Starting in 1998, Telefónica changed its shareholder remuneration policy, replacing cash dividend payments with bonus issues. These operations were charged against free reserves and recognized shareholders' the right to receive, free of charge, one new share for every fifty shares held.On July 24, 2002, Telefónica announced its commitment to restate cash dividend distributions as direct remuneration to shareholders. Consequently, approval was given at the General Shareholders' Meeting held on April 11 2003 for the payment of a gross cash dividend of 0.25 euros on all outstanding company shares, payable in two tranches, the first (0.13 euros per share) on July 3 2003 and the second (0.12 euros per share) on October 15 2003. Both dividend payments were charged against the company's Paid-in Capital Reserve. In addition, the payment of a dividend in kind charged against Paid-in Capital Reserves was also approved, consisting on the distribution of up to 30% of Antena 3 Televisión's share capital.Complementary to the payment of dividends, the company has set the acquisition of its own shares to be subsequently cancelled as an alternative formula to remunerate its shareholder base, selectively and depending on the pace of cash flow generation and the market price of the shares. In this respect, the Board of Directors at its meeting held on May 28, 2003, agreed to execute the proposal accepted at the General Shareholders Meeting held on April 11, 2003 to reduce share capital through the redemption of treasury stock, which resulted in the cancellation of 101,140,640 shares. In July 2003, Telefónica's Board of Directors decided to strengthen its commitment to remunerating the company shareholders, reaching the following agreements for 2004, 2005 and 2006: a) To propose for approval at the 2003 General Shareholders' Meeting the payment of a cash dividend of 0.4 euros per share corresponding to 2003 fiscal year, the Board's intention being to maintain this same dividend in fiscal years 2004 and 2005, prevailing legal, statutory and regulatory norms permitting. Accordingly, approval was given at the General Shareholders' Meeting held on April 30, 2004 to pay a fixed gross amount of 0.2 euros per share charged against 2003 earnings on May 14 to all shares outstanding entitled to receive such dividend, and to execute a second gross payment to all outstanding shares amounting to 0.2 euros per share in November 12, to be charged against the Paid-in Capital Reserve. b) To continue its policy of remunerating shareholders through appropriate share capital reductions via the redemption of treasury stock deemed appropriate. In accordance to this, on October 10, 2003 Telefónica announced its commitment to allocate 4.0 billion euros to the repurchase of shares for the 2003-2006 period. The timetable for the execution of these share buybacks shall depend on the pace of cash flow generation and the share price, in accordance with statutory, regulatory and legal restrictions in force. Telefónica´s treasury stock position as of February 15, 2005 was 246,104,407 shares representing 4.966% of its current share capital. As part of the remuneration policy approved by the Board of Directors in July 23rd 2003, and to execute the abovementioned commitment to dedicate a minimum 4.0 Billion Euros to the repurchase of shares for the 2003-2006 period, the company´s Board of Directors, at its meeting held November 24th 2004, agreed to submit to the 2005 Annual General Shareholders Meeting, a proposal to distribute treasury stock among its shareholders, in the proportion of one share for each twenty five held, charged against Paid-in Capital Reserve. The proposal has been approved at the Annual General Shareholders’ Meeting held May 31st 2005 (Point II, B of the Agenda). (Relevant Fact PDF 141 KB).Finally, and in accordance with the shareholders remuneration policy approved in July 23rd 2003, Telefónica’s Board of Directors, at its meeting held in January 26th 2005, agreed to increase the dividend payable this year by 25% to reach 0.5 euros per share, for which purpose the corresponding corporate resolutions will be adopted.To execute this agreement, the Board of Directors approved to distribute an interim cash dividend from 2004 net income of 0.23 euros per share, to be paid in May 13th 2005. In addition, the Board of Directors resolved to propose to the next Annual General Shareholders’ Meeting the distribution of a dividend in cash, from the additional Paid-in Capital Reserve, of 0.27 euros per share, to be paid in November 11th 2005. The former of the referred dividends was paid on May 13th, 2005, and the distribution of the other dividend in cash was approved by the Annual General Shareholders’ Meeting held on May 31st 2005 (Point II, A of the Agenda). (Relevant Fact PDF 350 KB).It is the intention of the Board of Directors to maintain the amount of 0.5 euros per share as a minimum dividend for 2006 (corresponding to 2005 fis ...
