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REPORT BY THE BOARD OF DIRECTORS OF INTERNATIONAL

CONSOLIDATED AIRLINES GROUP, S.A. IN RELATION TO THE

PROPOSED RE-ELECTION AND APPOINTMENT OF DIRECTORS

REFERRED TO UNDER ITEM 8 ON THE AGENDA FOR THE 2019 ANNUAL

SHAREHOLDERS’ MEETING

The Board of Directors of International Consolidated Airlines Group, S.A. (the

“Company” or “IAG”), with the support of the Nominations Committee, has issued this

report with a view to justifying the proposed re-election and appointment of directors of

the Company which is submitted to the Shareholders’ Meeting for approval under item

eight on the agenda.

In accordance with the provisions of Article 529 decies of the Spanish Companies Law

(Ley de Sociedades de Capital), all proposals for the appointment or re-election of

directors must be accompanied by an explanatory report by the Board of Directors

assessing the competence, experience and merits of the proposed candidate, which will

be attached to the minutes of the Shareholders’ Meeting or of the Board meeting. Pursuant

to sub-article 6 thereof, in the event of the appointment or re-election of any director that

is not an independent director, the proposal must also be preceded by a report by the

Nominations Committee.

The proposal that is presented to the Shareholders’ Meeting to re-elect and appoint the

directors of IAG, both independent directors and otherwise, has come from the

Nominations Committee, which has prepared this report for its delivery to the Board and

its subsequent presentation to shareholders for evaluation (accordingly, this report, which

has also been approved by the Nominations Committee and includes the proposals and

reports by said Committee, in accordance with subarticles 4 and 6 of article 529 decies of

the Companies Law).

In accordance with article 36 of the Corporate Bylaws, the term of office for directors of

the Company is one year. Although the Spanish Good Governance Code for Listed

Companies does not include a recommendation in this regard, the UK Corporate

Governance Code applicable in the United Kingdom recommends that directors of

companies belonging to the FTSE 350 index (which is the case of IAG, which belongs to

the FTSE 100 index) should be subject to re-election on an annual basis.

Accordingly, the Board of Directors proposes to the Shareholders’ Meeting the re-election

of the following Company directors: Mr. Antonio Vázquez Romero, Mr. William Walsh,

Mr. Marc Bolland, Ms. Deborah Kerr, Ms. María Fernanda Mejía Campuzano, Mr. Kieran

Poynter, Mr. Emilio Saracho Rodríguez de Torres, Ms. Nicola Shaw and Mr. Alberto Terol

Esteban; for the corporate bylaws mandated one-year term, all of them, as indicated

above, at the proposal from the Nominations Committee.

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The Board of Directors proposes to the Shareholders’ Meeting the appointment of Ms.

Margaret Ewing and Mr. Francisco Javier Ferrán Larraz as non-executive independent

directors for the one-year term specified in the Company’s bylaws, as indicated above, at

the proposal from the Nominations Committee, to fill the vacancies to be left by Mr.

Patrick Cescau and Dame Marjorie Scardino, who will not stand for re-election as part of

the Board of Director’s succession and renewal plan and who will consequently cease to

be directors of the Company at the 2019 Shareholders’ Meeting. The Board of Directors

expresses its appreciation to Mr. Patrick Cescau and Dame Marjorie Scardino for services

rendered.

In addition, as announced on April 15, 2019, Mr. Enrique Dupuy de Lôme is to step down

from his role as chief financial officer and executive director of the Company at the 2019

Shareholders’ Meeting. He will be replaced by Mr. Stephen Gunning, currently chief

financial officer at British Airways and, for that purpose, the Board of Directors proposes

to the Shareholders’ Meeting the appointment of Mr. Stephen Gunning as executive

director, for the one-year term specified in the Company’s bylaws, as indicated above, at

the proposal from the Nominations Committee, to fill the vacancy to be left by Mr.

Enrique Dupuy de Lôme. The Board of Directors expresses its appreciation to Mr.

Enrique Dupuy de Lôme for services rendered.

Each of the proposals for re-election or appointment of directors shall be voted on

separately and independently, pursuant to the provisions of Article 197 bis of the

Companies Law.

The first section of this report contains a joint evaluation of the proposal for the re-election

and appointment of the Company directors submitted to the Shareholders’ Meeting, and

the second section contains an individual report on each nominee with the information

necessary for shareholders to be able to cast their vote on the proposal.

1.- JOINT REPORT

1.1. The Board of Directors

The Board of Directors provides business leadership to the Group pursuant to

prudent and effective controls that allow for the assessment and management of

risk. The Board sets the strategic targets of the Group, ensures that the Group has

the financial and human resources necessary to achieve its targets and reviews the

performance of the management team. It also establishes the values and standards

of the Group and ensures that the Group’s obligations to its shareholders and other

stakeholders are understood and fulfilled. The functions of the Board of Directors

are set out in the Board Regulations, which are available on the Company’s website.

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The Board of Directors is currently made up of ten non-executive directors (all of

them independent directors) and two executive directors, the CEO and the CFO of

IAG.

1.2. Committees of the Board of Directors

The Board of Directors has created four specific committees to assist it in

effectively fulfilling its responsibilities: the Audit and Compliance Committee, the

Nominations Committee, the Remuneration Committee and the Safety Committee.

The functions and responsibilities of each of these committees are established in

the Board Regulations, which are available on the IAG’s website.

1.3. Evaluation of the Board of Directors, its committees and members

The Board and committees’ performance evaluation was conducted internally in

2018. The last external evaluation was completed in 2016. The internal process was

undertaken by way of a questionnaire, complemented with individual discussions

with the Chairman. Building on the initiatives already embedded in the Board’s

agenda, this year the evaluation exercise focused on the identification of areas for

improvement while ensuring that there are no areas of concern regarding the

performance of the Board. The topics considered in the evaluation included Board

composition, focus and activities, organisation and use of Board’s time, agenda

planning and quality of the information, relationship with management, as well as

training needs.

The Board Secretary prepared a report on the performance evaluation of the Board

and each of the committees. The Board report was considered by the Nominations

Committee; with each of the committees’ reports and the results being considered

by the different committees and discussed at the Board meeting held in January

2019. The review concluded that the Board had effectively fulfilled its

responsibilities during 2018, and the general progress made was unanimously

recognised by the Board.

The Chairman also met with each director individually to provide feedback on their

performance. He also discussed the functioning of the Board as a whole and the

contribution expected of each director. The Senior Independent Director discussed

the performance of the Chairman with all the directors.

The Board evaluation also included an assessment of performance against the

objectives agreed for 2018. The review concluded that the Board and the

committees continue to operate effectively and progress made against the 2018

action plan was unanimously acknowledged.

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1.4. Diversity on the Board of Directors

The Board approved on January 2016 a Directors Selection and Diversity policy

which superseded the former IAG Board Diversity policy. This Policy sets out the

principles that govern the directors’ selection process and the approach to diversity

on the Company’s Board of Directors.

As stated in this Policy, IAG is committed to promoting equality and diversity both

at Board and management level. At the same time, the appointment of directors to

the Board shall be made in accordance with a formal, rigorous and transparent

procedure, ensuring that the proposals for appointment are based on a prior analysis

of the Board’s needs and favour a diversity of knowledge, experience and gender.

This Policy incorporates the former IAG diversity principles while regulating the

process for appointing directors. Under this Policy, director appointments are

evaluated against the existing balance of skills, knowledge, independence,

experience and diversity on the Board, with directors asked to be mindful of

diversity, inclusiveness and meritocracy considerations when examining

nominations to the Board.

When reviewing board appointments, the Board’s policy is to consider candidates

from a wide variety of backgrounds, without discrimination based on gender, race,

colour, age, social class, beliefs, religion, sexual orientation, disability or other

factors.

The Board recognises the value of diversity as a tool to enrich its discussions and

decision-making process. Consequently, it is the Board’s objective to create a board

whose composition ensures a healthy diversity of opinions, perspectives, skills,

experiences, backgrounds and orientations. Specifically, this will include an

appropriate gender ratio, as well as including diversity in other senses, subject to

the overriding principle of merit and suitability mentioned above.

This will be achieved over time, taking account of the valuable knowledge and

experience of the present Board members and the value of a more diverse Board.

Accordingly, the Directors Selection and Diversity Policy establishes a female

representation objective of 33 per cent for 2020 following the recommendation

included in the final Davies report published in the UK and exceeding the 30 per

cent recommended in the Spanish Good Governance Code for Listed Companies.

It is the Nominations Committee’s intention to reconcile the achievement of this

objective while preserving the general diversity and merit based appointment

principles established in IAG’s policy.

The Board, through its Nominations Committee, regularly reviews the percentage

of women that sit on the Board and on the Company’s Management Committee, as

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well as the number of women in the Group’s workforce worldwide. The IAG Board

and Management Committee continue to focus on this important area.

The Nominations Committee leads the process for Board appointments. It evaluates

the balance of skills, experience, independence, diversity and knowledge on the

Board and, in the consideration of this evaluation, considers the role and capabilities

required for a particular appointment. This evaluation will be made alongside

succession plans for directors and takes into consideration any conclusions from the

annual review of Board performance.

The Director Selection and Diversity Policy states the Company’s intention only to

engage, so far as practicable, search firms which have signed up to the latest UK

Voluntary Code of Conduct for Executive Search Firms (or its international

equivalent). This is a voluntary code of conduct to address gender diversity on

corporate boards and best practice for the related search processes. The code lays

out steps for search firms to follow across the search process, from accepting a brief

through to final induction.

Following the recommendations of the Spanish Good Governance Code for Listed

Companies, in December 2018 the Nominations Committee carried out its annual

compliance check with its Directors Selection and Diversity Policy, concluding that

it was satisfactory, as described in greater detail in the 2018 Annual Report.

1.5. Succession planning for the Board of Directors

The Nominations Committee and the Board regularly reviews the formal succession

plan for the Board of Directors, including analysis of director’s length of tenure,

skills and experience. IAG follows both the Spanish and the UK corporate

governance standards, adapting to the most stringent requirements. The Board’s

refreshment cycle is determined in accordance with UK principles, whereby non-

executive directors' tenure should not exceed nine years, balancing the need for

regular Board refreshment with that of preserving the experience and knowledge

gained on the Board.

At regards the nine-year tenure principle, it is necessary to keep in mind that IAG

is the result of the combination of British Airways and Iberia. The merger between

the two airlines was completed on 21 January 2011 and the IAG shares began

trading in the London and Spanish Stock Exchanges on 24 January 2011. Therefore,

January 2011 is to be considered the date when IAG started its activities for the

purpose of the tenure of its directors.

1.6. Proposed re-elections and new appointments

In accordance with the Board of Director’s succession and renewal plan, the re-

election of Mr. Enrique Dupuy de Lôme, Mr. Patrick Cescau and Dame Marjorie

Scardino will not be submitted to the 2019 Shareholders’ Meeting and, accordingly,

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they will cease to be directors on that date. The Board of Directors has expressed

its appreciation for the services rendered.

In this regard, the Nominations Committee, in accordance with the Board of

Director’s succession plan, has carried out a detailed and rigorous selection process

to choose the nominees to fill the position of independent director of the Company,

with the collaboration of the firm Spencer Stuart (a search company that has

subscribed to the UK Voluntary Code of Conduct for Executive Search Firms), and

in compliance with the Director Selection and Diversity Policy, approved by the

Board of Directors on January 28, 2016.

The Nominations Committee has assessed the balance in capabilities, experience,

independence and knowledge among the Board of Directors, as well as the Group’s

current circumstances and changing needs, integrating this task with director

succession planning, and taking into account the conclusions of the annual

performance evaluation of the Board of Directors and its members. As a result, and

on the basis of this evaluation, the Nominations Committee has determined the

functions and capabilities required, agreeing to complete a two-fold search

focusing, on one side, on a solid financial background and, on the other, looking for

more generic managerial skills

For this purpose, the Nominations Committee established the relevant

specifications according to which Spencer Stuart worked extensively to provide a

list of possible candidates. The Committee considered a long list of candidates from

a wide variety of backgrounds, without discrimination based on gender, race,

colour, age, social class, beliefs, religion, sexual orientation, disability or other

factors, and based its decision solely on the suitability and merits of the candidates,

taking into consideration the needs of the Board of Directors.

After a detailed analysis, following a short-listing process and interviews with the

selected candidates, the Nominations Committee selected Ms. Margaret Ewing and

Mr. Francisco Javier Ferrán Larraz candidates who perfectly matches the

specifications sought and who fully satisfies the required legal and bylaw

conditions, have a good reputation, as well as the general knowledge, experience,

capabilities and availability necessary for the exercise of the functions and tasks

inherent in the position of independent non-executive director.

1.7. Overall evaluation

In preparing the proposal for re-election and appointment of directors, the

Nominations Committee and the Board of Directors itself have taken into account

all of the above aspects, as well as the suitability of the professional profiles of the

directors and candidates to the area of activity of the Company and to its

international nature and the requirements of the Board in order to effectively fulfil

its supervisory and control functions.

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In this connection, the experience, training and professional profile of the directors

and candidates whose re-election or appointment is submitted to the Shareholders’

Meeting for approval evidence their merits and competence to hold office as

directors of IAG and their experience and knowledge in diverse sectors and matters

that are relevant to the Company, thus guaranteeing the quality of debates within

the Board of Directors.

With the proposal made to the Shareholders’ Meeting, the Board of Directors will

be composed of 12 directors, 10 of whom will be independent directors (83.33 per

cent of all directors), and two of whom will be executive directors (16.67 per cent

of the total). Four directors will be women (33.33 per cent of the total), thus

achieving the objective of female representation established in the Company’s

Directors Selection and Diversity Policy.

In consideration of the above, the Nominations Committee and the Board of

Directors itself particularly value the contribution of the directors whose re-election

is proposed to the sound functioning of the Board and to the effective performance

of its supervisory and control functions, and the suitability, qualifications and merits

of the new directors whose appointments have been proposed, having concluded

that they all meet the requirements of good standing, suitability, reliability,

competence, qualifications, training, availability and commitment to office and are

not subject to any grounds for incompatibility, prohibition or conflict of interest.

2.- INDIVIDUAL REPORT

a) TO RE-ELECT MR. ANTONIO VÁZQUEZ ROMERO AS NON-EXECUTIVE

INDEPENDENT DIRECTOR.

• Professional profile and biographical data of Mr. Antonio Vázquez Romero:

Key areas of experience: consumer, sales/marketing, finance, governance.

Current external appointments: Member, Advisory Board of the Franklin

Institute. Member, Cooperation Board of the Loyola University. Trustee,

Nantik Lum Foundation.

Previous relevant experience: Chairman, Iberia 2012-2013. Chairman and

CEO, Iberia 2009-2011. Chairman and CEO, Altadis Group 2005-2008.

Chairman, Logista 2005-2008. Director, Iberia 2005-2007. Chief Operations

Officer and other various positions, Cigar Division of Altadis Group 1993-

2005. Various positions at Osborne 1978-1983 and Domecq 1983-1993. Began

his career in consultancy at Arthur Andersen & Co.

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• Date of first and of most recent appointment as a director of the Company:

Mr. Antonio Vázquez Romero was formally appointed as a director for the first

time on May 25, 2010, although IAG initiated its activities as the holding

company resulting from the merger between British Airways and Iberia in

January 2011. He was last re-elected as director on June 14, 2018.

• Shares of the Company and derivative financial instruments whose underlying

assets are shares of the Company held by the director:

Mr. Antonio Vázquez Romero owns 512,291 Company shares.

• Category of director:

Until January 21, 2017, Mr. Antonio Vázquez Romero was considered an other

external director, as he was executive director of Iberia up to the effective merger

of British Airways and Iberia (January 21, 2011) and therefore, pursuant to the

provisions of article 529 duodecies of the Companies Law, he could not have the

status of independent director.

Once the five year period required by article 529 duodecies of the Companies

Law elapsed he is considered as independent director, the Board of Directors

considers that Mr. Antonio Vázquez Romero can discharge his office without

being conditioned by relations with the Company or its Group, its significant

shareholders or its executives, for which reason he should have the category of

non-executive independent director.

• Proposed re-election:

In consideration of the above, the Board of Directors considers that Mr. Antonio

Vázquez Romero has the competence, experience and merits necessary to

discharge the office of non-executive independent director of the Company and

that it is in the best interests of the Company that he be re-elected to such office

for a further period of one year.

By virtue thereof, at the proposal of the Nominations Committee, the Board of

Directors makes the following proposal to the Shareholders’ Meeting for the

re-election of Mr. Antonio Vázquez Romero as a non-executive independent

director of IAG:

RESOLUTION 8.a)

“To re-elect Mr. Antonio Vázquez Romero as a director for the bylaw mandated

one-year term, upon proposal from the Nominations Committee, with the status

of non-executive independent director.”

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b) TO RE-ELECT MR. WILLIAM WALSH AS EXECUTIVE DIRECTOR.

• Professional profile and biographical data of Mr. William Walsh:

Key areas of experience: airline industry.

Other Group appointments: Chairman Aer Lingus Board of Directors.

Current external appointments: Chairman, Airlines for Europe (4AE).

Previous relevant experience: Chairman, National Treasury Management

Agency of Ireland, 2013-2018, Chairman, IATA Board of Governors 2016-

2018. Chief Executive Officer, British Airways 2005-2011. Chief Executive

Officer, Aer Lingus 2001-2005. Chief Operating Officer, Aer Lingus 2000-

2001. Chief Executive Officer, Futura (Aer Lingus’ Spanish Charter airline)

1998-2000. Joined Aer Lingus as cadet pilot in 1979.


Mr. William Walsh was formally appointed as a director for the first time on

May 25, 2010, although IAG initiated its activities as the holding company

resulting from the merger between British Airways and Iberia in January 2011.

He was last re-elected as director on June 14, 2018.



Mr. William Walsh owns 2,005,331 Company shares. In addition, he has

interests in shares as a result of share awards (conditional awards and options)

made pursuant to the Company share schemes as detailed below:

Plan Date of award Vesting date Shares within

award

IADP 2017 March 6, 2017 March 6, 2020

No performance conditions 51,893

PSP 2017 March 6, 2017

Subject to satisfaction of performance

conditions tested over a 3-year period

and a further 2-year holding period

311,355

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IADP 2018 May 10, 2018 March 8, 2021


PSP 2018 May 10, 2018




246,020

IADP 2019 March 8, 2019 March 8, 2022


PSP 2019 March 8, 2019




299,824


In accordance with the provisions of Article 529 duodecies 1 of the Companies

Law, Mr. William Walsh shall have the category of executive director.


In consideration of the above, the Board of Directors considers that Mr. William

Walsh has the competence, experience and merits necessary to discharge the

office of executive director of the Company and that it is in the best interests of

the Company that he be re-elected to such office for a further period of one year.



re-election of Mr. William Walsh as executive director of IAG:

RESOLUTION 8.b)

“To re-elect Mr. William Matthew Walsh as a director for the bylaw mandated


of executive director.”

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c) TO RE-ELECT MR. MARC BOLLAND AS NON-EXECUTIVE INDEPENDENT

DIRECTOR.

• Professional profile and biographical data of Mr. Marc Bolland:

Key areas of experience: general management, commercial

management/marketing, retail, hospitality industry.

Current external appointments: Head of European Portfolio Operations, The

Blackstone Group, Director, Coca-Cola Company. Non-Executive Director,

Exor S.p.A. Vice President, UNICEF UK.

Previous relevant experience: Chief Executive, Marks & Spencer 2010-2016.

Chief Executive, WM Morrison Supermarkets PLC 2006-2010. Director,

Manpower Inc USA 2005-2015. Chief Operating Officer 2005-2006, Director

2001-2005 and other executive and non-executive positions, Heineken 1986-

2001.


Mr. Marc Bolland was appointed as non-executive independent director for the

first time on June 16, 2016 and was last re-elected on June 14, 2018.



Mr. Marc Bolland has no shares in the Company.


Mr. Marc Bolland has been proposed in consideration of his personal and

professional traits, with the Nominations Committee and the Board of Directors

itself having deemed that he can discharge his office without being conditioned

by relations with the Company or its group, its significant shareholders or its

executives, for which reason he should have the category of non-executive

independent director.


In consideration of the above, the Board of Directors considers that Mr. Marc

Bolland has the competence, experience and merits necessary to discharge the

office of non-executive independent director of the Company and that it is in the

best interests of the Company that he be re-elected to such office for a further

period of one year.

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Directors makes the following proposal to the Shareholders’ Meeting for the re-

election of Mr. Marc Bolland as non-executive independent director of IAG:

RESOLUTION 8.c)

“To re-elect Mr. Marc Bolland as a director for the bylaw mandated one-year

term, upon proposal from the Nominations Committee, with the status of non-

executive independent director.”

d) TO RE-ELECT MS. DEBORAH KERR AS NON-EXECUTIVE INDEPENDENT DIRECTOR.

• Professional profile and biographical data of Ms. Deborah Kerr:

Key areas of experience: Technology, digital, marketing, operations, software

and services, general management.

Current external appointments: Director, NetApp Inc. Director, Chico’s FAS.

Inc. Director, ExlService Holdings, Inc. Managing Director, Warburg Pincus.

Previous relevant experience: Executive Vice President, Chief Product and

Technology Officer, SABRE Corporation 2013-2017. Director, DH

Corporation 2013-2017. Director, Mitchell International, Inc. 2009-2013.

Executive Vice President, Chief Product and Technology Officer, FICO, 2009-

2012. Vice President and Chief Technology Officer, HP Enterprise Services

2007-2009. Vice President Business Technology Optimization, Hewlett-

Packard Software 2005-2007. Senior Vice President Product Delivery,

Peregrine Systems 1998-2005. Prior senior leadership roles with NASA’s Jet

Propulsion Laboratory (including Mission Operations Manager, US Space

VLBI) 1988-1998.


Ms. Deborah Kerr was appointed as non-executive independent director for the

first time on June 14, 2018.



Ms. Deborah Kerr has no shares in the Company.


Ms. Deborah Kerr has been proposed in consideration of her personal and

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itself having deemed that she can discharge her office without being conditioned


executives, for which reason she should have the category of non-executive



In consideration of the above, the Board of Directors considers that Ms. Deborah

Kerr has the competence, experience and merits necessary to discharge the office

of non-executive independent director of the Company and that it is in the best

interests of the Company that she be re-elected to such office for a further period

of one year.



election of Ms. Deborah Kerr as non-executive independent director of IAG:

RESOLUTION 8.d)

“To re-elect Ms. Deborah Kerr as a director for the bylaw mandated one-year

term, upon proposal from the Nominations Committee, with the status of non-

executive independent director.”

e) TO RE-ELECT MS. MARÍA FERNANDA MEJÍA CAMPUZANO AS NON-EXECUTIVE


• Professional profile and biographical data of Ms. María Fernanda Mejía

Campuzano:

Key areas of experience: general management, marketing and sales, supply

chain, strategic planning, corporate transactions.

Current external appointments: Senior Vice President, The Kellogg Company.

President, Kellogg Latin America. Corporate Officer and member of Kellogg

Company Executive Leadership Team. Member of the Council of the

Americas.

Previous relevant experience: Vice-President and General Manager Global

Personal Care and Corporate Fragrance Development, Colgate-Palmolive Co.

2010-2011. Vice-President Marketing and Innovation Europe/South Pacific

Division Colgate-Palmolive Co. 2005-2010. President and CEO Spain and

Spain Holding Company 2003-2005, General Manager Hong Kong and

Greater China and Director, Greater China Management team, 2002-2003,

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Marketing Director Venezuela 2000-2002, Marketing Director Ecuador, 1998-

2000.


Ms. María Fernanda Mejía Campuzano was appointed as non-executive

independent director for the first time on February 27, 2014, by co-option, and

was last re-elected on June 14, 2018.



Ms. María Fernanda Mejía Campuzano owns 100 Company shares.


Ms. María Fernanda Mejía Campuzano has been proposed in consideration of

her personal and professional traits, with the Nominations Committee and the

Board of Directors itself having deemed that she can discharge her office without

being conditioned by relations with the Company or its group, its significant

shareholders or its executives, for which reason she should have the category of



In consideration of the above, the Board of Directors considers that Ms. María

Fernanda Mejía Campuzano has the competence, experience and merits

necessary to discharge the office of non-executive independent director of the

Company and that it is in the best interests of the Company that she be re-elected

to such office for a further period of one year.



election of Ms. María Fernanda Mejía Campuzano as non-executive

independent director of IAG:

RESOLUTION 8.e)

“To re-elect Ms. María Fernanda Mejía Campuzano as a director for the bylaw

mandated one-year term, upon proposal from the Nominations Committee, with

the status of non-executive independent director.”

f) TO RE-ELECT MR. KIERAN POYNTER AS NON-EXECUTIVE INDEPENDENT

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DIRECTOR.

• Professional profile and biographical data of Mr. Kieran Poynter:

Key areas of experience: professional services, finance services, corporate

governance, corporate transactions.

Current external appointments: Chairman, BMO Asset Management

(Holdings) PLC. Senior Independent Director, British American Tobacco.

Previous relevant experience: Chairman, Nomura International 2009-2015.

Member, Advisory Committee for the Chancellor of the Exchequer on the

competitiveness of the UK financial services sector 2009-2010. Member,

President’s committee of the Confederation of British Industry 2000-2008. UK

Chairman and Senior Partner, PricewaterhouseCoopers 2000-2008. UK

Managing Partner and other executive positions, PricewaterhouseCoopers

1982-2000.


Mr. Kieran Poynter was formally appointed as a director for the first time on

September 27, 2010, although IAG initiated its activities as the holding

company resulting from the merger between British Airways and Iberia in

January 2011. He was last re-elected as director on June 14, 2018.



Mr. Kieran Poynter owns 15,000 Company shares.


Mr. Kieran Poynter has been proposed in consideration of his personal and


itself having deemed that he can discharge his office without being conditioned


executives, for which reason he should have the category of non-executive



In consideration of the above, the Board of Directors considers that Mr. Kieran

Poynter has the competence, experience and merits necessary to discharge the


best interests of the Company that he be re-elected to such office for a further

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period of one year.



election of Mr. Kieran Poynter as non-executive independent director of IAG:

RESOLUTION 8.f)

“To re-elect Mr. Kieran Charles Poynter as a director for the bylaw mandated



g) TO RE-ELECT MR. EMILIO SARACHO RODRÍGUEZ DE TORRES AS NON-

EXECUTIVE INDEPENDENT DIRECTOR.

• Professional profile and biographical data of Mr. Emilio Saracho Rodríguez de

Torres:

Key areas of experience: corporate finance, investment banking, corporate

transactions.

Current external appointments: Director, Altamar Capital Partners. Director,

Inditex.

Previous relevant experience: Chairman of Banco Popular Español, 2017. Vice

Chairman and Member of the Investment Banking Management Committee,

JPMorgan Chase & Co. 2015-2016. Deputy CEO 2012-2015, CEO Investment

Banking for EMEA 2012-2014 and member of the Executive Committee 2009-

2013, JP Morgan. CEO, JP Morgan Private Banking for EMEA 2006-2012.

Director, Cintra 2008. Director, ONO 2008. Chairman, JP Morgan Spain and

Portugal 1998-2006. Global Investment Banking Head, Santander Investment

(UK) 1995-1998. Spanish Market Manager, Goldman Sachs International

1990-1995.


Mr. Emilio Saracho Rodríguez de Torres was appointed as non-executive

independent director for the first time on June 16, 2016 and was last re-elected

on June 14, 2018.



Mr. Emilio Saracho Rodríguez de Torres has no shares in the Company.

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Mr. Emilio Saracho Rodríguez de Torres has been proposed in consideration of

his personal and professional traits, with the Nominations Committee and the

Board of Directors itself having deemed that he can discharge his office without

being conditioned by relations with the Company or its group, its significant




In consideration of the above, the Board of Directors considers that Mr. Emilio

Saracho Rodríguez de Torres has the competence, experience and merits


Company and that it is in the best interests of the Company that he be re-elected

to such office for a further period of one year.



election of Mr. Emilio Saracho Rodríguez de Torres as non-executive


RESOLUTION 8.g)

“To re-elect Mr. Emilio Saracho Rodríguez de Torres as a director for the bylaw

mandated one-year term, upon proposal from the Nominations Committee, with

the status of non-executive independent director.”

h) TO RE-ELECT MS. NICOLA SHAW AS NON-EXECUTIVE INDEPENDENT DIRECTOR.

• Professional profile and biographical data of Ms. Nicola Shaw.

Key areas of experience: transport sector, public policy and regulatory affairs,

consumer, general management.

Current external appointments: Executive Director, National Grid plc. Member

of the Audit and Risk Committee English Heritage. Director for Major Projects

Association.

Previous relevant experience: Non-Executive, Ellevio AB 2015-2017. CEO,

HS1 Ltd 2011-2016. Member of the Department for Transport’s Rail

Franchising Advisory Panel 2013-2016. Non-Executive Director, Aer Lingus

Plc 2010-2015. Charity Trustee, Transaid 2011-2013. Director and previously

Managing Director, Bus Division at FirstGroup plc 2005-2010. Director of

- 18 -

Operations and other management positions at the Strategic Rail Authority

2002-2005. Deputy Director and Deputy Chief Economist, Office of the Rail

Regulator (ORR) 1999-2002. Associate, Halcrow Fox 1997-1999. Transport

specialist, The World Bank 1995-1997. Corporate planner, London Transport

1990-1993.


Ms. Nicola Shaw was appointed as non-executive independent director on June

15, 2017 with effect from January 1, 2018 and was re-elected on June 14, 2018.



Ms. Nicola Shaw owns 1,517 Company shares.


Ms. Nicola Shaw was proposed in consideration of her personal and professional

traits, with the Nominations Committee and the Board of Directors itself having

deemed that she can discharge her office without being conditioned by relations

with the Company or its group, its significant shareholders or its executives, for

which reason she should have the category of non-executive independent

director.


In consideration of the above, the Board of Directors considers that Ms. Nicola

Shaw has the competence, experience and merits necessary to discharge the


best interests of the Company that she be appointed to such office for the bylaw

period of one year.



appointment of Ms. Nicola Shaw as non-executive independent director of IAG:

RESOLUTION 8.h)

“To appoint Ms. Lucy Nicola Shaw as a director for the bylaw mandated one-

year term, upon proposal from the Nominations Committee, with the status of

non-executive independent director.”

i) TO RE-ELECT MR. ALBERTO TEROL ESTEBAN AS NON-EXECUTIVE INDEPENDENT

- 19 -

DIRECTOR.

• Professional profile and biographical data of Mr. Alberto Terol Esteban:

Key areas of experience: finance, professional services, information

technology, hospitality industry.

Current external appointments: Vice Chairman, Leading Independent Director

and Chairman of the Appointments, Remuneration and Corporate Governance

Committee, Indra Sistemas. Director, Broseta Abogados. International Senior

Advisor Centerbridge. Independent Director, Schindler España. Patron of

Fundación Telefonica. Executive Chairman of various family owned

companies.

Previous relevant experience: Chairman of the Supervisory Board, Senvion

GmbH. Chairman of the Audit Committee, Senvion S.A. Director, OHL 2010-

2016. Director, Aktua 2013-2016. Director, N+1 2014-2015. International

Senior Advisor, BNP Paribas 2011-2014. Member, Global Executive

Committee Deloitte 2007-2009. Managing Partner, EMEA Deloitte 2007-2009.

Managing Partner, Global Tax & Legal Deloitte 2007-2009. Member, Global

Management Committee Deloitte 2003-2007. Managing Partner: Latin

America Deloitte 2003-2007, Integration Andersen Deloitte 2002–2003,

Europe Arthur Andersen 2001-2002, Global Tax & Legal Arthur Andersen

1997-2001, Garrigues-Andersen 1997-2000.


Mr. Alberto Terol Esteban was appointed as non-executive independent

director on June 20, 2013 and was last re-elected on June 14, 2018.



Mr. Alberto Terol Esteban owns 26,537 Company shares.


Mr. Alberto Terol Esteban has been proposed in consideration of his personal

and professional traits, with the Nominations Committee and the Board of

Directors itself having deemed that he can discharge his office without being

conditioned by relations with the Company or its group, its significant



- 20 -


In consideration of the above, the Board of Directors considers that Mr. Alberto

Terol Esteban has the competence, experience and merits necessary to discharge

the office of non-executive independent director of the Company and that it is in

the best interests of the Company that he be re-elected to such office for a further

period of one year.



election of Mr. Alberto Terol as non-executive independent director of IAG:

RESOLUTION 8.i)

“To re-elect Mr. Alberto Terol Esteban as a director for the bylaw mandated



j) TO APPOINT MS. MARGARET EWING AS NON-EXECUTIVE INDEPENDENT

DIRECTOR.

• Professional profile and biographical data of Ms. Margaret Ewing:

Key areas of experience: Professional services, financial accounting, corporate

finance, strategic and capital planning, corporate governance, risk management

Current external appointments: Senior independent non-executive director,

ConvaTec Group Plc. Independent non-executive director and Chair of the

Audit and Risk Committee, ITV Plc. Trustee and Vice Chairman of the Board

and Chairman of the Finance and Audit Committee, Great Ormond Street

Hospital Children’s Charity.

Previous relevant experience: Non-executive director, Standard Chartered Plc

2012-2014. External independent member of the Audit Committee, John Lewis

Partnership Plc 2012-2014. Non-executive director, Whitbread Plc 2005-2007.

Vice Chairman, Managing Partner, Public Policy, Quality and Risk and London

Practice Senior Partner, Deloitte LLP 2007-2012. Director, Finance, BAA Ltd

2006 and Chief Financial Officer, BAA PLC 2002-2006. Group Finance

Director, Trinity Mirror PLC 2000-2002. Head, United Kingdom, Corporate

Finance Transaction Services 1995-1999 and Partner, Corporate Finance 1987-

1995, Deloitte & Touche LLP.


- 21 -

assets are shares of the Company held by the candidate:

Ms. Margaret Ewing has no shares in the Company.


Ms. Margaret Ewing was proposed in consideration of her personal and


itself having deemed that she can discharge her office without being conditioned


executives, for which reason she should have the category of non-executive


• Proposed appointment:

In consideration of the above, the Board of Directors considers that Ms. Margaret

Ewing has the competence, experience and merits necessary to discharge the


best interests of the Company that she be appointed to such office for the bylaw

period of one year.



appointment of Ms. Margaret Ewing as non-executive independent director of

IAG:

RESOLUTION 8.j)

“To appoint Ms. Margaret Ewing as a director for the bylaw mandated one-

year term, upon proposal from the Nominations Committee, with the status of

non-executive independent director.”

k) TO APPOINT MR. FRANCISCO JAVIER FERRÁN LARRAZ AS NON-EXECUTIVE


• Professional profile and biographical data of Mr. Francisco Javier Ferrán

Larraz:

Key areas of expertise: Consumer, finance, sales/marketing, governance

Current external appointments: Chairman Diageo plc. Non-executive director,

- 22 -

Coca Cola European Partners plc. Member, International Advisory Board

ESADE. Member, Supervisory Board Picard Surgeles.

Previous relevant experience: Non-executive director, Associated British

Foods plc 2005-2018. Non-executive director, SABMiller plc 2015-2016.

Member, Advisory Board Agrolimen SA 2005-2016. Vice Chairman, William

Grants & Sons Limited 2005-2014. Non-executive director, Louis Dreyfus

Holdings BV 2013-2014. Non-executive director, Abbott Group 2005-2008.

Non-executive director, Desigual SA. Non-executive director, Chupa Chups

SA. Partner, Lion Capital LLC 2005-2018. Management positions with Bacardi

Group including tenures as Regional President EMEA and President and Chief

Executive Officer.


assets are shares of the Company held by the candidate:

Mr. Francisco Javier Ferrán Larraz owns 80,000 Company shares.


Mr. Francisco Javier Ferrán Larraz has been proposed in consideration of his

personal and professional traits, with the Nominations Committee and the Board

of Directors itself having deemed that he can discharge his office without being

conditioned by relations with the Company or its group, its significant



• Proposed appointment:

In consideration of the above, the Board of Directors considers that Mr.

Francisco Javier Ferrán Larraz has the competence, experience and merits


Company and that it is in the best interests of the Company that he be appointed

to such office for the bylaw period of one year.



appointment of Mr. Francisco Javier Ferrán Larraz as non-executive


RESOLUTION 8.k)

“To appoint Mr. Francisco Javier Ferrán Larraz as a director for the bylaw

mandated one-year term, upon proposal from the Nominations Committee, with the

status of non-executive independent director.”

- 23 -

l) TO APPOINT MR. STEPHEN GUNNING AS AN EXECUTIVE DIRECTOR.

• Professional profile and biographical data of Mr. Stephen Gunning:

Key areas of experience: Finance, airline industry.

Other Group appointments: Director, IAG GBS Limited. Director, British

Airways Plc. Director, IAG Cargo Limited. Director, Avios Group (AGL)

Limited.

Current external appointments: Non-executive director, FirstGroup Plc.

Previous relevant experience: Chief Financial Officer, British Airways 2016

– 2019. Acting director, IAG Global Business Services 2017 – present. Chief

Executive Officer, IAG Cargo 2012 – 2015. Pension Trustee, British Airways

2006 – 2011. Managing Director of World Cargo, British Airways 2007 –

2012. Head of Internal Control, British Airways 2006 – 2007. World Cargo

Finance Director, British Airways 2004 – 2006.

• Shares of the Company and derivative financial instruments whose

underlying assets are shares of the Company held by the candidate:

Mr. Stephen Gunning owns 158,857 Company shares. In addition, he has

interests in shares as a result of share awards (conditional awards and options)

made pursuant to the Company share schemes as detailed below:

Plan Date of award Vesting date Shares within

award

IADP 2017 March 6, 2017 March 6, 2020


PSP 2017 March 6, 2017




96,703

IADP 2018 May 10, 2018 March 8, 2021


- 24 -

PSP 2018 May 10, 2018




77,800

IADP 2019 March 8, 2019 March 8, 2022


PSP 2019 March 8, 2019




101,587


In accordance with the provisions of Article 529 duodecies 1 of the Companies

Law, Mr. Stephen Gunning shall have the category of executive director.


In consideration of the above, the Board of Directors considers that Mr. Stephen

Gunning has the competence, experience and merits necessary to discharge the

office of executive director of the Company and that it is in the best interests of

the Company that he be appointed to such office for the bylaw period of one year.



appointment of Mr. Stephen Gunning as executive director of IAG:

RESOLUTION 8.l):

“To appoint Mr. Stephen Gunning as a director for the bylaw mandated one-year

term, upon proposal from the Nominations Committee, with the status of executive

director”.

* * *

Madrid, May 9, 2019

REPORT BY THE BOARD OF DIRECTORS OF INTERNATIONAL

CONSOLIDATED AIRLINES GROUP, S.A. IN RELATION TO ITEMS 11, 12

AND 13 ON THE AGENDA FOR THE 2019 ANNUAL SHAREHOLDERS’

MEETING

The Board of Directors of International Consolidated Airlines Group, S.A. (the

“Company”) has issued this report in relation to items 11, 12 and 13 on the agenda for

the Shareholders’ Meeting called for 19 June 2019, on first call, and for 20 June 2019, on

second call, referring to:

a) the proposed authorisation to the Board of Directors, pursuant to the provisions of

Article 297.1.b) of the Spanish Companies Law (Ley de Sociedades de Capital), to

resolve to increase the share capital and issue new shares (item 11 on the agenda);

b) the proposed authorisation to the Board of Directors to issue convertible and/or

exchangeable securities, including warrants (item 12 on the agenda); and

c) the proposed authorisation to the Board of Directors, pursuant to the provisions of

Articles 506 and 511 of the Companies Law, to exclude the shareholders’ pre-

emptive subscription right in connection with the capital increases and issuances of

convertible and/or exchangeable securities referred to, respectively, under

paragraphs a) and b) above (item 13 on the agenda).

Given that the limits to which such authorisations are linked, the Board of Directors has

considered it more appropriate to issue a single report covering the three items on the

agenda, making it easier to follow the explanations and justifications provided by the

directors according to applicable law.

1. PROPOSED AUTHORISATION TO THE BOARD OF DIRECTORS,

PURSUANT TO THE PROVISIONS OF ARTICLE 297.1.B) OF THE

COMPANIES LAW, OF THE POWER TO RESOLVE TO THE INCREASE

SHARE CAPITAL

1.1 Introduction

Under this section and in accordance with the provisions of Articles 285, 296.1, 297.1.b)

and 506 of the Companies Law, a detailed explanation and justification is provided, for

the purposes required by the legislation in force, the proposed authorisation to the Board

of Directors of the Company, in accordance with the provisions of Article 297.1.b) of the

Companies Law and with powers of substitution, of the power to resolve, on one or more

occasions and for a term ending at next year’s annual Shareholders’ Meeting (or, if earlier,

fifteen months from the date of passing the resolution), to increase the share capital.

- 2 -

This proposed authorisation to increase the share capital is for an amount up to one-third

of the share capital as at the date of passing the resolution (such amount to be reduced by

the amount that the share capital has been increased by and the maximum amount that the

share capital may need to be increased on the conversion or exchange of any securities

issued under Resolution 12).

Article 297.1.b) of the Companies Law authorises the Shareholders’ Meeting so that, in

line with the requirements provided for the amendment of the corporate bylaws, it may

delegate to the Board of Directors the power to resolve to increase the share capital on

one or more occasions up to a set figure (not higher than 50 per cent. of the share capital

at the date of passing the relevant resolution), at such time and in the amount it decides,

without consulting the Shareholders’ Meeting beforehand.

1.2 Justification for the proposal

The Board of Directors considers that the proposed resolution submitted to the

Shareholders’ Meeting is justified by the advisability of having a mechanism, provided

for in the corporate legislation in force, that allows it to resolve to increase capital on one

or more occasions, without having to subsequently call and hold a new shareholders’

meeting, albeit within the limits, terms and conditions decided by the Shareholders’

Meeting.

Companies must be in a position to make use of opportunities afforded to them within

current legislation to provide rapid and efficient responses to the needs that arise in the

course of the business operations. These needs undoubtedly include the need to provide

the Company with fresh funds, which can take the form of new capital contributions.

However, it is often impossible to determine the Company’s capital requirements in

advance and to anticipate the delays and increased cost that might naturally lead to the

call of a Shareholders’ Meeting in order to increase capital, making it difficult for the

Company to provide a quick and efficient response to the needs of the market. This makes

it recommendable for the Board to be in a position to use the authorised capital

mechanism provided in Spanish legislation.

The use of the delegation provided for in Article 297.1.b) of the Companies Law allows

the Company to provide the Board of Directors with a quick and flexible mechanism to

better cater to the needs of the Company, according to the circumstances of the market.

Taking into account the above, a proposal is submitted to the Shareholders’ Meeting to

delegate to the Board of Directors the power to resolve to increase the share capital of the

Company, on one or more occasions, up to the maximum aggregate nominal amount

indicated previously.

Capital increases performed under the proposed delegation would be carried out by

issuing and placing into circulation new shares, the consideration for which shall be cash

contributions.

- 3 -

The power thus delegated will also extend to the establishment of the various specific

terms and conditions of each capital increase and the conditions of shares to be issued,

including the power to resolve that, if the capital increase is not fully subscribed, the share

capital will be increased only by the amount of the shares subscribed, in accordance with

the provisions of Article 311.1 of the Companies Law, to amend the bylaw article relating

to share capital and to apply for the listing of the new shares.

The authorisation proposed to the Shareholders’ Meeting will expire once fifteen months

have elapsed from the date of the passing of the resolution or of the conclusion of the

annual Shareholders’ Meeting of the Company held in 2020, whichever is earlier.

2. PROPOSAL TO GRANT AUTHORISATION TO THE BOARD OF

DIRECTORS TO ISSUE CONVERTIBLE AND/OR EXCHANGEABLE

SECURITIES

2.1 Introduction

Under this section, justification is provided for the proposal to grant authorisation to the

Board of Directors, with powers of substitution, to issue securities (including, in

particular, warrants, debentures and bonds) exchangeable for or giving the right to acquire

shares of the Company and/or convertible into or giving the right to subscribe new shares

of the Company, pursuant to the general provisions governing the issuance of debentures

and the provisions of Articles 286, 297 and 511 of the Companies Law, and Article 319

of the Mercantile Registry Regulations (Reglamento del Registro Mercantil), up to a

maximum nominal amount of 1,500,000,000 euros or the equivalent thereof in another

currency, provided that the aggregate share capital that may need to be increased on the

conversion or exchange of all such securities may not be higher than one-third of the share

capital as at the date of passing the resolution (such amount to be reduced by the amount

that the share capital has been increased under Resolution 11).


The Board of Directors deems it highly advisable to hold the powers allowed to be

delegated under the legislation in force in order to be in a position at all times to raise the

necessary funds on primary securities markets to adequately manage the corporate

interests.

The purpose of the delegation is to provide the Company’s managing body with the room

for manoeuvre and capacity to respond required by the competitive environment in which

the Company operates, in which the success of a strategic initiative or financial

transaction or the ability to raise funds often depends on the capacity to act quickly,

without the inevitable delays and costs entailed in calling and holding a shareholders’

meeting. Thus the Board of Directors of the Company will be authorised, where

necessary, to raise a significant volume of funds in a short period of time.

- 4 -

The issuance of securities convertible into and/or exchangeable for shares is a means of

raising corporate finance from outside funds. These securities, on the one hand, have the

advantage of offering investors the opportunity to convert the debt owed to them by the

Company into Company shares, obtaining a potentially higher return than that offered by

other debt instruments and, on the other hand, enable the Company to increase its equity.

These characteristics mean that the coupon of convertible and/or exchangeable

debentures is usually lower than the cost of simple debt securities and of bank debt, since

the debenture interest rates reflect the value of the option conferred on investors to convert

the debentures into Company shares.

With this in mind, in accordance with the provisions of the legislation in force, this

proposed resolution is submitted to the Shareholders’ Meeting for consideration. In the

case of warrants, it is specifically provided that the legal and contractual rules governing

convertible and/or exchangeable debentures will apply, to the extent that they are

compatible with their specific nature.

The proposal specifically confers on the Board of Directors the power to issue, on one or

more occasions, convertible and/or exchangeable securities (including debentures and

bonds) and warrants granting options to subscribe for new shares of the Company or to

acquire existing shares of the Company and to resolve, where appropriate, on the capital

increase necessary to carry out the conversion or to exercise the right to subscribe for

shares, provided that this capital increase does not exceed the unused limit authorised

from time to time by the Shareholders’ Meeting in accordance with the provisions of

Article 297.1.b) of the Companies Law.

The proposed resolution establishes the maximum nominal amounts for which

authorisation is requested at 1,500,000,000 euros (or the equivalent thereof in another

currency), on the understanding that the aggregate figure by which the share capital may

need to be increased on the conversion or exchange of all such securities may not be

higher than the limit stated above.

The proposed resolution to be submitted to the Shareholders’ Meeting for approval also

establishes the criteria for determining the basis for and terms and conditions applicable

to the conversion and/or exchange, although it entrusts the Board of Directors, in the event

the Board resolves to make use of the authorisation granted, with the establishment of

some of the basis for and terms and conditions of each issuance, within the limits and in

accordance with the criteria established by the Shareholders’ Meeting.

Therefore the Board of Directors will be responsible for determining the specific

conversion ratio and for such purpose it will issue, on approving an issue of convertible

and/or exchangeable securities delegated under the authorisation conferred by the

Shareholders’ Meeting, a report detailing the specific basis for and terms and conditions

of the conversion applicable to such issue, which will also be the subject of the correlative

report by the auditors referred to in Articles 414 and 511 of the Companies Law.

- 5 -

Specifically, the proposed resolution submitted for approval to the Shareholders’ Meeting

by the Board of Directors provides that, for the purposes of the conversion or exchange,

the securities issued under this authorisation will be valued at their nominal amount and

the shares at the fixed exchange ratio (determined or to be determined) or at a variable

ratio to be determined in the relevant Board resolution.

Accordingly, the Board of Directors deems that it is given a sufficient margin of flexibility

in order to set the value of the shares for the purposes of the conversion according to

market terms and other applicable considerations.

In the case of warrants to subscribe new shares, the rules governing convertible

debentures contained in the proposal will apply, to the extent that they are compatible

with their specific nature.

Furthermore, pursuant to Article 415.2 of the Companies Law, the resolution to delegate

to the Board of Directors the power to issue convertible securities provides that, for the

purposes of their conversion, the nominal value of the debentures may not be lower than

the par value of the shares, neither may convertible debentures be issued for an amount

less than their nominal value.

It is also provided that the securities issued under this delegation may be listed on the

appropriate secondary markets, whether Spanish or foreign, official or unofficial,

organised or otherwise.

It may be advisable on occasion to issue the securities under this authorisation through a

subsidiary with the guarantee of the Company. As a result, it is deemed to be of interest

that the Shareholders’ Meeting authorise the Board of Directors to guarantee, on behalf

of the Company and within the limits set forth above, issues of convertible and/or

exchangeable securities and/or warrants by subsidiaries during the effective period of the

resolution, in order to grant maximum flexibility to the Board of Directors to structure

security issues in the manner most appropriate, according to the circumstances.

All powers conferred on the Board of Directors if the resolution is adopted shall be

conferred with the express power of substitution, in order to further contribute to the

pursued aim of expediting transactions as much as possible.

3. PROPOSED AUTHORISATION TO THE BOARD OF DIRECTORS TO

EXCLUDE PRE-EMPTIVE RIGHTS IN CONNECTION WITH THE

CAPITAL INCREASES AND THE ISSUANCES OF CONVERTIBLE OR

EXCHANGEABLE SECURITIES

3.1 Introduction

Under this section and in accordance with the provisions of Articles 506 and 511 of the

Companies Law, a detailed explanation and justification is provided, for the purposes

required by the legislation in force, the proposed authorisation to the Board of Directors

- 6 -

of the Company, with the express power of substitution, to totally or partially exclude the

shareholders’ pre-emptive subscription right in connection with the capital increases and

the issuances of convertible or exchangeable securities that the Board of Directors may

approve under the authorisations given under Resolutions 11 and 12 (if passed), subject

to an aggregate maximum nominal amount of the ordinary shares so allotted and that may

be allotted on conversion or exchange of such securities of five per cent. of the aggregate

nominal amount of the Company’s issued ordinary share capital as at the date of passing

the resolution.

In any case, in accordance with the provisions of Articles 506 and 511 of the Companies

Law, should the Board of Directors decide to exclude the shareholders’ pre-emptive

subscription right in any or all issues of shares or convertible and/or exchangeable

securities it decides to make under the delegations, it must prepare, on adopting the

relevant issuance resolution, a report detailing the specific reasons in the corporate

interests that justify such measure and such other content as required by Articles 308 (for

the issuance of shares) and 417 (for issuance of convertible and/or exchangeable

securities) of the Companies Law, which will also be the subject of the correlative report

by an auditor appointed by the Mercantile Registry other than the Company’s auditor, as

referred to the Companies Law. These reports must be made available to shareholders

and communicated to the first Shareholders’ Meeting held following the issuance

resolution.

In addition, in the case of issues of shares excluding the pre-emption subscription right of

the shareholders, the issue price of the new shares (nominal value of the shares to be

issued plus any share premium) must match the fair value resulting from the auditors’

report.


The Board of Directors considers that this power to exclude pre-emptive rights,

supplemental to the power to issue shares and convertible and/or exchangeable securities,

is justified for various reasons.

First of all, the elimination of the pre-emptive rights usually allows for a relative reduction

in the costs associated with the transaction (including, in particular, the fees of the

financial institutions participating in the issue) compared to an issue including the pre-

emptive rights.

Secondly, by having the authority to eliminate the pre-emptive rights, the Board of

Directors is able to significantly shorten the response time often required by the current

financial markets, enabling the Company to take advantage of periods in which the market

conditions are most favourable.

Furthermore, the elimination of the pre-emptive rights has a less distortive effect on the

trading of the Company’s shares during the issue period, which tends to be shorter than

an issue with rights.

- 7 -

In conclusion, the globalization of financial markets and the speed and flexibility with

which operations take place on those markets make it necessary for the Board of Directors

to have flexible and suitable instruments in order to provide an appropriate response to

the needs, from time to time, of the corporate interest, and the above-mentioned

delegation to the Board of Directors of the power to exclude, as the case may be, the pre-

emptive right should form an integral part of this strategy.

4. PROPOSED RESOLUTIONS

Set out below is the wording of Resolutions 11, 12 and 13 proposed to the Shareholders’

Meeting in relation to items eleven, twelve and thirteen on the agenda.

11.- AUTHORISATION TO THE BOARD OF DIRECTORS, WITH THE EXPRESS POWER OF

SUBSTITUTION, TO INCREASE THE SHARE CAPITAL PURSUANT TO THE PROVISIONS

OF ARTICLE 297.1.B) OF THE COMPANIES LAW.

RESOLUTION 11

“To authorise the Board of Directors, to the fullest extent required under applicable law,

with express power of substitution, and in accordance with Article 297.1.b) of the

Companies Law (Ley de Sociedades de Capital), to increase the share capital of the

Company on one or more occasions and when required, through the issuance and

placement into circulation of new shares (with or without a premium) the consideration

for which shall be cash contributions, under the following terms:

1.- Term of the authorisation.- The capital increases subject to this authorisation may

be done within a term ending at next year’s annual Shareholders’ Meeting (or, if earlier,

fifteen months from the date of passing of this resolution).

2.- Maximum amount authorised.- The aggregate maximum amount of the issuance or

issuances of ordinary shares shall be one-third of the share capital as at the date of

passing this resolution (such amount to be reduced by the amount that the share capital

has been increased by and the maximum amount that the share capital may need to be

increased on the conversion or exchange of any securities issued under Resolution 12).

3.- Scope of the authorisation.- The Board of Directors may establish, as to all matters

not otherwise contemplated, the terms and conditions of the share capital increase and

may also freely offer the new shares that are not subscribed for within the period or

periods for the exercise of pre-emptive rights. The Board of Directors may also resolve

that, in the event of incomplete subscription, the share capital shall be increased only by

the amount of the subscriptions made and amend the article of the bylaws relating to

share capital and number of shares.

4.- Admission to listing.- The Company shall, when appropriate, apply for listing on

regulated markets, multilateral trading systems or other secondary markets, organised

or otherwise, official or unofficial, Spanish or foreign, of the shares issued under this

- 8 -

authorisation and the Board of Directors shall be authorised to carry out all acts and

formalities that may be required for admission to listing with the appropriate authorities

of the various Spanish or foreign securities markets.

5.- Power of delegation.- The Board of Directors is expressly authorised to delegate the

powers sub-delegated thereto under this resolution, as permitted by Article 249.bis l) of

the Companies Law.”


SUBSTITUTION, TO ISSUE SECURITIES (INCLUDING WARRANTS) CONVERTIBLE

INTO AND/OR EXCHANGEABLE FOR SHARES OF THE COMPANY. ESTABLISHMENT

OF THE CRITERIA FOR DETERMINING THE BASIS FOR AND TERMS AND CONDITIONS

APPLICABLE TO THE CONVERSION OR EXCHANGE. AUTHORISATION TO THE

BOARD OF DIRECTORS, WITH THE EXPRESS POWER OF SUBSTITUTION, TO

DEVELOP THE BASIS FOR AND TERMS AND CONDITIONS APPLICABLE TO THE

CONVERSION OR EXCHANGE OF SUCH SECURITIES, AS WELL AS TO INCREASE THE

SHARE CAPITAL BY THE REQUIRED AMOUNT ON THE CONVERSION.

RESOLUTION 12

“To authorise the Board of Directors, with the express power of substitution, pursuant to

the general provisions governing the issuance of debentures and the provisions of Articles

286, 297 and 511 of the Companies Law (Ley de Sociedades de Capital) and Article 319

of the Regulations of the Mercantile Registry (Reglamento del Registro Mercantil), to

issue securities under the following terms:

1.- Securities to be issued.- The securities contemplated in this authorisation may be

debentures, bonds and other debt securities that are exchangeable for shares of the

Company and/or convertible into shares of the Company, as well as warrants (options to

subscribe for new shares of the Company or to acquire existing shares of the Company).

2.- Term of the authorisation.- The securities subject to this authorisation may be issued

on one or more occasions and when required, within the term ending at next year’s

annual Shareholders’ Meeting (or, if earlier, fifteen months from the date of passing of

this resolution).

3.- Maximum amount authorised.- The maximum aggregate nominal amount of the

issuance or issuances of securities approved under this delegation shall be 1,500,000,000

euros or the equivalent thereof in another currency, provided that the aggregate share

capital that may need to be increased on the conversion or exchange of all such securities

may not be higher than one-third of the share capital as at the date of passing this

resolution (such amount to be reduced by the amount that the share capital has been

increased Resolution 11).

4.- Scope of authorisation.- This authorisation extends as broadly as is required under

law, to the establishment of the various terms and conditions of each issuance. By way of

- 9 -

example and not of limitation, the Board of Directors shall be authorised to do the

following with respect to each issuance: determine the amount thereof, always within the

aforementioned overall quantitative limit; the place of issuance (in Spain or abroad); the

domestic or foreign currency, and in the case of a foreign currency, its equivalence in

euros; the name or form of the securities, whether they be bonds or debentures, including

subordinated debentures, warrants (which may in turn be settled by means of the physical

delivery of the shares or, if applicable, through the payment of differences in price), or

any other name or form permitted by law; the date or dates of issuance; the number of

securities and the par value thereof, which, in the case of convertible and/or

exchangeable bonds or debentures, shall not be less than the par value of the shares; in

the case of warrants and similar securities, the issue price and/or premium, the exercise

price (which may be fixed or variable) and the procedure, period and other terms and

conditions applicable to the exercise of the right to subscribe for the underlying shares

or, if applicable, the exclusion of such right; the interest rate (whether fixed or variable),

and the dates and procedures for payment of the coupon; whether the issuance is

perpetual or subject to repayment and, in the latter case, the repayment period and the

maturity date or dates; guarantees, reimbursement rate, premiums and lots; the form of

representation, as securities or book entries; anti-dilution provisions; the rules

applicable to subscription; the rank of the securities and the subordination clauses, if

any; the law applicable to the issuance; the power to make application, where

appropriate, for the listing of the securities to be issued on Spanish or foreign, official or

unofficial, organised or other secondary markets, subject to the requirements established

by applicable regulations in each case; and, in general, any other terms of the issuance

as well as, if applicable, the appointment of the security-holders’ syndicate representative

(comisario) and the approval of the basic rules that are to govern the legal relationships

between the Company and the syndicate of holders of the securities to be issued, in the

event that such syndicate must or is decided to be created.

5.- Basis for and terms and conditions applicable to the conversion and/or exchange.-

In the case of issuance of convertible and/or exchangeable debentures or bonds, and for

purposes of determining the basis for and terms and conditions applicable to the

conversion and/or exchange, it is resolved to establish the following criteria:

a) The securities issued pursuant to this resolution shall be convertible into shares of

the Company and/or exchangeable into shares of the Company, in accordance with

a fixed or variable conversion and/or exchange ratio determined or to be determined,

with the Board of Directors being authorised to decide whether they are convertible

and/or exchangeable, as well as to determine whether they are mandatorily or

voluntarily convertible and/or exchangeable, and if voluntarily, at the option of the

holder thereof and/or of the Company, at the intervals and during the period

established in the resolution providing for the issuance.

b) In the event that the issuance is convertible and exchangeable, the Board may also

provide that the issuer reserves the right at any time to elect between conversion into

new shares or the exchange thereof for outstanding shares of the Company, with the

- 10 -

nature of the shares to be delivered being determined at the time of conversion or

exchange, and may also elect to deliver a combination of newly-issued shares and

existing shares of the Company and even to settle the difference in cash.

c) For purposes of the conversion and/or exchange, the securities shall be valued at the

nominal amount thereof (including, should it be the case, accrued and not paid

interests), and the shares at the fixed exchange ratio established in the resolution of

the Board of Directors whereby this authorisation is exercised, or at a variable ratio

to be determined on the date or dates specified in such resolution of the Board, based

on the listing price of the Company’s shares on the date(s) or during the period(s)

used as a reference in such resolution, at a premium or at a discount, provided,

however, that if a discount is established on the price per share, it shall not be greater

than twenty five per cent. of the value of the shares used as a reference value as set

forth above.

d) In no event may the value of the share for purposes of the ratio for conversion of

debentures into shares be less than the par value thereof. In addition, pursuant to the

provisions of Article 415 of the Companies Law, debentures may not be converted

into shares when the nominal value of the former is less than the par value of the

latter.

6.- Basis and terms and conditions for the exercise of warrants.- In the case of issuances

of warrants, to which the provisions of the Companies Law on convertible debentures

shall apply by analogy, the Board of Directors is authorised to determine, in the broadest

terms, in connection with the basis for and terms and conditions applicable to the exercise

of such warrants, the criteria applicable to the exercise of rights to subscribe for or of

rights to acquire shares of the Company arising from the securities of this kind issued

under the delegation granted hereby. The criteria set forth in section 5 above shall apply

to such issuances, with such adjustments as may be necessary in order to bring them into

compliance with the legal and financial rules governing these kinds of securities.

7.- Other powers delegated.- This authorisation to the Board of Directors also includes,

without limitation, the delegation thereto of the following powers:

a) The power to increase the share capital to the extent required to attend requests for

conversion and/or for exercise of the right to subscribe for new shares. These powers

may only be exercised so long as the capital increase the Board of Directors

approves for the issue of convertible securities or warrants does not exceed the

unused limit authorised in each moment by the Shareholders’ Meeting in accordance

with Article 297.1.b) of the Companies Law. This authorisation to increase the share

capital includes the authorisation to issue and float, on one or more occasions, the

shares representing such capital that are necessary to carry out the conversion

and/or to exercise the right to subscribe for new shares, as well as the power to

amend the article of the bylaws relating to the amount of the share capital and the

number of shares and, if appropriate, to cancel the portion of such capital increase

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that was not required for the conversion of shares and/or the exercise of the right to

subscribe for new shares.

b) The power to elaborate on and specify the basis for and terms and conditions

applicable to the conversion, exchange and/or exercise of the rights to subscribe for

and/or acquire shares arising from the securities to be issued, taking into account

the criteria set out in sections 5 and 6 above.

c) The delegation to the Board of Directors includes the broadest powers that may be

required by law in order to interpret, apply, implement and develop the resolutions

providing for the issuance of securities that are convertible into or exchangeable for

shares of the Company, on one or more occasions, and to carry out the

corresponding capital increase, as well as the power to correct and supplement such

resolutions as to all matters that may be necessary and to comply with all legal

requirements for the successful implementation thereof. To such end, the Board of

Directors may correct any omissions or defects in the aforementioned resolutions

that may be identified by any Spanish or foreign authorities, officers or bodies, and

may also adopt all such resolutions and execute all such public or private documents

as it may deem necessary or appropriate in order to adjust the preceding resolutions

for the issuance of convertible or exchangeable securities and the corresponding

capital increase to the oral or written assessment of the Commercial Registrar or, in

general, of any other Spanish or foreign competent authorities, officers or entities.

8.- Admission to trading.- The Company shall, where appropriate, apply for listing on

regulated markets, multilateral trading systems or other secondary markets, organised

or otherwise, official or unofficial, Spanish or foreign of the securities issued by the

Company under this delegation, and the Board of Directors is authorised, as fully as is

required by law, to conduct all acts and formalities that may be necessary for admission

to listing before the appropriate authorities of the various Spanish or foreign securities

markets.

9.- Guarantee of issues of convertible and/or exchangeable securities or warrants by

subsidiaries.- The Board of Directors is also authorised to guarantee on behalf of the

Company, within the limits set forth above, new issuances of convertible and/or

exchangeable securities or warrants by subsidiaries during the effective period of this

resolution.

10.- Power to delegate.- The Board of Directors is expressly authorised to sub-delegate

the powers delegated thereto under this resolution, as permitted by Article 249bis l) of

the Companies Law.”


SUBSTITUTION, TO EXCLUDE PRE-EMPTIVE RIGHTS IN CONNECTION WITH THE

CAPITAL INCREASES AND THE ISSUANCES OF CONVERTIBLE OR EXCHANGEABLE

SECURITIES THAT THE BOARD OF DIRECTORS MAY APPROVE UNDER THE

AUTHORITIES GIVEN UNDER RESOLUTIONS 11 AND 12.

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RESOLUTION 13

“To authorise the Board of Directors, with the express power of substitution, to totally

or partially exclude the pre-emptive right, as permitted by Article 506 and Article 511 of

the Companies Law (Ley de Sociedades de Capital) in connection with issuances of

shares or convertible or exchangeable securities that the Board of Directors may approve

under the authority given under Resolutions 11 and 12 above provided that the such

capital increases and issuances of convertible or exchangeable securities are subject to

an aggregate maximum nominal amount of the shares so allotted and that may be allotted

on conversion or exchange of such securities of five per cent. of the share capital as at

the date of passing this Resolution.

The Board of Directors is expressly authorised to sub-delegate the powers delegated

thereto under this resolution, as permitted by Article 249bis l) of the Companies Law.”

* * *

Madrid, May 9, 2019.

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