• investor protection: the Directive harmonizes the rules in this area and aims at affording customers the same protection all round whatever the European Bank which provides the investment service,
• competition: the Directive does away with the stock exchanges' monopoly, permits the use of several different types of quotation and imposes best order execution, i.e the introduction of procedures that the banks have to implement to yield the best result for their clients. It reflects market trends: most transactions today are via electronic channels and the number of trading locations has increased (the stock exchanges come under competition from electronic trading platforms and from the banks' proprietary trading activity).

Customer classification

The MiFID aims at offering clients gradual protection adapted to the category they are classified in. The Directive distinguishes between three types of clients, viz

• non professional customers,
• professional customers
• eligible counterparties

The Banks' obligations vis a vis non professional customers are greater than towards professional customers. Eligible counterparties (i.e. credit institutions, insurance companies) enjoy less protection.

Clients assessment and information

Banks must assess their clients based on suitability criteria - i.e. their knowledge about, and experience with, financial products and their financial situation - and on their investment objectives, as appropriate. For instance, if the bank gives investment advice, it must ensure that the products that it recommends are suitable for the client in question.

Furthermore, financial institutions must provide information which is adapted to the client on the financial products and on the risks they involve before carrying out an operation or a transaction with them.

The Bank must provide the client with information about its order execution policy and check its efficiency.

Each entity must identify those activities apt to generate conflicts of interest. A Group policy for handling conflicts of interest specifies the conditions for their identification, prevention and settlement.

Calyon classifies clients in the following categories according to the type of investment service provided to a client and the status of that client: retail, professional or eligible counterparty. A client is classified as an eligible counterparty when Calyon provides to that client eligible services only, that is execution order services, dealing on own account and/or the receipt and transmission of orders.

Objectives and consequences of categorisation

Upon provision of an investment service and/or an ancillary service or in respect of a financial transaction, each client will receive a level of service from Calyon that accords with that client's classification in relation to the supply of investment and/or related services and/or the settlement of transactions. Applicable rules provide a greater or lesser degree of protection for clients in accordance with the relevant client category, which assumes a deemed level of competence for each category.

Therefore retail clients will receive a greater protection from Calyon than professional clients, and eligible counterparties will receive very little protection when Calyon provides an eligible service.

Methods of categorisation and requests for a change in category

Each client is classified according to the relevant rules and to information collected by Calyon and/or provided by the client. Professional clients and eligible counterparties must inform Calyon of all changes in their status and/or circumstances that might affect their categorisation.

A client can request to be classified in a different category. A request to change category may result in a change in the level of protection for a client by a decrease in protection (opt up) or by allowing for a higher degree of protection (opt down).

Before any request for a category change, we ask that you review the protections available for each category so that you are well informed about the implications of the various options (Opt up/Opt down) and of the rules that apply to each client category in the Information Document concerning the categorisation of clients. Please also consult your advisors before requesting a change.

The document has full details of:

• The rules applicable to each client category, with a table setting out the key protections available to each
• category of client; and
• The different options (Opt up and down) for a client to change categories.

When it provides an investment or ancillary service, an investment service provider must, before any transactions takes place, supply its clients with information about relevant financial instruments and the risks associated with those instruments. This information will be adapted according to the client's classification, and its experience and knowledge of financial instruments, or transactions it undertakes.

In this respect, Calyon requests that its clients, in particular those classified in the 'Retail Clients' category read the Information in relation to the nature and characteristics of financial instruments and the associated risks.

This document does not describe in a comprehensive manner all the different risks associated with each financial instrument offered by Calyon. It aims to supply clients with summarised information and general warnings on the risks associated with different types of financial instruments so that clients can reasonably understand the nature and the risks of the proposed financial instruments and, consequently, make investment decisions based, amongst other things, upon their knowledge of those instruments.
 

As a multi-capacity investment service firm Calyon may encounter situations where certain client interests could be in conflict with those of other clients, or those of Calyon and its employees. Calyon must try to avoid conflicts of interests and, where they cannot be avoided, ensure that clients are treated fairly. In order to deal with these types of situations, Calyon has developed rules and procedures over the years to identify, prevent and manage conflicts of interests.

In accordance with the Markets in Financial Instruments Directive 2004/39/EC ("MiFID"), the existing measures will be enhanced to identify and deal appropriately with the following types of conflicts of interests during the provision of all investment services, ancillary services or a combination thereof:

• those between Calyon (including its management, employees, tied agents if any, or any person directly or indirectly linked to Calyon under a control relationship) and Calyon's client; or
• those between two Calyon clients.

Calyon will provide information to the client about the general nature and/or the source of any conflict of interests before transacting with or acting on behalf of that client, if the organisational or administrative measures set up by Calyon to manage conflicts of interests are not sufficient to guarantee, with a reasonable certainty, that the interest of the client will not be adversely affected. This information will be communicated to the client via a durable medium and will contain sufficient detail so that the client can make an informed decision.

Calyon will establish and maintain efficient operational policies and procedures to help it manage conflicts of interests that are appropriate to its size, its organisation, and the nature, importance and complexity of its activities. These operational policies and procedures will also take into account the likely circumstances that can give rise to conflict of interests as a result of the structure and the activities of other members of the Credit Agricole Group.

Summary of the conflicts of interests policy is available. In addition to this policy, you can request more information on this policy from your usual contact.
 

Calyon may receive or pay remuneration from/to a third party in relation to the provision of an investment service.

When a client buys a share / unit of a Collective Investment Vehicle (CIV) managed by the following asset management companies, Calyon receives the remuneration set out in the table below from these companies: Crédit Agricole Asset Management and CPR Online.

These commissions are equal to a percentage of the management fees of the concerned CIV as indicated in its offering documents.

Calyon does not receive any part of the purchase fees which are payable to the fund or the asset management company upon purchase of CIV shares / units. 

The remuneration information shown above is up to date as at October 2007. Calyon's remuneration may change in accordance with the agreements entered into with the producers of the CIVs. The information will be updated as soon as possible following any such changes.

If you would like more information about Calyon's remuneration in relation to your purchase of  CIV, we would ask that you contact your Calyon adviser or if you subscribe to the "Optim Placement" service, to check the internet site which is  reserved for subscribers (once the Optim Placement site is  available  in  2008).

(*) Monetary CIV list :

The French regulations that transposed MiFID into French law requires financial institutions to modify (if need appropriate) their services agreements with their clients, and to update those agreements with the new requirements from MiFID particularly as regards client information.

If you received from Calyon a French law Financial Instruments Custody Account  Agreement  or "Convention de Tenue de Compte-Conservation d'Instruments Financiers et de Services" ("Agreement") before November 1st, 2007, please familiarise yourself with Calyon's new Agreement which cancels and replaces the previous agreement.

The terms of this new Agreement will apply to your relationship with Calyon as from November 1st, 2007 for any transaction in relation to the services it covers.