TELEFÓNICA, S.A. General Secretary and Secretary to the Board of Directors
TELEFÓNICA, S.A.TELEFÓNICA S.A., as provided in article 228 of the Spanish Stock Market Act (Ley del Mercado de Valores), hereby reports the following
In relation to the Significant Event filed on September 30, 2015 (under registration number 229120), Telefónica, S.A. informs that the Executive Commission, at its meeting held today, has agreed the implementation of a capital increase related to the shareholder compensation by means of a scrip dividend ('Telefónica's flexible dividend'), approved by the Annual General Shareholders´ Meeting, held on June 12, 2015 under section VI of its agenda.
It is hereby enclosed the Informative Document referred to the capital increase with charge to unrestricted reserves. This document has been prepared in accordance with the provision of section 26.1.e) of Royal Decree 1310/2005 of 4 November.
Madrid, November 13, 2015.
Gran Vía, 28 - 9ª Planta - 28013 Madrid
November 13, 2015
THIS DOCUMENT HAS BEEN PREPARED IN ACCORDANCE WITH THE PROVISION OF SECTION 26.1.E) OF ROYAL DECREE 1310/2005.
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PURPOSE
The shareholders at the Ordinary Annual Shareholders' Meeting of Telefónica, S.A. ('Telefónica' or the 'Company') held on June 12, 2015 resolved, under item VI of the agenda, to increase the share capital of Telefónica with a charge to the reserves contemplated in Section 303.1 of the Companies Act (Ley de Sociedades de Capital) by a determinable amount according to the terms of the resolution, and to delegate the power to implement such increase to the Board of Directors, with express authority to, in turn, delegate such power to the Executive Commission, pursuant to Section 297.1.a) of the Companies Act.
This informational document is issued for purposes of the provision of Section 26.1.e) of Royal Decree 1310/2005 of November 4, pursuant to which it shall not be necessary to prepare and publish a prospectus in connection with the issuance and admission to listing of the shares issued by way of implementation of a capital increase made by means of a scrip dividend' provided a document is available that sets forth information regarding the number and the nature of the shares, and the reasons for and details of the offer'.
The Telefónica's Registration Document verified by the Spanish Regulator ('Comisión Nacional del Mercado de Valores') on October 22, 2015 is available on the Company's website.
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REASONS FOR THE CAPITAL INCREASE
The Company has been compensating its shareholders in recent years through the payment of cash dividends, repurchases of shares and, for the first time, in May 2012, by means of a scrip dividend.
The Company wishes to again offer its shareholders, the alternative of the scrip dividend, also named ' Telefónica Flexible Dividend ', a form of shareholder compensation that allows them to receive paid-up shares of the Company as an alternative, without in any way limiting their ability to receive all of their compensation in cash if they so desire.
To such end, under the above-mentioned capital increase by means of a scrip dividend, each shareholder will receive one free allotment right for each Telefónica share such shareholder holds. Such free allotment rights may be traded and may be transferred on the Continuous Market in Spain during a period of fifteen calendar days, upon the expiration of which such rights will be automatically converted into newly issued shares.
Under this compensation system, each shareholder may choose from among the following options1:
Not to transfer his free allotment rights and receive the new shares. In this case, new shares corresponding to the number of rights held by him at the end of the trading period will be allocated free of charge to the shareholder. The allocation of shares is not subject to withholding tax.
To transfer all or part of the shareholder's free allotment rights to Telefónica under the irrevocable Undertaking to purchase free allotment rights assumed by the Company at a fixed price, which entails electing to receive the compensation in cash.
This option is granted only to shareholders who have status as such on the date on which the free allotment rights are allotted (which is expected to be at 11:59 p.m., Madrid time, on November 17, 2015 in accordance with the schedule included in section 3.3 below) and only in respect of such free allotment rights as they receive at that time. The cash option may therefore not be requested for the free allotment rights acquired on the market.
This option will have the same tax treatment as a dividend, and the amount to be received by the shareholders will therefore be subject to withholding.
To transfer all or part of their free allotment rights on the market. Since the rights may be traded in Spain, shareholders may decide to sell them on the market during the trading period specified in section 3.4 below at their listing price at the time and not at the guaranteed price offered by Telefónica. The amount from the sale of the rights on the market is not subject to withholding.
- DETAILS OF THE OFFER
Shareholders may also combine the foregoing options according to their needs or preferences.
Shareholders who do not give notice of their decision will receive the number of new shares to which they are entitled.
The Executive Commission of the Board of Directors, at its meeting of November 13, 2015, resolved to carry out the capital increase by means of a scrip dividend on the terms approved by the shareholders at the Annual Shareholders' Meeting held on June 12, 2015, under item VI of the agenda for such meeting.
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The options available to holders of Telefónica shares which are admitted to trading outside Spain (including those
traded in the form of ADSs) may have certain differences with respect to those described herein due to the characteristics of each market and to the terms and conditions applicable to the programs in which such holders participate.
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