EUR 508.94 For Business Accounts Only

Proxy Report - 10/04/2018

In item 4, the Board asks the authorization to increase the share capital and in item 5 to issue convertible bonds and other securities convertible into shares. The aggregate authorization to increase the share capital may not exceed 50% of the existing share capital, with the authority to exclude pre-emptive rights in connection with up to a maximum of 20% of the issued share capital. The proposals exceed the ECGS guidelines limit of 10% for general capital increases without pre-emptive rights. Although we understand the flexibility required by the Board, we consider that the proposed amount risks to excessively dilute existing shareholders' rights. In our opinion, a lower authorization on general increases would be more adequate, submitting to the shareholders' approval any significant increases that might be required by specific corporate needs. Hence, we recommend opposition.

In item 9, shareholders are called to an advisory vote on the Annual Remuneration Report. The overall variable remuneration amounts are reasonable (€ 500'000 the executives' base salary and aggregate variable remuneration capped at € 300'000), but
it is due to the fact that Bankia received financial support from the State and it is still indirectly held by the Government. Although the annual bonus represents 83% of the aggregate variable remuneration (€ 250'000 on € 300'000), the overall structure of
variable remuneration components is adequate to align the interests of executives and shareholders in the long term: the payment of 50% of the bonus is deferred of 3 years, and 50% is deferred of additional 2 years, subject to malus conditions. However, we nstrongly regret that the metrics used to calculate the annual bonus are only partially disclosed ex-post (performance conditions for 2018 are not disclosed and the Bank disclosed only 70% of criteria used in 2017). Therefore, we recommend opposition.