II. CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2012 AND CORRESPONDING NOTES

These financial statements are a free translation into English of the original Portuguese version. In case of doubt or misinterpretation the Portuguese version will prevail.

II. Consolidated Financial Statements

1. Consolidated Financial Statements and Notes to the Financial Statement 3
2. Appendix - Adoption of the Financial Stability Forum (FSF) and Committee of European Banking Supervisors (CEBS) Recommendations concerning the
Transparency of Information and the Valuation of Assets 152
3. Auditors' Report on the Consolidated Financial Statements 156
4. Report of the Audit Committee 159

1. Consolidated Financial Statements and Notes to the Financial

Statement

			(in thousands of euro
	Notes	31.12.2012	31.12.2011
Interest and similar income	5	3914109	4 084 862
Interest expense and similar charges	5	2733601	2 903 271
Net interest income		1 180 508	1 181 591
Dividend income		72 604	167 701
Fee and commission income	6	975 062	888 646
Fee and commission expenses	6	(181144)	(130546)
Net gains / (losses) from financial assets at fair value through profit or loss	7	(59, 408)	(178904)
Net gains / (losses) from available-for-sale financial assets	8	600 206	(68770)
Net gains / (losses) from foreign exchange differences	9	(23788)	(32645)
Net gains/ (losses) from the sale of other assets	10	(42159)	(91680)
Insurance earned premiums net of reinsurance	11	62 257
Claims incurred net of reinsurance	12	(362973)
Change on the technical reserves net of reinsurance	13	301 423
Other operating income and expense	14	109 562	357 803
Operating income		2632150	2 093 196

Staff costs	15	598 883	587 475
General and administrative expenses	17	442 120	433 753
Depreciation and amortisation	30 and 31	108 074	107 926
Provisions net of reversals	40	56 978	6860
Loans impairment net of reversals and recoveries	25	814 832	600 616
Impairment on other financial assets net of reversals and recoveries	23, 24 and 26	106 727	73 251
Impairment on other assets net of reversals and recoveries	28, 31 and 34	220 893	167 602
Operating expenses		2 348 507	1977483
Gains on disposal of investments in subsidiaries and associates	1	383	1795
Losses arising on business combinations achieved in stages	1 and 55	(89586)
Share of profit of associates	32	8 3 1 2	(175231)
Profit before income tax		202 752	(57723)
Income tax
Current tax	41	135 350	72 147
Deferred tax	41	(52434)	(133666)
		82916	(61519)
Profit for the year		119836	3796

Attributable to equity holders of the Bank		96 101	(108758)
Attributable to non-controlling interest	45	23 735	112 554
		119836	3 796
Earnings per share of profit attributable to the equity holders of the Bank
Basic (in Euro)	18	0,03	(0,04)
Diluted (in Euro)	18	0,03	(0,04)

GRUPO BANCO ESPÍRITO SANTO

CO NSO LIDATE D STATE ME NT O F CO MPRE HE NSIVE INCO ME FOR THE YE AR S E NDE D 31 DE CE MBE R 201 2 AND 201 1

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Profit for the period
Attributable to equity holders of the Bank	96 1 01	( 1 08 758)
Attributable to non-controlling interest	23 735	1 1 2 554
	1 1 9 836	3 796
Other comprehensive income for the period
Long-term benefit	( 1 91 647)	44 01 5
Income taxes on actuarial gains and losses from defined benefit obligations	1 8 597	( 1 3 093)
Exchange differences	( 57 21 6)	1 1 981
Income taxes on exchange differences on translating foreign operations	3 247	( 2 71 2)
Other comprehensive income appropriate from associates	( 9 800)	( 8 053)
	( 236 81 9)	32 1 38
Available-for-sale financial assets
Gains/ (losses) arising during the period	1 248 383	( 631 336)
Reclassification adjustments for gains/ (losses) included in the profit or loss	( 500 898)	1 26 561
Deferred taxes	( 1 31 438)	69 226
	61 6 047	( 435 549)
Total comprehensive income/(loss) for the period	499 064	( 399 61 5)

Attributable to equity holders of the B ank	492 21 6	( 523 227)
Attributable to non-controlling interest	6 848	1 23 61 2
	499 064	( 399 61 5)

The following notes form an integral part of these interim consolidated financial statements

GRUPO BANCO ESPÍRITO SANTO

CONSOLIDATE D B ALANCE SHE E T AS AT 31 DE CE MB E R 201 2 AND AT 31 DE CE MB E R 201 1

			(in thousands of euro)
	Notes	31.12.2012	31.1 2.2011
Assets
Cash and deposits at central banks	1 9	1 377 541	1 090 439
Deposits with banks	20	681 077	580 813
Financial assets held for trading	21	3 925 399	3 434 639
Other financial assets at fair value through profit or loss	22	2 821 553	1 963 989
Available-for-sale financial assets	23	1 0 755 310	1 1 482 866
Loans and advances to banks	24	5 426 518	3 282 576
Loans and advances to customers	25	47 706 392	49 043 382
Held-to-maturity investments	26	941 549	1 541 1 82
Derivatives for risk management purposes	27	51 6 520	510 090
Non-current assets held for sale	28	3 277 540	1 646 683
Investment properties	29	441 988	-
Property and equipment	30	931 622	851 678
Intangible assets	31	555 326	230 332
Investments in associates	32	580 982	806 999
Current income tax assets		24 648	28 692
Deferred income tax assets	41	728 905	712 1 57
Technical reserves of reinsurance ceded	33	3 804	-
Other assets	34	2 994 1 54	3 030 855
Total Assets		83 690 828	80 237 372
Liabilities
Deposits from central banks	35	1 0 893 320	1 0 013 713
Financial liabilities held for trading	21	2 122 025	2 1 25 253
Deposits from banks	36	5 088 658	6 239 360
Due to customers	37	34 540 323	34 206 1 62
Debt securities issued	38	1 5 424 061	1 8 452 648
Derivatives for risk management purposes	27	125 1 99	238 633
Investment contracts	39	3 41 3 563	-
Non-current liabilities held for sale	28	175 945	1 40 950
Provisions	40	236 950	1 90 450
Technical reserves of direct insurance	33	1 577 408	-
Current income tax liabilities		221 1 99	44 937
Deferred income tax liabilities	41	154 015	1 10 533
Subordinated debt	42	839 816	961 235
Other liabilities	43	1 145 602	1 321 023
Total Liabilities		75 958 084	74 044 897
E quity
Share capital	44	5 040 1 24	4 030 232
Share premium	44	1 069 517	1 081 663
Other equity instruments	44	29 295	29 505
Treasury stock	44	( 6 991)	( 997)
Preference shares	44	193 289	211 913
Other reserves, retained earnings and other comprehensive income	45	641 964	360 470
Profit for the period attributable to equity holders of the Bank		96 1 01	( 108 758)
Total E quity attributable to equity holders of the B ank		7 063 299	5 604 028
Non-controlling interest	45	669 445	588 447
Total E quity		7 732 744	6 1 92 475
Total E quity and Liabilities		83 690 828	80 237 372

The following notes form an integral part of these interim consolidated financial statements

(in thousands of euro)

GRUPO BANCO ESPÍRITO SANTO

CONSOLIDATE D STATE ME NT OF CHANGE S IN E QUITY FOR THE YE AR S E NDE D 31 DE CE MB E R 201 2 AND 201 1

						Othe r res erve s, re	taine d ea rnin nd o ther gs a inco me	preh ensi com ve	Prof it fo r the
	Sha pital re ca	Sha re prem ium	Othe uity instr r eq nts ume	Trea sury stoc k	Pref ce shar eren es	Fair valu e rese rve	Othe r res erve s, ined ning reta ear s and othe r preh ensi com ve inco me	Tota l	peri od attri buta ble t o ity h olde equ rs of th e B a nk	Tota l equ ity attri buta ble t uity o eq hold f the k B an ers o	Non rolli cont ng inte rest	l Tota ity equ
Bala s at 3 1 dec emb er 20 1 1 (re d) state nce a	3 50 0 000	1 085 398	269 9 53	-	600 0 00	( 9 5 80)	307 666	298 0 86	556 9 01	6 31 0 338	538 7 01	6 849 039
nsive inco Othe prehe r com me Ch s in f air va lue, n et of taxes ange Ac tuaria l devi ation t of ta s, ne xes nsive inco riate from ciate Othe prehe r com me a pprop asso s E x chan ge di fferen f taxe net o ces, s	- - - -	- - - -	- - - -	- - - -	- - - -	( 435 595) - - -	- 29 56 7 ( 8 0 53) ( 38 8)	( 435 595) 29 56 7 ( 8 0 53) ( 38 8)	- - - -	( 435 595) 29 56 7 ( 8 0 53) ( 38 8)	46 1 355 - 9 65 7	( 435 549) 30 92 2 ( 8 0 53) 9 269
Profit for th iod e per	-	-	-	-	-	-	-	-	( 1 08 758)	( 1 0 8 758 )	1 1 2 554	3 796
Tota l com preh ensiv e inc in th riod ome e pe	-	-	-	-	-	( 435 595)	21 1 26	( 41 4 469)	( 1 0 8 758 )	( 523 227)	1 23 61 2	( 399 61 5)
Capit al inc rease - iss ue of 294 573 4 1 8 ne w sha res	530 232 530 232 -	( 3 7 35) - -	( 24 0 448 ) - ( 240 448)	- - -	( 1 97 446) - ( 1 97 446)	- - -	54 67 3 - 54 67 3	54 67 3 - 54 67 3	- - -	1 43 2 76 530 2 32 ( 383 221 )	( 46 269) - ( 46 269)	97 007 530 2 32 ( 42 ) 9 490
- C osts with c apita l incr ease Purch f pref e sha res (s ee No te 44 ) ase o erenc ction s wit h non rolling inter Trasa -cont ests Trans fer to rese rves	- - - -	( 3 7 35) - - -	- - - -	- - - -	- ( 1 90 641 ) - -	- - - -	- 50 97 5 3 630 409 9 46	- 50 97 5 3 630 409 9 46	- - - ( 409 946)	( 3 7 35) ( 1 39 666) 3 630 -	- - ( 1 0 1 02) -	( 3 7 35) ( 1 39 666) ( 6 4 72) -
Divide nds o n ord inary shar es (a ) Divide nds o feren ce sh f taxe s (b) net o n pre ares, Varia tions of tre stoc k (se e Not e 44) asury Intere st of other equi ty ins et of (c) trume nts, n taxes	- - - -	- - - -	- - - -	- - ( 99 7) -	- - - -	- - - -	- ( 25 71 7) - ( 1 5 478)	- ( 25 71 7) - ( 1 5 478)	( 1 46 955) - - -	( 1 4 6 955 ) ( 25 71 7) ( 99 7) ( 1 5 478)	- - - -	( 1 46 955) ( 25 71 7) ( 99 7) ( 1 5 478)
Othe ts r mov emen in m inorit y inte rest ( 5) Othe r cha see N ote 4 nges	- -	- -	- -	- -	- -	- -	( 1 1 76) -	( 1 1 76) -	- -	( 1 1 76) -	- ( 1 7 495)	( 1 1 76) ( 1 7 495)
Bala s at 3 1 dec emb er 20 1 1 nce a	4 03 0 232	1 081 663	29 50 5	( 99 7)	21 1 91 3	( 445 1 75)	805 645	360 4 70	( 1 08 758)	5 60 4 028	588 4 47	6 1 92 475
Othe prehe nsive inco r com me Ch s in f air va lue, n et of taxes ange	-	-	-	-	-	61 6 0 25	-	61 6 0 25	-	61 6 0 25	22	61 6 0 47
tuaria l devi ation t of ta Ac s, ne xes Othe prehe nsive inco riate from ciate r com me a pprop asso s E x chan ge di fferen f taxe net o ces, s	- - -	- - -	- - -	- - -	- - -	- - -	( 1 73 1 71 ) ( 9 8 00) ( 36 939)	( 1 73 1 71 ) ( 9 8 00) ( 36 939)	- - -	( 1 73 1 71 ) ( 9 8 00) ( 36 939)	1 2 1 - ( 1 7 030)	( 1 73 050) ( 9 8 00) ( 53 969)
Profit for th iod e per Tota l com preh ensiv e inc in th riod ome e pe	- -	- -	- -	- -	- -	- 61 6 0 25	- ( 21 9 91 0)	- 396 1 1 5	96 1 0 1 96 1 0 1	96 1 0 1 492 2 1 6	23 73 5 6 848	1 1 9 8 36 499 0 64
Capit al inc rease - iss ue of 2 55 6 688 387 hares new s	1 00 9 892 1 00 9 892	( 1 2 1 46) -	- -	- -	- -	- -	- -	- -	- -	997 7 46 1 009 892	- -	997 7 46 1 009 892
with c apita l incr osts - c ease Purch f pref e sha res (s ee No te 44 ) ase o erenc Purch f othe ital in strum ents ase o	- -	( 1 2 1 46) -	- - ( 21 0)	- -	- ( 1 8 624)	- -	- 4 478	- 4 478	- -	( 1 2 1 46) ( 1 4 1 46) ( 21 0)	- -	( 1 2 1 46) ( 1 4 1 46) ( 21 0)
r cap actio ns wi trollin g inte Trans th no rests n-con Trans fer to rese rves Divide nds o feren ce sh f taxe s (b) net o n pre ares,	- - - -	- - - -	- - -	- - - -	- - - -	- - - -	- 497 ( 1 08 758) ( 6 1 37)	- 497 ( 1 0 8 758 ) ( 6 1 37)	- - 1 08 758 -	497 - ( 6 1 37)	- - - -	497 - ( 6 1 37)
Varia tions of tre stoc k (se e Not e 44) asury Intere st of other equi ty ins et of (c) trume nts, n taxes Chan n Con solid ated Perim eter ( See 45) note	- -	- -	- -	( 5 9 94) -	- -	- -	- ( 1 86 4)	- ( 1 8 64)	- -	( 5 9 94) ( 1 8 64)	- - 74 29 3	( 5 9 94) ( 1 8 64) 74 29 3
ges o Othe ts r mov emen Othe r cha in m inorit y inte rest ( see N ote 4 5) nges	- - -	- - -	- - -	- - -	- - -	- - -	- ( 2 8 37) -	- ( 2 8 37) -	- - -	- ( 2 8 37) -	- ( 1 4 3)	( 2 8 37) ( 1 4 3)
Bala s at 3 1 dec emb er 20 1 2 nce a	5 04 0 1 24	1 069 51 7	29 29 5	( 6 9 91 )	1 93 289	1 70 8 50	471 1 1 4	641 9 64	96 1 0 1	7 063 299	669 4 45	7 732 744

(a) Corresponds to a dividend per share of euro 0.1 26 distributed to the ordinary shares outstanding in 201 ¹ .

(b) Corresponds to a preferred dividend, based on an annual interest rate of 5.58% , related to preference shares issued by BE S Finance (see Note 44).

(c) Corresponds to a conditioned interest payable semi-annually and calculated based on an annual rate of 8.5% (amounts issued in euro) and 8.0% (amounts issued in U.S. dollars) related to perpetual bonds issued by BE S (see Note 44).

	Notes	31.12.2012	in urduudinud or curo 31.12.2011
Cash flows from operating activities
Interest and similar income received		3866756	3891906
Interest expense and similar charges paid		(2761592)	(2911344)
Fees and commission received		980 751	894 674
Fees and commission paid Insurance premiums		(188981) (301802)	(143.472)
Recoveries on loans previously written off		21 900	26 553
Contributions to pensions' fund		(86410)	(92467)
Cash payments to employees and suppliers		(845 776)	(1088677)
		684 846	577 173
Changes in operating assets and liabilities:
Deposits with central banks		(2475433)	3 3 1 5 3 6 5
Financial assets at fair value through profit or loss		1 433 434	(173894)
Loans and advances to banks		1 225 370	(290655)
Deposits from banks		(1296220)	(171308)
Loans and advances to customers		(388936)	332 334
Due to customers		320 144	3 313 699
Derivatives for risk management purposes		226 558	(142821)
Other operating assets and liabilities		(416008)	(746 285)
Net cash from operating activities before income tax		(686245)	6 013 608
Income taxes paid		(94908)	46 890
Net cash from operating activities		(781 153)	6 060 498
Cash flows from investing activities
Acquisition of subsidiaries and associates	1	(257 418)	(98191)
Sale of subsidiaries and associates	1	51 613	5 5 6 5
Dividends received		76 027	171 894
Acquisition of available-for-sale financial assets		(69, 490, 051)	(47352062)
Sale of available-for-sale financial assets		72 942 251	47 680 028
Held to maturity investments Issued insurance investment contracts		648 712 200 849	394 549
Purchase of tangible and intangible assets and investment properties		(532483)	(145361)
Sale of tangible and intangible assets and investment properties		7489	507
Net cash from investing activities		3646989	656 929
Cash flows from financing activities
Capital increase		997 746
Acquisition of preference shares		(11430)	(41841)
Bonds issued Bonds paid		13 218 398 (16529485)	9 0 9 5 6 2 4 (14422787)
Subordinated debt issued			8 1 7 4
Subordinated debt paid		(210096)	(989458)
Treasury stock		(5994)	(997)
Interest from other equity instruments		(2809)	(21801)
Dividends paid on ordinary shares			(146955)
Dividends paid on preference shares		(10997)	(25717)
Net cash from financing activities		(2554667)	(6 545 758)
Net changes in cash and cash equivalents		311 169	171 669
Cash and cash equivalents at the beginning of the period		1 542 251	1 341 403
BES Vida full consolidation impact	54	198 648
Effect of exchange rate changes on cash and cash equivalents		(27 535)	29 179
Net changes in cash and cash equivalents		311 169	171 669
Cash and cash equivalents at the end of the period		2 0 2 4 5 3 3	1 542 251

Cash and cash equivalents includes: Cash	15	303 538	278 179
Deposits at Central Banks	15	1 074 003	812 260
of which, restricted balances		(34085)	(129 001)
Deposits with banks	16	681 077	580 813
Total		2 0 2 4 5 3 3	1 542 251

Grupo Banco Espírito Santo

Notes to the Consolidated Financial Statements as at 31 December 2012

(Amounts expressed in thousands of euro, except when indicated)

NOTE 1 – ACTIVITY AND GROUP STRUCTURE

Banco Espírito Santo, S.A. (Bank or BES) is a commercial bank headquartered in Portugal, Avenida da Liberdade, no. 195, Lisbon. The Bank is authorised by the Portuguese authorities, central banks and other regulatory authorities, to operate in Portugal and in the countries where its international branches are located.

BES's foundation dates back to the last quarter of the 19th century. The Bank began its operations as a commercial bank in 1937, following the merger of Banco Espírito Santo and Banco Comercial de Lisboa, from which resulted Banco Espírito Santo e Comercial de Lisboa. On 6 July 1999, the Bank changed its name to Banco Espírito Santo, S.A.. BES is the core of a financial group – BES Group – which includes the Bank and a number of financial entities located in Portugal and abroad.

BES is listed on the NYSE Euronext Lisbon. As at 31 December 2012, the Bank's subsidiary BES Finance, Ltd had also 193 thousand preference shares listed on the Luxembourg Stock Exchange.

Since 1992, BES is part of the Espírito Santo Group, therefore its financial statements are consolidated by BESPAR SGPS, S.A., headquartered in Rua de São Bernardo, no. 62, Lisbon, and as well by Espírito Santo Financial Group, S.A. (ESFG), with headquarters in Luxembourg. BES Group has a network of 775 branches throughout Portugal (31 December 2011: 801), international branches in London, Spain, New York, Nassau, Cayman Islands, Cape Verde, Venezuela and Luxembourg, a branch in the Madeira Free Trade Zone and ten representative offices overseas.

Group companies where the Bank has a direct or indirect holding greater or equal to 20%, over which the Bank exercises control or has significant influence, and that were included in the consolidated financial statements, are as follows:

consonaacca an ~~~~
	Established	Acquired	Headquartered	Activity	% economic interest	Consolidation method
BANCO ESPÍRITO SANTO, SA (BES)	1937		Portugal	Commercial banking
Banco Espírito Santo de Investimento, SA (BESI)	1993	1997	Portugal	Investment bank	100,00%	Full consolidation
BES-Vida, Companhia de Seguros, SA (BES VIDA)	1993	2006	Portugal	Insurance	100,00%	Full consolidation
Aman Bank for Commerce and Investment Stock Company	2003	2010	Libya	Commercial banking	a) 40,00%	Full consolidation
Avistar, SGPS, SA	2009	2009	Portugal	Holding company	100,00%	Full consolidation
Espírito Santo Servicios, SA	1996	1997	Spain	Insurance	100,00%	Full consolidation
Espírito Santo Activos Financieros, SA	1988	2000	Spain	Asset management	95,00%	Full consolidation
Espírito Santo Vanguarda, SL	2011	2011	Spain	Services provider	100,00%	Full consolidation
Banco Espírito Santo dos Açores, SA (BAC)	2002	2002	Portugal	Commercial banking	57,53%	Full consolidation
BEST - Banco Electrónico de Serviço Total, SA (BEST)	2001	2001	Portugal	Internet banking	66,00%	Full consolidation
BES África, SGPS, SA	2009	2009	Portugal	Holding company	100,00%	Full consolidation
Banco Espírito Santo Angola, SA (BESA)	2001	2001	Angola	Commercial banking	51,94%	Full consolidation
BESAACTIF - Sociedade Gestora de Fundos de Investimento, SA	2008	2008	Angola	Asset management - Investment funds	63,70%	Full consolidation
BESAACTIF Pensões - Sociedade Gestora de Fundos de Pensões, SA	2009	2009	Angola	Asset management - Pension funds	63,70%	Full consolidation
Banco Espírito Santo do Oriente, SA (BESOR)	1996	1996	Macau	Commercial banking	99.75%	Full consolidation
Espírito Santo Bank (ESBANK)	1963	2000	USA	Commercial banking	99,99%	Full consolidation
BES Beteiligungs, GmbH (BES GMBH)	2006	2006	Germany	Holding company	100,00%	Full consolidation
BIC International Bank Ltd. (BIBL)	2000	2000	Cayman Islands	Commercial banking	100,00%	Full consolidation
Parsuni - Sociedade Unipessoal, SGPS	2004	2005	Portugal	Holding company	100,00%	Full consolidation
Praça do Marquês - Serviços Auxiliares, SA (PCMARQUÊS)	1990	2007	Portugal	Real estate	100,00%	Full consolidation
Espírito Santo, plc. (ESPLC)	1999	1999	Ireland	Non-bank finance company	99,99%	Full consolidation
ESAF - Espírito Santo Activos Financeiros, S.G.P.S., SA (ESAF)	1992	1992	Portugal	Holding company	89,99%	Full consolidation
ES Tech Ventures, S.G.P.S., SA (ESTV)	2000	2000	Portugal	Holding company	100,00%	Full consolidation
Banco Espirito Santo North American Capital Limited Liability Co. (BESNAC)	1990	1990	USA	Financing vehicle	100,00%	Full consolidation
BES Finance, Ltd. (BESFINANCE)	1997	1997	Cayman Islands	Issue of preference shares and other	100,00%	Full consolidation
ES, Recuperação de Crédito, ACE (ESREC)	1998	1998	Portugal	securities Financing vehicle	99,15%	Full consolidation
ES Concessões, SGPS, SA (ES CONCESSÕES)	2002	2003	Portugal	Holding company	71,66%	Full consolidation
Espírito Santo - Informática, ACE (ESINF)	2006	2006	Portugal	Services provider	82,28%	Full consolidation
Espírito Santo Prestação de Serviços, ACE 2 (ES ACE2)	2006	2006			88,26%	Full consolidation
	1995	1995	Portugal	Services provider
ESGEST - Esp. Santo Gestão Instalações, Aprov. e Com., SA (ESGEST)			Portugal	Services provider	100,00%	Full consolidation
Espírito Santo e Comercial de Lisboa, Inc. (ESCLINC)	1982	1997	USA	Representation office	100,00%	Full consolidation
Espírito Santo Representações, Ltda. (ESREP)	1996	1996	Brazil	Representation office	99.99%	Full consolidation
Quinta dos Cónegos - Sociedade Imobiliária, SA (CÓNEGOS)	1991	2000	Portugal	Real estate	81,00%	Full consolidation
Fundo de Capital de Risco - ES Ventures II	2006	2006	Portugal	Venture capital fund	60,09%	Full consolidation
Fundo de Capital de Risco - ES Ventures III	2009	2009	Portugal	Venture capital fund	61,54%	Full consolidation
Fundo de Capital de Risco - BES PME Capital Growth	2009	2009	Portugal	Venture capital fund	100,00%	Full consolidation
Fundo FCR PMF / RFS	1997	1997	Portugal	Venture capital fund	55,07%	Eull consolidation
Fundo Gestão Património Imobiliário - FUNGEPI - BES	1997	2012	Portugal	Real estate fund	81,09%	Full consolidation
Fundo de Gestão de Património Imobiliário - FUNGEPI - BES II	2011	2012	Portugal	Real estate fund	85,78%	Full consolidation
FUNGERE - Fundo de Gestão de Património Imobiliário	1997	2012	Portugal	Real estate fund	97,24%	Full consolidation
Imolnvestimento - Fundo Especial de Investimento Imobiliário Fechado	2012	2012	Portugal	Real estate fund	100,00%	Full consolidation
BESA Valorização - Fundo de Investimento Imobiliário Fechado	2012	2012	Angola	Real estate fund	51,94%	Full consolidation
FLITPTREL VIII, SA	2011	2011	Portugal	Ventures tourism developments	$10.00\%$ ^a)	^C Full consolidation
OBLOG Consulting, SA	1993	1993	Portugal	Software development	66,63%	Full consolidation
BES, Companhia de Seguros, SA (BES SEGUROS)	1996	1996	Portugal	Insurance	25,00%	Equity method
Société Civile Immobilière du 45 Avenue Georges Mandel (SCI GM)	1995	1995	France	Real estate	22,50%	Equity method
ESEGUR - Espírito Santo Segurança, SA (ESEGUR)	1994	2004	Portugal	Security	44,00%	Equity method
Locarent - Companhia Portuguesa de Aluguer de Viaturas, SA (LOCARENT)	1991	2003	Portugal	Renting	50,00%	Equity method
Banco Delle Tre Venezie, Spa	2006	2007	Italy	Commercial banking	20,00%	Equity method
Nanium, SA	1996	2010	Portugal	Industry	41,06%	Equity method
Ascendi Douro - Estradas do Douro Interior, SA	2008	2010	Portugal	Motorway concession	18,57%b)	Equity method
Ascendi Pinhal Interior - Estradas do Pinhal Interior, SA	2010	2010	Portugal	Motorway concession	18,57% ^b)	Equity method
UNICRE - Instituição Financeira de Crédito, SA	1974	2010	Portugal	Non-bank finance company	17,50%b)	Equity method
Ijar Leasing Argélie	2011	2011	Algeria	Leasing	35,00%	Equity method

a) Subsidiaries consolidated directly by the Bank:

b) Sub-Groups

	Established	Acquired	Headquartered	Activity	% economic interest	Consolidation method
Banco Espírito Santo de Investimento, SA (BES I)	1 993	1 997	Portugal	Investment bank	1 00.00%	Full consolidation
E spírito S anto Capital - Sociedade de Capital de Risco, S A (E SCAPITAL)	1 988	1 996	Portugal	Venture capital	1 00.00%	Full consolidation
S E S Iberia	2004	2004	S pain	Asset management	50.00%	Full consolidation
HLC - Centrais de Cogeração, S A	1 999	1 999	Portugal	Services provider	24.50%	E quity method
Coporgest, SA	2002	2005	Portugal	Services provider	25.00%	E quity method
Synergy Industry and Technology, SA	2006	2006	S pain	Holding company	26.00%	E quity method
Salgar Investments	2007	2007	S pain	Services provider	45.05%	E quity method
2BCapital Luxembourg S.C.A SICAR	201 1	201 1	Luxembourg	Investment fund	45.00%	E quity method
E SS I Comunicações SGPS, S A	1 998	1 998	Portugal	Holding company	1 00.00%	Full consolidation
E S SI SGPS, SA	1 997	1 997	Portugal	Holding company	1 00.00%	Full consolidation
E spírito S anto Investment Sp, Z.o.o.	2005	2005	Poland	Services provider	1 00.00%	Full consolidation
E spírito Santo S ecurities India	201 1	201 1	India	Brok erage house	75.00%	Full consolidation
E spírito Santo Investment Holding, Limited	201 0	201 0	United Kindom	Holding company	68.40%	Full consolidation
E xecution Holding, Limited	201 0	201 0	United Kindom	Holding company	68.40%	Full consolidation
MCO2 – S ociedade Gestora de Fundos de Investimento Mobiliário, S A	2008	2008	Portugal	Asset management - investment funds	25.00%	E quity method
E spírito Santo Investments PLC	1 996	1 996	Ireland	Non-bank finance company	1 00.00%	Full consolidation
E SS I Investimentos SGPS, SA	1 998	1 998	Portugal	Holding company	1 00.00%	Full consolidation
Polish Hotel Capital S P	2008	2008	Poland	Services provider	33.00%	E quity method
E spirito Santo Investimentos, S A	1 996	1 999	Brazil	Holding company	1 00.00%	Full consolidation
BE S Investimento do Brasil, SA	2000	2000	Brazil	Investment Bank	80.00%	Full consolidation
2BCapital, SA	2005	2005	Brazil	Holding company	45.00%	E quity method
BE S Securities do Brasil, SA	2000	2000	Brazil	Brok erage house	80.00%	Full consolidation
Gespar Participações, Ltda.	2001	2001	Brazil	Holding company	80.00%	Full consolidation
BE S Activos Financeiros, Ltda	2004	2004	Brazil	Asset management	85.00%	Full consolidation
E spírito S anto Serviços Financeiros DTVM, SA	2009	201 0	Brazil	Asset management	79.32%	Full consolidation
FI Multimercado Treasury	2005	2005	Brazil	Investment fund	80.00%	Full consolidation
R Invest, Ltda	2001	2009	Brazil	Services provider	80.00%	Full consolidation
R Consult Participações, Ltda	1 998	2009	Brazil	Services provider	80.00%	Full consolidation
BRB Internacional, S A	2001	2001	S pain	E ntertainment	24.93%	E quity method
Prosport - Com. Desportivas, SA	2001	2001	S pain	Sporting goods trading	25.00%	E quity method
Apolo Films, SL	2001	2001	S pain	E ntertainment	25,1 5%	E quity method
Cominvest- SGII, SA	1 993	1 993	Portugal	Real E state	a) 49.00%	Full consolidation
Fundo E spírito S anto IBE RIA I	2004	2004	Portugal	Venture capital fund	38.67%	E quity method
Fundo FIM BE S Moderado	2004	2009	Brazil	Investment fund	55.96%	Full consolidation
Fundo BE S Absolute Return	2002	2009	Brazil	Investment fund	a) 43.62%	Full consolidation
BES Beteiligungs, GmbH (BES GMBH)	2006	2006	Germany	Holding company	1 00.00%	Full consolidation
Bank E spírito Santo International, Ltd. (BE SIL)	1 983	2002	Cayman Islands	Commercial banking	1 00.00%	Full consolidation
BES África, S GPS, SA (BES ÁFRICA)	2006	2006	Portugal	Holding company	1 00.00%	Full consolidation
Banco E spírito Santo Cabo Verde, SA	201 0	201 0	CapeVerde	Commercial banking	99.99%	Full consolidation
Moza Banco, S A	2008	201 0	Mozambique	Commercial banking	25.1 0%	E quity method
ESAF - Espírito S anto Activos Financeiros, S.G.P.S., SA (ESAF)	1 992	1 992	Portugal	Holding company	89.99%	Full consolidation
E spírito Santo Fundos de Investimento Mobiliário, SA	1 987	1 987	Portugal	Asset management - investment funds	89.99%	Full consolidation
E spírito Santo International Management, S A	1 995	1 995	Luxembourg	Asset management - investment funds	89.81 %	Full consolidation
E spírito Santo Fundos de Investimento Imobiliário, SA	1 992	1 992	Portugal	Asset management - investment funds	89.99%	Full consolidation
E spírito Santo Fundo de Pensões, SA	1 989	1 989	Portugal	Asset management - investment funds	89.99%	Full consolidation
Capital Mais - Assessoria Financeira, SA	1 998	1 998	Portugal	Asset management - investment funds	89.99%	Full consolidation
E spirito Santo International Asset Management, Ltd.	1 998	1 998	British Virgin Islands	Asset management - investment funds	44.1 0%	E quity method
E spírito Santo Gestão de Patrimónios, SA	1 987	1 987	Portugal	Asset management - investment funds	89.99%	Full consolidation
E SAF - E spírito S anto Participações Internacionais, SGPS, SA	1 996	1 996	Portugal	Asset management - investment funds	89.99%	Full consolidation
E SAF - International Distributors Associates, Ltd	2001	2001	British Virgin Islands	Asset management - investment funds	89.99%	Full consolidation
ES Tech Ventures, S.G.P.S ., SA (ESTV)	2000	2000	Portugal	Holding company	1 00.00%	Full consolidation
E S Ventures - Sociedade de Capital de Risco, S A	2005	2005	Portugal	Venture capital fund	1 00.00%	Full consolidation
Yunit Serviços, SA	2000	2000	Portugal	Management of internet portals	33,33%	E quity method
FCR E spírito Santo Ventures Inovação e Internacionalização	201 1	201 1	Portugal	Venture capital fund	50.00%	E quity method
Fundo Bem Comum, FCR	201 1	201 1	Portugal	Venture capital fund	20.00%	E quity method
E spírito S anto Contact Center, Gestão de Call Centers, S A (E SCC)	2000	2000	Portugal	Call centers management company	41 .67%	Equity method
	1 927	1 993	France	Commercial banking	42.69%	E quity method

	Established	Acquired	Headquartered	Activity	% economic interest	Consolidation method
Fundo de Capital de Risco - ES Ventures II	2006	2006	Portugal	Venture capital fund	60.09%	Full consolidation
Atlantic Ventures Corporation	2006	2006	US A	Holding company	60.09%	Full consolidation
Sousacamp, S GPS , SA	2007	2007	Portugal	Holding company	23.50%	E quity method
Global Active - S GPS , SA	2006	2006	Portugal	Holding company	26.84%	E quity method
Outsystems, SA	2007	2007	Portugal	IT S ervices	b) 1 7.60%	E quity method
Corework s - Proj. Circuito Sist. E lect., SA	2006	2006	Portugal	IT S ervices	b) 1 9.45%	E quity method
Multiwave Photonics, S A	2003	2008	Portugal	IT S ervices	b) 1 2.47%	E quity method
Bio-Genesis	2007	2007	Brazil	Holding company	b) 1 7.98%	E quity method
YDreams - Informática, SA	2000	2009	Portugal	IT S ervices	28.84%	E quity method
Fundo de Capital de Risco - ES Ventures III	2009	2009	Portugal	Venture capital fund	61 .54%	Full consolidation
Nutrigreen, SA	2007	2009	Portugal	S ervices provider	b) 1 2.31 %	E quity method
Advance Ciclone Systems, SA	2008	2009	Portugal	Treatment and elimination of residues	b) 1 9.69%	E quity method
Watson Brown, HSM, Ltd	1 997	2009	United Kingdom	Recycling rubber	22.09%	E quity method
Domática, E lectrónica e Informática, S A	2002	201 1	Portugal	IT S ervices	b) 1 4.51 %	E quity method
Fundo FCR PME / BES	1 997	1 997	Portugal	Venture capital fund	55.07%	Full consolidation
Mobile World - Comunicações. SA	2009	2009	Portugal	Telecommunications	26.98%	E quity method
MMCI - Multimédia, SA	2008	2008	Portugal	Holding company	26.98%	E quity method
TLCI 2 - S oluções Integradas de Telecomunicações, SA	2006	2006	Portugal	Telecommunications	26.98%	E quity method
E nk rott S A	2006	2006	Portugal	Management and water treatment	b) 1 6.52%	E quity method
Palexpo - Imagem E mpresarial, S A	2009	2009	Portugal	Furniture manufacturing	27.26%	E quity method
Rodi - Sink s & Ideas, S A	2006	2006	Portugal	Metal industry	24.81 %	E quity method
Espírito Santo Activos Financieros, S A	1 988	2000	S pain	Asset management	95.00%	Full consolidation
E spírito Santo Gestión, S A, S GIIC	2001	2001	Spain	Asset management	95.00%	Full consolidation
E spírito Santo Pensiones, S .G.F.P., SA	2001	2001	Spain	Asset management - pension funds	95.00%	Full consolidation
Espírito Santo Bank (ES BANK)	1 963	2000	USA	Commercial banking	99.99%	Full consolidation
E S Financial S ervices, Inc.	2000	2000	US A	Brokerage house	99.99%	Full consolidation
Tagide Properties, Inc.	1 991	1 991	US A	Real estate	99.99%	Full consolidation
E spírito Santo Representaciones	2003	2003	Uruguai	Representation office	99.99%	Full consolidation
E S Investment Advisors, Inc.	201 1	201 1	US A	Investment consulting	99.99%	Full consolidation
BES -Vida, Companhia de Seguros, SA (BES VIDA)	1 993	2006	Portugal	Insurance	1 00.00%	Full consolidation
Caravela Defensive Fund	2006	201 2	Luxembourg	Investment fund	99.1 9%	Full consolidation
Caravela Balanced Fund	2006	201 2	Luxembourg	Investment fund	54.95%	Full consolidation
E S Plano Dinâmico	2008	201 2	Portugal	Investment fund	98.1 5%	Full consolidation
E S Rendimento Dinâmico	2008	201 2	Portugal	Investment fund	68.92%	Full consolidation
E S Arrendamento	2009	201 2	Portugal	Investment fund	1 00.00%	Full consolidation
E S E urobond	1 995	201 2	Luxembourg	Investment fund	52.77%	Full consolidation
Orey Reabilitação Urbana	2006	201 2	Portugal	Investment fund	77.32%	Full consolidation
Fimes Oriente	2004	201 2	Portugal	Investment fund	1 00.00%	Full consolidation
ES Concessões, SGPS, S A (ES CONCES SÕES )	2002	2003	Portugal	Holding company	71 .66%	Full consolidation
E S Concessions International Holding, BV	201 0	201 0	Netherlands	Holding company	71 .66%	Full consolidation
E mpark - Aparcamientos y Servicios, S A	1 968	2009	Spain	Management of park ing lots	b) 1 5.92%	E quity method
E S Concessions Latam, BV	201 1	201 1	Netherlands	Holding company	71 .66%	Full consolidation
Concesionaria Autopista Perote-Xalapa, CV	2008	2008	Mexico	Motorway concession	b) 1 4.33%	E quity method
Ascendi Group S GPS , SA	201 0	201 0	Portugal	Holding company	28.66%	E quity method
Auvisa - Autovia de los Viñedos, S A	2003	201 0	Spain	Motorway concession	35.83%	E quity method

a) These companies were fully consolidated, as the Group controls its activities.

b) The percentage in the table above represents the Group's economic interest. These companies were accounted for under the equity method, as the Group exercises a significant influence over them, in accordance with the accounting policy described in Note 2.2.

Additionally, in accordance with SIC 12, the Group consolidates the following special purpose entities:

	Established	Acquired	Headquartered	% economic interest	Consolidation method

Lusitano SME No.1 plc (*)	2006	2006	Ireland	1 00%	Full Consolidation
Lusitano Mortgages No.6 plc (*)	2007	2007	Ireland	1 00%	Full Consolidation
Lusitano Project Finance No.1 , FTC (*)	2007	201 1	Portugal	1 00%	Full Consolidation
Lusitano Mortgages No.7 plc (*)	2008	2008	Ireland	1 00%	Full Consolidation
Lusitano Leverage Finance No. 1 BV (*)	201 0	201 0	Netherlands	1 00%	Full Consolidation
Lusitano Finance No. 3 (*)	201 1	201 1	Portugal	1 00%	Full Consolidation
IM BE S E mpresas 1 (*)	201 1	201 1	Spain	1 00%	Full Consolidation
CLN Magnolia Finance 2038	2008	2008	Ireland	1 00%	Full Consolidation

(*) E ntities s et-up in the s cope of s ecuritis ation trans actions (See Note 43).

The consolidation of these entities had the following impact on the Group's accounts:

		(in thousands of euro)
	31 .12.2012	31.1 2.2011
Deposits with banks	195 586	572 182
Other financial assets at fair value through profit or loss	71 651	-
Available-for-sale financial assets	-	306 380
Due to costumers (net of impairment)	3 803 343	5 828 664
Debt securities issued	703 797	951 660

The main changes in the Group structure that occurred in 2012 are highlighted as follows:

Subsidiaries
In May 2012, BES acquired the remaining 50% of BES Vida sahre capital, by the amount of euro 225 000 thousand, holding the total share capital of the company and started to consolidate this entity under the full consolidation method (see Note 54);
In November 2012, the Group acquired units of Fungepi, Fungere and Imoinvestimento, which since that date are part of the Group's consolidation perimeter.
Associates (see Note 32)
In April 2012, ES Capital acquired 42.99% of 2BCapital Luxembourg S.C.A SICAR by the amount of euro 854 thousand; in May 2012 there was a capital increase, through which ES Capital invested an additional euro 15 619 thousand in the company;
In June 2012, ES Concessões transferred its shareholdings in SCUTVIAS Autoestradas da Beira Interior, SA and Portvias - Portagem de Vias, SA to Ascendi Group, SGPS, SA, incurring in a loss of euro 2 170 thousand;
In December 2012, BESI sold its shareholding in Polish Hotel Company, Sp, generating a gain of euro 2 509 thousand;

During the years 2012 and 2011, the movements regarding acquisitions and disposals of investments in subsidiaries and associates are presented as follows:

(in thousands of euro)

	31 .12.2012
		Acquisitions			Disposals
	Acquisiton cost	Other investments (a)	Total	Disposal value	Other reimbursements (a)	Total	Gains/(losses) from sales/disposals
Subsidiaries
BES Vida (b)	225 000 225 000	- -	225 000 225 000	- -	- -	- -	( 89 586) ( 89 586)
Associates
Moza Banco	-	2 991	2 991	-	-	-	-
Empark	-	-	-	-	( 2 584)	( 2 584)	-
Port vias	-	-	-	( 1 067)	-	( 1 067)	91 3
Scut vias	-	-	-	( 49 783)	-	( 49 783)	( 3 083)
Ascendi Group	-	1 1 462	11 462	-	-	-	-
Coreworks	-	-	-	-	( 286)	( 286)	0
Sousacamp	-	-	-	-	( 3 700)	( 3 700)	-
Fin Solutia	-	-	-	( 1 21 9)	-	( 1 21 9)	( 6)
2B Capital Luxembourg	854	1 5 619	16 473	-	-	-	-
Nova Figfort	-	-	-	( 71 9)	-	( 71 9)	-
Sopratutto Cafés	-	-	-	( 1 334)	-	( 1 334)	50
Ydreams	-	204	204	-	( 711 )	( 71 1)	-
MCO2	1 1 3	1 1 75	1 288	-	-	-
MRN - Manutenção de Rodovias Nacionais, SA (c)	-	-	-	-	( 11 )	( 1 1)	-
Polish Hotel Company	-	-	0	2 509	-	2 509	2 509
	967	31 451	32 418	( 51 61 3)	( 7 292)	( 58 905)	383
	225 967	31 451	257 418	( 51 61 3)	( 7 292)	( 58 905)	( 89 203)

			31 .1 2.201 1
		Acquisitions			Disposals
	Acquisiton cost	Other investments (a)	Total	Disposal value	Other reimbursements (a)	Total	Gains/(losses) from sales/disposals
S ubsidiaries
E SAF - E spírito Santo Activos Financeiros SGPS	1 3 1 89	-	1 3 1 89	( 1 305)	-	( 1 305)	1 305
E SAF - Alternative Asset Management, Ltd	-	-	-	-	-	-	-
E xecution Noble	23 943	-	23943	-	-	-	-
E S Concessões	808	24 692	25500	-	-	-	-
E S Financial Services	1 979	-	1 979	-	-	-	-
	39 91 9	24 692	64 61 1	( 1 305)	-	( 1 305)	1 305
Associates
BE S Vida	-	62 500	62 500	-	-	-	-
Moza Banco	8 01 8	1 782	9 800	-	-	-	-
Watson Brown	68	2 938	3 006	-	-	-	-
Ijar Leasing Algérie	1 2 361	-	1 2 361	-	-	-	-
E sumédica	-	-	-	-	-	-	380
Ascendi Group	-	4 969	4 969	-	-	-	-
E urop Assistance	-	-	-	( 2 465)	-	( 2 465)	1 1 0
Rua Bonita	-	-	-	-	( 81 8)	( 81 8)	-
Global Active	-	87	87	-	-	-	-
FCR E S Ventures Inovação e Internacionalização	5 000	-	5 000	-	-	-	-
Fundo Bem Comum, FCR	500	-	500	-	-	-	-
Autopista Perote-Xalapa	-	1 622	1 622	-	-	-	-
Ydreams	-	352	352	-	-	-	-
Nutrigreen	-	-	-	-	( 1 500)	( 1 500)	-
Domática	1 000	-	1 000	-	-	-	-
	26 947	74 250	1 01 1 97	( 2 465)	( 2 31 8)	( 4 783)	490
	66 866	98 942	1 65 808	( 3 770)	( 2 31 8)	( 6 088)	1 795

(a) capital increase and loans to companies.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1. Basis of preparation

In accordance with Regulation (EC) no. 1606/2002, of 19 July from the European Council and Parliament, and its adoption into Portuguese Law through Decree-Law no. 35/2005, of 17 February and Regulation no. 1/2005 from the Bank of Portugal, Banco Espírito Santo, S.A. ("BES" or "the Bank") is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").

IFRS comprise accounting standards issued by the International Accounting Standards Board ("IASB") and its predecessor body as well as interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and its predecessor body.

The consolidated financial statements for year ended 31 December 2012 were prepared in accordance with the IFRS effective and adopted by the EU until 31 December 2012.

The accounting policies applied by the Group in the preparation of its consolidated financial statements for the year ended 31 December 2012 are consistent with the ones used in the preparation of the annual consolidated financial statements as at and for the year ended 31 December 2011.

In addition and as described in Note 55, in the preparation of the Consolidated Financial Statements as at 31 December 2012, the Group adopted the accounting standards issued by IASB and IFRIC interpretations, effective since 1 January 2012.

The accounting policies adopted by the Group in the preparation of the Consolidated Financial Statements are in accordance with those described in that note. The adoption of these new standards and interpretations had no material effect in the Group's Consolidated Financial Statements.

The accounting standards and interpretations recently issued but not yet effective and that the Group has not yet adopted in the preparation of its financial statements can also be analysed in Note 55.

Moreover and as referred to in Note 1, the Group acquired, in May 2012, the remaining 50% of BES Vida share capital and the control over its activities. Therefore, from that date, BES Vida, which previously qualified as an associate and was accounted for in the consolidated financial statements up to 2011 under the equity method, is now being fully consolidated by the Group. Further details are provided in Note 54.

These consolidated financial statements are expressed in thousands of euro, rounded to the nearest thousand, and have been prepared under the historical cost convention, except for the assets and liabilities accounted at fair value, namely, derivative contracts, financial assets and financial liabilities at fair value through profit or loss, available-for-sale financial assets, recognised assets and liabilities that are hedged, in a fair value hedge, in respect of the risk that is being hedged.

The preparation of financial statements in conformity with IFRS requires the application of judgement and the use of estimates and assumptions by management that affects the process of applying the Group's accounting policies and the reported amounts of income, expenses, assets and liabilities. Actual results in the future may differ from those reported. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

These consolidated financial statements were approved in the Board of Directors meeting held on 1 March 2013.

2.2. Basis of consolidation

These consolidated financial statements comprise the financial statements of BES and its subsidiaries ("the Group" or "BES Group"), and the results attributable to the Group from its associates.

These accounting policies have been consistently applied by the Group companies, during all the periods covered by the consolidated financial statements.

Subsidiaries

Subsidiaries are entities over which the Group exercises control. Control is presumed to exist when the Group owns more than one half of the voting rights. Additionally, control also exists when the Group has the power to, directly or indirectly, govern the financial and operating policies of the entity, so as to obtain benefits from its activities, even if its shareholding is equal or less than 50%. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date that control ceases.

Accumulated losses of a subsidiary are attributed proportionally to the owners of the parent and to the non-controlling interest even if this results in non-controlling interest having a deficit balance.

In a business combination achieved in stages (step acquisition) where control is obtained, the Group remeasures its previously held non-controlling interest in the acquiree at its acquisition date fair value and recognises the resulting gain or loss in the income statement when determining the respective goodwill. At the time of a partial sale, from which arises a loss of control of a subsidiary, any remaining non-controlling interest retained is remeasured to fair value at the date the control is lost and the resulting gain or loss is recognised against the income statement.

Associates

Associates are entities over which the Group has significant influence over the company's financial and operating policies but not its control. Generally when the Group owns more than 20% of the voting rights it is presumed that it has significant influence. However, even if the Group owns less than 20% of the voting rights, it can have significant influence through the participation in the policymaking processes of the associated entity or the representation in its executive board of directors.

Investments in associates are accounted for under the equity method from the date on which significant influence is transferred to the Group until the date that significant influence ceases. The book value of the investments in associates includes the value of the respective goodwill determined on acquisition and is presented net of impairment losses.

In a step acquisition that results in the Group obtaining significant influence over an entity, any previously held stake in that entity is remeasured to fair value through the income statement when the equity method is first applied.

If the Group's share of losses of an associate equals or exceeds its interest in the associate, including any long-term interest, the Group discontinues the application of the equity method, except when it has a legal or constructive obligation of covering those losses or has made payments on behalf of the associate.

Gains or losses on sales of shares in associate companies are recognised in the income statement even if that sale does not result in the loss of significant influence.

Special purpose entities ("SPE")

The Group consolidates certain special purpose entities ("SPE"), specifically created to accomplish a narrow and well defined objective, when the substance of the relationship with those entities indicates that they are controlled by the Group, regardless the percentage of equity held.

The evaluation of the existence of control is made based on the criteria established by SIC 12 – Consolidation Special Purpose Entities, which can be summarised as follows:

In substance, the activities of the SPE are being conducted in accordance with the specific needs of the Group's business, so that the Group obtains the benefits from these activities;
In substance the Group has the decision-making powers to obtain the majority of the benefits from the activities of the SPE;
In substance, the Group has rights to obtain the majority of the benefits of the SPE, and therefore may be exposed to the inherent risks of its activities;
In substance, the Group retains the majority of residual or ownership risks related to the SPE so as to obtain the benefits from its activities.

Investment funds managed by the Group

As part of the asset management activity, the Group manages investment funds on behalf of the unitholders. The financial statements of these funds are not consolidated by the Group except in the cases where control is exercised over its activity based on the criteria established by SIC 12. It is assumed that there is control over a fund when the Group holds more than 50% of the units.

Goodwill

Goodwill resulting from business combinations that occurred until 1 January 2004 was offset against reserves, according to the option granted by IFRS 1, adopted by the Group on the date of transition to the IFRS.

Goodwill resulting from business combinations that occurred from 1 January 2004 until 31 December 2009 was accounted under the purchase method. The acquisition cost was measured as the fair value, at the acquisition date, of the assets and equity instruments given and liabilities incurred or assumed plus any costs directly attributable to the acquisition.

Goodwill represents the difference between the cost of acquisition and the fair value of the Group's share of identifiable net assets, liabilities and contingent liabilities acquired.

For acquisitions on or after 1 January 2010, in accordance with IFRS 3 – Business Combinations, the Group measures goodwill as the fair value of the consideration transferred including the fair value of any previously held non-controlling interests in the acquire, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Transaction costs are expensed as incurred.

At the acquisition date, the non-controlling interests are measured at their proportionate interest in the fair value of the net identifiable assets acquired and of the liabilities assumed, without the correspondent portion of goodwill. As a result, the goodwill recognised in these consolidated financial statements corresponds only to the portion attributable to the equity holders of the Bank.

In accordance with IFRS 3 – Business Combinations, goodwill is recognised as an asset at its cost and is not amortised. Goodwill relating to the acquisition of associates is included in the book value of the investment in those associates determined using the equity method. Negative goodwill is recognised directly in the income statement in the period the business combination occurs.

The recoverable amount of the goodwill recognised as an asset is reviewed annually, regardless of whether there is any indication of impairment. Impairment losses are recognised directly in the income statement.

The recoverable amount corresponds to the higher of its fair value less costs to sell and its value in use. In determining value in use, estimated futures cash flows are discounted using a rate that reflects market conditions, time value and business risks.

Transactions with non-controlling interests

Acquisitions of non-controlling interest are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such a transaction. Any difference between the consideration paid and the amount of non-controlling interest acquired is accounted for as a movement in equity.

Similarly, sales of non-controlling interest and dilutions from which does not result a loss of control, are accounted for as transactions with equity holders in their capacity as equity holders and therefore no gain or loss is recognised in the income statement. Any difference between the sale proceeds and the recognised amount of non-controlling interest in the consolidated financial statements is accounted for as a movement in equity.

Gains or losses on a dilution or on sale of a portion of an interest, from which results a loss of control, are accounted for by the Group in the income statement.

Foreign currency translation

The financial statements of each of the Group entities are prepared using their functional currency which is defined as the currency of the primary economic environment in which that entity operates. The consolidated financial statements are prepared in euro, which is BES's functional and presentation currency.

The financial statements of each of the Group entities that have a functional currency different from the euro are translated into euro as follows:

Assets and liabilities are translated into the functional currency using the exchange rate prevailing at the balance sheet date;
Income and expenses are translated into the functional currency at approximate rates of the rates ruling at the dates of the transactions;
The exchange differences resulting from the translation of the equity at the beginning of the period using the exchange rates at the beginning of the period and at the balance sheet date are accounted for against reserves net of deferred taxes. The exchange differences arising from the translation of income and expenses at the rates ruling at the dates of the transactions and at the balance sheet date are accounted for against reserves. When the entity is sold such exchange differences are recognised in the income statement as a part of the gain or loss on sale.

Balances and transactions eliminated in consolidation

Inter-company balances and transactions, including any unrealised gains and losses on transactions between Group companies, are eliminated in preparing the consolidated financial statements, unless unrealised losses provide evidence of an impairment loss that should be recognised in the consolidated financial statements.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment loss.

2.3. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to euro at the foreign exchange rates ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement.

Non-monetary assets and liabilities in a foreign currency that are measured at historical cost are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to euro at the foreign exchange rates ruling at the dates the fair value was determined. The resulting exchange differences are accounted for in the income statement, except if related to equity instruments classified as available-for-sale, which are accounted for in equity, within the fair value reserve.

2.4. Derivative financial instruments and hedge accounting

Classification

Derivatives for risk management purposes includes (i) hedging derivatives and (ii) derivatives used to manage the risk of certain financial assets and financial liabilities designated at fair value through profit or loss that were not classified as being hedging derivatives. All other derivatives are classified as trading derivatives.

Recognition and measurement

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into (trade date). Subsequent to initial recognition, the fair value of derivative financial instruments is re-measured on a regular basis and the resulting gains or losses on re-measurement are recognised directly in the income statement, except for derivatives designated as hedging instruments. The recognition of the resulting gains or losses of the derivatives designated as hedging instruments depends on the nature of the risk being hedged and of the hedge model used.

Fair values are obtained from quoted market prices, in active markets, if available or are determined using valuation techniques, including discounted cash flow models and options pricing models, as appropriate.

Derivatives traded in organised markets, namely futures and some options, are recognised as trading derivatives, being marked to market on a daily basis and the resulting gains or losses are recognised

directly in the income statement. Once the fair value changes on these derivatives are settled daily through the margin accounts held by the Group, these derivatives do not present any fair value on the balance sheet. The margin accounts are included under the caption Other assets (see Note 34) and comprise the minimum collateral mandatory for open positions.

Hedge accounting

Classification criteria

Hedge accounting is used for derivative financial instruments designated as hedging instruments, provided the following criteria are met:

(i) At the inception of the hedge, the hedge relationship is identified and documented, including the identification of the hedged item and of the hedging instrument and the evaluation of the effectiveness of the hedge;
(ii) The hedge is expected to be highly effective, both at the inception of the hedge and on an ongoing basis;
(iii) The effectiveness of the hedge can be reliably measured, both at the inception of the hedge and on an ongoing basis;
(iv) For cash flows hedges, the cash flows are highly probable of occurring.
Fair value hedge

In a fair value hedge, the book value of the hedged asset or liability, determined in accordance with the respective accounting policy, is adjusted to reflect the changes in its fair value that are attributable to the risks being hedged. Changes in the fair value of the derivatives that are designated as hedging instruments are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the risk being hedged.

If the hedge no longer meets the criteria for hedge accounting, the derivative financial instrument is transferred to the trading portfolio and the hedge accounting is discontinued prospectively. The cumulative adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortised to the income statement over the period to maturity.

Cash Flow hedge

When a derivative financial instrument is designated as a hedge of the variability in highly probable future cash flows, the effective portion of changes in the fair value of the hedging derivatives is recognised in equity. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect the income statement. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss recognised in equity at that time is recognised in the income statement when the hedged transaction also affects the income statement. When a hedged transaction is no longer expected to occur, the cumulative gain or loss reported in equity is recognised immediately in the income statement and the hedging instrument is reclassified for the trading portfolio.

Embedded derivatives

Derivatives that are embedded in other financial instruments are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract

and the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement.

2.5. Loans and advances to customers

Loans and advances to customers include loans and advances originated by the Group, which are not intended to be sold in the short term. Loans and advances to customers are recognised when cash is advanced to borrowers.

Loans and advances to customers are derecognised from the balance sheet when (i) the contractual rights to receive their cash flows have expired, (ii) the Group has transferred substantially all risks and rewards of ownership or (iii) although retaining some but not substantially all of the risks and rewards of ownership, the Group has transferred the control over the assets.

Loans and advances to customers are initially recorded at fair value plus transaction costs and are subsequently measured at amortised cost, using the effective interest rate method, less impairment losses.

In accordance with the documented strategy for risk management, the Group contracts derivative financial instruments to manage certain risks of a portion of the loan portfolio, without applying, however, the provisions of hedge accounting as mentioned in Note 2.4. These loans are measured at fair value through profit or loss, in order to eliminate a measurement inconsistency resulting from measuring loans and derivatives for risk management purposes on different basis (accounting mismatch). This procedure is in accordance with the accounting policy for classification, recognition and measurement of financial assets at fair value through profit or loss, as described in Note 2.6.

Impairment

The Group assesses, at each balance sheet date, whether there is objective evidence of impairment within its loan portfolio. Impairment losses identified are recognised in the income statement, and are subsequently reversed through the income statement if, in a subsequent period, the amount of the impairment losses decreases.

A loan or a loan portfolio, defined as a group of loans with similar credit risk characteristics, is impaired when: (i) there is objective evidence of impairment as a result of one or more events that occurred after its initial recognition and (ii) that event (or events) has an impact on the estimated future cash flows of the loan or of the loan portfolio, that can be reliably estimated.

The Group first assesses whether objective evidence of impairment exists individually for each loan. In this assessment the Group uses the information that feeds the credit risk models implemented and takes into consideration the following factors:

the aggregate exposure to the customer and the existence of non-performing loans;
the viability of the customer's business model and its capability to trade successfully and to generate sufficient cash flow to service their debt obligations;
the extent of other creditors' commitments ranking ahead of the Group;
the existence, nature and estimated realisable value of collaterals;
the exposure of the customer within the financial sector;
the amount and timing of expected recoveries.

When loans have been individually assessed and no evidence of loss has been identified, these loans are grouped together on the basis of similar credit risk characteristics for the purpose of evaluating the impairment on a portfolio basis (collective assessment). Loans that are assessed individually and found to be impaired are not included in a collective assessment for impairment.

If an impairment loss is identified on an individual basis, the amount of the impairment loss to be recognised is calculated as the difference between the book value of the loan and the present value of the expected future cash flows (considering the recovery period), discounted at the original effective interest rate. The carrying amount of impaired loans is reduced through the use of an allowance account. If a loan has a variable interest rate, the discount rate for measuring the impairment loss is the current effective interest rate determined under the contract rules.

The changes in the recognised impairment losses attributable to the unwinding of discount are recognised as interest and similar income.

The calculation of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral.

For the purposes of a collective evaluation of impairment, loans are grouped on the basis of similar credit risk characteristics, taking in consideration the Group's credit risk management process. Future cash flows in a group of loans that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the loans in the Group and historical loss experience. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group with the purpose of reducing any differences between loss estimates and actual loss experience.

When a loan is considered by the Group as uncollectible and an impairment loss of 100% was recognised, it is written off against the related allowance for loan impairment.

2.6. Other financial assets

Classification

The Group classifies other financial assets at initial recognition in the following categories:

Financial assets at fair value through profit or loss

This category includes: (i) financial assets held for trading, which are those acquired principally for the purpose of selling in the short term or that are owned as part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking and (ii) financial assets that are designated at fair value through profit or loss at inception.

The Group classifies, at inception, certain financial assets at fair value through profit or loss when:

Such financial assets are managed, measured and their performance evaluated on a fair value basis;
Such financial assets are being hedged (on an economical basis), in order to eliminate an accounting mismatch; or
Such financial assets contain an embedded derivative.

Note 27 include a summary of the assets and liabilities that were classified at fair value trough profit or loss at inception.

The structured products acquired by the Group corresponding to financial instruments containing one or more embedded derivatives meet the above mentioned conditions, and, in accordance, are classified under the fair value through profit or loss category.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold until its maturity and that are not classified, at inception, as at fair value through profit or loss or as available-for-sale.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets (i) intended to be held for an indefinite period of time, (ii) designated as available-for-sale at initial recognition or (iii) that are not classified in the other categories referred to above.

Initial recognition, initial measurement and derecognition

Purchases and sales of: (i) financial assets at fair value through profit or loss, (ii) held-to-maturity investments and (iii) available-for-sale financial assets, are recognised on trade-date – the date on which the Group commits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, in which case these transaction costs are directly recognised in the income statement.

Financial assets are derecognised when (i) the contractual rights to receive their cash flows have expired, (ii) the Group has transferred substantially all risks and rewards of ownership or (iii) although retaining some but not substantially all of the risks and rewards of ownership, the Group has transferred the control over the assets.

Subsequent measurement

Financial assets at fair value through profit or loss are subsequently carried at fair value and gains and losses arising from changes in their fair value are included in the income statement in the period in which they arise.

Available-for-sale financial assets are also subsequently carried at fair value. However, gains and losses arising from changes in their fair value are recognised directly in equity, until the financial assets are derecognised or impaired, at which time the cumulative gain or loss previously recognised in equity is recognised in the income statement. Foreign exchange differences arising from equity investments classified as available-for-sale are also recognised in equity, while foreign exchange differences arising from debt investments are recognised in the income statement. Interest, calculated using the effective interest rate method and dividends are recognised in the income statement.

Held-to-maturity investments are carried at amortised cost using the effective interest rate method, net of any impairment losses recognised. The fair values of quoted investments in active markets are based on current bid prices. For unlisted securities the Group establishes fair value by using (i) valuation techniques, including the use of recent arm's length transactions, discounted cash flow analysis and option pricing models and (ii) valuation assumptions based on market information.

Reclassifications between categories

The Group only reclassifies non-derivative financial assets with fixed or determinable payments and fixed maturities, from the available-for-sale financial assets category to the held-to-maturity investments category, if it has the intention and ability to hold those financial assets until maturity.

Reclassifications between these categories are made at the fair value of the assets reclassified on the date of the reclassification. The difference between this fair value and the respective nominal value is recognised in the income statement until maturity, based on the effective interest rate method. The fair value reserve at the date of the reclassification is also recognised in the income statement, based on the effective interest rate method.

Impairment

The Group assesses periodically whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired if there is objective evidence of impairment as a result of one or more events that occurred after their initial recognition, such as: (i) for equity securities, a significant or prolonged decline in the fair value of the security below its cost, and (ii) for debt securities, when that event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets, that can be reliably estimated.

For held-to-maturity investments, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (considering the recovery period) discounted at the financial asset's original effective interest rate and are recognised in the income statement. The carrying amount of the impaired assets is reduced through the use of an allowance account. If a held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. For held-to-maturity investments if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through the income statement.

If there is objective evidence that an impairment loss on available-for-sale financial assets has been incurred, the cumulative loss recognised in equity – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement – is taken to the income statement. If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the income statement up to the acquisition cost if the increase is objectively related to an event occurring after the impairment loss was recognised, except in relation to equity instruments, in which case the reversal is recognised in equity.

2.7. Sale and repurchase agreements

Securities sold subject to repurchase agreements (repos) at a fixed price or at the sales price plus a lender's return are not derecognised. The corresponding liability is included in amounts due to banks or to customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest rate method.

Securities purchased under agreements to resell (reverse repos) at a fixed price or at the purchase price plus a lender's return are not recognised, being the purchase price paid recorded as loans and advances to banks or customers, as appropriate. The difference between purchase and resale price is

treated as interest and accrued over the life of the agreements using the effective interest rate method.

Securities lent under lending agreements are not derecognised being classified and measured in accordance with the accounting policy described in Note 2.6. Securities borrowed under borrowing agreements are not recognised in the balance sheet.

2.8. Financial liabilities

An instrument is classified as a financial liability when it contains a contractual obligation to transfer cash or another financial asset, independently from its legal form.

Non-derivatives financial liabilities include deposits from banks and due to customers, loans, debt securities, subordinated debt and short sales. Preference shares issued are considered to be financial liabilities when the Group assumes the obligation of reimbursement and/or to pay dividends.

The financial liabilities are recognised (i) initially at fair value less transaction costs and (ii) subsequently at amortised cost, using the effective interest rate method, except for short sales and financial liabilities designated at fair value through profit or loss, which are measured at fair value.

The Group designates, at inception, certain financial liabilities as at fair value through profit or loss when:

Such financial liabilities are being hedged (on an economical basis), in order to eliminate an accounting mismatch; or
Such financial liabilities contain embedded derivatives.

The structured products issued by the Group meet the above mentioned conditions and, in accordance, are classified under the fair value through profit or loss category.

The fair value of quoted financial liabilities is based on the current price. In the absence of a quoted price, the Group establishes the fair value by using valuation techniques based on market information, including the own credit risk of the issuer.

If the Group repurchases debt issued, it is derecognised from the balance sheet and the difference between the carrying amount of the liability and its acquisition cost is recognised in the income statement.

2.9. Financial Guarantees

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument, namely the payment of principal and/or interests.

Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee is issued. Subsequently financial guarantees are measured at the higher of (i) the fair value recognised on initial recognition or (ii) any financial obligation arising as a result of the guarantees at the balance sheet date. Any increase in the liability relating to guarantees is taken to the income statement.

The financial guarantee contracts issued by the Group normally have a stated maturity date and a periodic fee, usually paid in advance on a quarterly basis. This fee varies depending on the counterparty risk, the amount and the time period of the contract. Therefore, the fair value of the financial guarantee contracts issued by the Group, at the inception date, equal the initial fee received, which is recognised in the income statement over the period to which it relates. The subsequent periodic fees are recognised in the income statement in period to which they relate.

2.10. Equity instruments

An instrument is classified as an equity instrument when it does not contain a contractual obligation to deliver cash or another financial asset, independently from its legal form, being a contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Transaction costs directly attributable to the issue of equity instruments are recognised under equity as a deduction from the proceeds. Amounts paid or received related to acquisitions or sales of equity instruments are recognised in equity, net of transaction costs.

Distributions to holders of an equity instrument are debited directly to equity as dividends, when declared.

Preference shares issued are considered as equity instruments if the Group has no contractual obligation to redeem and if dividends, non cumulative, are paid only if and when declared by the Group.

2.11. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.12. Non-current assets held-for-sale

Non-current assets or disposal groups (groups of assets to be disposed of together and related liabilities that include at least a non-current asset) are classified as held for sale when their carrying amounts will be recovered principally through sale (including those acquired exclusively with a view to its subsequent disposal), the assets or disposal groups are available for immediate sale and is highly probable.

Immediately before classification as held for sale, the measurement of the non-current assets or all assets and liabilities in a disposal group, is brought up to date in accordance with the applicable IFRS. Subsquently, these assets or disposal group are measured at the lower of their carrying amount or fair value less costs to sell.

In the scope of its activity, the Group incurs in the risk from failure of the borrower to repay all the amounts due. In case of loans and advances with mortgage collateral, the Group acquires the asset held as collateral in exchange from loans. In accordance with the requirements of Regime Geral das Instituições de Crédito e Sociedades Financeiras (RGICSF), banks are prevented, unless authorised by the Bank of Portugal, from acquiring property that is not essential to their daily operations (no. 1 of article 112 of RGICSF) being able to acquire, however, property in exchange for loans granted by the Group. This property must be sold within 2 years, period that may be extended by written

authorization from the Bank of Portugal and in conditions to be determined by this authority (no. 114 of art of RGICSF).

It is Group's objective to immediately dispose all property acquired in exchange for loans. This property is classified as non-current assets held-for-sale and initially recognised at the lower of its fair value less costs to sell and the carrying amount of the loans. Subsequently, this property is measured at the lower of its carrying amount and the corresponding fair value less costs to sell and is not depreciated. Any subsequent write-down of the acquired property to fair value is recorded in the income statement.

Property valuations are performed in accordance with one of the following methodologies, which are applied in accordance with the specific situation of the asset:

a) Market Method

The Market Comparison Criteria takes as reference transaction values of similar and comparable property to the property under valuation, obtained through market searching carried out in the zone.

b) Income Method

Under this method, the property is valued based on the capitalization of its net income, discounted for the present moment, through the discounted cash-flows method.

c) Cost Method

This method separates the value of property on its basic components: Urbane Ground Value and Urbanity Value; Construction value; and Indirect Costs Value.

The valuations are performed by independent specialized entities. The valuation reports are analysed internally with the gauging of processes adequacy, by comparing the sales values with the reevaluated values.

2.13. Property and equipment

Property and equipment are measured at cost less accumulated depreciation and impairment losses. The value includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group. All other repairs and maintenance are charged to the income statement during the period in which they are incurred.

Land is not depreciated. Depreciation of other assets is calculated using the straight-line method over their estimated useful lives, as follows:

	Number of years
Buildings	35 to 50
Improvements in leasehold property	10
Computer equipment	4 to 5
Furniture	4 to 10
Fixtures	5 to 10
Security equipment	4 to 10
Office equipment	4 to 10
Motor vehicles	4
Other equipment	5

When there is an indication that an asset may be impaired, IAS 36 requires that its recoverable amount is estimated and an impairment loss recognised when the net book value of the asset exceeds its recoverable amount. Impairment losses are recognised in the income statement.

The recoverable amount is determined as the greater of its net selling price and value in use which is based on the net present value of future cash flows arising from the continuing use and ultimate disposal of the asset.

2.14. Intangible assets

The costs incurred with the acquisition, production and development of software are capitalised, as well as the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis during their expected useful lives, which is usually between three to six years.

Costs that are directly associated with the development of identifiable specific software applications and that will probably generate economic benefits beyond one year, are recognised as intangible assets. These costs include employee costs from the Group companies specialised in IT directly associated with the development of the referred software.

All remaining costs associated with IT services are recognised as an expense as incurred.

2.15. Leases

The Group classifies its lease agreements as finance leases or operating leases taking into consideration the substance of the transaction rather than its legal form, in accordance with IAS 17 – Leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases.

Operating leases

Payments made under operating leases are charged to the income statement in the period to which they relate.

Finance leases

As lessee

Finance lease contracts are recorded at inception date, both under assets and liabilities, at the cost of the asset leased, which is equal to the present value of outstanding lease instalments. Instalments comprise (i) an interest charge, which is recognised in the income statement and (ii) the repayment of principal, which is deducted from liabilities. Financial charges are recognised as costs over the lease period, in order to produce a constant periodic rate of interest on the remaining balance of liability for each period.

As lessor

Assets leased out are recorded in the balance sheet as loans granted, for the amount equal to the net investment made in the leased assets.

Interest included in instalments charged to customers is recorded as interest income, while repayments of principal also included in the instalments, is deducted from the amount of the loans granted. The recognition of the interest reflects a constant periodic rate of return on the lessor's net outstanding investment.

2.16. Employee benefits

Pensions

Arising from the signing of the "Acordo Colectivo de Trabalho" (ACT) and subsequent amendments resulting from the 3 tripartite agreements as described in Note 13, the Bank and other Group entities set up pension funds and other mechanisms to cover the liabilities with pensions on retirement and disability, widows' pension and health-care benefits.

The pension liabilities and health care benefits are covered by funds that are managed by ESAF – Espírito Santo Fundos de Pensões, S.A., a Group's subsidiary.

The pension plans of the Group are classified as defined benefit plans, since the criteria to determine the pension benefit to be received by employees on retirement are predefined and usually depend on factors such as age, years of service and level of salary.

In the light of IFRS 1 and until 2011, the Group decided to adopt, at transition date (1 January 2004), IAS 19 retrospectively and has recalculated the pension and other post-retirement benefits obligations and the corresponding actuarial gains and losses, to be deferred in accordance with the corridor method allowed by this accounting standard. In December 2011, as described in Note 16, the Group changed retrospectively the accounting policy related to actuarial gains and losses recognition, adjusting the opening balance sheet and comparative values, starting to recognise, as allowed under paragraph 93A of IAS 19 "Employee Benefits", the actuarial deviations under other comprehensive income.

The liability with pensions is calculated semi-annually by the Group, as at 31 December and 30 June for each plan individually, using the projected unit credit method, and is reviewed annually by qualified independent actuaries. The discount rate used in this calculation is determined based on market rates of emissions associated with high quality corporate bonds, denominated in the currency in which benefits will be paid and with a similar maturity to the date of termination of the plan.

The expected return on plan assets is based on the long term expected return for each asset class within the portfolio of the pension funds and takes in consideration the investment strategy determined for the funds.

Actuarial gains and losses determined semi-annually and resulting from (i) the differences between financial and actuarial assumptions used and real values obtained and (ii) the changes in actuarial assumptions, are recognised under share capital in the balance other comprehensive income.

At each period, the Group recognises as a cost in the income statement a net total amount that comprises (i) the service cost, (ii) the interest cost, (iii) the expected return on plan assets, (iv) effect early retirement, and (v) effect of settlement or curtailment occurred during the period. Early retirement costs corresponds to an increase on the liabilities due to the fact the employee retires before reaching 65 years of age.

Past service costs (and negative past service costs) are recognised in the income statement, on a straight line basis, over the vesting period. To the extent that the benefits vest immediately on the date of the introduction of, or change to, the pension plan, past service costs (and negative past service costs) are recognised in the income statement immediately.

The Group makes payments to the funds in order to maintain its solvency and to comply with the following minimum levels: (i) the liability with pensioners shall be totally funded at the end of each

year, and (ii) the liability related to past services cost with employees in service shall be funded at a minimum level of 95%.

Semiannually, the Group assesses for each plan separately, the recoverability of any recognised asset in relation to the defined benefit pension plans, based on the expectation of reductions in future contributions to the funds.

Health care benefits

The Group provides to its banking employees health care benefits through a specific Social-Medical Assistance Service. This Social-Medical Assistance Service (SAMS) is an autonomous entity which is managed by the respective Union.

SAMS provides to its beneficiaries services and/or contributions on medical assistance expenses, diagnostics, medicines, hospital confinement and surgical operations, in accordance with its financing availability and internal regulations.

The annual contribution of the Group to SAMS amounts to 6.5% of the total annual remuneration of employees, including, among others, the holiday and Christmas subsidy.

The measurement and recognition of the Group's liability with post-retirement healthcare benefits is similar to the measurement and recognition of the pension liability described above. These benefits are covered by the Pension Fund which at present covers all responsibilities with pensions and health care benefits.

Long-term service benefits

In accordance with the ACT "Acordo Colectivo de Trabalho" for the banking sector, the Group has assumed the commitment to pay to current employees that achieve 15, 25 and 30 years of service within the Group, long-term service premiums corresponding, respectively, to 1, 2 and 3 months of their effective monthly remuneration earned at the date the premiums are paid.

At the date of early retirement or disability, employees have the right to a premium proportional to what they would earn if they remained in service until the next payment date.

These long-term service benefits are accounted for by the Group in accordance with IAS 19 as other long-term employee benefits.

The liability with long-term service benefits is calculated semi-annually, at the balance sheet date, by the Group using the projected unit credit method. The actuarial assumptions used are based on the expectations about future salary increases and mortality tables. The discount rate used in this calculation was determined based on the same methodology described for pensions.

In each period the increase in the liability for long-term service premiums, including actuarial gains and losses and past service costs is charged to the income statement.

Variable remuneration payment plan on financial instruments (PRVIF)

Following the recommendations of the Supervising and Regulatory authorities, on the shareholders General Meeting, held in 6 April 2010 it was approved a new remuneration policy for the Executive Committee members. This policy consists in giving to the Executive Committee members a fixed remuneration, which should represent approximately 45% of the total remuneration, and a variable component representing around 55% of the total remuneration. The variable remuneration shall have

two components: one associated with short-term performance and another with medium-term performance. Half of the short-term component must be paid in cash and the remaining 50% should be paid over a three years period, with half of these payments to be made in cash and the remaining through the attribution of shares. The medium-term component has associated a share options program with the exercise of the options set at 3 years from the date of its attribution.

The execution of PRVIF regarding the total remunerations in cash, number of shares and options attributable to each Executive Committee member will be determined by the Remuneration Committee.

Regarding the first scheme, the attribution of PRVIF shares to the beneficiaries is performed on a deferred basis over a period of three years ( 1st year: 33%; 2nd year: 33% and 3rd year: 34%) and is subject to the achievement of a Return on Equity (ROE) greater than or equal to 5%.

Regarding the attribution of options to the beneficiaries is also performed by the Remuneration Committee, and the exercise price is equal to the single average of the closing prices of BES shares on NYSE Euronext Lisbon during the 20 days preceding the day of attribution of the options, plus 10%. The option can only be exercised at maturity and the beneficiary may choose between the physical settlement or the financial settlement of the options.

PRVIF provides for the granting of options on BES shares to the Bank Top Management. The options are granted by the Board of Directors to the beneficiaries in identical terms to those explained above for the attribution of options to the members of the Executive Committee.

PRVIF is accounted for under IFRS rules (IFRS 2 and IAS 19).

Bonus to employees and to the Board of Directors

In accordance with IAS 19 Employee benefits, the bonus payment to employees and to the Board of Directors is recognised in the income statement in the period to which they relate.

2.17. Income tax

Income tax for the period comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Income tax recognised directly in equity relating to fair value remeasurement of available-for-sale financial assets and cash flow hedges is subsequently recognised in the income statement when gains or losses giving rise to the income tax are also recognised in the income statement.

Current tax is the tax expected to be paid on the taxable profit for the period, calculated using tax rates enacted or substantively enacted at the balance sheet date at each jurisdiction.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax basis, and is calculated using the tax rates enacted or substantively enacted at the balance sheet date in any jurisdiction and that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax liabilities are recognised for all taxable temporary differences except for goodwill, not deductible for tax purposes, differences arising on initial recognition of assets and liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that probably they will not reverse in the foreseeable future. Deferred tax assets are

recognised to the extent it is probable that future taxable profits will be available against which deductible temporary differences can be deducted.

The Group offsets deferred taxes assets and liabilities for each subsidiary, whenever (i) the subsidiary has a legally enforceable right to set off current tax assets against current tax liabilities, and (ii) they relate to income taxes levied by the same taxation authority. This offset is therefore performed at each subsidiary level, being the deferred tax asset presented in the consolidated balance sheet the sum of the subsidiaries' amounts which present deferred tax assets and the deferred tax liability presented in the consolidated balance sheet the sum of the subsidiaries' amounts which present deferred tax liabilities.

2.18. Provisions

Provisions are recognised when: (i) the Group has present legal or constructive obligation, (ii) it is probable that settlement will be required in the future and (iii) a reliable estimate of the obligation can be made.

When the effect of the passage of time (discount) is material, the provision corresponds to the net present value of the expected future payments, discounted at an appropriate rate considering the risk associated to the obligation.

Restructuring provisions are recognised when the Group has approved a detailed and formal restructuring plan and such restructuring either has commenced or has been announced publicly.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligation under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net costs of continuing with the contract.

2.19. Interest income and expense

Interest income and expense are recognised in the income statement under interest and similar income and interest expense and similar charges for all non-derivative financial instruments measured at amortised cost and for the available-for-sale financial assets, using the effective interest rate method. Interest income arising from non-derivative financial assets and liabilities at fair value through profit or loss is also included under interest and similar income or interest expense and similar charges, respectively.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. The effective interest rate is calculated at inception and it is not subsequently revised, except in what concerns financial assets and liabilities with a variable interest rate. In this case the effective interest rate is periodically revised, having in consideration the impact of the change in the reference interest rate in the estimated future cash-flows.

When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and commissions paid or received that

are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. In the case of financial assets or groups of similar financial assets for which an impairment loss was recognised, interest income is calculated using the interest rate used to measure the impairment loss.

For derivative financial instruments, except for derivatives for risk management purposes (see Note 2.4), the interest component of the changes in their fair value is not separated out and is classified under net gains/(losses) from financial assets and financial liabilities at fair value through profit or loss. The interest component of the changes in the fair value of derivatives for risk management purposes is recognised under interest and similar income or interest expense and similar charges.

2.20. Fee and commission income

Fees and commissions are recognised as follows:

Fees and commissions that are earned on the execution of a significant act, as loan syndication fees, are recognised as income when the significant act has been completed;
Fees and commissions earned over the period in which the services are provided are recognised as income in the period the services are provided;
Fees and commissions that are an integral part of the effective interest rate of a financial instrument are recognised as income using the effective interest rate method.

2.21. Dividend income

Dividend income is recognised when the right to receive payment is established.

2.22. Segmental reporting

The Group adopted IFRS 8 – Segmental reporting, for the disclosure of the financial information by operating segments (see Note 4).

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.

The results of the operating segments are periodically reviewed by the Management for decisions taking purposes. The Group prepares on a regular basis, financial information regarding the operating segments, which is reported to the Management.

A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments.

2.23. Earnings per share

Basic earnings per share is calculated by dividing net income available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding the average number of ordinary shares purchased by the Group and held as treasury stock.

For the diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to assume conversion of all dilutive potential ordinary shares, such as convertible debt and share options granted to employees. Potential or contingent share issuances are treated as dilutive when their conversion to shares would decrease net earnings per share.

2.24. Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months' maturity from the inception date, including cash, deposits with banks and deposits at Central Banks.

Cash and cash equivalents exclude restricted balances with central banks.

2.25. Investment properties

The Group classifies as investment property the property held to earn rentals or for capital appreciation or both. Investment property is recognised initially at cost, including transaction costs that are directly attributable expenditures, and subsequently at their fair value. Changes in the fair value determined at each balance sheet date are recognised in the income statement. Investment property is not amortised.

Subsequent expenditure is capitalised only when it is probable that it will give rise to future economic benefits in excess of the originally assessed standard of performance of the asset.

2.26. Insurance contracts

The Group issues contracts that contain insurance risk, financial risk or a combination of both insurance and financial risk. A contract, under which the Group accepts significant insurance risk from another party, by agreeing to compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract.

A contract issued by the Group without significant insurance risk, but on which financial risk is transferred with discretionary participating features is classified as investment contract recognised and measured in accordance with the accounting policies applicable to insurance contracts (IFRS 4). A contract issued by the Group that transfers only financial risk, without discretionary participating features, is classified as an investment contract and accounted for as a financial instrument (IAS 39).

The financial assets held by the Group to cover the liabilities arising under insurance and investment contracts are classified and accounted for in the same way as other Group financial assets.

Insurance contracts and investment contracts with discretionary participating features are recognised and measured as follows:

Premiums

Gross written premiums are recognised for as income in the period to which they respect, in accordance with the accrual accounting principle. Reinsurance premiums ceded are accounted for as expense in the period to which they respect in the same way as gross written premiums.

Unearned premium reserve

The reserve for unearned gross written premiums and reinsurance ceded premiums reflects the part of the written premiums before the end of the period for which the risk period continues after the end of the period. This reserve is calculated using the pro-rata temporis method applied to each contract in force.

Acquisition costs

Acquisition costs that are directly or indirectly related to the selling of insurance and investment contracts with discretionary participating features are capitalized and deferred through the life of the contracts. Deferred acquisition costs are subject to recoverability testing at the time of the insurance policy or investment contract is issued and subject to impairment test (liability adequacy test) at each reporting date.

Claims reserves

Claims outstanding reflects the estimated total outstanding liability for reported claims and for incurred but not reported claims (IBNR). Reserves for both reported and not reported claims are estimated by management based on experience and available data using statistical methods. Claims reserves are not discounted.

Life assurance reserve

The life assurance reserve reflects the present value of the Group's future obligations arising from life policies (insurance contracts and investment contracts with discretionary participating features) written and is calculated in accordance with recognised actuarial methods within the scope of applicable legislation.

Reserve for bonus and rebates

The reserve for bonus and rebates corresponds to the amounts attributed to policyholders or beneficiaries of insurance or investment contracts, in the form of profit participation, which have not yet been specifically allocated and included in the life assurance reserve.

Shadow accounting

In accordance with IFRS 4, the unrealised gains and losses on the assets covering liabilities arising out from insurance and investment contracts with discretionary participating features are attributable to policyholders, to the extent that it is expected that policyholders will participate on those unrealised gains and losses when they became realised in accordance with the terms of the contracts and applicable legislation, by recording those amounts under liabilities.

Liability adequacy test

At each reporting date, the Group performs a liability adequacy test to the insurance and investment contracts with discretionary participating features liabilities. The assessment of the liabilities is performed using the best estimate of future cash flows under each contract, discounted at a risk free rate. The liability adequacy test is performed product by product or aggregate basis when contracts are subject to broadly similar risks and managed as a single portfolio. Any deficiency determined, if exists, is recognised directly through income.

Unearned premium reserve

NOTE 3 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

IFRS set forth a range of accounting treatments and require management to apply judgement and make estimates in deciding which treatment is most appropriate. The most significant of these accounting policies, are discussed in this section in order to improve understanding of how their application affects the Group's reported results and related disclosure. A broader description of the accounting policies applied by the Group is shown in Note 2 to the Consolidated Financial Statements.

Because in many cases there are other alternatives to the accounting treatment chosen by management, the Group's reported results would differ if a different treatment were chosen. Management believes that the choices made are appropriate and that the financial statements present the Group's financial position and results fairly in all material aspects.

3.1. Impairment of available-for-sale financial assets

The Group determines that available-for-sale financial assets are impaired when there has been a significant or prolonged decline in the fair value below its cost or when it has identified an event with impact on the estimated future cash flows of the assets. This determination requires judgement based on all available relevant information, including the normal volatility of the financial instruments prices. Considering the high volatility of the markets, the Group has considered the following parameters when assessing the existence of impairment losses:

(i) Equity securities: significant decline in market value in relation to the acquisition cost or market value below the acquisition cost for a prolonged period;

(ii) Debt securities: objective evidence of events that have an impact on the estimated future cash flows of these assets.

In addition, valuations are generally obtained through market quotation or valuation models that may require assumptions or judgement in making estimates of fair value.

Alternative methodologies and the use of different assumptions and estimates could result in a higher level of impairment losses recognised with a consequent impact in the income statement of the Group.

3.2. Fair value of derivatives and other assets and liabilities at fair value

Fair values are based on listed market prices if available; otherwise fair value is determined either by dealer price quotations (both for that transaction or for similar instruments traded) or by pricing models, based on net present value of estimated future cash flows which take into account market conditions for the underlying instruments, time value, yield curve and volatility factors. These pricing models may require assumptions or judgements in estimating fair values.

Consequently, the use of a different model or different assumptions or judgements in applying a particular model may have produced different financial results from the ones reported.

3.3. Impairment losses on loans and advances

The Group reviews its loan portfolios to assess impairment on a regular basis, as described in Note 2.5.

The evaluation process in determining whether an impairment loss should be recorded in the income statement is subject to numerous estimates and judgements. The frequency of default, risk ratings, loss recovery rates and the estimation of both the amount and timing of future cash flows, among other factors, are considered in making this evaluation.

Alternative methodologies and the use of different assumptions and estimates could result in a different level of impairment losses with a consequent impact in the consolidated income statement of the Group.

3.4. Goodwill impairment

Goodwill recoverable amount recognised as an asset of the Group is revised annually regardless the existence of impairment losses.

For this purpose, the carrying amount of the business units of the Group for which goodwill has been recognised is compared with the respective recoverable amount. A goodwill impairment loss is recognised when the carrying amount of the business unit exceeds the respective recoverable amount.

In the absence of an available market value, the recoverable amount is determined using cash flows/ dividends predictions, applying a discount rate that includes a risk premium appropriated to the business unit being tested.

Changes in the expected cash flows and in the discount rate may lead to different conclusions from those that led to the preparation of these financial statements.

3.5. Securitisations and special purpose entities (SPE)

The Group sponsors the formation of special purpose entities (SPEs) primarily for asset securitisation transactions.

The Group does not consolidate SPEs that it does not control. As it can sometimes be difficult to determine whether the Group does control an SPE, it makes judgements about its exposure to the risks and rewards, as well as about its ability to make operational decisions for the SPE in question (see Note 2.2).

The determination of the SPEs that needs to be consolidated by the Group requires the use of estimates and assumptions in determining the respective expected residual gains and losses and which party retains the majority of such residual gains and losses. Different estimates and assumptions could lead the Group to a different scope of consolidation with a direct impact in net income.

3.6. Held-to-maturity investments

The Group follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement.

In making this judgement, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value instead of amortised cost.

Held-to-maturity investments are subject to impairment tests made by the Group. The use of different assumptions and estimates could have an impact on the income statement of the Group.

3.7. Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant interpretations and estimates are required in determining the worldwide amount for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

Different interpretations and estimates would result in a different level of income taxes, current and deferred, recognised in the period.

The Tax Authorities are entitled to review the Bank and its subsidiaries located in Portugal's determination of annual taxable earnings, for a period of four years or six years in case there are tax losses brought forward. Hence, it is possible that some additional taxes may be assessed, mainly as a result of differences in interpretation of the tax law. However, the Board of Directors of the Bank, and those of its subsidiaries, are confident that there will be no material tax assessments within the context of the financial statements.

3.8. Pension and other employees' benefits

Determining pension liabilities requires the use of assumptions and estimates, including the use of actuarial projections, estimated returns on investment, and other factors that could impact the cost and liability of the pension plan.

Changes in these assumptions could materially affect these values.

3.9. Insurance and investment contracts liabilities

Insurance and investment contracts liabilities represent liabilities for future insurance policy benefits. Insurance reserves for traditional life insurance, annuities, and workmen's compensation policies have been calculated based upon mortality, morbidity, persistency and interest rate assumptions applicable to those coverages. The assumptions used reflect the Groups' and market experience and may be revised if it is determined that future experience will differ substantially from that previously assumed. Insurance and investment contracts liabilities include: (i) life mathematical reserve, (ii) reserve for bonus and rebates, (iii) claims reserves, (iv) unexpired risk reserve and (v) unearned premiums reserve. Claims reserves include estimated provisions for both reported and unreported claims incurred and related expenses.

When claims are made by or against policyholders, any amounts that the Group pays or expects to pay are recorded as losses. The Group establishes reserves for payment of losses for claims that arise from its insurance and investment contracts.

In determining their insurance reserves and investment contracts liabilities, the Group's insurance companies perform a continuing review of their overall positions, their reserving techniques and their reinsurance coverage. The reserves are also reviewed periodically by qualified actuaries.

The Group maintains property and casualty loss reserves to cover the estimated ultimate unpaid liability for losses with respect to both reported and not reported claims incurred as of the end of each accounting year.

Claims reserves do not represent an exact calculation of liability, but instead represent estimates, generally using actuarial valuations/techniques. These reserve estimates are expectations of what the ultimate settlement of claims is likely to cost based on an assessment of facts and circumstances then known, a review of historical settlement patterns, estimates of trends in claims severity, frequency, legal theories of liability and other factors. Variables in the reserve estimation process can be affected by both internal and external events, such as changes in claims handling procedures, economic inflation, legal trends and legislative changes. Many of these items are not directly quantifiable, particularly on a prospective basis. Additionally, there may be significant reporting lags between the occurrence of the insured event and the time it is actually reported to the insurer. Reserve estimates are continually reviewed in a regular ongoing process as historical loss experience develops and additional claims are reported and settled.

NOTE 4 – SEGMENT REPORTING

BES Group activities are focused on the financial sector and are directed to companies, institutionals and private customers. The Group's decision centre is in Portugal, which makes it its privileged market. The historical link with Brazil and Africa, the globalization of the Portuguese companies and the Portuguese emigration to several countries, led to an internationalisation of the Group, which already has an international structure contributing significantly to the Group's activities and results.

The Group's products and services includes deposits, loans to retail and corporate customers, fund management, broker and custodian services, investment banking services and the commercialization of life and non-life insurance products. Additionally, the Group makes short, medium and long term investments in the financial and currency exchange markets with the objective of taking advantages from the prices changes or to have a return from its available resources.

The Group has BES as its main operating unit - with 636 branches in Portugal and with branches in London, New York, Spain (25 branches), Nassau, Cayman Islands, Cape Verde, Venezuela, Luxembourg and Madeira Free Zone and 15 representation offices – with BES Investmento (investment banking); BES Angola (41 branches); BES Açores (18 branches); Banco BEST (11 branches); Espírito Santo Bank; BES Oriente; Aman Bank; BES Vénétie; Espírito Santo Activos Financeiros (ESAF); BES Seguros (non life insurance) and BES Vida, among other companies.

When evaluating the performance by business area, the Group considers the following Operating Segments: (1) Domestic Commercial Banking, including Retail, Corporate, Institutional and Private Banking; (2) International Commercial Banking; (3) Investment Banking; (4) Asset Management; (5) Life insurance; (6) Capital Markets and Strategic Investments; and (7) Corporative Centre. Each segment includes the BES structures that directly or indirectly relate to it, and also the other units of the Group whose activities are most related to one of these segments. In addition to the individual evaluation of each operating unit of the Group (considered as an investment centre), the Executive Committee defines strategies, commercial programs and performance evaluation for each operating segment.

Complementary, the Group uses a second segmentation of its activities and results according to geographic criteria, segregating the activity and the results generated from the units located in Portugal (domestic activities) from the units located abroad (international activities).

4.1. Operating Segments Description

Each of the operating segments includes the following activities, products, customers and Group structures:

Domestic Commercial Banking

This operating segment includes all the banking activity with corporate and institutional customers developed in Portugal, based in the branch offices network, corporate centres and other channels and includes the following:

a) Retail: corresponds to all activity developed by BES in Portugal with private customers and small businesses, fundamentally originated by the branches network, agent network and electronic channels. The financial information of the segment relates to, among other products and services, mortgage loans, consumer credit, financing the clients' activity, deposits repayable on demand and term deposits, retirement plans and other insurance

products to private customers, commissions over account management and electronic payments, the investment funds cross-selling and brokerage and custodian services.

b) Corporate and Institutional: includes BES activities in Portugal with small, medium and large companies, through its commercial structure dedicated to this segment, which includes 24 corporate centres. Also includes activities with institutional and municipal customers. The main products considered on this segment are: discounted bills, leasing, factoring and short and long term loans; includes deposits and guarantees, custodian services, letters of credit, electronic payments management and other services.
c) Private Banking: includes private banking activity of BES, all profit, loss and assets and liabilities associated to customers classified as private by BES. The main products considered on this segment are: deposits; discretionary management, selling of investment funds, custodian services, brokerage services and insurance products.

International Commercial Banking

This operating segment includes the units located abroad, which banking activities are focused on corporate and retail customers, excluding investment banking and asset management, which are integrated in the corresponding segments.

Among the units comprising this segment are BES Angola and Spain, London, New York, Cape Verde, Luxembourg and Venezuela branches. The main products included in this segment are deposits, credit, leveraged finance, structured trade finance and project finance operations. This segment, in the context of the funding strategy, has been assuming a relevant role, mainly within institutional customers.

Investment Banking

Includes assets, liabilities, profits and losses of the operating units that consolidate in BES Investimento, which comprises all the investment banking activities of the Group originated in Portugal and abroad. In addition to the lending activity, deposits and other forms of funding, it includes Project Finance advisory services, mergers and acquisitions, restructuring and debt consolidation, initial public offerings (shares and bonds), brokerage and other investment banking services.

Asset Management

This segment includes the asset management activities developed by ESAF in Portugal and abroad (Spain, Brazil, Angola e Luxembourg). ESAF's products includes all types of funds - investment funds, real estate funds and pension funds, and also includes discretionary management services and portfolio management.

Life Insurance

This segment includes the activities of BES-Vida, through the sale of traditional and investment insurances and retirement plans to BES customers.

Capital Markets and strategic investments

This segment includes the financial management of the Group, namely the investments in capital markets instruments (equity and debt), whether they are integrated in trading, fair value, available for sale or held to maturity financial assets portfolios. Also included in this segment is the Group's investment in non-controlling strategic positions, as well as all the activity inherent to interest rate and exchange rate risk management, long and short positions on financial instruments management,

which allow the Group to take advantage of the price changes in those markets where these instruments are exchanged.

Corporative centre

This area does not correspond to an operating segment. It refers to an aggregation of corporative structures acting throughout the entire Group, such as, areas related to the Board of Directors, Compliance, Planning, Financial and Accounting, Risk management, Investor Relations, Internal Audit, Organization and Quality, among others.

4.2. Allocation criteria of the activity and results to the operating segments

The financial information presented for each segment was prepared in accordance with the criteria followed for the preparation of internal information analysed by the decision makers of the Group, as required by IFRS.

The accounting policies applied in the preparation of the financial information related with the operating segments are consistent with the ones used in the preparation of these consolidated financial statements, which are described in Note 2, being also adopted the following principles:

Measurement of profit or loss from operating segments

The Group uses net income before taxes as the measure of profit or loss for evaluating the performance of each operating segment.

Autonomous Operating Segments

As mentioned above, each operating unit (branches abroad, affiliated and associated entities) is evaluated separately, as these units are considered investment centres. Additionally, considering the characteristics of the business developed by these units, they are fully included in one of the operating segments, assets, liabilities, equity, income and expenses.

BES structures dedicated to segments

BES activity comprises most of its operating segments and therefore its activity is disaggregated.

For the purpose of allocating the financial information, the following principles are used: (i) the origin of the operation, i.e., the operation is allocated to the same segment as the commercial structure that originated it, even though, in a subsequent phase, the group makes a strategic decision in order to securitize some of these originated assets; (ii) the allocation of a commercial margin to mass-products, established in a high level when the products are launched; (iii) the allocation of a margin directly negotiated by the commercial structures with the clients for non-mass-products; (iv) the allocation of direct costs from commercial and central structures dedicated to the segment; (v) the allocation of indirect cost (central support and IT services) determined in accordance with specific drivers and with the Cost Based Approach (CBA) model; (vi) the allocation of credit risk determined in accordance with the impairment model; (vii) the allocation of the Bank total equity to the capital markets and strategic investments segment.

The transactions between the independent and autonomous units of the Group are made at market prices; the price of the services between the structures of each unit, namely the price established for funding between units, is determined by the margins process referred above (which vary in accordance with the strategic relevance of the product and the balance between funding and lending); the remaining internal transactions are allocated to the segments in accordance with CBA without any

margin from the supplier; the strategic decisions and/ or of exceptional nature are analysed on a case by case basis, being the income and/ or costs generally allocated to the capital markets and strategic investments segment.

The interest rate risk, exchange risk, liquidity risk and others, except for credit risk, are included in the Financial Department, whose mission is to make the Bank's financial management. The related activity and results are included in Capital Markets and Strategic Investments segment.

Interest and similar income/expense

Since the Group's activities are exclusively related to the financial sector, the major income results from the difference between interest received on assets and interest paid from liabilities. This situation and the fact that the segments evaluation is based on negotiated margins or determined previously to each product, leads to the results on the intermediation activity being presented, as permitted by IFRS 8 paragraph 23, as the net value of interest under the designation of Financial Income.

Consolidated Investments under the Equity Method

Investments in associated companies consolidated under the equity method are included in Capital Markets and Strategic Investments segment, in case of BES associates. For other companies of the Group, the same entities are included in the segment they relate to.

Non current assets

Non current assets, according to IFRS 8, include Other Tangible Assets and Intangible Assets. BES includes these assets on the Capital Markets and Strategic Investments segment; the non current assets held by the subsidiaries are allocated to the segment in which these subsidiaries develop their business.

Income taxes

Income tax is a part of the Group net income but does not affect the evaluation of most of the Operating Segments. Deferred tax assets and liabilities are included in the Capital Markets and Strategic Investments segment.

Post Employment Benefits

Assets under post employment benefits are managed in a similar way to deferred income taxes assets, and are included in the Capital Markets and Strategic Investments segment. The factors that influence the amount of responsibilities and the amount of the funds assets correspond, mainly, to external elements; it is Group's policy not to include these factors on the performance evaluation of the operating segments, which activities relate to customers.

Domestic and International Areas

In the disclosure of financial information by geographical areas, the operating units that integrate the International Area are: BES Angola and its branches, BES África, Aman Bank, BES Oriente, Espírito Santo Bank, BES Cape Verde; Espírito Santo Vénétie, Banco Delle Tre Venezie, Moza Bank, Ijar Leasing Argélie and the branches in London, Spain, New York, Cape Verde, Venezuela and Luxembourg and the operating units located abroad from BES Investimento and ESAF.

The financial elements related to the international area are presented in the financial statements of those units with the respective consolidation and elimination adjustments.

The primary segments reporting are presented as follows:

										(in thousands of euro)
					31.12.2012
	Retail	Corporate and Institutional	Private banking	International commercial banking	Investment banking	Asset management	Insurance	Capital markets and strategic investments	Corporative centre	Total
Net interest income	397 594	196 006	92 834	300 543	94 844	3 01 5	1 1 5 902	( 20 230)	-	1 1 80 508
Other operating income	244 968	276 208	27 098	271 979	1 64 289	61 727	1 23 555	281 81 8	-	1 451 642
Total operating income	642 562	472 21 4	11 9 932	572 522	259 1 33	64 742	239 457	261 588	-	2 632 1 50
Operating expenses	482 861	702 036	20 421	446 406	222 262	20 796	8 81 6	282 072	1 62 837	2 348 507
Includes:
Provisions/Impairment	74 51 3	640 964	2 429	205 524	46 205	3 1 1 9	41 8	226 258	-	1 1 99 430
Gains on disposal of investments in subsidiaries and associates	-	-	-	-	2 503	-	-	( 2 1 20)	-	383
Gains arising on business combinations achieved in stages	-	-	-	-	-	-	-	( 89 586)	-	( 89 586)
Share of profit of associates	-	-	-	272	336	-	-	7 704	-	8 312
Profit before income tax and non-controlling interests	1 59 701	( 229 822)	99 51 1	1 26 388	39 71 0	43 946	230 641	( 1 04 486)	( 1 62 837)	202 752
Intersegment operating income	4 799	31 248	1 1	87 861	( 1 3 361 )	( 1 3 921 )	( 953)	( 66 720)	-	28 964
Total Net Assets	15 633 394	23 032 898	1 491 100	22 096 488	6 484 489	1 89 948	6 657 573	8 1 04 938	-	83 690 828
Total Liabilities	15 542 145	23 032 898	1 491 149	20 607 324	5 745 347	23 622	6 385 553	3 1 30 046	-	75 958 084
Investments in associates	-	-	-	8 539	57 456	-	-	51 4 987	-	580 982

										(in thousands of euro)
					31.12.2011
	Retail	Corporate and Institutional	Private banking	International commercial banking	Investment banking	Asset management	Insurance	Capital markets and strategic investments	Corporative centre	Total
Net interest income	347 682	161 543	60 91 8	471 289	76 858	2 359	-	60 942	-	1 1 81 591
Other operating income	227 1 24	267 504	25 066	92 303	1 56 561	49 1 03	-	93 944	-	911 605
Total operating income	574 806	429 047	85 984	563 592	233 41 9	51 462	-	1 54 886	-	2 093 1 96
Operating expenses	489 709	355 31 6	1 9 1 1 2	304 043	222 795	1 8 491	-	399 681	1 68 336	1 977 483
Includes:
Provisions/Impairment	67 382	290 378	( 270)	102 005	44 187	( 950)	-	345 596	-	848 328
Gains on disposal of investments in subsidiaries and associates	-	-	-	-	-	1 305	-	490	-	1 795
Share of profit of associates	-	-	-	64	4 753	-	-	( 1 80 048)	-	( 1 75 231 )
Profit before income tax and non-controlling interests	85 097	73 731	66 872	259 61 3	1 5 377	34 276	-	( 424 353)	( 1 68 336)	( 57 723)
Intersegment operating income	4 1 69	33 844	32	( 1 1 5 220)	( 1 0 1 06)	( 1 8 900)	-	1 73 652	-	67 471
Total Net Assets	17 092 934	22 91 0 839	2 341 794	1 8 890 876	6 578 61 2	1 73 869	-	1 2 248 448	-	80 237 372
Total Liabilities	17 016 100	22 91 0 839	2 341 835	1 7 483 049	5 938 31 4	30 006	-	8 324 754	-	74 044 897
Investments in associates	-	-	-	-	51 980	-	-	755 01 9	-	806 999

The secondary segment information is prepared in accordance with the geographical distribution of the Group's business units, as follows:

											(in thousands of euro)
						31 .1 2.201 2
	Portugal	Spain	France / Luxembourg	United Kingdom	United States of America	Brazil	Angola	Cape Verde	Macao	Other	Total
Net profit for the year	8 41 6	1 5 825	6 293	1 9 232	5 868	1 1 088	31 680	1 756	3 982	( 8 039)	96 1 01
Net assets	59 1 75 822	4 652 643	464 238	5 944 423	1 393 230	2 439 976	7 970 699	208 048	446 385	995 364	83 690 828
Capital expenditure (Property and equipment)	9 929	2 939	976	388	44	305	1 26 709	1 81	-	7 329	1 48 800
Capital expenditure (Intangible assets)	375 338	4 31 8	51	887	1 49	901	382	444	-	6 038	388 508

											(in thousands of euro)
						31 .1 2.201 1
	Portugal	Spain	France / Luxembourg	United Kingdom	United States of America	Brazil	Angola	Cape Verde	Macao	Other	Total

Net profit for the year	( 269 562)	9 888	7 41 6	1 8 627	1 4 334	20 442	91 71 2	1 1 33	2 449	( 5 1 97)	( 1 08 758)
Net assets	59 249 764	5 302 492	76 237	3 575 449	1 391 250	2 645 743	6 866 988	1 44 852	249 876	734 721	80 237 372
Capital expenditure (Property and equipment)	20 802	3 204	-	267	203	1 1 63	59 682	720	409	1 9 307	1 05 757
Capital expenditure (Intangible assets)	38 892	4 502	-	3 082	655	1 43	884	21 1	3	41 0	48 782

NOTE 5 – NET INTEREST INCOME

This balance is analysed as follows:

						(in thousands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Assets/ Liabilities at Amortised Cost and Available-for-Sale Financial Assets	Assets/ Liabilities at Fair Value Through Profit or Loss	Total	Assets/ Liabilities at Amortised Cost and Available-for-Sale Financial Assets	Assets/ Liabilities at Fair Value Through Profit or Loss	Total
Interest and similar income
Interest from loans and advances	2 51 8 907	8 367	2 527 274	2 661 047	1 7 379	2 678 426
Interest from financial assets at fair value through profit or loss	-	255 529	255 529	-	1 85 934	1 85 934
Interest from deposits with banks	61 876	3 749	65 625	71 287	2 572	73 859
Interest from available-for-sale financial assets	538 988	-	538 988	455 874	-	455 874
Interest from held-to-maturity financial assets	45 01 4	-	45 01 4	91 067	-	91 067
Interest from derivatives for risk management purposes	-	459 01 2	459 01 2	-	581 873	581 873
Other interest and similar income	22 667	-	22 667	1 7 829	-	1 7 829
	3 1 87 452	726 657	3 91 4 1 09	3 297 1 04	787 758	4 084 862
Interest ex pense and similar charges
Interest from debt securities	824 832	37 481	862 31 3	667 253	1 62 91 6	830 1 69
Interest from amounts due to customers	1 004 605	33 1 64	1 037 769	1 001 81 6	35 956	1 037 772
Interest from deposits from central banks and other banks	408 1 39	1 1 028	41 9 1 67	444 824	1 5 432	460 256
Interest from subordinated debt	70 820	-	70 820	77 01 7	-	77 01 7
Interest from derivatives for risk management purposes	-	343 532	343 532	-	498 057	498 057
	2 308 396	425 205	2 733 601	2 1 90 91 0	71 2 361	2 903 271
	879 056	301 452	1 1 80 508	1 1 06 1 94	75 397	1 1 81 591

Interest from loans and advances includes an amount of euro 78 290 thousand (31 December 2011: euro 51 487 thousand) related to the unwind of discount regarding the impairment losses of loans and advances to customers that are overdue (see Note 25).

Interest from derivatives for risk management purposes includes, in accordance with the accounting policy described in Notes 2.4 and 2.19, interests from hedging derivatives and from derivatives used to manage the risk of certain financial assets and financial liabilities designated at fair value through profit or loss in accordance with the accounting policies described in Notes 2.5, 2.6 and 2.8.

NOTE 6 – NET FEE AND COMMISSION INCOME

This balance is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Fee and commission income
From banking services	561 1 03	476 424
From guarantees granted	227 836	21 5 951
From transactions with securities	60 560	69 873
From commitments assumed to third parties	35 1 52	42 789
Other fee and commission income	90 41 1	83 609
	975 062	888 646
Fee and commission ex penses
From banking services rendered by third parties	80 796	81 1 05
From transactions with securities	26 568	25 285
From guarantees received	59 735	9 1 1 9
Other fee and commission expenses	1 4 045	1 5 037
	1 81 1 44	1 30 546
	793 91 8	758 1 00

Fee and commission expenses from guarantees received includes as at 31 December 2012, the amount of euro 58.5 million (31 December 2011: euro 8 million) related with the guarantees received from the Portuguese government in relation with the debt issued by the Group.

Notes to the Consolidated Financial Statements 44

NOTE 7 – NET GAINS / (LOSSES) FROM FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

This balance is analysed as follows:

						(in thousands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Gains	Losses	Total	Gains	Losses	Total
Trading assets and liabilities
Bonds and other fixed income securities
Issued by government and public entities	943 283	723 240	220 043	70 069	51 928	1 8 1 41
Issued by other entities	1 1 495	26 01 6	( 1 4 521 )	29 627	23 287	6 340
Shares	43 840	47 740	( 3 900)	88 509	61 91 4	26 595
Other variable income securities	320	270	50	377	769	( 392)
	998 938	797 266	201 672	1 88 582	1 37 898	50 684
Derivative financial instruments
E xchange rate contracts	1 040 055	1 038 856	1 1 99	1 874 587	1 903 1 62	( 28 575)
Interest rate contracts	4 958 027	4 91 0 937	47 090	6 245 494	6 1 78 005	67 489
E quity/Index contracts	1 342 51 9	1 325 590	1 6 929	2 058 038	2 1 08 643	( 50 605)
Credit default contracts	753 554	783 848	( 30 294)	845 621	865 81 0	( 20 1 89)
Other	1 04 652	( 44 482)	1 49 1 34	21 5 463	1 78 91 4	36 549
	8 1 98 807	8 01 4 749	1 84 058	1 1 239 203	1 1 234 534	4 669
Other financial assets and liabilities at fair value through profit or loss
Securities
Bonds and other fixed income securities
Issued by government and public entities	64 235	2 642	61 593	-	-	-
Issued by other entities	1 83 334	1 09 685	73 649	1 1 4 644	1 29 836	( 1 5 1 92)
Shares	2 025	5 792	( 3 767)	5 027	358	4 669
Other securities of variable income	1 1 9 647	1 89 055	( 69 408)	80 1 08	343 1 79	( 263 071 )
	369 241	307 1 74	62 067	1 99 779	473 373	( 273 594)
Other financial assets (1 )
Loans and Advances to costumers	8 768	9 406	( 638)	25 921	33 538	( 7 61 7)
	8 768	9 406	( 638)	25 921	33 538	( 7 61 7)
Financial liabilities (1 )
Deposits from Banks	1 091	25 228	( 24 1 37)	21 702	48 665	( 26 963)
Due to costumers	57 034	1 68 007	( 1 1 0 973)	31 4 522	272 51 2	42 01 0
Debt S ecurities issued	71 1 73	267 531	( 1 96 358)	95 669	63 762	31 907
Life Insurance products	71 859	247 91 4	( 1 76 055)	-	-	-
Subordinated Debt	2 71 5	1 759	956	-	-	-
	203 872	71 0 439	( 506 567)	431 893	384 939	46 954
	581 881	1 027 01 9	( 445 1 38)	657 593	891 850	( 234 257)
	9 779 626	9 839 034	( 59 408)	1 2 085 378	1 2 264 282	( 1 78 904)

(1 ) Includes the fair value change of hedged assets and liabilities or at fair value option.

As at 31 December 2012, this balance includes a negative effect of euro 35.2 million related to the change in fair value of financial liabilities designated at fair value through profit or loss attributable to the Group's credit risk component (31 December 2011: positive effect of euro 50.9 million).

In accordance with the accounting policies followed by the Group, financial instruments are initially recognised at fair value. The best evidence of the fair value of the instrument at inception is deemed to be the transaction price. However, in particular circumstances, the fair value of a financial instrument at inception, determined based on a valuation techniques, may differ from the transaction price, namely due to the existence of a built-in fee, originating a day one profit.

The Group recognises in the income statement the gains arising from the built-in fee (day one profit), generated, namely, on the trading of foreign exchange financial products, considering that the fair value of these instruments at inception and on subsequent measurements is determined only based on observable market data and reflects the Group access to the wholesale market.

In 2012, the gains recognised in the income statement arising from the built-in fee amounted to approximately euro 14 587 thousand (2011: euro 14 161 thousand).

NOTE 8 – NET GAINS / (LOSSES) FROM AVAILABLE-FOR-SALE FINANCIAL ASSETS

					(in thousands of euro)
31 .1 2.201 2			31 .1 2.201 1
Gains	Losses	Total	Gains	Losses	Total

81 3 802	23 738	790 064	1 2 585	1 0 502	2 083
77 000	62 31 6	1 4 684	1 2 771	39 337	( 26 566)
46 523	250 272	( 203 749)	240 591	290 227	( 49 636)
1 3 564	1 4 357	( 793)	9 072	3 723	5 349
950 889	350 683	600 206	275 01 9	343 789	( 68 770)

This balance is analysed as follows:

During 2012, the Group sold at market prices through the overall stock exchange 96.4 million ordinary shares of EDP and 260.7 million ordinary shares of Portugal Telecom. These transactions generated a realised net loss of euro 224.9 million.

During the year ended 31 December 2011, the Group sold at market prices through the stock exchange 81.6 million ordinary shares of Bradesco, 165.4 million ordinary shares of EDP and 113.8 million ordinary shares of Portugal Telecom. These transactions generated a realised net gain of euro 40.0 million.

Related party transactions are described in Note 48.

NOTE 9 – NET GAINS / (LOSSES) FROM FOREIGN EXCHANGE DIFFERENCES

This balance is analysed as follows:

						(in thousands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Gains	Losses	Total	Gains	Losses	Total
Foreign exchange translation	948 205	971 993	( 23 788)	1 327 568	1 360 21 3	( 32 645)
	948 205	971 993	( 23 788)	1 327 568	1 360 21 3	( 32 645)

This balance includes the exchange differences arising on translating monetary assets and liabilities at the exchange rates ruling at the balance sheet date in accordance with the accounting policy described in Note 2.3.

NOTE 10 – NET GAINS / (LOSSES) FROM THE SALE OF OTHER ASSETS

This balance is analysed as follows:

		(in thousand of euro)
	31 .1 2.201 2	31.1 2.2011
Loans and advances to customers (deleverage )	( 39 507)	( 89 774)
Non current assets held for trade	( 5 91 7)	( 4 828)
Other	3 265	2 922
	( 42 159)	( 91 680)

As at 31 December 2012, Loans and advances to customers include a loss of euro 29.6 million related to the sale of euro 262 million of credits realized within the deleverage program of the Group (31 December 2011: euro 77.5 million).

NOTE 11 – INSURANCE EARNED PREMIUMS, NET OF REINSURANCE

The insurance earned premiums, net of reinsurance, can be analysed as follows:

		(in thousands of euro)
	31.1 2.201 2	31 .12.201 1
Gross written premiums	64 491	-
Reinsurance premiums ceded	( 2 347)	-
Net premiums written	62 1 44	-
Change in the provision for unearned premiums, net of reins urance	1 13	-
Earned premiums, net of reinsurance	62 257	-

Gross written premiums from life insurance business are analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Risk contracts	39 632	-
Saving contracts with profit sharing	24 859	-
	64 491	-

The reinsurance premiums ceded respect to cover the risk of death and longevity of contracts made in the traditional segments.

In accordance with IFRS 4, the contracts issued by the Group for which there is only a transfer of financial risk, with no discretionary participating features, are classified as investment contracts and accounted for as financial liabilities.

Contracts for which the investment risk is borne by insurance contracts and fixed rate without profit are not accounted for as premiums.

NOTE 12 – CLAIMS INCURRED, NET OF REINSURANCE

Claims incurred, net of reinsurance are analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Claims paid
G ross amount	( 366 81 2)	-
R eins urance share	2 621	-
	( 364 1 91 )	-
Change in claims outstanding res erve
G ross amount	854	-
R eins urance share	364	-
	1 218	-
	( 362 973)	-

NOTE 13 – CHANGE IN THE TECHNICAL RESERVES, NET OF REINSURANCE

The change in the technical reserves, net of reinsurance is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Mathematical reserves	298 451	-
Reserve for bonus and rebates	( 1 1 08)	-
Other thechnical reserves	2 964	-
Reserve for reinsurance	1 1 1 6	-
	301 423	-

NOTE 14 – OTHER OPERATING INCOME AND EXPENSES

This balance is analysed as follows:

		(in thousands of euro)
	31 .12.2012	31.12.2011
Other operating income / (expenses)
IT related bus iness	5 689	6 028
Gains on repurchase of Group debt securities (see Notes 38 and 42)	1 13 721	470 735
Non recurring gains on credit operations	21 900	26 553
Non recurring gains on advisory services	4 299	2 586
D irect and indirect taxes	( 43 054)	( 47 589)
C ontributions to the deposits guarantee fund	( 1 0 372)	( 6 463)
Membership and donations	( 8 252)	( 7 744)
Los ses arising from the transfer, to the social security, of the pensioners' defined benefit obligations	-	( 1 07 1 73)
Other	25 631	20 870
	1 09 562	357 803

Direct and indirect taxes include an amount of euro 27.9 million relating to the cost with the introduction of a Contribution of the Banking sector (31 December 2011: euro 30.5 million), created by Law No. 55-A/2010, of 31 December (see Note 41).

As at 31 December 2012, the caption Other operating income includes a gain of euro 21.8 million related with the negative past service cost (gain) which arose from the change introduced by Decree Law 133/2012 to the calculation method for the death allowance, as explained in Note 16.

Also under Other operating income, as at 31 December 2012, is included the gain of euro 10.3 million arising from the termination of the exclusive distribution agreement established between ESAF and Banco Pastor, as explained in Note 31.

As at 31 December 2011, this balance includes a cost in the amount of euro 24.4 million related with the Investors Compensations Scheme.

NOTE 15 – STAFF COSTS

This balance is analysed as follows:

31 .1 2.201 2	31 .1 2.201 1

462 683	447 591
459 681	447 033
3 002	558
1 03 579	94 253
8 544	21 025
24 077	24 606
598 883	587 475

As at 31 December 2012, other costs include the amount of euro 489 thousand related with the variable remuneration plan on financial instruments (PRVIF) of BES in accordance with the accounting policy described in Note 2.16. (31 December 2011: euro 286 thousands) The details of this plan implemented by the Group are presented in Note 16.

The salaries and other benefits attributed to the key management personnel of Group are analysed as follows:

				(in thousands of euro)
	B oard of	Audit	Other Key	Total
	Dire ctors	Committee	Management
31 December 201 2
S alaries and other s hort-term benefits	5 523	364	1 3 589	1 9 476
B onus	1 946	-	1 670	3 61 6
S ub total	7 469	364	1 5 259	23 092
P ension costs	2 794	-	1 782	4 576
Long service benefits and other	27	-	45	72
Total	1 0 290	364	1 7 086	27 740
31 December 201 1
S alaries and other s hort-term benefits	5 827	739	1 3 509	20 075
B onus	3 501	-	3 359	6 860
S ub total	9 328	739	1 6 868	26 935
P ension costs	6 358	2	1 1 46	7 506
Long service benefits and other	275	-	1 00	375
Total	1 5 961	741	1 8 1 1 4	34 81 6

Other key management personnel include board members of BES subsidiaries, the top management and the Advisors to the Board of Directors of the Bank.

As at 31 December 2012 and 2011, loans granted by BES Group to its key management personnel, amounted to euro 28 883 thousand and euro 28 183 thousand, respectively.

As at 31 December 2012 and 2011, the number of employees of the Group is analysed as follows:

	31 .1 2.201 2	31 .1 2.201 1
BE S employees	6 675	6 704
Financial sector subsidiaries employees	3 269	3 1 59
Financial sector group entities employees	9 944	9 863

By professional category, the number of BES Group employees, is analysed as follows:

	31 .1 2.201 2	31 .1 2.201 1
Senior management	1 1 89	1 1 37
Management	1 060	994
Specific functions	4 1 86	4 027
Administrative functions and other	3 509	3 705
	9 944	9 863

NOTA 16 – EMPLOYEES BENEFITS

Pension and health-care benefits

In compliance with the collective labor agreement (ACT) for the banking sector established with the unions, the Bank undertook the commitment to grant its employees, or their families, pension on retirement and disability, and widows' pension. Pension payments consist of a rising percentage based on years of service, applicable to each year's negotiated salary table for the active work force.

As at 30 December 1987, the Bank estabilished a pension fund to cover the above mentioned liabilities with pension payments. Later, after obtaining the authorisation from the Portuguese Insurance Institute, the Bank has changed the pension fund contract in order to allow the coverage of all pension liabilities, health care benefits and, in 2009, the death allowance. The pensions funds in Portugal are managed by ESAF – Espírito Santo Fundo de Pensões, S.A.

However, it should be noted that in what concerns the banking subsidiaries, the employees hired after 31 March 2008 are covered by the Portuguese Social Security scheme.

Additionally, with the publication of Decree-Law n.1-A / 2011 of January 3, all banking sector employees beneficiaries of "CAFEB – Caixa de Abono de Família dos Empregados Bancários" were integrated into the General Social Security Scheme from 1 January 2011, which assumed the protection of banking sector employees in the contingencies of maternity, paternity and adoption and even old age, remaining under the responsibility of the banks the protection in sickness, disability, survivor and death.

Retirement pensions of banking employees integrated into the General Social Security Regime continue to be calculated according to the provisions of ACT and other conventions. Banking employees, however, are entitled to receive a pension under the general regime, which amount takes into account the number of years of discounts for that scheme. Banks are responsible for the difference between the pension determined in accordance with the provisions of ACT and that the one that the banking employees are entitled to receive from the General Social Security Regime.

The contribution rate to the Social Security Regime is 26.6%, 23.6% paid by the employer and 3% paid by the employees, instead of Caixa de Abono de Família dos Empregados Bancários (CAFEB), abolished by the same law. In consequence of this change, the pension rights of active employers is to be covered under the terms defined by the General Social Security Regime, taking into account the length of service from 1 January 2011 until retirement. The differential required to support the guaranteed pension in terms of the ACT is paid by the Banks.

Notwithstanding, the integration leads to a decrease in the actual present value of total benefits reported to the normal retirement age (VABT) to be borne by the pension fund, after considering the future contributions to be made by the bank and the employees to the social security regime. Since there was no reduction in benefits on a beneficiary's perspective and the liabilities for past services remained unchanged, the Group has not recorded in its financial statements any impact in terms of the actuarial calculatins at 31 December 2010, arising from the integration of its workers in the Social Security Scheme. The resulting gain will be deferred over the average working life until the employees reach the normal retirement age.

At the end of 2011 following the third tripartite agreement established between the Portuguese Government, the Portuguese Banking Association and the banking sector employees unions, it was decided to transfer to the Social Security Regime the banks liabilities with pension in payment as at 31 December, 2011.

The tripartite agreement established, provides for the transfer to the Social Security sphere of the liabilities with pensions in payment as of 31 December 2011 at constant values (0% discount rate). The responsibilities relating to updates of pensions value, other pension benefits in addition to those to be borne by the Social Security, health-care benefits, death allowance and deferred survivor pensions, will remain in the sphere of responsibility of the banks with the correspondent funding being provided through the respective pension funds.

The banks pension funds assets, specifically allocated to the cover of the transferred liabilities were also be transferred to the Social Security.

Being thus a definitive and irreversible transfer of the liabilities with pensions in payment (even if only on a portion of the benefit), the conditions set out in IAS 19 'Employee benefits' underlying the concept of settlement were met, as the obligation with pension in payment as at 31 December, 2011 extinguished at the date of transfer. On this basis, the impacts derived from this transfer were recognized in the income statement in 2011.

		As su mp tions			Actual
		31 .1 2.201 2
	1 st through 4th year	5th and s ubs equent years	31 .12.2011	31.1 2.2012	31.12.2011
Actuarial As su mp tions
E xpected return of plan assets		5,50%	5,50%	-2,37%	-7,38%
Discount rate		4,50%	5,50%	-	-
Pensions increase rate	0,00%	0,75%	1,00%	-0,56%	-0,70%
Salaries increase rate	1 ,00%	1,75%	2,25%	1 ,02%	1 ,1 0%
Mortality table men		TV 73/77 - 1 year
Mortality table woman		TV 88/90

The key actuarial assumptions used to calculate pension liabilities are as follows:

Disability decreases are not considered on the liabilities calculation. The determination of the discount rate as at 31 December 2012 was based on: (i) the evolution of the main indexes related with high quality corporate bonds and (ii) the duration of liabilities.

The number of persons covered by the plan is as follows:

	31 .1 2.201 2	31 .1 2.201 1

E mployees	5 31 1	6 007
Pensioners	5 734	5 706

TOTAL	1 1 045	1 1 71 3

The application of IAS 19 on responsibilities and coverage levels reportable to 31 December 2012 and 2011 is presented as follows:

		(in thousands of euro)
	31 .12.201 2	31.12.2011
Net Assets / (liabilities) recognised in the balance sheet
Total obligations	(1 206 283)	(1 077 864)
Pensioners	( 448 265)	( 397 857)
E mployees	( 758 018)	( 680 007)
Coverage Fair value of plan assets	1 220 885	1 1 84 878
Net assets in balance sheet (see No te 34)	14 602	1 07 01 4
Acumulated actuarial deviations recognised in other comprehensive income	1 078 732	886 964

In accordance with the accounting policy described in Note 2.16 – Employees Benefits, the Group liability with pensions is calculated semi-annually.

In accordance with the accounting policy described in Note 2.16 and following the requirements of IAS 19 – Employees benefits, the Group assesses at each balance sheet date and for each plan separately, the recoverability of the recognised assets in relation to the defined benefit pension plans based on the expectation of reductions in future contributions to the funds.

The changes in the defined benefit obligation can be analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Defined benefit obligation at the beginning of the period	1 077 864	2 205 366
Service cost	1 2 01 2	1 7 242
Interest cost	58 994	1 1 7 091
Plan participants' contribution	3 259	3 267
Actuarial (gains) / losses:
- changes in actuarial assumptions	65 366	( 201 792)
- experience adjustments	40 300	( 1 1 0 266)
Pensions paid by the fund	( 27 481 )	( 1 1 2 555)
Transfer to the Social Security regime of the liabilities with pensions in payment	-	( 853 839)
Costs with negative past services	( 21 81 3)	-
E xchange differences and other	( 2 21 8)	1 3 350
Defined benefit obligation at the end of the period	1 206 283	1 077 864

During the year ended 31 December 2012, following the amendment to Decree Law 133/2012 which determines the calculation method for the death allowance, there was a reduction on the defined benefit obligation with this benefit, in the amount of euro 21.8 million, which qualifies as a negative past cost (a gain). On this basis and in accordance with the accounting policy described in Note 2.18, this gain should be recognized in the income statement during the vesting period. Considering that this benefit is already vested (given that the employee or retiree is entitled to the benefit in full without the need to comply with any service condition), the Group recognized the gain in the income statement.

Under the third tripartite agreement mentioned above and the subsequent transfer to the Social Security sphere of the banks liabilities with pensions in payment as at 31 December 2011, there was a reduction of liabilities, measured based on the actuarial assumptions used in preparing the financial statements and consistent with IAS 19, in the amount of euro 853.8 million.

However, under the agreement, the value of assets to be transferred to the Social Security in return for the transfer of the liabilities with pensions in payment was determined on a settlement perspective, as it is a definitive and irreversible transfer of these responsibilities and corresponded to

the value thereof, and it was estimated based on a discount rate of 4% (instead of the 5.5% rate used for the purpose of preparing the financial statements). Thus, the amount payable by the Group to the State amounted to euro 961 million, which led to the recognition in 2011 in the income statement of cost in the amount of euro 107.2 million, corresponding to the differential of the discount rates mentioned above.

Of the total payable amount (euro 961 million), euro 853.8 million were borne by the Pension Fund and euro 107.2 million directly by the Group. At the end of December 2011, 55% of the amount outstanding was paid, and the remaining was paid in June of 2012.

The change in the fair value of the plan assets for the years ended 31 December 2012 and 2011 is analysed as follows:

	(in thousand of euro)
	31.1 2.201 2	31.1 2.2011
F air valu e of plan ass ets at the beginn ing of the p eriod	1 1 84 878	2 206 31 3
Actual return on plan assets	( 24 299)	( 154 735)
Group contributions	86 41 0	92 467
Plan participants' contributions	3 259	3 267
Pensions paid by the fund	( 27 481 )	( 11 2 555)
Transfer to the S ocial S ecurity regime of the liabilities with pensions in payment	-	( 853 839) (1 )
E xchange differences and other	( 1 882)	3 960
F air valu e of plan ass ets at the end of the period	1 220 885	1 1 84 878

(1 ) 55% of this amount was paid to State in 201 1, and the remaining was also recognized in 2011 as a liability in the Pension Fund and paid in 2012.

The fair value of plan assets can be analysed as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Shares	1 78 654	371 270
Fixed income securities	335 1 92	1 36 21 2
Real estate	370 769	657 856
Other	336 270	403 767
Amounts payable to the Social Security	-	( 384 227)
Total	1 220 885	1 1 84 878

The real estate assets rented to BES Group and securities issued by Group companies which are part of the plan assets are analysed as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Shares	1 200	1 288
Fixed income securities	6 382	339
Real estate	298 022	21 7 802
Total	305 604	21 9 429

The pension fund holds participation units of ES Ventures III Fund, which is fully consolidated in the Group.

As at 31 December 2012, the pension fund holds participation units of ES Ventures III Fund, which is fully consolidated in the Group.

During the year ended 31 December 2011 the Group sold 18 520 and 4 830 units of Fungepi Fund and Fungere Fund to the Group pensions funds, by a global amount of euro 80.0 million, not incurring in any material loss or gain (see Note 48).

During the year ended 31 December 2012 the Group acquired 49 779 and 37 115 thounsands units of Fungere Fund and Fungepi Fund to the Group pensions funds, by a global amount of euro 158.1 million and euro 87.2 million, respectively (see Note 1).

The changes in the accumulated actuarial gains and losses are analysed as follows:

	(in thousands of euro)
31 .1 2.201 2	31 .1 2.201 1
886 964	930 979
65 366	( 201 792) 1 57 777
( 701 )	-
1 078 732	886 964
	1 27 1 03

The net benefit cost can be analysed as follows:

	(in thousands of euro)
31 .1 2.201 2	31 .1 2.201 1
1 2 01 2	1 7 242
58 994	1 1 7 091
( 62 504)	( 1 1 3 308)
42	-
8 544	21 025

In the years ended in 31 December 2012 and 2011, the changes in the net assets/ (liabilities) recognised in the balance sheet is analysed as follows:

		(in thousands of euro)
	31 .12.2012	31 .1 2.201 1
At the beginning of th e period	1 07 01 4	947
Net periodic benefit cost	( 8 544)	( 21 025)
Actuarial (gains)/ losses recognised on other comprehensive income	( 191 768)	44 015
C ontributions of the period and pensions paid by the Group	86 41 0	92 467
Other (a)	21 490	( 9 390)
At the end of th e period	14 602	1 07 014

(a) In 201 2, this amount includes a profit of euro 21 . 8 million related to the liability decrease with death subsidy.

The evolution of the defined benefit obligations, fair value of plan assets and of the experience adjustments gains/ (losses) in the past 5 years, is presented as follows:

					( in thousands of euro)
	31.12.2012	31.12.2011	31.12.2010	31.12.2009	31.12.2008
Defined benefit obligation	(1 206 283)	(1 077 864)	(2 205 366)	(2 125 202)	(2 064 874)
Fair value of plan asssets	1 220 885	1 184 878	2 206 313	2 198 280	2 056 627
(Un)/over funded liabilities	14 602	107 014	947	73 078	( 8 247)
(Gains)/losses from experience adjustments arising on defined benefit oblig	40 300	( 110 266)	25 201	51 583	23 510
(Gains)/losses from experience adjustments arising on plan assets	86 803	268 043	66 895	( 90 994)	727 214

Variable remuneration payment plan on financial instruments (PRVIF)

Following the recommendations of the Supervising and Regulatory authorities, on the shareholders General Meeting, held in 6 April 2011 it was approved a new remuneration policy for the Executive Committee members. This policy consists in giving to the Executive Committee members a fixed remuneration, which should represent approximately 45% of the total remuneration, and a variable component representing around 55% of the total remuneration. The variable remuneration shall have two components: one associated with short-term performance and another with medium-term performance. Half of the short-term component must be paid in cash and the remaining 50% should be paid over a three years period, with half of these payments to be made in cash and the remaining through the attribution of shares. The medium-term component has associated a share options program with the exercise of the options set at 3 years from the date of its attribution.

The option can only be exercised at maturity and the beneficiary may choose between the physical settlement or the financial settlement of the options.

The plans' initial fair value was calculated using an option valuation model with the following assumptions:

	Option valuation assumption 1 st attribution 2nd attribution

Inicial reference date	1 2.04.201 1	1 2.1 0.2012
F inal reference date	31 .03.201 4	1 5.01.2016
R ights granted to employees	2 250 000	6 280 045
R eference price (in euro)	3,47	0,67
Interest rate	2,31 %	0,67%
Volatility	40,0%	65,00%
Inicial fair value of the plan (in thousands of euro)	1 1 30	1 940

PRVIF is accounted for in accordance with the applicable IFRS rules (IFRS 2 and IAS 19). During 2012, the Group registered, against liabilities, a cost of euro 489 thousand (31 December 2011: euro 286 thousands) related to the amortization of the initial options premium granted

Long-term service benefits

As referred in Note 2.16, for employees that achieve certain years of service, the Bank pays long term service premiums, calculated based on the effective monthly remuneration earned at the date the premiums are due. At the date of early retirement or disability, employees have the right to a premium proportional to that they would earn if they remained in service until the next payment date.

As at 31 December 2012 and 2011, the Group's liabilities regarding this benefits amount to euro 28 691 thousand and euro 27 477 thousand, respectively (see Note 37). The costs incurred in the year ended 31 December 2012 with long-term service benefits amounted to euro 3 002 thousand (31 December 2011: euro 558 thousand).

The actuarial assumptions used in the calculation of the liabilities are those presented for the calculation of pensions (when applicable).

NOTE 17 – GENERAL AND ADMINISTRATIVE EXPENSES

This balance is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Rental costs	71 788	69 347
Advertising costs	34 476	35 271
Communication costs	45 766	46 373
Maintenance and related services	21 752	1 8 465
Travelling and representation costs	31 676	32 639
Transportation	7 894	8 708
Insurance costs	8 232	8 297
IT services	66 632	65 841
Independent work	7 863	7 434
Temporary work	5 346	6 677
E lectronic payment systems	1 0 836	1 2 479
Legal costs	1 9 745	1 9 933
Consultants and external auditors	28 251	25 699
Water, energy and fuel	1 2 275	1 0 755
Consumables	5 358	5 370
Other costs	64 230	60 465
	442 1 20	433 753

The balance other costs includes, among others, specialised services with security, information, databases, costs with training and external suppliers.

The outstanding lease installments related to the non-cancelable operational leasing contracts were as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Up to 1 year	8 903	9 1 33
1 to 5 years	1 0 451	1 3 575
	1 9 354	22 708

The fees invoiced during the years 2012 and 2011 by the statutory auditors, according to art. 508.-F of "Código das Sociedades Comerciais", are presented as follows:

	(in thousands of euro)
	31 .12.2012	31.12.2011
Audit fees	2 709	2 604
Audit related fees	1 1 48	1 544
Tax consultancy services	650	591
Other services	309	949
Total invoices s ervices	4 816	5 688

NOTE 18 – EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share are calculated by dividing the net profit attributable to equity holders of the Bank by the weighted average number of ordinary shares outstanding during the year.

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Profit attributable to the equity holders of the Bank (1)	90 073	( 44 305)
Weighted average number of ordinary shares (thousands) Weighted average number of treasury stock (thousands)	3 096 971 ( 1 1 91 0)	1 1 87 255 ( 257)
Weighted average number of ordinary shares outstanding (thousands)	3 085 061	1 1 86 998
Basic earnings per share attributable to equity holders of the Bank (in euro)	0,03	(0,04)

(1) Net profit for the period adjus ted by the dividend from preference shares and from perpetual bonds interes t, and res ults form the repurchas e of preference s hares.

Diluted earnings per share

The diluted earnings per share is calculated considering the profit attributable to the equity holders of the Bank and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.

The diluted earnings per share are not different from the basic earning per share as the outstanding plans of PRVIF do not have a dilutive effect.

NOTE 19 – CASH AND DEPOSITS AT CENTRAL BANKS

As at 31 December 2012 and 31 December 2011, this balance is analysed as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Cash	303 538	278 1 79
Deposits at central banks Bank of Portugal Other central banks	26 1 36 1 047 867	1 1 0 045 702 21 5
	1 074 003	81 2 260
	1 377 541	1 090 439

The deposits at Central Banks include mandatory deposits with the Bank of Portugal intended to satisfy legal minimum cash requirements, for an amount of euro 26 136 thousand (31 December 2011: euro 110 045 thousand). According to the European Central Bank Regulation (CE) no. 1745/2003, of 12 September 2003, minimum cash requirements kept as deposits with the Bank of Portugal earn interest, and correspond to 1% of deposits and debt certificates maturing in less than 2 years, excluding deposits and debt certificates of institutions subject to the European System of Central Banks' minimum reserves requirements. During 2012, these deposits have earned interest at an average rate of 0.89% (31 December 2011: 1.25%).

The fulfilment of the minimum cash requirements for a given period of observation is monitored taking into account the value of bank deposits with the Bank of Portugal during the referred period. The balance of the bank account with the Bank of Portugal as at 31 December 2012, was included in the observation period from 12 December 2012 to 15 January 2013, which corresponded to an average minimum cash requirements of euro 282.9 million.

NOTE 20 – DEPOSITS WITH BANKS

As at 31 December 2012 and 31 December 2011, this balance is analysed as follows:

	( in thousands of e uro)
	3 1 .1 2.2 01 2	31 .1 2 .201 1
Deposits with banks in Portugal
R epayable on demand	1 07 3 54	1 53 662
U ncolle cte d cheque s	1 38 8 54	58 38 4
	2 46 2 08	21 2 046
Deposits with banks abroad
R e payable on demand	3 92 1 8 3	1 98 75 1
Uncollecte d cheque s	8 962	4 466
O the r	33 7 2 4	1 65 55 0
	434 8 69	368 767
	681 07 7	58 0 81 3

Uncollected cheques in Portugal and abroad were sent for collection during the first working days following the reference dates.

NOTE 21 – FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

As at 31 December 2012 and 31 December 2011, this balance is analysed as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Financial assets held for trading
Securities
Bonds and other fixed income securities Issued by government and public entities Issued by other entities	1 347 806 259 203	888 797 286 843
Shares	51 91 1	41 268
Other variable income securities	2 01 4	727
	1 660 934	1 21 7 635
Derivatives
Derivative financial instruments with positive fair value	2 264 465	2 21 7 004
	3 925 399	3 434 639
Financial liabilities held for trading
Derivative financial instruments with negative fair value	2 1 21 229	2 1 24 388
Short sales	796	865
	2 1 22 025	2 1 25 253

As at 31 December 2012 and 2011 the analysis of the securities held for trading by the period to maturity, is presented as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1

Up to 3 months	1 38 71 0	93 686
3 to 1 2 months	1 30 677	225 924
1 to 5 years	757 798	200 443
More than 5 years	576 1 27	655 587
Undetermined	57 622	41 995
	1 660 934	1 21 7 635

In accordance with the accounting policy described in Note 2.6, securities held for trading are those which are bought to be traded in the short-term, regardless of their maturity.

The securities pledged as collateral by the Group are analysed in Note 46.

As at 31 December 2012 and 2011, financial assets held-for-trading analysed by quoted and unquoted securities, are presented as follows:

						(in thous ands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Q uo te d	Unq u o te d	To ta l	Q uo te d	Unq u o te d	To ta l
S ecurities
B onds and other fixed inc ome s ecurities
Is s ued by govermment and public entities	1 347 806	-	1 347 806	852 761	36 036	888 797
Is s ued by other entities	94 1 57	1 65 046	259 203	1 09 400	1 77 443	286 843
S hares	40 1 35	1 1 776	51 91 1	40 1 91	1 077	41 268
O ther variable income s ec urities	2 01 4	-	2 01 4	727	-	727
	1 484 1 1 2	1 76 822	1 660 934	1 003 079	21 4 556	1 21 7 635

As at 31 December 2012, the exposure to public debt from peripheral Eurozone countries is presented in Note 51 – Risk Management.

As at 31 December 2012 and 2011, derivative financial instruments can be analysed as follows:

					(in thousands of euro)
	31 .1 2.201 2			31 .1 2.201 1
				Fair Value
	Assets	Liabilities		Assets	Liabilities



1 21 7 845			1 460 1 51
1 226 399			1 458 21 4		1 3 605

3 357 723			2 442 950
3 344 1 04			2 431 893		1 1 602
278 31 7	-	-	58 503	-	-

					26 259
2 41 4 534	41 41 5	46 846	3 578 304	90 389	90 729
1 2 073 273	75 826	79 634	1 1 761 084	1 58 974	1 42 1 95

					1 982
	1 953 058	1 81 2 560		1 71 2 479	1 656 756
	1 556	1 556		5 003	5 1 57
4 918 557	40 843	38 562	7 690 395	51 553	47 305
					-
1 903 388	1 341	1 341	1 893 560	25 473	31 71 4
41 81 9 049	1 996 798	1 854 035	50 866 809	1 795 555	1 742 91 4

					51 1 22
					1 02 1 79
					-
82 234	-	-	32 089	-	-
3 555 81 2	1 46 928	1 56 082	3 1 24 625	1 1 1 286	1 53 301

2 774 780	44 91 3	31 478	3 559 588	1 51 1 89	85 978
60 222 91 4	2 264 465	2 1 21 229	69 31 2 1 06	2 21 7 004	2 1 24 388
	Notional 1 1 8 945 1 1 5 406 200 000 30 649 333 363 000 3 784 771 664 51 6 2 71 2 479 96 583	6 968 1 753 25 690 - - 86 202 60 726 -	Fair Value 1 2 443 2 002 1 8 343 1 6 - 24 936 1 31 1 46 -	Notional 1 68 995 1 62 074 380 000 34 581 122 2 747 936 3 573 796 843 91 1 2 095 91 9 1 52 706	27 672 1 2 41 6 28 497 1 047 - 50 453 60 833 -

a) Derivatives traded in organised markets, whose fair value is settled daily through the margin accounts.

As at 31 December 2012 the fair value of derivative financial instruments included the net amount of euro 21.1 million (31 December 2011: net amount of euro 43.5 million) related to the positive fair value of the embedded derivatives, as described in Note 2.4.

As at 31 December 2011 and 2010, the analysis of trading derivatives by the period to maturity is presented as follows:

		31 .1 2.201 2		(in thousands of euro) 31 .1 2.201 1
	Notional	Fair value (net)	Notional	Fair value (net)
Up to 3 months	1 3 956 784	71 1 33	1 1 431 250	( 42 51 5)
3 to 1 2 months	9 998 962	( 46 401 )	1 1 664 854	( 1 334)
1 to 5 years	1 8 71 9 605	21 460	27 576 01 0	23 078
More than 5 years	1 7 547 563	97 044	1 8 639 992	1 1 3 387
	60 222 91 4	1 43 236	69 31 2 1 06	92 61 6

NOTE 22 – OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

This balance is analysed as follows:

	(in thousands of euro)
	31 .1 2 .2 01 2	31 .1 2 .2 01 1
B onds and othe r fixed income securitie s Issued by government and public e ntitie s	51 5 9 94	-
Issued by othe r e ntitie s	1 1 1 8 425	1 2 7 7 31
S hare s and other variable income securitie s	1 1 8 7 1 34	1 83 6 2 58
	2 82 1 553	1 963 989

In light of IAS 39 and in accordance with the accounting policy described in Note 2.6, the Group designated these financial assets at fair value through profit or loss, in accordance with the documented risk management and investment strategy, considering that these financial assets (i) are managed and evaluated on a fair value basis and/or (ii) have embedded derivatives.

As at 31 December 2011 and 2010, the analysis of the financial assets at fair value through profit or loss by the period to maturity is presented as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Up to 3 months	486 789	385 546
3 to 1 2 months	239 972	400
1 to 5 years	224 257	1 278 221
More than 5 years	733 700	69 81 0
Undetermined	1 1 36 835	230 01 2
	2 821 553	1 963 989

Regarding quoted or unquoted securities, the balance financial assets at fair value through profit or loss, is presented as follows:

						(in thousands of euro) )
		31 .1 2.201 2			31 .1 2. 201 1
	Q uote d	Unquo ted	Total	Q uote d	Unquo ted	Total
Bonds and other fixed income securities
Issued by govermment and public entities	51 5 994	-	51 5 994	-	-	-
Issued by other entities	272 936	845 489	1 1 1 8 425	1 5 885	1 1 1 846	1 27 731
S hares and O ther variable income securities	599 049	588 085	1 1 87 1 34	1 3 71 9	1 822 539	1 836 258
	1 387 979	1 433 574	2 821 553	29 604	1 934 385	1 963 989

The significant increase in this caption during 2012, arises mainly on the full consolidation of BES Vida from 1 May 2012, as referred in Note 54.

NOTE 23 – AVAILABLE-FOR-SALE FINANCIAL ASSETS

As at 31 December 2012 and 31 December 2011, this balance is analysed as follows:

					(in thousands of euro)
	Fair value reserve Cost (1 ) Positive Negative			Impairment	Book
				losses	value
Bonds and other fixed income securities
Issued by government and public entities	4 205 940	201 1 52	( 1 703)	-	4 405 389
Issued by other entities	4 086 487	65 422	( 78 023)	( 1 7 1 71 )	4 056 71 5
Shares	1 557 346	82 1 53	( 45 387)	( 1 85 1 90)	1 408 922
Other variable income securities	908 326	1 6 472	( 4 908)	( 35 606)	884 284
Balance as at 31 december 201 2	1 0 758 099	365 1 99	( 1 30 021 )	( 237 967)	1 0 755 31 0
Bonds and other fixed income securities
Issued by government and public entities	4 81 3 456	666	( 1 24 908)	-	4 689 21 4
Issued by other entities	5 634 799	34 1 46	( 1 54 61 5)	( 1 1 094)	5 503 236
Shares	1 1 95 790	41 200	( 1 84 1 53)	( 1 32 088)	920 749
Other variable income securities	393 790	4 057	( 3 080)	( 25 1 00)	369 667
Balance as at 31 December 201 1	1 2 037 835	80 069	( 466 756)	( 1 68 282)	1 1 482 866

(1) Acquisition cost relating to shares and other variable income securities and amortised cost relating to debt securities.

As at 31 December 2012, the exposure to debt of peripheral countries in the euro area is analysed in Note 51 – Risk Management.

In accordance with the accounting policy described in Note 2.6, the Group assesses periodically whether there is objective evidence of impairment on the available-for-sale financial assets, following the judgment criteria's described in Note 3.1.

The securities pledged as collateral by the Group are analysed in Note 46. As at 31 December 2011, the available for sale securities portfolio includes the amount of euro 306.4 million related with securitization operations (see Note 1).

The changes occurred in impairment losses of available-for-sale financial assets are presented as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .12.2011

Balance at the beginning of the year	1 68 282	1 59 232
Charge for the year	1 03 233	64 573
Charge off	( 28 426)	( 51 363)
Write back of the year	( 3 925)	( 6 782)
E xchange differences and others	( 1 197)	2 622
B alan ce at th e en d o f the year	237 967	1 68 282

(in thousands of euro)

As at 31 December 2012 and 2011, the analysis of available-for-sale assets by the period to maturity is presented as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1

Up to 3 months	2 859 487	4 91 5 609
3 to 1 2 months	1 263 81 4	1 386 299
1 to 5 years	1 227 774	2 001 542
More than 5 years	3 1 1 4 31 6	1 887 667
Undetermined	2 289 91 9	1 291 749
	1 0 755 31 0	1 1 482 866

The main equity exposures that contribute to the fair value reserve, as at 31 December 2012 and 2011, can be analysed as follows:

					(in thousands of euro)
		31 .1 2.201 2
	Acquisition	Fair value reserve			Book
Description	cost	Positive	Negative	Impairment	value
Portugal Telecom	346 637	-	( 1 0 757)	-	335 880
E DP- E nergias de Portugal	1 73 826	24 447	-	-	1 98 273
Banque Marocaine du Commerce E xtérieur	81 004	-	( 1 5 81 3)	-	65 1 91
	601 467	24 447	( 26 570)	-	599 344

31 .1 2.201 1 Positive Negative Portugal Telecom 603 298 - ( 1 51 041 ) - 452 257 E DP- E nergias de Portugal 200 664 - ( 24 077) - 1 76 587 Banque Marocaine du Commerce E xtérieur 2 376 5 454 - ( 348) 7 482 806 338 5 454 ( 1 75 1 1 8) ( 348) 636 326 Book value Description Acquisition cost Fair value reserve Impairment

Following the market transactions with Portugal Telecom shares, the portfoloio average price has reduced significantly. The unrealized losses presented in the fair value reserve at year end, represent a recent decline in value that occurred after the Group having recognized positive fair value reserves in the third and fourth quarter of 2012. The unrealized losses recorded at year end do not exceed 3.1% of the portfolio.

In prior years the Group recorded an impairment loss regarding Banque Marocaine du Commerce Exterieur, which price has subsequently recovered, allowing the recognition of a positive fair value reserve of euro 5.454 thousand as at 31 December 2011. During 2012, there was a decline in the fair value, which consumed the existing positive reserves and resulted in an unrealized loss, representing 19.52% of the investment average cost, recognized in reserves. As at 31 December 2012, it was considered that there is no objective evidence of impairment in this investment.

During the year ended 31 December 2012, the Group sold at market prices 96.4 million ordinary shares of EDP, and 260.7 million ordinary shares of Portugal Telecom. These transactions generated a realised net loss of euro 224.9 million (see Note 8).

During the year ended 31 December 2011, the Group sold at market prices 81.6 million ordinary shares of Bradesco, 165.4 million ordinary shares of EDP and 113.8 million ordinary shares of Portugal Telecom. These transactions generated a realised net gain of euro 40.0 million.

The analysis of the available-for-sale financial assets by quoted and unquoted securities is presented as follows:

						(in thousands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Quoted	Unquoted	Total	Quoted	Unquoted	Total
S ecurities
Bonds and other fixed income securities
Issued by govermment and public entities	3 1 1 1 938	1 293 451	4 405 389	2 839 437	1 849 777	4 689 21 4
Issued by other entities	785 750	3 270 965	4 056 71 5	750 832	4 752 404	5 503 236
Shares	787 1 78	621 744	1 408 922	688 01 5	232 734	920 749
Other variable income securities	323 81 0	560 474	884 284	1 26 1 1 1	243 556	369 667
	5 008 676	5 746 634	1 0 755 31 0	4 404 395	7 078 471	1 1 482 866

NOTE 24 – LOANS AND ADVANCES TO BANKS

As at 31 December 2012 and 2011, this balance is analysed as follows:

	(in thousands of euro)
	31.1 2.2012	31.1 2.201 1
Loan s an d advances to banks in Portu gal
Deposits at central banks	3 350 000	-
Deposits at other banks	39 372	94 925
Loans	127 581	71 1 963
Very short term deposits	34 085	1 8 1 05
Other loans and advances	84 474	1 247
	3 635 512	826 240
Loan s an d advances to banks abroad
Deposits	833 223	1 170 236
Very short term deposits	148 696	36 343
Loans	703 798	777 027
Other loans and advances	105 653	472 949
	1 791 370	2 456 555
Impairment loss es	( 364)	( 21 9)
	5 426 518	3 282 576

The main loans and advances to banks in Portugal, as at 31 December 2012, bear interest at an average annual interest rate of 1.73% (31 December 2011: 2.22%). The main loans and advances to banks abroad bear interest at an average annual interest rate of 0.88%.

As at 31 December 2012 and 2011, the analysis of loans and advances to banks by the period to maturity is presented as follows:

(in thousands of euro)
31 .1 2.201 2	31 .1 2.201 1
5 063 1 07	2 830 270
96 652	68 71 5
79 623	1 1 8 91 6
	264 705
73	1 89
5 426 882	3 282 795
	1 87 427

The changes occurred during the year in impairment losses of loans and advances to banks are presented as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Balance at the beginning of the year	21 9	244
Charge for the year	1 366	406
Write back for the year	( 1 207)	( 446)
E xchange differences and other	( 1 4)	1 5
Balance at the end of the year	364	21 9

NOTE 25 – LOANS AND ADVANCES TO CUSTOMERS

As at 31 December 2012 and 2011, this balance is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Domestic loans
Corporate
Loans	1 2 605 085	1 3 71 7 31 9
Commercial lines of credits	5 247 361	5 31 2 532
Finance leases	2 560 544	2 937 632
Discounted bills	454 624	51 2 259
Factoring	1 41 2 476	1 451 226
Overdrafts	76 303	27 075
Other loans	31 0 1 68	370 395
Retail
Mortgage loans	1 0 067 1 67	1 0 556 061
Consumer and other loans	1 726 91 0	1 890 81 1
	34 460 638	36 775 31 0
Foreign loans
Corporate
Loans	8 593 536	7 958 1 47
Commercial lines of credits	2 1 81 087	2 1 05 01 7
Finance leases	69 732	67 01 9
Discounted bills	1 45 877	1 1 3 044
Factoring	52 494	23 036
Overdrafts	581 680	525 849
Other loans	458 646	451 51 5
Retail
Mortgage loans	964 525	956 733
Consumer and other loans	705 091	689 507
	1 3 752 668	1 2 889 867
Overdue loans and interest
Up to 3 months	21 9 41 6	1 42 390
From 3 months to 1 year	608 075	365 1 41
From 1 to 3 years	791 568	680 1 78
More than 3 years	566 369	357 940
	2 1 85 428	1 545 649
	50 398 734	51 21 0 826
Impairment losses	(2 692 342)	(2 1 67 444)

As at 31 December 2012, the balance loans and advances to customers (net of impairment) includes an amount of euro 3 803.3 million (31 December 2011: euro 5 828.7 million) related to securitised loans following the consolidation of the securitisation vehicles (see Note 1 and 49), according to the accounting policy described in Note 2.2. The liabilities related to these securitisations are booked under debt securities issued (see Notes 38 and 49).

As at 31 December 2012, loans and advances include euro 5 605.1 million of mortgage loans that collateralise the issue of covered bonds (31 December 2011: euro 5 305.9 million) (see Note 38).

As at 31 December 2012 and 2011, the analysis of loans and advances to customers by the period to maturity is presented as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Up to 3 months	7 932 875	7 695 41 3
3 to 1 2 months	6 1 43 51 8	6 006 1 09
1 to 5 years	1 0 058 945	1 1 376 077
More than 5 years	24 077 968	24 587 578
Undetermined	2 1 85 428	1 545 649
	50 398 734	51 21 0 826

The changes occurred in impairment losses of loans and advances to customers are presented as follows:

	( in thousands of euro)
	31 .1 2.201 2	31.1 2.2011
Balance at the beginning of the year	2 167 444	1 776 988
Charge for the year	1 01 6 1 53	895 416
Charge off	( 208 494)	( 1 58 578)
Write back of the year	( 201 321)	( 294 800)
Unwind of discount	( 78 290)	( 51 487)
E xchange differences and other	( 3 150)	( 95)
B alan ce at th e en d o f the year	2 692 342	2 167 444

The unwind of discount represents the interest on overdue loans, recognised as interest and similar income, as impairment losses are calculated using the discounted cash flows method.

As at 31 December 2012 and 31 December 2011, the detail of loans and advances to customers and impairment losses can be analysed as follows:

							(in thousands of euro)
				31 .1 2.201 2
	individual basis	Loans with impairment losses calculated on an		Loans with impairment losses calculated on a portfolio basis		Total
	Gross amount	Impairment	Gross amount	Impairment	Gross amount	Impairment	Net Loans Impairment

Corporate loans	1 2 51 0 484	2 1 95 708	24 1 26 648	1 49 576	36 637 1 32	2 345 284	34 291 848
Mortgage loans	2 362 525	1 60 1 35	8 771 297	6 884	1 1 1 33 822	1 67 01 9	1 0 966 803
Consumers loans - other	585 945	1 68 948	2 041 835	1 1 091	2 627 780	1 80 039	2 447 741
Total	1 5 458 954	2 524 791	34 939 780	1 67 551	50 398 734	2 692 342	47 706 392

							(in thousands of euro)
				31 .1 2.201 1
	Loans with impairment losses calculated on an individual basis		Loans with impairment losses calculated on a portfolio basis		Total
	Gross amount	Impairment	Gross amount	Impairment	Gross amount	Impairment	Net Loans Impairment

Corporate loans	1 3 552 504	1 776 056	23 332 728	77 781	36 885 232	1 853 837	35 031 395
Mortgage loans	2 1 81 624	146 301	9 428 488	1 2 718	1 1 610 1 1 2	159 019	1 1 451 093
Consumers loans - other	538 378	143 1 44	2 177 1 04	1 1 444	2 715 482	154 588	2 560 894
Total	1 6 272 506	2 065 501	34 938 320	101 943	51 210 826	2 167 444	49 043 382

The impairment calculated on an individual basis corresponds to the impairment related to loans with objective evidence of impairment and to loans classified as "Higher Credit Risk." The objective evidence of impairment occurs when there is a default event, i.e., from the moment that a significant change occurs in the lender-borrower relationship and the lender is subject to a loss. The "Higher Credit Risk " corresponds to loans without objective evidence of impairment but that present higher risk signs (e.g. customers with overdue loans; litigations; higher risk rating / scoring; allocated to the Companies Monitoring Department).

The interest recognised as interest and similar income during the year ended 31 December 2012 in relation to these loans amounted to euro 825.4 million (31 December 2011: euro 759.0 million), which includes the effect of the unwind of discount in connection with overdue loans.

The Group carries out a renegotiation of a loan in order to maximize its recovery. A loan is renegotiated in accordance with selective criteria, based on the analysis of the overdue circumstances, or when there is a high risk that the loan will become overdue, and the client has made a reasonable effort to fulfill the contractual conditions previously agreed and is expected to have the capacity to meet the new terms agreed. The renegotiation normally includes the maturity extension, changes in the payment dates defined and / or amendment of the contracts' covenants. Whenever possible, the renegotiation includes obtaining new collaterals. The renegotiated loans are still subject to an impairment analysis resulting from the revaluation of the new expected cash flows, based in the new contract terms, updated at the original effective interest rate and taking into account the new collaterals.

As at 31 December 2012, loans and advances (excluding overdue loans and interest) includes euro 221 416 thousand of renegotiated loans (31 December 2011: euro 178 017 thousand). At the same date, the impairment regarding these renegotiated loans amounted to euro 16 363 thousand (31 December 2011: euro 17 137 thousand). The related interest recognized in the income statement amounted to euro 9 940 thousand (31 December 2011: euro 8 440 thousand).

The Group requires that some credit operations be collateralised, in order to mitigate credit risk. The more common type of collaterals held are mortgages and securities. The fair value of these collaterals is determined at the date the loan is advanced to customers, being periodically reassessed.

The collateral received regarding credit operations can be analysed as follows:

				(in thousands of euro)
	31.12.2012		31 .1 2.201 1
	C redit Value	Fair Value collateral	Cred it Valu e	F air Valu e collateral
Mortgage loans
Mortgages	10 951 831	1 0 930 789	11 325 239	11 306 989
Pawns	4 739	4 570	4 845	6 360
Not collateralised	177 252	-	280 028	-
	11 133 822	1 0 935 359	11 61 0 1 12	11 31 3 349
Individuals loans
Mortgages	31 0 561	291 897	299 256	289 356
Pawns	585 020	388 748	679 981	487 877
Not collateralised	1 732 199	-	1 736 245	-
	2 627 780	680 645	2 71 5 482	777 233
C ompanies loan s
Mortgages	10 034 387	9 122 921	10 489 853	9 489 1 88
Pawns	6 884 077	3 562 838	6 01 6 400	4 080 1 84
Not collateralised	19 71 8 668	-	20 378 979	-
	36 637 132	1 2 685 759	36 885 232	13 569 372
Total	50 398 734	24 301 763	51 21 0 826	25 659 954

Loans and advances to customers by interest rate type are analysed as follows:

		(in thousands of euro) 31 .1 2.201 2 31 .1 2.201 1

Fixed interest rate	8 1 26 91 3	6 955 398
Variable interest rate	42 271 821	44 255 428
	50 398 734	51 21 0 826

An analysis of finance leases by the period to maturity is presented as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Gross investment in finance leases, receivable
Up to 1 year	432 202	491 51 1
From 1 to 5 years	1 1 30 447	1 41 0 375
More than 5 years	1 373 1 1 6	1 535 201
	2 935 765	3 437 087
Unearned future finance income on finance leases
Up to 1 year	68 859	1 1 0 457
From 1 to 5 years	1 57 21 7	294 738
More than 5 years	79 41 3	27 241
	305 489	432 436
Net investment in finance leases
Up to 1 year	363 343	381 054
From 1 to 5 years	973 230	1 1 1 5 637
More than 5 years	1 293 703	1 507 960
	2 630 276	3 004 651
Impairment	( 1 44 097)	( 97 1 90)
	2 486 1 79	2 907 461

As at 31 December 2012 and 2011 there are no finance leases which represent individually more than 5% of the total minimum lease payments. There are no finance leases with contingent rents.

NOTE 26 – HELD-TO-MATURITY INVESTMENTS

The held-to-maturity investments can be analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
B onds and other fixed income securities
Issued by government and public entities	295 271	805 437
Issued by other entities	685 389	768 061
	980 660	1 573 498
Impairment losses	( 39 1 1 1 )	( 32 31 6)
	941 549	1 541 1 82

As at 31 December 2012 and 2011, the analysis of held-to-maturity investments by the period to maturity is presented as follows:

		(in thousands of euro)
	31 .1 2.201 2	31.12.2011
Up to 3 months	14 71 5	401 785
3 to 1 2 months	1 75 566	283 473
1 to 5 years	230 854	273 232
More than 5 years	559 525	61 5 008
	980 660	1 573 498

The analysis of the held-to-maturity investments by quoted and unquoted securities is presented as follows:

					(in thousands of euro)
	31 .1 2.201 2			31 .1 2.201 1
Quoted	Unquoted	Total	Quoted	Unquoted	Total

292 678	2 593	295 271	803 589	1 848	805 437
1 58 769	526 620	685 389	207 661	560 400	768 061
451 447	529 213	980 660	1 01 1 250	562 248	1 573 498

The changes occurred in impairment losses of held-to-maturity investments are presented as follows: (in thousands of euro)

	31 .1 2.201 2	31 .1 2.201 1
Balance at the beginning of the year	32 31 6	50 094
Charge for the year	7 260	1 5 500
Charge off	( 467)	( 33 1 31 )
E xchange differences and other	2	( 1 47)
Balance at the end of the year	39 1 1 1	32 31 6

The securities pledged as collateral by the Group are analysed in Note 46.

During the year ended 31 December 2008, the Group has reclassified non-derivative financial assets to the held-to-maturity investments category for an amount of euro 767.2 million, as follows:

							(in thousands of euro)
			On the transfer date
	Acquis ition value	Value of Fair value Reserve	Effective rate	Market value in December
		Book Value	Pos itive	Negative	future cas h flows a)		2008
Available-for-sale financial assets	551 897	522 71 5	424	( 29 607)	701 070	5,75%	485 831
Financial assets held for trading	243 1 1 4	244 530	-	-	408 976	1 1 ,50%	237 295
Bonds and other fix ed income securities	795 01 1	767 245	424	( 29 607)	1 1 1 0 046		723 1 26

a) Undiscounted capital and interest cash-flow s; future interest is calculated based on the forw ard rates at the date of reclassification.

b) Effective interest rate w as calculated based on the forw ard interest rates at the date of reclassification; the maturity considered w as the minimum betw een the call date, w hen applicable, and the maturity date of the financial asset.

If the reclassification of financial assets had not occurred, the impact in the financial statements of the Group would be as follows:

	(in thousands of euro)
31 .1 2.201 2	31 .1 2.201 1

947	(1 .347)
(73)	183
874	(1 .1 64)

(3.780)	(1 6.329)
1 .1 91	4.308
(2.589)	(1 2.021 )

The reclassification of financial assets held-for-trading as held-to-maturity investments was performed following the amendment to IAS 39 Financial instruments: recognition and measurement and IFRS 7 Financial instruments: disclosures, adopted by the Regulation (EU) n.º 1004/2008 issued in 15 October 2008. This reclassification was made due to the market conditions following the international financial crisis that characterised the year 2008, which was considered to be one of the rare circumstances justifying the application of the amendment to IAS 39.

Following the publication by the Bank of Portugal, in May 2011 OF Notice no. 3/2011, which has established new minimum levels for the Core Tier 1 ratio (9% at 31 December 2011 and 10% in 31 December 2012) and bearing in mind the need to achieve, from 2014, a stable funding ratio of 100%, according to the Memorandum of Economic and Financial Policies established between the Portuguese Government, the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF, the Group has decided during the second half of 2011 to sell a significant portion of the held-to-maturity investments portfolio. Under this decision, the securities to be sold were transferred to the available-for-sale financial assets portfolio and valued at market.

Taking into account that the reclassification and subsequent sale of those securities is attributable to the significant increase in the industry regulatory capital requirements, it qualifies as an exception to the taiting rules as established under paragraph AG 22 of IAS 39 'Financial Instruments: Recognition and Measurement'. On these basis and once the Group has the intention and ability to hold the remaining securities until their maturity, they remained classified on the held-to-maturity investments portfolio.

The effects of the securities reclassification in the Group consolidated financial statements, at the transfer date, can be analysed as follows:

							(in thousands of euro)
	Held-to-maturity investments					Available-for-sale financial assets
Acquisition Value	Fair value Reserves a)	Impairment	Book value	Acquisition Value	Fair value Reserves	Impairment	Book value
584 923	( 6 1 38)	( 50)	578 735	584 923	( 1 3 590)	( 50)	571 283

a) Remaining value of the fair value reserves at the transfer date for the held-to-maturity investments portfolio occurred w ith reference to 1 J une 2008.

NOTE 27 – DERIVATIVES FOR RISK MANAGEMENT PURPOSES

As at 31 December 2012 and 31 December 2011, the fair value of the derivatives for risk management purposes can be analysed as follows:

		31 .1 2.201 2		31 .1 2.201 1
	Hedging	Risk management	Total	Hedging	Risk management	Total
Derivatives for risk management purposes
Derivatives for risk management purposes - assets	1 53 897	362 623	51 6 520	21 0 027	300 063	51 0 090
Derivatives for risk management purposes - liabilities	( 43 581 )	( 81 61 8)	( 1 25 1 99)	( 82 208)	( 1 56 425)	( 238 633)
	1 1 0 31 6	281 005	391 321	1 27 81 9	1 43 638	271 457
Fair value component of assets and liabilities being hedged
Financial assets
Loans and advances to customers	22 391	-	22 391	23 839	-	23 839
	22 391	-	22 391	23 839	-	23 839
Financial liabilities
Deposits from banks	( 67 996)	-	( 67 996)	( 56 254)	-	( 56 254)
Due to customers	( 787)	( 90 099)	( 90 886)	( 838)	22 751	21 91 3
Debt securities issued	( 38 472)	47 631	9 1 59	( 38 497)	1 54 872	1 1 6 375
	( 1 07 255)	( 42 468)	( 1 49 723)	( 95 589)	1 77 623	82 034
	( 84 864)	( 42 468)	( 1 27 332)	( 71 750)	1 77 623	1 05 873

As mentioned in the accounting policy described in Note 2.4, derivatives for risk management purposes include hedging derivatives and derivatives contracted to manage the risk of certain financial assets and financial liabilities designated at fair value through profit or loss (and that were not classified as hedging derivatives).

Hedging derivatives

As at 31 December 2012 and 2011, the fair value hedge relationships present the following features:

							(in thousands of euro)
		31 .1 2.201 2
Derivative	Hedged item	Hedged risk	Notional	Fair value of (2) derivative	Changes in the fair value of the derivative in the year	Fair value component of the hedged item (1)	Changes in the fair value of the hedged item in the year (1)
Interest Rate Swap/ Currency			529 897	( 23 884)	( 1 79)	22 391	( 638)
Interest Rate Swap	Loans and advances to customers	Interest rate and FX
Interest Rate Swap	Deposits from banks	Interest rate	1 74 000	64 725	1 3 779	( 67 996)	( 1 1 744)
Interest Rate Swap	Due to customers	Interest rate	4 41 7	2 1 74	( 50)	( 787)	51
E quity / Interest Rate Swap	Debt security issued	Interest rate / Quote	1 656 777	67 301	4 929	( 38 472)	( 3 685)
			2 365 091	1 1 0 31 6	1 8 479	( 84 864)	( 1 6 01 6)

(1 ) Attributable to the hedged risk

(2) Includes accrued interest

							(in thousands of euro)
		31 .1 2.201 1
Derivative	Hedged item	Hedged risk	Notional	Fair value of (2) derivative	Changes in the fair value of the derivative in the year	Fair value component of the hedged item (1)	Changes in the fair value of the hedged item in the year (1)
Interest Rate Swap/ Currency Interest Rate Swap	Loans and advances to customers	Interest rate and FX	740 420	( 20 61 4)	( 36 705)	23 839	( 7 61 7)
Interest Rate Swap	Due to customers	Interest rate	4 41 7	1 978	( 1 060)	( 838)	91 8
Interest Rate Swap	Deposits from banks	Interest rate	1 86 300	53 435	28 658	( 56 254)	( 26 963)
Interest Rate Swap	Debt security issued	Interest rate	3 924 826	93 020	45 639	( 38 497)	( 1 3 344)
			4 855 963	1 27 81 9	36 532	( 71 750)	( 47 006)
(1 ) Attributable to the hedged risk

(2) Includes accrued interest

Changes in the fair value of the hedged items mentioned above and of the respective hedging derivatives are recognised in the income statement under net gains/ (losses) from financial assets and financial liabilities at fair value through profit or loss (See Note 7).

As at 31 December 2012, the ineffectiveness of the fair value hedge operations amounted to euro 2.5 million (31 December 2011: euro 10.5 million) and was recognised in the income statement. BES Group evaluates on an ongoing basis the effectiveness of the hedges.

Other derivatives for risk management purposes

Other derivatives for risk management purposes includes derivatives held to hedge assets and liabilities at fair value through profit and loss in accordance with the accounting policies described in Notes 2.5, 2.6 and 2.8 and that the Group did not classify as hedging derivatives.

The book value of financial assets and financial liabilities at fair value through profit and loss can be analysed as follows:

		31 .1 2.201 2						(in thousands of euro)
			Derivative				Assets/liabilities associated
Derivative	Financial assets/liabilities economically hedged	Notional	Fair Value	Changes in the fair value during the year	Fair Value	Changes in the fair value during the year	Book Value	Reimbursement amount at maturity date (1 )
	Liabilities
Interest Rate Swap	Due to customers	7 540 000	1 79 038	67 206	( 90 099)	( 1 1 1 024)	8 791 778	8 71 2 699
Interest Rate Swap/ FX Forward	Debt security issued	1 485 628	97 092	28 745	69 21 7	( 53 029)	303 386	370 71 4
Credit Default Swap	Debt security issued	346 845	5 81 0	44 774	( 22 202)	( 53 860)	376 308	358 728
E quity Swap	Debt security issued	405 1 55	( 3 662)	1 5 81 3	2 985	( 24 257)	339 252	357 237
E quity Option	Debt security issued	82 525	2 727	1 3	( 2 369)	( 5 339)	1 25 874	1 31 828
		9 860 1 53	281 005	1 56 551	( 42 468)	( 247 509)	9 936 598	9 931 206

								(in thousands of euro)
		31 .1 2.201 1

		Derivative			Assets/liabilities associated
Derivative	Financial assets/liabilities economically hedged	Notional	Fair Value	Changes in the fair value during the year	Fair Value	Changes in the fair value during the year	Book Value	Reimbursement amount at maturity date (1 )
	Liabilities
Interest Rate Swap	Due to customers	5 858 000	1 30 251	46 477	1 8 824	41 092	7 296 870	7 31 5 694
Interest Rate Swap/ FX Forward	Debt security issued	1 822 391	77 431	34 408	1 20 593	6 971	278 702	395 878
Credit Default Swap	Debt security issued	205 778	( 33 905)	( 37 349)	22 287	1 4 560	21 9 839	238 524
E quity Swap	Debt security issued	947 585	( 33 873)	( 25 271 )	1 5 371	23 203	334 881	349 886
E quity Option	Debt security issued	78 71 9	3 734	3 285	548	51 7	1 07 521	1 1 0 039
		8 91 2 473	1 43 638	21 550	1 77 623	86 343	8 237 81 3	8 41 0 021

As at 31 December 2011, the fair value of the financial liabilities at fair value through profits and losses, includes a positive cumulative effect of euro 167.1 million (31 December 2011: positive cumulative effect of euro 202.3 million) attributable to the Group's own credit risk. The change in fair value attributable to the Group's own credit risk resulted in the recognition, in 2012, of a loss amounting to euro 35.2 million (31 December 2011: profit of euro 50.9 million) (see Note 7).

As at 31 December 2012 and 2011, the analysis of derivatives for risk management purposes by the period to maturity, can be analysed as follows:

				(in thousands of euro)
		31 .1 2.201 2		31 .1 2.201 1
	Notional	Fair Value	Notional	Fair Value
Up to 3 months	1 674 024	1 3 571	3 01 4 403	24 059
3 to 1 2 months	2 361 702	25 889	2 688 223	38 1 59
1 to 5 years	7 205 288	205 686	7 024 951	82 709
More than 5 years	984 230	1 46 1 75	1 040 859	1 26 530
	1 2 225 244	391 321	1 3 768 436	271 457

NOTE 28 – NON-CURRENT ASSETS AND LIABILITIES HELD FOR SALE

As at 31 December 2012 and 31 December 2011, this balance is analysed as follows:

				(in thousands of euro)
	31 .1 2.201 2		31 .1 2.201 1
	Assets	Liabilities	Assets	Liabilities
Assets and liabilities of subsidiaries acquired exclusively
for resale purposes	731 767	1 75 945	291 248	1 40 950
Property held for sale	2 843 378	-	1 531 1 80	-
E quipment	2 524	-	2 203	-
Other	3 501	-	3 501	-
	2 849 403	-	1 536 884	-
Impairment losses	( 303 630)		( 1 81 449)	-
	2 545 773	-	1 355 435	-
	3 277 540	1 75 945	1 646 683	1 40 950

The amounts presented refer to (i) investments in entities controlled by the Group, which have been acquired exclusively with the purpose of being sold in the short term, and (ii) assets acquired in exchange for loans and discontinued branches available for immediate sale.

Assets / liabilities of subsidiaries acquired for resale primarily reflect assets and liabilities of companies acquired by the Group on loan restructuring operations and that the Group intends to sell within one year. However, given the current market conditions it was not possible to sell them within the expected time frame, but the sales effort and, in some cases, negotiations with potential buyers are still ongoing.

As at 31 December 2012, the amount of property held for sale includes euro 21 598 thousand (31 December 2011: euro 16 392 thousand) related to discontinued branches, in relation to which the Group recognised an impairment loss amounting to euro 11 193 thousand (31 December 2011: euro 7 699 thousand).

The changes occurred in impairment losses are presented as follows:

	(thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Balance at the beginning of th e year	181 449	89 825
C hanges in the consolidation scope C harge/ Write back of the year	11 6 654 40 1 78	- 1 23 062
C harge off E xchange differences and others	( 29 664) ( 4 987)	( 31 057) ( 381 )
Balance at the end of th e year	303 630	1 81 449

The changes occurred during 2012 and 2011 in non-current assets held for sale are presented as follows:

		(in thousands of euro)
	31.1 2.201 2	31 .1 2.201 1
Balance at the beginning of th e year	1 536 884	642 952
C hanges in the consolidation scope Additions	530 343 996 260	- 1 077 644
S ales	( 218 735)	( 1 90 452)
Other	4 651	6 740
Balance at the end of th e year 2 849 403		1 536 884

The Group has implemented a plan for the immediate sale of non-current assets held for sale. However, given the current market conditions it was not possible, in some situations, to sell them within the expected time frame. However, the Group continues to work towards the achievement of the sales plan established.

Following the sales occurred in 2012, the Group realised a loss amounting to euro 5 914 thousand (31 December 2011: euro 4 828 thousand).

NOTE 29 – INVESTMENT PROPERTIES

The movement in investment properties for the period ended 30 December 2012 can be analysed as follows:

		(thousands of euro)
	31 .1 2.201 2	31 .12.2011
Balance at the beginning of the period	-	-
Change in the scope of consolidation a)	446 135	-
Improvements	748	-
Other	( 4 895)	-
	441 988	-

a) Related with the entry of BES Vida, Fungere and Fungepi into the Group consolidation perimeter.

The significant increase in this caption in 2012, arises mainly on the full consolidation of BES Vida from 1 May 2012, as referred in Note 54.

The carrying amount of investment property is the fair value of the properties as determined by a registered and independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued. Fair values were determined having regard to recent market transactions for similar properties in the same locations as the Group's investment property when available.

Investment property includes a number of commercial properties that are leased to third parties. Most lease contracts do not have a specified term being possible for the lessee to cancel at any time. However, for a small portion of commercial properties leased to third parties on average the leases contain an initial non-cancellable period of 10 years. Subsequent renewals are negotiated with the lessee.

The investment properties fair value increase of euro 2.9 million, and the rental income from investment property amounting to euro 3.2 million are recognised in "Other operating income".

The direct operating costs, including maintenance and repair, arising from investment properties leased during 2012 and from investment properties that were not leased during 2012 amounted to euro 0.7 million and euro 0.2 million, respectively.

NOTE 30 – PROPERTY AND EQUIPMENT

As at 31 December 2012 and 2011, this balance is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Property
For own use	472 650	445 236
Improvements in leasehold property	228 098	240 603
Other	1 1 39	842
	701 887	686 681
Equipment
Computer equipment	308 497	292 982
Fixtures	1 42 759	1 40 21 6
Furniture	1 31 075	1 28 340
Security equipment	42 469	38 043
Office equipment	34 961	35 597
Motor vehicles	1 2 627	1 1 756
Other	6 1 35	4 929
	678 523	651 863
Other	624	643
	1 381 034	1 339 1 87
Work in progress
Improvements in leasehold property	344	1 422
Property for own use	396 237	31 8 1 60
E quipment	2 092	6 643
Other	54	260
	398 727	326 485
	1 779 761	1 665 672
Accumulated depreciation	( 848 1 39)	( 81 3 994)
	931 622	851 678

The movement in this balance was as follows:

				(in thousands of euro)
	Property	Equipment	Other	Work in progress	Total
Acquisition cost
Balance as at 31 December 201 0	685 065	632 1 07	765	261 934	1 579 871
Acquisitions	6 380	22 1 84	( 1 06)	77 299	1 05 757
Disposals	( 4 680)	( 1 2 077)	-	( 4)	( 1 6 761 )
Transfers (a)	( 1 68)	8 31 1	( 21 )	( 1 3 794)	( 5 672)
E xchange differences and other (b)	84	1 338	5	1 050	2 477
Balance as at 31 December 201 1	686 681	651 863	643	326 485	1 665 672
Acquisitions	5 41 0	27 61 5	-	1 1 5 775	1 48 800
Disposals	( 20 291 )	( 1 2 565)	( 1 6)	( 850)	( 33 722)
Transfers (a)	22 859	5 009	-	( 34 592)	( 6 724)
E xchange differences and other (b)	7 228	6 601	( 3)	( 8 091 )	5 735
Balance as at 31 December 201 2	701 887	678 523	624	398 727	1 779 761
Depreciation
Balance as at 31 December 201 0	274 409	496 1 73	252	-	770 834
Acquisitions	21 233	40 487	9	-	61 729
Disposals	( 4 571 )	( 1 1 995)	-	-	( 1 6 566)
Transfers (a)	( 1 355)	( 48)	-	-	( 1 403)
E xchange differences and other (b)	( 1 067)	459	8	-	( 600)
Balance as at 31 December 201 1	288 649	525 076	269	-	81 3 994
Acquisitions	22 006	39 906	1 0	-	61 922
Disposals	( 1 8 667)	( 7 765)	-	-	( 26 432)
Transfers (a)	( 1 1 1 0)	( 41 3)	-	-	( 1 523)
E xchange differences and other (b)	( 525)	685	1 8	-	1 78
Balance as at 31 December 201 2	290 353	557 489	297	-	848 1 39
Net amount as at 31 December 201 2	41 1 534	1 21 034	327	398 727	931 622
Net amount as at 31 December 201 1	398 032	1 26 787	374	326 485	851 678

(a) Property and equipment transferred to the balance other assets, referring to discontinued branches transferred to the balance non-current assets held for sale.

(b) Includes euro 8 743 thousand from property, euro 7 91 9 thousand from equipment and euro 6 647 thousand of accumulated depreciation related to the inclusion of BE S Vida in the consolidation scope.

The balance Equipment – Motor vehicles includes equipment acquired under finance lease agreements, whose payment schedule is as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Gross investment in finance leases, payable
Up to 1 year	1 6	1 5
1 to 5 years	-	1 6
	1 6	31
Overdue interest
Up to 1 year	1	3
1 to 5 years	-	1
	1	4
Overdue loans
Up to 1 year	15	12
1 to 5 years	-	1 5
	15	27

NOTE 31 – INTANGIBLE ASSETS

As at 31 December 2012 and 2011, this balance is analysed as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Goodwill	31 3 665	97 739
Value In Force (a)	1 09 937	-
Internally developed Software	58 1 86	47 644
Acquired to third parties Software Other	645 01 0 951	61 0 469 91 7
	645 961	61 1 386
Work in progress	33 701	26 41 3
	1 1 61 450	783 1 82
Accumulated amortisation Impairment losses	(596 345) (9 779)	(543 222) (9 628)
	555 326	230 332

(a) related to BE S Vida

The balance internally developed software includes the costs incurred by the Group in the development and implementation of software applications that will generate economic benefits in the future (see Note 2.14).

Goodwill is registered in accordance with the accounting policy described in Note 2.2. and is presented as follows:

		(in thousands of euro)
	31 .1 2.201 2	31.1 2.201 1
Subsidiaries
BES Vida	234 574	-
ES Inves tment Holding (a)	48 567	47 449
E S Gestion ( b)	2 459	22 142
Aman Bank	16 046	16 046
Concordia	1 756	1 605
Other	2 370	2 604
Other cash-generating units
Leasing and Factoring	7 893	7 893
	313 665	97 739
Impairment loss es	( 9 779)	( 9 628)
	303 886	88 11 1

(a) Company that holds E xecution Noble

(b) As at 31 December, 2011 this balance includes the amountof euro 2 459 thousand and euro 19 683 thousand related to Inversión B ank and G espastor, respectively, companies which were incorporated by fusion in ES Gestion, after the acquisition.

ES Investment Holding Limited

The recoverable amount of ES Investment Holding Limited has been determined using cash flow/dividends predictions based on (i) the financial budget approved by management covering a nineyear period, (ii) a terminal growth rate in line with the estimated nominal growth for the country where the company is located and (iii) a discount rate of 10.71% including a risk premium appropriated to the estimated future cash-flows.

The nine-year period for estimating the future cash-flows reflect the fact that the company was acquired in late 2010 and its business strategy is being redefined. It is expected that the company achieves a maturity stage only at the end of that time period.

Based on the above assumptions, the recoverable amount exceeded the carrying amount including goodwill.

ES Gestion

On 7 October 2011, Banco Popular and Banco Pastor announced their intention to begin a merger process. The merger of Banco Popular with Banco Pastor had a significant impact on the implementation of the exclusive distribution agreement established in 2010 between Banco Pastor and ESAF - Espirito Santo Financial Assets SGPS, SA (through ES Gestion), which included indemnity clauses in favor of the Group. During May 2012, ESAF (through ES Gestion) and Banco Pastor signed a termination contract, having the Group received a compensation, calculated based on the rules established on the distribution agreement, amounting to euro 30 million. The goodwill related to the acquisition of Gespastor in 2010 (subsequently merged into ES Gestion), amounting to euro 19.7 million, was written-off. The net gain of euro 10.3 million was recognised in 2012, under Other operation income (see Note 14).

Aman Bank

On 31 December 2011, the Group recognised an impairment of euro 8 023 thousand in goodwill recorded on the date of acquisition of Aman Bank. The impairment reflects the changes of the estimated future cash flows expected by the Group in this entity as a result of the political situation lived in Libya during 2011.

In 2012, this entity showed a positive trend, thus there was no need to reinforce the impairment loss recognised.

The movement in this balance was as follows:

					(in thousands of euro)
	Good will and Value In Force	Software	Other	Work in progress	Total
Acquisition cost
Balance as at 31 December 2010	95 61 6	600 037	1 3 1 2	35732	732 697
Acquisitions:
Internally developed				9178	9178
Acquired from third parties		12 5 21		27 083	39 604
Disposals		(360)	(409)		(769)
Transfers		45 0 88		(45088)
Variação cambial e outros movimentos	2 1 2 3	827	14	(492)	2472
Balance as at 31 December 2011 Acquisitions:	97 739	658113	917	26 413	783182
Internally developed		54		8 2 5 7	8 3 1 1
Acquired from third parties (a)	344 511	11 533		24152	380196
Disposals		(1414)		(103)	(1517)
Transfers		26 2 5 5		(26 255)
Exchange differences and other (b) (c)	(18648)	8655	34	1 2 3 7	(8722)
Balance as at 31 December 2012	423 602	703196	951	33 701	1161 450
Amortis ations
Balance as at 31 December 2010		496 211	1149		497 360
Amortisations of the period		46 0 68	129		46 197
Disposals		(57)	(409)		(466)
Exchange differences and other		122	9		131
Balance as at 30 June 2011		542 344	878		543 222
Amortisations of the period		46116	36		46152
Disposals		(1318)			(1318)
Exchange differences and other (d)		8288	$\mathbf{1}$		8 2 8 9
Balance as at 31 December 2012		595 430	915		596345
Impaiment
Balance as at 31 December 2010	1800				1800
Impairment losses	8 0 23				8023
Exchange differences and other	(195)				(195)
Balance as at 31 December 2011	9628				9628
Exchange differences and other	151				151
Balance as at 31 December 2012	9779				9779
Net amount as at 31 December 2012	413 823	107766	36	33 701	555326
Net amount as at 31 December 2011	88 11 1	115769	39	26 413	230332

(a) Goodwill and VIF relates to BE S Vida control acquisition.

(b) Includes euro 19 682 thousands regarding Gespastor goodwill derecognition.

(d) Includes euro 8 791 thousands from BE S Vida control acquisition (see Note 54).

NOTE 32 – INVESTMENTS IN ASSOCIATES

			The financial information concerning associates is presented in the following table:

										(in thousands of euro)
	As s ets		Liabilities		Equity		Income		Profit/(Los s ) for the period
	31.12.2012	31.12.2011	31.12.2012	31.12.2011	31.12.2012	31.12.2011	31.12.2012	31.12.2011	31.12.2012	31.12.2011
BES VIDA	-	5 658 690	-	5 601 926	-	56 764	-	390 722	-	( 1 07 968)
ES VÉNÉTIE	1 61 6 961	1 636 829	1 444 71 5	1 471 545	1 72 246	1 65 284	75 01 2	67 785	1 0 31 5	1 0 000
LOCARENT	285 740	321 581	277 404	31 4 938	8 336	6 643	94 21 3	97 798	2 595	3 01 7
BES SEGUROS	1 20 243	1 31 1 84	89 039	1 1 1 531	31 204	1 9 653	66 537	66 344	6 971	3 324
ESEGUR	39 1 21	41 679	28 526	31 524	1 0 595	1 0 1 55	50 980	54 478	595	600
EUROP ASSISTANCE	-	-	-	-	-	-	-	-	-	1 456
FUNDO ES IBERIA	1 3 894	1 4 252	1 69	266	1 3 725	1 3 986	466	298	( 1 06)	( 1 1 98)
SCI GEORGES MANDEL	1 1 271	1 1 292	9	1 1	1 1 262	1 1 281	957	980	591	61 0
BRB INTERNACIONAL	1 2 883	1 4 899	1 2 407	1 2 596	476	2 303	1 243	3 525	( 589)	84
AUTOPISTA PEROTE-XALAPA	650 1 79	441 723	521 1 67	308 586	1 29 01 2	1 33 1 37	-	-	( 6 634)	( 223)
ASCENDI GROUP	4 056 000	3 945 239	3 656 000	3 561 239	400 000	384 000	1 40 000	99 266	28 000	1 27 257
EMPARK	782 872	773 857	651 074	626 861	1 31 798	1 46 996	1 66 594	1 82 274	( 7 1 71 )	357
AUVISA - AUTOVIA DE LOS VIÑEDOS	21 6 000	248 201	222 000	21 4 586	( 6 000)	33 61 5	1 4 000	1 2 791	( 4 000)	1 494
UNICRE	305 005	307 856	1 79 941	1 94 01 2	1 25 064	1 1 3 844	231 070	241 045	1 1 256	8 745
MOZA BANCO	1 86 71 9	92 737	1 54 683	64 908	32 036	27 829	21 760	1 1 720	( 3 289)	595
RODI SINKS & IDEAS	43 446	45 21 1	20 537	24 1 96	22 909	21 01 5	1 9 528	1 6 71 9	1 609	902
SCUTVIAS	-	71 8 866	-	647 086	-	71 780	-	1 1 6 590	-	1 2 663

Note: Information adjusted for consolidation purposes

								(in thousands of euro)
	Participation Cos t		Economic Interes t		Book Value		Share of profits of as s ociates
	31.12.2012	31.12.2011	31.12.2012	31.12.2011	31.12.2012	31.12.2011	31.12.2012	31.12.2011
BES VIDA a)	-	537 497	-	50.00%	-	200 000	2 761	( 1 93 261 )
ES VÉNÉTIE	42 293	42 293	42.69%	42.69%	73 672	70 700	4 403	4 269
LOCARENT	2 967	2 967	50.00%	50.00%	4 478	3 632	1 298	1 509
BES SEGUROS	3 749	3 749	25.00%	25.00%	7 798	4 91 1	1 743	831
ESEGUR	9 634	9 634	44.00%	44.00%	1 1 506	1 1 31 2	262	264
EUROP ASSISTANCE	-	-	-	-	-	-	-	335
FUNDO ES IBERIA	7 087	8 708	38.67%	38.69%	5 649	5 262	261	( 292)
SCI GEORGES MANDEL	2 401	2 401	22.50%	22.50%	2 534	2 538	1 33	1 37
BRB INTERNACIONAL	1 0 659	1 0 659	25.00%	24.93%	1 1 9	335	( 21 6)	92
AUTOPISTA PEROTE-XALAPA b)	36 678	36 678	1 4.33%	1 4.33%	30 802	26 628	3 647	209
ASCENDI GROUP b)	1 79 772	1 68 31 0	28.66%	28.66%	1 86 955	1 69 900	6 566	7 1 30
EMPARK b)	52 429	55 01 3	1 5.92%	1 5.92%	50 090	54 661	( 2 1 93)	( 698)
AUVISA - AUTOVIA DE LOS VIÑEDOS	41 056	41 056	35.83%	35.83%	34 792	38 304	( 2 531 )	( 5)
UNICRE b)	1 1 497	1 1 497	1 7.50%	1 7.50%	21 886	1 9 923	1 970	1 530
MOZA BANCO	1 2 791	9 800	25.1 0%	25.1 0%	1 2 234	1 1 1 78	( 826)	1 49
RODI SINKS & IDEAS	1 240	1 240	24.81 %	24.81 %	8 1 29	7 528	1 94	-
SCUTVIAS b)	-	50 669	-	1 5.93%	-	50 669	-	-
OTHERS	1 40 507	1 30 1 03			1 30 338	1 29 51 8	( 9 1 60)	2 570
	554 760	1 1 22 274			580 982	806 999	8 31 2	( 1 75 231 )

a) In May 201 2, BES acquired the remaining 50% of BES Vida share capital, becoming fully consolidated in BES (see Note 54).

b) Although the Group's economic interest is less than 20% , this entities w ere consolidated under the equity method, as the Group exercises a significant influence over their activities.

The movement occurred in this balance is presented as follows:

		( in thousands of euro)
	31.1 2.2012	31 .12.2011
Balance at the beginning of th e year	806 999	961 908
Disposals	( 58 905)	( 2 021)
Acquisitions ( see Note 1 )	32 418	98 1 91
Share of profit of associates	8 312	( 38 956)
Impairment of associates	-	( 1 36 275)
F air value reserve from investments in associates	43 084	( 58 128)
Dividends received	( 3 423)	( 4 193)
C hanges in the consolidation scope	( 243 790)	-
E xchange differences and other	( 3 71 3)	( 13 527)
Balance at the end of th e year	580 982	806 999

The changes in consolidation scope in the first semester of 2012, arises mainly on the full consolidation of BES Vida from 1 May 2012, as referred in Note 54.

During the year ended in 31 December 2011, the Group recognised an impairment in the amount of euro 136 275 thousand regarding the investment in BES Vida, corresponding to the difference between the carrying amount of the investment and the estimated recoverable amount. The recoverable amount of BES Vida, as at 31 December 2011, was determined based on the Appraisal Value method. This methodology derives from Market Consistent Embbeded Value and market value attributable to the new business. Market Consistent Embbeded Value is a specific method of evaluating life insurance companies to determine the fair value of its contracts portfolio (insurance contracts and investment contracts) and is consistent with the general principles of the method of discounted future profits.

NOTE 33 – TECHNICAL RESERVES

	31.12.2012			(in thousands of euro) 31.12.2011
	Direct insurance	Reinsurance ceded	Total	Direct insurance	Reinsurance ceded	Total
Unearned premiums reserve	2 618	-	2 618	-	-	-
Life mathematical reserve	1 545 079	( 129)	1 544 950	-	-	-
Claims outstanding reserve	27 447	( 1 621)	25 826	-	-	-
Reserve for bonus and rebates	2 264	( 2 054)	210	-	-	-
	1 577 408	( 3 804)	1 573 604	-	-	-

The direct insurance and reinsurance ceded technical reserves are analysed as follows:

This caption arises on the full consolidation of BES Vida from 1 May 2012, as referred in Note 54.

In accordance with IFRS 4, the contracts issued by the Group for which there is only a transfer of financial risk, with no discretionary profit sharing, are classified as investment contracts and accounted for as financial liabilities (see Note 39).

The life mathematical reserve is analysed as follows:

		31 .1 2.201 2			(in thousands of euro) 31 .1 2.201 1
	Direct insurance	Reinsurance ceded	Total	Direct insurance	Reinsurance ceded	Total
Annuities	-	-	-	-	-	-
Traditional	31 979	( 1 29)	31 850	-	-	-
Saving contracts with profit sharing	1 51 3 1 00	-	1 51 3 1 00	-	-	-
	1 545 079	( 1 29)	1 544 950	-	-	-

The claims outstanding reserve is analysed as follows:

						(in thousands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Direct insurance	Reinsurance ceded	Total	Direct insurance	Reinsurance ceded	Total
Annuities	-	-	-	-	-	-
Traditional	1 4 31 6	( 1 621 )	1 2 695	-	-	-
Saving contracts with profit sharing	13 131	-	13 131	-	-	-
	27 447	( 1 621 )	25 826	-	-	-

The claims outstanding reserve represents unsettled claims occurred before the balance sheet date and include an estimated provision in the amount of euro 429 thousand for claims incurred before 31 December 2012, but not reported (IBNR).

The movements on the claims outstanding reserve of direct insurance business are analyzed as follows:

						(in thousands of euro)
		31 .1 2.201 2			31 .1 2.201 1
	Direct insurance	Reinsurance ceded	Total	Direct insurance	Reinsurance ceded	Total
Balance at the beginning of the period	-	-	-	-	-	-
Change in the scope of consolidation	30 1 94	( 1 257)	28 937	-	-	-
Plus incurred claims	-
Current year	362 235	( 1 1 01 )	361 1 34	-	-	-
Prior years	1 830	( 1 1 7)	1 71 3	-	-	-
Less paid claims related to
Current year	( 361 834)	640	( 361 1 94)	-	-	-
Prior years	( 4 978)	21 4	( 4 764)	-	-	-
Balance at the end of the period	27 447	( 1 621 )	25 826	-	-	-

The reserve for bonus and rebates corresponds to the amounts attributed to policyholders or beneficiaries of insurance and investment contracts with profit sharing, in the form of profit participation, which have not yet been specifically allocated and included in the life mathematical reserve.

The movement in the reserve for bonus and rebates for the year ended 31 December 2012 is as follows: (in thousands of euro)

	31 .1 2.201 2			31 .1 2.201 1
	Direct insurance	Reinsurance ceded	Total	Direct insurance	Reinsurance ceded	Total
Balance at the begginning of the period	-	-	-	-	-	-
Changes in the scope of consolidation	1 326	( 804)	522	-	-	-
Amounts paid	( 1 70)	1 87	1 7	-	-	-
E stimated attributable amounts	1 1 08	( 1 437)	( 329)	-	-	-
Balance at the end of the period	2 264	( 2 054)	21 0	-	-	-

The provision for rate commitments refers to the result obtained in the liability adequacy test.

NOTE 34 – OTHER ASSETS

As at 31 December 2012 and 2011, the balance other assets is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Debtors
Deposits placed with futures contracts	1 664 467	1 605 033
Recoverable government subsidies on mortgages loans	38 658	48 892
Debtors for unrealised capital of subsidiaries	7 000	7 000
Public sector	1 44 697	1 36 749
Debtors from the insurance business	567	-
Sundry debtors	628 668	629 030
	2 484 057	2 426 704
Impairment losses on debtors	( 234 987)	( 47 861 )
	2 249 070	2 378 843
Other assets
Gold, other precious metals, numismatics,
and other liquid assets	1 0 834	1 1 1 22
Other assets	1 85 994	84 700
	1 96 828	95 822
Accrued income	48 41 5	52 71 8
Deferred acquisition costs	1 1 4 766	1 22 849
Other sundry assets
Foreign exchange transactions pending settlement	1 6 1 79	2 489
Stock exchange transactions pending settlement	1 54 257	1 71 91 8
Other transactions pending settlement	200 037	99 202
	370 473	273 609
Assets recognised on pensions	1 4 602	1 07 01 4
	2 994 1 54	3 030 855

The sundry debtors' amount includes:

euro 100 million related with loans to Locarent – Companhia Portuguesa de Aluguer de Viaturas, S.A. (31 December 2011: euro 100 million);
euro 67.2 million of loans to entities within the Group's venture capital business, of which euro 30.7 million are provided for (31 December 2011: euro 70.5 million, of which euro 8.3 million were provided for);
and 94.3 million of loans and junior securities, following the transfer of loans/assets to companies and specialized funds, of which euro 87.7 million are provided for (31 December 2011: euro 36.2 million, of which euro 23.0 million were provided for).

The impairment losses on debtors caption includes also an amount of euro 86.6 million related to the impairment of international assets in the carbon market.

As at 31 December 2012, the balance prepayments and deferred costs includes the amount of euro 64 901 thousand (31 December 2011: euro 66 199 thousand) related to the difference between the nominal amount of loans granted to Group's employees under the collective labour agreement for the banking sector (ACT) and their respective fair value at grant date, calculated in accordance with IAS 39. This amount is charged to the income statement over the lower period between the remaining maturity of the loan granted, and the estimated remaining service life of the employee.

The stock exchange transactions pending settlement refer to transactions with securities on behalf of third parties, recorded on trade date and pending settlement, in accordance with the accounting policy described in Note 2.6.

The movements occurred in impairment losses are presented as follows:

		(in thousands of euro)
	31.12.2012	31 .12.201 1
Balance at the beginning of th e year	47 861	1 5 047
C harge of the year	1 94 142	39 1 65
C harge off	( 355)	( 2 91 6)
Write back of the year	( 1 3 427)	( 2 648)
Other	6 766	( 787)
Balance at the end of th e year	234 987	47 861

NOTE 35 – DEPOSITS FROM CENTRAL BANKS

The balance deposits from central banks is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
From the European System of Central Banks
Deposits	1 29 382	22 204
Other funds	1 0 1 50 000	8 764 000
	1 0 279 382	8 786 204
From other Central Banks
Inter-bank money market	-	21 650
Deposits	61 3 938	1 205 859
	61 3 938	1 227 509
	1 0 893 320	1 0 01 3 71 3

As at 31 December 2012, Other funds from the European System of Central Banks includes euro 10 156 million (31 December 2011: euro 8 764 million), covered by securities pledged as collaterals (see Note 46).

As at 31 December 2012, the balance Deposits from other Central Banks includes the amount of euro 431 million related to deposits with Angola Central Bank (31 December 2011: euro 1 098 million).

As at 31 December 2012 and 2011 the analysis of deposits from banks by the period to maturity is presented as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Up to 3 months	804 630	4 61 0 827
3 to 1 2 months	-	401 497
1 to 5 years	1 0 088 690	5 001 389
	1 0 893 320	1 0 01 3 71 3

NOTE 36 – DEPOSITS FROM BANKS

The balance deposits from banks is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Domestic
Deposits	383 720	481 579
Very short term funds	40 1 72	251 045
Repurchase agreements	66 579	1 70 850
Other funds	4 487	5 279
	494 958	908 753
International
Deposits	504 679	854 289
Loans	2 31 5 433	2 206 392
Very short term funds	1 94 475	1 21 259
Repurchase agreements	1 31 1 1 62	1 847 600
Other funds	267 951	301 067
	4 593 700	5 330 607
	5 088 658	6 239 360

As at 31 December 2012, this balance includes the amount of euro 212 million (31 December 2011: 219 million) related to deposits recognised on the balance sheet at fair value through profit or loss (see Note 27).

As at 31 December 2012 and 2011 the analysis of deposits from banks by the period to maturity is presented as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Up to 3 months	2 363 81 3	3 304 307
3 to 1 2 months	1 327 967	343 026
1 to 5 years	669 591	1 760 271
More than 5 years	727 287	831 756
	5 088 658	6 239 360

NOTE 37 – DUE TO CUSTOMERS

The balance due to customers is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Repayable on demand
Demand deposits	1 0 458 336	8 573 096
Time deposits
Time deposits	21 71 9 358	23 397 235
Other	56 391	1 1 0 21 0
	21 775 749	23 507 445
Savings accounts
Pensioners	28 022	1 5 049
Other	1 645 970	1 470 261
	1 673 992	1 485 31 0
Other funds
Repurchase agreements	242 1 50	267 801
Other	390 096	372 51 0
	632 246	640 31 1
	34 540 323	34 206 1 62

This balance includes the amount of euro 8 792 million (31 December 2011: euro 7 297 million) of deposits recognised in the balance sheet at fair value through profit or loss (see Note 27).

The analysis of the amounts due to customers by the period to maturity is as follows:

		(in thousands of euro)
	31.1 2.201 2	31.1 2.201 1
Repayable on demand	10 458 336	8 573 096
Term liabilities
Up to 3 months	11 024 506	14 31 0 762
From 3 months to 1 year	6 51 7 198	6 556 146
From1 to 5 years	6 1 69 147	4 640 082
More than 5 years	371 136	1 26 076
	24 081 987	25 633 066
	34 540 323	34 206 162

NOTE 38 – DEBT SECURITIES ISSUED

The balance debt securities issued is analysed as follows:

( in tho u sands o f e uro)
3 1 .1 2.20 1 2	3 1 .1 2.2 01 1
1 0 033 38 2	9 7 3 5 46 8
6 1 2 03 3	6 4 4 1 0 3
1 3 05 29 9	3 2 5 8 82 4
8 64 1 00	9 3 3 73 2
2 6 09 247	3 8 8 0 52 1
1 5 424 061	1 8 45 2 648

As at 31 December 2012, bonds issued by the Group includes the amount of euro 4 750 million of debt securities issued with a guarantee from the Portuguese Republic (31 December 2011: euro 1 572 million).

This balance includes the amount of euro 1 488 million (31 December 2011: euro 1 234 million) related with debt securities issued at fair value through profit or loss (see Note 27).

Under the covered bonds programme, which has a maximum amount of 10 000 million, the Group issued covered bonds for a total amount of euro 4 590 million. The main characteristics of these issues are as follows:

	Nominal value	Book value					Rating
Description	(in thousands of euro)	(in thousands of euro)	Issue date		Maturity date Interest payment	Taxa de J uro	Moody's	DBRS
BES Obrigações hipotecárias 3,375%	1 000 000	821 922	17/11/2009	17/02/2015	Annually	3.375%	Baa3	AL
BES Obrigações hipotecárias DUE J UL 17 1 050 000		-	07/07/2010	09/07/2017	Annually	6 month Euribor + 0.60%	Baa3	AL
BES Obrigações hipotecárias 21/07/2017 1 250 000		29	21/07/2010	21/07/2017	Annually	6 month Euribor + 0.60%	Baa3	AL
BES Obrigações hipotecárias DUE 4,6%	40 000	42 149	15/12/2010	26/01/2017	Annually	Fixed rate 4,6%	Baa3	AL
BES Obrigações hipotecárias HIPOT. 201	1 250 000	-	25/01/2011	25/01/2018	Annually	6 month Euribor + 0.60%	Baa3	AL
	4 590 000	864 100

These covered bonds are guaranteed by a cover assets pool, comprised of mortgage credit assets and limited classes of other assets, that the issuer of mortgage covered bonds shall maintain segregated and over which the holders of the relevant covered bonds have a statutory special creditor privilege. These conditions are set up in Decree-Law no. 59/2006, Regulations 5/2006, 6/2006, 7/2006 and 8/2006 of the Bank of Portugal and Instruction 13/2006 of the Bank of Portugal.

As at 31 December 2012, the mortgage loans that collateralise these covered bonds amount to euro 5 605.1 million (31 December 2011: euro 5 305.9 million) (see Note 25).

The changes occurred in debt securities issued during 2012 are analysed as follows:

						(in thous ands of euro)
	31 .1 2.201 1	Is sues	Rep ayments	Net repurchase	Other movements a)	31.1 2.201 2
E uro Medium Term Notes (E MTN)	9 735 468	4 682 456	( 3 370 609)	( 1 355 01 4)	341 081	10 033 382
Certificates of deposit	644 103	-	( 31 077)	- b)	( 993)	61 2 033
Bonds	3 258 824	30 000	( 1 991 107)	84 402	( 76 820)	1 305 299
Covered bonds	933 732	-	-	( 76 054)	6 422	864 1 00
Other	3 880 521	8 505 942	(9 526 639)	( 1 89 293)	( 61 284)	2 609 247
	18 452 648	1 3 218 398	(14 919 432)	(1 535 959)	208 406	15 424 061

a) Other movements include accrued interes t, corrections by hedging operations, fair value adjustments and foreign exchanges differences.

b) Certificates of deposit are presented at the net value, considering their short term maturity.

In accordance with the accounting policy described in Note 2.8, debt issued repurchased by the Group is derecognised from the balance sheet and the difference between the carrying amount of the liability and its acquisition cost is recognised in the income statement. Following the repurchases performed, as at 31 December 2012 and 31 December 2011, the Group recognised a gain of euro 74.1 million and of euro 155.3 million respectively (see Note 14 and 42).

The analysis of debt securities issued by the period to maturity is presented as follows:

	(in thous ands of euro)
	31 .12.2012	31 .12.2011
Up to 3 months	2 466 1 03	6 038 482
3 to 1 2 months	1 345 865	761 034
1 to 5 years	7 367 491	7 693 938
More than 5 years	4 244 602	3 959 194
	1 5 424 061	1 8 452 648

The main characteristics of debt securities issued during the year ended 31 December 2012, are presented as follows:

					31.1 2.201 2		(in thousands of euro)
Issuer	Designation		Currency	Issue date	Book value	Maturity	Interest rate
BE S	BE S DUE 201 3		E UR	2007	398 329	201 3	E uribor 3 months + 0.125%
BE S	BE S DUE J UN 14		E UR	2007	375 554	201 4	E uribor 3 months + 0.125%
BE S BE S	BE S E R 4% ABR05 BE S-E .RE NDA 4%	a) a)	E UR E UR	2005 2005	1 81 7 1 71 2	201 3 201 3	ixed rate 4.14% on 1st, 2nd and 8th years + swap rate from 3rd to 7th years ixed rate 4.15% on 1st, 2nd and 8th years + swap rate from 3rd to 7th years
BE S	BE S 5,625% 2014		E UR	2009	1 359 732	201 4	Fixed rate- 5.63%
BE S	BE S 3,375%		E UR	2009	821 922	201 5	Fixed rate3.375%
BE S	BE S DUE 02/201 3		E UR	2009	685 983	201 3	E uribor 3 months + 1%
BE S	BE S DUE 3,875%		E UR	201 0	436 458	201 5	Fixed rate3.875%
BE S BE S	BE S 21 /07/2017 BE S DUE 4,6%		E UR E UR	201 0 201 0	29 42 1 49	201 7 201 7	E uribor 6 months + 0.60% Fixed rate4.6%
BE S	BE S DUE J ULY 1 6		E UR	201 1	59 708	201 6	Fixed rate6.875%
BE S	BE S PORTUGAL NO	a)	E UR	201 1	1 9 578	201 4	E uribor 6 months + 3.5%
BE S	BE S PORTUGAL	a)	E UR	201 1	21 986	201 4	E uribor 6 months + 3.5%
BE S	BE S 3% 16/12/20		E UR	201 1	59 938	2021	Fixed rate3%
BE S BE S	BE S DUE FE V.1 4 BE S 4 ANOS 7%		E UR E UR	201 2 201 2	11 3 367 126 782	201 4 201 6	Fixed rate6.5% Fixed rate7%
BE S	BE S 6,9% 2024		E UR	201 2	68 281	2024	Fixed rate6.9%
BE S	BE S 26/1 0/2015		E UR	201 2	50 358	201 5	E uribor 6 months + 3.85%
BE S	BE S 5,875% 2015		E UR	201 2	738 81 5	201 5	Fixed rate: 5.875%
BE S (Cayman Branch)	BE S CAYMAN ZC 02/1 8/2028		E UR	2003	1 3 603	2028	Zero Coupon - E fective rate 5.50%
BE S (Cayman Branch)	BE S CAYMAN Step Up 08/27/13		E UR	2003	57 452	201 3	StepUp (1º cupão 3.00% )
BE S (Cayman Branch) BE S (Cayman Branch)	BE S CAYMAN Step Up 09/02/13 BE S CAYMAN Step Up 1 0/07/13		E UR E UR	2003 2003	77 461 77 437	201 3 201 3	StepUp (1º cupão 3.00% ) StepUp (1º cupão 3.10% )
BE S (Cayman Branch)	BE S CAYMAN - Zero cupon		E UR	2003	32 51 3	2028	Zero Coupon - E fective rate 5.81 %
BE S (Cayman Branch)	BIC CAYMAN 23 2001		E UR	2001	78 1 40	201 3	Fixed rate- 6.03%
BE S (Cayman Branch)	BIC CAYMAN 25 2001		E UR	2001	78 81 6	201 4	Fixed rate- 6.02%
BE S (Cayman Branch)	BIC CAYMAN 27 2001		E UR	2001	48 061	201 5	Fixed rate- 6.09%
BE S (Spain Branch)	Mortgage Bonds	a)	E UR	2008	153 762	201 4	Fixed rate4.5%
BE S (Spain Branch) BE S (Spain Branch)	Mortgage Bonds Mortgage Bonds	a) a)	E UR E UR	2008 2008	80 369 86 1 67	201 4 201 6	Fixed rate4% Fixed rate4.25%
BE S (Spain Branch)	Pagaré		E UR	201 2	600	201 3	Fixed rate4.42%
BE S (Spain Branch)	Pagaré		E UR	201 2	5 986	201 3	Fixed rate4.26%
BE S (Spain Branch)	Pagaré		E UR	201 2	499	201 3	Fixed rate4.26%
BE S (Spain Branch)	Pagaré		E UR	201 2	996	201 3	Fixed rate4.23%
BE S (Spain Branch)	Pagaré		E UR	201 2	699	201 3	Fixed rate3.71%
BE S (Spain Branch)	Pagaré		E UR	201 2	499	201 3	Fixed rate3.6%
BE S (Spain Branch) BE S (Spain Branch)	Pagaré Pagaré		E UR E UR	201 2 201 2	550 849	201 3 201 3	Fixed rate3.6% Fixed rate3.61%
BE S (Spain Branch)	Pagaré		E UR	201 2	499	201 3	Fixed rate3.58%
BE S (Spain Branch)	Pagaré		E UR	201 2	2 097	201 3	Fixed rate3.61%
BE S (Spain Branch)	Pagaré		E UR	201 2	596	201 3	Fixed rate3.68%
BE S (Spain Branch)	Pagaré		E UR	201 2	599	201 3	Fixed rate3.58%
BE S (Spain Branch)	Pagaré		E UR	201 2	749	201 3	Fixed rate3.58%
BE S (Spain Branch) BE S (Spain Branch)	Pagaré Pagaré		E UR E UR	201 2 201 2	1 098 549	201 3 201 3	Fixed rate3.61% Fixed rate3.59%
BE S (Spain Branch)	Pagaré		E UR	201 2	748	201 3	Fixed rate3.61%
BE S (Spain Branch)	Pagaré		E UR	201 2	498	201 3	Fixed rate3.61%
BE S (Spain Branch)	IM BE S E MPRE SAS 1 FTA BONO A		E UR	201 1	129 769	2043	E ur 1 m + 0.3%
BE S (London Branch)	Certificates of deposits		E UR	201 1	1 3 994	201 3	4.1 3% - 4.87%
BE S (London Branch) BE S (London Branch)	Certificates of deposits E MTN Series 1		USD E UR	201 1 201 2	597 448 140 085	201 3 201 4	4.79% - 5.47% Nominal rate 6.5%
BE S (London Branch)	E MTN Series 2		E UR	201 2	109 71 3	201 6	Nominal rate7%
BE S (London Branch)	E MTN Series 3		E UR	201 2	137 879	2022	Nominal rate5%
BE S (London Branch)	E MTN Series 4		E UR	201 2	46 240	201 4	Nominal rate6.5%
BE S (London Branch)	E MTN Series 5		E UR	201 2	39 784	201 6	Nominal rate7%
BE S (London Branch)	E MTN Series 6		E UR	201 2	199 234	2022	Nominal rate5%
BE S (London Branch) BE S (London Branch)	E MTN Series 7 E MTN Series 8		E UR E UR	201 2 201 2	148 644 43 395	201 9 201 5	Nominal rate5% Nominal rate6.75%
BE S (London Branch)	E MTN Series 9		E UR	201 2	21 5 207	201 5	Nominal rate6.75%
BE S (London Branch)	E MTN Series 10		E UR	201 2	554 081	201 9	Nominal rate5%
BE S (London Branch)	E MTN Series 11		E UR	201 2	66 367	201 5	Nominal rate6.75%
BE S (London Branch)	E MTN Series 12		E UR	201 2	330 243	201 9	Nominal rate5%
BE S (London Branch) BE S (London Branch)	E MTN Series 13 E MTN Series 14		E UR E UR	201 2 201 2	329 51 0 329 300	201 9 201 9	Nominal rate5% Nominal rate5%
BE S (London Branch)	E MTN Series 15		E UR	201 2	23 744	201 4	Nominal rate5.5%
BE S (Luxembourg Branch)	BE S Luxembourg 5.75% 28/06/1 7		E UR	201 2	1 9 703	201 7	Nominal rate- 5.75%
BE S (Luxembourg Branch)	BE S Luxembourg 3% 21 /06/22		USD	201 2	88 645	2022	Nominal rate- 3%
BE S (New York Branch)	Certificados de depósito		USD	201 1	591	201 3	4.41% - 5.53%
E S Concessões	Papel Comercial		E UR	201 2	73 500	201 3	Fixed rate6.1 440%
BE S Finance BE S Finance	E MTN 37 E MTN 39		E UR E UR	2004 2005	30 476 100 090	2029 201 5	Zero Coupon - E fective rate 5.30% E uribor 3 months + 0.23%
BE S Finance	E MTN 40	a)	E UR	2005	163 551	2035	xed from 1 st to 4th year to fixed rate 6.00% ; indexed to swap rate after 4th y
BE S Finance	E MTN 56		E UR	2009	36 686	2043	Zero Coupon
BE S Finance	E MTN 57		E UR	2009	34 556	2044	Zero Coupon
BE S Finance	E MTN 58		E UR	2009	32 580	2045	Zero Coupon
BE S Finance	E MTN 59		E UR	2009	42 403	2042	Zero Coupon
BE S Finance BE S Finance	E MTN 60 E MTN 61		E UR E UR	2009 2009	47 484 44 898	2040 2041	Zero Coupon Zero Coupon
BE S Finance	E MTN 62		E UR	2009	78 482	2039	Zero Coupon - Fixed rate3%
BE S Finance	E MTN 63		E UR	2009	34 984	2039	Fixed rate3%
BE S Finance	E xchangeable Bonds (Bradesco)	a)	USD	201 0	350 939	201 3	Fixed rate1.625%
BE S Finance	E xchangeable Bonds (E DP)	a)	E UR	201 0	392 753	201 5	Fixed rate3%
BE S Finance	E xchangeable Bonds	a)	USD	201 2	31 7 1 28	201 5	Fixed rate3.5%
BE S Finance	E MTN 64		E UR	2009	5 352	2040	Fixed rate3%
BE S Finance BE S Finance	E MTN 65 E MTN 66		E UR E UR	201 0 201 0	28 1 90 83 869	2040 2041	Fixed rate3% Fixed rate3%
BE S Finance	E MTN 67		E UR	201 0	63 906	2041	Fixed rate3%
BE S Finance	E MTN 69		E UR	201 0	3 892	2042	Fixed rate3%
BE S Finance	E MTN 70		E UR	201 0	98 568	2042	Fixed rate3%
BE S Finance	E MTN 71		E UR	201 0	22 855	2043	Fixed rate3%

					31 .1 2.201 2		(in thousands of euro)
Issuer	Designation		Currency	Issue date	Book value	Maturity	Interest rate
BE S Finance	E MTN 72		E UR	201 0	43 284	2044	Fixed rate3%
BE S Finance BE S Finance	E MTN 73 E MTN 79		E UR E UR	201 0 201 0	1 7 386 40 1 72	2046 2047	Fixed rate3% Fixed rate3%
BE S Finance	E MTN 80		E UR	201 0	1 573	2048	Fixed rate3%
BE S Finance	E MTN 81	a)	E UR	201 0	6 881	201 5	Fixed rate3.1 9%
BE S Finance	E MTN 82	a)	E UR	201 0	6 724	201 5	Fixed rate3.1 9%
BE S Finance BE S Finance	E MTN 83 E MTN 84	a) a)	E UR E UR	201 0 201 0	6 723 6 934	201 5 201 5	Fixed rate3.1 9% Fixed rate3.1 9%
BE S Finance	E MTN 85	a)	E UR	201 0	6 671	201 5	Fixed rate3.1 9%
BE S Finance	E MTN 91	a)	E UR	201 1	1 4 768	201 3	Fixed rate4.75%
BE S Finance	E MTN 92	a)	E UR	201 1	1 5 728	201 3	Fixed rate4.75%
BE S Finance	E MTN 93	a)	E UR	201 1	1 5 728	201 3	Fixed rate4.75%
BE S Finance BE S Finance	E MTN 94 E MTN 95	a) a)	E UR E UR	201 1 201 1	1 5 678 1 4 768	201 3 201 3	Fixed rate4.75% Fixed rate4.75%
BE S Finance	E MTN 96	a)	E UR	201 1	9 053	201 5	Fixed rate5.75%
BE S Finance	E MTN 97	a)	E UR	201 1	8 943	201 5	Fixed rate5.75%
BE S Finance	E MTN 98	a)	E UR	201 1	9 382	201 5	Fixed rate5.75%
BE S Finance BE S Finance	E MTN 99 E MTN 1 00	a) a)	E UR E UR	201 1 201 1	9 382 9 382	201 5 201 5	Fixed rate5.75% Fixed rate5.75%
BE S Finance	E MTN 1 01	a)	E UR	201 1	1 4 1 53	201 3	Fixed rate4.51%
BE S Finance	E MTN 1 02	a)	E UR	201 1	1 5 1 64	201 3	Fixed rate4.51%
BE S Finance	E MTN 1 03	a)	E UR	201 1	1 5 1 64	201 3	Fixed rate4.51%
BE S Finance	E MTN 1 04	a)	E UR	201 1	1 4 658	201 3	Fixed rate4.51%
BE S Finance BE S Finance	E MTN 1 05 E MTN 1 06	a) a)	E UR E UR	201 1 201 1	1 4 557 9 720	201 3 201 5	Fixed rate4.51% Fixed rate5.51%
BE S Finance	E MTN 1 07	a)	E UR	201 1	9 556	201 5	Fixed rate5.51%
BE S Finance	E MTN 1 08	a)	E UR	201 1	1 0 860	201 5	Fixed rate5.51%
BE S Finance	E MTN 1 09	a)	E UR	201 1	1 0 860	201 5	Fixed rate5.51%
BE S Finance	E MTN 1 1 0	a)	E UR	201 1	1 0 860	201 5	Fixed rate5.51%
BE S Finance	E MTN 1 1 1		USD	201 1	1 652	2038	Fixed rate3%
BE S Finance BE S Finance	E MTN 1 1 2 E MTN 1 1 3	a) a)	E UR E UR	201 1 201 1	52 443 68 899	201 4 2021	Fixed rate6% Fixed rate5%
BE S Finance	E MTN 1 1 4	a)	E UR	201 1	28 082	2021	Fixed rate5%
BE SI	BE SI OBCX R.ACCRUAL TARN MAR201 6		E UR	2006	1 069	201 6	Fixed rate6% + Range Accrual
BE SI	BE SI OB CX RE NDIM STE P UP APR1 4		E UR	2006	4	201 4	Fixed rateCrescente
BE SI	BE S INVE ST BRASIL 5.625% MAR201 5		USD	201 0	342 310	201 5	Fixed rate- 5.625%
BE SI BE SI	BE SI BRASIL 1 050 MAR201 3 BE SI SE P201 4 E QL LINKE D	a)	BRL E UR	201 0 201 0	510 3 630	201 3 201 4	Fixed rate- 1 0.5% aj)
BE SI	BE SI SE P201 4 ORIE NTE IV E QL	a)	E UR	201 0	1 2 612	201 4	ao)
BE SI	BE SI 1 .8% GOLD APR201 5	a)	E UR	201 1	1 832	201 5	Fixed rate1 .8% + Indexed to Gold
BE SI	BE SI CLN PORTUGUE SE RE P OCT201 4	a)	E UR	201 2	7 1 09	201 4	Portuguese Republic CLN
BE SI	BE SI BRASIL AG.CAYMAN 400 MAY201 3		USD	201 2	7 739	201 3	Fixed rate- 4%
BE SI BE SI	BE SI BRASIL AG.CAYMAN 400 J UN201 3 BE SI MAR201 3 CONVE R SP500	a)	USD E UR	201 2 201 2	5 381 704	201 3 201 3	Fixed rate- 4% SPX500 VIX Linked
BE SI	49-LCA - Letter		BRL	201 2	35 785	201 3	90% - 98.6% do CDI
BE SI	53-LF LetterFIN		BRL	201 0	47 231	201 5	1 00% - 1 1 6.5% do CDI
E S Investment Plc	E SIP OUT24 E SFP LINKE D CMS NOTE		E UR	2004	5 251	2024	Fixed rate+ Indexed to CMS
E S Investment Plc	E SIP CALL RANGE ACCRUAL MAY201 5		E UR	2005	1 258	201 5	Range accrual
E S Investment Plc E S Investment Plc	E SIP RANGE ACCRUAL J UN15 E SIP E UR LE VE RAGE SNOWBALL J UL1 5		E UR E UR	2005 2005	239 1 265	201 5 201 5	Range accrual Fixed rate+ Snowball h)
E S Investment Plc	E SIP AGO05 SE P35 CALLABLE INV FL		E UR	2005	1 0 393	2035	E uribor 1 2 months + i)
E S Investment Plc	E SIP LE VE RAGE SNOWBALL SE P2015		E UR	2005	2 424	201 5	Fixed rate+ Snowball h)
E S Investment Plc	E SIP CALL RANGE ACCRUAL NOV2017	a)	E UR	2005	1 216	201 7	Range accrual
E S Investment Plc	E SIP 30CMS-2CMS LKD NOTE NOV2036	a)	E UR	2005	1 7 361	2036	Fixed rate7.44% + Indexed to CMS
E S Investment Plc E S Investment Plc	E SIP E UR12M+1 6 BP APR201 6 E SIP J AN2017 INDE X BASKE T LKD	a)	E UR E UR	2006 2007	4 040 7 007	201 6 201 7	E uribor 1 2M j)
E S Investment Plc	E SIP MAY14 E QUITY BASKT LINKE D	a)	USD	2007	1 376	201 4	p)
E S Investment Plc	E SIP DE C201 5 BASKE T LINKE D	a)	E UR	2007	34	201 5	Indexed to BBVA. Credit Agricole and Fortis
E S Investment Plc	E SIP BARCLAYS LKD ZC MAR201 6	a)	E UR	2008	543	201 6	ZC + g)
E S Investment Plc E S Investment Plc	E SIP BARCLAYS LKD 6.30% MAR2016 E SIP APR201 3 AE GON SHARE LKD	a) a)	E UR E UR	2008 2008	1 47 2 869	201 6 201 3	Fixed rate6.30% + g) Indexed to AE GON
E S Investment Plc	E SIP J UN2013 CARBON NOTE S	a)	E UR	2008	3 744	201 3	an)
E S Investment Plc	E SIP LACAIXA E UR3M+2% MAR2011	a)	E UR	2009	2 428	201 6	E URIBOR3M +2% + g)
E S Investment Plc	E SIP J UL201 4 INFLATION LINKE D	a)	E UR	2009	1 452	201 4	Indexed to Inflação
E S Investment Plc	E SIP FE B2020 E QL LINKE D	a)	E UR	2009	10	2020	ad)
E S Investment Plc E S Investment Plc	E SIP CLN 5.45% OCT201 4 E SIP OCT2014 E QL	a) a)	E UR E UR	2009 2009	96 965	201 4 201 4	g) Indexed to Gazprom. Nokia e DU PONT
E S Investment Plc	E SIP CIMPOR CLN E UR3M DE C2014	a)	E UR	2009	3 760	201 4	g)
E S Investment Plc	E SIP FTD IBE RIA 5.95% DE C201 4	a)	E UR	2009	1 65	201 4	g)
E S Investment Plc	E SIP FTD IBE RIA II 5.5% DE C201 4	a)	E UR	2009	4 853	201 4	g)
E S Investment Plc	E SIP USD FTD IBE RIA 5.5% DE C201 4	a)	USD	2009	3 667	201 4	g)
E S Investment Plc E S Investment Plc	E SIP DE C201 4 SX5E LINKE D E SIP BRAZIL E QL LINKE D	a) a)	E UR E UR	2009 2009	3 285 3 540	201 4 201 4	Indexed to DJ E urostoxx 50 al)
E S Investment Plc	E SIP BSKT ME RC E ME RG E QL FE B2014	a)	E UR	201 0	2 694	201 4	d)
E S Investment Plc	E SIP WORST SOFT CMDT MAR201 3	a)	E UR	201 0	1 210	201 3	k)
E S Investment Plc	E SIP DJ US RE AL E ST LKD MAR201 5	a)	E UR	201 0	1 572	201 5	Indexed to Ishares DJ US Real State Index fund
E S Investment Plc	E SIP SOFT COMMODIT LKD APR201 3	a)	E UR	201 0	2 1 02	201 3	o)
E S Investment Plc E S Investment Plc	E SIP USDE UR FX LKD MAY201 5 E SIP CRDAGRI CL E UR6M+1.1 5 J UN1 5	a) a)	E UR E UR	201 0 201 0	287 2 517	201 5 201 5	Indexed to E UR/USD E uribor 6M ACT/360
E S Investment Plc	E SIP E DP BCP PT LKD J UN201 3	a)	E UR	201 0	1 369	201 3	w)
E S Investment Plc	E SIP FTD CRD LINKE D J UN201 5	a)	E UR	201 0	4 570	201 5	x)
E S Investment Plc	E SIP BRAZIL E QL MAY201 6	a)	E UR	201 0	3 307	201 6	ac)
E S Investment Plc	E SIP SX5E MAY1 4 E QL	a)	E UR	201 0	1 729	201 4	Indexed to E urostoxx
E S Investment Plc E S Investment Plc	E SIP J UN2013 BASKE T LINKE D E SIP BE S RE NDIM CRD LKD J UN201 3	a) a)	E UR E UR	201 0 201 0	3 674 1 9 697	201 3 201 3	5.70% + af) ag)
E S Investment Plc	E SIP TE LE COM LKD J UL201 3	a)	E UR	201 0	8 670	201 3	ah)
E S Investment Plc	E SIP BASKE T LKD J UL201 3	a)	E UR	201 0	3 799	201 3	ai)
E S Investment Plc	E SIP BASKE T LKD J UL201 4	a)	E UR	201 0	1 387	201 4	ai)
E S Investment Plc	E SIP AUG1 3 RANGE ACCRUAL	a)	E UR	201 0	1 002	201 3	Range accrual
E S Investment Plc E S Investment Plc	E SIP AUG2013 E URUSD FX LINKE D E SIP SE P201 3 CURRE NCIE S LINKE D	a) a)	E UR E UR	201 0 201 0	767 906	201 3 201 3	Indexed to Câmbio ap)
E S Investment Plc	E SIP SE P15 DIGITAL	a)	USD	201 0	1 1 15	201 5	Digital US Libor 3M
E S Investment Plc	E SIP J AN2011 DOW J ONE S INDUS LKD	a)	E UR	201 0	1 1 36	201 3	Indexed to INDU
E S Investment Plc	E SIP ASIA INDE X LKD SE P201 4	a)	E UR	201 0	1 557	201 4	ab)
E S Investment Plc	E SIP E DP PT CGD CRDLKD DE C201 3	a)	E UR	201 0	6 966	201 3	v)
E S Investment Plc E S Investment Plc	E SIP GOLD LKD OCT2013 E SIP E DP CRDLKD DE C201 3	a) a)	E UR E UR	201 0 201 0	1 383 4 593	201 3 201 3	Indexed to Gold E uribor 6m + 3.5% +Indexed to E DP
E S Investment Plc	E SIP NOV2013 SAN BBVA E QL LINKE D	a)	E UR	201 0	1 664	201 3	Indexed to BSCH e BBVA
E S Investment Plc	E SIP NOV2013 SANTANDE R LKD	a)	E UR	201 0	937	201 3	Indexed to BSCH

E S Investment Plc E SIP SAN BBVA LINKE D NOV2013 a) E UR 201 0 2 1 52 201 3 Indexed to BSCH and BBVA

		31 .1 2.201 2					(in thousands of euro)
Issuer	Designation		Currency	Issue date	Book value	Maturity	Interest rate
E S Investment Plc	E SIP DE C201 3 SAN BBVA E QL LINKE D	a)	E UR	201 0	931	201 3	Indexed to BSCH and BBVA
E S Investment Plc E S Investment Plc	E SIP NOV2013 ASIA PACIF BSKT LKD E SIP NOV2013 AME RLATIN BSKT LKD	a) a)	E UR E UR	201 0 201 0	2 394 1 839	201 3 201 3	u) t)
E S Investment Plc	E SIP DE C201 5 CRE DLINKE D BSCH	a)	E UR	201 1	1 570	201 5	Indexed to BBVA, Credit Agricole and Fortis
E S Investment Plc	E SIP CABAZ BRASIL LKD FE B14	a)	E UR	201 1	1 675	201 4	b)
E S Investment Plc E S Investment Plc	E SIP FE B1 6 5A E XPOSIC AFRICA LKD E SIP E XPOSIÇAO E URUSD LKD FE B1 4	a) a)	E UR E UR	201 1 201 1	1 1 77 1 216	201 6 201 4	c) FX E UR/USD Linked
E S Investment Plc	E SIP DUAL5% +AFRICA LKD FE B1 5	a)	E UR	201 1	1 1 58	201 5	s)
E S Investment Plc	E SIP 2 ANOS E URUSD LKD FE B13	a)	E UR	201 1	1 438	201 3	FX E UR/USD Linked
E S Investment Plc E S Investment Plc	E SIP SX5E LKD FE B1 4 E SIP CLN E DP MAR201 4	a) a)	E UR E UR	201 1 201 1	342 1 0 820	201 4 201 4	E urostoxx Linked 7% + CLN E DP
E S Investment Plc	E SIP WORST DIG COMM E QL MAR201 3	a)	E UR	201 1	822	201 3	e)
E S Investment Plc	E SIP MAR14 BE S E URUSD LINKE D	a)	E UR	201 1	1 488	201 4	FX USD/BRL Linked
E S Investment Plc E S Investment Plc	E SIP APR201 5 BE S E NE RGIA LINKE D E SIP MAR14 E URCHF LINKE D	a) a)	E UR E UR	201 1 201 1	1 0 1 35 1 364	201 5 201 4	E spirito Santo Rockefeller Global Linked FX E UR/CHF Linked
E S Investment Plc	E SIP CLN SANTANDE R MAR201 4	a)	E UR	201 1	6 260	201 4	6.35% + CLN BSCH SUB
E S Investment Plc	E SIP E DP MAR201 4 CLN	a)	E UR	201 1	1 6 053	201 4	6.5% + CLN E DP
E S Investment Plc	E SIP SX5E SPX LKD MAR2016	a)	E UR	201 1	1 658	201 6	E urostoxx Linked
E S Investment Plc E S Investment Plc	E SIP APR201 5 BE S E NE RGIA LKD E SIP MAR201 4 TE F FTE LINKE D	a) a)	USD E UR	201 1 201 1	2 592 607	201 5 201 4	E spirito Santo Rockefeller Global Linked Telefonica e France Telecom Linked
E S Investment Plc	E SIP APRIL201 4 HE ALTH CARE LKD	a)	E UR	201 1	8 020	201 4	Health Care Select Sector SPDR Fund Linked
E S Investment Plc	E SIP APR201 3 E URUSD LKD	a)	E UR	201 1	2 469	201 3	FX E UR/USD Linked
E S Investment Plc E S Investment Plc	E SIP SX5E SPX LKD APR2014 E SIP HE ALTH CARE LKD APR201 4	a) a)	E UR E UR	201 1 201 1	2 388 2 300	201 4 201 4	SX5E e SPX Linked f)
E S Investment Plc	E SIP TE F PT LKD 26APR201 4	a)	E UR	201 1	467	201 4	Telefonica e Portugal Telecom Linked
E S Investment Plc	E SIP E DP CLN J UN2014	a)	E UR	201 1	1 3 940	201 4	7% + CLN E DP
E S Investment Plc E S Investment Plc	E SIP STE P-UP APR201 3 E SIP TE F PT LKD APR201 4	a) a)	E UR E UR	201 1 201 1	1 204 462	201 3 201 4	Fixed STE P-UP Rate Telefonica e Portugal Telecom Linked
E S Investment Plc	E SIP E UR CLN J UN2014	a)	E UR	201 1	1 0 250	201 4	6.75% + CLN PT
E S Investment Plc	E SIP BE S MOME NTUM J UN2015	a)	E UR	201 1	6 737	201 5	E spirito Santo Momentum Fund Linked
E S Investment Plc	E SIP BSCH CLN J UN2014	a)	E UR	201 1	6 1 83	201 4	6.1 % + CLN BSCH
E S Investment Plc E S Investment Plc	E SIP BE S PROTE CÇAO J UN201 4 E SIP BRAZIL NOTE S LKD MAY201 1	a) a)	E UR E UR	201 1 201 1	52 823 3 949	201 4 201 6	m) FX E UR/BRL Linked
E S Investment Plc	E SIP BE S 5ANOS E FIC E NE RG J UNE 1 6	a)	E UR	201 1	3 049	201 6	r)
E S Investment Plc	E SIP PE TROBRAS CLN J UN201 4	a)	USD	201 1	2 284	201 4	3-Month USD libor + 3.70% + CLN PE TROBRAS
E S Investment Plc E S Investment Plc	E SIP PT II CLN J UN201 4 E SIP TE F PT J UN201 4	a) a)	E UR E UR	201 1 201 1	8 1 70 750	201 4 201 4	7% + CLN PT Telefonica e Portugal Telecom Linked
E S Investment Plc	E SIP J AN2013 BE S BRASIL 18M	a)	E UR	201 1	7 467	201 3	E WZ Linked
E S Investment Plc	E SIP SANTANDE R CLN J UN2014	a)	E UR	201 1	2 898	201 4	6.4% + CLN BSCH
E S Investment Plc	E SIP BE S PROTE CÇAO II J UN201 4	a)	E UR	201 1	24 818	201 4	Inflation and E uribor 1 2M Liked
E S Investment Plc E S Investment Plc	E SIP E UR PRICING POWE R 5Y J UL1 4 E SIP 2Y BULLISH CAB VS USD J UL1 3	a) a)	E UR E UR	201 1 201 1	1 816 1 451	201 6 201 3	z) Fx linked
E S Investment Plc	E SIP ASCE NDI CLN J UL201 3	a)	USD	201 1	5 063	201 3	7,25% + Ascendi CLN
E S Investment Plc	E SIP SX5E J UL1 5 E QL	a)	E UR	201 1	1 510	201 5	E urostoxx Linked
E S Investment Plc E S Investment Plc	E SIP AUG1 4 E S ROCKE FE LLE RGLO LKD E SIP BARCLAYS CLN SE P201 4	a) a)	E UR E UR	201 1 201 1	940 2 981	201 4 201 4	E spírito Santo Rockfeller Linked 6% + Barclays CLN
E S Investment Plc	E SIP AUG1 4 INFLATION LKD	a)	E UR	201 1	41 261	201 4	Inflation Linked
E S Investment Plc	E SIP AUG2014 ALE MANHA E QL LINKE D	a)	E UR	201 1	513	201 4	q)
E S Investment Plc E S Investment Plc	E SIP E SFP CLN J UL201 3 E SIP BRL FXL LINKE D SE P201 6	a) a)	USD E UR	201 1 201 1	5 550 1 636	201 3 201 6	E SFP CLN Fx linked
E S Investment Plc	E SIP SE P14 TRY LKD	a)	E UR	201 1	1 594	201 4	Fx linked
E S Investment Plc	E SIP BANCO POPULAR CLN SE P201 4	a)	E UR	201 1	3 391	201 4	8,75% + POPULAR CLN
E S Investment Plc	E SIP BCO POPULAR CLN SE P201 4	a)	E UR	201 1	1 798	201 4	8,75% + POPULAR CLN
E S Investment Plc E S Investment Plc	E SIP SE P201 4 INFLATION+E URIBOR E SIP SE P201 4 PSI20 E QL 4	a) a)	E UR E UR	201 1 201 1	29 076 2 926	201 4 201 4	Inflation and E uribor 1 2M Liked PSI20 Linked
E S Investment Plc	E SIP DE C201 3 BE S4% GLOBAL LINKE D	a)	E UR	201 1	29 366	201 5	aq)
E S Investment Plc	E SIP BCO POPULAR CRDLK SE P201 4	a)	E UR	201 1	7 755	201 4	9.40% + Banco Popular CLN
E S Investment Plc E S Investment Plc	E SIP OCT2014 WORLD INVE STM E QL 3 E SIP PT CLN DE C201 4	a) a)	E UR E UR	201 1 201 1	1 835 22 569	201 4 201 4	j) 1 1% + PT CLN
E S Investment Plc	E SIP AUTOCALLABLE 201 4	a)	E UR	201 1	2 679	201 4	ar)
E S Investment Plc	E SIP TE LE COM ITALIA CLN DE C2014	a)	E UR	201 1	5 628	201 4	7.25% + Telecom Italia CLN
E S Investment Plc E S Investment Plc	E SIP E DP USD CLN DE C201 4 E SIP AUTOCALL HIGH DIVD DE C201 4	a) a)	USD E UR	201 1 201 1	1 613 1 874	201 4 201 4	8.5% + E DP CLN at)
E S Investment Plc	E SIP WORLD INVE STME NT II DE C2014	a)	E UR	201 1	1 023	201 4	j)
E S Investment Plc	E SIP TE LE FONICA CLN DE C201 4	a)	E UR	201 1	4 862	201 4	7.1 5% + Telefonica CLN
E S Investment Plc E S Investment Plc	E SIP PORTUGUE SE RE P CLN DE C2021 E SIP UTILITIE S SHS DE C2018	a) a)	E UR E UR	201 1 201 1	25 643 508	2021 201 8	6% + Portuguese Republic CLN au)
E S Investment Plc	E SIP UTILIT FINANCIALS SHS DE C1 8	a)	E UR	201 1	2 460	201 8	n)
E S Investment Plc	E SIP PT CRDLKD DE C201 3	a)	E UR	201 2	1 6 473	201 3	7.75% + PT CLN
E S Investment Plc E S Investment Plc	E SIP E WZ E QL J AN201 5 E SIP FE B1 6 E MP NORDICAS E QL	a) a)	E UR E UR	201 2 201 2	1 001 1 993	201 5 201 6	E WZ Linked y)
E S Investment Plc	E SIP AUG2014 CABAZ MOE DAS 1 2-1 4	a)	E UR	201 2	7 408	201 4	av)
E S Investment Plc	E SIP CABAZMOE DA VS E UR FE B15 FXL	a)	E UR	201 2	754	201 5	av)
E S Investment Plc E S Investment Plc	E SIP E MPRE S CHINE SAS FE B201 7 E QL E SIP E DP MAR201 4 CLN 2	a) a)	E UR E UR	201 2 201 2	1 437 1 4 569	201 7 201 4	aw) 6.9% + E DP CLN
E S Investment Plc	E SIP TWIN WIN E URUSD MAR201 5	a)	E UR	201 2	1 037	201 5	E UR/USD Linked
E S Investment Plc	E SIP LUXURY GOODS LKD MAR2015	a)	E UR	201 2	1 619	201 5	ax)
E S Investment Plc	E SIP PSI20 LKD MAR2015	a)	E UR	201 2	3 443	201 5	PSI20 Linked
E S Investment Plc E S Investment Plc	E SIP DUAL UPGRADE MAR201 4 E SIP DIG CPN E URIBOR 3M MAR201 5	a) a)	E UR E UR	201 2 201 2	1 560 1 685	201 4 201 5	ay) Digital E URIBOR 3M
E S Investment Plc	E SIP APR201 9 RE COV BASKE T LINKE D	a)	E UR	201 2	1 75	201 9	az)
E S Investment Plc	E SIP BBVA LKD APR201 3	a)	E UR	201 2	2 472	201 3	BBVA Linked
E S Investment Plc E S Investment Plc	E SIP APR201 5 PSI20 LINKE D E SIP APR2020 BE S PROTE CÇAO LKD	a) a)	E UR E UR	201 2 201 2	1 334 340	201 5 2020	PSI20 Linked Inflation Linked
E S Investment Plc	E SIP BBVA LINKE D APR201 3	a)	E UR	201 2	1 038	201 3	BBVA Linked
E S Investment Plc	E SIP PT 3YR CRE DIT LKD J UN15	a)	E UR	201 2	1 0 613	201 5	7.75% + PT CLN
E S Investment Plc E S Investment Plc	E SIP BBVA LKD MAY201 3 E SIP PT 3YR CRE DIT LINKE D J UN1 5	a) a)	E UR E UR	201 2 201 2	1 075 1 4 482	201 3 201 5	BBVA Linked 7.75% + PT CLN
E S Investment Plc	E SIP BE S TE CNOLOGIA J UN201 5 E QL	a)	E UR	201 2	4 791	201 5	ba)
E S Investment Plc	E SIP SANTANDE R J UN201 5	a)	E UR	201 2	779	201 5	BSCH Linked
E S Investment Plc	E SIP E XPOSIÇAO PE TROLE O J UN2015	a)	E UR	201 2	565	201 5	Brent Linked
E S Investment Plc E S Investment Plc	E SIP BE S E XPOS PE TROLE J UN1 5 E QL E SIP RE COV BSKT LINKE D J UN2019	a) a)	E UR E UR	201 2 201 2	2 278 758	201 5 201 9	Brent Linked bb)
E S Investment Plc	E SIP E DP 3YR CRE DIT LINKE D J UN1 5	a)	E UR	201 2	1 5 853	201 5	8% + E DP CLN
E S Investment Plc	E SIP SANTANDE R J UL1 5 E QL	a)	E UR	201 2	806	201 5	BSCH Linked
E S Investment Plc E S Investment Plc	E SIP SX5E J UN1 5 E QL E SIP E QUITY LKD AUG2016	a) a)	E UR E UR	201 2 201 2	60 3 740	201 5 201 6	SX5E Linked l)
E S Investment Plc	E SIP E DP 3YR II CRE DIT LKD J UN1 5	a)	E UR	201 2	1 3 058	201 5	8% + E DP CLN
E S Investment Plc	E SIP J UL1 5 E QL	a)	E UR	201 2	839	201 5	SPX500 Linked
E S Investment Plc	E SIP TE LE COM ITALIA CLN SE P2015	a)	E UR	201 2	4 754	201 5	7% + TE LE COM ITALIA CLN

							(in thousands of euro)
					31 .1 2.201 2
Issuer	Designation		Currency	Issue date	Book value	Maturity	Interest rate
E S Investment Plc	E SIP E -COMME RCE E QTY LKD AUG201 6	a)	E UR	201 2	4 545	201 6	ak)
E S Investment Plc	E SIP PT TE LE CO CLN S E P201 5	a)	E UR	201 2	6 751	201 5	7% + PT CLN
E S Investment Plc	E SIP S E P201 5 E DP LKD	a)	US D	201 2	1 602	201 5	7.45% + E DP CLN
E S Investment Plc	E SIP SE P201 5 CRE SCIM IMOBILI LKD	a)	E UR	201 2	3 475	201 5	IY R Linked
E S Investment Plc	E SIP E DP CLN SE P201 5	a)	E UR	201 2	8 369	201 5	6.25% + E DP CLN
E S Investment Plc	E SIP BRL E QL SE P201 7	a)	E UR	201 2	3 306	201 7	E UR/BRL Linked
E S Investment Plc	E SIP BE S E XP COMMOD AGRICOL E QL4	a)	E UR	201 2	8 500	201 4	o)
E S Investment Plc	E SIP COMMOD AGRICOL E QL5 OCT201 5	a)	E UR	201 2	4 665	201 5	k)
E S Investment Plc	E SIP BASKE T LINKE D OCT201 9	a)	E UR	201 2	399	201 9	am)
E S Investment Plc	E SIP BRAZILIAN NOTE S IV OCT201 7	a)	E UR	201 2	1 665	201 7	E UR/BRL Linked
E S Investment Plc	E SIP IBE RIA NOV201 5	a)	E UR	201 2	2 206	201 5	IBE X+PSI20 Linked
E S Investment Plc	E SIP TURKISH LIRA E QL6 OCT201 5	a)	E UR	201 2	1 547	201 5	E UR/TRY Linked
E S Investment Plc	E SIP BASKE T OCT201 9 E QL2	a)	E UR	201 2	1 282	201 9	RE P e BSCH Linked
E S Investment Plc	E SIP NOV201 3 BARCLAY S LKD	a)	E UR	201 2	1 092	201 3	Barclays Linked
E S Investment Plc	E SIP COMMODITIE S NOV201 5	a)	E UR	201 2	4 021	201 5	bc)
E S Investment Plc	E SIP SX5E AUTOCALL NOV201 5	a)	E UR	201 2	2 366	201 5	SX5E Linked
E S Investment Plc	E SIP DE C201 5 CRDLKD E UR FTD TE LE	a)	E UR	201 2	1 3 977	201 5	bd)
E S Investment Plc	E SIP DE C201 2 BAS KE T FTD	a)	E UR	201 2	1 497	201 5	be)
E S Investment Plc	E SIP DE C201 6 AUTOCALL BRASIL	a)	E UR	201 2	6 881	201 6	bf)
E S Investment Plc	E SIP DE C201 5 SX7P LINKE D	a)	E UR	201 2	940	201 5	SX7P Linked
E S Investment Plc	E SIP DE C201 7 E DP PT TE L.ITAL LK	a)	E UR	201 2	1 934	201 7	bg)
E S Investment Plc	E SIP DE C201 5 CRDLKD E DP	a)	E UR	201 2	986	201 5	5.25% + E DP CLN
E S Investment Plc	E SIP DE C201 5 CRDLKD E DP PT	a)	E UR	201 2	3 832	201 5	6.50% + E DP PT CLN
E S Investment Plc	E SIP DE C201 5 CRDLKD E DP PT TLCM	a)	E UR	201 2	1 873	201 7	bg)
E S Investment Plc	E SIP DE C201 7 RE NAULT PT LINKE D	a)	E UR	201 2	4 1 64	201 7	8.65% + RE NAULT PT CLN
BE SIL	BE SIL STE P UP 09/02/1 3		E UR	2003	1 882	201 3	Fixed rate- 6.44%
BE S IL	BE SIL STE P UP 1 0/07/1 3		E UR	2003	1 766	201 3	Fixed rate- 6.44%
E SPLC	BE S051 3_23E BE SE SPLC23/05/201 3		E UR	201 2	29 822	201 3	Fixed rate1 .764%
E SPLC	BE S01 1 3_44E BE SE SPLC1 1 /01 /201 3		E UR	201 2	25 247	201 3	Fixed rate3.2%
E SPLC	BE S01 1 3_50E BE S E S PLC04/01 /201 3		E UR	201 2	1 50 266	201 3	Fixed rate0.75%
E SPLC	BE S01 1 3_51 E BE SE SPLC08/01 /201 3		E UR	201 2	1 30 222	201 3	Fixed rate0.75%
E SPLC	BE S01 1 3_52E BE S E S PLC07/01 /201 3		E UR	201 2	20 1 1 1	201 3	Fixed rate3.5%
E SPLC	BE S01 1 3_54E BE S E S PLC1 4/02/201 3		E UR	201 2	1 23 1 00	201 3	Fixed rate0.70%
E SPLC	BE S01 1 3_55E BE S E S PLC1 8/02/201 3		E UR	201 2	1 27 1 01	201 3	Fixed rate0.70%
E SPLC	BE S01 1 3_56E BE SE SPLC25/02/201 3		E UR	201 2	1 20 077	201 3	Fixed rate0.70%
E SPLC	BE S01 1 3_53E BE S E S PLC06/1 1 /201 3		USD	201 2	27 474	201 3	Fixed rate4.45%
E SPLC	BE S031 3_59E BE SE SPLC1 1 /03/201 3		E UR	201 2	1 60 047	201 3	Fixed rate0.70%
E SPLC	BE S031 3_60E BE SE SPLC1 5/03/201 3		E UR	201 2	1 40 035	201 3	Fixed rate0.70%
Lusitano Mortgage no. 6	Class A Mortgage Backed Floating Rate Notes		E UR	2007	520 802	2060	E uribor + 0.20%
Lusitano Mortgage no. 6	Class B Mortgage Backed Floating Rate Notes		E UR	2007	6 501	2060	E uribor + 0.30%
Lusitano Mortgage no. 6	Class C Mortgage Backed Floating Rate Notes		E UR	2007	1 0 003	2060	E uribor + 0.45%
Lusitano SME no. 1	Class A asset backed floating rate notes		E UR	2006	1 00 590	2028	E uribor + 0.1 5%
Lusitano SME no. 1	Class B asset backed guaranteed floating rate notes		E UR	2006	35 941	2028	E uribor + 0.05%
Lusitano SME no. 1	Class C asset backed floating rate notes		E UR	2006	29 960	2028	E uribor + 2.20%

1 5 424 061

a) Liabilities at fair value through profit and loss or with embedded derivatives.

b) Indexed to a basket composed byPetrobras, Companhia Siderurgia Nacional, Vale SA, Itau Unibanco and Banco Bradesco shares.

c) Indexed to a basket composed by MSCI Daily TR Net E merging Markets E gypt USD and FTSE /J SE Africa TOP40 index.

d) Indexed to basket composed by E ricsson, Komatsu, Santander, Sanofi-Aventis and ABB LTD shares.

e) Indexed to a basket of Commodities composed by Copper, Oil, Sugar, e Gold.

f) Indexed to a basket composed by Gilead sciences, Celgene corp, Mylan Inc,Teva Pharmaceutical Ind Ltd and Amgen Inc shares.

g) Indexed to credit risk

h) Indexed to previous cupon + spread - E uribor i) Indexed to reverse floater

j) Indexed to a basket composed by Dow J ones E urostoxx 50, S&P 500 and Nikkei 225 index.

k) Indexed to a basket composed by Commodities Corn, Wheat e Soybean.

l) Indexed to a basket composed by Vodafone, Sanofi, Novasrtis e McDonald's shares.

m) 4% + Indexed to E urostat Consumer Price Index (CPI) (excl. Tobaco) for the E urozone

n) Indexed to a basket composed by Telefonica, Santander, Deutsche Bank and Deutsche Telecom shares.

o) Indexed to a basket of Commodities Corn, Wheat e Sugar

p) Indexed to a basket composed by BBVA e BSCH shares.

q) Indexed to a basket composed by Daimler, DB, E .ON shares.

r) Indexed to a basket Philips, Siemens, Iberdrola e Veolia shares. s) 5% + Indexed to a basket composed by MSCI Daily TR Net E merging Markets E gypt USD and FTSE /J SE Africa TOP40 index.

t) Indexed to a basket composed by MSCI Brasil, Chile and Mexico index.

u) Indexed to a basket composed HSCE I, MSCI India, KOSPI200 and SP ASX500 index.

v) Indexed to E DP, PT and CGD loans.

w) Indexed to a basket composed by E DP, BCP e PT shares.

x) Indexed to a Credit (First to default) about Santander, PT INT FIN, E DP and Brisa.

y) Indexed to a basket composed by Telenor, Aker Solutions, Tele2 and Volvo shares.

z) Indexed to a basket composed by Oracle, SAP, Caterpillar, Komatsu, BHP Billiton and Mitsubishi shares. aa) Indexed to a basket composed by BBVA, RE PSOL e E NE L shares.

ab) Indexed to a basket HSCE I, MSCI India, MSCI Taiwan and SP ASX200 index.

ac) Indexed to a basket composed by Petrobras, Gerdau, Vale, Itau Unibanco and Banco Bradesco shares.

ad) Indexed to a basket composed by France Telecom e Deutsche Telekom shares. ae) Indexed to a basket composed by E urostoxx, SP500, Nasdaq1 00 and iShare MSCI Brazil Fund index.

af) Indexed to Brisa, E DP, PT e Credit Agricole loans.

ag) Indexed to PT, E DP e Brisa loans.

ah) Indexed to a basket composed by Telefonica, Deutsche Telecom and Vodafone shares.

ai) Indexed to a basket composed by Louis Vuitton, Nokia, Bayer and E ON shares. aj) Indexed to a basket composed by E urostoxx50, SP500, Nasdaq1 00 and E WZ index.

ak) Indexed to a basket composed by Amazon, E bay, Fedex and United Parcel Services shares.

al) Indexed to a basket composed by Petrobras, Companhia Siderurgia Nacional, Itau Unibanco and Banco Bradesco shares.

am) Indexed to a basket composed by Nestle, Roche, Deutsche Telecom and Societe Generale shares.

an) Indexed to a basket composed by Petroleo Brasileiro, Banco Bradesco, Companhia Vale Rio Doce shares. ao) Indexed to a basket composed byTOPIX, HANG SE NG, HSCE I, NIFTY , KOSPI2 and MSCI Singapore index.

ap) Indexed to a basket composed by E UR/AUD, E UR/CAD, E UR/NZD, E UR/INR currency.

aq) 4% + Barclays Capital Armour E UR 7% Index

ar) Indexed to a basket composed by Ambev, TAM, Brasil Foods, Itau Unibanco, Gerdau and Cia E nergética de Minas Gerais shares. as) Indexed to a basket composed by Telefonica, Banco Santander, BBVA and Banco Popular shares.

at) Indexed to a basket composed by Vodafone Group PLC, Sanofi, Novartis AG and MacDonald's Corp shares.

au) Indexed to a basket composed by Telefonica, Iberdrola, E NI spa and Deutsche Telecom shares.

av) Indexed to a basket composed by E UR/USD; E UR/NOK and E UR/SE K currency.

aw) Indexed to a basket composed by China Life Insurance Co, Petrochina Co and China Mobile LTD shares. ax) Indexed to a basket composed by Anglo American, Cie Financiere Richemont, Porsche, Pernod Ricard, LVMH Moet Hennessy shares.

ay) Indexed to a basket composed by FedE X, Macy's, Harley Davidson, Red Hat and Swiss RE shares.

az) Indexed to a basket composed by Telefonica, BNP Paribas, Vodafone Group PLC and E .ON shares.

ba) Indexed to a basket composed by HTC, Panasonic and Samsung shares.

bb) Indexed to a basket composed by Telefonica, Repsol, Santander and France Telecom shares.

bc) Indexed to a basket of Commodities Copper, Gold and Palladium bd) Indexed to Portugal Telecom, Telefonica and Telecom Italia loans.

be) Indexed to a basket Gás Natural, Renault and Telecom Italia loans.

bf) Indexed to a basket Petroleo Brasileiro, Companhia Vale Rio Doce, Itau Unibanco and BRF Brasil Foods SA shares. bg) Indexed to a basket Portugal Telecom, E DP and Telecom Italia loans.

NOTE 39 – INVESTMENT CONTRACTS

	(in thousands of euros)
	31 .1 2.201 2	31 .1 2.201 1
Fixed rate investment contracts	1 298 933	-
Investment contracts in which the financial risk is borne by the policyholder	2 1 1 4 630	-
	3 41 3 563	-

The liabilities arising from investment contracts are analysed as follows:

The significant increase in this caption in 2012, arises mainly on the full consolidation of BES Vida from 1 May 2012, as referred in Note 54.

In accordance with IFRS 4, the insurance contracts issued by the Group for which there is only a transfer of financial risk, with no discretionary participating features, are classified as investment contracts.

The movement in the liabilities arising out from the investment contracts with fixed rate is analysed as follows:

	(in thous ands of euros )
	31 .1 2.201 2	31 .1 2.201 1
B alance at the begginning of the period	-	-
Change in the cons olidation s cope	376 975	-
Net depos its received	1 01 6 704	-
B enefits paid	( 1 44 049)	-
Technical interes t charged	49 303	-
B alance at the end of the period	1 298 933	-

The movement in the liabilities arising out from the investment contracts in which the financial risk is borne by the policyholder is analysed as follows:

	( in thous ands of euros )
	31 .1 2.201 2	31 .1 2.201 1
B alance at the begginning of the period	-	-
Change in the cons olidation s cope	1 868 1 67	-
Net depos its received	253 300	-
B enefits paid	( 1 93 1 24)	-
Technical res ult	1 86 287	-
B alance at the end of the period	2 1 1 4 630	-

NOTE 40 – PROVISIONS

As at 31 December 2012 and 31 December 2011, the balance of provisions presents the following movements:

		(in thousands of euros)
	31 .1 2.201 2	31 .1 2.201 1
B alan ce at th e begginning of the year	1 90 450	214 706
Change in the consolidation scope	16 945	-
Charge/ Write back of the year	56 978	6 860
Charge off	( 1 7 954)	( 35 678)
E xchange differences and others	( 9 469)	4 562
B alan ce at th e en d o f the year	236 950	1 90 450

Provisions for an amount of euro 236 950 thousand (31 December 2011: euro 190 450 thousand) are intended to cover certain contingencies related to the Group's activities, the more relevant being as follows:

Contingencies in connection with the exchange, during 2000, of Banco Boavista Interatlântico shares for Bradesco shares. The Group has provisions for an amount of approximately euro 60.3 million (31 December 2011: euro 61.4 million) to cover these contingencies;
Contingencies in connection with legal processes established following the bankruptcy of clients which might imply losses for the Group. Provisions for an amount of euro 67.7 million as at 31 December 2012 (31 December 2011: euro 22.5 million) were established to cover these losses;
Contingencies for ongoing tax processes. To cover these contingencies, the Group maintains provisions of approximately euro 36.1 million (31 December 2011: euro 36 million);
The remaining balance of approximately euro 72.9 million (31 December 2011: euro 70.6 million), is maintained to cover potential losses in connection with the normal activities of the Group, such as frauds, robbery and on-going judicial cases.

NOTE 41 – INCOME TAXES

The Bank and its subsidiaries domiciled in Portugal are subject to taxation in accordance with the corporate income tax code (IRC) and to local taxes.

Income taxes (current or deferred) are recognised in the income statement except in cases where the underlying transactions have been reflected in equity items. In these situations, the corresponding tax is also charged to equity, not affecting the net profit for the year.

The 2012 current tax calculation for the Group's entities covered by the Portuguese tax legislation, used an IRC and City surcharge ("Derrama Municipal") rate of 26.5%, according to Law no. 107-B/2003, of 31 December and Law no. 2/2007, of 15 January (which approved the Local Finance Law, "Lei das Finanças Locais"), plus an additional fee up to 5% on the State surcharge ("Derrama Estadual") over taxable income above 10 million, according to Law No. 64-B/2011, of 30 December (2012 State Budget Law, "Lei do Orçamento do Estado para 2012").

Additionally, in the 2012 income tax calculation was considered the Decree-Law no. 127/2011, of 31 December, which regulates the transfer of pension benefits responsibilities to the National Social Security and that, in conjunction with Article 183 of Law no. 64-B/2011, of 30 December (2012 State Budget Law), established a special tax deductibility for expenses and other changes in equity arising from such transfer:

The negative equity variation from the accounting policy change on recognizing actuarial gains and losses which were previously deferred, will be fully deductible in equal parts during 10 years from 1 January 2012. This impact is recorded in equity;
The settlement effect (determined by the difference between the liability measured in accordance with the IAS 19 criteria and the criteria established in the agreement) will be fully deductible, from 1 January 2012, for purposes of determining taxable income, in equal parts, according to the average life expectancy of pensioners whose responsibilities were transferred (16 years in case of BES). This impact is recorded in the income statement.

Deferred tax assets arising from the transfer of pension benefits responsibilities and the accounting policy change on recognizing actuarial gains and losses will be recovered during 10 and 16 years, through equity and income statement, respectively.

The 2011 current tax calculation used an IRC and City surcharge ("Derrama Municipal") rate of 26.5%, according to Law no. 107-B/2003, of 31 December and Law no. 2/2007 , of 15 January (which approved the Local Finance Law, "Lei das Finanças Locais"), plus an additional fee of 2.5% on the State surcharge ("Derrama Estadual") provided for under the additional Stability and Growth Program measures ("Programa de Estabilidade e Crescimento (PEC)") approved by Law no. 12-A/2010, of 30 June.

Regarding current tax, the offshore branch located in Madeira Free Trade Zone, in accordance with Article 33 of the Statute of Fiscal Benefits, had an exemption in corporate tax until 31 December 2012. For the purposes of this exemption, it is considered that at least 85% of taxable income of the entire business of the Bank results from activities performed outside the institutional framework of Madeira Free Zone.

Deferred taxes are calculated based on tax rates anticipated to be in force at the temporary differences reversal date, which corresponds to the rates enacted or substantively enacted at the balance sheet date.

To the extent that the change in rates provided by Law 64-B/2011 of 30 December 2011 (State Budget Law for 2012), applies only to the years ended 2012 and 2013 and it is estimated that in these years no reversal of temporary differences with significant net effect will occur, it was not taken into account in the calculation of the deferred taxes as at 31 December 2011 and 2012. Thus, for the years in question, deferred tax was calculated based on the aggregate rate of 29%, resulting from the sum of IRC (25%), City surcharge (1.5%) and State surcharge (2.5%) rates above referred. Deferred tax assets relating to tax losses is determined based on the income tax rate of 25%.

The Portuguese Tax Authorities are entitled to review the annual tax return of the Group subsidiaries domiciled in Portugal for a period of four years. Hence, it is possible that some additional taxes may be assessed, mainly as a result of differences in interpretation of the tax law. However, the Board of Directors of the Group subsidiaries domiciled in Portugal are confident that there will be no material differences arising from tax assessments within the context of the financial statements.

Income taxes of the Group's entities located abroad are subject to the tax laws prevailing in the respective countries where they operate.

						(in thousands of euro)
	Assets		Liabilities		Net
	31 .1 2.201 2	31 .1 2.201 1	31 .1 2.201 2	31 .1 2.201 1	31 .1 2.201 2	31 .1 2.201 1
Financial instruments	74 257	1 1 1 81 5	( 1 06 71 7)	( 95 91 0)	( 32 460)	1 5 905
Loans and advances to customers impairment	402 750	333 721	-	-	402 750	333 721
Property and equipment	271	285	( 8 901 )	( 9 068)	( 8 630)	( 8 783)
Intangible assets	1 02	1 02	-	-	1 02	1 02
Investments in subsidiaries and associates	-	-	( 1 63 986)	( 54 572)	( 1 63 986)	( 54 572)
Provisions	54 356	33 357	-	-	54 356	33 357
Pensions	257 901	290 1 50	( 35 507)	( 39 825)	222 394	250 325
Long-term service benefits	7 726	8 1 85	-	-	7 726	8 1 85
Debt securities issued	-	204	( 1 01 0)	-	( 1 01 0)	204
Other	1 6 81 5	7 645	( 4 1 1 7)	( 2 052)	1 2 698	5 593
Tax losses brought forward	80 654	1 7 587	296	-	80 950	1 7 587
Deferred tax asset / (liability)	894 832	803 051	( 31 9 942)	( 201 427)	574 890	601 624
Assets / liabilities compensation for deferred taxes	( 1 65 927)	( 90 894)	1 65 927	90 894	-	-
Deferred tax asset / (liability), net	728 905	71 2 1 57	( 1 54 01 5)	( 1 1 0 533)	574 890	601 624

The deferred tax assets and liabilities recognised in the balance sheet as at 31 December 2012 and 2011 can be analysed as follows:

The Group has evaluated the deferred taxes recoverability considering the expectation of future taxable profits.

The Group does not recognise deferred tax assets on tax losses brought forward by certain subsidiaries, because it is not expectable that they will be recovered in a foreseeable future. A detail of the tax losses brought forward for which no deferred tax assets were recognised, is presented as follows:

Deadline	Tax losses brought forward
to deduction	31 .1 2.201 2	31 .1 2.201 1
201 1	-	6 235
201 2	1 1 55	1 1 55
201 3	826	826
201 4	-	58 21 6
	1 981	66 432

The changes in deferred taxes were recognised as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Balance at the beginning of the period	601 624	425 026
Recognised in the income statement	52 434	1 33 666
Recognised in fair value reserve (1 )	( 56 61 7)	74 738
Recognised in equity - other comprehensive income	9 882	( 1 5 551 )
Recognised in other reserves	( 30 280)	( 29 1 89)
Changes in the scope of consolidation	( 291 )	-
E xchange differences and other	( 1 862)	1 2 934
Balance at the end of the period (Assets/ (Liabilities))	574 890	601 624

(1 ) The amount recognised in the consolidated statement of comprehensive income as at 31 December 201 1 includes, additionally, the deferred tax recognised on the fair value reserves of associates in the amount of euro 5 51 2 thousands (costs).

The deferred tax recognised in the income statement and reserves, during 2012 and 2011 is analysed as follows:

				(in thousands of euro)
	31 .1 2.201 2		31 .1 2.201 1
	Recognised in (profit) /loss	Recognised in reserves	Recognised in (profit) /loss	Recognised in reserves
Financial Instruments	( 1 6 371 )	60 205	8 959	( 74 738)
Loans and advances to customers impairment	( 69 029)	-	( 81 1 41 )	-
Property and equipment	( 1 53)	-	( 456)	-
Investments in subsidiaries and associates	81 689	( 3 528)	( 1 7 523)	2 71 2
Provisions	( 20 343)	-	289	-
Pensions	4 005	( 6 354)	( 22 680)	1 2 839
Health care - SAMS	-	-	202	-
Long-term service benefits	459	-	( 33)	-
Debt securities issued	1 21 4	-	( 28 01 8)	-
Other	( 1 633)	-	4 830	1 083
Tax losses brought forward	( 32 272)	26 692	1 905	28 1 06
Deferred taxes	( 52 434)	77 01 5	( 1 33 666)	( 29 998)
Current taxes	1 35 350	( 75 1 04)	72 1 47	4 497
Total	82 91 6	1 91 1	( 61 51 9)	( 25 501 )

The current tax accounted for in reserves during 2012 includes, a tax credit of euro 5 553 thousands on State and City surcharges related with the pension benefits tax regime impact in accordance with Article 183 of Law no. 64-B/2011, of 30 December and an IRC tax credit of euro 7 773 thousands from negative equity changes (primarily related to pension benefits) and euro 59 247 thousand of non realised gains in fair value reserve in assurance activity.

The reconciliation of the income tax rate can be analysed as follows:

				(in thousands of euro)
	31 .1 2.201 2		31 .1 2.201 1
	%	Amount	%	Amount
Profit before tax es		202 752		( 57 723)
Banking levy		27 91 0		30 489
Profit before tax for the tax rate reconciliation		230 662		( 27 234)
Statutory tax rate	31.5		29.0
Income tax calculated based on the statutory tax rate		72 659		( 7 898)
Tax-exempt dividends	(5.3)	( 1 2 1 47)	…	( 36 677)
Tax-exempt profits (off shore)	(1 4.1 )	( 32 449)	…	( 82 728)
Tax-exempt gains	27.7	63 887	…	58 886
Non-taxable share of profit in associates	(1 .0)	( 2 41 0)	(6.9)	1 879
Non deductible costs	8.8	20 375	…	39 41 0
Utilization of tax losses brought forward for which no deferred tax assets had been
constituted	(26.0)	( 59 968)	…	( 27 678)
Non deductible losses arising from subsidiaries acquisition	1 4.4	33 230	…	-
Other	(0.1 )	( 261 )	24.6	( 6 71 3)
	…	82 91 6	…	( 61 51 9)

Following the Law No. 55-A/2010 of 31 December, was established a Banking levy, which is not elegible as a tax cost, and whose regime was extende by Law no. 64-B/2011, of 30 December. As at 31 December 2012, the Group recongnised a cost of euro 27.9 million (31 December 2011: euro 30.5 million, which was included in Other operating income and expenses – Direct and indirect taxes (see Note 14).

NOTE 42 – SUBORDINATED DEBT

The balance subordinated debt is analysed as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Bonds	774 473	81 5 01 9
Perpetual Bonds	65 343	1 46 21 6
	839 81 6	961 235

The main features of the subordinated debt are presented as follows:

							(in thousands of euro)
					31 .1 2.201 2
Issuer	Designation	Currency	Issue Date	Amount Issued	Carrying amount	Interest Rate		Maturity
BE S Finance	Subordinated perpetual bonds	E UR	2002	30 843	23 642	E uribor 3M + 2.83%	201 3	a)
BE S Finance	Subordinated perpetual bonds	E UR	2004	95 767	20 439	4.50%	201 5	a)
BE S Finance	Bonds	E UR	2008	20 000	20 1 69	E uribor 3M + 1 %	201 8
BE S I	Bonds	BRL	2008	1 683	1 888	1 .30%	201 3
BE S I	Bonds	BRL	2007	21 1 34	20 349	1 .30%	201 4
BE S I	Bonds	BRL	2008	1 0 099	1 1 628	1 .30%	201 5
BE S I	Bonds	E UR	2005	60 000	1 6 885	5.33%	201 5
BE S I	Bonds	E UR	2003	1 0 000	263	5.50%	2033
BE S	Bonds	E UR	2004	25 000	22 594	E uribor 6M + 1 .25%	201 4
BE S	Bonds	E UR	2008	41 550	3 548	E uribor 3M + 1 %	201 8
BE S	Bonds	E UR	2008	638 450	595 21 4	E uribor 3M + 8.5%	201 9
BE S	Bonds	E UR	2008	50 000	50 050	E uribor 3M + 1 .05%	201 8
BE S	Bonds	E UR	201 1	8 1 74	8 234	Fixed rate 1 0%	2021
BE S Vida	Bonds	E UR	2002	45 000	23 651	E uribor 3M + 2.20%	2022
BE S Vida	Subordinated perpetual bonds	E UR	2002	45 000	21 262	E uribor 3M + 2.50%	201 3	a)
				1 1 02 700	839 81 6

a) Call option date

The changes occurred in subordinated debt during 2012 are analysed as follows:

					(in thousands of euro)
	Balance as at 31 December 201 1	Repayments	Net Repurchases	Other movements (a)	Balance as at 31 December 201 2

Bonds	81 5 01 9	( 9 547)	( 57 323)	26 324	774 473
Perpetual Bonds (b)	1 46 21 6	-	( 1 03 599)	22 726	65 343
	961 235	( 9 547)	( 1 60 922)	49 050	839 81 6

a) Other movements include accrued interest, fair value and foreign exchange translation adjustments and the amount of euro 48 605 thousands related w ith BES Vida integration.

b) In the issues w ere considered the amounts corresponding to debt replacements previously repurchased by the Group.

In accordance with the accounting policy described in Note 2.8, debt issued repurchased by the Group is derecognised from the balance sheet and the difference between the carrying amount of the liability and its acquisition cost is recognised in the income statement. Following the repurchases performed during 2012, the Group has recognised a gain in the amount of euro 39.6 million (2011: euro 315.4 million) (see Note 14 and 38).

NOTE 43 – OTHER LIABILITIES

As at 31 December 2012 and 31 December 2011, the balance other liabilities is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Creditors
Public sector	1 35 693	1 72 523
Deposit accounts	1 73 955	1 1 2 543
Sundry creditors
Creditors from transactions with securities	89 357	87 439
Suppliers	49 61 9	50 306
Creditors from factoring operations	3 509	2 770
Creditors from insurance operations	2 040	-
Other sundry creditors	228 052	21 1 647
	682 225	637 228
Accrued ex penses
Long-term service benefits (see Note 1 6)	28 691	27 477
Other accrued expenses	1 27 430	1 65 924
	1 56 1 21	1 93 401
Deferred income	22 267	36 829
Other sundry liabilities
Stock exchange transactions pending settlement	92 363	31 5 1 81
Foreign exchange transactions pending settlement	1 9 999	23 947
Other transactions pending settlement	1 72 627	1 1 4 437
	284 989	453 565
	1 1 45 602	1 321 023

NOTE 44 – SHARE CAPITAL, SHARE PREMIUM, TREASURY STOCK AND PREFERENCE SHARES

Ordinary shares

As at 31 December 2012, the Bank's share capital in the amount of euro 5 040.1 million, was represented by

4 017 928 471 ordinary shares, which were subscribed and fully paid by the following entities:

	% Capital
	31.12.2012	31.12.2011
BESPAR - Sociedade Gestora de Participações Sociais, S.A.	35.29%	35.00%
Credit Agricole, S.A.	10.81%	8.63%
Bradport, SGPS, S.A. ⁽¹⁾	4.83%	4.83%
Silches ter International Investors Limited	5.76%	5.67%
E spírito S anto Financial Group, S.A.	0.74%	2.27%
PT Prestações - Mandatária de Aquisições e Gestão de Bens, S.A. ⁽²⁾	2.09%	2.09%
Outros	40.48%	41.51%
	1 00.00%	100.00%

(1) P ortugue se Law c ompany wholly owne d by B anco B rade sco (B razil), to which are attributable the voting rights.

(2) C ompany fully and indire ctly dominated by Portugal Tele com, SGP S, SA.

On May 2012, BES issued 2 556 688 387 ordinary shares at an issue price of euro 0,395 each, totaling euro 1 009.9 million, fully subscribed and paid. The new shares are fungible with all other shares of the issuer and give their holders the same rights as other existing shares before the capital increase. The capital increase did not cause significant changes in the shareholder structure of reference of BES.

In the year ended 31 December 2011, the Bank made a capital increase through an exchange offer (OPT) over securities issued by Banco Espírito Santo, Banco Espírito Santo de Investimento and BES Finance.

As a result of the exchange offer, which took place in November 2011, a total of 294 573 418 new ordinary BES shares at the price of Euro 1.80 per share and 81 736 subordinated bonds with €100 par value each were be issued:

			Counterparty
Issuer	Nature	Nominal amount	Bonds issued by BES	Cash bonds issued
Undated deeply subordinated notes with BES		€ 238,400,000	128.527.730	70.400
	conditional interest	USD 2727000	992.857	1.918
BES INVESTIMENTO	Undated deeply subordinated notes with conditional interest	€46,269,000	25,180,367	9.418
	Undated Subordinated Notes	€184,214,000	72,960,255	not applicable
BES FINANCE	Non-cumulative guaranteed step-up preference shares series A	€197.446.000	66.912.209	not applicable
	TOTAL	€668,308,530	294.573.418	81.736

The impact of this transaction in the Group share capital is presented as follows:

	(in million of e uro)
Capital	530
S hare premium	( 4)
Preference shares	( 1 97)
Other equity instruments	( 240)
Other reserves and retained earnings	55
Profit for the year	38
Non-controlling interests	( 46)
Total Equity	1 36

Preference shares

The BES Finance issued 450 thousand non-voting preference shares, which were listed in the Luxembourg stock Exchange in July 2003. In March 2004, 150 thousand preference shares were additionally issued forming a single series with the existing preference shares, in a total amount of euro 600 million. The face value of these shares is euro 1 000 and is wholly (but not partially) redeemable by option of the issuer at its face value, as at 2 July 2014, subject to prior approvals of BES and Bank of Portugal. During the year ended 31 December 2011, the Group acquired 338 thousand preference shares, issued by BES Finance, of which 197 thousand were acquired in scope of the exchange offer over securities referred to above. The Group recorded a capital gain, net of taxes in the amount of euro 105.6 million recognised in other reserves.

In the year ended 31 December 2012, the Group acquired 19 000 preference shares, having recorded a net gain in the amount of euro 4.5 million recognised in Other reserves. In the year ended 31 December 2012, there were 193 thousands preference shares outstanding with a value of euro 193.3 million.

These preference shares pay an annual non cumulative preferred dividend, if and when declared by the Board of Directors of the issuer, of 5.58% per annum on nominal value. The dividend is paid on 2 July of each year, beginning 2 July 2004 and ending 2 July 2014.

If the issuer does not redeem these preference shares on 2 July 2014, the dividend applicable rate will be the 3 months Euribor plus 2.65%, with payments on 2 January, 2 April, 2 July and 2 October of each year, if declared by the Board of Directors of the issuer.

BES unconditionally guarantees dividends and principal repayment related to the above mentioned issue, until the limit of the dividends previously declared by the Board of Directors of the issuer.

These shares rank lower than any BES liability, and pari passu relative to any preference shares that may come to be issued by the Bank.

Share Premiums

In the year ended 31 December 2012, share premiums are represented by euro 1 069 517 thousand related to the premium paid by the shareholders following the share capital increases.

Other equity instruments

The Group issued during 2010, perpetual subordinated bonds with interest conditioned in the total amount of euro 320 million, of which euro 270 million were issued by BES and the remaining euro 50 million by BESI. These bonds have an interest conditioned non-cumulative, payable only if and when declared by the Board of Directors.

Other equity instruments issued by BES reduced by an amount of euro 240 448 thousand and Noncontrolling interests issued by BESI reduced by an amount of euro 46 269 thousand.

These bonds are subordinated in respect of any liability of BES and BESI and pari passu in respect of any subordinated bonds with identical characteristics that may be issued by the Bank. Given their characteristics, these obligations are considered as equity instruments in accordance with the accounting policy described in Note 2.10.

						(in thousands of euro)
Is suer	Issue date	Currency	Book Value	Interest rate	Coupon date	Reimbursement possibility (2)
BES BES	Dez/10 Dez/10	EUR USD	26.217 3.078	8.50% 8.00%	15/Mar and 14/Sep 15/Mar and 14/Sep	From Sep/15 From Sep/15
			29.295
BESI ⁽¹⁾	Out/10	EUR	3.681	8.50%	20/Apr and 20/Oct	From Oct/15
			32,976

The main characteristics of these equity instruments are presented as follows:

(1 ) BE SI issue is included in the balance non-controlling interest (see Note 39)

(2) The reimbursement of these securities may be performed in full, but not partially, at the option of the issue r, subject to prior approval of the Bank of Portugal.

During the year ended 31 December 2012, the Group made an interest payment in the amount of euro 2 809 thousand, which was recorded as a deduction to equity.

Treasury stock

During 2011, BES acquired own shares under PRVIF (see Note 16).

As at 27 January 2012, BES sold 67 184 shares, following the retirement of two directors to whom had been assigned 33 592 shares on the distribution of results in 2010, according to PRVIF approved by the General Meeting held on 6 April 2010 and in accordance with the proposal of the Board on the acquisition and disposal of own shares approved at the General Meeting on 31 March 2011.

The movement in treasury stocks is analysed as follows:

		31.12.2012	31.12.2011
	Number of shares	Amount (thousands of euro)	Number of shares	Amount (thousands of euro)
Transactions under PRVIF
Opening balance	342 475	997
Shares acquired ⁽¹⁾			342 475	997
Shares sold $(2)$	67184	196)
	275 291	801	342 475	997
Other transactions
Opening balance
Changes in the scope of consolidation $(3)$	68 333 226	43 51 5
Shares acquired	11 268 161	5 4 0 9
Shares sold	69 488 622	42734)
	10 11 2 765	6190
Balanced as at 31 December 2012	10 388 056	6 9 9 1	342 475	997

(1 ) S hares acquired un der PR VIF , at a p rice of 2.909 euro per s hare.

(2) S hares s old under PR VIF , at a price of 1 .31 5 euro per share in J anuary 201 2.

(3) Res pects to B E S shares in B ES Vida portfolio, following the control acquisition in May 2012.

(4) Shares acquired/sold that composed/left to be part of portfolio of B ES Vida.

NOTE 45 – FAIR VALUE RESERVE, OTHER RESERVES AND RETAINED EARNINGS AND NON-CONTROLLING INTEREST

Legal reserve

The legal reserve can only be used to absorb accumulated losses or to increase the amount of the share capital. Portuguese legislation applicable to the banking sector (Article 97 of Decree-Law no. 298/92, 31 December) requires that 10% of the profit for the year be transferred to the legal reserve until it is equal to the share capital.

Fair value reserve

The fair value reserve represents the amount of the unrealized gains and losses arising from securities classified as available-for-sale, net of impairment losses recognised in the income statement in the year/previous years. The amount of this reserve is shown net of deferred taxes and non-controlling interests.

The changes in these balances were as follows:

		Fair value reserve			Other comprehensive income, other reserves and retained earnings
	Available for sale financial assets	Deferred tax reserves	Total fair value reserve	Actuarial deviations (net of tax es)	Exchange differences (net of tax es)	Legal reserve	Other reserves and retained earnings	Total Other reserves and retained earnings	Total
Balance as at 31 December 201 0 (Reported)	( 1 1 291 )	1 71 1	( 9 580)	-	480	59 000	91 9 068	978 548	968 968
Accounting policy change	-	-	-	( 670 882)	-	-	-	( 670 882)	( 670 882)
Balance as at 31 December 201 0 (Restated)	( 1 1 291 )	1 71 1	( 9 580)	( 670 882)	480	59 000	91 9 068	307 666	298 086
Acquisition of preference shares (a)	-	-	-	-	-	-	1 05 648	1 05 648	1 05 648
Actuarial Deviations	-	-	-	29 567	-	-	-	29 567	29 567
Interest of other equity instruments	-	-	-	-	-	-	( 1 5 478)	( 1 5 478)	( 1 5 478)
Dividends from preference shares	-	-	-	-	-	-	( 25 71 7)	( 25 71 7)	( 25 71 7)
Changes in fair value	( 504 536)	68 941	( 435 595)	-	-	-	-	-	( 435 595)
E xchange differences	-	-	-	-	( 388)	-	-	( 388)	( 388)
Transfer to reserves	-	-	-	-	-	26 000	383 946	409 946	409 946
Acquired/sold subsidiaries	-	-	-	-	-	-	3 630	3 630	3 630
Other comprehensive income of associates appropriate	-	-	-	-	-	-	( 8 053)	( 8 053)	( 8 053)
Other variations	-	-	-	-	-	-	( 1 1 76)	( 1 1 76)	( 1 1 76)
Balance as at 31 December 201 1	( 51 5 827)	70 652	( 445 1 75)	( 641 31 5)	92	85 000	1 361 868	805 645	360 470
Acquisition of preference shares (a)	-	-	-	-	-	-	4 478	4 478	4 478
Actuarial Deviations	-	-	-	( 1 73 1 71 )	-	-	-	( 1 73 1 71 )	( 1 73 1 71 )
Interest of other equity instruments	-	-	-	-	-	-	( 1 864)	( 1 864)	( 1 864)
Dividends from preference shares	-	-	-	-	-	-	( 6 1 37)	( 6 1 37)	( 6 1 37)
Changes in fair value	747 463	( 1 31 438)	61 6 025	-	-	-	-	-	61 6 025
E xchange differences	-	-	-	-	( 36 939)	-	-	( 36 939)	( 36 939)
Transfer to reserves	-	-	-	-	-	-	( 1 08 758)	( 1 08 758)	( 1 08 758)
Purchase and sale of subsidiaries	-	-	-	-	-	-	( 9 800)	( 9 800)	( 9 800)
Other comprehensive income from associates	-	-	-	-	-	-	497	497	497
Other variations	-	-	-	-	-	-	( 2 837)	( 2 837)	( 2 837)
Balance as at 31 December 201 2	231 636	( 60 786)	1 70 850	( 81 4 486)	( 36 847)	85 000	1 237 447	471 1 1 4	641 964

The fair value reserve is analysed as follows:

		( in thousands of euro)
	31.1 2.2012	31.1 2.201 1
Amortized cost of financial assets available for sale	1 0 758 099	1 2 037 835
Accumulated impairment recognized	( 237 967)	( 1 68 282)
Amortized cost of financial assets available for sale, net of impairment	1 0 520 1 32	1 1 869 553
F air value of financial assets available for s ale	1 0 755 310	1 1 482 866
Gains / (losses) recognized potential in the fair value res erve	235 1 78	( 386 687)
F air value reserves as sociated with assets transferred to assets held to maturity	( 3 249)	( 4 088)
D effered tax	( 60 786)	57 737
Gains / (losses) of ass ociated companies recognized potential in the fair value reserve	2 054	( 1 1 2 861 )
Total fair value res erve	173 1 97	( 445 899)
Non-controlling interests	( 2 347)	724
F air valu e res erve attributable to shareholders of the Bank	170 850	( 445 175)

The movement in the fair value reserve, net of deferred taxes, impairment losses and non-controlling interest is analysed as follows:

		(in thous ands of euro)
	31.12.2012	31.12.2011
Balance at the beginning of the year	( 445 175)	(9 580)
Changes in fair value	1 1 7 7 5 6 5	631 097)
Disposals during the year	(600 206)	68 770
Impairment recognised during the year	99 308	57 791
Increase in share capital of subsidiaries (a)	70 796
Deferred taxes recognised in reserves during the year	(131 438)	68 941
Balance at the end of the year	170850	445 175)

(a) B E S Vida

Non-controlling Interests

Non-controlling interests by subsidiary are analysed as follows:

				(in thousands ofeuro)
	31.12.2012		31.12.2011
	Balance	Income	Balance	Income
	sheet	statement	sheet	statement
BES ANGOLA	396 369	25 5 5 4	382 073	116 448
BE SI ^a	3681		3731
AMAN BANK	34 974	1 7 4 5	34145	(2978)
ES CONCESSÕES	25868	5 673)	34840	1 31 4
FCR VENTURES II	17676	499	21 2 3 9	6 5 6 7)
BES Securities	5480	147)	13191	1 2 5 2
BES Investimento do Brasil	32886	2 2 9 2	31 922	4538
ESAF	12887	1991	12640	2 3 1 8
BES ACORES	18018	530	16909	2 0 7 5
E spirito S anto Investment Holding ^b)	3967	4 607)	4729	(7347)
BEST	18161	2989	14117	2679
FCR VENTURES III	17043	855)	13403	(2582)
FUNGEPI	56 5 3 7	570)
0 _ther	25898	987	5 5 0 8	1 40 4
	669 445	23735	588 447	11 2 55 4

The movements in non-controlling interests in the year ended 31 December 2012 and 2011 are analysed as follows:

		(in thous ands of euro)
	31.12.2012	31.12.2011

Non-controlling interests at the beginning of the period	588 447	538 701
Changes in the scope of consolidation	74 293	44 052)
Increase/ (decrease) in share capital of subsidiaries	13 527	33 950
Other equity instruments issue/ (reimbursement)		46269
Dividends paid	(2924)	(4170)
Changes in fair value reserve	22	46
Exchange differences and other	(2765)	(2313)
Profit for the year	23 735	112 554
Non-controlling interests at the end of the period	669 445	588 447

NOTE 46 – OFF-BALANCE SHEET ITEMS

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Contingent liabilities
Guarantees and stand by letters of credit	8 023 520	8 376 006
Assets pledged as collateral	21 632 555	1 2 874 708
Open documentary credits	3 776 399	2 941 1 1 4
Other	531 757	482 426
	33 964 231	24 674 254
Commitments
Revocable commitments	5 462 823	5 843 661
Irrevocable commitments	3 280 971	4 21 6 289
	8 743 794	1 0 059 950

As at 31 December 2012 and 2011, this balance can be analysed as follows:

Guarantees and standby letters of credits are banking operations that do not imply any out-flow by the Group.

As at 31 December 2012, the balance assets pledged as collateral include:

Securities pledged as collateral to the Bank of Portugal in the scope of a liquidity facility collateralised by securities for an amount of euro 13.5 billion (31 December 2011: euro 11.1 billion);
Securities pledged as collateral to the Portuguese Securities and Exchange Commission (CMVM) in the scope of the Investors Indemnity System (Sistema de Indemnização aos Investidores) in the amount of euro 20.8 million (31 December 2011: euro 19.4 million);
Securities pledged as collateral to the Deposits Guarantee Fund (Fundo de Garantia de Depósitos) for an amount of euro 82.6 million (31 December 2011: euro 65.1 million);
Securities pledged as collateral to the European Investment Bank in the amount of euro 1 822.5 million (31 December 2011: euro 1 213.5 million).

The above mentioned securities pledged as collateral are booked in the available-for-sale portfolio and they can be executed in case the Group does not fulfil its obligations under the terms of the contracts.

Documentary credits are irrevocable commitments by the Group, in the name of its clients, to pay or order to pay a certain amount to a supplier of goods or services, within a determined term, against the exhibition of the expedition documentation of the goods or service provided. The condition of irrevocable consists of the fact that the terms initially agreed can only be changed or cancelled with the agreement of all parties.

Revocable and irrevocable commitments represent contractual agreements to extend credit to the Group's customers (eg. unused credit lines). These agreements are, generally, contracted for fixed periods of time or with other expiration requisites and usually require the payment of a commission. Substantially, all credit commitments require that clients maintain certain conditions verified at the time when the credit was granted.

Despite the characteristics of these contingent liabilities and commitments, these operations require a previous rigorous risk assessment of the client and its business, like any other commercial operation. When necessary, the Group require that these operations are collateralised. As it is expected that the majority of these operations will mature without any use of funds, these amounts do not represent necessarily future out-flows.

Additionally, the off-balance sheet items related to banking services provided are as follows:

	(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Securities and other items held for safekeeping on behalf of customers	54 335 220	57 749 398
Assets for collection on behalf of clients	294 295	270 997
Securitised loans under management (servicing)	2 671 390	2 875 874
Other responsibilities related with banking services	8 784 286	7 61 9 322
	66 085 1 91	68 51 5 591

NOTE 47 – ASSETS UNDER MANAGEMENT

In accordance with the legislation in force, the fund management companies and the depositary bank are jointly liable before the participants of the funds for the non fulfilment of the obligations assumed under the terms of the Law and the management regulations of the funds.

As at 31 December 2012 and 2011, the amount of the investment funds managed by the Group is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Securities investment funds	5 1 1 5 043	4 633 21 7
Real estate investment funds	1 075 678	1 202 987
Pension funds	1 783 359	2 1 54 923
Bancassurance (a)	89 662	3 478 338
Portfolio management	1 960 206	877 81 2
Others	1 378 639	1 366 597
	1 1 402 587	1 3 71 3 874

(a) - Along w ith the first full consolidation of BES Vida, the Bancassurance Vida products became part of Grupo BES balance sheet.

The amounts recognised in these accounts are measured at fair value determined at the balance sheet date.

NOTE 48 – RELATED PARTIES TRANSACTIONS

The entities considered to be BES Group related parties together with the subsidiaries referred in Note 1, as defined by IAS 24, are as follows:

Grupo BES Associates companies	ESFG's subsidiaries, associates and related entities
Fin Solutia - Consultoria e Gestão de Créditos, SA	Group Credit Agricole
Polish Hotel Capital SP MCO2 – Sociedade Gestora de Fundos de Investimento Mobiliário	Saxo Bank The Atlantic Company ( Portugal ) - Turismo e Urbanização, SA
Hlc - Centrais de Cogeração, SA	Agribahia, S/A
Coporgest	Atr - Actividades Turisticas e Representações, Lda
Synergy Industry and Technology, S.A. Salgar Investments	Aveiro Incorporated Beach Heath Investments, Ltd
2BCapital, SA	Companhia Agricola Botucatu, SA
2B Capital Luxembourg S.C.A SICAR	Casas da Cidade - Residências Sénior, SA
Espírito Santo IBERIA I Apolo Films SL	Cerca da Aldeia - Sociedade Imobiliária, SA Cimenta - Empreendimentos Imobiliários, SA
Brb Internacional, S.A.	Cidadeplatina - Construção SA
Prosport, SA	Clarendon Properties, Inc.
Banque Espirito Santo et de la Vénétie, SA YUNIT - Serviços, SA	Clube de Campo da Comporta - Actividades Desportivas e Lazer, Lda Club de Campo Villar Ollala, SA
E.S. Contact Center - Gestão de Call Centers, SA	Clup Vip - Marketing de Acontecimentos, SA
Fundo de Capital de Risco Espírito Santo Ventures Inovação e Internacionalização	Clube Residencial da Boavista, SA
Fundo Bem Comum FCR Esiam - Espirito Santo International Asset Management, Ltd	Companhia Brasileira de Agropecuária Cobrape Coimbra Jardim Hotel - Sociedade de Gestão Hoteleira, S.A.
Société 45 Avenue Georges Mandel, SA	Construcciones Sarrión, SL
BES, Companhia de Seguros , SA Locarent - Companhia Portuguesa de Aluguer de Viaturas, SA	Ganadera Corina Campos y Haciendas, S/A E.S.B. Finance Ltd
Esegur - Empresa de Segurança, SA	Eastelco - Consultoria e Comunicação, SA
Ascendi Group, SGPS, SA	E.S. Asset Administration, Ltd.
Empark Aparcamientos y Servicios SA Concesionaria Autopista Perote-Xalapa, CV	Espírito Santo Cachoeira Desenvolvimento Imobiliário Ltda ES Comercial Agrícola, Ltda
Autovia De Los Vinedos, SA	Espírito Santo Guarujá Desenvolvimento Imobiliário Ltda
MRN - Manutenção de Rodovias Nacionais, SA	ES Holding Administração e Participações, S/A
Portvias - Portagem de Vias, SA Scutvias - Autoestradas da Beira Interior , SA	Espírito Santo Hotéis, SGPS, SA Espirito Santo Industrial ( BVI ), SA
SOUSACAMP, SGPS, SA	Espírito Santo Indaiatuba Desenvolvimento Imobiliário Ltda
GLOBAL ACTIVE - GESTÃO P.S.SGPS, SA	Espirito Santo Industrial, SA
OUTSYSTEMS, SA Coreworks - Proj. Circuito Sist. Elect., SA	Espírito Santo Industrial ( Portugal ) - SGPS, SA Espirito Santo Irmãos - Sociedade Gestora de Participações Sociais, SA
Multiwave Photonics, SA	Espírito Santo Itatiba Desenvolvimento Imobiliário Ltda
BIO-GENESIS	Espírito Santo Primavera Desenvolvimento Imobiliário Ltda
YDreams - Informática, SA Nutrigreen, S.A.	ES Private Equity, Ltd Espirito Santo Property (Brasil) S/A
Advance Ciclone Systems, SA	Espírito Santo Services, SA
WATSON BROWN HSM, Ltd	Espirito Santo Tourism, Ltd
Domática, Electrónica e Informática, SA MMCI - Multimédia, SA	Espirito Santo Tourism ( Europe ), SA Espírito Santo Venture Ltd
Mobile World - Comunicações, SA	Espírito Santo Viagens - Sociedade Gestora de Participações Sociais, SA
Sopratutto Café , SA Enkrott SA	ES Viagens e Turismo, Lda Espírito Santo Viagens - Consultoria e Serviços, SA
Rodi Sinks & Ideas, SA	Escae Consultoria, Administração e Empreendimento, Ltda
Palexpo - Imagem Empresarial, SA	Escopar - Sociedade Gestora de Participações Sociais, SA
Nova Figfort - Têxteis, Lda TLCI 2 - Soluções Integradas de Telecomunicações, SA	ESDI Administração e Participações Ltda Esger - Empresa de Serviços e Consultoria, SA
BANCO DELLE TRE VENEZIE SPA	Espirito Santo International (BVI), SA
NANIUM , SA	E.S. International Overseas, Ltd.
IJAR LEASING ALGÉRIE Ascendi Pinhal Interior Estradas do Pinhal Interior, SA	Esim - Espirito Santo Imobiliário, SA E.S. - Espírito Santo, Mediação Imobiliária, S.A.
Ascendi Douro Estradas do Douro Interior, SA	Espirito Santo Property SA
Unicre - Cartão Internacional de Crédito, SA	Espirito Santo Property Holding, SA
MOZA BANCO	Espírito Santo Property España, S.L. Espart - Espirito Santo Participações Financeiras, SGPS, SA
ESFG's subsidiaries, associates and related entities	Espirito Santo Resources, Ltd
Bespar - Sociedade Gestora de Participações Sociais, SA	Espirito Santo Resources ( Portugal ), SA
Banque Privée Espírito Santo Banque Privée Espírito Santo Sucursal Portugal	E.S. Resources Overseas, Ltd Espírito Santo Resources SA
ES Bank (Panama), SA	Estoril Inc
ES Bankers (Dubai) Limited	Euroamerican Finance Corporation, Inc.
Espirito Santo Financial ( Portugal ), SGPS, SA Espirito Santo Financial Group, SA	Euroamerican Finance SA Euroatlantic, Inc.
ESFG International, Ltd	Fafer - Empreendimentos Turisticos e de Construção, SA
Esfil - Espírito Santo Financiére, S.A. ( Luxemburgo )	Fimoges - Sociedade Gestora de Fundos de Investimento Imobiliário, SA
Espírito Santo International SA Espírito Santo Saúde SGPS, S.A.	GES Finance Limited Gesfimo - Espirito Santo, Irmãos, Soc. Gestora de Fundos de Investimento Imobiliários,SA
Clínica Parque dos Poetas, SA	Gestres - Gestão Estratégica Espirito Santo, SA
Cliria - Hospital Privado de Aveiro, SA ES Saúde - Residência com Serviços Senior, S.A.	Goggles Marine, Ltd Sociedade Agricola Golondrina, S/A
Espírito Santo - Unidades de Saúde e de Apoio à Terceira Idade, S.A.	HDC - Serviços de Turismo e Imobiliário, SA
Genomed, Diagnóstico de Medicina Molecular, SA	Herdade da Boina - Sociedade Agrícola, SA
HCI - Health Care International, Inc HME Gestão Hospitalar	Herdade da Comporta - Actividades Agro Silvícolas e Turísticas, SA Hoteis Tivoli, SA
Hospital da Arrábida - Gaia, SA	Hotelagos, SA
Hospital da Luz - Centro Clínico da Amadora, SA	Hospital Residêncial do Mar, SA
Hospital da Luz, SA Hospor - Hospitais Portugueses, SA	I.A.C. UK, Limited Inter-Atlântico, S/A
Instituto de Radiologia Dr. Idálio de Oliveira - Centro de Radiologia Médica, S.A.	Iber Foods - Produtos Alimentares e Biológicos, SA
RML - Residência Medicalizada de Loures, SGPS, SA Surgicare - Unidades de Saúde, SA	Imopca, SA Lote Dois - Empreendimentos Turisticos SA
Vila Lusitano - Unidades de Saúde, SA	Luzboa, SA
Key Space Investments LLC	Luzboa Um, SA
Marignan Gestion, SA Omnium Lyonnais de Participations Industrielles, SA	Luzboa Dois, SA Luzboa Três, SA
Partran - Sociedade Gestora de Participações Sociais, SA	Luzboa Quatro, SA
Société Antillaise de Gestion Financiére, S.A. - SAGEFI	BEMS, SGPS, SA
Société Lyonnaise de Marchands de Biens Companhia de Seguros Tranquilidade, SA	Margrimar - Mármores e Granitos, SA Marinoteis - Sociedade de Promoção e Construção de Hoteis, SA
T - Vida, Companhia de Seguros, SA	Marmetal - Mármores e Materiais de Construção, SA
Seguros Logo, SA	Metal - Lobos Serralharia e Carpintaria, Lda
Advancecare - Gestão e Serviços de Saúde, SA Pastor Vida, S.A de Seguros y Reaseguros	Multiger - Sociedade de Gestão e Investimento Imobiliário, SA Mundo Vip - Operadores Turísticos, SA
Esumédica - Prestação de Cuidados Médicos, SA	Net Viagens - Agência de Viagens e Turismo, SA
Europe Assistance - Companhia Portuguesa de Seguros de Assistência, SA	Novagest Assets Management, Ltd
BESV Courtage SA AOC Patrimoine, SA	Opca Angola, SA Opca Moçambique, Lda
ES Consultancy Singapore	Opcatelecom - Infraestuturas de Comunicação, SA

ESFG's subsidiaries, associates and related entities	ESFG's subsidiaries, associates and related entities
OPWAY - Engenharia, SA	Sisges, SA Desenvolvimento de Projectos de Energia
OPWAY Imobiliária, SA	Solférias - Operadores Turísticos, Lda
OPWAY - SGPS, SA	Sopol - Concessões, SGPS, SA
Pavi do Brasil - Pré-Fabricação, Tecnologia e Serviços, Lda.	Sotal - Sociedade de Gestão Hoteleira, S.A.
Pavicentro - Pré-Fabricação, SA	Space - Sociedad Peninsular de Aviación, Comércio e Excursiones, SA
Pavilis - Pré-Fabricação, SA	Suliglor - Imobiliária do Sul, SA
Paviseu - Materiais Pré-Fabricados, SA	TA DMC Brasil - Viagens e Turismo, SA
Pavitel, SARL	Agência de Viagens Tagus, S.A.
Personda - Sociedade de Perfurações e Sondagens, SA	Construtora do Tamega Madeira SA
Placon - Estudos e Projectos de Construção, Lda	Construtora do Tamega Madeira SGPS SA
Pojuca, SA	Terras de Bragança Participações, Ltda
Pontave - Construções, SA	Timeantube Comércio e Serviços de Confecções, Ltda
Agência Receptivo Praia do Forte, Ltda	Tivoli Gare do Oriente - Sociedade de Gestão Hoteleira, S.A.
Praia do Forte Operadora de Turismo, Ltda	TOP A DMC Viajes, SA
Grupo Proyectos y Servicios Sarrion, SA	Top Atlântico - Viagens e Turismo, SA
Quinray Technologies Corp.	Top Atlântico DMC, SA
Quinta da Areia - Sociedade Agrícola Quinta da Areia, SA	Transcontinental - Empreendimentos Hoteleiros, SA
Sociedade Agricola Quinta D. Manuel I, SA	Turifonte, Empreendimentos Hoteleiros, SA
Recigreen - Reciclagem e Gestão Ambiental, SA	Turistrader - Sociedade de Desenvolvimento Turístico, SA
Recigroup - Industrias de Reciclagem, SGPS, SA	Ushuaia - Gestão e Trading Internacional Limited
Recipav - Engenharia e Pavimentos, Unipessoal, Lda	Sociedade Agricola Turistica e Imobiliária Várzea Lagoa, SA
Recipneu - Empresa Nacional de Reciclagem de Pneus, Lda	Viveiros da Herdade da Comporta - Produção de Plantas Ornamentais, Lda
Santa Mónica - Empreendimentos Turísticos, SA	Ribeira do Marchante, Administração de Bens Móveis e Imóveis, S.A.
Saramagos S/A Empreendimentos e Participações	Casa da Saudade, Administração de Bens Móveis e Imóveis, S.A.
Société Congolaise de Construction et Travaux Publiques, SARL	Angra Moura-Sociedade de Administração de Bens,S.A.
Series - Serviços Imobiliários Espirito Santo, SA	Sociedade de Administração de Bens - Casa de Bons Ares, S.A.
Sociedade Gestora do Hospital de Loures, SA	ACRO, Sociedade Gestora de Participações Sociais, S.A.
Sintra Empreendimentos Imobiliários, Ltda	Diliva, Sociedade de Investimentos Imobiliários, S.A.

As at 31 December 2012 and 2011, the balances and transactions with related parties are presented as follows:

										(in thousands of euro)
			31 .1 2.201 2					31 .1 2.201 1
	Assets	Liabilities	Guarantees	Income	Ex penses	Assets	Liabilities	Guarantees	Income	Expenses
Associates companies
BE S VIDA a)	-	-	-	-	-	1 355 845	293 741	-	25 805	1 875
BE S VÉ NÉ TIE	726 91 0	623	5 627	2 705	-	865 066	1 39 834	1 1 794	2 665	1 25
ASCE NDI GROUP SGPS	299 462	3 781	28 364	1 1 278	2	1 88 1 29	8 337	29 358	1 6 025	7
LOCARE NT	1 29 81 8	3 723	-	2 692	1 1 006	1 42 280	31 2	-	4 708	1 0 354
AE NOR DOURO	271 887	3 461	1 1 000	8 985	-	247 956	1 898	1 2 000	1 1 202	1 8
NANIUM	35 327	4 272	1 8 349	306	4	42 044	2 752	1 8 387	971	-
E MPARK	49 1 79	-	4 684	3 872	246	40 080	-	-	2 675	-
ASCE NDI PINHAL INTE RIOR	98 356	2 051	1 5 374	3 073	-	33 732	1 0 686	1 5 374	1 505	1 03
SCUTVIAS	7 1 47	-	6 545	2 631	3 083	8 840	-	6 868	2 967	-
PALE XPO	7 266	1 24	26	537	-	6 800	75	-	495	-
BE S SE GUROS	630	1 8 456	-	41 5	1 6	23	1 2 578	-	1 1 9	1 1
E SE GUR	7 680	3	2 1 05	1 055	430	2 620	21 9	2 1 97	922	1 42
E S CONTACT CE NTE R	1 858	-	43	90	874	2 1 96	-	43	1 1 4	961
UNICRE	26	2	-	1	-	1	1 0 008	-	-	280
OTHE RS	58 358	24 459	1 1 508	1 2 278	1 250	40 059	20 41 7	7 697	4 223	2 953
	1 693 904	60 955	1 03 625	49 91 8	1 6 91 1	2 975 671	500 857	1 03 71 8	74 396	1 6 829

a) Since May 201 2 BE S Vida was fully consolidaded in Grupo BE S.

Balances and transactions with the above referred entities relate mainly to loans and advances and deposits in the scope of the banking activity of the Group. The liabilities relate mainly to bank deposits taken.

As at 31 December 2012 and 2011, the total amount of assets and liabilities of BES Group with ESFG (Bank holding) and related companies, is as follows:

									(in thousands of euro)
					31 .1 2.201 2
			Assets
	Loans and advances to banks	Loans	Securities	Other	Total	Guarantees	Liabilities	Income	Ex penses
Shareholders
E S FINANCIAL GROUP	548	-	40 632	2	41 1 82	-	28	1 1 86	-
E SF PORTUGAL	-	-	72 666	-	72 666	-	1 09	2 349	-
BE SPAR	-	-	-	-	-	-	386	-	-
GRUPO CRÉ DIT AGRICOLE	973	1 08	1 01 6	1 1 0	2 207	1 080	271	1 0	-
Subsidiaries, associates from shareholders
PARTRAN	-	-	-	-	-	-	22	-	-
E SPÍRITO SANTO FINANCIÉ RE , SA	-	7 579	-	-	7 579	-	1 53	-	-
COMPANHIA SE GUROS TRANQUILIDADE	-	1 50 1 50	-	520	1 50 670	21 979	1 1 6 657	1 582	1 200
BANQUE PRIVÉ E E SPÍRITO SANTO	1 5 794	-	-	1 1	1 5 805	8 01 8	32 904	503	351
E S BANK PANAMA	1 35 000	-	-	-	1 35 000	-	35 512	1 0 1 39	-
E S SAUDE	-	1 8 484	45 1 1 2	64	63 660	24 269	1 3 1 40	464	2
T - VIDA	-	55 560	9 291	1 63	65 01 4	-	98 611	492	364
E SUMÉ DICA	-	1 000	-	-	1 000	4	24	80	81
E UROP ASSISTANCE	-	24	-	34	58	25	2 749	57	-
Other
E S IRMÃOS	-	1 04 570	-	-	1 04 570	-	1	4 708	-
OPWAY	-	3 645	-	2 686	6 331	48 029	35 089	362	225
CONSTRUCCIONE S SARRION	-	1 6 527	-	-	1 6 527	8 745	-	233	-
E SPÍRITO SANTO RE SOURCE S	-	1 1	-	1 9	30	-	2 359	51	221
OTHE RS	-	62 048	20 971	1 075	84 094	1 7 294	32 368	5 1 62	2 438
TOTAL	1 52 31 5	41 9 706	1 89 688	4 684	766 393	1 29 443	370 383	27 378	4 882

	(in thousands of euro)
					31 .1 2.201 1
			Assets
	Loans and advances to banks	Loans	Securities	Other	Total	Guarantees	Liabilities	Income	Ex penses
Shareholders
E S FINANCIAL GROUP	-	-	4 71 5	695	5 41 0	-	696	3 367	-
E SF PORTUGAL	-	-	78 81 0	-	78 81 0	-	451	1 385	-
BE SPAR	-	-	-	-	-	-	729	-	-
GRUPO CRÉ DIT AGRICOLE	1 046	5	-	57	1 1 08	1 1 50	460	23	-
Subsidiaries, associates from shareholders
PARTRAN	-	-	-	-	-	-	1 4	-	-
E SPÍRITO SANTO FINANCIÉ RE , SA	-	1 73 644	-	-	1 73 644	-	1 54	-	-
COMPANHIA SE GUROS TRANQUILIDADE	-	1 67 298	3	426	1 67 727	21 1 55	1 02 166	1 1 73	1 306
BANQUE PRIVÉ E E SPÍRITO SANTO	40 550	-	-	1 9	40 569	7 874	27 059	523	364
E S BANK PANAMA	384 087	-	-	-	384 087	-	71 9	9 045	25
E S SAUDE	-	22 479	31 253	35	53 767	24 870	23 873	746	25
T - VIDA	-	85 983	275 778	1 83	361 944		96 250	200	28
E SUMÉ DICA (a)	-	1 949	-	3	1 952	4	-	1 1 4	52
E UROP ASSISTANCE (b)	-	1 5	-	1 8	33	8	1 835	44	-
Other
E S IRMÃOS	-	99 341	-	-	99 341	-	1	5 242	-
OPWAY	-	1 4 1 33	-	1 279	1 5 41 2	47 642	1 3 073	287	-
CONSTRUCCIONE S SARRION	-	25 800	-	-	25 800	1 0 765	-	-	-
E SPÍRITO SANTO RE SOURCE S	-	1	-	23	24	-	901	56	224
OTHE RS	26 558	47 330	3 737	1 061	78 686	22 293	30 390	6 671	602
TOTAL	452 241	637 978	394 296	3 799	1 488 31 4	1 35 761	298 771	28 876	2 626

As at 31 December 2012, loans granted by BES Group to the members of the Board of Directors of ESFG that are not simultaneously members of the Board of Directors of BES, amounted to euro 4 047 thousand (31 December 2011: euro 4 911 thousand).

All transactions with related parties are made on an arms length basis, under the fair value principle.

Credits granted to members of the Board of Directors correspond to operations under the BES core business, being excluded from the nr. 1, 2, 3 and 4 of article 397 of the Código das Sociedades Comerciais.

However, credit granted by the Group to members of the Board of Directors of credit institutions are under the scope of article 85 of the Regime Geral das Instituições de Crédito e Sociedades Financeiras (RGICSF) being these operations subject to reporting to the Bank of Portugal, under the terms of Instruction nr. 17/2011, of August 2011.

It cannot be granted credit to executive members of the Board of Directors and to the Fiscal Board (including first degree relatives), with the exception of operations (i) with a social purpose, (ii) under the company policies, or (iii) resulting from the use of credit cards in conditions similar to the ones applied to the general clients with similar risk profile. All these exception are included in nr. 4 of article 85 of RGICSF;
Credit operations with non-executive members of the Board of Directors are subject to approval by a majority of at least two thirds of the remaining Board Members and can only be granted with the approval of the Fiscal Board, in accordance with nr. 8 of article 85 of RGICSF;
The credit is granted and approved at market prices and the Board Member involved in the operation cannot intervene in the decision making process.

All credits granted to Board Members fulfill the above mentioned requirements.

All credits granted to related parties are included in the impairment model, being subject to provisions in the same manner that the commercial credits granted by the Group. As at 31 December 2012 and 2011, none of the credits granted to related parties were subject to individual impairment. However, these credits are subject to an impairment evaluation on a portfolio basis, as referred in Note 2.5 – Loans and advances to customers.

The breakdown of the remuneration of key personnel is decriminalized in Note 15.

During the year ended 31 December 2011 the Group sold 18 520 and 4 830 units of the Fungepi Fund and Fungere Fund to the Group pensions funds, by a global amount of euro 80.0 million, not incurring in any material loss or gain (See note 16).

In 2012 the Group acquired:

(i) to the Group pension funds 49 779 and 37 115 thousand units of the Fungere Fund and Fungepi Fund, by the amount of euro 158.1 million and euro 87.2 million, respectively;
(ii) to ESPART 50% of the company Greenwoods, 100% of Quinta D. Manuel I and 100% of the company Várzea da Lagoa by the amount of euro 50.7 million;
(iii) to OPWAY 100% of the company Quinta da Areia and several properties y the amount of euro 43.1 million euros; and
(iv) to Rio Forte Investments, SA 64,206 units of the Fimes Oriente Fund by the amount of euro 103.3 million.

NOTE 49 – SECURITISATION TRANSACTIONS

As at 31 December 2012, the outstanding securitisation transactions performed by the Group were as follows:

				(in thousands of euro)
Designation	Initial date	Original amount	Current amount	Asset securitised
Lusitano Mortgages No.1 plc	December 2002	1 000 000	362 957	Mortgage loans (subsidised regime)
Lusitano Mortgages No.2 plc	November 2003	1 000 000	362 304	Mortgage loans (subsidised and general regime)
Lusitano Mortgages No.3 plc	November 2004	1 200 000	521 143	Mortgage loans (general regime)
Lusitano Mortgages No.4 plc	September 2005	1 200 000	596 623	Mortgage loans (general regime)
Lusitano Mortgages No.5 plc	September 2006	1 400 000	828 363	Mortgage loans (general regime)
Lusitano SME No.1 plc	01 October 2006	862 607	239 278	Loans to small and medium entities
Lusitano Mortgages No.6 plc	J uly 2007	1 100 000	757 723	Mortgage loans (general regime)
Lusitano Project Finance No.1 , FTC	December 2007	1 079 1 00		1 31 526 (1 ) Project Finance Loans
Lusitano Mortgages No.7 plc	September 2008	1 900 000	1 797 397	Mortgage loans (general regime)
Lusitano Leverage finance No. 1 BV	February 2010	51 6 534 (2)	1 29 666	Leverage Finance Loans
Lusitano Finance N.º 3	November 2011	657 981	434 362	Retail loans
IM BES Empresas 1	November 2011	485 000	375 770	Loans to small and medium entities

(1) In March 2011, the credit portfolio associated to this securitisation was partially sold, with the remaining (domestic credit) been to "Lusitano Project Finance Nº. 1 FTC".

(2) This securitisation includes the amount of euro 382 062 thousand of mortgage loans from BES and an amount of euro 134 472 thousand of mortgage loans fromBESI and BES Vénétie,

As permitted by IFRS 1, the Group has applied the derecognition requirements of IAS 39 for the transactions entered into after 1 January 2004. Therefore, the assets derecognised until that date, in accordance with the previous accounting policies, were not restated in the balance sheet.

The assets sold in the securitisation transactions Lusitano Mortgages No.3, Lusitano Mortgages No.4 and Lusitano Mortgages No.5, performed after 1 January 2004, were derecognised considering that the Group has transferred substantially all the risks and rewards of ownership.

In accordance with SIC 12, the Group fully consolidates Lusitano SME No. 1, plc, Lusitano Mortgages No.6 plc, Lusitano Project Finance No. 1 FTC and Lusitano Mortgages No.7 plc as it retains the majority of the risks and rewards associated with the activity of these SPE's. Therefore, the respective assets and liabilities are included in the consolidated balance sheet of the Group. The other securitisation vehicles are not included in the consolidated financial statements of the Group as it has not retained the majority of the risks and rewards of ownership.

In 2011 there were two securitization transactions: loans to households (Lusitano Finance Nº3) with loan originated by BES and other of corporate loans (IM BES Empresas 1) with loans originated by BES Spanish branch. During 2010 it was set-up two securitization operations of corporate loans (Lusitano Leverage Finance Nº1) which includes loans from BES London Branch, BESI and ES Vénétie and other of corporate loans and commercial paper (Lusitano SME Nº2), and the latter been repaid in March 2012. These loans were not derecognised considering that the group has not transferred substantially all the risks and rewards of ownership.

The main characteristics of these transactions, as at 31 December 2012, can be analysed as follows: (in thousands of euro)

Designation			Current	Securities held				Rantings (inicial)			Ratings (actual)
	Notes issues	Issue amount (per value)	amount (per value)	by BES (per value)	Maturity Date	Fitch	Moody's	S&P	DBRS	Fitch	Moody's	S&P	DBRS
Lusitano Mortgages No.1 plc	Class A	91 5 000	265 866	87	December 2035	AAA	Aaa	AAA	-	A	Baa3	A-	-
	Class B	32 500	32 500	-	December 2035	AA	Aa3	AA	-	A	Baa3	A-	-
	Class C	25 000	25 000	3 000	December 2035	A	A2	A	-	A	Ba1	A-	-
	Class D	22 500	22 500	-	December 2035	BBB	Baa2	BBB	-	BBB+	Ba3	BB	-
	Class E	5 000	5 000	-	December 2035	BB	Ba1	BB	-	BB+	B2	B-	-
	Class F	1 0 000	1 0 000	-	December 2035	-	-	-	-	-	-	-	-
Lusitano Mortgages No.2 plc	Class A	920 000	279 078	4 277	December 2036	AAA	Aaa	AAA	-	A	Baa3	A-	-
	Class B	30 000	30 000	1 2 500	December 2046	AA	Aa3	AA	-	A	Baa3	BBB	-
	Class C	28 000	28 000	5 000	December 2046	A	A3	A	-	A	Ba2	BB-	-
	Class D	1 6 000	1 6 000	4 000	December 2046	BBB	Baa3	BBB	-	BBB+	B1	B	-
	Class E	6 000	6 000	-	December 2046	BBB-	Ba1	BB	-	BB	B3	B-	-
	Class F	9 000	9 000	-	December 2046	-	-	-	-	-	-	-	-
Lusitano Mortgages No.3 plc	Class A	1 1 40 000	465 202	3 836	December 2047	AAA	Aaa	AAA	-	A	Ba1	A-	-
	Class B	27 000	1 7 833	-	December 2047	AA	Aa2	AA	-	A	Ba3	BBB	-
	Class C	1 8 600	1 2 285	-	December 2047	A	A2	A	-	BBB	B2	BB-	-
	Class D	1 4 400	9 51 1	-	December 2047	BBB	Baa2	BBB	-	BB-	Caa1	B-	-
	Class E	1 0 800	9 270	-	December 2047	-	-	-	-	-	-	-	-
Lusitano Mortgages No.4 plc	Class A	1 1 34 000	51 1 939	7 449	December 2048	AAA	Aaa	AAA	-	BBB-	Ba1	A-	-

	Class B	22 800	21 553	-	December 2048	AA	Aa2	AA	-	BBB-	Ba3	BB+	-
	Class C	1 9 200	1 8 1 50	3 309	December 2048	A+	A1	A+	-	BBB-	B2	B+	-
	Class D	24 000	22 687	4 500	December 2048	BBB+	Baa1	BBB+	-	CCC	Caa3	B-	-
	Class E	1 0 200	1 0 200	1 320	December 2048	-	-	-	-	-	-	-	-
Lusitano Mortgages No.5 plc	Class A	1 323 000	739 478	5 589	December 2059	AAA	Aaa	AAA	-	BBB-	Ba1	A-	-
	Class B	26 600	25 494	-	December 2059	AA	Aa2	AA	-	BBB-	B1	A-	-
	Class C	22 400	21 469	-	December 2059	A	A1	A	-	BB-	B3	BB+	-
	Class D	28 000	26 836	5 271	December 2059	BBB+	Baa2	BBB	-	CCC	Ca	B+	-
	Class E	1 1 900	1 1 900	1 700	December 2059	-	-	-	-	-	-	-	-
Lusitano SME No.1 plc	Class A	759 525	1 05 1 65	4 61 4	December 2028	AAA	-	AAA	-	BBB	-	A-	-
	Class B	40 974	35 931	-	December 2028	AAA	-	AAA	-	AAA	-	AAA	-
	Class C	34 073	29 880	-	December 2028	BB	-	BB	-	CCC	-	B	-
	Class D	28 035	24 585	24 585	December 2028	-	-	-	-	-	-	-	-
	Class E	8 626	8 626	8 626	December 2028	-	-	-	-	-	-	-	-
Lusitano Mortgages No.6 plc	Class A	943 250	570 1 31	49 41 3	March 2060	AAA	Aaa	AAA	-	A	Ba1	A-	-

	Class B	65 450	65 450	58 950	March 2060	AA	Aa3	AA	-	A	Ba1	A-	-
	Class C	41 800	41 800	31 800	March 2060	A	A3	A	-	BBB	B1	A-	-
	Class D	1 7 600	1 7 600	1 7 600	March 2060	BBB	Baa3	BBB	-	B	B3	BB	-
	Class E	31 900	31 900	31 900	March 2060	BB	-	BB	-	CCC	-	B-	-
	Class F	22 000	22 000	22 000	March 2060	-	-	-	-	-	-	-	-
Lusitano Project Finance No.1 FTC		1 98 1 01	1 39 1 39	1 39 1 39	March 2025	-	-	-	-	-	-	-	-
Lusitano Mortgages No.7 plc	Class A	1 425 000	1 31 6 460	1 31 6 459	October 2064	-	-	AAA	AAA	-	-	A-	AAH
	Class B	294 500	294 500	294 500	October 2064	-	-	BBB-	-	-	-	BB-	-
	Class C	1 80 500	1 80 500	1 80 500	October 2064	-	-	-	-	-	-	-	-
	Class D	57 000	57 000	57 000	October 2064	-	-	-	-	-	-	-	-
Lusitano Leverage finance No. 1 B	Class A	352 000	-	-	J anuary 2020	-	-	AAA	-	-	-	AAA	-
	Class C	206 800	21 850	20 633	J anuary 2020	-	-	-	-	-	-	-	-
	Class X	21 850	1 91 293	1 46 1 09	J anuary 2020	-	-	-	-	-	-	-	-

Lusitano SME No.2	Class A	1 1 07 300	-	-	March 201 2	-	Aaa	-	AAA	-	-	-	-
	Class B	369 1 00	-	-	March 201 2	-	A2	-	A (low)	-	-	-	-
	Class C	466 300	-	-	March 201 2	-	-	-	-	-	-	-	-
	Class D	38 900	-	-	March 201 2	-	-	-	-	-	-	-	-
Lusitano Finance N.º 3	Class A	450 700	269 279	269 279	November 2029	-	-	-	-	-	-	-	-
	Class B	207 200	207 200	207 200	November 2029	-	-	-	-	-	-	-	-
	Class C	20 000	20 000	20 000	November 2029	-	-	-	-	-	-	-	-
IM BE S E mpresas 1	Class A	242 500	1 29 769	-	November 2043	-	AAA	-	-	-	A3	-
	Class B	242 500	242 500	242 500	November 2043	-	Caa2	-	-	-	Caa2	-

NOTE 50 – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The fair value of financial assets and liabilities, for the Group, is analysed as follows:

						(in thousands of euro)
			Fair Value
	Amortised Cost	Quoted Market Prices	Valuation models based on observable market information	Valuation models based on non observable market information	Book Value	Fair Value
Balance as at 31 December 201 2
Cash and deposits at central banks Deposits with banks Other financial assets held for trading Financial assets at fair value through profit or loss Available-for-sale financial assets Loans and advances to banks Loans and advances to customers	1 377 541 681 077 - - a) 8 605 5 426 51 8 47 1 94 030	- - 1 484 1 1 2 1 387 979 5 008 676 - -	- - 2 441 287 1 1 53 990 4 778 336 - 51 2 362	- - - 279 584 959 693 - -	1 377 541 681 077 3 925 399 2 821 553 1 0 755 31 0 5 426 51 8 47 706 392	1 377 541 681 077 3 925 399 2 821 553 1 0 755 31 0 5 426 51 8 44 684 1 22
Held-to-maturity investments Derivatives for risk management purposes	941 549 -	- -	- 51 6 520	- -	941 549 51 6 520	879 265 51 6 520
Financial assets	55 629 320	7 880 767	9 402 495	1 239 277	74 1 51 859	71 067 305
Deposits from central banks Financial liabilities held for trading Deposits from banks Due to customers Debt securities issued Derivatives for risk management purposes Subordinated debt	1 0 893 320 - 4 476 381 25 743 341 1 2 764 479 - 839 553	- - - - - - -	- 2 1 22 025 61 2 277 8 796 982 2 659 582 1 25 1 99 263	- - - - - - -	1 0 893 320 2 1 22 025 5 088 658 34 540 323 1 5 424 061 1 25 1 99 839 81 6	1 0 893 320 2 1 22 025 4 898 506 34 540 323 1 5 990 921 1 25 1 99 81 1 686
Financial liabilities	54 71 7 074	-	1 4 31 6 328	-	69 033 402	69 381 980
Balance as at 31 December 201 1
Cash and deposits at central banks Deposits with banks Other financial assets held for trading Financial assets at fair value through profit or loss Available-for-sale financial assets Loans and advances to banks Loans and advances to customers Held-to-maturity investments Derivatives for risk management purposes	1 090 439 580 81 3 - - a) 1 4 260 3 282 576 48 454 1 85 1 541 1 82 -	- - 1 003 079 29 604 4 404 395 - - - -	- - 2 431 560 1 924 698 6 81 0 704 - 589 1 97 - 51 0 090	- - - 9 687 253 507 - - - -	1 090 439 580 81 3 3 434 639 1 963 989 1 1 482 866 3 282 576 49 043 382 1 541 1 82 51 0 090	1 090 439 580 81 3 3 434 639 1 963 989 1 1 482 866 3 282 576 45 864 208 1 359 782 51 0 090
Financial assets	54 963 455	5 437 078	1 2 266 249	263 1 94	72 929 976	69 569 402
Deposits from central banks Financial liabilities held for trading Deposits from banks Due to customers Debt securities issued Derivatives for risk management purposes Subordinated debt	1 0 01 3 71 3 - 5 481 596 26 904 037 1 4 393 295 - 961 235	- - - - - - -	- 2 1 25 253 757 764 7 302 1 25 4 059 353 238 633 -	- - - - - - -	1 0 01 3 71 3 2 1 25 253 6 239 360 34 206 1 62 1 8 452 648 238 633 961 235	1 0 01 3 71 3 2 1 25 253 5 373 851 34 206 1 62 1 5 788 71 3 238 633 843 750
Financial liabilities	57 753 876	-	1 4 483 1 28	-	72 237 004	68 590 075

a) Assets at acquisition cost net of impairment losses. These assets refer to equity instruments issued by non-quoted entities in relation to which no recent transactions were identified or is not possible to estimate reliably its fair value.

BES Group determines the fair value of its financial assets and liabilities in accordance with the following hierarchy:

Quoted market prices – this category includes financial assets with available quoted market prices in official markets and with dealer prices quotations provided by entities that usually provide transaction prices for these assets/liabilities traded in active markets.

Valuation models based on observable market information – consists on the use of internal valuation techniques, namely discounted cash flow models and option pricing models which imply the use of estimates and require judgments that vary in accordance with the complexity of the financial instrument. Notwithstanding, the Group uses observable market data such as interest rate curves, credit spreads, volatility and market indexes. Includes also instruments with dealer price quotations but which are not traded in active markets.

Valuation models based on non-observable market information – consists on the use of internal valuation models or quotations provided by third parties but which imply the use of non-observable market information. Changes in the parameters used in 2012 and 2011, have no significant impact to the Group consolidated financial statements.

The movements of the financial assets valued based on non-observable market information, during 2012, can be analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Balance at the beggining of the year	263 1 94	21 3 434
Acquisitions	989 342	98 499
Disposals	( 1 7 604)	( 9 1 71 )
Transfers	6 593	1 0 956
Changes in value	( 2 248)	( 50 524)
Balance at the end of the year	1 239 277	263 1 94

The main assumptions and inputs used during the years ended 2011 and 2010 in the valuation models are presented as follows:

Interest rate curves

The short term rates presented reflect benchmark interest rates for the money market, being that for the long term the presented values represent the swap interest rate for the respective periods:

						(%)
		31.1 2.2012			31 .1 2.201 1
	E UR	USD	GBP	EUR	US D	GB P
Overnight	0.0700	0.1000	0.4700	0.3250	0.11 00	0.4300
1 month	0.1 759	0.2300	0.4600	1.0240	0.2953	0.7604
3 months	0.1 870	0.41 50	0.4800	1.3560	0.581 0	1.0900
6 months	0.3200	0.4400	0.6200	1.61 70	0.8085	1.3400
9 months	0.31 78	0.5900	0.7900	1.7910	0.9659	1.5900
1 year	0.3200	0.3260	0.5411	1.41 75	0.6770	1.0850
3 years	0.4700	0.4765	0.7783	1.3750	0.8225	1.3601
5 years	0.7650	0.8260	1 .01 69	1.7240	1.2260	1.5624
7 years	1 .1 250	1 .2435	1 .3563	2.0690	1.6335	1.861 9
1 0 years	1 .5700	1 .7500	1 .8560	2.3870	2.01 60	2.2940
1 5 years	2.01 84	2.2800	2.41 35	2.6750	2.371 5	2.6525
20 years	2.1 715	2.5020	2.7230	2.6920	2.4960	2.8322
25 years	2.2203	2.6240	2.8800	2.6250	2.5460	2.9426
30 years	2.2413	2.6880	2.9535	2.5610	2.5870	2.9920

Credit spreads

The credit spreads used by the Group on the valuation of the credit derivatives are disclosed on a daily basis by Markit representing observations constituted for around 85 renowned international financial entities. The evolution of the main indexes, understood as being representative of the credit spreads behaviour in the market throughout the year, is presented as follows:

						(basis points)
Index	Series	1 year	3 years	5 years	7 years	10 years
Year 2012
C DX USD Main	1 9	33.02	58.73	95.39	11 8.68	1 36.14
iTraxx Eur Main	18	-	76.38	1 17.43	141.58	1 54.60
iTraxx Eur Senior F inancial	18	-	-	1 42.44	-	1 74.98
Year 2011
C DX USD Main	1 7	60.25	93.98	1 20.03	128.87	1 37.62
iTraxx Eur Main	16	-	1 53.99	1 73.38	177.50	1 79.25
iTraxx Eur Senior F inancial	16	-	-	275.25	-	275.25

Interest rates volatility

The values presented below, refer to the implied volatilities (at the money) used for the valuation of the interest rate options:

		31.1 2.2012			31 .1 2.201 1
	E UR	USD	GBP	EUR	USD	GB P

1 year	197.1 8	66.60	54.1 0	51 .08	76.51	53.15
3 years	84.70	72.90	64.90	52.92	77.70	67.00
5 years	67.50	63.22	60.80	50.31	67.85	62.90
7 years	52.90	51 .03	49.60	44.19	56.34	52.30
1 0 years	39.70	42.33	37.20	38.00	47.78	39.70
1 5 years	31 .43	35.80	27.80	32.42	42.36	29.70

Exchange rate and volatility

Presented below are the exchange rates (European Central bank) at the balance sheet date and the implied volatilities (at the money) for the main currencies used on the derivatives valuation:

			Volatility (%)
Exchange Rates	31.12.2012	31.12.2011	1 month	3 months	6 months		9 months 12 months
E UR/USD	1.3194	1 .2939	8.18	8.33	8.70	9.04	9.20
E UR/GBP	0.8161	0.8353	5.63	5.85	6.28	6.65	6.83
E UR/CHF	1.2072	1 .21 56	2.10	3.05	3.70	4.52	4.85
E UR/NOK	7.3483	7.7540	4.95	5.23	5.55	5.91	6.08
E UR/PLN	4.0740	4.4580	6.60	7.05	7.85	8.35	8.75
E UR/RUB	40.3295	41 .7650	7.78	8.17	8.35	8.90	9.23
USD/BRL a)	2.0491	1 .8671	9.33	9.55	9.80	10.10	1 0.40
USD/TR Y b)	1.7850	1 .8882	5.70	6.68	7.70	8.43	8.95

(a) Calculation based in EUR/USD and EUR/BRL exchange rates

(b) Calculation based in EUR/USD and EUR/TRY exchange rates

Concerning the exchange rates, the Group uses in the valuation models the spot rate observed in the market at the time of the valuation.

Equity index

In the table below, is presented the evolution of the main market equity indexes and the respective volatilities used for the valuation of equity derivatives:

		Quote		Historical volatility	Implied
	31 .1 2.201 2	31 .12.2011	% change	1 month	3 months	volatility

DJ E uro Stoxx 50	2 636	2 317	13.8	11 .11	17.02	18.12
PSI 20	5 655	5 494	2.9	12.60	15.40	-
IBEX 35	8 168	8 566	- 4.7	13.68	21 .34	-
F TSE 100	5 898	5 572	5.8	8.83	11 .42	13.64
DAX	7 61 2	5 898	29.1	11 .10	14.26	15.34
S&P 500	1 426	1 258	13.4	12.28	12.28	16.15
BOVE SPA	60 952	56 754	7.4	17.96	18.31	20.34

The methods and assumptions used in estimating the fair values of financial assets and liabilities measured at amortised cost in the balance sheet are analysed as follows:

Cash and deposits at central banks, Deposits with banks and Loans and advances to banks Considering the short term nature of these financial instruments, carrying value is a reasonable estimate of its fair value.

Loans and advances to customers

The fair value of loans and advances to customers is estimated based on the discount of the expected future cash flows of capital and interest, assuming that the installments are paid on the dates that have been contractually defined. The expected future cash flows of loans with similar credit risk characteristics are estimated collectively. The discount rates used by the Group are current interest rates used in loans with similar characteristics.

Held-to-maturity investments

The fair values of these financial instruments are based on quoted market prices, when available. For unlisted securities the fair value is estimated by discounting the expected future cash-flows.

Deposits from central banks and Deposits from banks

Considering the short term nature of these financial instruments, carrying value is a reasonable estimate of its fair value

Due to customers

The fair value of these financial instruments is estimated based on the discount of the expected future cash flows of capital and interest, assuming that the installments are paid on the dates that have been contractually defined. The discount rates used by the Group are the current interest rates used in instruments with similar characteristics. Considering that the applicable interest rates to these instruments are floating interest rates and that the period to maturity is substantially less than one year, the difference between fair value and book value is not significant.

Debt securities issued and Subordinated debt

The fair value of these instruments is based on market prices, when available. When not available, the Group estimates its fair value by discounting the expected future cash-flows.

NOTE 51 – RISK MANAGEMENT

A qualitative outlook of the risk management at the Group is presented below:

Credit risk

Credit risk represents the potential financial loss arising from the failure of a borrower or counterparty to honour its contractual obligation. Credit risk is essentially present in traditional banking products – loans, guarantees granted and contingent liabilities – and in trading products – swaps, forwards and options (counterparty risk). Regarding credit default swaps, the net exposure between selling and buying positions in relation to each reference entity, is also considered as credit risk to the Group. The credit default swaps are accounted for at fair value in accordance with the accounting policy described in Note 2.4.

Credit portfolio management is an ongoing process that requires the interaction between the various teams responsible for the risk management during the consecutive stages of the credit process. This approach is complemented by the continuous introduction of improvements in the methodologies, in the risk assessment and control tools, as well as in procedures and decision processes.

The risk profile of BES Group is analysed on a regular basis by the risk committees, especially in what concerns the evolution of credit exposures and monitoring of credit losses.

BES Group credit risk exposure is analysed as follows:

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1

Deposits with banks	3 799 1 29	4 675 649
Financial assets held for trading	3 871 474	3 392 644
Other financial assets at fair value through profit or loss	1 634 41 9	1 27 731
Available-for-sale financial assets	8 462 1 04	1 0 1 92 450
Loans and advances to customers	47 706 392	49 043 382
Held-to-maturity investments	941 549	1 541 1 82
Derivatives for risk management purposes	51 6 520	51 0 090
Other assets	480 754	682 779
Guarantees granted	8 023 520	8 376 006
Stand by letters of credit	3 776 399	2 941 1 1 4
Irrevocable commitments	3 280 971	4 21 6 289
Credit risk associated to the credit derivatives reference entities	489 884	1 65 573
	82 983 1 1 5	85 864 889

The analysis of the risk exposure by sector of activity, as at 31 December 2012 and 2011, can be analysed as follows:

										(in thousands of euro)
					31 .1 2.201 2
	Loans and advances to customers		Financial assets held for trading	Other financial assets at fair value through	Derivatives for risk management	assets	Available-for-sale financial	Held-to-maturity investments		Guarantees granted
	Gross amount Impairment			profit and loss	purposes	Gross amount	Impairment	Gross amount	Impairment
Agriculture	434 485	( 27 1 52)	1 4 202	-	-	1 0 725	( 6)	-	-	36 677
Mining	309 229	( 1 1 966)	3 742	1 1 708	-	1 2 969	( 675)	-	-	53 656
Food, beverage and tobacco	974 407	( 50 542)	25 727	2 685	-	1 0 395	( 52)	-	-	1 02 293
Textiles	31 6 309	( 31 090)	862	-	-	1 0 425	( 3 958)	-	-	1 2 779
Shoes	63 359	( 6 843)	38	-	-	499	( 499)	-	-	2 063
Wood and cork	1 47 345	( 23 1 21 )	480	2 236	-	4 366	( 1 330)	-	-	7 466
Printing and publishing	331 889	( 1 5 601 )	6 683	-	-	1 1 968	( 1 1 968)	-	-	84 260
Refining and oil	6 976	( 45)	4 81 7	3 385	-	1 1 61 8	-	-	-	5 425
Chemicals and rubber	61 6 899	( 1 4 1 49)	20 744	1 471	-	24 009	( 1 3 276)	-	-	1 02 280
Non-metallic minerals	363 449	( 28 435)	431	-	-	1 3 1 03	( 7 958)	-	-	20 1 52
Metallic products	877 1 38	( 48 939)	1 4 592	1 94	-	2 407	-	-	-	1 55 603
Production of machinery, equipment and electric	280 584	( 1 1 883)	3 079	584	-	31 249	( 5 632)	-	-	1 20 022
Production of transport material	1 1 3 698	( 9 677)	630	1 0 741	1 4	33 298	( 3 438)	-	-	34 662
Other transforming industries	389 355	( 27 340)	1 61 1	2 642	-	31 758	( 1 1 280)	-	-	38 449
E lectricity, gas and water	1 458 334	( 1 1 032)	1 55 360	23 846	-	687 307	-	-	-	487 693
Construction	4 429 927	( 368 41 7)	41 6 606	57 643	-	27 858	( 1 688)	-	-	2 292 61 9
Wholesale and retail	3 1 88 671	( 289 276)	1 0 81 0	1 366	-	33 764	( 1 5 430)	1 537	-	546 904
Tourism	1 453 1 73	( 91 21 5)	1 4 625	65 301	-	39 439	( 379)	-	-	1 01 949
Transports and communications	2 1 52 1 59	( 46 964)	291 1 75	1 8 483	-	271 487	( 8 91 6)	9 894	-	1 01 0 767
Financial activities	3 952 1 38	( 1 23 257)	1 045 792	1 901 531	51 6 506	3 650 620	( 70 301 )	526 584	( 20 794)	1 61 474
Real estate activities	6 249 967	( 431 61 1 )	52 371	70 000	-	201 741	( 1 891 )	1 299	-	456 531
Services provided to companies	4 749 1 80	( 369 927)	344 883	91 424	-	1 1 56 930	( 33 1 97)	39 1 39	-	1 484 41 4
Public services	954 941	( 22 959)	1 361 1 85	51 5 994	-	4 405 389	-	295 271	-	227 1 98
Non-profit organisations	2 682 267	( 268 571 )	1 33 1 28	38 356	-	303 008	( 46 089)	1 06 936	( 1 8 31 7)	402 493
Mortgage loans	1 1 1 33 822	( 1 69 1 1 4)	-	-	-	-	-	-	-	9
Consumers loans	2 627 780	( 1 91 270)	-	-	-	-	-	-	-	70 704
Other	1 41 253	( 1 946)	1 826	1 963	-	6 945	( 4)	-	-	4 978
TOTAL	50 398 734	(2 692 342)	3 925 399	2 821 553	51 6 520	1 0 993 277	( 237 967)	980 660	( 39 1 1 1 )	8 023 520

										(in thousands of euro)
					31 .1 2.201 1
	Loans and advances to customers		Financial assets held for trading	Other financial assets at fair value through	Derivatives for risk management	assets	Available-for-sale financial	Held-to-maturity investments		Guarantees granted
	Gross amount	Impairment		profit and loss	purposes	Gross amount	Impairment	Gross amount	Impairment
Agriculture	435 935	( 1 7 077)	1 1 803	-	-	1 1 31 5	( 3 087)	-	-	45 525
Mining	215 006	( 9 788)	3 869	-	-	1 027	( 546)	-	-	1 9 408
Food, beverage and tobacco	909 823	( 44 21 5)	1 1 537	-	-	22 286	( 52)	-	-	93 689
Textiles	315 807	( 28 1 71 )	1 906	-	-	20 1 03	( 2 238)	-	-	1 5 482
Shoes	71 989	( 5 842)	459	-	-	51 5	( 499)	-	-	2 040
Wood and cork	1 59 555	( 24 975)	812	-	-	1 372	-	-	-	6 879
Printing and publishing	340 289	( 6 638)	5 272	-	-	1 23 364	( 1 989)	-	-	89 423
Refining and oil	29 233	( 1 91 )	3 204	-	-	4 1 54	-	-	-	6 997
Chemicals and rubber	631 525	( 1 1 442)	1 1 1 56	-	-	56 770	( 1 3 389)	-	-	95 474
Non-metallic minerals	435 583	( 1 8 446)	475	-	-	37 764	( 7 548)	-	-	26 912
Metallic products	845 522	( 35 765)	1 324	-	-	500	-	-	-	122 800
Production of machinery, equipment and electric	278 209	( 7 037)	2 381	-	-	62 61 2	( 7 11 3)	-	-	162 205
Production of transport material	332 333	( 1 4 200)	504	-	-	585	( 108)	-	-	29 431
Other transforming industries	379 1 73	( 23 987)	2 350	-	-	35 792	( 8 41 3)	-	-	44 328
E lectricity, gas and water	1 607 225	( 9 554)	92 584	-	-	526 959	( 1 855)	-	-	626 046
Construction	4 694 390	( 236 1 34)	344 306	56 000	-	1 53 446	( 1 687)	-	-	2 566 951
Wholesale and retail	3 260 235	( 257 343)	1 9 263	-	-	31 5 889	( 1 5 203)	-	-	537 255
Tourism	1 571 254	( 60 542)	1 7 522	-	-	2 874	( 379)	-	-	96 906
Transports and communications	1 895 253	( 85 982)	305 527	-	-	537 632	( 8 91 5)	9 865	-	985 644
Financial activities	2 844 493	( 1 41 628)	1 052 404	1 695 543	51 0 090	1 938 549	( 25 239)	618 975	( 21 393)	164 929
Real estate activities	6 864 981	( 304 001 )	65 606	70 000	-	285 634	( 1 776)	-	-	465 535
Services provided to companies	4 449 41 2	( 21 7 566)	21 3 640	1 04 436	-	2 01 4 1 90	( 29 923)	-	-	1 689 810
Public services	1 062 578	( 22 593)	889 770	-	-	4 689 21 4	-	805 437	-	244 897
Non-profit organisations	3 016 41 9	( 264 537)	368 585	38 01 0	-	790 406	( 35 392)	1 39 221	( 1 0 923)	144 089
Mortgage loans	1 1 610 1 1 2	( 1 60 473)	-	-	-	-	-	-	-	39
Consumers loans	2 715 482	( 1 55 292)	-	-	-	-	-	-	-	91 311
Other	239 01 0	( 4 025)	8 380	-	-	1 8 1 96	( 2 931 )	-	-	2 001
TOTAL	51 210 826	(2 1 67 444)	3 434 639	1 963 989	51 0 090	11 651 1 48	( 1 68 282)	1 573 498	( 32 31 6)	8 376 006

					(in million of euro)
		31 .1 2.201 2		31 .1 2.201 1
Rating/Scoring models	Internal scale	Credit amount	(%)	Credit amount	(%)
	[aaa;a-]	8	0.02%	77	0.1 5%
	[bbb+;-bbb-]	2 31 3	4.59%	2 535	4.95%
Large companies	[bb+;bb-]	4 997	9.91 %	4 697	9.1 7%
	[b+;b-]	8 080	1 6.02%	8 601	1 6.80%
	ccc+	1 277	2.53%	1 806	3.53%
	8-9	535	1 .06%	692	1 .35%
	1 0-1 1	532	1 .06%	656	1 .28%
	1 2-1 3	632	1 .25%	859	1 .68%
	1 4-1 5	438	0.87%	576	1 .1 2%
Medium enterprises	1 6-1 7	567	1 .1 3%	596	1 .1 6%
	1 8-1 9	342	0.68%	575	1.12%
	20-21	347	0.69%	457	0.89%
	22-23	294	0.58%	345	0.67%
	24-25	1 659	3.29%	1 01 6	1 .98%
	A	71	0.1 4%	91	0.1 8%
	B	305	0.61 %	365	0.71 %
	C	620	1 .23%	878	1.71%
Small enterprises	D	31 1	0.62%	382	0.75%
	E	251	0.50%	21 6	0.42%
	F	557	1.11%	51 5	1 .01 %
	01	1 1 96	2.37%	1 1 07	2.1 6%
	02	4 341	8.61 %	4 259	8.32%
	03	1 492	2.96%	1 632	3.1 9%
	04	71 0	1 .41 %	81 4	1 .59%
Mortgage loans	05	503	1 .00%	574	1 .1 2%
	06	488	0.97%	51 0	1 .00%
	07	679	1 .35%	696	1 .36%
	08	953	1 .88%	1 1 01	2.1 5%
	01	86	0.1 7%	1 01	0.20%
	02	66	0.1 3%	1 1 7	0.23%
	03	1 30	0.26%	1 56	0.30%
	04	31 2	0.62%	328	0.64%
	05	1 36	0.27%	208	0.41 %
Private individuals	06	1 98	0.39%	244	0.48%
	07	1 44	0.29%	1 68	0.33%
	08	1 09	0.22%	1 44	0.28%
	09	260	0.52%	232	0.45%
	1 0	4	0.01 %	3	0.01 %
No internal rating/scoring loans		1 4 456	28.68%	1 2 882	25.1 5%
TOTAL		50 399	1 00.00%	51 21 1	1 00.00%

As at 31 December 2012 and 2011, the analysis of the loan portfolio by rating is as follows:

Market risk is the possible loss resulting from an adverse change in the value of a financial instrument due to fluctuations in interest rates, foreign exchange rates, share prices, commodities prices, volatility and credit spread.

The market risk management is integrated with the balance sheet management through the Asset and Liability Committee (ALCO). This committee is responsible for defining policies for the structuring and composition of the balance sheet, and for the control of exposures to interest rate, foreign exchange and liquidity risk.

The main measure of market risk is the assessment of potential losses under adverse market conditions, for which the Value at Risk (VaR) valuation criteria is used. BES's VaR model uses the Monte Carlo simulation, based on a confidence level of 99% and an investment period of 10 days. Volatilities and correlations are historical, based on an observation period of one year. As a complement to VaR stress testing has been developed, allowing to evaluate the impact of potential losses higher than the ones considered by VaR.

				(in thousands of euro)
		31 .1 2.201 2
	December	Annual average	Maximum	Minimum
E xchange Risk	3 399	1 1 272	1 3 723	3 399
Interest rate risk	8 793	1 8 426	28 532	8 793
Shares and commodities	1 5 026	1 4 439	1 1 1 27	1 5 026
Volatility	7 1 1 2	7 222	7 1 73	7 1 1 2
Credit Spread	1 3 887	40 21 2	71 556	1 3 887
Diversification effect	( 1 0 1 05)	( 1 7 030)	( 20 347)	( 1 0 1 05)
Total	38 1 1 2	74 541	1 1 1 764	38 1 1 2

(in thousands of euro)

		31 .1 2.201 1
	December	Annual average	Maximum	Minimum
E xchange Risk	4 872	9 254	1 1 634	4 872
Interest rate risk	1 0 764	1 1 404	1 4 863	1 0 764
Shares and commodities	1 3 554	1 9 209	1 2 042	1 3 554
Volatility	1 4 291	30 073	57 979	1 4 291
Credit Spread	1 5 1 70	1 0 434	1 1 1 70	1 5 1 70
Diversification effect	( 1 1 1 32)	( 1 5 638)	( 1 9 020)	( 1 1 1 32)
Total	47 51 9	64 736	88 668	47 51 9

Group has a VaR of euro 38 112 thousand (31 December 2011: euro 47 519 thousand), for its trading positions.

Following the recommendations of Basel II (Pilar 2) and Instructions nº19/2005, of the Bank of Portugal BES Group calculates its exposure to interest rate risk based on the methodology of the Bank of International Settlement (BIS), classifying all balance and off-balance balances which are not part of the trading portfolio, by repricing intervals.

(in thousands of euro)

				31 .12.201 2
	E ligible amounts	Non sentitive	Up to 3 months	3 to 6 months	6 to 1 2 months	1 to 5 years	More than 5 years
Cash and deposits	7 492 060	438 713	6 664 597	269 579	1 03 370	1 5 754	46
Loans and advances to customers	49 673 250	-	29 712 842	8 957 736	2 736 21 0	5 965 359	2 301 1 03
Securities	16 725 064	7 367 973	4 002 972	1 359 061	1 058 477	1 742 554	1 194 026
Debt securities issued	3 804	3 804	-	-	-	-	-
Total			40 380 41 1	1 0 586 376	3 898 057	7 723 668	3 495 1 75
Deposits from Banks	15 867 594	-	1 4 1 82 895	525 694	648 472	270 027	240 506
Due to customers	34 031 479	-	22 337 278	2 929 281	3 066 320	5 685 1 75	1 3 424
Securities issue	15 858 652	-	5 1 39 450	752 979	279 880	6 547 539	3 138 805
Investiments contracts	3 31 9 944	545 779	25 622	371 293	-	1 671 301	705 950
Debt securities issued	1 547 697	1 531 1 05	-	-	-	5 904	1 0 689
Total			41 685 244	4 579 247	3 994 673	14 179 946	4 109 373
GAP (assets - liabilities)	(2 464 796)		(1 304 833)	6 007 129	( 96 61 6)	(6 456 278)	( 61 4 198)
Off Balance sheet			(6 11 4 471 )	( 751 350)	509 366	6 289 980	66 475
Structural GAP	(2 464 796)		(7 41 9 305)	5 255 779	41 2 750	( 1 66 298)	( 547 723)
Accumulated GAP			(7 41 9 305)	5 255 779	5 668 529	5 502 231	4 954 509

							(in thousands of euro)
				31 .12.201 1
	E ligible amounts	Non sentitive	Up to 3 months	3 to 6 months	6 to 1 2 months	1 to 5 years	More than 5 years
Loans and advances to customers	4 787 662	278 1 79	4 234 688	42 487	4 952	226 340	1 016
Securities	49 095 349	-	33 287 221	1 0 443 084	2 274 857	1 797 421	1 292 766
Debt securities issued	16 064 643	4 340 1 15	7 021 587	1 587 333	1 484 844	1 090 437	540 327
Total			44 543 496	1 2 072 904	3 764 653	3 11 4 1 98	1 834 1 09
Deposits from banks	16 21 6 997	-	1 3 706 51 7	603 595	680 262	91 2 891	31 3 732
Due to customers	33 576 964	-	22 615 631	3 1 58 141	3 421 871	4 284 310	97 011
Securities issue	19 086 330	-	9 370 785	711 284	245 487	6 266 941	2 491 833
Total			45 692 933	4 473 020	4 347 620	11 464 1 42	2 902 576
GAP (assets - liabilities)	(3 550 931)		(1 149 437)	7 599 884	( 582 967)	(8 349 944)	(1 068 467)
Off Balance Sheet	-		(5 81 0 719)	(1 737 590)	1 788 949	5 545 617	21 3 743
Structural GAP	(3 550 931)		(1 149 437)	7 599 884	( 582 967)	(8 349 944)	(1 068 467)
Accumulated GAP			(1 149 437)	7 599 884	7 01 6 91 7	(1 333 027)	(2 401 494)

Sensitivity analysis to the interest rate risk of the bank prudential portfolio are performed, based on the duration model approach and considering several scenarios of movements of the yield curve at all interest rate levels.

	31 .1 2.201 2						31 .1 2.201 1
	Parallel increase of 1 00 bp	Parallel decrease of 1 00 bp	Increase of 50 bp after 1 year	Decrease of 50 bp after 1 year	Parallel increase of 1 00 bp	Parallel decrease of 1 00 bp	Increase of 50 bp after 1 year	Decrease of 50 bp after 1 year
At 31 December	( 85 483)	85 483	( 34 1 38)	34 1 38	1 75 371	( 1 75 371 )	1 02 1 91	( 1 02 1 91 )
Average of the year	( 22 320)	22 320	( 976)	976	239 334	( 239 334)	1 32 845	( 1 32 845)
Maximum for the year	( 1 24 700)	1 24 700	60 383	( 60 383)	336 477	( 336 477)	1 79 1 58	( 1 79 1 58)
Minimum for the year	1 3 477	( 1 3 477)	22 242	( 22 242)	1 75 371	( 1 75 371 )	1 02 1 91	( 1 02 1 91 )

The following table presents the average balances, interests and interest rates in relation to the Group's major assets and liabilities categories, for the period ended 31 December 2012 and 2011:

						(in thousands of euro)
		31 .12.2012			31.1 2.201 1
	Average balance for the year	Interest for the year	Average interest rate	Average balanc e for the year	Interest for the year	Average interest rate
Monetary assets	4 885 099	1 92 458	3.94%	5 413 930	1 70 403	3.15%
Loans and advances to customers	50 31 5 715	2 527 274	5.02%	51 519 608	2 678 426	5.20%
Securities	14 242 252	850 845	5.97%	13 333 830	737 976	5.53%
Differencial applications	-	-	-	11 481	-	-
Financial Assets	69 443 066	3 570 577	5. 14%	70 278 848	3 586 805	5.10%
Monetary Liabilities	17 566 965	419 167	2.39%	16 511 041	460 256	2.79%
Due to consumers	34 029 787	1 037 769	3.05%	32 534 704	1 037 772	3.19%
Other	16 564 422	933 133	5.63%	21 233 104	907 1 86	4.27%
Differencial liabilities	1 281 892	-	-	-	-	-
Financial Liabilities	69 443 066	2 390 069	3. 44%	70 278 848	2 405 214	3.42%
Net interest inc ome		1 1 80 508	1. 70%		1 1 81 591	1 .68%

Foreign Exchange Risk

In relation to foreign exchange risk, the breakdown of assets and liabilities by currency as at 31 December 2012 and 31 of December of 2011, is analysed as follows:

									(in thousands of euro)
			31 .1 2.201 2				31 .1 2.201 1
		Spot	Forward	Other elements	Net ex posure	S pot	Forward	Other elements	Net ex posure
	USD United Stades Dollars	( 802 201 )	842 328	32 097	72 224	( 661 275)	835 766	41 845	21 6 336
	GBP Great Britain Pounds	466 1 68	( 467 042)	( 1 057)	( 1 931 )	480 536	( 476 598)	( 80)	3 858
	BRL Brazillian real	1 87 801	( 1 83 686)	( 4 738)	( 623)	21 0 597	( 200 379)	1 6 357	26 575
	DKK Danish Krone	21 947	( 21 579)	-	368	21 6	( 3 720)	-	( 3 504)
J PY	J apanese yene	27 297	5 1 71	( 40 1 66)	( 7 698)	( 8 799)	1 7 400	( 1 0 271 )	( 1 670)
CHF	Swiss krone	9 944	( 6 962)	( 1 286)	1 696	53 075	( 48 646)	( 1 291 )	3 1 38
	SE K Swedish krone	7 403	( 7 778)	( 53)	( 428)	( 2 1 38)	1 305	1 82	( 651 )
	NOK Norwegian krone	( 49 539)	49 807	69	337	( 3 251 )	1 030	( 54)	( 2 275)
	CAD Canadian Dollar	22 866	( 23 290)	( 7 227)	( 7 651 )	40 1 69	( 62 399)	456	( 21 774)
ZAR	Rand	( 5 569)	4 475	497	( 597)	( 602)	( 71 5)	2 637	1 320
	AUD Australian Dollar	( 8 51 0)	1 0 1 24	1 7	1 631	98 577	( 1 01 357)	3 1 06	326
	AOA Kwanza	( 53 208)	-	-	( 53 208)	( 228 429)	-	-	( 228 429)
CZK	Czach koruna	5	-	-	5	3 804	302	( 2 247)	1 859
	MXN Mexican Peso	63 789	( 75 772)	9 338	( 2 645)	61 971	( 81 497)	3 21 5	( 1 6 31 1 )
	Others	1 6 727	45 008	34 626	96 361	( 6 276)	( 54 1 70)	80 31 9	1 9 873
		( 95 080)	1 70 804	22 1 1 7	97 841	38 1 75	( 1 73 678)	1 34 1 74	( 1 329)

Exposure to peripheral Eurozone countries public debt

As at 31 December 2012 and 31 December 2011 the exposure to public debt from peripheral Eurozone countries which are monitored by the Group is analysed as follows:

						(in thousands of euro)
	31 .12.2012
	Loans and Advances to Customers	Financial Assets held for trading at fair value	Derivatives instruments (1)	Available-for sale financial assets	Held-to-maturity investments	Total
Portugal	935 771	592 985	31 1 43	2 468 941	1 28 147	4 1 56 987
Spain	11 1 1 21	568	( 76)	605 499	-	717 11 2
Greece	-	3 439	-	-	-	3 439
Irland	-	-	-	-	24 894	24 894
Italy	-	6 225	-	21 290	-	27 51 5
Hungary	-	-	-	-	-	-
	1 046 892	603 217	31 067	3 095 730	1 53 041	4 929 947

(1 ) Net values: receivable/payable

(in thousands of euro)

	31 .12.2011
	Loans and Advances to Customers	Financial Assets held for trading at fair value	Derivatives instruments (1)	Available-for sale financial assets	Held-to-maturity investments	Total
Portugal	876 702	123 852	69 714	2 820 649	-	3 890 91 7
Spain	132 418	563	1 989	4 096	-	1 39 066
Greece	-	-	( 265)	-	-	( 265)
Irland	-	-	( 1 069)	-	-	( 1 069)
Italy	-	-	( 2 865)	-	-	( 2 865)
Hungary	-	-	-	-	-	-
	1 009 1 20	124 415	67 504	2 824 745	-	4 025 783

(1 ) Net values: receivable/payable

All the exposures presented above, except loans and advances to customers, are recorded in the Group's balance sheet at fair value, which is based on market quotations or, in relation to derivatives, based on valuation techniques with observable market data. Loans and advances to customers are recorded at amortized cost net of impairment losses.

A detailed exposure regarding securities recorded in financial assets available-for-sale, financial assets held for trading, financial assets at fair value through profit or loss and held to maturity investments can be analysed as follows:

(in thousands of euro)

	31.12.2012
	Nominal Amount	Market value	Accrued interest	Book value	Impairment	Fair value reserves
Available-for-sale financial assets
Portugal	2669666	2 4 21 2 41	47700	2 468 941		191 142
Maturity up to 1 year	187 331	186 135	113	186 248		498
Maturity exceeding 1 year	2 482 335	2 2 3 5 1 0 6	47 587	2 2 8 2 6 9 3		190 644

Spain	616092	597 401	8098	605 499	$\blacksquare$	2 1 9 0
Maturity up to 1 year	389 350	383 681	325	384 006		796
Maturity exceeding 1 year	226742	213 720	7773	221 493		1 3 9 4
Italy	20 000	20 867	423	21 290		478
Maturity up to 1 year
Maturity exceeding 1 year	20 000	20 867	423	21 290		478
	3 305 758	3 0 39 5 09	56 221	3 095 730	$\blacksquare$	193810
Financial assets held for trading
Portugal	158 946	141 676	3807	145 483
Spain	304	302		302

	159 250	141 978	3807	145 785	$\blacksquare$
Financial assets at fair value
Portugal	523775	439 544	7958	447 502
Spain	260	259	7	266
Greece	129655	3 4 3 9	÷.	3 4 3 9
Italy	5969	6 2 2 4	1	6 2 2 5
	659 659	449 466	7966	457 432	$\qquad \qquad \blacksquare$

Financial assets held to maturity Portugal	137 000	126 431	1716	128 147
Irland	24 000	24 051	844	24 894

	161 000	150 482	2560	153 041	$\blacksquare$

		31.12.2011				(in thousands of euro)
	Nominal	Market value	Accrued	Book value	Impairment	Fair value
	Amount		interest			res erv es

Available-for-sale financial assets Portugal	3187790	2780 693	39726	2820 649		(124406)
Maturidade até 1 ano	2 069 941	2 0 4 0 4 8 1	14542	2 0 5 2 2 3 6		(16736)
Maturidade superior 1 ano	1 117 849	740 212	25184	765 413		(107670)
Spain	4036	4 0 27	69	4 0 9 6		- 9) €
Maturidade até 1 ano	4014	4 0 0 4	68	4 0 7 2		4)
Maturidade superior 1 ano	22	23	$\mathbf{1}$	24		5) (

	3 191 8 26	2784720	39795	2824745	$\blacksquare$	(124415)
Financial assets held for trading
Portugal	126 208	120 458	3 3 9 4	123 852
S pain	568	563		563

126 776 1 21 021 3 394 1 24 41 5 - -

Liquidity risk

Liquidity risk derives from the potential inability to fund assets while satisfying commitments on due dates and from potential difficulties in liquidating positions in portfolio without incurring in excessive losses.

The liquidity risk can be divided into two types:

Assets liquidity (market liquidity risk) unable to sell a particular asset due to lack of liquidity in the market, which results in extending the bid / offer spread or applying a haircut to the market value.
Funding (funding liquidity risk) unable to, within the desired timeframe and currency, fund assets in the market and / or refinance debt that is due. This inability can be reflected by a significant increase of the financing cost or the requirement of collateral to obtain funds. The difficulty of (re) financing can lead to asset sales, even incurring in significant losses. The risk of (re) financing should be minimized through adequate diversification of funding sources and maturities.

The first half of 2012 was marked by the by the stabilization of the impression and financial markets conditions. The main contributions for this stabilization are presented as follows:

The actions of the European Central Bank that besides de reduction of the reference rate from 1.5% to 1% in the final of the year 2011, held two liquidity operations with a maturity of three years (LTRO), extended the eligibility criteria for the assets pledged as collateral in monetary policy operations and reduced the threshold of minimum reserves in European Central Bank from 2% to 1%. These measures allowed an increase of the available market liquidity, when it was predicted to occur several major debt maturities in the banking sector;
The Greek debt restructuring, although it not completely dissipated the Eurozone peripherical economies sovereign debt crisis.
The results of the European Council at the end of June and the statements of the ECB President to support the Euro in July;
The resolutions adopted at the ECB meeting in September, especially the details of the new program for purchasing government debt (Outright Monetary Transactions - "OMT").

The last measure had a key role for reducing the systemic risk and represents an important step for stabilizing the Eurozone. Consequently, in the fourth quarter of 2012, the yields of sovereign debt of peripheral countries experienced sharp declines and the yields on Portuguese public debt showed levels lower than those observed when applying for financial help in April 2011.

At year end, the portfolio value of assets eligible for rediscount operations was euro 22.3 thousands million, of which euro 19.4 thousand million with the European Central Bank.

Aiming to assess the overall exposure to liquidity risk is assessed through reports that provide not only identify the negative mismatch, how to make coverage and dynamic basis.

							(in thousands of euro)
				31 .12.2012
	Eligible amounts	Up to 7 days	From 7 days to 1 month	From 1 to 3 months	From 3 to 6 months	From 6 months to 1 year	More than 1 year
AS SE TS
C ash and deposits with banks	420	420	-	-	-	-	-
Loans and advances to banks and central banks	7 072	5 61 4	504	607	223	95	30
Loans and advances to customers	43 500	561	1 1 70	1 41 1	1 501	2 291	36 566
S ecurities	25 684	2 601	1 1 40	2 226	889	1 500	1 7 328
Debt securities issues	4	4	-	-	-	-	-
Other Assets, net	1 81 6	1 81 6	-	-	-	-	-
Off Balance s heet (Commitments and Derivatives )	6 570	31 3	1 39	268	454	513	4 883
Total		11 329	2 953	4 51 2	3 067	4 399	58 807
L IABILITIE S
Deposits from banks, central banks and other loans	1 6 11 0	2 092	515	680	479	770	1 1 573
Due to customers	33 789	594	957	1 974	731	1 38	29 396
S ecurities	1 5 862	176	441	1 936	927	278	1 2 1 03
Investments contracts	3 320	21	1	83	63	1 62	2 989
Debt securities issues	1 548	1 0	5	1 4	28	71	1 418
Other short-term liabilities	1 589	1 589	-	-	-	-	-
Off Balance s heet (Commitments and Derivatives )	1 0 188	330	201	41 7	624	520	8 096
Total		4 81 2	2 1 20	5 104	2 852	1 939	65 575
GAP (Ass ets - Liabilities)		6 51 5	833	( 593)	21 4	2 459
Accumulated GAP		6 51 5	7 348	6 755	6 970	9 429
B uffer > 1 2 months							581

							(in thousands of euro)
				31 .12.2011
	Eligible amounts	Up to 7 days	From 7 days to 1 month	From 1 to 3 months	From 3 to 6 months	From 6 months to 1 year	More than 1 year
AS SE TS
C ash and deposits with banks	436	436	-	-	-	-	-
Loans and advances to banks and central bank s	4 509	2 368	823	1 037	42	8	232
Loans and advances to customers	48 372	61 4	1 610	1 800	1 652	2 543	40 1 52
S ecurities	1 9 307	536	1 727	2 193	727	474	1 3 650
D ebt securities issues	-	-	-	-	-	-	-
Other Assets, net	3 779	3 779	-	-	-	-	-
Off Balance s heet (Commitments and D erivatives )	6 141	21 7	1 75	535	856	475	3 883
T otal		7 950	4 335	5 565	3 277	3 500	57 917
L IAB ILITIE S
D eposits from banks, c entral banks and other loans	1 6 535	3 642	2 319	2 457	583	462	7 072
D ue to customers	33 259	85	1 065	1 987	531	1 067	28 524
S ecurities	1 9 124	30	2 774	2 944	555	209	1 2 612
Investments contracts	-	-	-	-	-	-	-
D ebt securities issues	-	-	-	-	-	-	-
Other short-term liabilities	1 683	1 683	-	-	-	-	-
Off Balance s heet (Commitments and D erivatives )	1 2 224	282	292	754	939	541	9 415
T otal		5 722	6 450	8 142	2 608	2 279	57 623
GAP ( Ass ets - Liabilities)		2 229	( 2 11 6)	( 2 578)	668	1 221
Ac cumulated GAP		2 229	1 13	( 2 465)	( 1 797)	( 575)
B uffer > 1 2 months							2 752

The one year cumulative gap went from euro -575 million in December 2011 to euro 9 429 million in December 2012. It should be noted that as at 31 December 2012 this amount includes BES Vida. This positive change reflects the liquidity risk management conservative orientation with the liquidation of assets and extension of liabilities.

Additionally, and in accordance with Instruction no. 13/2009 of Bank of Portugal, the liquidity gap is defined by the indicator [(Net Assets - Volatile Liabilities) / (Assets - Net assets) * 100] on each residual cumulative maturity scale. Net assets include cash and net securities and volatile liabilities include issuances, commitments, derivatives and other liabilities. This indicator allows a characterization of the wholesale risk of the institutions.

As at 31 December 2012, BES Group one year liquidity gap was -1.7, which compares to -15.0 from the same period last year and is in line with other banks in Portugal (-5.4 in June 2012). This reflects a positive change, as previously mentioned, with the liquidation of assets and extension of liabilities. Note that the above figures, calculated in accordance with Instruction no. 13/2009 of Bank of Portugal,

do not include BES Vida, whose activity is regulated by the Portuguese Insurance Authority ("Instituto de Seguros de Portugal"), which establishes exposure limits for diversification and prudential spread.

In order to try to anticipate possible constraints, BES Group considers extreme scenarios in terms of liquidity (moderate and severe), different timeframes and different impact areas (systemic, specific to the Bank and combined). For example, in the systemic scenario is simulated the closure of the wholesale market, while in the specific scenario to the Bank is simulated the run-off of customer deposits from retail and non-retail, with different severity levels.

As at 31 December 2012, the net assets buffer (consisting of deposits at central banks and securities available in the pool of assets rediscountable at ECB) exceeded cash outflows arising from the application of stress tests.

In January 2013, under the Basel III framework, the Bank of International Settlements published new legislation regarding the Liquidity Coverage Ratio (LCR). As at 31 December 2012, the Group has met on this ratio the limit set for 2015.

Operational risk

Operational risk represents the risk of losses resulting from failures in internal procedures, people behaviors, information systems and external events. It is understood, therefore, operational risk as the sum of the following risks: operational, information systems, compliance and reputation.

To manage operational risk, it was developed and implemented a system that standardizes, systematizes and regulates the frequency of actions with the objective of identification, monitoring, controlling and mitigation of risk. The system is supported at organizational level by a unit within the Global Risk Department, exclusively dedicated to this task, and by representatives designated by each of the relevant departments and subsidiaries.

Insurance business specific risk (life insurance)

Underwriting

There are written rules that establish the guidelines to consider in the risk acceptance, and which were based on the analysis performed over several portfolio indicators to enable matching the best possible price to the risk. The information provided by the Company's reinsurers is also taken into account and the underwriting policies are defined by business segment.

Pricing

The Company aims to set prices sufficient and adequate to cover all commitments (outstanding claims, expenses and cost of capital).

Upstream, the price suitability is tested through techniques of realistic cash flow projections and downstream, the profitability of each product or group of products is monitored annually when calculating the Market Consistent Embedded Value.

There are metrics and guidelines defined by the Company setting out the minimum requirements for profitability of any new product, as well as to perform sensitivity analysis. The calculation of the Market Consistent Embedded Value is conducted once a year by the Company and reviewed by external consultants.

Reserving

In general, the Company's policy is prudential and uses recognized actuarial methods fulfilling the legislation in force. The main policy objective is to record appropriate and adequate reserves so that

the Company meets all its future liabilities. For each line of business, the Company records reserves within their liabilities for future claims and segregate assets to represent these reserves. This requires the preparation of estimates and the use of assumptions that may affect the assets and liabilities amounts in future years.

Such estimates and assumptions are periodically evaluated, including through statistical analysis of historical internal and / or external data. The adequacy of estimated liabilities for the insurance activity is reviewed annually. If the technical reserves are not sufficient to cover the present value of expected future cash flows (claims, costs and commissions), the insuffciencty is immediately recognized through additional reserves.

Insurance specific risk

Biometric risks

Biometric risks include the risks of longevity, mortality and disability. The longevity risk covers the uncertainty in the ultimate loss due to policyholders living longer than expected and can arise for example, in annuities. The longevity risk is managed through pricing, underwriting policy and by regularly reviewing the mortality tables used to set prices and create reserves in compliance. The mortality risk is linked to an increase of the mortality rate which may have an impact on insurances that guarantee capital in the event of death. This risk is mitigated through underwriting policies, regular review of the mortality tables used and reinsurance. The disability risk covers the uncertainty of actual losses due to disability rates higher than expected.

The sensitivity of the portfolio to biometric risks is analyzed through realistic cash flow projections - Market Consistent Embedded Value Model.

Non-collection risk

The non-collection risk relates to the risk of nonpayment of premiums and cancellation of policies. The redemption and cancellation rates are monitored regularly in order to monitor its impact on the Company's portfolio. The portfolio's sensitivity to this risk is analyzed through realistic cash flow projectios - Market Consistent Embedded Value Model.

The main assumptions used by type of contract are as follows:

	Mortality Table	Technical rate
Retirements savings plans and capitalization products
Up to December 1 997	GKM 80	4%
From J anuary 1 998 to February 1 999	GKM 80	3.25%
From J uly 1 999 to February 2003	GKM 80	2.25% e 3%
From Mars 2003 to December 2003	GKM 80	2.75%
After J anuary 2004	GKM 80	Set per calendar year (*)
Insurance in case of life
Rents
Up to J une 2002	TV 73/77	4%
From J uly 2002 to December 2003	TV 73/77	3%
From J anuary 2004 to August 2006	GKF 95	3%
After September 2006	GKM - 3 years	2%
Other insurance
Insurance in case of death
Up to December 2004	GKM 80	4%
After J anuary 2005	GKM 80	0% a 2%
Insurance mixed
Up to September 1 998	GKM 80	4%
After October 1 998	GKM 80	3%

(*) In the years of 201 2 and 201 1 the technical rate w as 2%

For liability adequacy test purposes, the mortality assumptions are based on best estimates derived from portfolio experience investigations. Future cash flows are evaluated and discounted at government bonds rate.

The mortality assumptions used are as follows:

Mortality Table
Rents	GRM 95
Savings and Other contracts	30% GKM 80

The following table shows the sensitivity analyzes in Market Consistant Embedded Value of insurance activity:

	(in thousands of euro)
	31 -1 2-2012
1 0% growth in redemptions	( 3 873)
D ecrease of 1 0% in redemptions	4 896
5% growth in mortality rate (life except rents)	( 1 789)
D ecrease of 5% in mortality rate (life except rents)	2 055

The following table presents the sensitivity analysis on the impact net of tax reserves and gains and losses from changes in the interest rate without risk and the market value of the shares of insurance activity:

(in thousands of euro)

	31 -1 2-2012
	Profit for the period	Reserve net taxes
1 00 pb growth in risk-free rate	1 701	( 55 632)
Decrease of 1 00 pb in risk-free rate	( 1 819)	60 249
Devaluation of 10% in the market value of the shares		- ( 30 21 9)
1 0% appreciation in the market value of the shares		- 30 219

Capital management and solvability ratio

The main objective of the Group capital management is to ensure compliance with the Group's strategic objectives in terms of capital adequacy, respecting and enforcing the minimum capital requirements set by supervisors.

The definition of the strategy in terms of capital adequacy is made by the Executive Committee and is integrated in the global goals of the Group.

The Group is subject to Bank of Portugal supervision that, under the capital adequacy Directive from the CE, establishes the prudential rules to be attended by the institutions under its supervision. These rules determine a minimum solvability ratio in relation to the requirements of the assumed risks that institutions have to fulfill.

In the scope of the implementation of the new capital accord Basel II, and using the permission granted by the new prudential regime established by Decree-Law 103/2007 and Decree-Law 104/2007, the Group was authorized to use, starting 31 March 2009, the approach based in the use of internal models for credit risks (Foundation Internal Rating Based Approach – IRBF) for credit risk and the Standardized Approach – TSA) for operational risk.

The capital elements of BES Group are divided into: Basic Own Funds, Complementary Own Funds and Deductions, as follows:
Core Tier I: This category includes mainly the share capital, share premiums, elegible reserves, the net profit for the year retained when certified and non-controlling interests. The fair value reserves are excluded except for the deduction of negative fair value reserves associated with shares or other equity instruments, is also deductible to Core Tier I the following balance shets amounts goodwill, intangible assets, negative actuarial deviations arising from liabilities with postemployment benefits to employees above the prudential corridor limit and, where applicable, the net loss for the period.
Basic Own Funds (BOF): In addition to the amounts considered as Core Tier I, this category includes the preference shares and hybrid capital instruments. It can be deducted from capital half of the value converted into equity, above 10%, in financial institutions and insurance companies. Following the implementation of the IRB method for credit risk, is now also adjusted 50% of the expected loss amount for exposures on the part that exceeds the sum of value adjustments and existing reserves.
Complementary Own Funds (COF): Essentially incorporates the subordinated eligible debt and 45% of the positive fair value reserve associated with equity securities. The book value of investments in banking and insurance associates is deducted in 50% of its value and since 2009, is also deducted 50% of the expected losses of the risk positions less any existing provisions, following the application of the IRBF method for credit risk

Deductions (D): Essentially incorporates the prudential amortization of assets received as a recovery of non-performing loans.

Additionally there are several rules that limit the composition of the capital basis. The prudential rules determine that the COF cannot exceed the BOF. Also, some components of the COF (Lower Tier II) cannot exceed 50% of the BOF.

In December 2008, the Bank of Portugal issued the Notice 11/2008, establishing a transitory period of four years, from December 2009 to December 2012, for the recognition of the actuarial gains/losses determined in 2008, deducted from the expected return of the fund plan assets for the same year. This transitory period ended in December 2012 coinciding with the last prudential depreciation.

In May 2011 and in the context of the negotiation of the Financial Assistance Programme to Portugal – with the European Commission, the European Central Bank and the International Monetary Fund – the Bank of Portugal issued the Notice 3/2011, establishing new minimum levels of solvency to be followed by the financial groups subject to its supervision. Therefore, Portuguese credit institutions must reach a Core Tier I ratio of no less than 9% by 31 December 2011 and 10% by 31 December 2012.

At the same time, european banks must reach a Core Tier I ratio of 9% as defined by the European Banking Authority (EBA).

		(in thousands of euro)
	31 .1 2.201 2	31 .1 2.201 1
Balance at the beggining of the period	6 1 71	6 040
Capital increase (exchange of hybrid instruments for capital)	-	521
Capital increase	998	-
Hybrid instuments	( 1 9)	( 675)
E legible reserves and retained earnings (excluding fair value reserves)	42	( 1 1 9)
Non-controlling interest, excluding hybrids	2	94
Goodwill	( 1 66)	1 39
Changes on actuarial Losses	( 526)	1 44
Recognition of the impact of adopting IFRS	( 12)	( 13)
Deduction in connection with investments held in banking and insurance entities	( 1 65)	202
Fair value reserves with an impact in BOF	1 42	( 1 64)
Other effects	( 29)	2
Balance at the end of the period	6 438	6 1 71

As at 31 December 2012 and 2011, the main movements occurred in BOF are as follows:

			(in thousands of euro)
		31 .1 2.201 2	31 .1 2.201 1
A - Capital Requirements
Share Capital, Issue Premium and Treasury stock		6 074	5 1 06
E legible reserves and retained earnings (excluding fair value reserves)		1 237	1 1 95
Minority Interest		587	585
Intangible assets		( 1 41 )	( 1 42)
Changes on actuarial Losses		( 741 )	( 21 5)
Goodwill		( 506)	( 340)
Fair value reserves with an impact on BOF		( 52)	( 1 94)
Recognition of the impact of adopting IFRS		1 3	25
Basic own funds ex cluding preference shares (Core Tier I)	( A1 )	6 471	6 020
Hybrid instuments, elegible for Tier I		226	245
Deductions in connection with investments held in banking and insurance entities		( 259)	( 94)
Own Funds for the determination of the EBA Core Tier I ratio	( C )	6 091	-
Basic own funds (Tier I)	( A2 )	6 438	6 1 71
Positive fair value reserves (45% )		47	25
E ligible subordinated debt		801	923
Deductions in connection with investments held in banking and insurance entities		( 259)	( 90)
Complementary own funds (Tier II)		589	858
Deductions		( 72)	( 59)
Eligible own funds	( A3 )	6 955	6 970
B- Risk Weighted Assets
Calculated according Notice 5/2007 (Credit Risk)		56 454	59 705
Calculated according Notice 8/2007 (Market Risk)		1 503	1 742
Calculated according Notice 9/2007 (Operational Risk)		3 694	3 938
Risk Weighted Assets Total	( B )	61 651	65 385
C- Prudential Ratios
Core Tier 1	( A1 / B )	1 0,5%	9,2%
Core Tier 1 E BA	(C / B )	9,9%	-
Tier 1	( A2 / B )	1 0,4%	9,4%
Solvency Ratio	( A3 / B )	1 1 ,3%	1 0,7%

The capital adequacy of BES Group as at 31 December 2012 and 2011 is presented as follows:

Financing and capitalization plans (2011 - 2015)

According to the Memorandum of Economic and Financial Policies signed between the Portuguese Government and the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF), Portuguese banks, and financial holding companies that consolidate Portuguese banking subsidiaries, have to quarterly develop financing and capitalization plans for the period from 2011 to 2015, in order to achieve the following objectives:

The loans to deposits ratio should reach a maximum value of 120% from December 2014, inclusive;
The stable funding ratio should be 100% from December 2014, inclusive;
The Core Tier I ratio should be 10% as at 31 December 2012 as established in Notice 3/2011 of Bank of Portugal.

Additionally, the financing plans should consider that the dependence of domestic funds from its branches and subsidiaries abroad should be minimized; must reduce its funding dependence from the ECB; consider a progressive access to the short-term market and a progressive opening of the medium and long term market from the fourth quarter of 2013; and should be supported by commercial policies to support the Portuguese economy sectors, namely the small and medium enterprises.

NOTE 52 – CONTRACTUAL COMMITMENTS

Securitization transactions

During the year 2011 and 2012, the securitization transactions originated by BES suffered successive rating downgrades, following the downgrades attributed by various rating agencies to the Portuguese Republic and Portuguese banks. Traditionally, these operations include in their structures different risk protection mechanisms, namely the substitution of counterparties when credit ratings fall below minimum levels required by rating agencies or by triggering corrective actions enabling the mitigation of the exposure risk to those counterparties.

In addition, BES acted as swap counterparty in two of its operations (Lusitano Mortgage No.6 and Lusitano Mortgage No.7). The performance of these functions in securitization transactions is restricted to entities that meet the minimum rating levels established by the rating agencies. Therefore, following the downgrades, BES position in the operation Lusitano Mortgage No.6 was transferred to a financial institution that meets the eligibility criteria of the agencies and in the operation Lusitano Motgage No.7, the Group preceded to the restructuring of the operation.

Additionally, following the Portuguese Republic downgrade by Moody's in February 2012, this agency set the maximum rating attributable to bonds issued in securitized operations as Baa1. Thus, the operation of securitization of small and medium enterprises settled by BES in December 2010 – Lusitano SME No.2 – lost the eligibility for rediscount at ECB and BES chose to exercise the call option in 23th March 2012.

Covered Bonds

The issues of covered bonds also suffered a strong impact caused by the downgrade of the Portuguese Republic and the Portuguese banks. As a result, BES could no longer be the counterparty in interest rate swaps transactions and proceeded to its transfer and, in some cases, to its cancelation.

Contract Support Annex (CSA)

BES has a set of contracts negotiated with counterparties with who trades derivative in the OTC market. CSA takes the form of collateral agreement established between two parties dealing with each other derivatives Over-the-Counter, with the main objective to provide protection against credit risk, establishing for the purpose a set of rules regarding the collateral. Derivatives transactions are regulated by the International Swaps and Derivatives Association (ISDA) and have a minimum margin of risk that may change according to the parties rating.

NOTE 53 – ASSETS TRANSFER

As part of the restructuring process of the Portuguese real estate sector, several initiatives have been launched in order to create financial, operational and management conditions to revitalize the sector. Accordingly, the Government, in close liaison with the business and the financial sector, including the BES Group, encouraged the creation of companies and specialized funds that, through merger, consolidation and integrated management, would obtain the required synergies to recover the sector. Pursuing the goals established, were created companies (parent companies), where BES Group has

minority interests (in partnership with other banks that also have a minority interest), and which in turn now hold almost all of the capital of certain subsidiaries (subsidiaries of those parent companies) in order to acquire certain real estate bank loans.

During 2012, BES transferred financial assets (mainly corporate loans) to the subsidiaries of the parent companies. These entities are responsible for managing the assets received as collateral, which after the transfer of loans are received in exchange for the loans, and have the goal to implement a plan to increase its value.

These acquiring entities (the subsidiaries of the parent companies) have a specific management structure, fully autonomous from the banks, selected on the date of their incorporation and have the following main responsibilities:

define the entity's purpose;
administer and manage on an exclusive and independent way the assets acquired, determine objectives and investment policy and the manner to conduct the entity's management and affairs.

The acquiring entities are predominantly financed through the issuance of senior equity instruments fully underwritten by the parent company. The amount of capital represented by senior securities equals the fair value of the underlying asset, determined through a negotiation process based on evaluations made by both parties. These securities are remunerated at an interest rate that reflects the risk of the company holding the assets. Additionally, the funding can be supplemented through banks underwriting of junior capital instruments equal to the difference between the book value of the loans transferred and the fair value based on the senior securities valuation. These junior instruments, when signed by BES Group will be entitled to a contingent positive amount if the assets transferred value, when sold, exceeds the amount of senior securities plus its remuneration. Normally, the amount of the junior security is limited to a maximum of 25% of the total amount resulting from the senior and junior securities issued.

Given that these junior securities reflect a different assessment of the assets transferred, based on valuation performed by independent bodies and a negotiation process between the parties, they are fully provided for in the Group's balance sheet.

Therefore, following the transfer of assets occurred in 2012, the Group subscribed:

equity instruments, representing the parent companies' share capital on which the cash flows that will enable its recovery come from a wide range of assets transferred by the various banks. These securities are recorded under financial assets available for sale and are measured at market value with valuation regularly reported by those parent companies whose accounts are audited at the end of each year;
junior instruments issued by the acquiring companied (the subsidiaries of the parent companied) which are fully provided for thus reflecting the best impairment estimation of the financial assets transferred.

The instruments subscribed by BES Group clearly resulted in a minority position in the capital of the parent companies and of its subsidiaries.

In this context, having no control but being exposed to some risk and rewards of ownership in relation to the transferred assets through the securities as referred above, the Group, in accordance with IAS 39.21, conducted an analysis in order to compare the exposure to the variability of risks and rewards of the transferred assets before and after the operation and concluded that it has not retained

substantially all the risks and rewards of ownership. Additionally, and considering that also has no control has been retained, it proceeded in accordance with IAS 93.20c (i) to the derecognition of the assets transferred and the recognition of the assets received in return, as shown in the following table: (in thousands of euro)

	Values at the date of transfer
	Values ??associated with the Assignment of Assets					Securities subscription
	Net Assets Transfer	Transfer Value	Income from Transfer	Securities (senior titles)	Securities (junior titles)	Total	Impairment	Net Profit
Tourism Recovery Fund, FCR	282 1 21	282 1 21	-	256 891	34 906	291 797	(34 906)	256 891
FLIT SICAV	252 866	254 547	1 682	235 304	23 247	258 551	(23 247)	235 304
Discovery Portugal Real E state Fund	96 1 96	93 208	(2 988)	96 81 2	-	96 81 2	-	96 81 2
Vallis Construction Sector Fund	66 272	66 272	-	81 002	21 992	1 02 994	(21 992)	81 002
	697 455	696 1 48	(1 307)	670 009	80 1 45	750 1 54	(80 1 45)	670 009

As showed in the table above, the junior securities underwritten specifically as part of the transfer of assets are fully provided for. The provision amount recorded in 2012 following these transactions amounts to approximately euro 80.1 million.

Although the junior securities are fully provided for, the Group also maintains an indirect exposure to the assets transferred through its minority interest in the parent companies capital and therefore, in all pool of assets that resulted from the various assets transfers performed by the banks (shareholders of the parent companies).

Almost all of the financial assets transferred in these operations were derecognised from the Group's balance sheet as there was a transfer, to third parties, of substantially all risks and rewards of ownership, as well as the respective control.

There was however an operation with the company FLITPTREL VIII in which, as the acquiring company substantial holds assets transferred by BES Group and considering the holding of junior securities, the variability of the test resulted in a substantial exposure to all risks and benefits. In this circumstance, the operation, amounting to euro 60 million, remained recognized in the Group's balance sheet under Other assets.

NOTA 54 – BUSINESS COMBINATIONS

BES VIDA

Until 30 April 2012, BES held a 50% interest in BES-Vida, Companhia de Seguros, S.A. (BES Vida), a life insurance company, which distributes its products in Portugal and Spain, through BES branch network. Crédit Agricole owned the remaining 50 % and controlled its activities.

As referred in Note 1, in May 2012, BES acquired, from Credit Agricole, the remaining 50% of the share capital of BES Vida with the objective of leveraging the marketing of BES Vida's insurance products.

Following this acquisition, BES became to hold the entire share capital of BES Vida and has the management control over its activities. Therefore, BES Vida, which qualified as an associated and was included in the consolidated financial statements of BES following the equity method, has become a subsidiary and is being fully consolidated since May 2012.

The total investment amounted to euro 225 million euro, paid in cash and BES Vida reimbursed, in October 2012, the additional paid-in capital amounting to euro 125 million.

This transaction was accounted for in accordance with the provisions of paragraph 42 of IFRS 3 related with business combination achieved in stages, which requires any previously held equity interest in the acquire, to be remeasured to fair value at the acquisition date and the resulting gain or loss to be recognised in the income statement. The amounts recognised in the fair value reserve up to the date in which control in acquired, are required to be recycled to the income statement.

Moreover, in accordance with paragraph 45 of IFRS 3, this acquisition was accounted on a provisional basis, due to fact that the transaction took place in May 2012 and the Group currently is in the process of concluding the fair value of the assets and liabilities acquired namely in what concerns deferred taxes related with losses carry forward existing at acquisition date which are subject to the approval of Tax Authorities. The eventual impact of this situation is a decrease in goodwill in the amount of euro 33 million and a corresponding increase in deferred tax assets by the same amount. The Group has until 30 April 2013 to conclude this process.

As at 1 May 2012, the balance sheet of BES-Vida included in the BES Group consolidated financial statements can be analysed as follows:

The Balance Sheet of BES Vida reported on 1 May 2012, including the consolidated financial statements of BES can be analysed as follows:

	(in thousand of euro)
As sets
C ash and deposits with banks	1 98 648
Other financial assets at fair value through profit or loss	2 759 100
Available-for-sale financial assets	1 917 328
Held-to-maturity investments	1 59 551
Property and equipment	93 864
Intangible assets	76 641
Technical reserves of reinsurance ceded	2 51 2
Income tax assets	11 2
Other assets	1 78 71 2
	5 386 468
L iabilities
Technical reserves	1 880 631
Investment contracts	3 053 344
Other financial liabilities	1 94 434
Income tax liabilities	2 342
Other liabilities	40 291
	5 1 71 042
E quity
S hare Capital	50 000
Other reserves and retained earnings	1 65 426
	215 426
	5 386 468

The fair value of recognised identifiable assets acquired and liabilities assumed include, under Intangible assets, the amount of euro 107 768 thousand (euro 76 515 thousand net of assets) related to the present value of the business in force acquired related to life insurance contracts (Value in Force). This asset will be amortised over the remaining lifetime of the contracts.

The goodwill recognized as a result of this acquisition amounts to about euro 234 574 thousands and is detailed as follows:

	%	in thousands of euro
Goodwill as the excess of:
Consideration transferred		225 000
Aquisition date fair value of the 50% interest previously held in BE S Vida		225 000
		450 000
Over:
Fair value of identifiable assets and liabilities acquired (1)	1 00	21 5 426
Goodwill determined on a provisional basis		234 574
(1 ) mensured on a provisional basis

The goodwill is attributable mainly to the potential growth of the market where BES-Vida operates.

The impact in the income statement of measuring at fair value the previously held equity interest in BES Vida, representing 50% of its share capital, following the requirements of paragraph 42 of IFRS 3, can be analysed as follows:

	in thousands of euro
50% interest previously held in BE S Vida
Fair value	225 000
Book value	243 790

Loss on remeasurement of the previously held in BE S Vida	( 1 8 790)
Recognition in the income statement of the accumulated fair value reserve
of BE S Vida appropriated on consolidation up the acquisition date	( 70 796)

Loss arising from the acquisition of control in BE S Vida	( 89 586)

The impact of fully consolidating BES Vida resulted in a gain of euro 68.7 million included in the Group's profit for the year, detailed as follows:

measurement of the 50% share capital already held by the Group in the amount of euro -89.6 million; which deducted from the intra-group transactions amounting to euro 35.5 million, brings the total impact in the first full consolidation to euro -54.1 million, net of taxes;
Appropriation trough the equity method of the net profit generated by BES Vida from 1 January to 30 April 2012, amounting to euro 2.8 million; and
Appropriation through the consolidation method of the net profit generated by BES Vida from 1 May until 31 December 2012, net of consolidation adjustments, amounting to euro 120.0 million.

If BES Vida had been fully consolidated since 1 January 2012, the net profit for the period would be higher by about euro 2 761 thousands.

NOTE 55 – RECENTLY ISSUED PRONOUNCEMENTS

Recently issued pronouncements already adopted by the Group

In the preparation of the consolidated financial statements for the year ended 31 December 2012, the Group adopted the following standards and interpretations that are effective since 1 January 2012:

IFRS 7 (amended) – Financial Instruments: Disclosures – Transfers of Financial Assets

The International Accounting Standards Board (IASB), issued on 7th October 2010, amendments to "IFRS 7 – Disclosures – Transfers of Financial Assets", effective for annual periods beginning on or after 1st July 2011. Those amendments were endorsed by EU Commission Regulation 1205/2011, 22nd November.

The amendment requires enhanced disclosures about transfers of financial assets that enable users of financial statements:

To understand the relationship between transferred financial assets that are not derecognized in their entirety and the associated liability; and
To evaluate the nature of, and risks associated with, the entity´s continuing involvement in derecognised financial.

The amendments also required additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

The adoption of this amendment by the Group had no impact on its financial statements.

IAS 12 (amended) – Deferred Tax: Recovery of Underlying Assets

The IASB, issued on 20th December 2010, amendments to "IAS 12 – Income Tax – Recovery of Underlying Assets" (and withdraw SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets), effective for annual periods beginning on or after 1st January 2012. Those amendments were endorsed by EU Commission Regulation 1255/2012, 11th December.

The amendments to IAS 12 provide that, the deferred tax related to investment properties are measured with the presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale. Before the amendment, entities were allowed to consider that the carrying amount of investment proprieties would be recovered either through use or sale, depending on management intention.

The adoption of this amendment by the Group had no impact on its financial statements.

Recently issued pronouncements yet to be adopted by the Group

The new standards and interpretations that have been issued, but that are not yet effective and that the Group has not yet applied, are analysed below. The Group will apply these standards when they are effective.

Presentation of Items of Other Comprehensive Income – Amendments to IAS 1 – Presentation of Financial Statements

The IASB, issued on 16th June 2011, amendments to "IAS 1 – Presentation of Financial Statements", effective (with retrospective application) for annual periods beginning on or after 1st January 2012. Those amendments were endorsed by EU Commission Regulation 475/2012, 5th June.

The changes retain the entity's option to present profit or loss and other comprehensive income in two statements, however requires:

to present separately the items of other comprehensive income that may be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss; and
an entity that presents items of other comprehensive income before related tax effects will also have to allocate the aggregated tax amount between the two subcategories.
change the title to "statement of profit or loss and other comprehensive income" although other titles could be used;

The amendments affect presentation only and have no impact on the Group's financial position or performance.

IAS 19 Revised – Employee Benefits

The IASB, issued on 16th June 2011, amendments to "IAS 19 – Employee Benefits", effective (with retrospective application) for annual periods beginning on or after 1st January 2012. Those amendments were endorsed by EU Commission Regulation 475/2012, 5th June.

The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The Group made a voluntary change in the accounting police related to actuarial gains and losses arising from its post employment benefits which from 2011 are charged to equity, under other comprehensive income.

However, the amended standard will impact the net benefit expenses as the expected return on plan assets will be calculated using the same interest rate as applied for the purpose of discounting the benefit obligation.

IFRS 7 (Amended) - Financial Instruments: Disclosure – Offsetting Financial Assets and Financial Liabilities

The IASB, issued on 16th December 2011, amendments to "IFRS 7 – Financial Instruments: Disclosure – Offsetting Financial Assets and Financial Liabilities", effective (with retrospective application) for annual periods beginning on or after 1st January 2013. Those amendments were endorsed by EU Commission Regulation 1256/2012, 11th December.

These amendments required an entity to disclose information about what amounts have been offset in the statement of financial position and the nature and extend of rights to set-off and related arrangements (e.g. collateral arrangements).

The new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32.

The Group is evaluating the impact of adopting this interpretation on its financial statements.

IAS 32 (Amended) - Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities

The IASB, issued on 16th December 2011, amendments to "IAS 32 – Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities", effective (with retrospective application) for annual periods beginning on or after 1st January 2014. Those amendments were endorsed by EU Commission Regulation 1256/2012, 11th December.

The IASB amended IAS 32 to add application guidance to address the inconsistent application of the standard in practice. The application guidance clarifies that the phrase 'currently has a legal enforceable right of set-off' means that the right of set-off must not be contingent on a future event and must be legally enforceable in the normal course of business, in the event of default and in the event of insolvency or bankruptcy, of the entity and all of the counterparties.

The application guidance also specifies the characteristics of gross settlement systems in order to be considered equivalent to net settlement.

The Group is not expecting a significant impact from the adoption of the amendment to IAS 32.

IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine

The International Financial Reporting Interpretations Committee (IFRIC), issued on 19th October 2011, "IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine", effective (with retrospective application) for annual periods beginning on or after 1st January 2013. Those amendments were endorsed by EU Commission Regulation 1255/2012, 11th December.

Give the nature of the Group´s operation, this interpretation does not have any impact on the financial stamtents.

IAS 27 (Revised) – Separate Financial Statements

The IASB, issued on 12th May 2011, amendments to "IAS 27 – Separate Financial Statements", effective (with prospective application) for annual periods beginning on or after 1st January 2014. Those amendments were endorsed by EU Commission Regulation 1254/2012, 11th December.

Taking in consideration that IFRS 10 addresses the principles of controls and the requirements relating to the preparation of consolidated financial statements, IAS 27 was amended to cover exclusively separate financial statements.

The amendments aimed, on one hand, to clarify the disclosures required by an entity preparing separate financial statements so that the entity would be required to disclose the principal place of business (and country of incorporation, if different) of significant investments in subsidiaries, joint ventures and associates and, if applicable, of the parent.

The previous version required the disclosure of the country of incorporation or residence of such entities.

On the other hand, it was aligned the effective dates for all consolidated standards (IFRS10, IFRS11, IFRS12, IFRS13 and amendments to IAS 28).

The Group expects no impact from the adoption of this amendment on its financial statements.

IFRS 10 Consolidated Financial Statements

The IASB, issued on 12th May 2011, "IFRS 10 Consolidated Financial Statements", effective (with retrospective application) for annual periods beginning on or after 1st January 2013. These amendments were endorsed by EU Commission Regulation 1254/2012, 11th December, that allows a delayed on mandatory application for 1st January 2014.

IFRS 10, withdraw one part of IAS 27 and SIC 12, and introduces a single control model to determine whether an investee should be consolidated.

The new concept of control involves the assessment of power, exposure to variability in returns and a linkage between the two. An investment controls an investee when it is exposed, or has rights, to variability returns from its involvement with the investee and is able to affect those returns through its power over the investee (facto control).

The investor considers whether it controls the relevant activities of the investee, taking into consideration the new concept. The assessment should be done at each reporting period because the relation between power and exposure variability in returns may change over the time.

Control is usually assessed over a legal entity, but also can be assessed over only specified assets and liabilities of an investee (referred to as silo).

The new standard also introduce other changes such as: i) accounting requirements for subsidiaries in consolidation financial statements are carried forward from IAS 27 to this new standards and ii) enhanced disclosures are requires, including specific disclosures for consolidated and unconsolidated structured entities.

The group has not carried out a thorough analysis of the impacts of the application of this standard. Given the introduction of a new control model the Group may need to change its consolidation conclusion in respect of its investees.

IFRS 11 – Joint Arrangements

The IASB, issued on 12th May 2011, "IFRS 11 Joint arrangemnts", effective (with retrospective application) for annual periods beginning on or after 1st January 2013. These amendments were endorsed by EU Commission Regulation 1254/2012, 11th December, that allows a delayed on mandatory application for 1st January 2014.

IFRS 11, withdraw IAS 31 and SIC 13, defines "joint control" by incorporating the same control model as defined in IFRS 10 and requires an entity that is part of a "join arrangement" to determine the nature of the joint arrangement ("joint operations" or "joint ventures") by assessing its rights and obligations.

IFRS 11 removes the option to account for joint ventures using the proportionate consolidation. Instead, joint arrangements that meet the definition of "joint venture" must be account for using the equity method (IAS 28).

The Group expects no impact form the adoption of this amendment on its financial statements.

IAS 28 (Revised) – Investments in Associates and Joint Ventures

The IASB, issued on 12th May 2011, "IAS 28 Investments in Associates and Joint Ventures", effective (with retrospective application) for annual periods beginning on or after 1st January 2013. These amendments were endorsed by EU Commission Regulation 1254/2012, 11th December, that allows a delayed on mandatory application for 1st January 2014.

As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed as IAS 28 Investments in Associates and Joint ventures, and describes the application of the entity method to investments in joint ventures and associates.

The Group expects no impact form the adoption of this amendment on its financial statements.

IFRS 12 – Disclosures of Interest in Other Entities

The IASB, issued on 12th May 2011, "IFRS 12 Disclosures of Interests in Other Entities", effective (with retrospective application) for annual periods beginning on or after 1st January 2013. These amendments were endorsed by EU Commission Regulation 1254/2012, 11th December, that allows a delayed on mandatory application for 1st January 2014.

The objective of this new standard is to require an entity to disclose information that enables users of its financial statements to evaluate: (a) the nature of, and risks associated with, its interests in other entities; and (b) the effects of those interests on its financial position, financial performance and cash flows.

IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special vehicles and other off balance sheet vehicles.

The Group is yet assessing the full impact of the new IFRS 12 in line with the adoption of IFRS 10 and IFRS 11.

IFRS 13 – Fair Value Measurement

The IASB, issued on 12th May 2011, "IFRS 13 fair value Measurement", effective (with prospective application) for annual periods beginning on or after 1st January 2013. These amendments were endorsed by EU Commission Regulation 1255/2012, 11th December.

IFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair value measurement guidance that is currently dispersed throughout IFRS. Subject to limited exceptions, IFRS 13 is applied when fair value measurements or disclosures are required or permitted by other IFRSs.

The Group is currently reviewing its methodologies for determining fair values.

Although many of IFRS 13 disclosures requirements regarding financial assets and financial liabilities are already required, the adoption of IFRS 13 will require the Group to provide additional disclosures, These include fair value hierarchy disclosures for non-financial assets/liabilities and disclosures on fair value measurements that are categorized in Level 3.

Investment Entities – Amendments to IFRS 10, IFRS12 and IAS 8 (issued by IASB on 31st October 2012)

The amendments apply to a particular class of business that qualify as investment entities. The IASB uses the term 'investment entity' to refer to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. An investment entity must also evaluate the performance of its investments on a fair value basis. Such entities could include private equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other investment funds.

The amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them. The amendments also set out disclosure requirements for investment entities.

The amendments are effective from 1 January 2014 with early adoption permitted. This option allows investment entities to apply the Investment Entities amendments at the same time they first apply the rest of IFRS 10.

The Group does not expect any major impact from the adoption of this amendment on its financial statements.

Improvements to IFRS (2009-2011)

The annual improvements cycle 2009-2011, issued by IASB on 17th May 2012, introduce amendments, with effective date on, or after, 1st January 2013, to the standards IFRS1, IAS1, IAS16, IAS32, IAS34 and IFRIC2.

IAS 1 Presentation of Financial Statements

This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period.

IAS 16 Property Plant and Equipment

This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory

IAS 32 Financial Instruments, Presentation and IFRIC 2

The improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes, avoid any interpretation that may mean any either application.

IAS 34 Interim Financial Reporting

The amendments align the disclosure requirement for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures in relation to the changes of profit and loss account and other comprehensive income.

The Group is evaluating the impact on the adoption of these improvements.

IFRS 9 Financial instruments (issued in 2009 and revised in 2010)

IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. IFRS 9 (2010) introduces additions relating to financial liabilities. The IASB currently has an active project of make limits amendments to the classification and measurement requirements of IFRS 9 and new requirements to address the impairment of financial assets and hedge accounting

The IFRS 9 (2009) requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: amortised cost and fair value. A financial asset would be measured at amortised cost if is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset's contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available-for-sale and loans and receivables.

For an investment in an equity instrument which is not held for trading, the standard permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss at a later date. However, dividends on such investments are recognized in profits or loss, rather than other comprehensive income unless they clearly represent a partial recovery of the cost of the investment.

Investments in equity instruments in respect of which an entity does not elect to present fair value changes in other comprehensive income would be measured at fair value with changes in fair value recognized in profit or loss.

The standard requires that derivatives embedded in contracts with a host that is a financial asset within the scope of the standard are not separated; instead the hybrid financial instruments is assessed in its entirety as to whether it should be amortised cost or fair value.

IFRS 9 (2010) introduces a new requirement in respect of financial liabilities designated under the fair value option to generally present fair value changes that are attributable to the liability's credit risk in other comprehensive income rather in profit or loss. Apart from this change, IFRS 9 (2010) largely carries forward without substantive amendment the guidance on classification and measurement of financial liabilities form IAS 39.

IFRS 9 is effective for annual periods beginning on or after 1 January 2015 with early adoption permitted. The IASB decided to consider making limited amendments to IFRS 9 to address practice and other issues.

The Group has commenced the process of evaluating the potential effect of this standard but is awaiting finalization of the limited amendments before the evaluation can be completed. Given the

nature of the Group's operation, this standard is expected to have a pervasive impact on the Group's financial statements.

NOTE 55 – SUBSEQUENT EVENTS

Banco Espírito Santo issued during January 2013 euro 500 million senior unsecured debt under the Euro Medium Term Notes Programme. The notes have a maturity of 5 years and will pay a coupon of 4.75%. The order book reached ca. Eur 3.0 bn, with the participation of more than 280 national and international investors.

On January 11 BES issued a notification about the acquisition of a qualified shareholding in Banco Espirito Santo, S.A. by Wellington Management Company, LLP (Wellington Management). The qualified shareholding represents an aggregate of 2.02% of the voting rights corresponding to 81 297 790 shares in Banco Espirito Santo, S.A. ("BES"), by virtue of the acquisition, on 8 January 2013, of 2 446 594 shares in BES carried out on market by Wellington Management on behalf of clients with which Wellington Management has entered into an agreement for the exercise of the respective voting rights. No individual client of Wellington Management holds a shareholding representing 2% or more of the voting rights in BES. Wellington Management Company is an Asset Manager, with approximately USD 748 billion in client assets under management and serves as an investment advisor to more than 2 100 institutions located in over 50 countries.

As at 30 January 2013, BES early reimbursed euro 1.0 billion of the BCE's Long Term Refinancing Operation.

2. Appendix - Adoption of the Financial Stability Forum (FSF) and Committee of European Banking Supervisors (CEBS) Recommendations concerning the Transparency of Information and the Valuation of Assets

(Bank of Portugal's Circular Letters no. 97/2008/DSB, of 3 December and no. 58/2009/DSB of 5 August)

In its Circular Letter no. 58/2009/DSB of 5 August 2009, the Bank of Portugal reiterated "the need for institutions to maintain adequate compliance with the recommendations of the Financial Stability Forum (FSF), as well as those issued by the Committee of European Banking Supervisors (CEBS), concerning the transparency of information and the valuation of assets, taking into account the proportionality principle", as set out in Circular Letters no. 46/08/DSBDR of 15 July 2008 and no. 97/08/DSB of 3 December 2008.

The Bank of Portugal recommends the inclusion in the reporting documents of a specific chapter or annex exclusively dedicated to the issues dealt with in the CEBS and FSF recommendations.

This chapter aims to ensure compliance with the Bank of Portugal's recommendation, including references to where the information provided may be found within the body of the Management Report or in the Notes to the Financial Statements for fiscal years 2011 and 2012.

I. BUSINESS MODEL

1. Description of the Business Model

A description of the Group's business model is provided in Item 4 of the Management Report. The performance of the main business areas (operational segments) of the Group is also presented in Note no. 41 .

2. Strategy and Objectives

A detailed description of the Group's strategy and objectives is provided in Item 1 of the Management Report and in Note no. 51, under Funding and Capitalisation Plans (2011—2015). The securitisation transactions are detailed in Note 49.

3., 4. and 5. Activities developed and contribution to the business

Item 4 of the Management Report and Note no. 4 contain information about the activity and contribution to the business.

II. RISK AND RISK MANAGEMENT

6. and 7. Description and Nature of the Risks Incurred

Item 6 of the Management Report describes how the risk management function is organised within BES

Group.

¹ The numbering refers to the Notes to the Consolidated Financial Statements.

Note 51 contains diverse information that in total allows the market to form a thorough perception about the risks incurred by the Group and the management mechanisms in place to monitor and control such risks.

III. IMPACT OF THE PERIOD OF FINANCIAL TURMOIL ON THE RESULTS

8.,9., 10 and 11. Qualitative and quantitative description of the results and comparison of impacts between periods

Activity during 2011 was conducted in a climate of deterioration of Portugal's economic situation, with a negative impact on risk. Consequently the Group reinforced provisions by a total of EUR 848.3 million (EUR 314.7 million more than in 2010). The situation of the financial markets and sovereign risk context also impacted the fair value reserve, whose value decreased by EUR 504.5 million.

These adverse economic and financial conditions persisted during 2012 across Europe and in particular in Portugal, causing a further deterioration of credit risk. BES Group consequently increased provisions by EUR 1,199.4 (EUR 351.1 million more than in 2011).The situation in the financial markets and sovereign risk context, influenced by the effects of the monetary policy measures implemented by the ECB, had a positive impact on the value of financial assets, leading to a EUR 747.5 increase in the fair value reserve.

12. Decomposition of realised and non realised write-downs

The profit and loss of assets and liabilities held for trading and of assets at fair value and assets available for sale are detailed by financial instrument in Notes 7 and 8. In addition, non realised gains and losses on assets available for sale are detailed in Notes 23 and 45, while the most significant positions are decomposed in Note 23.

13. Financial turmoil and the price of the BES share

Item 1 of the 2012 Management Report presents the evolution of the BES share price and the factors that influenced its performance. Item III.8 of the 2012 Corporate Governance Report presents the BES share price performance in 2012.

14. Maximum loss risk

Item 6 of the Management Report and Note 51 contain the relevant information about potential losses in market stress situations.

15. Debt issued by the Group and results

Note 50 contains information on the impact of debt revaluation and the methods used to calculate this impact on the results.

IV. LEVEL AND TYPE OF EXPOSURES AFFECTED BY THE PERIOD OF TURMOIL

1. Nominal and fair value of exposures
1. Credit risk mitigators
1. Information about the Group's exposures

In 2011 and 2012 the turmoil resulted from the deterioration of sovereign risk in the Euro Zone peripheral countries.

As at December 31st, 2011 BES Group's total exposure to these countries' public debt was EUR 2,950 million (of which EUR 2,945 million to Portugal and EUR 5 million to Spain) to which was associated a negative fair value reserve of EUR 124.4 million. The Group had no exposure to Italian, Irish, Greek or Hungarian public debt as of that date.

At the end of 2012 BES Group's exposure to Portuguese public debt totalled EUR 3,190 million, to which was associated a negative fair value reserve of EUR 191.1 million. As regards exposures to public debt of other peripheral European countries, BES Group had EUR 606 million of Spanish debt (positive fair value reserve of EUR 2.2 million), EUR 28 million of Italian debt (positive fair value reserve of EUR 0.5 million), EUR 25 million of Irish debt and EUR 3 million of Greek debt.

19. Movement in exposures between periods

Note 51 contains diverse information comparing the exposures and results in 2011 and 2012. The disclosed information is considered sufficient, given the detail and quantification provided.

20. Non consolidated exposure

All the structures related to securitisation operations originated by the Group are presented in Note 49. None of the SPEs were consolidated due to the market turbulence.

21. Exposure to monoline insurers and quality of the assets insured

The Group does not have exposures to monoline insurers.

V. ACCOUNTING POLICIES AND VALUATION METHODS

22. Structured Products

These situations are described in Note 2 – Main accounting policies.

23. Special Purpose Entities (SPEs) and consolidation

Disclosure available in Notes 2 and 49.

24. and 25. Fair value of financial instruments

See the comments to item 16 of this Appendix. Notes 2 and 50 contain the conditions for utilisation of the fair value option as well as the methodology used to value the financial instruments.

VI. OTHER RELEVANT ASPECTS OF DISCLOSURE

26. Description of the disclosure policies and principles

The BES Group, within the context of accounting and financial information disclosure, aims to satisfy all the regulatory requirements, defined by the accounting standards or by the supervisory and regulatory entities.

At the same time, the Group aims to meet the best market practices in information disclosure, balancing the cost of preparing the relevant information with the benefit that it may provide to the users.

From the information made available to the Group's shareholders, clients, employees, supervisory entities and the public in general, we highlight the Annual, Interim and Quarterly Management Reports, the Financial Statements and the respective Notes, and the Corporate Governance Report.

The management reports and financial statements, released on a quarterly basis, are prepared under IFRS that comply with the highest degree of disclosure and transparency and facilitate comparison to other domestic and international banks.

The Corporate Governance Report provides a detailed view about the governing structure of the Group.

The Sustainability Report, which forms an integral part of the Annual Management Report, conveys the Group's perspective about social responsibility in the context of the numerous challenges that the modern world faces, whether of an environmental or social nature, or pertaining to innovation and entrepreneurship.

A detailed description of all the means used by the Group to communicate with the financial community and the public in general is provided in item III.16 of the 2012 Corporate Governance Report.

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II. CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2012 AND CORRESPONDING NOTES

Table of Contents

II. Consolidated Financial Statements

1. Consolidated Financial Statements and Notes to the Financial

Statement

GRUPO BANCO ESPÍRITO SANTO

CO NSO LIDATE D STATE ME NT O F CO MPRE HE NSIVE INCO ME FOR THE YE AR S E NDE D 31 DE CE MBE R 201 2 AND 201 1

GRUPO BANCO ESPÍRITO SANTO

CONSOLIDATE D B ALANCE SHE E T AS AT 31 DE CE MB E R 201 2 AND AT 31 DE CE MB E R 201 1

GRUPO BANCO ESPÍRITO SANTO

CONSOLIDATE D STATE ME NT OF CHANGE S IN E QUITY FOR THE YE AR S E NDE D 31 DE CE MB E R 201 2 AND 201 1

Grupo Banco Espírito Santo

Notes to the Consolidated Financial Statements as at 31 December 2012

NOTE 1 – ACTIVITY AND GROUP STRUCTURE

b) Sub-Groups

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1. Basis of preparation

2.2. Basis of consolidation

Subsidiaries

Associates

Special purpose entities ("SPE")

Investment funds managed by the Group

Goodwill

Transactions with non-controlling interests

Foreign currency translation

Balances and transactions eliminated in consolidation

2.3. Foreign currency transactions

2.4. Derivative financial instruments and hedge accounting

Classification

Recognition and measurement

Hedge accounting

Embedded derivatives

2.5. Loans and advances to customers

Impairment

2.6. Other financial assets

Classification

Initial recognition, initial measurement and derecognition

Subsequent measurement

Reclassifications between categories

Impairment

2.7. Sale and repurchase agreements

2.8. Financial liabilities

2.9. Financial Guarantees

2.10. Equity instruments

2.11. Offsetting financial instruments

2.12. Non-current assets held-for-sale

2.13. Property and equipment

2.14. Intangible assets

2.15. Leases

Operating leases

Finance leases

2.16. Employee benefits

Pensions

Health care benefits

Long-term service benefits

Variable remuneration payment plan on financial instruments (PRVIF)

Bonus to employees and to the Board of Directors

2.17. Income tax

2.18. Provisions

2.19. Interest income and expense

2.20. Fee and commission income

2.21. Dividend income

2.22. Segmental reporting

2.23. Earnings per share

2.24. Cash and cash equivalents

2.25. Investment properties

2.26. Insurance contracts

Premiums

Unearned premium reserve

Acquisition costs

Claims reserves

Life assurance reserve

Reserve for bonus and rebates

Shadow accounting

Liability adequacy test

Unearned premium reserve

NOTE 3 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES