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Information on Banco Espírito Santo´s Order Execution Policy

1. Introduction

Following the publication of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 and Directive 2006/73/EC of the Commission of 10 August 2006 regarding markets in financial instruments (MiFID) and Regulation no. 1287/2006 of the Commission of 10 August 2006 enshrining certain rules in the MiFID, Banco Espírito Santo dos Açores has defined its Order Execution Policy, which is as follows.

The requirement of documenting and publishing an order execution policy is a new feature introduced by the MiFID. Nevertheless, Banco Espírito Santo dos Açores does not expect it to result in any significant changes in the Bank's relationship with its customers, as its activities are usually based on the fundamental principles of a policy of executing orders on the most favourable terms.

2. Scope

Banco Espírito Santo dos Açores is obliged to execute orders on the most favourable terms whenever executing orders on financial instruments on behalf of customers classified as professional or retail customers. Banco Espírito Santo dos Açores must abide by this obligation for all orders received in the European Economic Area.

All customers are informed of their classification as part of the measures that Banco Espírito Santo dos Açores has been implementing in compliance with the MiFID. If you do not know your category, please ask your usual contact at Banco Espírito Santo dos Açores.

2.1 Acting on customers' behalf

Banco Espírito Santo dos Açores is considered to be acting on its customers' behalf whenever:
(a) It receives orders from customers for execution;
(b) It receives orders from customers for transmission to other entities;
(c) It issues orders on its customers' behalf for execution by other entities or by Banco Espírito Santo dos Açores following investment decisions made for customers as part of its discretionary portfolio management service.

Banco Espírito Santo dos Açores is not acting on its customers' behalf and is therefore not bound by the obligation to operate on the most favourable terms whenever:

(a) A transaction is carried out after Banco Espírito Santo dos Açores has informed the customer at his/her request or on a continuous basis of a price for a particular financial instrument and the customer has decided to trade the financial instrument on the basis of this price; and
(b) Banco Espírito Santo dos Açores is acting on its own account for its own portfolio and the terms of the transaction have been negotiated with the customer.

3. Obligation to execute orders on terms most favourable to the customer

Under the MiFID, Banco Espírito Santo dos Açores is obliged to establish and implement an order execution policy that provides for all reasonable steps to obtain the BES dos Açorest possible result for its customers. Banco Espírito Santo dos Açores's order execution policy also includes the procedures to be followed for operations for which Banco Espírito Santo dos Açores is not under an obligation to execute orders on the most favourable terms.

The order execution policy on the most favourable terms does not subject Banco Espírito Santo dos Açores to any obligation other than those specifically provided for in the Securities Code and its regulations and, in particular, does not create any contractual obligation.

In the reception and transmission of orders and the discretionary management of portfolios and when fulfilling its general duty to execute orders on the most favourable terms, Banco Espírito Santo dos Açores is obliged to take measures to ensure that the financial intermediaries to whom orders are transmitted also have a policy of executing orders on the most favourable terms.

4. Execution, reception and transmission of orders

Whenever it is following its order execution policy, Banco Espírito Santo dos Açores may execute its customers' orders or transmit these orders to a financial intermediary for execution, depending on the nature of the financial instrument in question, taking into account the goal of achieving the most favourable terms for the customer.

4.1 Execution by Banco Espírito Santo dos Açores

After considering all relevant factors and on the basis of any specific instructions from the customer, orders received by Banco Espírito Santo dos Açores will be sent to an execution venue.

These execution venues are sources of liquidity and include:

(c) regulated markets
(d) multilateral trading facilities (MTFs)
(e) systematic internalisers
(f) market makers
(g) other suppliers of liquidity
(h) entities outside the European Economic Area (EEA) that perform a function similar to any of the abovementioned entities.

Banco Espírito Santo dos Açores has included in its execution policy the trading venues that it believes will enable it to consistently obtain the BES dos Açorest possible result for executing its customers' orders for each financial instrument for which Banco Espírito Santo dos Açores will execute orders on behalf of its customers.

Banco Espírito Santo dos Açores may execute orders at a trading venue that is not a regulated market or MTF whenever qualified to do so.

Banco Espírito Santo dos Açores may also act as a counterparty provided that all the requirements in the Securities Code are met.

Banco Espírito Santo dos Açores may also execute orders by matching orders received from one customer with a corresponding order received from another.

Banco Espírito Santo dos Açores's order execution policy has rules on the aggregation of operations on its own account with one or more orders from customers and on the aggregation of orders from several customers. These rules lay down that this type of aggregation may only occur when it is neutral or advantageous to customers.

If an aggregated order is partially executed, the operation will in most cases be allocated to the customer first, if it is aggregated with an operation performed on own account, or allocated equally to the different customers in all other cases.

4.2 Reception and transmission of orders

For certain financial instruments, Banco Espírito Santo dos Açores will transmit customers' orders to other financial intermediaries for execution. These financial intermediaries are selected by means of an evaluation process that takes into account their ability to offer the best possible result in the execution of orders transmitted to them by Banco Espírito Santo dos Açores.

Particular attention is given to the relevant factors mentioned in paragraph 5, along with the institutions' reputation and credibility in the market.

Regarding the agreements made with these financial intermediaries, Banco Espírito Santo dos Açores will ensure that they have an order execution policy enabling Banco Espírito Santo dos Açores to fulfil its general obligation to execute orders on the most favourable terms for its customers.

In most cases, Banco Espírito Santo dos Açores currently transmits customers' orders to companies in the Banco Espírito Santo Group for execution or to financial intermediaries from whom Banco Espírito Santo dos Açores has contracted this service in certain circumstances.

5. Relevant factors

5.1 Relevant factors

When executing a customer's order, Banco Espírito Santo dos Açores takes into account a number of factors, which include:

(i) price
(j) costs
(k) speed
(l) likelihood of execution and settlement
(m) volume
(n) nature
(o) any other considerations relevant to the execution of the order

5.2 Relative importance of each factor

The following will be considered when determining the relative importance of these factors:

(p) customer classification
(q) size and nature of order
(r) characteristics of financial instruments in question
(s) characteristics and availability of liquidity of the trading venues to which the order is transmitted for execution
(t) the order's impact on the market

Whenever Banco Espírito Santo dos Açores executes orders on behalf of a customer classified as a retail investor, the most favourable terms will be determined on the basis of the overall monetary value, i.e. the sum of the price and transaction costs.

Whenever Banco Espírito Santo dos Açores executes orders on behalf of a customer classified as a qualifying investor, the most favourable terms will, in most cases, be determined on the basis of total monetary value. In certain circumstances Banco Espírito Santo dos Açores may, however, consider some factors to be more relevant than others in order to achieve the BES dos Açorest possible result.

Eligible counterparties do not benefit from the obligation of execution on the most favourable terms, though if they wish and Banco Espírito Santo dos Açores agrees, this obligation may be established in a contract.

Banco Espírito Santo dos Açores will take into consideration its customers' knowledge and experience of the market in question, their trading profile and the nature of the service that they require and any specific or generic instructions given that permit it to execute their orders.

6. Customers' specific instructions

Without prejudice to the regulations of each market to which Banco Espírito Santo dos Açores transmits orders for execution, when a customer gives Banco Espírito Santo dos Açores a specific instruction regarding an order, including specifying a particular trading venue, Banco Espírito Santo dos Açores will execute the order following the customer's instructions.

A SPECIFIC INSTRUCTION TRANSMITTED BY A CUSTOMER MAY PREVENT BANCO ESPÍRITO SANTO FROM FOLLOWING SOME OR ALL OF THE STEPS IN ITS ORDER EXECUTION POLICY WITH REGARD TO THE ASPECTS COVERED BY THIS INSTRUCTION. THESE STEPS HAVE BEEN DESIGNED TO ACHIEVE THE BES dos AçoresT POSSIBLE RESULTS WHEN EXECUTING ORDERS.

7. Monitoring and revision

7.1 Annual assessments

Every year, Banco Espírito Santo dos Açores will assess the efficacy of its order execution policy and its order execution agreements in order to identify and implement any necessary improvements.

In addition, it will also check, every year, whether the trading venues included in its execution policy and the financial intermediaries to whom Banco Espírito Santo dos Açores transmits orders for execution consistently provide the most favourable result for its customers and will change its execution agreements if necessary.

7.2 Monitoring

Banco Espírito Santo dos Açores will also monitor its order execution policy and the efficacy of the financial intermediaries to which it transmits orders in order to revise its order execution policy or  execution agreements whenever there are significant changes likely to affect Banco Espírito Santo dos Açores's ability to continue to obtain the BES dos Açorest possible results for its customers.

8. Consent

Banco Espírito Santo dos Açores's order execution policy will come into effect on 1 November 2007. As of this date, Banco Espírito Santo dos Açores will consider that any order received from one of its customers who is a retail or professional investor expresses the customer's consent to its order execution policy.

9. Communication of information on order execution policy and updates

Information on Banco Espírito Santo dos Açores's order execution policy is also available on
http://www.besdosacores.pt.

Any significant amendments to its order execution policy will be posted there. Customers will be provided with up-to-date hard-copy information on the order execution policy on request.

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