Shareholders are called to approve the re-election of Mr. Löscher as independent Director in item 4.6, however, due to his position as Chair of the Supervisory Board in Telefónica Deutschland AG and his aggregate time commitments, ECGS opposes his re-appointment. Therefore, due to the lack of independence on the Board (47%), we recommend that shareholders oppose the re-elections of proprietary and external Directors in items 4.1 and 4.4.

In item 5.1, a first scrip dividend is proposed in lieu of the second cash dividend against 2019 results, in order to help the Company preserve capital without hindering shareholder remuneration. A second scrip dividend is proposed in item 5.2 corresponding to the first dividend of FY 2020. We commend the Company for taking measures to avoid liquidity and financial risks amid COVID-19 and we recommend that shareholders support both resolutions.

In item 6, the Board asks for a 5-year authorisation to increase the share capital by up to 50% of the issued shares, with the power to exclude pre-emptive rights up to 20%, surpassing ECGS'limit of 10%. Furthermore, we consider that the term of authorisation, albeit in line with Spanish regulations, is too long. Hence, we recommend that shareholders oppose this resolution.

In item 7, Telefónica asks for the authorisation to issue fixed-income securities and other debt instruments convertible into Company shares, including non-voting shares, potentially undermining the principle of shareholder equality. The issue is capped at €25 billion, and the maximum amount of shares that may be issued without pre-emptive rights is 20%, exceeding ECGS' voting policy limit of 10%. Hence, we recommend opposition.

Shareholders are called to an advisory vote on the 2019 Director's Remuneration Report in item 9. We consider non-executive remuneration to be high. Furthermore, the executive Chairman's and the CEO's base salaries are excessive, and consequently, their variable remuneration (based on them). Likewise, the pension contributions, largely exceed ECGS'limits. Therefore, we recommend that shareholders oppose.