2 ANNUAL REPORT 2010 CGD REPORTS

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3 2 ANNUAL REPORT 2010 CGD REPORTS

4 INDEX 1. BOARD OF DIRECTORS REPORT KEY INDICATORS CHAIRMAN S STATEMENT EXECUTIVE SUMMARY GROUP PRESENTATION MACROECONOMIC BACKGROUND STRATEGY AND BUSINESS MODEL FINANCIAL ANALYSIS RISK MANAGEMENT PROPOSAL FOR THE APPROPRIATION OF RESULTS DECLARATION ON THE CONFORMITY OF THE PRESENTATION OF FINANCIAL INFORMATION SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS NOTES, REPORTS AND OPINIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CEBS REPORTS AUDIT REPORTS AND OPINIONS STATUTORY AUDIT CERTIFICATE AUDIT REPORT CONSOLIDATED FINANCIAL STATEMENTS STATUTORY AUDIT CERTIFICATE ON THE CONSOLIDATED ACCOUNTS REPORT AND OPINION OF AUDIT BOARD CORPORATE GOVERNANCE REPORT 351 ASSESSMENT OF LEVEL OF COMPLIANCE WITH GOOD GOVERNANCE PRINCIPLES BINDING UPON CGD UNDER COUNCIL OF MINISTERS RESOLUTION 49/ MANAGEMENT, MISSION, OBJECTIVES AND CORPORATE POLICIES GUIDELINES GENERAL OPERATING PRINCIPLES RELEVANT TRANSACTIONS WITH RELATED ENTITIES OTHER TRANSACTIONS CORPORATE MODEL REMUNERATION OF MEMBERS OF STATUTORY BODIES CONTROL SYSTEM DISCLOSURE OF RELEVANT INFORMATION ANALYSIS OF THE COMPANY S SUSTAINABILITY IN THE ECONOMIC, SOCIAL AND ENVIRONMENTAL DOMAINS NOMINATION OF AN OMBUDSMAN 385 ANNEX I RÉSUMÉS OF MEMBERS OF STATUTORY BODIES 386 ANNEX II REMUNERATION OF MEMBERS OF CGD S STATUTORY BODIES 399 EXCERPT FROM THE MINUTE OF THE ANNUAL SHAREHOLDERS MEETING OF CAIXA GERAL DE DEPÓSITOS, SA 404 CGD REPORTS ANNUAL REPORT

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6 1. BOARD OF DIRECTORS REPORT KEY INDICATORS CHAIRMAN S STATEMENT EXECUTIVE SUMMARY GROUP PRESENTATION MACROECONOMIC BACKGROUND STRATEGY AND BUSINESS MODEL FINANCIAL ANALYSIS RISK MANAGEMENT PROPOSAL FOR THE APPROPRIATION OF RESULTS DECLARATION ON THE CONFORMITY OF THE PRESENTATION OF FINANCIAL INFORMATION SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS 129

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8 CGD GROUP CONSOLIDATED OPERATIONS 1.1. KEY INDICATORS (EUR million) Balance sheet Loans and advances to customers (gross) Customer resources Debt securities Shareholders equity Assets (net) Operating income Net interest income including income from equity investments Non-interest income Technical income from insurance operations Net operating income Gross operating income Income before tax Net income Ratios Solvency ratio (Bank of Portugal) 10.1% 10.7% 12.6% 12.3% Tier I (Bank of Portugal) 6.2% 7.0% 8.5% 8.9% Non-performing credit / total credit (1) 2.07% 2.33% 3.00% 3.13% Overdue credit / total credit 2.05% 2.38% 2.87% 2.93% Accumulated impairment / overdue credit 121.4% 115.1% 105.3% 105.3% Accumulated impairment / credit overdue for more than 90 days 137.9% 137.3% 122.4% 117.4% Cost-to-income (consolidated operations) (1) 55.1% 51.2% 64.7% 63.3% Cost-to-income (separate operations) (1) 50.0% 41.9% 59.6% 58.5% Gross return on equity ROE (1) 20.5% 12.6% 5.9% 5.0% Return on equity after tax ROE (1) 17.1% 9.6% 4.8% 4.1% Gross return on assets ROA (1) 1.09% 0.61% 0.32% 0.29% Return on assets after tax ROA (1) 0.91% 0.47% 0.26% 0.24% Other indicators Number of bank branches Portugal Abroad Number of representative offices Number of employees (2) CGD Portugal In other banking institutions Insurance companies Financial companies Other activities Ratings (long / short term) Moody s Aa1/P-1 Aa1/P-1 Aa2/P-1 A1/P-1 Standard & Poor s A+/A-1 A+/A-1 A+/A-1 A-/A-2 Fitch Ratings AA-/F1+ AA-/F1+ AA-/F1+ A/F1 (1) Indicator calculated in accordance with Bank of Portugal instructions. (2) Does not include 274 CGD employees in the CGA Support Department or 99 employees engaged on public service secondment or in other situations. CGD REPORTS ANNUAL REPORT

9 1.2. CHAIRMAN S STATEMENT , which coincides with the end of the term of office of CGD s current board of directors, was profoundly marked by the financial crisis starting in second half 2007 and extending through the whole of the last three year period was particularly affected by the crisis s worsening impacts, deriving from the appearance of what is commonly referred to as the sovereign debt crisis in several member states of the European Union, affecting Greece in early 2010, immediately followed by Ireland, Portugal and Spain from the end of the first half. Countries most affected by the sovereign debt crisis face a highly complex situation: They must drastically reduce debt and implement profound budget consolidation actions; Markets perception of these countries significantly increases yields and spreads on credit in which the impact of interest on external public debt creates a vicious circle in terms of increasing debt levels; The access of such countries banking system to the market as a consequence of the sovereign debt crisis, has become extremely difficult and in certain cases has been limited to ECB funding which, in turn, has imposed restrictions on the economy s borrowing requirements investment and economic activity; Major deleverage in economies usually goes hand in hand with recession, increasing difficulties in making adjustments and mortgaging the future; The fact that their internal savings are generally lower than the European Union average, which reduces investment capacity. 2. Portugal is one of the member states more affected by the sovereign debt crisis. We must therefore implement a rigorous adjustment programme, which currently comprises the Stability and Growth Programme (PEC) and wait and see whether the execution of the budget and measures set out in the PEC will be sufficient to regain the confidence of investors. Greater coordination of economic, budget and fiscal policy and the approval of more flexible and adequate instruments than those set out in the current European Union Economic Stabilisation Fund would obviously facilitate the adjustment process being implemented by the member states affected by the sovereign debt crisis. In addition to reducing the budget deficit and public debt and increasing internal savings, the other side of the coin comprises the problem of economic growth. The issues at stake require short term results and major changes in our growth model, over the medium to long term. What is essentially required is, inter alia, a decisive response from civil society (businesspeople, workers, consumers, institutions), adequate public policies and an action strategy. 3. The Portuguese banking system is basically sound and national banks have demonstrated major resilience and solidity during the course of the financial crisis beginning in A major contributory factor has been its modern approach and the fact that it was not affected by property bubbles or toxic assets, implementing business models geared to retail banking and punctiliously complying with the rules defined by the regulators and supervisors to which they report. The system, in general, and the biggest banks in particular have, much higher capital ratios (Tier I, Core Tier I and solvency) than required by regulations, in line with risk levels in their balance sheets. The solidity of Portuguese banks was confirmed by the stress tests performed in ANNUAL REPORT 2010 CGD REPORTS

10 It is, however, common knowledge that the sovereign debt crisis following the international crisis, affected the banking system, in terms of liquidity and profitability (already affected by the international crisis). Substantially greater difficulties in access to funding, originated an increase in ECB funding in the first stage, followed by a certain decrease in last quarter The situation, since the end of 2007 has been a major challenge for the banks whose capacity to respond and adjust has been remarkable. There was, during the period as a whole, a year-on-year growth in credit, albeit progressively decelerating in an adverse economic environment. The banks fulfilled their mission of meeting the economy s borrowing requirements. The evolution of asset quality was, on the other hand, more benign than in many other countries with banks having progressively reinforced their capitalisation levels. As a consequence of the sovereign debt crisis, liquidity has been and continues to be the major challenge to be met by Portuguese banks in This explains banks multifaceted approach to liquidity management and the importance of retail banking activity based on traditional financial intermediation to support the resilience of results and competitive positioning of each bank in its core markets. 4. Within such a context, CGD s results were affected by two fundamental aspects: High impairment levels resulting from the depreciation of securities in its strategic investments portfolio as a consequence of negative capital market evolution; Negative evolution of net interest income as a result of low interest rates (Euribor) and the credit portfolio profile (with its high proportion of mortgages and medium and long term loans). 5. In such an unfavourable environment, CGD s global performance was highly positive. Reference should be made to the significant increase in shareholders equity, as a sign of value creation. CGD Group s consolidated net income of EUR 251 million, was down 10% over the preceding year, particularly deriving from a decrease in net interest income and need to recognise impairment on securities. I wish to stress the following aspects of CGD s performance: Shareholders equity was up from EUR million at the end of 2009 to EUR million; the solvency ratio was 12.3%, TIER 1 8.9% and CORE TIER 1 8.8%; The deposits-to-loans conversion ratio remains close to 121%; Assets (net) were up 4% to EUR 126 billion; Loans and advances to customers totalled EUR 84.5 billion with balance sheet resources taken from (retail) customers of EUR 67.7 billion. Total resources, excluding institutional investors were EUR 84.2 million; Net commissions were up 12.2% to EUR million; The overdue credit ratio, up from 2.87% to 2.93%, was not particularly expressive and lower than the sector average, taking into account the crisis situation affecting companies and households, affected by rigorous risk management policies. 6. The Group continued to perform well in its various operating areas, in The expansion of its international operations was fundamentally marked by the formation of a new investment and development bank in Mozambique and the issue of a licence to set up another bank in Angola. A partnership agreement with Banif CGD REPORTS ANNUAL REPORT

11 Group was entered into in Brazil for a 70% equity investment by CGD Group in Banif Corretora de Valores e Câmbio. The Group s international operations contributed EUR 78.8 million to CGD s consolidated net income, before impairment, in 2010, representing 15.4% of the total. Net assets as a whole accounted for around EUR 21 billion. In turn, Caixa Banco de Investimento s positive performance translated into a contribution of around EUR 35 million to the group s consolidated net income. Lastly, healthcare and insurance operations were penalised by portfolio impairment and the losses made by hospital activity which continue to reflect the impact of the current growth stage. 7. Caixa, as the benchmark institution in the Portuguese financial system, has added responsibilities deriving from its history and values. Based on its vision for the future, Caixa can only occupy a front line position in terms of sustainable development. Sustainability has been assumed at the highest levels within CGD and transversally applied through the institution as a whole. In the community relationships domain, Caixa has sponsored a large number of actions designed to achieve social, educational, cultural and environmental well-being with the aim of improving the population s living conditions. Special reference should be made to the activity of the Caixa Geral de Depósitos Culturgest Foundation, which is one of CGD s most relevant intervention instruments in the domain of cultural action operating on behalf of the Portuguese population and national and foreign creators and artists. The Foundation, in 2010, maintained its usually intense level of activity in the broadest range of cultural areas. 8. In the three year period (comprising a period of profound financial and economic crisis), CGD continued to play a fundamental role in the economy and reinforced its solvency, as evidenced by the following key indicators: Change Credit % Individual customers + 9.8% Mortgage loans + 9.9% Corporate % General government % Deposits % Individual customers % Corporate % Solvency (consolidated) Solvency p.p. to 12.3% Tier I p.p. to 8.9% Core Tier I p.p. to 8.8% Overdue credit proportion in sector 27.8% in % in 2010 A reduction in net income was, however, inevitable during the three year period. This derived from significantly higher impairment owing to depreciation of EUR million in securities portfolios, during the said period and a drop in net interest income from EUR million in 2008 to EUR million in 2009 and EUR million in 2010, strongly correlated with the level of interest rates (with 6 month Euribor down from 4.73% in 2008 to 1.43% in 2009 and 1.10% in 2010). 10 ANNUAL REPORT 2010 CGD REPORTS

12 Reference should be made to endeavours to contain the increase in spreads for companies, with a view to shoring up the Portuguese economy, in addition to greater efforts to improve commercial competences to make improvements to levels of service to individual and corporate customers. Caixa s board of directors has, as one of its main missions, set itself the twofold objective of internally reinforcing medium / long term distinctive and differentiating factors, while furthering its commitment to operating as the main partner of both households and companies as a catalysing force in the Portuguese economy. Caixa Group has, in business terms, reinforced its competitive position over the last 3 years, retaining its clear lead in deposit-taking (up 1.5 p.p. over December 2007), unit trust investment funds, financial insurance (a 14.7 p.p. increase in sales over 2007) and specialised credit, while also achieving pole position in loans and advances to customers (up 0.6 p.p. over December 2007), based on the consolidation of its lead in terms of mortgage loans and its achievement of market share in the corporate segment, particularly SMEs. Caixa s lead of domestic retail business is also visible in its branch office network transformation process, particularly local branches whose customer service model has been irreversibly geared to relational management, focusing on sales and services and the creation of different experiences designed to retain customer loyalty. The fundamental pillars of this transformation, in internal terms, was to create physical, organisational and technical conditions, leading to a proactive, multifaceted approach of agents and customer service areas, with the ultimate objective of reinforcing Caixa s commercial effectiveness and quality of service: The new branch office model, which is currently visible in more than 500 branches, has reorganised customer reception and service areas in addition to customers freedom of in-branch movement, creating a new environment based on a layout geared to proximity, utility and comfort for each visit and favouring the development of relationships; With the strengthening of the customer segmentation base, the relational management service has been extended to embrace a growing number of added value or potentially added value customers, with different value proposals for each segment. More than 990 Caixazul customer managers, 720 Caixa Empresas and 760 Caixa Mais commercial assistants and distance banking service models currently provide personal proactive services to almost 890 thousand individual customers, self-employed businesspeople and small and micro companies, representing more than three times the number of customers with dedicated relational management than at the start of 2008 and more than 20% of our current customer base, making Caixa the leading domestic bank in terms of customer care and service; The process of change was supported by an extensive training programme for all commercial teams, to align and assimilate new commercial dynamics. In terms of tools, improvements were made to branch office work platforms, providing all functions with customer relational management support information and functionalities; As a consequence of the various actions taken and commitment to the service and quality of customer experience, in addition to the marked reinforcement of involvement and customer loyalty levels to Caixa, reference should be made to the significant increase in customer satisfaction indices, assessed both by external studies (up 0.5 points in the ECSI Portugal 2009 Individual Customers Satisfaction Index and up 6 p.p. in the percentage of SME customers using Caixa as their main bank, Data E 2010) and internal programmes (up 6.2 p.p. in the branch office programme, up 3.5 p.p. in the Caixazul programme and up 3.6 p.p. in the SME programme, in comparison to the average for 2007). Reference should also be made to the development of risk competences using new risk management and credit recovery tools and methodologies. CGD REPORTS ANNUAL REPORT

13 Priority continued to be afforded to exports, notably in the form of lines of credit and trade finance development, particularly the Iberian Offer. The international expansion strategy was important as an offset element, in addition to its two strategic objectives of supporting the internationalisation of Portuguese communities and growth of CGD as an institution. The acceleration of the group s internationalisation, with its opening of subsidiaries in Angola and Brazil, was accompanied by a growing contribution of external activity to CGD Group s results. Reference should also be made to the excellent performance of investment banking and expressive increase in the share of insurance operations, reinforcing a clear market lead. Internally, CGD has significantly reinforced its budget control and rigour achieving a 2.3% reduction of structural costs in the three year period (down 3.4% in employee costs and down 0.7% in external supplies and services), which, together with higher turnover, has enabled CGD to considerably outperform the market average in terms of efficient management, measured by the general expenditure / turnover ratio. As regards its contribution to the stability and strength of the financial system, CGD played a decisive role in the management of Banco Português de Negócios, with the aim of protecting the interests of depositors, state / taxpayers and workers, providing the said institution with around EUR 5 billion in terms of state backed liquidity funding operations. In terms of interbank market operations, CGD has reinforced its support for other national financial institutions. A restructuring project for CGD s corporate architecture was produced, taking into consideration regulatory changes and the objective of immunising banking operations from the volatility of non-core assets. 9. Lastly, reference to CGD s priorities for 2011: a) Greater efforts in support of exports / internationalisation Caixa should operate as a fundamental support bank for export companies and internationalisation. Reference should, herein, be made to its commitments to lines of credit, foreign trade operations, the Iberian Passport product, support for trade missions and advisory services to customers through its network of subsidiaries and branch and representative offices in 24 countries; b) Increasing its share of the SME market. Caixa Geral de Depósitos should continue to operate in this domain, reinforcing its credit portfolio s share of the SME market; c) Supporting the capitalisation of companies and microfinance. Intervention in this area is fundamental to guarantee the financing of investments needed to improve the competitiveness of companies and reduce their financial costs. CGD has two highly relevant initiatives in progress: one, already in place comprises the formation of the European Venture Club; and the other will comprise the formation of a capitalisation fund with other banks in Portugal and international equity funds, in support of good SMEs; d) Furthering the expansion of personalised management and a multichannel customer approach. These are fundamental elements representing Caixa s difference and position in retail banking and have been designed to increase our customers levels of involvement and loyalty. Constant innovation incremental or disruptive in products, channels, sales processes, price formulas and respective transposition to different market segments or commercial inter-network approaches have been and will continue to be a critical 12 ANNUAL REPORT 2010 CGD REPORTS

14 factor in Caixa s success, illustrated by the fact that it was considered the 1st Portuguese Bank and 16th in Europe in innovation investment ( The 2010 EU Industrial R&D Scoreboard ). At the same time the operation of the customer and business intelligence and advanced marketing competences designed to increase the assertiveness of value proposals for each customer and even more geared and proactive commercial dynamics will continue to represent an enhancement factor in terms of the virtuous cycle of knowledge, segmentation, differentiation and loyalty of our current and potential customers. e) Intensifying and diversifying liquidity sources. The adopting of a commercial strategy enabling balance sheet liquidity risk to be reduced, by taking in balance sheet resources in terms of retail banking activity and diversifying funding sources in international markets. The deposit-taking objective is fully compatible with the national objective of spurring internal savings, household savings (as well as companies and the state), contributing towards the aim of meeting the economy s borrowing requirements. Deleverage and diversification of financing sources, entailing an integrated communication strategy with investors, institutions and the international media are other modus operandi of the banks. Deceleration of credit growth has been occurring on account of the reduction in the demand for credit, owing to greater selectivity in lending which is obviously more expensive. Clear-sightedness entails the requirement for a lending ranking scheme based not only on the assessment of risk factors (in any event increasingly more decisive in terms of decisions) but also in terms of impact on the Portuguese economy (naturally favouring exports, innovative and high added value projects). f) Increasing CGD s international expansion. CGD should have an adequate presence in countries which are fundamental for the internationalisation process of Portuguese companies, either in the form of commercial activities or investment. g) Restructuring the corporate model. The implementation of a new corporate model enabling the elimination of capital market volatility on the bank s results and making adjustments to prudential ratios to the new Basel III rules. This new model will require the creation of mechanisms needed for the performance of corporate type functions, namely those associated with strategic, risk and liquidity management. 10. The board of directors wishes to express its gratitude to its State Shareholder, Bank of Portugal and CMVM (Securities Market Commission), Audit Board, Statutory Auditor and External Auditor, for their valuable cooperation and monitoring of CGD s activity. We are grateful for the preference and trust of our customers which we shall do everything possible to merit as CGD is not only interested in being the most solid but also the best Portuguese bank Last but not least, the board of directors wishes to express its gratitude to all CGD Group workers for their high level of commitment and professionalism in performing their duties, enabling the group to continue to merit its customers confidence in the current difficult economic environment. Fernando Faria de Oliveira Chairman of Board of Directors CGD REPORTS ANNUAL REPORT

15 1.3. EXECUTIVE SUMMARY Board of Directors (Standing) Pedro Cardoso, Rodolfo Lavrador, Jorge Tomé and José de Araújo e Silva (members) (Seating) Francisco Bandeira (deputy-chairman), Fernando Faria de Oliveira (chairman) and Norberto Rosa (member) Caixa Geral de Depósitos Group s (CGD Group s) consolidated net income of EUR million in 2010 was down by 10.2%. against the previous year s EUR million. This evolution translated the recognition of EUR million in impairment on financial investments, in the income statement, most of which already recognised in fair value reserves. The depreciation of securities, witnessed since the start of the current financial crisis has forced CGD to recognise impairment, particularly on CGD investments and securities in the group s insurance portfolios, as a cost for the year, totalling a respective accumulated amount of EUR million, since the start of Income before tax and minority shareholders interests were down 2.7% over 2009 to EUR million. Operating income from banking and insurance activities was up 3.3% by EUR 99.9 million to EUR million in comparison to the preceding year. This growth benefited from the 12.2% increase in net commissions to EUR million. The 7.7% decrease in net interest income over the previous year to EUR million, derived both from the impact of the reduction of interest rates, which affected profitability, taking into account the composition of the credit portfolio and higher funding costs. It should be remembered that CGD s option to afford priority to its support for the economy, even with a certain inevitable reduction of profitability, translated into a policy of moderation in setting loan spreads. Income from financial operations was down 37.6% in 2010 to EUR million against the preceding year s EUR million. The technical margin on insurance operations was up 3.6% by EUR 17.8 million over the preceding year to EUR 509 million. The operating costs trend (up 1.6% to EUR million) was one of containment, having benefited from the evolution of CGD s separate operations, whose reduction, in all cost components was around 2.4%. 14 ANNUAL REPORT 2010 CGD REPORTS

16 Impairment of other assets (net) for the year, was EUR million of which amount EUR million relative to EDP, ZON and BCP shares, unit trust investment funds and the group s insurance companies investment portfolios, translating into losses, a large part of which previously recognised in fair value reserves. As regards CGD Group s consolidated balance sheet, assets (net) were up by 4% over December 2009 to EUR billion. Shareholders equity was up 9.5% by EUR 692 million to EUR million, over end 2009, benefiting from the EUR 550 million increase in share capital in December Loans and advances to customers (gross), were up 6.1% by EUR 4.9 billion over December 2009 to EUR 84.5 billion with mortgage lending, in Portugal, up 1.3% and corporate loans up 3.1%. Customer resources also turned in a positive level of performance with a 5.3% increase to EUR 67.7 billion over the preceding year. These evolutions translated a deposit-to-loans conversion ratio of 121.0%. The solvency ratio, on a consolidated basis, including retained earnings, at 12.3%, with a Tier I ratio of 8.9% and Core Tier I ratio of 8.8%, translated CGD s solidity. CGD reduced its ECB funding to EUR 6.55 billion in second half Total assets eligible for ECB funding at the end of 2010 were around EUR 13 billion. The credit overdue for more than 90 days ratio was 2.63%, with a respective impairment cover ratio of 117.4%. Notwithstanding the difficult economic and financial circumstances, CGD continues to enjoy the highest ratings awarded to a Portuguese banking Group. CGD REPORTS ANNUAL REPORT

17 1.4. GROUP PRESENTATION EQUITY STRUCTURE Caixa Geral de Depósitos equity capital is owned by the Portuguese state as its sole shareholder. The state approved a share capital increase of EUR 550 million at 31 December 2010 increasing CGD s share capital to EUR million MILESTONES 1876 Formation of Caixa Geral de Depósitos, under the aegis of the Junta de Crédito Público, for the essential purpose of taking in mandatory deposits required by the law or the courts Formation of Caixa Económica Portuguesa, to receive and administer the deposits of the less moneyed classes in a de facto merger with CGD in CGD is spun off from the Junta de Crédito Público. Formation of Caixa de Aposentações for salaried workers and the Monte da Piedade Nacional, for pawnbroking operations under CGD administration CGD starts to perform general credit operations CGD up to the said date, a public service, subject to the state s administrative rules, becomes a state-owned public limited liability company Formation of Paris branch Formation of the Locapor and Imoleasing leasing companies. The following years witnessed the formation of property fund managers Fundimo (1986) and unit trust fund company Caixagest (1990). Equity investments were also made in the brokerage companies Sofin (1998) and consumer credit company Caixa de Crédito (2000) Formation of Caixa Group as the majority shareholder in Banco Nacional Ultramarino and Companhia de Seguros Fidelidade Acquisition of Banco da Extremadura and Chase Manhattan Bank España, in Spain, with a name change to Banco Luso-Español Equity investment in the venture capital company Promindústria, giving rise to the Caixa Investimentos investment company, in CGD becomes an exclusively state-owned public company confirming its status as a universal bank operating in a fully competitive regime, without prejudice to being particularly geared to the formation and taking in of savings and providing support to Portuguese development Acquisition of Banco Simeón (in Spain) Formation of new Banco Comercial de Investimentos de Moçambique Formation of HPP Hospitais Privados de Portugal, later to become CGD Group s healthcare arm Acquisition of Mundial Confiança insurance company and Banco Totta & Comercial Sotto Mayor de Investimentos, SA, later to become Caixa Banco de Investimento CGD opens its East Timor branch. The Paris branch assimilates Banque Franco Portugaise to create the France branch Rationalisation and consolidation of the commercial banks in Spain, in the form of a merger between Banco Luso-Español, Banco de Extremadura and Banco Simeón CGD Group becomes the domestic insurance sector leader through its acquisition of the Império Bonança insurance company, in ANNUAL REPORT 2010 CGD REPORTS

18 CGD takes a controlling interest in Mercantile Lisbon Bank Holding of South Africa, via a capital increase Banco Simeón changes its name to Banco Caixa Geral Formation of Parcaixa (share capital of EUR 1 billion: 51% CGD and 49% Parpública). Permission to set up Banco Caixa Geral Brasil, with operations starting Formation of Caixa Geral de Depósitos Culturgest Foundation. Caixa Seguros becomes Caixa Seguros e Saúde, SGPS, SA after a reorganisation of the said business areas, with the transfer of the HPP universe from Fidelidade Mundial s to Caixa Seguros s balance sheet Resumption of CGD Group s presence in Brazil through the start-up of Banco Caixa Geral Brasil. Equity investment in Banco Caixa Geral Totta de Angola, in which CGD and Santander Totta control 51% of the total Exercising of a purchase option on 1% of the share capital of Partang, SGPS, SA, which owns 51% of the share capital of Banco Caixa Geral Totta de Angola (BCGTA) giving CGD a controlling interest in the holding company and indirectly in the bank itself, in July Formation of Banco Nacional de Investimento (BNI) in Mozambique, 70 million meticais of whose capital was paid up by shareholders i.e. around EUR 1.6 million. Agreement for a 70% equity investment in Banif Corretora de Valores e Câmbio (Banif CVC) by CGD Group DIMENSION AND INTERNATIONAL RANKING OF GROUP CGD Group retained pole position in most of its business areas, in 2010, while also increasing its market shares in various sectors. The following table provides a summary of CGD Group s position in the national market: MARKET SHARES IN PORTUGAL Dec Dec Share Ranking Share Ranking Banking Assets (net) (a) 30.6% 1st 31.2% 1st Loans and advances to customers (b) 20.5% 1st 20.9% 1st Loans and advances to companies 15.5% 2nd 16.1% 2nd Loans and advances to individual customers 23.6% 1st 23.6% 1st Mortgage loans 27.1% 1st 26.8% 1st Customer deposits (b) 28.9% 1st 28.5% 1st Individual customers deposits 34.0% 1st 33.2% 1st Insurance (c) 30.3% 1st 34.5% 1st Life insurance 31.2% 1st 37.0% 1st Non-life insurance 28.1% 1st 27.1% 1st Specialised credit (d) Property leasing 18.7% 3rd 21.8% 2nd Equipment leasing 14.3% 1st 19.4% 1st Factoring 14.7% 4th 13.1% 4th Asset management Unit trust investment fund (e) 23.8% 1st 23.1% 1st Property investment fund (FII) (e) 14.0% 1st 14.6% 1st Pension fund (f) 9.6% 4th 11.1% 4th Wealth management (g) 27.7% 1st 27.0% 1st (a) Considering the consolidated operations of the five biggest Portuguese banking system groups. (b) Source: Bank of Portugal (Monetary and Financial Statistics). Credit includes securitised operations. (c) Dec Source Portuguese Insurance Companies Association. Referring to activity in Portugal. (d) Source: ALF (Portuguese Leasing and Factoring Association). (e) APFIPP (Portuguese Investment Funds, Pensions and Wealth Association). (f) Source: Portuguese Insurance Institute. Joint CGD Pensões, SA and Fidelidade Mundial, SA shares. (g) Source: CMVM (Securities Market Commission). CGD REPORTS ANNUAL REPORT

19 CGD s committed support for the national economy translated into a reinforcement of its market share of loans and advances to companies from15.5% to 16.1%. Its market share of mortgage loans was down from 27.1% to 26.8% with a market share of around 40% in loans and advances to general government. In global terms, the market share of loans and advances to customers was reinforced from 20.5% to 20.9%. Caixa retained pole position in customer deposits, in Portugal, with a market share of 28.5% (down 0.4 pp over December 2009). It has a market share of 33.2% of the individual customers segment and 15.3% of the companies segment, representing an increase of 5.2 p.p. in the year. Caixa Seguros e Saúde was by far and away the national leader in the insurance area with an increase in global market share from 30.3% to 34.5%. Its market share of life insurance was 37.0% and in the case of non-life insurance 27.1%. In the financial leasing area, Caixa Leasing e Factoring retained pole position in the equipment leasing ranking, reinforcing its market share to 19.4%. The company s 21.8% property leasing market share enabled it to rise to second position in this subsector s ranking. Caixagest s share of unit trust investment funds management activity remained at 23%, having retained its market lead in a year characterised by a large volume of redemptions of treasury and bond funds. Fundimo increased its share of the property investment funds market to 14.7% and also retained its market lead. CGD Group also retained first place in the wealth management ranking by amounts with a market share of 27%. The performance of Caixa Banco de Investimento (CaixaBI) continued to merit recognition in Global Finance and Euromoney magazine selected CaixaBI as the Best Investment Bank in Portugal and Best Debt bank in Portugal, in 2010, respectively. Project Finance magazine, in turn, awarded European Hi-Speed Rail Deal of the Year 2010 status to the ELOS (high speed Portugal Spain rail link) project. In the primary debt market, the Bloomberg league table ranked the bank as the principal bookrunner for euro bonds issued by national entities for the fourth consecutive year, with CaixaBI coming 3rd in the capital market area (equities) based on CMVM data. CaixaBI consolidated its position in the M&A market in Portugal in the financial advisory area coming in second place in the Bloomberg ranking. A similar performance level was achieved in the financial intermediation area in which, according to data relating to November, released by the CMVM, CaixaBI achieved a 131% increase over the same period last year with a market share of 16%. Various project finance area rankings also positioned CaixaBI amongst the principal world players: 1st place in Portugal, 6th in Iberia, 24th in Europe and 43rd worldwide, as mandated lead arranger for PFI / PPP project finance loans. This is indicative of the contribution and importance of the operations led by CaixaBI in the international market. As in past years, The Banker magazine produced a list of the Top World Banks in Caixa Geral de Depósitos once again improved its position coming 113th (126th in 2009 and 128th in 2008), based on shareholders equity (Tier I). CGD also improved its position in the ranking from 103rd to 101st based on asset volumes EVOLUTION OF CGD GROUP CGD Group reinforced its intervention in international markets with historical, linguistic and cultural affinities in 2010, in light of the economic and financial slowdown which was particularly felt in the Eurozone. Special mention should be made of the group s activity in Lusophone Africa and Brazil, which represented a further step forward in exploiting the synergies of CGD s worldwide presence. In Angola, permission was given, at the start of 2010, to form Banco para Promoção e Desenvolvimento (BPD), with a start-up capital of five hundred million dollars jointly and equally owned by CGD and Sonangol Groups. BPD will concentrate on supporting the development of the Angolan and Portuguese economies. Reference should also be made, in the case of Angola, to CGD s exercising of its purchase option on 1% of the share capital of Partang, SGPS, SA, which owns 51% of the share capital of Banco Caixa Geral Totta de Angola (BCGTA), in July This gives CGD a controlling interest in the holding company and indirectly in the bank itself. In Mozambique, permission was given to form Banco Nacional de Investimento (BNI), 49.5% of whose capital to be held by CGD, 49.5% by the State of the Mozambique through the National Directorate for the Treasury and 1% by Banco Comercial e de Investimentos (CGD Group). The title deed for the formation of BNI was signed in June million meticais of the 18 ANNUAL REPORT 2010 CGD REPORTS

20 share capital or around EUR 1.6 million was paid up by shareholders. BNI will concentrate on supporting the development of Mozambique s economy. Caixa Banco de Investimento (CaixaBI), in progressing its international strategy, plans to have a presence in Angola and Mozambique over the short term. The recommencement of CGD Group s banking operations in Brazil, through Banco Caixa Geral Brasil (BCG Brasil), was highly successful. The success of this initiative was confirmed, in first half 2010, by two operations designed to leverage corporate and investment banking operations in the Brazilian market: BCG Brasil increased its share capital from 123 million to 400 million reais to endow the bank with the necessary resources to enable it to expand its respective business plan up to 2012; CGD Group entered into a partnership agreement with Banif Group in Brazil for a 70% equity investment in Banif Corretora de Valores e Câmbio, SA (Banif CVC). The acquisition will permit a broader, more consistent range of activity in the Brazilian capital market. There were two capital increases in Spain with the objective of maintaining the solvency ratios of Banco Caixa Geral at adequate levels: one in May for an amount of EUR 20 million and another in October for around EUR 26 million, mainly subscribed for and paid up by CGD. The downgrade of the rating on the Portuguese Republic partly justifies the need to increase the bank s capital, given its high level of exposure to Portuguese assets. In Cape Verde, Banco Interatlântico increased its capital from 400 million to 1 billion Cape Verde escudos, in April CGD matched this capital increase by maintaining its 70% equity investment in the bank. Reference should be made in terms of the activity of Caixa Seguros e Saúde, SGPS (CSS), to the February opening of the new Cascais hospital managed by HPP Saúde, as a PPP. The HPP ACE grouping was formed in March as a provider of miscellaneous services to the group s hospitals. July witnessed a EUR 25 million increase in the equity capital of HPP Hospitais Privados de Portugal, SGPS, subscribed for and paid up by CSS which increased the size of its investment to 94.33%. Various operations were realised in second half 2010 for the purpose of concentrating the full amount of CGD Group s investment in CaixaBI, in Gerbanca, SGPS, which is a directly and indirectly wholly owned CGD subsidiary. Reference should, lastly, be made to the disposal of the full amount of the 17.6% equity investment in UNICRE, in May, and 5% of the capital of EDP Energias de Portugal, in September and December. CAIXA GERAL DE DEPÓSITOS GROUP (*) DOMESTIC INTERNATIONAL COMMERCIAL BANKING Caixa Geral de Depósitos, SA Banco Caixa Geral (Spain) 99.8% Banco Caixa Geral Brasil 100.0% BNU (Macau) 100.0% CGD Subsidiária Offshore Macau 100.0% B. Comercial do Atlântico (C. Verde) 59.3% B. Interatlântico (C. Verde) 70.0% Mercantile Bank Hold. (South Africa) 91.8% Parbanca, SGPS 100.0% B. Com. Invest. (Mozambique) 51.0% Partang, SGPS 51.0% Banco Caixa Geral Totta de Angola 26.0% ASSET MANAGEMENT Caixa Gestão de Activos, SGPS 100.0% Caixagest 100.0% CGD Pensões 100.0% Fundimo 100.0% SPECIALISED CREDIT Caixa Leasing e Factoring IFIC 51.0% BCI ALD (Mozambique) 46.1% Locarent 50.0% Credip IFIC 80.0% CGD REPORTS ANNUAL REPORT

21 ...continued CAIXA GERAL DE DEPÓSITOS GROUP (*) DOMESTIC INTERNATIONAL INVESTMENT BANKING AND VENTURE CAPITAL Gerbanca, SGPS 100.0% A Promotora (Cape Verde) 52.7% Caixa Banco de Investimento 99.7% GCI S. Capital Risco (Mozambique) 34.6% Caixa Capital 99.7% Banco Nacional Invest. (Mozambique) 50.0% Caixa Desenvolvimento, SGPS 99.7% INSURANCE AND HEALTHCARE Caixa Seguros e Saúde, SGPS 100.0% Garantia (Cape Verde) 65.4% Comp. Seg. Fidelidade Mundial 100.0% Império Bonança Comp. Seguros 100.0% Via Directa Comp. de Seguros 100.0% Cares Companhia de Seguros 100.0% Companhia Port. de Resseguros 100.0% Fidelidade Mundial, SGII 100.0% GEP Gestão de Perit. Automóveis 100.0% EAPS E. Análise, Prev. e Seg % HPP Hosp. Privados Portugal, SGPS 100.0% HPP Lusíadas 100.0% HPP Boavista 100.0% HPP Algarve 100.0% HPP Saúde Parcerias Cascais 100.0% HPP Viseu, SA 65.0% LCS Linha de Cuidados de Saúde 100.0% Multicare Seguros de Saúde 100.0% EPS Gestão de Sistemas de Saúde 100.0% AUXILIARY SERVICES Caixatec Tecnologias de Informação 100.0% SISP (Cape Verde) 12.9% Imocaixa 100.0% Inmobiliaria Caixa Geral (Spain) 99.8% Sogrupo Sistema Informação ACE 100.0% Sogrupo Compras e Serv. Partilh. ACE 100.0% Sogrupo IV Gestão de Imóveis ACE 100.0% Caixa Imobiliário 100.0% CaixaNet 80.0% ESegur 50.0% SIBS 21.6% Trionis 2.2% (*) Percentage of effective participating interest. 20 ANNUAL REPORT 2010 CGD REPORTS

22 OTHER EQUITY INVESTMENTS DOMESTIC INTERNATIONAL OTHER EQUITY INVESTMENTS Parcaixa, SGPS 51.0% La Seda Barcelona 14.8% Caixa Participações, SGPS 100.0% Wolfpart, SGPS 100.0% Banco Comercial Português 2.7% Banco Inter. São Tomé e Príncipe 27.0% Portugal Telecom 6.3% EDP 0.4% REN Redes Energéticas Nacionais 1.2% GALP Energia 1.4% ZON Multimédia 10.9% TagusParque 10.0% AdP Águas de Portugal, SGPS 9.7% SOFID Soc. Financ. Desenv. IFIC 10.0% Turismo Fundos, SGFII 33.5% Floresta Atlântica, SGFII 11.9% Brisa 1.6% Cimpor 9.6% VAA Vista Alegre Atlantis 4.5% BRANCH OFFICE NETWORK CGD Group s branch office network, at the end of 2010, comprised branches of which 870 in Portugal and 462 abroad. The number was reinforced by an additional 59 branches 21 in Portugal and 38 abroad. In the case of international operations reference should be made to the reinforcement of the branch network in Mozambique (BCI) by 24 branches, in addition to Angola (Banco Caixa Geral Totta de Angola) with 10 branches. NUMBER OF CGD GROUP BRANCHES OFFICES CGD (Portugal) Branch office network Corporate office network Banco Caixa Geral (Spain) Banco Comercial e de Investimentos (Mozambique) Banco Comercial do Atlântico (Cape Verde) Banco Caixa Geral Totta de Angola Mercantile Lisbon Bank Holdings (South Africa) Banco Nacional Ultramarino (Macau) Banco Interatlântico (Cape Verde) 8 9 Caixa Banco de Investimento (Lisbon+Madrid) 2 2 Banco Caixa Geral Brasil 1 1 France branch Other CGD branch offices Macau Offshore branch 1 1 Total Representative offices The expansion of CGD s branch office network continues to be based on modernisation and adapting of spaces to new business models. In the individual customers segment, reference should be made to the Caixazul service which is geared to premium customers and housed 541 branches at the end of The Caixa Mais service model was launched in 2010 and has 571 commercial operatives in 810 branches. CGD REPORTS ANNUAL REPORT

23 INTERNATIONAL BRANCH OFFICE NETWORK EUROPE Spain Germany Belgium Banco Caixa Geral 211 CGD Representative office 1 CGD Representative office Caixa Banco de Investimento 1 United Kingdom Switzerland CGD Spain branch 1 CGD London branch 1 CGD Representative office Fidelidade Mundial branch 1 Luxembourg BCG Representative office France CGD Luxembourg branch CGD France branch Fidelidade Mundial branch Madeira Offshore branch Fidelidade Mundial branch AMERICAS United States Venezuela Cayman Islands CGD New York branch 1 CGD Representative office CGD Cayman Islands branch Mexico BCG Representative office 1 Brazil BCG Representative office Banco Caixa Geral Brasil CGD Representative office 1 1 AFRICA Cape Verde São Tomé e Príncipe South Africa Banco Comercial do Atlântico 32 Banco Internac. S. Tomé e Pr. Mercantile Bank Banco Interatlântico 9 Mozambique Angola Garantia 10 Banco Comercial e de Invest. Banco Caixa Geral Totta de Angola A Promotora ASIA China China Macau East Timor CGD Zhuhai branch 1 Banco Nacional Ultramarino, SA 14 CGD East Timor branch CGD Shanghai Representative office Macau Offshore branch India 1 1 Fidelidade Mundial branch CGD Representative office CAIXA BRAND The Caixa Geral de Depósitos brand ( Caixa ) is the Portuguese financial market benchmark and one of its principal assets. Caixa Geral de Depósitos s operating strategy is geared to efficiency and innovation, as a partner in the growth and sustained development of households, companies and institutions. Based on a strong culture and the highest ethical standards, rigour and professionalism, but permanently open to change, Caixa is currently the parent company of a modern financial group, prepared to meet the needs and expectations of millions of customers and provide for the challenges of market globalisation. Caixa was the leader in top-of-mind and spontaneous brand recognition terms in the Portuguese banking sector in High levels of performance in terms of brand recognition are correlated with the whole range of experience and points of contact with the brand. Caixa has the highest levels of average adhesion to the brand s values of solidity, trust, prestige and reference. The brand is recognised and associated with sustainability (social, environmental and economic) and culture and has also maintained a consistent lead in terms of brand association with social and environmental actions in Source: Brand Performance Barometer 2010 BrandScore Report Consultants Group. 22 ANNUAL REPORT 2010 CGD REPORTS

24 Caixa was, for the third consecutive time, considered to be Portugal s Most Valuable Banking Brand in February 2010, according to Brand Finance Banking 500. CGD came in 101st position with a brand value of more than EUR 1 billion. The Caixa Geral de Depósitos brand was elected by Selecções do Reader s Digest magazine readers as the most trustworthy brand in the eyes of Portuguese citizens in the banking category for the 10th consecutive year in March. We were present on the occasion of the May issue of this publication in a special section announcing the nomination, attended by the brands with the highest number of readers votes. Our presence provided us with an opportunity to publicise information on Caixa Geral de Depósitos brand s performance over the last 10 years in contact with the magazine s almost readers. In second half 2010, in accordance with Pulse 2010, a study carried out by the Reputation Institute (RI) on 72 worldwide financial institutions, Caixa was the most well known Portuguese brand with a point assessment and was classified as having a strong brand recognition factor. A targeted institutional campaign comprising a two page insert and digital issue on the bank s reputation and respective indicators was organised and well attended by the press. The creative proposal comprised the presentation of the word reputation composed, inter alia, on the basis of its component parts of trust, safety, experience, commitment, precision and rigour. GLOBAL REPUTATION OF CAIXA BRAND IN 2010 CGD s reputation in the eyes of consumers is higher than all of the companies listed on the PSI-20 index. It is the Portuguese brand with the best reputation in Portugal. Reputation is the result of consumers perception of 7 indicators: products / services, innovation, workplace, management model, citizenship, leadership and performance. Source: Ranking Reputation Institute Pulse FINANCIAL VALUE OF CAIXA BRAND The Caixa Geral de Depósitos brand was considered, to be the "Most valuable Banking Brand in Portugal" in 2010, for the 3rd consecutive time according to the Ranking Brand Finance Banking 500. With a brand value of EUR 1 billion, Caixa comes in 101st position in the Brand Finance 500 Ranking which is the world leader in terms of brand assessment and management. Source: Ranking Brand Finance Banking 500. DISTINCTIONS INVESTORS RELATIONS & GOVERNANCE AWARDS PRIZE CGD won this year s special Investors Relations & Governance Awards prize, for having the Best Market Discipline Report, in terms of changes to the financial system under the new Basel II capital accord. EXCELLENCE BRAND 2010 SUPERBRANDS Recognised by the Portuguese and Superbrands specialists, Caixa won the Excellence Brands award in TRUSTWORTHY BRAND AND ENVIRONMENTAL PERFORMANCE SELECÇÕES READER S DIGEST As regards consumer trust, the Caixa Geral de Depósitos Brand was re-elected for the 10th consecutive time as Portugal s Trustworthy Brand, in the Trustworthy Brands study, which has been performed by Selecções do Reader s Digest for the last ten years (since 2000). The Trustworthy Brands Study 2010 assessed "Trust and the Environment", for the second time, distinguishing those brands with the best environmental performance. Caixa was recognised as the banking category brand with the highest number of initiatives designed to protect the planet. WORLDLIFESTYLE 2010 PRIZE Caixa was one of the brands distinguished by the World Lifestyle 2010 prize, awarded to companies of excellence and prestige, in recognition of their initiatives in the social responsibility domain. CGD REPORTS ANNUAL REPORT