Bond BES Financial Ltd 2.319% ( XS0171467854 ) in EUR

BES Financial Ltd

100 % ▲

Portugal

XS0171467854 ( in EUR )

2.319% per year ( payment 4 times a year)

Perpetual

Prospectus brochure of the bond BES Finance Ltd XS0171467854 en EUR 2.319%, maturity Perpetual

1 000 EUR

211 913 000 EUR

02/10/2025 ( In 17 days )

BES Finance Ltd is a financial services company offering a range of products and services, including but not limited to, investment management, wealth management, and corporate finance solutions.

The perpetual bond identified by ISIN XS0171467854, issued from Portugal by BES Finance Ltd, a subsidiary of the historically significant but later resolved Portuguese banking group Banco Espírito Santo, currently trades at 100% of its par value in EUR. This fixed-income instrument provides an annual interest rate of 2.319%, with payments distributed quarterly. Part of a total issuance amounting to 211,913,000 EUR, the bond allows for minimum investments of 1,000 EUR. Its perpetual maturity characteristic means it has no fixed redemption date, a defining feature for a security issued by an entity linked to the 2014 financial crisis that led to the restructuring of its parent institution.

OFFERING CIRCULAR
BES Finance Ltd.
(incorporated with limited liability in the Cayman Islands)
E150,000,000 Non-cumulative Guaranteed
Step-Up Preference Shares Series A
having the benefit of a subordinated guarantee of
Banco Espi´rito Santo, S.A.
(incorporated with limited liability in Portugal)
(forming a single series with the E450,000,000 Non-cumulative Guaranteed Step-Up Preference Shares Series
A issued on 2nd July, 2003)
Issue price: E1024.68 per Preference Share
(plus E6,220,327.87 representing an amount equal to 272 days accrued Preferred Dividend)
Unless expressly indicated otherwise, the terms and expressions used herein have the same meaning as given to them in the
Description of the Preference Shares (the ` Articles''). The E150,000,000 Non-cumulative Guaranteed Step-Up Preference
Shares Series A (the ` New Preference Shares' ) each with a liquidation preference of E1,000 (the ` Liquidation Preference'')
are proposed to be issued by BES Finance Ltd. (the ` Issuer' or the ` Company' ) on 30th March, 2004 (the ` Closing Date'').
The New Preference Shares form a single series with the E450,000,000 Non-cumulative Guaranteed Step-Up Preference
Shares Series A (the ``Existing Preference Shares' and together with the New Preference Shares, the ` Preference Shares'')
issued by the Issuer on 2nd July, 2003. Banco Espi´rito Santo, S.A. (the ` Bank' ) (acting through its London branch) has
unconditionally guaranteed the payment of dividends and payments on liquidation and redemption with respect to the
Preference Shares to the extent described herein under (``Subordinated Guarantee'').
Non-cumulative preferential cash dividends will be payable on the Preference Shares, when and if declared by the Directors of
the Issuer, annually in arrear on 2nd July in each year, commencing on 2nd July, 2004 up to and including the First Call Date,
and thereafter quarterly in arrear on 2nd January, 2nd April, 2nd July and 2nd October in each year, commencing on
2nd October, 2014. In relation to each Preferred Dividend Period falling in the period from 2nd July, 2003 and ending on the
day before the First Call Date, the rate of Preferred Dividend shall be 5.58 per cent. per annum. In relation to a Preferred
Dividend Period commencing on the First Call Date or any Preferred Dividend Payment Date thereafter, the rate of Preferred
Dividend shall be 2.65 per cent. per annum above Three Month EURIBOR.
The Preference Shares are perpetual securities and have no fixed redemption date. However, the Preference Shares may be
redeemed, at the option of the Issuer, in whole but not in part on the First Call Date and on any Preferred Dividend Payment
Date falling thereafter, upon not less than 30 nor more than 60 days notice, each to be redeemed at the Redemption Price plus
accrued and unpaid Preferred Dividends in respect of the most recent Preferred Dividend Period. Such redemption is subject to
the consent of the Bank and the Bank of Portugal.
See ` Investment Considerations' for a discussion of certain factors that should be considered by prospective investors.
Application has been made to list the New Preference Shares on the Luxembourg Stock Exchange.
The Preference Shares are expected to be rated ``A3'' by Moody's Investors Service Limited, ``BBB'' by Standard & Poor's
Rating Services, a division of the McGraw Hill Companies Inc., and ``A'' by Fitch Ratings Ltd. A rating is not a
recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the
assigning rating organisation.
The New Preference Shares will be initially represented on issue by a single temporary global certificate in registered form (the
``Temporary Global Certificate''). The Temporary Global Certificate will be registered in the name of Chase Nominees
Limited as nominee for, and will be deposited with, a common depositary for Euroclear Bank S.A./N.V., as operator of the
Euroclear system (``Euroclear' ) and Clearstream Banking, socie´te´ anonyme (``Clearstream, Luxembourg' ) on or around the
Closing Date. The Temporary Global Certificate will be exchangeable in whole for a single permanent global certificate (the
``Permanent Global Certificate' and together with the Temporary Global Certificate, the ` Global Certificates' ) representing
the New Preference Shares on 10th May, 2004 whereupon the New Preference Shares will become fungible for trading
purposes with the Existing Preference Shares.
Joint Bookrunners
LEHMAN BROTHERS
MERRILL LYNCH INTERNATIONAL
Joint Lead Manager
BANCO ESPI´RITO SANTO DE INVESTIMENTO
The date of this Offering Circular is 29th March, 2004.

The Issuer and the Bank accept responsibility for the information contained in this Offering Circular. To
the best of the knowledge and belief of the Issuer and the Bank (each having taken all reasonable care to
ensure that such is the case) the information contained in this Offering Circular is in accordance with the
facts and does not omit anything likely to affect the import of such information.
This Offering Circular is to be read in conjunction with all documents which are deemed to be
incorporated herein by reference (see ``Documents Incorporated by Reference'' below). This Offering
Circular shall be read and construed on the basis that such documents are incorporated and form part of
this Offering Circular.
The Managers have not separately verified the information contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility or liability
is accepted by the Managers or any of them as to the accuracy or completeness of the information
contained in this Offering Circular or any other information provided by the Issuer or the Bank in
connection with the Preference Shares or their distribution.
No person is or has been authorised to give any information or to make any representation not contained in
or not consistent with this Offering Circular or any other information supplied in connection with the
offering of the Preference Shares and, if given or made, such information or representation must not be
relied upon as having been authorised by the Issuer, the Bank or any of the Managers (as defined under
``Subscription and Sale'' below).
This Offering Circular is not intended to provide the basis of any credit or other evaluation and should not
be considered as a recommendation by the Issuer, the Bank or any of the Managers that any recipient of
this Offering Circular should purchase any of the Preference Shares. Each investor contemplating
purchasing Preference Shares should make its own independent investigation of the financial condition and
affairs, and its own appraisal of the creditworthiness, of the Issuer and/or the Bank.
Neither the delivery of this Offering Circular nor any sale made hereunder shall, under any circumstances,
constitute a representation or create any implication that there has been no change in the affairs of the
Issuer, the Bank or the Group since the date hereof. This Offering Circular does not constitute an offer of,
or an invitation by, or on behalf of, the Issuer, the Bank or the Managers to subscribe for, or purchase, any
of the Preference Shares. This Offering Circular does not constitute an offer, and may not be used for the
purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such
an offer or solicitation is not authorised or is unlawful.
The Preference Shares have not been and will not be registered under the United States Securities Act of
1933, as amended, (the ``Securities Act'') and are subject to U.S. tax law requirements. Subject to certain
exceptions, the Preference Shares may not be offered, sold or delivered within the United States or to U.S.
persons. For a further description of certain restrictions on the offering and sale of the Preference Shares
and on distribution of this Offering Circular, see ``Subscription and Sale'' below.
No offer shall be made to the public in the Cayman Islands to subscribe for any of the Preference Shares.
IN CONNECTION WITH THE ISSUE OF THE PREFERENCE SHARES, LEHMAN BROTHERS
INTERNATIONAL (EUROPE) OR ANY PERSON ACTING FOR IT MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE EXISTING
PREFERENCE SHARES AND/OR THE NEW PREFERENCE SHARES AT A LEVEL HIGHER THAN
THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED PERIOD. HOWEVER THERE IS
BE NO OBLIGATION ON LEHMAN BROTHERS INTERNATIONAL (EUROPE) OR ANY AGENT OF
ITS TO DO THIS. SUCH STABILISING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD.
All references in this Offering Circular to ``euro'', ``EUR'' and ``E'' refer to the currency introduced at the start of
the third stage of European economic and monetary union pursuant to the Treaty establishing the European
Community (signed in Rome on 25th March, 1957), as amended.
2

TABLE OF CONTENTS
Page
Documents Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Summary of the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Description of the Preference Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Subordinated Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
BES Finance Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Capitalisation of BES Finance Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
Financial Information of BES Finance Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
Banco Espi´rito Santo, S.A. and the BES Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Financial Statements of the BES Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67
Subscription and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
DOCUMENTS INCORPORATED BY REFERENCE
The audited consolidated financial statements of the Bank for the years ended 31st December, 2001 and 2002 and
the unaudited consolidated financial statements of the Bank for the six months ended 30th June, 2003 are
incorporated by reference in this Offering Circular. Copies of these financial statements are available free of
charge at the specified office of each of the Paying and Transfer Agents as described in ``General Information''
below.
3

SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by the more detailed information included elsewhere in this
Offering Circular. Capitalised terms used but not defined in this summary shall bear the respective meanings
ascribed to them under ``Description of the Preference Shares''. Prospective investors should also consider
carefully, amongst other things, the factors set out under ``Investment Considerations''.
Issuer:
BES Finance Ltd., a wholly-owned subsidiary of the Bank incorporated
as an exempted company under the Companies Law (Revised) of the
Cayman Islands on 15th November, 1996.
Guarantor:
Banco Espi´rito Santo, S.A., (acting through its London branch).
Issue Size:
E150,000,000.
Issue Details:
E150,000,000 Non-cumulative Guaranteed Step-Up Preference Shares
Series A each with a par value and a liquidation preference of E1,000,
forming a single series with the E450,000,000 Non-cumulative
Guaranteed Step-Up Preference Shares Series A issued by the Issuer
on 2nd July, 2003.
Preferred Dividends:
Preferred Dividends on the Preference Shares will be paid by the Issuer
out of funds legally available therefor if and when declared by the
Directors of the Issuer, subject to certain limitations (see ``Limitations
on Payments'' below).
For each Preferred Dividend Period before the First Call Date,
Preferred Dividends on the Preference Shares will be payable
annually in arrear on 2nd July in each year, commencing on 2nd July,
2004 up to and including the First Call Date, at a rate of 5.58 per cent.
per annum.
For each Preferred Dividend Period after the First Call Date, Preferred
Dividends on the Preference Shares will be payable, when and if
declared by the Directors of the Issuer, quarterly in arrear on
2nd January, 2nd April, 2nd July and 2nd October in each year,
commencing on 2nd October, 2014, at a rate of 2.65 per cent. per
annum above Three Month EURIBOR.
Subordinated Guarantee:
The Bank, acting through its London branch, will unconditionally
guarantee payments on the Preference Shares in respect of payment of
declared Preferred Dividends, payments on liquidation of the Issuer,
and payments on redemption of the Preference Shares.
The Bank's obligations under the Subordinated Guarantee will be
subordinated so that they rank junior to all Senior Creditors; pari passu
with the Parity Obligations, if any, of the Bank; and senior to all Junior
Obligations.
The Bank will not be required or permitted to make a payment under
the Subordinated Guarantee in respect of the Preference Shares in
circumstances where it could not have made the payment had the
Preference Shares been issued directly by the Bank.
The Bank will undertake in the Subordinated Guarantee that, in the
event that any Preferred Dividend is not paid in full to Holders, the
Bank will not:
(a)
declare or pay any distribution or dividend and, where applicable,
will procure that no distribution or dividend is declared or paid on
any Junior Obligations, until after the following Preferred Dividend
Payment Date or, after the First Call Date, the fourth consecutive
4

following Preferred Dividend Payment Date on which a Preferred
Dividend is paid in full; or
(b)
(if permitted) repurchase or redeem Parity Obligations or Junior
Obligations until after the following Preferred Dividend Payment
Date, or after the First Call Date, the fourth consecutive
following Preferred Dividend Payment Date on which a
Preferred Dividend in respect of the Preference Shares is paid
in full. (See ``Subordinated Guarantee'').
Limitations on Payments:
The Issuer will not pay any Preferred Dividend on the Preference
Shares:
(a)
to the extent that such Preferred Dividend, together with the
amount of:
(i)
any Preferred Dividends previously paid in respect of the
Preference Shares and distributions previously paid in
respect of Preferred Dividend Parity Obligations in the then
current fiscal year; and
(ii)
any Preferred Dividends proposed to be paid in respect of
the Preference Shares and distributions proposed to be paid
in respect of any Preferred Dividend Parity Obligations in
the then current fiscal year, if on or before the First Call
Date, or if thereafter, in the then current calendar quarter;
is greater than Distributable Funds; and
(b)
even if Distributable Funds are sufficient, if the Issuer has been
notified that in the judgement of the Board of Directors of the
Bank after consultation with the Bank of Portugal, such payment
would breach or cause a breach by the Bank of the Capital
Adequacy Regulations.
References to Preferred Dividends includes additional amounts payable
under the gross up provisions contained in the Preference Shares and in
the Subordinated Guarantee (see ``Withholding Taxes and Additional
Amounts'' below).
For the avoidance of doubt, the payment of the Preferred Dividends by
the Issuer is at the discretion of the Directors of the Issuer.
Partial Payments:
In the event that the payments described above cannot be made in full
by reason of any such limitation, such payments will be made pro rata
in the proportion that the amount available for payment bears to the full
amount that would have been payable but for such limitation.
Preferred Dividends
If the Directors of the Issuer do not declare a Preferred Dividend
non-cumulative:
payable on a Preferred Dividend Payment Date, then the entitlement of
the holders of Preference Shares to such Preferred Dividend shall lapse.
Accordingly no payment will need to be made at any time by the Issuer
or the Bank in respect of any such missed payment.
Withholding Tax and
The Preference Shares will contain a gross up provision in respect of
Additional Amounts:
imposition of Cayman Islands, Portuguese or UK withholding taxes.
The Subordinated Guarantee will contain a gross up provision in
respect of imposition of Portuguese or UK withholding taxes. Each
gross up provision will be subject to customary exceptions.
Under the gross up provisions, subject to customary exceptions, the
Issuer, or the Bank pursuant to the Subordinated Guarantee, will pay to
each holder of the Preference Shares such additional amounts as may
be necessary in order that every net payment in respect of the
5

Preference Shares, after withholding for any taxes imposed by the
Cayman Islands, Portugal or the UK, as the case may be, upon or as a
result of such payment, will not be less than the amount otherwise
required to be paid.
The obligations of the Issuer and the Bank to pay any such additional
amounts will be subject to limitations described in ``Limitation on
Payments'' above.
Optional Redemption:
The Preference Shares are redeemable at the option of the Issuer, in
whole but not in part, on the First Call Date and on any Preferred
Dividend Payment Date falling thereafter, at E1,000 per Preference
Share plus an amount equal to any accrued and unpaid Preferred
Dividends in respect of the most recent Preferred Dividend Period,
whether or not declared, up to the date fixed for redemption, and any
Additional Amounts.
Such optional redemption will be subject to the prior consent of the
Bank and the Bank of Portugal.
Capital Disqualification
If, at any time falling prior to but excluding the First Call Date, a
Redemption:
Capital Disqualification Event occurs, the Preference Shares will be
redeemable, in whole but not in part, at the option of the Issuer.
In these circumstances the Preference Shares may be redeemed at a
price equal to E1,000 per Preference Share or, if higher, the Make
Whole Redemption Price plus, in each case, an amount equal to any
accrued and unpaid Preferred Dividends in respect of the most recent
Preferred Dividend Period, whether or not declared, up to the date fixed
for redemption, and any Additional Amounts,
Any such redemption will be subject to the prior consent of the Bank
and the Bank of Portugal.
Redemption for Tax Reasons:
If, at any time falling prior to but excluding the First Call Date, a Tax
Event occurs, the Preference Shares will be redeemable, in whole but
not in part, at the option of the Issuer.
In these circumstances the Preference Shares may be redeemed at a
price equal to: (i) in the case of a Tax Event described in paragraphs (a)
or (b) of the definition of ``Tax Event'', E1,000 per Preference Share; or
(ii) in the case of a Tax Event described in paragraphs (c) or (d) of the
definition of ``Tax Event'', the Make Whole Redemption Price, plus in
each case, an amount equal to any accrued and unpaid Preferred
Dividends in respect of the most recent Preferred Dividend Period,
whether or not declared, up to the date fixed for redemption plus
Additional Amounts.
Any such redemption will be subject to the prior consent of the Bank
and the Bank of Portugal.
Rights upon Liquidation:
In the event of any summary winding-up, voluntary liquidation or
dissolution of the Issuer, Holders of Preference Shares will be entitled
to receive the Liquidation Distribution per Preference Share held out of
assets available for distribution to shareholders.
Notwithstanding the availability of sufficient assets of the Issuer to pay
any Liquidation Distribution, if at the time such Liquidation
Distribution is to be paid, proceedings are pending or have been
commenced for the voluntary or involuntary liquidation, dissolution or
winding-up of the Bank, the Liquidation Distribution per Preference
Share paid to Holders of Preference Shares and the liquidation
distribution per share paid to the holders of Liquidation Parity
6

Obligations shall not exceed the amount per share that would have been
paid as the liquidation distribution from the assets of the Bank had the
Preference Shares and Liquidation Parity Obligations been issued by
the Bank and ranked:
(x)
junior to all Senior Creditors;
(y)
pari passu with the Liquidation Parity Obligations, if any, of the
Bank; and
(z)
senior to all Junior Obligations.
In the event of liquidation, dissolution or winding-up of the Bank, the
Directors of the Issuer shall convene an extraordinary general meeting
of the Issuer for the purpose of placing the Issuer in liquidation and the
amount per share to which Holders of Preference Shares shall be
entitled as a Liquidation Distribution will be as described above.
The Bank has undertaken in the Subordinated Guarantee that, so long
as any of the Preference Shares is outstanding, it will not permit, or take
any action to cause, the liquidation, dissolution or winding-up of the
Issuer unless the Bank of Portugal has given its prior approval, or the
Bank itself is in liquidation.
Voting Rights:
Generally Holders of the Preference Shares will not be entitled to vote
at any general meeting of shareholders of the Issuer.
Holders of the Preference Shares (together with the holders of any other
preferred or preference shares of the Issuer having the right to vote for
the election of Directors in such event) are entitled to elect two
additional Directors of the Issuer's board of Directors if, in respect of a
Preferred Dividend Period or Preferred Dividend Periods amounting in
each case to a period of not less than one year, Preferred Dividends on
the Preference Shares have not been paid in full, or if the Bank
breaches its payment obligations under the Subordinated Guarantee.
Such Directors will vacate their office if Preferred Dividends are
resumed by the Issuer, or payments under the Subordinated Guarantee
by the Bank in respect thereof are made in full.
Form of the Preference Shares:
The Preference Shares will be in registered form. The New Preference
Shares will be initially represented on issue by the Temporary Global
Certificate which will be registered in the name of Chase Nominees
Limited as nominee for, and will be deposited with, a common
depositary for Euroclear and Clearstream Luxembourg on or around the
Closing Date. The Temporary Global Certificate will be exchangeable
in whole for the Permanent Global Certificate on 10th May, 2004
whereupon the New Preference Shares will become fungible for trading
purposes with the Existing Preference Shares.
Governing Law:
The Preference Shares will be governed by, and construed in
accordance with, Cayman Islands law.
The Subordinated Guarantee of the Bank will be governed by, and
construed in accordance with, English law, save that the provisions
concerning the ranking of the Subordinated Guarantee, as described
above, will be governed by, and construed in accordance with,
Portuguese law.
Use of proceeds:
The net proceeds from the issue of the Preference Shares will augment
the Bank's tier 1 capital on a consolidated basis and will be used by the
Bank for its general corporate purposes.
7

Listing:
Application has been made to list the New Preference Shares on the
Luxembourg Stock Exchange.
Rating:
The Preference Shares are expected to be rated ``A3'' by Moody's
Investors Service Limited, ``BBB'' by Standard & Poor's Rating
Services, a division of the McGraw Hill Companies Inc., and ``A'' by
Fitch Ratings Ltd. A rating is not a recommendation to buy, sell or hold
securities and may be subject to revision, suspension or withdrawal at
any time by the assigning rating organisation.
8

INVESTMENT CONSIDERATIONS
Prospective investors should consider carefully the following information in conjunction with the other
information contained in this Offering Circular before investing in the Preference Shares.
Risks Associated with the Bank's Financial Condition
An investment in the Preference Shares will have substantially the same economic risks as an investment in non-
cumulative perpetual preference shares issued directly by the Bank having the same liquidation preference and
rate of distribution as the Preference Shares. The Preference Shares are guaranteed on a limited and subordinated
basis by the Bank pursuant to the terms of the Subordinated Guarantee. Accordingly, if the Bank's financial
condition were to deteriorate, the Issuer and the Holders may suffer direct and materially adverse consequences,
including non-payment of Preferred Dividends on the Preference Shares or of payments under the Subordinated
Guarantee.
Preferred Dividends not Cumulative
The payment of Preferred Dividends on the Preference Shares by the Issuer will always be subject to the
Memorandum and Articles of Association of the Issuer and Cayman Islands law.
Preferred Dividends on the Preference Shares are not cumulative. As set out in ``Description of the Preference
Shares'', Preferred Dividends on the Preference Shares, when and if declared by the Directors of the Issuer, will
be paid on each Preferred Dividend Payment Date unless the Bank has insufficient Distributable Funds to enable
the Issuer to pay Preferred Dividends on the Preference Shares (and in respect of any Preferred Dividend Parity
Obligations) or such payment would result in the Bank breaching the Capital Adequacy Regulations. If Preferred
Dividends on the Preference Shares for any Preferred Dividend Period are not paid, the Holders will not be
entitled to receive such Preferred Dividends (or any payment under the Subordinated Guarantee in respect of such
Preferred Dividends) whether or not funds are, or subsequently become, available.
Perpetual Nature of the Preference Shares
The Preference Shares have no fixed final redemption date and Holders have no rights to call for the redemption
of the Preference Shares. Although the Issuer may redeem the Preference Shares in certain circumstances
(including at its option on the First Call Date or any Preferred Dividend Payment Date thereafter or following the
occurrence of certain Tax Events (as set out in ``Description of the Preference Shares'') or a Capital
Disqualification Event, there is no obligation for it to do so and there are limitations on its ability to do so.
Therefore, Holders should be aware that they may be required to bear the financial risks of an investment in the
Preference Shares for an indefinite period of time. Any redemption or purchase of the Preference Shares by the
Issuer or any payments on liquidation of the Issuer will be subject to general principles of Cayman Islands law in
effect from time to time.
Subordination
The obligations of the Issuer under the Preference Shares and of the Bank under the Subordinated Guarantee will
rank junior as to payments to all liabilities to creditors of the Issuer and the Bank, as the case may be, (including
without limitation depositors, general creditors and subordinated debt holders) and claims of holders of senior
ranking securities. In the event that the Bank is wound-up, liquidated or dissolved, the assets of the Bank would
be available to pay obligations under the Subordinated Guarantee only after all payments have been made on such
senior liabilities and claims.
No Limitation on Senior Debt
Neither the Issuer nor the Bank is prohibited from issuing, guaranteeing or otherwise incurring further debt
ranking pari passu with, or senior to, its obligations under the Preference Shares or the Subordinated Guarantee,
as the case may be.
Absence of Prior Public Markets
The Preference Shares constitute a new issue of shares by the Issuer. Prior to this issue, there will have been no
public market for the Preference Shares. Although application has been made for the Preference Shares to be
listed on the Luxembourg Stock Exchange, there can be no assurance that an active public market for the
Preference Shares will develop and, if such a market were to develop, the Managers are under no obligation to
maintain such a market. The liquidity and the market prices for the Preference Shares can be expected to vary
with changes in market and economic conditions, the financial condition and prospects of the Bank and other
factors that generally influence the market prices of securities.
9

DESCRIPTION OF THE PREFERENCE SHARES
The following summary sets forth the material terms and provisions of the Preference Shares. It is qualified in its
entirety by reference to the terms and conditions of the Company's Articles of Association. Copies of the
Company's Articles of Association and other documents relating to the Preference Shares are available as
described under ``General Information Documents''.
1.
Definitions and Interpretation
In this description of the Preference Shares, except to the extent that the context requires otherwise:
``Additional Amounts'' means the additional amounts which may be payable in respect of the Preference Shares
as described in Article 10;
``Agency Agreement'' means the agency agreement dated 2nd July, 2003 relating to the Existing Preference
Shares, as supplemented by the first supplemental agency agreement dated 30th March, 2004 relating to the New
Preference Shares, in each case between the Bank, the Company, the Principal Paying and Transfer Agent, the
Preference Shares Registrar and the other agents named therein;
``Bank'' means Banco Espi´rito Santo, S.A. and its successors and assigns;
``Business Day'' means any day on which commercial and foreign exchange markets settle payments in London,
Lisbon and the Cayman Islands and on which the TARGET System, or any successor thereto, is operating;
``Capital Adequacy Regulations'' means at any time, the regulations, requirements, guidelines and policies
relating to capital adequacy of the Bank of Portugal or otherwise applicable to banks in Portugal then in effect;
``Capital Disqualification Event'' means a change in any applicable law or regulation, or in the official
interpretation or application thereof, as a result of which, for the purposes of the Capital Adequacy Regulations at
that time, securities of the nature of the Preference Shares can no longer qualify for inclusion in the tier one
capital of the Bank on a consolidated basis;
``Cayman Islands Tax'' means any present or future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of the Cayman Islands or any political sub-division thereof or
by any authority therein or thereof having power to tax;
``Clearstream, Luxembourg'' means Clearstream Banking, socie´te´ anonyme or its successor;
``Closing Date'' means, in respect of the Existing Preference Shares, 2nd July, 2003 and, in respect of the New
Preference Shares, 30th March, 2004;
``Common Depositary'' means JP Morgan Chase Bank, London branch as common depositary for Euroclear and
Clearstream, Luxembourg;
``Company'' means BES Finance Ltd., the company incorporated as an exempted company under the Companies
Law (Revised) of the Cayman Islands on 15th November, 1996 in respect of which the articles have been
registered;
``Distributable Funds'' means in respect of each fiscal year of the Bank, the aggregate amount, as calculated as
of the end of the immediately preceding fiscal year, of:
(a)
the Bank's accumulated retained earnings and any other reserves and surpluses available for distribution
as cash dividends to holders of the ordinary share capital of the Bank under the companies laws of
Portugal, before deduction of the amount of any dividend or other distribution declared on the Bank's
ordinary share capital in respect of such prior fiscal year;
(b)
increased by the amount of any profit or decreased by any loss from such prior fiscal year, net of any
amounts required to be transferred to legal or other restricted reserves;
(c)
less any distribution of bonuses, pursuant to the Bank's bylaws to employees and directors or funds
distributed to their pension funds approved at the annual general meeting of shareholders that approves
the accounts in respect of such prior fiscal year.
``Dividends'' means the Preferred Dividends and the Ordinary Dividends or either of them;
10