by letter, prior to the meeting’s scheduled date. Shareholders who are singular persons may

arrange to be represented by other shareholders or other lawfully entitled persons. Collective persons shall

be represented by the person nominated for the purpose in question.

The chairman of the shareholders’ meeting shall call an extraordinary shareholders’ meeting whenever

requested by shareholders with the minimum number of shares required by law and who request the

meeting in a letter with a notarised signature providing precise information on the issues to be included on

the agenda and justifying the need for the meeting. A shareholders’ meeting called at the request of

shareholders shall only be held if applicants holding the minimum number of shares required to call the

meeting are present.

There are no limitations on voting rights, nor does any shareholder enjoy special rights and there is no

knowledge of any shareholders’ agreement.

Composition of shareholders’ meeting (2011-2013)

Chairman – José Lourenço Soares

Secretary – Salomão Jorge Barbosa Ribeiro

Secretary – António Pereira Grada Ferreira


210

Board of directors

The board of directors comprises a minimum of three and maximum of fifteen members elected for three

year terms of office by the shareholders’ meeting and may be re-elected on one or more occasions. The

board of directors shall choose its chairman and may, at its discretion, appoint one or more deputy chairmen

from among their number.

The board of directors is responsible for the Bank’s corporate business affairs and meets whenever called by

its chairman and at least once every three months. Resolutions are taken by an absolute majority of the

members present or represented with the chairman, deputy chairman or respective deputy having the

casting vote. Board of directors’ resolutions are only valid when more than half of its members are present or

represented.

Under the terms of the articles of association, the board of directors delegates the authority to manage the

company’s day-to-day affairs to the executive committee giving it - without prejudice to the faculty of taking

upon itself any of the respective competencies - the authority necessary to make decisions on all issues

related to the Bank’s performance of its activity, with the exception of those issues which cannot be

delegated under no. 4 of article 407 of the commercial companies code.

The board of directors met twelve times in 2011 and the executive committee met weekly.

Composition of board of directors (2011-2013)

Chairman – Jorge Humberto Correia Tomé

Chairman of executive committee – Jorge Telmo Maria Freire Cardoso

Executive director – Gonçalo Vaz Gago da Câmara de Medeiros Botelho

Executive director – Francisco José Pedreiro Rangel

Non-executive director – Rui Manuel do Vale Jordão Gonçalves Soares

Non-executive director – José Pedro Cabral dos Santos

Non-executive director – José Manuel Carreiras Carrilho


211

Fiscal board

The fiscal board is responsible for inspecting the company. It meets and establishes the contacts considered

necessary for collecting all and any pertinent information on the Bank and other companies included in the

consolidation.

The fiscal board is made up of three acting and one deputising member who perform their duties as set out

by law. It is elected every three years by the shareholders’ meeting, which also appoints its respective

chairman. Members are lawfully entitled to be re-elected.

The members of the fiscal board are not affected by the incompatibilities referred to in article 414-A of the

commercial companies code and are mainly independent in conformity with the recommendation set out in

Bank of Portugal circular letter 24/2009/DSB and article 414 nos. 5 and 6 of the commercial companies

code.

Composition of fiscal board (2011-2013)

Chairman – Miguel José Pereira Athayde Marques

Member – Pedro António Pereira Rodrigues Felício

Member – Maria Rosa Tobias Sá

Deputy – João Barata da Silva

Statutory auditor

The statutory auditor is elected every three years by the shareholders’ meeting with the competencies

defined by law. There is a deputising statutory auditor.

Statutory auditor (2011-2013)

Acting - Deloitte & Associados, SROC represented by João Carlos Henriques Gomes Ferreira

Deputising - Carlos Luís Oliveira de Melo Loureiro


212

Curriculum Vitae of Members of the Board of Directors and Fiscal Board

Board of Directors

Chairman of Board of Directors


Date of birth 7 November 1954

Current positions Member of the board of directors of Caixa Geral de Depósitos, S.A., since January 2008

Chairman of the board of directors of Gerbanca, SGPS, S.A., since May 2009

Non-executive board member of Cimpor - Cimentos de Portugal, SGPS since May 2009

Non-executive board member of Parcaixa, SGPS, S.A., since April 2009

Deputy chairman of the board of directors of Banco Caixa Geral - Brasil, S.A., since April 2009

Non-executive board member of Portugal Telecom, SGPS, S.A., since March 2009

Non-executive director of monitoring and strategy committee of Fomentinvest, SGPS, since

May 2008

Chairman of the board of directors of Credip - Instituição Financeira de Crédito, S.A., since

April 2008

Chairman of the board of directors of Caixa - Banco de Investimento S.A., since March 2008

Non-executive board member of Banco Comercial e de Investimentos, SARL (Mozambique)

since August 2007

Chairman of the board of directors of Trem - Aluguer Material Circulante, ACE, since March

2002

Chairman of the board of directors of Trem II - Aluguer Material Circulante, ACE, since March

2002

Former positions Chairman of executive board of Caixa – Banco de Investimento, S.A., from March 2002 to

January 2008

Non-executive board member of Caixa Gestão de Patrimónios, S.A., from September 2001 to

March 2004

Executive director of Caixa – Banco de Investimento, S.A., from July 2001 to March 2002

Non-executive director of BANIF Imobiliária, S.A., from April to June 2001

Non-executive director of BANIF IMO - Sociedade Gestora de Fundos de Investimento

Imobiliário, from June 2000 to June 2001

Director of Sociedade Gestora de Fundos de Pensões, S.A. – Açor Pensões, S.A. (currently

Banif Açor Pensões), from October 1999 to July 2001

Executive board member of “O Trabalho” and “O Trabalho Vida”, insurance companies from

May 2000 to July 2001

Director (executive) of Companhia de Seguros Açoreana, BANIF Group, with direct

responsibility for the financial and administrative, personnel, IT, legal affairs office and life

insurance areas from December 1996 to May 2000

Partner of Coopers & Lybrand in Portugal, responsible for the financial and corporate finance

areas, from June 1995 to November 1996

Director of Banco Pinto & Sotto Mayor responsible for the coordination of the bank’s branch in

France and Sottomayor Bank of Canada (BPSM subsidiary), from February 1995 to May 1995


213

Chairman of Board of Directors


Director of Banco Pinto & Sotto Mayor, responsible for international management, IT and

organisational management, administration and Telesotto (BPSM instrumental company for

home banking) from March 1994 to January 1995 (date of the bank’s privatisation)

Executive director of Sociedade de Capital de Risco SULPEDIP, S.A. (currently PME

Investimentos, S.A.), from July 1989 to March 1994

Technical officer in the capital market section of the securities division of Banco Pinto & Sotto

Mayor, from September 1985 to 1986, having worked in the division as a deputy manager and

director from 1986 to 1994

Director of CPG – Sociedade Gestora de Fundos de Investimento FIPOR, on behalf of the

bank

Corporate and industrial projects and tourism sector analysis officer for Banco Pinto & Sotto

Mayor (economic studies division), engaged in April 1983

Technical officer at Coopers & Lybrand, Lda., engaged in February 1980, promoted to senior

auditor in 1982

Technical officer/economist at Instituto de Apoio às Pequenas e Médias Empresas e ao

Investimento (IAPMEI), engaged in September 1979

Academic qualifications Masters in applied economics from the economics faculty of Universidade Nova de Lisboa

Degree in organisation and corporate management from ISCTE


214

Chairman of Executive Committee

Jorge Freire Cardoso

Date of birth 8 August 1971

Current positions Chairman of the executive committee of Caixa - Banco de Investimento, S.A., since May 2011

Non-executive board member of ZON – Serviços de Telecomunicações e Multimédia, SGPS,

S.A., since January 2008

Non-executive board member of Empark Portugal – Empreendimentos e Exploração de

Parqueamentos, S.A., since February 2010

Non-executive board member of Dornier, S.A., since February 2010

Areas of responsibility Financial brokerage division

Project finance division

Corporate finance advisory division

Equity capital market division

Strategic planning and organisation division

Marketing and communications office

Human and administrative resources office

Former positions Executive director of Caixa – Banco de Investimento, S.A., from March 2008

Non-executive board member of Fomentinvest, SGPS, S.A., from 2007 to 2008

Coordinating director of Caixa – Banco de Investimento, S.A., in the corporate equity finance

division, supervising the primary share, financial advisory and mergers and acquisitions areas

from 2000 to 2008

Director of corporate finance of Banco Efisa, from 1995 to 2000

Consultant of Roland Berger & Partners, from 1993 to 1994

Academic qualifications MBA from INSEAD

Degree in economics from Universidade Nova de Lisboa

Other qualifications/ distinctions

Guest assistant professor at FEUNL


215

Executive Board Member


Date of birth 7 November 1966

Current positions Executive director of Caixa – Banco de Investimento, S.A., since June 2005

Non-executive director of Corporación Interamericana para el Financiamento de Infraestructura

(CIFI), since March 2004

Non-executive director of Portugal-Brazil Chamber of Commerce, since February 2009

Non-executive director of Banco Caixa Geral – Brasil, S.A., since July 2009

Non-executive director of BNI – Banco Nacional de Investimento, since November 2011

Areas of responsibility Corporate debt finance division

Syndication and sales desk

Research office

Internal audit office

CIFI

Spain branch

Africa

Former positions Non-executive director of La Seda de Barcelona, from October 2010 to October 2011

Coordinating director responsible for the international customers division of Caixa Banco de

Investimento, S.A., from 2004 to 2005

Coordinating director responsible for customer division of Caixa - Banco de Investimento, S.A.,

from 2000 to 2004

Board member of CaixaWeb, SGPS, S.A., from 2000 to 2005

Member of the fiscal board of Portugal Telecom, SGPS, S.A., from 2003 to 2007

Non-executive board member of Previsão – Sociedade Gestora de Fundos de Pensões, S.A.,

from 2003 to 2004

Member of the board of directors of Aenor – Auto-Estradas do Norte, S.A. and Operanor –

Operação e Manutenção de Auto-Estradas, S.A., from 1999 to 2000

Coordinating director of major enterprises division of Grupo Mundial - Confiança (Banco Totta

& Açores, Banco Pinto & Sotto Mayor and Banco Chemical Finance), from 1996 to 2000

Sub director responsible for the major enterprises division of Banco Mello de Investimentos,

from 1993 to 1996

Analyst and account manager at Banque Nationale de Paris (Portugal Branch), from 1990 to

1993

Account manager at McCann Eriksson, in 1990

Trainee at Banco Português do Atlântico, from 1989 to 1990

Academic qualifications Financial management programme from Stanford Business School – 1994

MBA specialising in marketing from Universidade Católica Portuguesa – 1993

Degree in corporate management and administration from Universidade Católica Portuguesa –

1989


216

Executive Board Member


Date of birth 29 September 1971

Current positions Executive board member of Caixa - Banco de Investimento, S.A., since September 2011

Areas of responsibility Financial and structuring division

Structured finance division

Operations division

Information systems division

Accounts division

Compliance office

Legal affairs office

Former positions Coordinating director responsible for the strategic planning and organisation division of Caixa -

Banco de Investimento, S.A., 2011

Coordinating director responsible for the corporate finance – advisory area of Caixa - Banco de

Investimento, S.A., from 2008 to 2011

Director of the corporate finance – advisory division of Caixa - Banco de Investimento, S.A.,

from 2000 to 2008

Research director of Banco de Mello de Investimentos, from 1996 to 2000

Financial analyst in Lisbon Stock Exchange from 1993 to 1996

Academic qualifications Degree in economics from Universidade Nova de Lisboa


Assistant professor at FEUNL, from 1998 to 2000


217

Non-executive Board Member


Date of birth 19 May 1964

Current positions Executive deputy chairman and chief corporate development officer of Banco Caixa Geral

(Spain), since 2006

Executive chairman of Imobiliária Caixa Geral (Spain), since 2008

Non-executive director of Caixa - Banco de Investimento, S.A., since 2008

Non-executive director of GERBANCA – Sociedade Gestora Participações Sociais, S.A., since

2011

Member of advisory board of consular section of the Portuguese Embassy in Spain, since 2010

Chairman of Spain-Portugal Chamber of Commerce and Industry in Spain, since 2005

Former positions Executive chairman of the board of directors of JustLink – Redes e Conteúdos de Internet,

S.A., from 2003 to 2005

Chairman of the board of directors of IAPMEI – Instituto de Apoio às Pequenas e Médias

Empresas e ao Investimento from 2000 to 2003

Member of general board of Competitiveness Forum from 2000 to 2003

Chairman of shareholders’ meeting of APCRI – Associação Portuguesa de Capital de Risco,

from 2000 to 2003

Director of IPE – Estudos, Projectos e Investimentos, S.A., in 2000

Executive director of the internationalisation area of IPE – Estudos, Projectos e Investimentos,

S.A., in 2000

Chairman of IPE Capital - Soc. de Capital de Risco, S.A., from 1997 to 2000

Board member of EVCA – European Venture Capital Association, from 1995 to 2000

Chairman of APCRI – Associação Portuguesa de Capital de Risco, from 1992 to 2000

Director of IPE Capital - Soc. de Capital de Risco, S.A., from 1992 to 1997

Advisor to the board of directors of IPE - Investimentos e Participações Empresariais, in 1992

Advisor to the board of directors of EGF - Empresa Geral de Fomento, from 1991 to 1992

Project manager at IPE, in the investment and development division from 1987 to 1991

Academic qualifications MBA in international management

Postgraduation in European studies

Degree in corporate management and organisation from Universidade Católica Portuguesa


Postgraduation coordinator of municipal corporations management at Universidade Católica

Portuguesa

Lecturer at Universidade Católica Portuguesa

Masters in management studies lecturer at Instituto Inter-Universitário de Macau

Lecturer at the Escola de Pós-Graduação da Universidade Lusófona

Lecturer on the Dislogo programme (open and distance training) – UCP

Coordinator of publications prepared by Universidade Católica Portuguesa for Instituto de

Turismo de Portugal


218



Date of birth 5 July 1960

Current positions Central director of major enterprises division of Caixa Geral de Depósitos, S.A.

Non-executive director of Caixa - Banco de Investimento, S.A.

Former positions Director (non-executive) of Lusofactor, Sociedade de Factoring, S.A. (2003-2005)

Director of CGD’s major enterprises division, responsible for northern division (1999-2002)

Director of CGD’s northern commercial division, responsible for coordination of the major

companies segment (1998-1999)

Coordinating director of BFE/Grupo BPI (1994-1997)

Director (non-executive) of FINICRÉDITO SFAC (1992-1994)

Technical officer in Finindústria-Sociedade de Investimentos e de Financiamento Industrial and

latterly subdirector of Finibanco (1989-1994)

Technical trainee and latterly senior technical operative at União de Bancos Portugueses

(1984-1989)

Academic qualifications Degree in economics from the faculty of economics of Porto University, in 1983


Guest assistant lecturer at faculty of economics of Porto University (1983-1988)


219



Date of birth 30 March 1951

Current positions Member of the board of directors of Caixa Capital – Sociedade de Capital de Risco, S.A., since

2000

Member of the board of directors of Caixa Desenvolvimento, SGPS, S.A., since 2000

Member of the board of directors of CaixaBI – Banco de Investimento, S.A., since 2008

Member of the board of directors of Vila Galé – Sociedade de Empreendimentos Turísticos,

S.A., since 2010

Member of the board of directors of Visabeira Imobiliária, SGPS, S.A. since 2006

Member of the board of directors of Visabeira Indústria, SGPS, S.A. since 2006

Member of the board of directors of Visabeira Participações Financeiras, SGPS, S.A. since

2006

Member of the board of directors of Visabeira Turismo, SGPS, S.A. since 2006

Member of the board of directors of Mesquita ETVIA, SGPS, S.A. since 2009

Member of the board of directors of A. Silva & Silva – Imobiliária e Serviços, S.A., since 2002

Member of the board of directors of PP3E – Projectos e Participações em Empreendimentos

de Energia Eléctrica, S.A., since 2003

Former positions Member of the board of directors of Caixa Investimentos – Sociedade de Investimentos, S.A.,

from 2000 to 2002

Chairman of the board of directors of PME Investimentos – Sociedade de Investimentos, S.A.,

from 1996 to 2000

Chairman of the board of directors of PME Capital – Sociedade de Capital de Risco, S.A., from

1996 to 1999

Member of the board of directors of LISPOLIS – Associação para o Pólo Tecnológico de

Lisboa, from 1999 to 2000;

Member of the board of directors of COMPTRIS – Companhia Portuguesa de Capital de Risco,

S.A., from 1998 to 2000

Member of the board of directors of CEDINTEC – Centro para o Desenvolvimento e Inovação

Tecnológica, from 1990 to 1999

Member of the board of directors of IPE – Companhia Portuguesa de Capital de Risco, S.A.,

from 1994 to 1997

Chairman of fiscal board of COMPTRIS – Companhia Portuguesa de Capital de Risco, S.A.,

from 1994 to 1996

Member of the board of directors of SULPEDIP – Sociedade de Capital de Risco, S.A., from

1995 to 1996

Technical operator/regional director of IAPMEI – Instituto de Apoio às Pequenas e Médias

Empresas e ao Investimento, from 1976 to 1995

Academic qualifications Degree in finance, from ISEG

Specialised training in INSEAD (Fontainebleau)


Guest professor at ISCTE


220

Fiscal board

Chairman


Date of birth 29 April 1955

Current positions Non-executive director of Brisa, CR, S.A.

Chairman of fiscal board of Caixa - Banco de Investimento, S.A.

Professor of management at Universidade Católica Portuguesa

Former positions Chairman of the board of directors of Euronext Lisbon, S.A.

Chairman of the board of directors of Interbolsa, S.A..

Director of Euronext, N.V. (Holland)

Non-executive director of Paris, Brussels and Amsterdam stock exchanges

Member of the executive committee of the New York Stock Exchange

Director of Caixa Geral de Depósitos

Member of the executive committee of Jerónimo Martins

Chairman of board of directors of ICEP

Academic qualifications PhD in corporate management from University of Glasgow, School of Financial Studies

Degree in corporate administration and management from Universidade Católica Portuguesa

(Lisbon)

Member

Pedro António Felício

Date of birth 8 December 1971

Current positions Responsible for the international purchasing division of PT Compras

Member of fiscal board of Caixa - Banco de Investimento, S.A.

Chairman of shareholders’ meeting of Parpública - Participações Públicas (SGPS), S.A.

Former positions Director-general of the Portuguese Treasury and Finances Department

Member of fiscal board of Caixa Geral de Depósitos, S.A.

Executive member of the board of directors of Sagestamo - Sociedade Gestora de

Participações Sociais Imobiliárias, S.A.

Chairman of the board of directors of Agência Nacional de Compras Públicas, E.P.E.

Director of financial services of PT PRO - Serviços de Gestão, S.A.

Academic qualifications Degree in economics from Instituto Superior de Economia e Gestão (ISEG) - Universidade

Técnica de Lisboa.


221

Member


Date of birth 16 August 1960

Current positions Assistant to Minister of Health

Member of fiscal board of Caixa - Banco de Investimento, S.A.

Chair of fiscal board of PARUPS, S.A., PARVALOREM, S.A. and PARPARTICIPADAS, SGPS,

S.A.

Former positions Chair of advisory board of INRB, I.P.

Head of unit in the European anti-fraud organism

Director of technical advisory section of the Procuratorship General of the Republic

Deputy manager general of the department for European Social Fund affairs

Director of Inspectorate General of Agriculture services

Inspectorate General of Finance inspector

Member of fiscal board of CGD

Chair of fiscal board of Banco Efisa, S.A.

Academic qualifications Degree in economics from Instituto Superior de Economia e Gestão (ISEG) – mathematical

methods area

Deputy

João Barata da Silva

Date of birth 17 March 1947

Current positions Member of fiscal board of IPAI - Instituto Português de Auditoria Interna, since 2002

Chairman of fiscal board of Banco Interatlântico, since 2006

Chairman of fiscal board of Banco Internacional de S. Tomé e Príncipe, since 2006

Chairman of remuneration committee of A Promotora, Sociedade de Capital de Risco, S.A.

Chairman of remuneration committee of Banco Comercial do Atlântico, S.A.R.L.

Chairman of remuneration committee of Garantia, Companhia de Seguros, S.A.R.L.

Deputising member of fiscal board of Parcaixa, SGPS, S.A.

Deputising member of Caixa – Banco de Investimento, S.A.

Former positions Deputising member of fiscal board of Locapor (leasing)

Director of audit department of CGD, from 1991 to 2005

Academic qualifications Higher banking degree (IFB/Universidade Católica)

Degree in economics (ISE - Faculdade Técnica de Lisboa)

Certified accountant (former Instituto Comercial de Lisboa)


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Prevention of conflicts of interest

The members of the board of directors are fully aware of their duties not to be involved in discussions and

adoptions of resolutions on certain subject matters and comply with these standards in their activity.

5.2 Specialised committees

CaixaBI has four specialised committees and a remunerations committee whose competencies, composition

and frequency of meetings is set out below.

Business Committee

CaixaBI’s Business Committee meets every week and has the following main functions:

To analyse the main macro and microeconomic events and their expectable impact on the Bank’s

activity;

To analyse the evolution of the financial brokerage business notably volume of market trading and

commissions received;

To monitor the Bank’s activity, notably mandates in progress;

To analyse operations in the pipeline;

To analyse eventual cross-selling business opportunities;

To take note of other matters directly related with the Bank’s operations.

Composition of the Business Committee

Members of Executive Board

Directors, or their deputies, of the following organs:

- Research Office

- Financial Brokerage Division

- Financial and Structuring Division

- Project Finance Division

- Structured Finance Division

- Spain Branch

- Corporate Debt Finance Division

- Equity Capital Market Division

- Corporate Finance Advisory Division

- Syndication and Sales Desk

- Strategic Planning and Organisation Division

- Caixa Capital

Credit Committee

CaixaBI’s Credit Committee is responsible for the competencies delegated to it in credit matters, namely:

To authorise medium and long term operations;


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To periodically define limits on short term operations;

To analyse non-performing loans, particularly at their pre-legal and legal proceedings stages when

involving a loss of interest or reduction of assets;

To discuss the specific situation of sectors of the economy;

To define credit and respective credit risk policies;

To define the processes to be submitted to the Extended Credit Committee of CGD (customers or

borrowers who belong to groups of customers with accumulated liabilities of more than €50 million to

CGD and other CGD Group companies) and to the Credit Committee of CGD (customers with

accumulated liabilities of more than €10 million and less than €50 million to CGD and other CGD Group

companies).

The Credit Committee meets every week but may be called on an extraordinary basis, if required.

Composition of the Credit Committee

Members of the Executive Board


- Financial and Structuring Division

- Project Finance Division

- Structured Finance Division

- Spain Branch


- Equity Capital Market Division

- Corporate Finance Advisory Division


- Legal Affairs Office

Directors of the Bank’s other organs may be called upon to participate on the Committee

Investments Committee

CaixaBI’s Investments Committee meets every week and has the following main functions:

To monitor the evolution of the Bank’s own portfolio as well as its funding requirements;

To monitor the evolution of the results of the Financial and Structuring Division, in addition to the risk

indicators supplied;

To monitor the evolution and prospects of the relevant financial markets for CaixaBI’s activity;

To issue guidelines on the strategic positioning and risk taking and management in light of the market

environment.

Composition of the Investments Committee

Members of the Executive Board

Management of the Financial and Structuring Division



- Syndication and Sales Desk


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- Other divisions operating in the capital markets and which interact with the Financial and Structuring Division in such a

capacity

Operational Risk And Internal Control Management Committee

The Operational Risk and Internal Control Management Committee is an Executive Board advisory body,

responsible for the coordination, appraisal and discussion of issues related with operational risk and internal

control management which meets every six months.

The Operational Risk and Internal Control Management Committee is the body responsible for verifying the

conformity of the Bank’s performance with the strategy and policies established for the management of

operational risk and internal control, monitoring the management thereof and proposing action plans to the

executive committee. It is responsible for:

Proposing operational risk management policies;

Proposing the operational risk profile to be adopted by the Bank;

Verifying conformity between the Bank’s operation and operational risk management policies;

Verifying the adequacy of the internal control system;

Monitoring the level of the Bank’s operational risk;

Proposing action plans to the executive committee for reducing operational risk and strengthening the

internal control system.

Composition of the Operational Risk and Internal Control Management Committee

Members of the Executive Committee


- Information Systems Division

- Accounting Division


- Compliance Office

- Internal Audit Office

Directors of the Bank’s other organs may be called upon to participate on the Committee

Steering Committee for the Business Continuity Plan

The Steering Committee for the Business Continuity Plan is responsible for the coordination and

implementation of policies and procedures to guarantee CaixaBI’s continuous operation or prompt recovery,

on the occurrence of events leading to an across-the-board failure of its physical infrastructures or the

impossibility of its employees of occupying their workplaces.

The Steering Committee for the Business Continuity Plan defines and monitors the procedures to be

followed or activated in response to crisis situations of a greater or lesser degree of severity which may affect

operational and technological components and therefore avoiding the prolonged stoppage of CaixaBI’s

activity and accordingly helping to reduce the impacts of crisis events on its activity and customers.


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Composition of the Steering Committee for the Business Continuity Plans

Members of executive committee


- Compliance Office

- Information Systems Division

- Operational Division


Directors of other Bank organs may be called to participate on the Committee.

Remunerations Committee

The Remunerations Committee is made up of representatives of the majority shareholder, elected by the

shareholders’ meeting and is statutorily responsible for defining the remuneration of the members of the

statutory bodies for periods of three years.

Composition of the Remuneration Committee

Gerbanca, SGPS, S.A., represented by Henrique Pereira Melo and Vitor José Lilaia da Silva


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6 Remuneration of members of statutory bodies

Remuneration policy for members of statutory and inspection bodies

As stipulated in article 23 of CaixaBI’s articles of association, the Remuneration Committee defines the

remuneration of the Board of Directors and inspection bodies.

In the case of the Board of Directors, remuneration is only paid to the Executive Committee.

For further details on the remuneration of statutory bodies please consult the chapter on compliance with

legal obligations in this report on corporate governance.


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7 Control system

7.1 Internal control system

In compliance with the dispositions of the Bank of Portugal’s Official Notice 5/2008 in addition to CMVM

Regulation 3/2008, CaixaBI has implemented an internal control system to fulfil the principles and meet the

requirements established in the referred to regulations.

The Bank’s risk control and management, aligned with the strategies and polices defined by CGD Group, are

based on a risk culture present over the whole of its structure which guarantees the identification, analysis

and management of the Bank’s exposure to different risk categories.

In addition to specific regulations whose application is accompanied by the supervisors with the objective of

guaranteeing the strength of the financial system and protection of customers’ interests, best practice in risk

management terms has also been implemented within CaixaBI and contributes to maximising sustained

value creation and the maintenance of the Bank’s solidity.

CaixaBI’s internal control system comprises a collection of strategies, systems, processes, policies and

procedures, defined by the board of directors, in addition to the actions taken by the board and its other

employees, for the purpose of ensuring:

The efficient and profitable performance of activity, over the medium and long term (performance

objectives);

The existence of full, pertinent, reliable, prompt financial and management information (information

objectives);

Compliance with applicable legal and regulatory dispositions (compliance objectives).

CaixaBI also produces an annual internal control report which is submitted for the appraisal of its supervisors

– Bank of Portugal and CMVM.

In order to achieve effective compliance with its defined objectives and to guarantee the quality and

effectiveness of the system over time, CGD Group endeavours to guarantee an adequate control

environment, a solid risk management system, an efficient information and communication system, adequate

control activities and an effective monitoring process.


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Risk management process

The risk management process comprises a series of activities performed on a CGD Group level, as set out in

the following six stages.

Risk management process

Risk management process stages

Activity Scope

Definition and adjustment of guidelines, models and processes

Definition/approval by areas, type of risk or portfolios of (i) guidelines, (ii) models and

indicators for risk assessments and (iii) risk management support processes and a

regular assessment thereof for the purpose of the continuous and necessary adaptation

to the economic environment/market conditions, evolution of risk assessment

measures, strategy defined by CGD Group and evolution in terms of internal structure

and information systems.

Identification of risk positions Recognition, characterisation and assessment of portfolio positions or potential

operations (credit, market and liquidity risks).

Identification and characterisation of the processes implemented and occurrence of

losses (operational, compliance and reputational risks).

Assessment of risks and performance

Quantification of exposure to diverse types of risk and performance measurement using

appropriate internal models (per operation, portfolio, process or entity), developed and

implemented on a CGD Group level.

Identificationof risks

Decision

Monitoringcontrol of risks

andperformance

Riskassessment

Taking / Adjusting risk

Definition and adjustment of guidelines, models and processes1

2

3

4

5

6


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Activity Scope

Monitoring and control of risks and performance

Decision-making support activities for risk-taking purposes (monitoring of

risks/performance) or adjustment of portfolio risks (risk control), through the

ascertaining or reporting of risk positions, risk and performance levels and verification of

compliance with guidelines.

Decision Interpretation of results from the monitoring and control of risks and performance stage,

expectations of evolution of external variables and decision on the performance of risk-

taking or adjustment actions (reduction of exposure or cover).

Risk taking/adjustments Negotiation and entering into of operations in accordance with previously made

decisions (decision stage) under the scope of business/support processes or for risk

adequacy/cover purposes.

Parties involved in risk management

To ensure the adequate management of the internal control system, responsibilities have been defined for

certain structural bodies which operate in conjunction with the remaining CGD Group structures and entities.

Risk management parties

Scope Involved organs

Definition and adjustment of risk management strategy and policies

Board of Directors and Executive Committee of CaixaBI.

Assets and Liabilities Management Committee (“ALCO”) of CGD Group.

Management of credit risk All CaixaBI structural bodies making loans.

Risk Management Division (DGR) of CGD.

CaixaBI’s Credit Committee, CGD’s Credit Committee and Expanded Credit Committee.

CaixaBI’s Executive Committee.

Management of market risk CaixaBI’s Financial and Structuring Division.

CGD’s Risk Management Division (DGR).

CaixaBI’s Investment Committee.

Management of liquidity risk CaixaBI’s Financial and Structuring Division.

All other CaixaBI structural bodies.

CaixaBI’s Investment Committee.

Management of operational risk

CaixaBI’s Operational Risk Management and Internal Risk Control Committee.

CaixaBI’s Strategic Planning and Organisation Division.

CaixaBI’s Accounting Division.

CaixaBI’s Internal Audit Office.

CaixaBI’s structural bodies of its Spain branch and Caixa Capital.


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Scope Involved organs

Management of compliance and reputational risk

CaixaBI’s Compliance Office.

All other CaixaBI structural bodies.

7.2 Control system on the protection of the company’s investments and its

assets

Securities portfolio

The management of CaixaBI’s securities portfolio is subordinated to the risk levels defined for the Bank

adjusted to the budget approved by the board of directors. Several basic objectives have also been defined,

namely:

achieving an adequate level of net interest income for the balance sheet of an investment bank;

establishing a securities portfolio permitting a normal degree of rotation and adequate return in terms of

capital gains;

the investment portfolio’s composition shall be limited to maximum and minimum exposure levels;

safeguarding of a minimum liquidity level required of a financial institution.

The return required from the portfolio comprises a defined ROE level obtained on the daily valuation thereof

at market prices, net of financing costs.

In calculating the allocation of shareholders’ equity to operations, the necessary requirements for hedging

credit, market and operational risks are considered in accordance with current Bank of Portugal rules.

Tradable instruments include bonds, shares, selected asset managers’ funds and their derivatives - futures,

options swaps and forwards traded with the treasury or forex positions in CGD’s trading room.

Credit portfolio

The production of commercial proposals for the Credit Committee (see page 222) is the responsibility of the

structural bodies which submit them for appraisal and which should obtain, in advance, when applicable, the

risk opinion of CGD’s Risk Management Division. According to CaixaBI’s internal regulations, certain

proposals should be subsequently submitted for the approval of CGD’s credit committees.

7.3 Control system for safeguarding customers’ assets held under CaixaBI’s

custodian services

In compliance with the CVM dispositions of no. 4 of article 304-C, the external auditors should issue an

annual report on the adequacy of the procedures and measures adopted by CaixaBI to safeguard its

customers’ assets.


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These procedures should ensure the following objectives are met (articles 306 to 306-D of the CVM):

In all acts performed as well as in its accounting and operational records, financial intermediaries

should ensure a clear distinction between their own and each of their customer’s assets.

The opening of insolvency proceedings, corporate recoveries or restructuring of the financial

intermediary does not affect the acts performed by the financial intermediary on behalf of its customers.

A financial intermediary may not, on its interest or on a third party’s behalf, use its customers’ financial

assets or exercise any of the rights thereto pertaining unless approved in writing by their titleholders.

Investment companies may not use moneys received from customers either on their own or on a third

party’s behalf.

The latest opinion of the external auditors available hitherto, for 2010, make it possible to conclude that the

procedures and measures adopted by CaixaBI are adequate to permit compliance, in all materially relevant

aspects, with the dispositions defined under the scope of articles 306 to 306-D, of the CVM.


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8 Disclosure of relevant information

8.1 Market relations representative

Ália Pereira da Silva

Rua Barata Salgueiro, 33

1269-057 Lisbon

Telephone: +351 21 313 73 00

Fax: +351 21 352 63 27

Email: [email protected]

8.2 Disclosure of relevant information

CaixaBI provides a large amount of information on its website at www.caixabi.pt.

Based on its website the Bank provides its customers, analysts and general public with permanent access to

relevant, up-to-date information such as the presentation and identification of the Bank, mission, vision and

strategy, history, organisation, relationships, rating, annual report, news, prices, business areas, corporate

governance, sustainability and distinctions.

In addition to the possibility of consulting information on the Bank and its respective activity, the Bank’s

research area provides access to historical and current information of relevance to investors.

8.3 Diagramme of CaixaBI investments

The Bank’s corporate structure comprises adequate investments to provide for its business segmentation

while enabling it to leverage CGD Group’s market intervention capacity, through its constant provision of

quality, value added services to its predominantly large and medium sized corporate customers.

Information on CaixaBI’s equity investments is set out in the following organogram:

100% of CaixaBI Brasil – Serviços de Assessoria Financeira, Ltda.6, headquartered in São Paulo, with

the corporate object of providing advisory and financial consultancy services;

100% of Caixa Capital, SCR, S.A. (“Caixa Capital”), a company managing five venture capital funds;

100% of Caixa Desenvolvimento, SGPS, S.A. (“Caixa Desenvolvimento”), whose activity has been

curtailed following the restructuring of the portfolio of venture capital area subsidiaries; and

91% of FIQ Energias Renováveis, a fund managed by Caixa Capital which has been consolidated with

CaixaBI.

6

Of which 90% is held directly by CaixaBI and 10% indirectly by Caixa Desenvolvimento.


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Diagramme of CaixaBI investments

8.4 Share capital and dividends policy

The Bank’s share capital consists of eighty one million two hundred and fifty thousand fully subscribed and

paid up shares with a nominal value of one euro each. Shares may be nominative or bearer, registered or

not and are reciprocally convertible.

In share capital increases paid up in cash, shareholders will be given preference rights in subscribing for new

shares in proportion to those they already hold unless otherwise decided by the shareholders’ meeting in

conformity with lawfully imposed constraints.

The Board of Directors may increase the Bank’s share capital on one or more occasions in the form of cash

payments until its share capital totals a maximum amount of two hundred and fifty million euros.

Under the terms of CaixaBI’s articles of association, the shareholders’ meeting shall pass a resolution on the

appropriation of annual profits, without being subject to any obligatory annual minimum limit. The Board of

Directors with the consent of the Fiscal Board, may decide to issue an advance of profit to shareholders as

permitted by law.


Caixa Desenvolvimento,

SGPS, S.A.

Caixa Capital, SCR, S.A.

FIQ Energias Renováveis

CaixaBI Brasil –Serviços de Assessoria

Financeira, Ltda.

100% 100% 90% 91%

10%


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9 Analysis of economic, social and environmental sustainability

CaixaBI has, since 2004, published an annual sustainability report in the economic, social and environmental

domains as an integral part of its annual report. Over the course of the years society as a whole and the

Bank with it have evolved to thresholds of growing awareness of the importance of social responsibility and

inclusion of sustainable development.

As a member of the largest Portuguese financial group, CaixaBI has always aligned with CGD Group’s

sustainability practice. This has allowed the Bank to intervene with its stakeholders, with a dimension and

effectiveness which it would otherwise have been unable to achieve.

Recognised as a leading, benchmark institution in domestic investment banking terms, CaixaBI has

assumed enhanced responsibilities in the domains of sustainability and social responsibility, practising the

following principles which are transversal to its activity:

An involvement based on ethical business values;

A desire to achieve continuous progress;

Understanding and acceptance of the company’s interdependence with its environmental surrounds;

Long term vision based on responsibilities to future generations;

Principle of prudence as a decision-making rule;

Regular dialogue and consultation with all parties involved;

A desire to inform linked with transparency;

Acceptance of responsibility for the direct and indirect consequences of its activity.

In 2011, the Bank furthered its activity based on the same sustainability strategy, i.e. emphasising business

guidelines based on sustainable development and, simultaneously, contributing to business evolution and

greater competitiveness.

CaixaBI recognises that the value of the sustainable development of its activity is enhanced by the relations

of transparency and trust it has formed with its stakeholders:

Shareholders;

Customers;

Partners;

Suppliers ;

Workers;

Financial markets;

Competitors;

Regulators;


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Public opinion;

Community.

CaixaBI favours continuous dialogue and effective involvement with its strategic stakeholders based on

various relationship channels, in line with currently available technological solutions and the social and

economic environment in which the Bank operates.

CaixaBI’s relationship with its stakeholders

Stakeholders Forms of relationship Frequency

Shareholders Shareholders’ meeting

Financial reporting

Annual

Quarterly

Customers CaixaBI website

Complaints management

Advertising

Financial newsletter

Research reports

Internet banking services

Permanent

Permanent

Occasional

Daily

Daily

Daily

Partners CaixaBI website

Events and sponsorships

Permanent

Occasional

Suppliers Meetings and periodical contacts Occasional

Workers Intranet

Training actions

Performance assessments

Internal communication

Permanent

Occasional

Annual

Occasional

Financial markets Research reports

CaixaBI website

Financial newsletter

Daily

Daily

Daily

Competitors Events and sponsorships Occasional

Regulators Regulators’ specific instructions

Requests for clarification

Participation in workgroups

Personal supervisory actions

Public tenders

Production of reports

Permanent

Permanent

Permanent

Permanent

Permanent

Permanent

Public opinion Interviews

Events and sponsorships

Requests for clarification

Research reports

Occasional

Occasional

Occasional

Daily

Community CGD Culturgest Foundation

Protocols with universities

Permanent

Annual

The involvement process with stakeholders should be considered as an evolutive, ongoing process and is

indicative of their impact on the Bank’s activity and the importance of CaixaBI’s activity to the said

stakeholders.


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The involvement strategy of CaixaBI’s stakeholders is in line with CGD guidelines, essentially based on four

operating areas:

Identification of strategic stakeholders;

Assessment of material considerations;

Based on dialogue;

Inclusion of information obtained from stakeholders in business and sustainability management.

Involvement with stakeholders permits the identification, comprehension and alignment of their expectations

and concerns in respect of the Bank’s performance in addition to risk management and the identification of

opportunities resulting from the interaction between CGD Group and society.

CGD’s sustainability programme, consolidated in 2010, is based on four essential pillars guiding the Bank’s

activity:

Economic viability;

Financial viability;

Social fairness;

Environmental correctness.

With the formalising and implementation of its sustainability programme and respective model and

management, CGD has translated its desire to implement guideline processes and procedures on all of its

activity in this domain, designed to create value for the Bank.

The management model for CGD’s sustainability programme is based on the formalising of the

responsibilities of each CGD structural body and several CGD Group companies, such as CaixaBI, for the

correct furtherance of the adopted strategies, defined policies and recommendations.

The management model of CGD’s sustainability programme comprises the following structures, with CaixaBI

being represented in the ambassadors’ group and workgroups:

CGD’s Board of Directors

This body has the maximum responsibility for defining sustainability strategy in its approval of proposals and

the respective budgets submitted by the general sustainability committee and the granting of authority to the

structural bodies for implementing the respective actions.

General Sustainability Committee (CGSU)

A Board of Directors advisory body, responsible for the assessment, debate and monitoring of the

implementation of CGD’s sustainability strategy.

Coordination Team

A structure reporting to the communication and brand division, responsible for coordinating the sustainability

programme, proposing projects and actions with workgroups and CGSU and accompanying and controlling

the development of initiatives.


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Ambassadors

Responsible for analysing and/or validating the proposals and recommendations generated by the

workgroups for proposal to the CGSU and performing a prospective analysis of opportunities, in the

sustainability sphere, in their intervention area.

Workgroups

Workgroups, in collaboration with the Coordination Team, perform functions designed to develop the

applicability of the defined objectives and approved projects/actions, guaranteeing the efficiency of the

procedures necessary for their furtherance. Workgroups meet every month or whenever the Coordination

Team considers necessary on the basis of the dynamics involved in the activity of each workgroup and in

agreement with the respective teams.

To guarantee the furtherance of this programme’s objectives CGD has defined a sustainability policy which

defines the five main strategic operating areas, always geared to value creation for the CGD Group and its

respective stakeholders:

Responsible banking: to develop balanced, transparent and responsible relationships with customers.

Future promotion: to recognise banking activity’s importance to sustainable development, in the

desire to contribute to a better future.

Environmental protection: to promote an active response to society’s environmental problems.

Involvement with the community: to promote investment in the community and develop society in

general.

Human assets management: to endeavour to develop workers and their respective recognition as

factors of differentiation.

In addition to its sustainability policy, CGD has implemented other guideline policies such as its

environmental policy and community development policy for its activity to promote the integration of

sustainability management.

As an integral and operative part of CGD Group, CaixaBI follows the policies and principles set out in CGD’s

sustainability report, produced to comply with the guidelines corresponding to the maximum level (A+) for the

Global Reporting Initiative as a fundamental tool to guarantee the effective management of the Bank’s

economic, social and environmental activity.

9.1 Economic considerations

The economic dimension of sustainability is measured by organisations’ impacts on the economic conditions

of its stakeholders and on the economic system at all levels, complying with a long term vision to embrace

the disciplines of the environment, social aspects and human resources.

This interdisciplinary nature of economic performance embraces all aspects of economic interactions which

may exist between an organisation and its stakeholders, including the income traditionally recognised in

financial balance sheets. Such financial balance sheets make priority reference to indicators related with a

company’s profitability because they are geared to providing information to managers and shareholders.


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Sustainable development indicators, however, cater for other priorities and should permit the implications of

corporate activity in terms of the well-being of its stakeholders to be perceived.

CaixaBI accordingly prepares its activity plans and endeavours to execute them in line with a sustainable

development strategy, reconciling profit ratios required by shareholders, with the need to energise the

business environment comprising customers, therefore impacting the positive effects of its economic and

financial health on the community.

The Bank therefore endeavours to achieve new economic efficiency contexts in its awareness of the fact that

its mission also involves sustained value creation for its stakeholders, comprising the supply of top quality

financial products and services supported by its membership of the largest Portuguese financial group - CGD

Group.

Subject to such behavioural parameters, CaixaBI has succeeded in recognising and exceeding its

customers’ expectations, improving performance levels to a higher quality threshold, acting as a benchmark

market operator based on ethical standards and responsibility, consolidating customers’ trust in CaixaBI.

9.2 Environmental considerations

Although the financial sector is not an area of activity which entails the greatest environmental risks, its

possible intervention role must not be underestimated, in terms of internal operations - power consumption,

water, paper, consumables, fuel, recycling, materials re-use, waste reduction, supplier selection, are, inter

alia, several of the principal direct environmental impacts to be safeguarded.

In addition to such direct intervention, the financial sector’s role, however, is fundamental as from the time

when developers’ projects with an environmental impact apply for advisory services and/or funding.

In this context, CaixaBI’s activity, as an entity supplying credit to companies and investors in the financial

market has an indirect environmental impact.

The introduction of environmental criteria and assessment of environmental risks in terms of project analyses

and companies eligible for support, represent a fundamental contribution to environmental protection.

Securing and structuring operations comprise opportunities for the Bank to express its concerns over the

assessment of the environmental impact of the activity of its corporate customers and include the analysis of

environmental effects on corporate assessments and funding costs.

CaixaBI has made important investments in projects in the environmental area, namely wind farms,

hydroelectric power plants and other renewable energy sources, waste processing and basic sanitation,

which projects have an enormous environmental impact, involving complexity at all levels, including

approvals and environmental monitoring.

9.3 Social considerations

Social considerations are assessed by the analysis of an organisation’s impact on its stakeholders -

employees, suppliers, customers, community, government and society in general - locally, nationally and

globally.


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A socially responsible company, therefore, encourages the personal development of its employees through

training and regularly monitoring their health. CaixaBI considers that it has immediate responsibility for

providing its employees with a healthy working environment – providing them with a medical plan to include

their direct family members (spouses and children) and monitoring the health of its employees in the

workplace, arranging for respective annual check-ups – and their professional career development in

approving a multiplicity of training actions, ranging from attendance at seminars to postgraduate courses and

MBAs. The Bank also provides its employees with a complementary retirement plan.

In terms of social considerations, CaixaBI publishes its corporate governance report, adopting a totally

transparent attitude in its relations with all stakeholders. The Bank has published internal regulations

designed to ensure the high ethical standards of its employees, in addition to preventative and inspection

procedures. It has a Compliance Office to verify compliance with standards and regulations in force and a

code of conduct, binding upon all employees, for fraud prevention purposes. CaixaBI has also published an

anti-money laundering handbook providing for collaboration with its supervisors.

As a CGD group member, the Bank is also directly and indirectly involved in diverse sponsorships,

particularly involving the organisation of artistic events in the Culturgest auditorium and helping to promote

national cultural heritage as a basis for providing continuity to a diverse cultural heritage as an important

catalysing force in consolidating a community identity.

On account of their dimension and the importance of their contribution to economic, social and

environmentally sustainable development, reference should be made to the following operations in which

CaixaBI was privileged to participate in 2011:

Indáqua Santo Tirso: refinancing of the water and sewage concession in the municipalities of Santo

Tirso and Trofa, in the sphere of restoring the concession’s economic-financial balance. All of the

original funding was supplied by CGD.

Embraport: construction of a port terminal which, at a first stage will be capable of handling 1.2 million

TEU and will have the capacity to handle bulk liquids, improving the capacity of the Port of Santos

(Brazil) to receive new generation deep keel cargo vessels. The project’s promoters are Odebrecht

Transport, Dubai Port World and Coimex. The project was financed by an A/B Loan from the Inter-

American Development and a Caixa Económica Federal loan in which CGD operated as the MLA for

the IDB A/B loan.


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II Compliance with legal guidelines

Compliance with legal guidelines on management objectives

CaixaBI’s shareholders did not establish guidelines or management objectives for 2011 as provided for in

article 11 of Decree Law 300/2007 of 23 August.

Compliance with legal guidelines on special information disclosures

Special information disclosure duties, namely reporting to the Directorate General of the Treasury and

Finance or the Inspectorate General of Finance, are performed on a consolidated basis by Caixa Geral de

Depósitos, S.A., as the group’s parent company.

Compliance with legal guidelines on income obtained from the scope of compliance with

shareholders’ recommendations

The shareholders did not issue any additional recommendations at the time of the approval of the 2010

accounts.

Compliance with legal guidelines on remunerations

Remunerations of statutory bodies

CaixaBI complied with the legal regulations namely the dispositions of article 29 of Law 55-A/2010 of 31

December, not having paid any management bonuses in 2011 to board members.

CaixaBI fully complied with the provisions of article 12 of Law 12-A/2010 of 30 June, having reduced the

gross monthly remunerations of all members of CaixaBI’s executive committee by 5%.

Reference should, herein, be made to the fact that, since January 2011, CaixaBI also levied a reduction of

10% on the monthly gross remunerations of the executive committee, in compliance with sub-paragraph c) of

no. 1 and sub-paragraph q) of no. 9 of article 19 of Law 55-A/2010 of 31 December.


241

Information on the remunerations of members of CaixaBI’s Executive Committee for 2011

Chairman Executive director Executive director

(amounts in euros) Jorge Cardoso Gonçalo Botelho Francisco Rangel

For period01/01/2011 to 31/12/2011

01/01/2011 to 31/12/2011

26/09/2011 to 31/12/2011

1. Remuneration

1.1. Base annual/fixed remuneration 218,426 206,388 50,573

1.2. Reduction deriving from Law 12-A/2010 10,770 10,319 2,529

1.3. Reduction deriving from Law 55-A/2010 20,462 19,607 4,804

1.4. Effective annual remuneration (1.1.-1.2.-1.3.) 187,195 176,462 43,240

1.5. Attendance vouchers

1.6. Accumulation of management functions

1.7. Variable remuneration

1.8. Exemption from overtime (this account heading is

included in 1.1)22,144 28,150 4,952

1.9. Other (full details)

2. Other benefits and compensation

2.1. Annual limit on mobile communications - - -

2.2. Expenditure on mobile communications 5,811 12,699 68

2.3. Meal allowances 2,120 1,587 699

2.5. Other (1)

3,019 13,296 168

3. Costs of social benefits

3.1. Social protection regime 44,459 42,952 9,474

3.2. Healthcare insurance No individual insurance

3.3. Life insurance No individual insurance

3.4. Personal accidents insurance No individual insurance

3.5. Other (2)

6,552 6,176 1,384

4. Vehicle fleet

4.1. Brand Audi Audi Mercedes

4.2. Model A6 A6 E250

4.3. Type of use (acquisition/LTL/renting/leasing) Renting Renting Renting

4.4. Start year 2009 2009 2009

4.5. End year 2012 2012 2012

4.6. Amount of instalment / annual payment for

company car17,884 17,161 4,407

4.7. Vehicle fuel costs 2,769 2,919 399

4.8. Annual fuel allowance - - -

4.9. Other

5. Additional information

5.1. Option of wages paid by former job (y/n) n n n

5.2. Annual gross remuneration paid by former job

5.3. Social protection regime

5.3.1 Social security (y/n) y y y

5.3.2 Other (specify)

5.4. Performance of paid functions outside group (y/n) n n n

5.5. Other

(1)Allowances

(2) Complementary retirement plans


242

Former chairman Former executive director

Former executive director

(amounts in euros) Luís Laranjo António Martins Sérgio Monteiro

For period01/01/2011 to 20/05/2011

01/01/2011 to 31/01/2011

20/05/2011 to 27/06/2011

1. Remuneration

1.1. Base annual/fixed remuneration 122,126 14,742 21,364

1.2. Reduction deriving from Law 12-A/2010 4,601 737 295

1.3. Reduction deriving from Law 55-A/2010 8,744 1,401 560

1.4. Effective annual remuneration (1.1.-1.2.-1.3.) 108,781 12,604 20,510

1.5. Attendance vouchers

1.6. Accumulation of management functions

1.7. Variable remuneration

1.8. Exemption from overtime (this account heading is

included in 1.1)- - 2,170

1.9. Other (full details)

2. Other benefits and compensation

2.1. Annual limit on mobile communications - - -

2.2. Expenditure on mobile communications 349 113 719

2.3. Meal allowances 710 233 444

2.5. Other

3. Costs of social benefits

3.1. Social protection regime 6,649 1,128 4,871

3.2. Healthcare insurance No individual insurance

3.3. Life insurance No individual insurance

3.4. Personal accidents insurance No individual insurance

3.5. Other 0 2,793 718

4. Vehicle fleet

4.1. Brand Jaguar Mercedes BMW

4.2. Model XF E250 320D

4.3. Type of use (acquisition/LTL/renting/leasing) Renting Renting Renting

4.4. Start year 2008 2009 2008

4.5. End year Returned in 2011 2012 Returned in 2011

4.6. Amount of instalment / annual payment for

company car7,467 1,469 2,071

4.7. Vehicle fuel costs 1,868 347 133

4.8. Annual fuel allowance - - -

4.9. Other

5. Additional information

5.1. Option of wages paid by former job (y/n) n n n

5.2. Annual gross remuneration paid by former job

5.3. Social protection regime

5.3.1 Social security (y/n) y n y

5.3.2 Other (specify) CGA / Pension Fund

5.4. Performance of paid functions outside group (y/n) n n n

5.5. Other


243

Information on the remuneration of the members of CaixaBI’s fiscal board for 2011

Chairman Member Member Chairman Member Member

(amounts in euros)Hernani Loureiro

António Ribeiro

João Martins

Eduardo Ferreira

Pedro Felício

Maria Rosa Sá

For period 201020-05-2011

a 21-07-2011

20-05-2011 a

31-12-2011

20-05-2011 a

31-12-2011

Fixed annual remuneration 29.472 27.072 27.072 4.744 14.972 14.972

Reduction deriving from Law 55-A/2010

n.a n.a n.a 166 850 1.497

Effective annual remuneration 29.472 27.072 27.072 4.578 14.122 13.475

Remuneration of statutory auditor

Deloitte & Associados, SROC, represented by João Carlos Henriques Gomes Ferreira

(in euros – exclusive of VAT) 2010 2011

Audit and revision of accounts 83,862 69,883

Other reliability guarantee services 36,845 36,845

Fiscal consultancy 138,895 115,920

Other services 51,400 33,500

The reduction of remuneration under the terms of article 22 of Law 55-A/2010 was complied with.

Remunerations of other workers

Following the entry into force of Law 55-A/2010 of 31 December (State Budget Law for 2011) CGD Group, of

which CaixaBI is a member, applied the appropriate deductions to remuneration, adapted as justified by its

corporate nature and duly authorised by the Secretary of State for the Treasury and Finance. The amount of

the reduction is set out in the summary table relative to compliance with the legal obligations, set out at the

end of this chapter.

Compliance with legal guidelines on the level of public contracting

The Public Contracts Code approved by Decree Law 18/2008 of 29 January, does not apply to CaixaBI.

However, CaixaBI uses the services of Sogrupo – Compras e Serviços Partilhados, Agrupamento

Complementar de Empresas whose mission is to provide services related with human resources

management, negotiation and management of goods and services, based on a CGD Group shared services

unit approach, centralising its activities and common processes, endeavouring, on the basis of economies of

scale and knowledge, to reduce costs, maximise productivity and improve the quality of the service provided.


244

Compliance with legal guidelines on the level of membership of the National Public

Procurement System

CaixaBI, as in the case of Caixa Geral de Depósitos, S.A., although not a National Public Procurement

System (SNCP) subscriber, has developed the rationalisation of procurement policies for goods and

services, through the use of Sogrupo – Compras e Serviços Partilhados, Agrupamento Complementar de

Empresas, whose activity is subject to a collection of internal and external regulations in line with SNCP

procedures.

Compliance with the costs reduction plan

CaixaBI’s majority shareholder (Gerbanca, SGPS, S.A.) has defined a cost reduction plan for CaixaBI on its

activity in Portugal, to be achieved in 2011, affecting employee costs, its wage bill and administrative

expenditure.

Employee costs were effectively down by 11% in 2011 against 2010. The savings correspond to 130% of the

established objective.

There was an effective reduction of 15% in the wage bill over 2010, corresponding to 189% of the

established savings objective.

General administrative expenditure, was effectively reduced by 23% over 2009, corresponding to 171% of

the established savings objective.


245

Summary table of compliance with legal obligations

Compliance with legal guidelinesCompliance

Quantification JustificationY N N.A.

Management objectives x Not applicable

Special disclosure requirements x Not applicable

Shareholder’s recommendations for the approval of accounts x Not applicable

Remunerations:

Non payment of management bonuses x

Statutory bodies - reduction of remuneration under article 19 of Law 55-A/2010

x €55,578

Statutory bodies - reduction of 5% through application of article 12 of Law No.12-A/2010

x €29,251

External auditor - reduction of remuneration under article 22 of Law 55-A/2010

x €13,979

Other workers - reduction of remuneration under article 19 of Law 55-A/2010

x €155,781 (a)

Public contracts x Not applicable

Cost reduction plan

Employee costs x 130% (b)

External supplies and services x 171% (b)

(a) Following the entry into force of Law 55-A/2010 of 31 December (State Budget Law for 2011) CGD Group, of which CaixaBI is a

member, applied the appropriate deductions, adapted as justified by its corporate nature which were duly authorised by the

Secretary of State for the Treasury and Finance.

(b) See item on compliance with the costs reduction plan on the preceding page.

CaixaBI R&C 2011_EN.docx

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