CAPA R&C E Contracapa

FIT F O R A NEW ERA ANNUAL REPORT 2014 INDEX Management Report Message from the Chief Executive Officer ................................................................................................ 1 Resolution Measure Applied by Bank of Portugal to Banco Espírito Santo, S.A……….………………… 3 1.Governance ........................................................................................................................................... 6 Corporate Bodies and Executive Committee ............................................................................................. 6 Senior Managing Directors ......................................................................................................................... 8 Product Divisions, Departments and Units ................................................................................................. 8 Branches, Subsidiaries and Representative Offices ................................................................................ 11 Executive Committee .............................................................................................................................. 13 Principles and Values ............................................................................................................................... 17 Organisational Chart ................................................................................................................................ 18 2. Earnings Distribution Proposal ........................................................................................................ 19 3. Declaration of Conformity ................................................................................................................. 20 4. Global Strategy of BESI and Main Developments in 2014 ............................................................. 22 Development Strategy .............................................................................................................................. 22 Company Events ...................................................................................................................................... 23 Economic Environment ............................................................................................................................. 25 Consolidated Financial Highlights ............................................................................................................ 28 Financial Overview ................................................................................................................................... 29 Rating Actions .......................................................................................................................................... 32 5. Activity Review ................................................................................................................................... 33 Investment Banking Business .................................................................................................................. 33 Client Relationship and Origination .......................................................................................................... 34 Private Solutions. ...................................................................................................................................... 39 Capital Markets ......................................................................................................................................... 40 Equities ..................................................................................................................................................... 47 Fixed Income ............................................................................................................................................ 50 Corporate Finance .................................................................................................................................... 52 Mid-Cap Financial Advisory ...................................................................................................................... 59 Project Finance and Securitisation ........................................................................................................... 60 Acquisition Finance and Other Loans ...................................................................................................... 65 Treasury.................................................................................................................................................... 69 Asset Management ................................................................................................................................... 71 Private Equity ........................................................................................................................................... 72 6. Human Resources .............................................................................................................................. 74 7. Integrated Risk Management ............................................................................................................ 77 Annual Report 2014 Consolidated Financial Statements and Notes to the Consolidated Financial Statements Consolidated Financial Statements .......................................................................................................... 95 Notes to the Consolidated Financial Statements ................................................................................... 101 Report and Opinion of the Supervisory Board ................................................................................ 197 Statutory Audit and Auditor’s Report............................................................................................... 200 Auditors’ Report .............................................................................................................................. 203 Individual Financial Statements and Notes to the Individual Financial Statements Individual Financial Statements.............................................................................................................. 205 Notes to the Individual Financial Statements ......................................................................................... 211 Report and Opinion of the Supervisory Board ................................................................................ 289 Statutory Audit and Auditor’s Report............................................................................................... 292 Auditors’ Report .............................................................................................................................. 295 Annexes I - Shares and Bonds held by the Members of the Board of Directors and the Supervisory Bodies.. 298 II - Shareholders .................................................................................................................................299 III - Adoption of the Financial Stability Forum (FSF) and Committee of European Banking Supervisors (CEBS) Recommendations on Transparency of Information and Valuation of Assets ............... 300 IV - Corporate Governance Structures and Practices ........................................................................ 304 V - Bank of Portugal Reference Indicators ........................................................................................ 306 VI - Remuneration of the Board of Directors and Supervisory Board Members and Relevant Staff (Senior Managing Directors and Control Functions Staff) ........................................................... 308 VII - Statement on the Remuneration Policy of the Board of Directors and Supervisory Board Members.............................................................................................................................313 VIII - Excerpts from Minutes of the Annual General Meeting Held on 02 April 2015…………………....338 Message from the Chief Executive Officer The end of 2014 marked a turning point in the history of BESI. After being part of the Banco Espírito Santo Group for nearly three decades, on 8 December 2014 BESI embarked on a new phase of development, after Novo Banco entered into an agreement to sell 100% of its share capital to Chinese based Haitong Group. This agreement was the culmination of a period of great difficulty and uncertainty the outcome of which was the resolution of Banco Espírito Santo and the creation of Novo Banco, S.A. – which is owned by the Resolution Fund and is the sole shareholder of BESI. Despite the negative impacts of the afore-mentioned situation, more notably the suspension of BESI’s rating by S&P, which caused a slowdown in the Bank’s activity, BESI succeeded to preserve the confidence of the majority of its Clients, maintain most of its mandates as at the date of application of the resolution measure and even attract new transactions. BESI's resilience is demonstrated in its very positive operational performance. The Bank's operating results totalled EUR 89 million at the end of 2014, a year-on-year increase of 18.5%. Banking Income reached EUR 250 million, slightly above (+1.2%) its 2013 level, while Operating Costs were reduced by 6.4% year-on-year, to EUR 161 million. These results were mainly achieved in the first half of the year, in a context of economic recovery both in Portugal and in the Eurozone, combined with an improvement in financing conditions in Portugal that culminated with the country's

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