Corporate Governance

Preamble

In order to ensure compliance with the provisions of Securities Market Law 24/1988, of July 28, and Royal Decree 629/1993, of May 3, on the Rules of Conduct in Securities Markets and Mandatory Records, the Board of Directors of ENDESA approved the Internal Regulations on Conduct in securities markets at its Meeting on July 24, 2001.

The principles on which these Regulations are based are impartiality, good faith, placing the common interest ahead of personal interests, and care and diligence in the use of information and in conduct in the markets.

These Internal Regulations on Conduct are mandatory and are addressed to all those who participate somehow in activities of ENDESA that are related to their purpose, and their provisions are binding in nature rather than mere recommendations.

By virtue of the amendments introduced by Law 44/2002 on Measures for Reforming the Financial System into Securities Market Law 24/1988, of July 28, the Board of Directors of ENDESA resolved to amend these Regulations on May 27, 2003.

Approval of these Regulations implies a commitment to ensure that they are kept up to date and that their contents are known to and understood and accepted by those defined as falling within its scope of application.

1. PURPOSE

The ENDESA Internal Regulations on Conduct in securities markets define the rules of conduct to be observed by the persons to whom they apply in the transactions they perform, so as to contribute to their transparency and to the protection of investors.

2. SUBMISSION TO LEGISLATION IN FORCE

The Regulations are approved in implementation and subject to Securities Market Law 24/1988, of July 28, and Royal Decree 629/1993, of May 3, on the Rules of Conduct in Securities Markets and Mandatory Records, and to other applicable legal provisions.

Should the transactions envisaged in these Regulations be performed on securities markets not subject to Spanish law, the legislation of the country in question and these Regulations will apply insofar as the latter do not conflict with the former.

3. PERSONS TO WHOM THESE REGULATIONS APPLY

The Internal Regulations on Conduct in securities markets are binding on:

• Members of the Board of Directors.
• Senior executives.
• Such executives and employees as may be determined, whether from ENDESA or from its investees, who work in securities market-related areas or have access to confidential information.
• Advisers and consultants engaged by ENDESA to act in transactions subject to these Regulations.

The General Secretary will keep an updated list of persons subject to these Regulations.

4. SECURITIES TO WHICH THESE REGULATIONS APPLY

4.1. ENDESA securities

These Regulations apply to all transactions in shares, convertible or nonconvertible debentures, bonds, promissory notes, subordinated debt, other financial instruments whose underlying asset is mainly securities of ENDESA or of any of its investees, and, in general, securities issued by ENDESA or any of its investees and listed on a stock exchange or other organized market, as well as energy futures transactions.

4.2. Securities of other companies

These Regulations will also apply to transactions in securities issued by other companies where the persons subject to these Regulations have obtained confidential or insider information by virtue of their relationship with ENDESA.

5. GENERAL RULES OF CONDUCT IN RELATION TO SECURITIES

5.1. Rules of conduct

In conformity with securities market legislation, persons subject to these Regulations must act in the course of their work with impartiality, without placing their personal interests ahead of those of ENDESA or those of other companies having relationships with ENDESA, and subject to the enforceable duty of secrecy.

5.2. Obligation of disclosure

Persons subject to these Regulations must communicate to the General Secretary of ENDESA, in the terms of Exhibit I to these Regulations, any transaction in securities of ENDESA, of its investees, or of other companies, in the terms defined in Sections 4.1 and 4.2 hereof.

The communication will be effected within 7 calendar days from the performance of such a transaction. Persons who, for any reason, become for the first time persons to whom these Regulations apply, must communicate ownership of any security to which these Regulations apply.

5.3. Information on conflicts of interest

Persons subject to these Regulations must inform the General Secretary of any conflict of interest that may arise in connection with the ownership of personal or family property or with any cause that interferes with the pursuit of the activities subject to these Regulations.

Should there be any doubt over the existence of a conflict of interest, the persons subject to these Regulations must consult the General Secretary who will rule on it in writing. The General Secretary may refer the matter to the Audit and Compliance Committee if he sees fit due to its importance or difficulty.

If the person affected by the potential conflict of interest is a member of the Audit and Compliance Committee or the Managing Director, the Committee will rule on its existence or absence. If the person affected is the General Secretary, he must communicate to the Managing Director the potential conflict of interest so that the latter rule on its existence or, as the case may be, refer the matter to the Audit and Compliance Committee.

5.4. Transactions of particular importance

In the phases of studying or negotiating any kind of legal or financial transaction that may have an appreciable effect on the market price of the securities described in Sections 4.1 and 4.2 of these Regulations, the persons in charge of the transactions must:

• Limit knowledge of the information strictly to persons, whether within or outside the organization, whose participation is essential.
• Keep, for each transaction, a documentary record of the names of the persons referred to in the preceding indent.
• Expressly caution the persons included in the record on the nature of the information, their duty of confidentiality and the prohibition on its use.
• Establish security measures for the custody, storage, reproduction and distribution of, and access to, the information.

The persons in charge of the transactions must communicate to the General Secretary and the Secretary of the Board the persons included in the documentary record of persons subject to this Section.

The persons involved in these transactions, whether within or outside the Company, must sign to such end the "Confidentiality Undertaking," attached as Exhibit II to these Regulations, and will refrain from performing any transaction in securities or financial instruments affected.

Endesa will also monitor the performance in the market of its listed securities and any news affecting it broadcast or published by professional disseminators of financial information or by the media.

If an abnormal variation occurs in the volumes traded or in the prices quoted and there are reasonable indications that such variation is occurring as a result of a premature, partial or distorted disclosure of a transaction, Endesa will immediately report a relevant fact disclosing clearly and precisely the status of the transaction in progress or anticipating the information to be supplied.

5.5. Record of communications

The General Secretary will keep a record of the communications referred to in the preceding Sections. The contents of the record will be confidential and the data can only be disclosed to the Board of Directors or to whomever the Board may determine, in the course of a specific activity.

5.6. Portfolio management

The disclosure obligation provided for in Section 5.2. will not apply if the person subject to these Regulations has entered into a portfolio management agreement with any person or entity so that such person or entity can buy and sell securities without the involvement of the owner, provided that the manager follows professional criteria applicable, in turn, to other clients with the same profile.

5.7. Related persons

The rules contained in this Section will also apply to companies controlled by persons subject to these Regulations or acting in concert with those companies, to those acting for the account of persons subject to these Regulations, and to related persons. "Related persons" means the underage children and spouses of the persons subject to these Regulations.

6. RULES ON RELEVANT, INSIDER AND CONFIDENTIAL INFORMATION

6.1. Relevant information

All information, knowledge of which may reasonably affect an investor when buying or selling securities or financial instruments and which therefore may influence appreciably their price on a secondary market will be considered "relevant information".

Relevant information will be communicated to the Spanish National Securities Market Commission by ENDESA's General Secretary and, where appropriate, in connection with matters falling within his jurisdiction, by the Economic and Financial Corporate Manager, by the deadlines and in accordance with the formalities established in the provisions in force.

The relevant information must be communicated to the Spanish National Securities Market Commission before it is disseminated by any other means and as soon as the fact is known, the decision has been adopted, or the agreement or contract in question with third parties has been signed. The information communicated must be true, clear, complete and, where the nature of the information so requires, quantified so that it does not cause confusion or mislead. ENDESA will also disseminate this information on its website.

If it is considered that the information must not be made public because it affects its legitimate interests, ENDESA will immediately inform the Spanish National Securities Market Commission, which may grant it a dispensation from such obligation in conformity with the provisions of Article 91 of Securities Market Law 24/1988, of July 28.

Persons subject to these Regulations will not supply analysts, stockholders, investors or the press with information the contents of which are considered to be relevant information if it has not been supplied previously or simultaneously to the market in general.

6.2. Insider information

All information of a specific nature which refers directly or indirectly to one or more marketable securities or financial instruments among those falling within the scope of application of Securities Market Law 24/1988 of July 28, or to one or more issuers of those marketable securities or negotiable instruments, which has not been made public, and which if it is, or had been, made public could have, or would have had, an appreciable effect on their price on an organized trading system or market, will be considered to be "insider information".

6.3. Rules of conduct in cases of insider information

All persons subject to these Regulations who have any insider information must refrain from engaging for their own account or that of another directly or indirectly in any of the following types of conduct:

• Preparing or performing any type of transaction in the market in securities to which the information relates.
• Communicating the information to third parties other than in the ordinary course of their work, profession or duties.
• Recommending to a third party that he buy or sell, or cause another to buy or sell, securities based on the information.

6.4. Confidential information

All information affecting securities markets, outside the public domain, and known to persons subject to these Regulations by reason of their work, profession, office or functions, in conformity with Article 81 of Securities Market Law 24/1988, of July 28, is "confidential information".

6.5. Rules of conduct in cases of confidential information

Persons subject to these Regulations who possess confidential information must safeguard its content, without prejudice to their duty of communication and cooperation to and with the judicial and administrative authorities. In particular, they will ensure that such data or information cannot be abused or used unfairly, report any cases where this has happened, and immediately take the necessary measures to prevent, avoid and, if appropriate, remedy any consequences that may arise from it.

6.6. Related persons

The obligations in this Section will apply to controlled companies, persons who act for the account of persons subject to these Regulations or in concert with them and related persons, in the terms defined in Section 5.7 of these Regulations.

7. RULES ON MANAGEMENT OF TREASURY STOCK

Treasury stock will be managed in accordance with the provisions of Securities Market Law 24/1988, of July 28, and with the other provisions in force in this area.

ENDESA will make transactions in treasury stock or in financial instruments tied to them subject to measures that prevent investment or divestment decisions from being affected by knowledge of insider information.

The Economic and Financial Manager of ENDESA will officially notify treasury stock transactions, pursuant to the requirements of the provisions in force, and will keep proper control over, and a record of, those transactions.

8. ENTRY INTO FORCE

These Regulations will enter into force on the day after the date of their approval.

9. BREACH

Apart from the consequences provided for in Spanish law, a breach of the provisions of these Internal Regulations on Conduct will be deemed to be a labor infringement, the seriousness of which will be determined through the legally provided procedures and channels.

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