FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

Telefónica, S.A.

(Translation of registrant’s name into English)

Gran Vía, 28
28013 Madrid, Spain
3491-459-3050
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F þ                    Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes o                         No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes o                         No þ

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes o                         No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 

 

Telefónica, S.A.

TABLE OF CONTENTS

		Sequential
		Page
Item		Number
1. Annual Report on Corporate Governance – Financial year 2008			1

ANNUAL REPORT ON CORPORATE GOVERNANCE

LISTED COMPANIES

ISSUER’S IDENTIFICATION DETAILS
DATE OF FINANCIAL YEAR ENDED 31/12/08

TAX ID CODE:
A28015865

Company Name: TELEFÓNICA, S.A.

MODEL OF ANNUAL CORPORATE GOVERNANCE REPORT FOR LISTED COMPANIES

For a full understanding of this model and the subsequent drafting of the report, please read the instructions for its completion provided at the end of this report.

A

SHAREHOLDING STRUCTURE

A.1

Fill in the following table regarding the company’s share capital:

Date of latest

Number of voting

change

Share capital (€)

No. of shares

rights

07/18/08

4,704,996,485.00

4,704,996,485

4,704,996,485

Please state whether there are different classes of shares, with different associated rights:

No

A.2

Please list the direct and indirect holders of significant shareholdings in your organization at financial year end, excluding members of its Board of Directors:

Name or company

Number of direct

Number of indirect voting

% of total voting

name of shareholder

voting rights

rights (*)

rights

Banco Bilbao Vizcaya Argentaria, S.A.

243,243,144

20,728

5.170

Caja de Ahorros y Pensiones de Barcelona, “la Caixa”

160,312

235,720,481

5.013

		Through: name or
Name or company name		company name of		Number of direct				% of total voting
of indirect shareholder		direct shareholder		voting rights				rights
Banco Bilbao Vizcaya Argentaria, S.A.		BBVA Seguros, S.A. de Seguros y Reaseguros			20,728				0.000
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Criteria CaixaCorp, S.A.			235,720,481				5.010

Please state the most significant movements in the shareholding structure during the financial year:

A.3

Please fill in the following tables regarding members of the Board of Directors of the company who hold voting rights on company shares:

Name or company		Number of direct voting				Number of indirect voting				% of total voting
name of director		rights				rights (*)				rights
César Alierta Izuel			3,837,003				78,000				0.083
Isidro Fainé Casas			311,966				0				0.007
Vitalino Manuel Nafría Aznar			11,300				0				0.000
Julio Linares López			185,922				1,840				0.004
Alfonso Ferrari Herrero			569,563				20,800				0.013
Antonio Massanell Lavilla			2,274				0				0.000
Carlos Colomer Casellas			564				63,190				0.001
David Arculus			10,500				0				0.000
Francisco Javier de Paz Mancho			1,000				0				0.000
Gonzalo Hinojosa Fernández de Angulo			85,476				436,000				0.011
José Fernando de Almansa Moreno-Barreda			19,349				0				0.000
José María Abril Pérez			300				18,402				0.000
José María Álvarez-Pallete López			134,481				1,036				0.003
Luiz Fernando Furlán			100				0				0.000
María Eva Castillo Sanz			58,450				0				0.001
Pablo Isla Álvarez de Tejera			8,601				0				0.000
Peter Erskine			69,259				0				0.001

		Through: Name or		Number of
Name or company name of		company name of direct		direct voting				% of total voting
indirect shareholder		shareholder		rights				rights
César Alierta Izuel		Grupo Arce de Inversiones, S.A. SICAV			78,000				0.002
Julio Linares López		Judbem de Inversiones, S.A. SICAV			1,700				0.000
Julio Linares López		María Jesús Romaña Pescador			140				0.000
Gonzalo Hinojosa Fernández de Angulo		Eletres, S.L.			436,000				0.009
Carlos Colomer Casellas		Ahorro Bursátil, S.A. SICAV			49,920				0.001
José María Álvarez-Pallete López		Alvaro Álvarez-Pallete Samaniego			302				0.000
Carlos Colomer Casellas		Inversiones Mobiliarias Urquiola S.A. SICAV			13,270				0.000
Alfonso Ferrari Herrero		Inversiones Singladura, S.A. SICAV			20,800				0.000
José María Álvarez-Pallete López		José María Álvarez-Pallete Samaniego			432				0.000
José María Abril Pérez		María Teresa Arandia Urigüen			18,402				0.000
José María Álvarez-Pallete López		Purificación Samaniego Linares			302				0.000

Total % of voting rights held by the Board of Directors			0.126

Please fill in the following tables regarding members of the Board of Directors of the company holding company share options:

Name or
company														% of total
name of		Number of direct				Number of indirect				Equivalent number of				voting
director		share option rights				share option rights				shares				rights
César Alierta Izuel			394,240				0				394,240				0.008
César Alierta Izuel 2			10,200,000				0				0				0.217
Julio Linares López			224,375				0				224,375				0.005
Alfonso Ferrari Herrero			485,000				0				0				0.010
José María Álvarez-Pallete López			183,202				0				183,202				0.004

	A.4		Where applicable, please state any family, commercial, contractual or corporate relationships between owners of significant shareholdings, as far as the Company is aware, unless of little relevance or ensuing from ordinary trading or exchange:
	A.5		Where applicable, please state any commercial, contractual or corporate relationships between owners of significant shareholdings and the company and/or its group, unless of little relevance or ensuing from ordinary trading or exchange:

Name or company name of
related party		Type of relationship		Brief description
Banco Bilbao Vizcaya Argentaria, S.A.		Corporate		Joint shareholding with Telefónica Móviles España, S.A.U. in Mobipay España, S.A.
				Joint shareholding with Telefónica, S.A. in Mobipay Internacional, S.A.

A.6

Please indicate any shareholders’ agreements reported to the company subject to article 112 of the Securities Market Law. Please provide a brief description of the agreement and list the shareholders involved:

No

Please indicate any concerted actions among company shareholders of which the company is aware. If any, please provide a brief description:

No

Please state explicitly any change in or break-up of said concerted actions or agreements that has taken place during the financial year:

A.7

Please state whether there is any person or organization that exercises or may exercise control over the company pursuant to Article 4 of the Securities Market Law. If so, please specify:

No

A.8

Please fill in the following tables regarding the company’s treasury stock:

At financial year end:

Number of shares held		Number of shares held indirectly
directly		(*)				Total % of share capital
125,561,011			0				2.669

Total:			0

Please list any significant variations that may have occurred during the financial year, in accordance with Royal Decree 1362/2007:

		Total number of
Date of		direct shares				Total number of indirect
notification		acquired				shares acquired				Total % of share capital
03/17/08			48,842,100				0				1.016
07/17/08			48,824,503				0				1.014
11/03/08			49,626,522				0				1.057

Gain / (Loss) from sale of treasury stock during the period (thousands €)			83

	A.9.		Please detail the conditions and effective term of any authorization(s) conferred by the General Shareholder’s Meeting to the Board of Directors to purchase and/or transfer treasury stock.
			The Ordinary General Shareholders’ Meeting of Telefónica, at its session held on 22 April 2008 solved to renew the authorization granted by the GSM of 21 June 2006, for the derivative acquisition of treasury stock, either directly or through Group companies, in the terms literally transcribed below:
			“To authorize, as set forth in Articles 75 and following, and in the additional provision one, section 2, of the current Spanish Companies Law (LSA for its acronym in Spanish), the acquisition, at any moment and as many times as considered necessary by Telefónica, S.A. — either directly or through any of the subsidiary companies of which it is the controlling company — of fully paid treasury stock, through a purchase-sale transaction or for any other legal valuable consideration.
			The minimum acquisition price or compensation will be equivalent to the nominal value of the treasury stock acquired and the maximum acquisition price or compensation will be equal to the market value of the treasury stock on an official secondary market at the time of the acquisition.

			Said authorization is granted for a period of 18 months, as from the date of the current Annual General Shareholders’ Meeting, and is expressly subject to the limitation that, at any time, the nominal value of the treasury stock acquired under this authorization, added to that already held by Telefónica, S.A. and any of the controlled subsidiary companies, may exceed 5 percent of the share capital at the time of the acquisition, respecting the limitations set for the acquisition of treasury stock as imposed by the regulatory authorities of the markets on which Telefónica, S.A. shares are listed.
			It is expressly noted that the authorization granted for the acquisition of treasury stock can be used wholly or partially for the acquisition of shares of Telefónica, S.A. which the Company must deliver or transfer to its directors or employees, or to those of the companies in its Group, directly or as a consequence of them having exercised their option rights, within the framework of the remuneration systems linked to the market value of the company shares, duly approved.
			To empower the Board of Directors, in the broadest possible terms, to exercise the authorization derived from this resolution and to execute the remaining items included herein, enabling the Board of Directors to delegate in the Executive Committee, the Executive Chairman of the Board or any other person expressly empowered by the Board to this effect.
			The unexecuted part of the resolution adopted by the Company’s Ordinary General Shareholders’ Meeting of May 10, 2007, in relation to point V of the Agenda of this same Meeting, shall remain null and void.”
	A.10		Please indicate any restrictions under law or the company bylaws regarding the exercise of voting rights and any legal restrictions regarding the acquisition and/or transfer of company stock.
			Indicate any legal restrictions on exercising voting rights:

No

Maximum percentage of voting rights a shareholder may exercise by legal restriction			0

Please state whether they are any restrictions in the company bylaws with regard to the exercise of voting rights:

Yes

Maximum percentage of voting rights a shareholder may exercise, according to restrictions established in the Company’s bylaws.			10.000

Description of legal and company bylaws’ restrictions regarding the exercise of voting rights

In accordance with Article 21 of the Company By-Laws, no shareholder may cast a number of votes in excess of 10 percent of the total voting capital existing at any time, regardless of the number of shares held by such shareholder. In determining the maximum number of votes that each shareholder may cast, only the shares held by each such shareholder shall be computed, and those held by other shareholders that have granted their proxy to the first-mentioned shareholder shall not be computed, without prejudice to the application of the aforementioned limit of 10 percent to each of the shareholders that have granted a proxy.

The limitation established in the preceding paragraphs shall also apply to the maximum number of votes that may be collectively or individually cast by two or more shareholder companies belonging to the same group of entities, as well as to the maximum number of votes that may be cast by an individual or corporate shareholder and the entity or entities that are shareholders themselves and which are directly or indirectly controlled by such individual or corporate shareholder.

Please state whether there are any legal restrictions regarding the acquisition or transfer of company stock:

No

A.11

Please state whether the General Shareholders’ Meeting has agreed to adopt measures to neutralize a public purchase offer by virtue of Law 6/2007.

No

If so, please explain the measures approved and the terms of inefficiency of the restrictions:

B

STRUCTURE OF CORPORATE ADMINISTRATION

B.1

Board of Directors

B.1.1

Detail the maximum and minimum number of directorships established under the bylaws

Maximum number of directors			20
Minimum number of directors			5

B.1.2

Complete the following table with the Board members:

Name or
company name		Represented		Position on the		Date of first		Date of last		Election
of director		by		Board		appointment		appointment		procedure
César Alierta Izuel		—		Chairman		01/29/97		05/10/07		Vote at General Shareholders’ Meeting
Isidro Fainé Casas		—		Vice Chairman		01/26/94		06/21/06		Vote at General Shareholders’ Meeting
Vitalino Manuel Nafría Aznar		—		Vice Chairman		12/21/05		06/21/06		Vote at General Shareholders’ Meeting
Julio Linares López		—		Chief Operating Officer		12/21/05		06/21/06		Vote at General Shareholders’ Meeting
Alfonso Ferrari Herrero		—		Director		03/28/01		06/21/06		Vote at General Shareholders’ Meeting
Antonio Massanell Lavilla		—		Director		04/21/95		06/21/06		Vote at General Shareholders’ Meeting
Carlos Colomer Casellas		—		Director		03/28/01		06/21/06		Vote at General Shareholders’ Meeting
David Arculus		—		Director		01/25/06		06/21/06		Vote at General Shareholders’ Meeting
Francisco Javier de Paz Mancho		—		Director		12/19/07		04/22/08		Vote at General Shareholders’ Meeting
Gonzalo Hinojosa Fernández de Angulo		—		Director		04/12/02		05/10/07		Vote at General Shareholders’ Meeting
José Fernando de Almansa Moreno-Barreda		—		Director		02/26/03		04/22/08		Vote at General Shareholders’ Meeting
José María Abril Pérez		—		Director		07/25/07		04/22/08		Vote at General Shareholders’ Meeting
José María Álvarez-Pallete López		—		Director		07/26/06		05/10/07		Vote at General Shareholders’ Meeting
Luiz Fernando Furlán		—		Director		01/23/08		04/22/08		Vote at General Shareholders’ Meeting
María Eva Castillo Sanz				Director		01/23/08		04/22/08		Vote at General Shareholders’ Meeting
Pablo Isla Álvarez de Tejera		—		Director		04/12/02		05/10/07		Vote at General Shareholders’ Meeting
Peter Erskine		—		Director		01/25/06		06/21/06		Vote at General Shareholders’ Meeting

Total Number of Directors			17

Please indicate any members who have left the Board during this period:

Name or company name of		Type of directorship at time of		Date of
director		leaving		leaving
Manuel Pizarro Moreno		Independent		01/23/08
Antonio Viana-Baptista		Executive		01/23/08

B.1.3

Fill in the following tables regarding the Board members and their different directorships:

EXECUTIVE DIRECTORS

Name or company name of		Committee proposing		Post held in the
director		appointment		company
César Alierta Izuel		Nominating, Compensation and Corporate Governance Committee		Executive Chairman
Julio Linares López		Nominating, Compensation and Corporate Governance Committee		Chief Operating Officer (COO)
José María Álvarez-Pallete López		Nominating, Compensation and Corporate Governance Committee		General Manager of Telefónica Latinoamérica

Total number of executive directors			3
% of total number of members of Board			17.647

EXTERNAL PROPRIETARY DIRECTORS

				Name or company
				name of significant
				shareholder
				represented or who
Name or company name of		Committee proposing		proposed the
director		appointment		appointment
Isidro Fainé Casas		Nominating, Compensation and Corporate Governance Committee		Caja de Ahorros y Pensiones de Barcelona, la Caixa
Vitalino Manuel Nafría Aznar		Nominating, Compensation and Corporate Governance Committee		Banco Bilbao Vizcaya Argentaria, S.A.
Antonio Massanell Lavilla		Nominating, Compensation and Corporate Governance Committee		Caja de Ahorros y Pensiones de Barcelona, la Caixa
José María Abril Pérez		Nominating, Compensation and Corporate Governance Committee		Banco Bilbao Vizcaya Argentaria, S.A.

Total number of proprietary directors			4
% of the Board			23.529

EXTERNAL INDEPENDENT DIRECTORS

Name or company name of director		Profile
Alfonso Ferrari Herrero		Industrial Engineer. Formerly Executive Chairman of Beta Capital, S.A. and senior manager at Banco Urquijo.
Carlos Colomer Casellas		Economics Degree. Chairman of the Colomer Group.
David Arculus		Engineering and Economics Degree. Director of Telefónica Europe, Plc. and Pearson, Plc. Chairman of the Royal Institution of Great Britain.
Francisco Javier de Paz Mancho		Information and Advertising Degree. Law Studies. IESE Business Management Program. Formerly Chairman of the State-owned company MERCASA.
Gonzalo Hinojosa Fernández de Angulo		Industrial Engineer. Formerly Chairman and CEO of Cortefiel Group.
Luiz Fernando Furlán		Degrees in Chemical Engineering and Business Administration, specializing in Financial Administration. From 2003 to 2007 he was Minister of Development, Industry and Foreign Trade of Brazil.
María Eva Castillo Sanz		Degrees in Business, Economics and Law. Head of Merrill Lynch’s Global Wealth Management business operations in Europe, the Middle East, & Africa.
Pablo Isla Álvarez de Tejera		Law Degree. Member of the Body of State Lawyers (on leave of absence). First Vice Chairman and CEO of Inditex, S.A.

Total number of independent directors			8
% of the Board			47.059

OTHER EXTERNAL DIRECTORS

Name or company name of director		Committee proposing appointment
José Fernando de Almansa Moreno-Barreda		Nominating, Compensation and Corporate Governance Committee
Peter Erskine		Nominating, Compensation and Corporate Governance Committee

Total number of other external directors			2
% of the Board			11.765

List the reasons why they cannot be considered proprietary or independent and their relationship with the company, Board members or shareholders:

				Company, director or
Name or company				shareholder with whom
name of director		Reasons		relationship is held
Peter Erskine		On 31 December 2007, Peter Erskine relinquished his executive functions in the Telefónica Group. Therefore his classification has been changed from Executive Director to Other External Director.		Telefónica, S.A.
José Fernando de Almansa Moreno-Barreda		Mr. de Almansa was appointed a Member of the Board of Directors of Telefónica, S.A. with the qualification of independent Director, on 26 February 2003, following a favorable report from the Nominating, Compensation and Corporate Governance Committee.		Alternate Director of BBVA Bancomer México, S.A. de C.V.
		In accordance with the criteria established in the Unified Code on Good Governance with regard to the qualification of Directors and taking into account the concurrent circumstances in this specific case, the Company considers that Mr. Almansa belongs to the category of Other External Directors, for the following reasons:
		•    He is an Alternate Director (independent and non-proprietary) of BBVA Bancomer México, S.A. de C.V., and has never held an executive role.
		•    Until March 2008, he was the CEO of the Mexican company Servicios Externos de Apoyo Empresarial, S.A. de C.V., of Group BBVA.

Please indicate any variations that have occurred in the type of directorship held by each director during the period:

Name or company name of director		Date of change		Previous type		Current type
Peter Erskine		12/31/07		Executive		Other External

	B.1.4		Please explain, if applicable, the reasons why proprietary directors have been appointed at the request of shareholders whose stake is less than 5% of the share capital:
			Please indicate whether any formal requests for inclusion in the Board from other shareholders with a stake the same or larger than the others at whose requests proprietary directors have been appointed, have been dismissed. If so, please explain the reasons why the requests have been dismissed:

No

B.1.5

Please indicate whether any director has left his/her position on the board before the end of his/her mandate, whether he/she explained their reasons to the Board, and by which means, and in the case that the explanation was provided in writing to all the Board, please explain below, at least the reasons given by the director:

Yes

Name of director		Reason for leaving
Antonio Viana-Baptista		Handed in voluntary resignation verbally to the Chairman of the Board of Directors, citing personal reasons. The rest of the Board was duly notified at the meeting held on 23 January, 2008.
Manuel Pizarro Moreno		Handed in voluntary resignation verbally to the Chairman of the Board of Directors, citing personal reasons. The rest of the Board was duly notified at the meeting held on 23 January, 2008.

B.1.6

Indicate, if applicable, any powers delegated to the Managing Director(s):

	•		César Alierta Izuel — Executive Chairman (Chief Executive Officer):
			The Chairman of the Company, as the Chief Executive Officer, has been expressly delegated all the powers of the Board of Directors, except those that cannot be delegated by Law, by the Company By-Laws, or by the Regulations of the Board of Directors which establishes, in Article 5.4, the competencies that the Board of Directors reserves itself, and may not delegate. Article 5.4 specifically stipulates that the Board of Directors reserves the power to approve: (i) the general policies and strategies of the Company; (ii) the evaluation of the Board, its Committees and its Chairman; (iii) the appointment of senior executive officers, as well as the compensation policy for Directors and senior executive officers; and (iv) strategic investments.
	•		Julio Linares López — Chief Operating Officer:
			The Chief Operating Officer has been delegated those powers of the Board of Directors related with the management of the business and the performance of the highest executive functions over all the Company’s business areas, except those which cannot be delegated by Law, by the Company By-Laws or by the Regulations of the Board of Directors.

B.1.7

Identify any board members holding senior management or directorships in other companies belonging to the listed company’s group:

Name or company name of director		Corporate name of the group company		Position
Julio Linares López		Telefónica de España, S.A.U.		Director
		Telefónica Europe, Plc.		Director
		Telefónica Móviles España, S.A.U.		Director
		Compañía de Telecomunicaciones de Chile, S.A.		Acting Director
Alfonso Ferrari Herrero		Telefónica del Perú, S.A.A.		Director
		Telefónica Internacional, S.A.U.		Director
		Telefónica Móviles Chile, S.A.		Director
David Arculus		Telefónica Europe, Plc.		Director
Francisco Javier de Paz Mancho		Atento Holding, Inversiones y Teleservicios, S.A.		Non-executive Chairman
		Telecomunicaçoes de Sao Paulo, S.A.		Director
		Telefónica de Argentina, S.A.		Director
		Telefónica Internacional, S.A.U.		Director
José Fernando de Almansa Moreno-Barreda		Telecomunicaçoes de Sao Paulo, S.A.		Director
		Telefónica de Argentina, S.A.		Director
		Telefónica del Perú, S.A.A.		Director
		Telefónica Internacional, S.A.U.		Director
		Telefónica Móviles México, S.A. de C.V.		Director
José María Álvarez-Pallete López		Brasilcel, N.V.		Chairman of Supervisory Board
		Colombia Telecomunicaciones, S.A. ESP		Director
		Compañía de Telecomunicaciones de Chile, S.A.		Acting Director
		Telecomunicaçoes de Sao Paulo, S.A.		Director/Vice Chairman
		Telefónica DataCorp, S.A.U.		Director
		Telefónica de Argentina, S.A.		Acting Director
		Telefónica del Perú, S.A.A.		Director
		Telefónica Internacional Chile, S.A.		Director
		Telefónica Internacional, S.A.U.		Executive Chairman
		Telefónica Larga Distancia de Puerto Rico, Inc.		Director
		Telefónica Móviles Chile, S.A.		Acting Director
		Telefónica Móviles Colombia, S.A.		Acting Director
		Telefónica Móviles México, S.A. de C.V.		Director/Vice Chairman
		Telefónica USA, Inc.		Director
Luiz Fernando Furlán		Telecomunicaçoes de Sao Paulo, S.A.		Director
Peter Erskine		Telefónica Europe, Plc.		Director

B.1.8

List any company board members who are also members of the board(s) of directors in other companies listed on official securities markets in Spain, other than your own group, that have been reported to the company:

Name or company name of director		Company name of listed company		Position
Isidro Fainé Casas		Criteria CaixaCorp, S.A.		Director
		Abertis Infraestructuras, S.A.		Chairman
		Repsol YPF, S.A.		2nd Vice Chairman
Carlos Colomer Casellas		Indo Internacional, S.A.		Director
		Inversiones Mobiliarias Urquiola S.A. SICAV		Chairman
		Ahorro Bursátil, S.A. SICAV		Chairman
Gonzalo Hinojosa Fernández de Angulo		Dinamia Capital Privado, S.A., SCR		Director
Pablo Isla Alvarez de Tejera		Inditex, S.A.		Vice Chairman-Chief Executive Officer

B.1.9

Please indicate whether, and if so, explain, the company has established rules regarding the number of Boards its directors can belong to:

Yes

Explanation of rules

The Nominating, Compensation and Corporate Governance Committee establishes as one of the obligations of the Directors (Article 29 of the Regulations of the Board of Directors) that Directors must devote the time and efforts required to perform their duties and, to such end, shall report to the Nominating, Compensation and Corporate Governance Committee on their other professional obligations if they might interfere with the performance of their duties as Directors

In addition (Article 32.g of the Regulations of the Board of Directors), the Board of Directors, at the proposal of the Nominating, Compensation and Corporate Governance Committee, may forbid Directors from holding significant positions within entities that are competitors of the Company or of any of the companies in its Group.

B.1.10

In accordance with recommendation number 8 of the Unified Code, please indicate the general policies and strategies of the company which must be approved by the Board in full:

The investment and financing policy		Yes
The definition of the structure of the group of companies		Yes
The corporate governance policy		Yes
The corporate social responsibility policy		Yes
The strategic or business Plan, as well as the management aims and annual budgets		Yes
The remuneration policy and performance assessment of senior management		Yes
The policy of risk management and control, as well as the periodic monitoring of the internal information and control systems		Yes
Policy on dividends, treasury and, specifically, on the limits to apply.		Yes

B.1.11

Please fill in the following tables regarding the accrued aggregate remuneration of Directors during the financial year:

a)

In the company subject of this report:

Remuneration item		Thousand euros
Fixed remuneration			8,298
Variable remuneration			6,409
Attendance fees			215
Token Payments			0
Stock options and/or other financial instruments			0
Other			1,602
TOTAL:			16,524

Other Benefits		Thousand euros
Advances			0
Loans granted			0
Pension Plans and Funds: Contributions			18
Pension Plans and Funds: Commitments			0
Life Insurance premiums			59
Guarantees constituted by the company in favor of directors			0

b)

For belonging to other Boards of Directors and/or senior management of group companies:

Remuneration item		Thousand euros
Fixed remuneration			2,678
Variable remuneration			1,477
Attendance fees			0
Token Payments			0
Stock options and/or other financial instruments			0
Other			353
TOTAL			4,508

Other Benefits		Thousand euros
Advances			0
Loans granted			0
Pension Plans and Funds: Contributions			7
Pension Plans and Funds: Commitments			0
Life Insurance premiums			12
Guarantees constituted by the company in favor of directors			0

c)

Total remuneration by type of directorship:

Type of director		By company				By group
Executive			12,698				3,264
External Proprietary			1,201				0
External Independent			2,128				760
Other external			497				484
Total			16,524				4,508

d)

With regard to the profit attributed to the controlling company:

Total directors’ remuneration (thousand euros)			21,032
Total directors’ remuneration/benefits attributed to the controlling company (in %)			0.3

B.1.12

Please identify the members of senior management who are not also executive directors and indicate total remuneration accruing to them during the year:

Name or company name		Position
Santiago Fernández Valbuena		General Manager of Finance and Corporate Development
Luis Abril Pérez		Technical General Secretary to the Chairman
Ramiro Sánchez de Lerín García-Ovies		General Legal Secretary and of the Board of Directors
Calixto Ríos Pérez		Internal Auditing Manager
Guillermo Ansaldo Lutz		General Manager Telefónica España
Matthew Key		General Manager Telefónica España

Total remuneration of senior management (thousand euros)			14,135

B.1.13

Identify in aggregate terms any guarantees or “golden parachute” clauses in case of dismissal or changes in control benefiting senior managers (including executive directors) of the company or its group. Indicate whether these contracts must be reported to and/or approved by the governing bodies of the company or its group:

Number of beneficiaries			9

						General Shareholders’
		Board of Directors				Meeting
Body authorizing the clauses		Yes				No

Is the General Shareholders’ Meeting informed of these clauses?		Yes

B.1.14

Indicate the process for establishing board members’ remuneration and any relevant clauses in the Bylaws.

Process for establishing board members’ remuneration and any relevant clauses in the By-laws

In accordance with Article 28 of the By-Laws, Directors’ compensation shall consist of a fixed and specific monthly remuneration and of fees for attending meetings of the Board of Directors and the executive and advisory Committees thereof. The compensation amount that the Company may pay to all of its Directors as remuneration and attendance fees shall be fixed by the shareholders at the General Shareholders’ Meeting, which amount shall remain unchanged until and unless the shareholders decide to modify it. To this effect, the General Shareholders’ Meeting held on 11 April 2003 fixed the maximum gross annual sum for remuneration to the Board of Directors at 6 million euros.

The Board of Directors shall determine the exact amount to be paid within such limit and the distribution thereof among the Directors.

In accordance with Article 35 of the Regulations of the Board of Directors, Directors shall be entitled to receive the compensation set by the Board of Directors in accordance with the By-Laws and following a report of the Nominating, Compensation and Corporate Governance Committee.

In accordance with Article 5 of this same regulatory text, the Board of Directors expressly reserves the power to approve both the Directors’ compensation policy and the decisions related thereof.

The Nominating, Compensation and Corporate Governance Committee has the following competencies (Article 22 of the Regulations of the Board of Directors):

	•		To propose to the Board of Directors the compensation for the Directors and review it periodically to ensure that it is in keeping with the tasks performed by them.
	•		To propose to the Board of Directors the extent and amount of the compensation, rights and remuneration of a financial nature, of the Chairman, the executive Directors and the senior executive officers of the Company, including the basic terms of their contracts, for purposes of contractual implementation thereof.
	•		To prepare and propose to the Board of Directors an annual report regarding the Director compensation policy.

Additionally, apart from such remuneration as is provided for under the previous section, other remuneration systems may be established that may either be indexed to the market value of the shares, or consist of stock or of stock options for the Directors. The application of said remuneration systems must be authorized by the General Shareholders’ Meeting, which shall fix the share value that is to be taken as the term of reference thereof, the number of shares to be given to each Director, the exercise price of the stock options, the term of such remuneration system and such other terms and conditions as deemed appropriate.

The remuneration systems set out in the preceding paragraphs, arising from membership of the Board of Directors, shall be deemed compatible with any and all other professional or work-based compensations to which the Directors may be entitled in consideration for whatever executive or advisory services they may provide for the Company other than such supervisory and decision-making duties as may pertain to their posts as Directors, which shall be subject to the applicable legal provisions.

Please state whether the Board in full has reserved the right to approve the following decisions:

At the proposal of the company’s chief executive, the appointment and removal of senior officers, and their termination clauses.		Yes
Directors’ remuneration and, in the case of executive directors, the additional consideration for their management duties and the approval of their contracts.		Yes

B.1.15

Please state whether the Board of Directors approves a detailed remuneration policy and specify the matters on which it issues an opinion:

Yes

Amount of fixed remuneration items, with breakdown, if applicable of allowances for belonging to the Board and its Committees and an estimate of the resulting fixed annual remuneration		Yes
Variable remuneration items		Yes
Main characteristics of the benefits system, with an estimate of their amount or equivalent annual cost.		Yes
Conditions that must be respected in contracts of those who exercise senior management functions as executive directors		Yes

B.1.16

Please state whether the Board puts to vote at the General Shareholders’ Meeting, as a separate point in the order of the day, and for consultation purposes, a report on the board member remuneration policies. If applicable, explain the aspects of the report with regard to the remuneration policy approved by the Board for future years, the most significant changes of said policies with regard to that applied during this financial year and a global summary of how the remuneration policy was applied during the financial year. Please provide details of the role played by the Compensation Committee and, if external advice was sought, the identity of the external consultants who provided said advice:

No

Role played by Compensation Committee

	•		To propose to the Board of Directors, in the framework established in the Company By-Laws, the compensation for the Directors.
	•		To prepare and propose to the Board of Directors an annual report regarding the Director compensation policy.

The report regarding the Director compensation policy of Telefónica, S.A. deals with the following:

	•		Aims of remuneration policy.
	•		Detailed structure of remuneration.
	•		Scope of application and reference parameters for variable remuneration.
	•		Relative importance of variable remuneration with regard to fixed remuneration.
	•		Basic conditions of contracts of Executive Directors.
	•		Remuneration performance.
	•		Process of drawing up remuneration policy.

Was external advice sought?		Yes
Identify the external consultants		Towers Perrin

B.1.17

Indicate the identity of any board members who sit on board(s) of directors or hold senior management posts in companies having significant shareholdings in the listed company and/or its group companies:

Name or company name of		Company name of significant
director		shareholder		Position
Isidro Fainé Casas		Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Chairman of Caja de Ahorros y Pensiones de Barcelona, “la Caixa”
				Director of Criteria CaixaCorp, S.A.
Antonio Massanell Lavilla		Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Director of Boursorama, S.A.
				Executive Deputy General Manager of Caja de Ahorros y Pensiones de Barcelona, “la Caixa”
				Director of Caixa Capital Risc, S.G.E.C.R., S.A.
				Executive Chairman of Serveis Informátics la Caixa, S.A. (SIIK)
				Director of e-la Caixa 1, S.A.
				Director of Espacio Pyme, S.A.
				Director of Port Aventura, S.A.
José Fernando de Almansa Moreno-Barreda		Banco Bilbao Vizcaya Argentaria, S.A.		Alternate Director of BBVA Bancomer México, S.A. de C.V.

Please detail, if applicable, any relevant relationships other than those mentioned in the previous paragraph, of the members of the Board of Directors whereby they are related with significant shareholders and/or companies of the group:

Name or company name		Name or company name of
of director with		significant shareholder
relationship		with relationship		Description of relationship
Vitalino Manuel Nafría Aznar		Banco Bilbao Vizcaya Argentaria, S.A.		Early retirement. Formerly Retail Banking Manager for Spain and Portugal.
José María Abril Pérez		Banco Bilbao Vizcaya Argentaria, S.A.		Early retirement. Formerly Wholesale and Investment Banking Manager.

B.1.18

Please indicate whether there have been any changes to the Board regulations during the financial year:

Yes

Description of changes

The Board of Directors, at its meeting held on February 27, 2008, approved a new amendment of the Regulations of the Board of Directors, which affects only the composition of the Board Committees listed below. Specifically, it affects, the maximum number of Directors each may contain. In all cases the minimum number of Directors necessary for each Committee is three, and it is a requirement that a majority of them are external Directors.

	•		Regulation Committee (Article 23)
	•		Human Resources and Corporate Reputation and Responsibility Committee (Article 24)
	•		Service Quality and Customer Service Committee (Article 25)
	•		International Affairs Committee (Article 26)

Them main justification for this change is the need to provide the Board of Directors with more flexibility as regards the maximum number of members that should form part of each of the Committees at any given time, being able to establish the composition of the committees in the manner it deems most convenient, on the basis of the powers and duties assigned to each of them.

These modifications were notified to the CNMV and inscribed in the Mercantile Register of Madrid on April 2, 2008.

B.1.19

Indicate any procedures for appointment, re-election, assessment and removal of Directors. List the competent bodies, the steps to be followed and the criteria to be applied in each of the procedures.

Appointment

Telefónica’s By-Laws establish that the Board of Directors shall be composed of a minimum of five members and a maximum of twenty, to be appointed at the General Shareholders’ Meeting. The Board of Directors may, in accordance with the provisions set out in the Spanish Companies Law and in the Company By-Laws, fill vacant positions temporarily by interim appointment.

It is only on certain occasions that the Board of Directors shall have the power to fill, on an interim basis, any vacancies that may occur therein, by appointing, in such manner as is legally allowed, the persons who are to fill such vacancies until the holding of the next General Shareholders’ Meeting.

In all other cases, the proposed appointments must follow the procedure set out in the Regulations of the Board of Directors, and must be preceded by the relevant favorable report from the Nominating, Compensation and Corporate Governance Committee, and in the case of independent Directors, by the corresponding proposal.

Thus, in accordance with the duties assigned to the Nominating, Compensation and Corporate Governance Committee, it should report, with objectivity and in line with social interests, the proposals for nominating, re-electing and removal of Company Directors, assessing the necessary competencies, knowledge and experience of the candidates to cover the vacancies.

In line with the provisions of the Regulations, the Board of Directors, exercising the right to fill vacancies by interim appointment and to propose appointments to the shareholders at the General Shareholders’ Meeting, shall ensure that, in the composition of the Board of Directors, external or non-executive Directors represent an ample majority over executive Directors.. In addition, the Board shall ensure that the total number of independent Directors represents at least one-third of the total number of members of the Board.

Likewise, the type of directorship of each Director will be explained by the Board of Directors before the General Shareholders’ Meeting that must carry out or ratify their appointment. The type of directorship will be revised on an annual basis by the Board, subsequent to the verification by the Nominating, Compensation and Corporate Governance Committee, providing information of this in the Annual Corporate Governance Report.

In any case, and in the event of re-election or ratification of Directors by the General Shareholders’ Meeting, the report of the Nominating, Compensation and Corporate Governance Committee, or, in the case of independent Directors, the proposal of said Committee, will contain an assessment of the work and effective time devoted to the post during the last period in which it was held by the proposed Director.

Lastly, both the Board of Directors and the Nominating, Compensation and Corporate Governance Committee will ensure, within the scope of their competencies, that the election of whoever has been proposed for the post of Director corresponds to people of recognized solvency, competence and experience, who are willing to devote the time and effort necessary to carrying out their functions, it being essential to be rigorous in the election of those people called to cover the posts of independent Directors.

Re-election

Directors shall serve in their position for a period of five years. They may be re-elected one or more times to terms of the same duration.

As with proposals for appointment, proposals for re-election of Directors must be preceded by the relevant favorable report issued by the Nominating, Compensation and Corporate Governance Committee, and, in the case of independent Directors, by the corresponding proposal.

Assessment

In accordance with the Regulations of the Board of Directors, the latter reserves expressly the duty to approve on a regular basis its functioning and the functioning of its Committees, it being the duty of the Nominating, Compensation and Corporate Governance Committee to organize and coordinate, together with the Chairman of the Board of Directors, the regular assessment of said Body.

In accordance with the above, it should be noted that the Board of Directors and its Committees carry out a periodic evaluation of the operation of the Board of Directors and of the Committees thereof in order to determine the opinion of Directors regarding the workings of these bodies and to establish any proposals for improvements to ensure the optimum working of the company’s governing bodies.

Removal

Directors shall cease to hold office when the term for which they were appointed elapses, or when such removal is resolved by the General Shareholders’ Meeting, in the exercise of the powers granted to this body by law.

The Board of Directors will not propose the removal of any independent Director before the established period for which they were nominated has been completed, save in cases of fair cause, as judged by the Board subsequent to a report by the Nominating, Compensation and Corporate Governance Committee. In particular, it will be deemed that there is fair cause when the Director has failed to comply with the duties inherent to their post.

The removal of independent Directors may also be proposed as a result of Public Tender Offers, mergers or other similar corporate transactions that entail a change in the company’s capital structure.

B.1.20

Indicate under what circumstances directors are obliged to resign.

In accordance with Article 12 of the Regulations of the Board of Directors, Directors must tender their resignation to the Board of Directors and formalize such resignation in the following cases:

a)

When they cease to hold the executive positions to which their appointment as Directors is linked, or when the reasons for which they were appointed no longer exist.

b)

When they are affected by any of the cases of incompatibility or prohibition established by statute.

c)

When they are severely reprimanded by the Nominating, Compensation and Corporate Governance Committee for having failed to fulfill any of their obligations as Directors.

d)

When their remaining on the Board might affect the Company’s credit or reputation in the market or otherwise jeopardizes its interests.

The conditions listed above under Recommendation B.1.19 “Removal” must also be taken into consideration.

B.1.21

Explain whether the duties of the chief executive officer fall upon the Chairman of the Board. If so, indicate the measures taken to limit the risk of the accumulation of powers in a single person:

Yes

Measures to limit risks

	•		Pursuant to the provisions of the Regulations of the Board of Directors, the actions of the Chairman must follow the criteria established by the General Shareholders’ Meeting, the Board of Directors and the Board Committees at all times.
	•		Likewise, all agreements or decisions of particular significance for the Company must be previously submitted for the approval of the Board of Directors or the relevant Board Committee, as the case may be.
	•		The Board of Directors reserves the power to approve: the general policies and strategies of the Company; the evaluation of the Board, its Committees and its Chairman; the appointment of senior executive officers, as well as the compensation policy for Directors and senior executive officers; and strategic investments.
	•		In addition, reports and proposals from the different Board Committees are required for the adoption of certain resolutions.
	•		It is important to note that the Chairman does not hold the casting vote within the Board of Directors.
	•		The Board of Directors of the Company, at its meeting held on December 19, 2007, agreed to appoint Julio Linares López Chief Operating Officer of Telefónica, S.A., reporting directly to the Chairman and with responsibility over all of Telefónica Group’s Business Units.

Please indicate and, if applicable, explain, whether regulations have been established enabling one of the independent directors to request that a Board Meeting be called or to include new points in the order of the day, to coordinate and reflect the concerns of external directors and direct the assessment by the Board of Directors

No

B.1.22

Are qualified majorities other than those established by law, required for certain decisions?

No

Indicate how the Board of Directors adopts resolutions, including at least the minimum quorum of attendees and the types of majorities required to pass resolutions:

Adoption of resolutions
Description of resolution		Quorum		Type of Majority
All resolutions		Personal or proxy attendance of one half plus one of all Directors.		Resolutions shall in all cases be adopted by a majority of votes cast by the Directors present at the meeting in person or by proxy, except in those instances in which the Law requires the favorable vote of a greater number of Directors for the validity of specific resolutions and in particular for: (i) the appointment of Directors not holding a minimum of shares representing a nominal value of 3,000 euros, (Article 25 of the Company By-Laws) and (ii) for the appointment of Chairman, Vice Chairman, CEO or member of the Executive Committee, in accordance with the requirements explained in the following section.

B.1.23

Explain whether there are other requirements, other than those for Directors, for being appointed Chairman.

Yes

Description of requirements

In order for a Director to be appointed Chairman, he/she must have been a member of the Board for at least three years prior to such appointment. However, this requirement shall not be applicable if the appointment is made with the favorable vote of at least 85 percent of the members of the Board of Directors.

B.1.24

Indicate whether the Chairman has the casting vote:

No

B.1.25

Please indicate whether the Company Bylaws or the Board regulations establish an age limit for Directors:

No

Age limit for Chairman		Age limit for CEO		Age limit for Directors
0		0		0

B.1.26

Please indicate whether the Company Bylaws or the Board Regulations establish a limit on the term of office of independent Directors:

No

Maximum number of years in office			0

B.1.27

When women directors are few or non existent, state the reasons for this situation and the measures taken to correct it.

Explanation of reasons and measures

The search for women who meet the necessary professional profile is a question of principle and, in this regard, it is clear that Telefónica has taken this concern on board. In this regard, it should be noted that, on January 23, 2008, the Board of Directors unanimously agreed to appoint, by means of interim appointment and at the proposal of the Nominating, Compensation and Corporate Governance Committee, María Eva Castillo Sanz as an Independent Member of the Board of Telefónica. This appointment was ratified by the Ordinary General Shareholders’ Meeting of Telefónica held on April 22, 2008, and she was thus appointed as a Member of the Board of the Company for a period of five years.

Likewise, on December 19, 2007, the Board of Directors unanimously agreed, following a favorable report from the Nominating, Compensation and Corporate Governance Committee, to appoint María Luz Medrano Aranguren as the Deputy Secretary General and of the Board of Directors of Telefónica.

Article 10.3. of the Regulations of the Board of Directors stipulates that the Board of Directors and the Nominating, Compensation and Corporate Governance Committee shall ensure, within the scope of their respective powers, that the candidates chosen are persons of recognized caliber, qualifications and experience, who are willing to devote a sufficient portion of their time to the Company, and shall take extreme care in the selection of the persons to be appointed as independent Directors.

Therefore, the selection procedure described above is based exclusively on the personal merits of the candidates (“recognized caliber, qualifications and experience”) and their ability to dedicate themselves to the functions of members of the board, so there is no implicit bias capable of impeding the selection of female directors, if, within the potential candidates, there are female candidates who meet the professional profile sought at each moment.

Specifically, please indicate whether the Nominating and Compensation Committee has established procedures to ensure that the selection processes are not implicitly biased against the selection of female directors and that they deliberately seek female candidates that meet the required profile:

Yes

Description of the main procedures

Article 10.3 of the Regulations of the Board of Directors stipulates that the Board of Directors and the Nominating, Compensation and Corporate Governance Committee shall ensure, within the scope of their respective powers, that the candidates chosen are persons of recognized caliber, qualifications and experience, who are willing to devote a sufficient portion of their time to the Company.

B.1.28

Indicate whether there are formal processes for proxy voting in the Board of Directors. If so, please describe briefly.

In accordance with Article 18 of the Regulations of the Board of Directors, Directors must attend meetings of the Board in person, and when unable to do so in exceptional cases, they shall endeavor to ensure that the proxy they grant to another member of the Board includes, as the extent practicable, appropriate instructions. Such proxies may be granted by letter or any other means that, in the Chairman’s opinion, ensures the certainty and validity of the proxy granted.

B.1.29

Indicate the number of meetings held by the Board of Directors during the financial year. Likewise, indicate the number of times, if any, the Board has met in the absence of its Chairman:

Number of Board meetings			11
Number of Board meetings held in the absence of its chairman			0

Indicate the number of Board Committees meetings held during the financial year:

Number of Executive or Delegated Commission meetings			18
Number of Audit Committee meetings			12
Number of Nominating and Compensation Committee meetings			9
Number of Nominating Committee meetings			0
Number of Remuneration Committee meetings			0

B.1.30

Please state the number of Board meetings held during the financial year in which all its members did not attend. Representatives sent without specific instructions count towards the final count:

Number of absences of board members during the year			1
% of absences with regard to total number of votes during the exercise			0.534

B.1.31

Indicate whether the individual and consolidated accounts are certified prior to their presentation to the Board of Directors for their approval:

No

Identify, if applicable, the person(s) certifying the individual and consolidated accounts for their formulation by the Board:

B.1.32

Explain the mechanisms, if any, established by the Board of Directors to ensure the individual and consolidated accounts are not presented at the General Shareholders’ Meeting with qualifications in the auditor’s report.

Through the Audit and Control Committee, the Board of Directors plays an essential role supervising the preparation of the Company financial information, controlling and coordinating the various players that participate in this process.

In this regard, and in order to achieve this objective, the Audit and Control Committee’s work addresses the following basic questions:

(i) to know the process for gathering financial information and the internal control systems. With respect thereto:

a)

To supervise the process of preparation and the integrity of the financial information relating to the Company and the Group, reviewing compliance with regulatory requirements, the proper determination of the scope of consolidation, and the correct application of accounting standards, informing the Board of Directors thereof.

b)

To propose to the Board of Directors the risk management and control policy.

(ii) to ensure the independence of the External Auditor, supervising their work and acting as a channel of communication between the Board of Directors and the External Auditor, as well as between the External Auditor and the Company management team;

(iii) to supervise the internal audit services; and, in particular:

a)

To ensure the independence and efficiency of the internal audit function

b)

To propose the selection, appointment and removal of the person responsible for the internal audit;

c)

To propose the budget for such service;

d)

To review the internal audit work plan and its annual activities report;

e)

To receive periodic information of its activities; and

f)

To verify that the senior executive officers take into account the conclusions and recommendations of its reports.

The Audit and Control Committee verifies both the periodical financial information and the Annual Financial Statements, ensuring that all financial information is drawn up according to the same professional principles and practices. To this effect, the Audit and Control Committee meets whenever appropriate, having held twelve (12) meetings in the course of 2008.

Furthermore, the External Auditor participates regularly in the Audit and Control Committee meetings, when called to do so by the Committee, to explain and clarify different aspects of the audit reports and other aspects of its work. Additionally, and at the Committee’s request, other members of the Company management team and that of its subsidiary companies have also been called to Committee meetings to explain specific matters that are directly within their scope of competence. In particular, managers from the finance, planning and controlling areas, as well as those in charge of internal audits, are often convened to participate in these meetings. The members of the Committee have held separate meetings with each of these when it was deemed such a measure was necessary to closely monitor the preparation of the Company’s financial information.

Notwithstanding the above, Article 41 of the Regulations of the Board of Directors stipulates that the Board of Directors shall endeavor to prepare the final financial statements in a manner that that will create no reason for qualifications from the Auditor. However, whenever the Board considers that it should maintain its standards, it shall publicly explain the contents and scope of the discrepancies.

B.1.33

Is the secretary of the Board a director?

No

B.1.34

Explain the procedures for the appointment and removal of the Secretary of the Board, stating whether their appointment and removal have been reported by the Nominating Committee and approved in full by the Board.

Procedure of appointment and removal

In accordance with Article 15 of the Regulations of the Board of Directors, the Board of Directors, upon the proposal of the Chairman, and after a report from the Nominating, Compensation and Corporate Governance Committee, shall appoint a Secretary of the Board, and shall follow the same procedure for approving the removal thereof.

Does the Nominating Committee notify the appointment?		Yes
Does the Nominating Committee notify the removal?		Yes
Does the Board in full approve the appointment?		Yes
Does the Board in full approve the removal?		Yes

Is the secretary of the Board responsible for safeguarding the good governance recommendations?

Yes

Comments

In any case, the Secretary of the Board shall attend to the formal and substantive legality of the Board’s actions, the conformance thereof to the By-Laws, the Regulations for the General Shareholders’ Meeting and of the Board, and maintain in consideration the corporate governance recommendations assumed by the Company in effect from time to time (Article 15 of the Regulations of the Board of Directors).

B.1.35

Please state the mechanisms, if any, established by the company to preserve the independence of the auditor, of financial analysts, investment banks and rating agencies.

With regards to the independence of the external Auditor of the Company, Article 41 of the Regulations of the Board of Directors stipulates that the Board of Directors shall, through the Audit and Control Committee, establish a stable, professional relation with the Company’s Auditor, strictly respecting the independence thereof. Thus, one of the fundamental duties of the Audit and Control Committee is to “maintain relations with the Auditor in order to receive information on all matters that could jeopardize the independence thereof”.

In addition, in accordance with Article 21 of the Regulations of the Board of Directors, it is the Audit and Control Committee that proposes to the Board of Directors, for submission to the shareholders at the General Shareholders’ Meeting, the appointment of the Auditor as well as, where appropriate, appropriate terms of for the hiring thereof, the scope of its professional engagement and revocation or renewal of its appointment.

Likewise, the External Auditor has direct access to the Audit and Control Committee and participates regularly in its meetings, in the absence of the Company management team when this is deemed necessary. To this effect, and in keeping with United States legislation on this matter, the external Auditors must inform the Audit and Control Committee at least once a year on the most relevant generally accepted auditing policies and practices followed in the preparation of the Company’s financial and accounting information that affect relevant elements in the financial statements which may have been discussed with the management team, and of all relevant communications between the Auditors and the Company management team.

In accordance with internal Company regulations and in line with the requirements imposed by US legislation, the engagement of any service from the external Company Auditors must always have the prior approval of the Audit and Control Committee. Moreover, the engagement of non-audit services must be done in strict compliance with the Accounts Audit Law (in its version established in Law 44/2002 of 22 November, on Financial System Reform Measures) and the Sarbanes-Oxley Act published in the United States and subsequent regulations. For this purpose, and prior to the engagement of the Auditors, the Audit and Control Committee studies the content of the work to be done, weighing the situations that may jeopardize independence of the Company Auditor and specifically supervises the percentage the fees paid for such services represent in the total revenue of the auditing firm. Thus, the Company reports the fees paid to the external Company Auditor, including those paid for non-audit services, in its Notes to the Financial Statements, in accordance with the legislation in effect.

B.1.36

Please state whether during the financial year, the Company has changed external auditor. Is so, please specify the incoming and outgoing auditors:

No

Outgoing Auditor		Incoming Auditor

In the case that there were discrepancies with the outgoing auditor, please explain the content of said discrepancies:

No

B.1.37

Please indicate whether the auditing firm does non-audit work for the company and/or its group. If so, state the fees it receives for such work and the percentage represented by such fees of the total fees invoices by the company and/or its group:

Yes

		Company				Group				Total
Amount from non-audit work (thousand euros)			0				14				14
Amount from non-audit work / total amount invoiced by the auditing firm (in %)			0				0.067				0.058

B.1.38

Indicate whether the audit report of the previous year’s annual accounts is qualified or has reservations. Should such reservations or qualifications exist, both the Chairman of the Audit Committee and the auditors should give a clear account to shareholders of their scope and content.

No

B.1.39

Please state how many consecutive years the current auditing firm has been auditing the annual accounts of the company and/or its group. In addition, indicate how many years the current auditing firm has been auditing the accounts as a percentage of the total number of years over which the annual accounts have been audited:

		Company				Group
Number of consecutive years			4				4

		Company				Group
Number of years audited by current auditing firm/number of years the company accounts have been audited (in %)			15.4				22.2

B.1.40

Please list the stock holdings of the members of the company’s Board of Directors in other companies with the same, similar or complementary types of activities of the company and/or its group, and which have been reported to the company. In addition, list the posts or duties they hold in such companies:

		Corporate name of
Name or company name		the company in
of director		question		% share				Post or Duties
Isidro Fainé Casas		Abertis Infraestructuras, S.A.			0.002			Chairman
David Arculus		BT Group Plc.			0.000			—
		British Sky Broadcasting Group Plc.			0.000			—

B.1.41

Please indicate and, where appropriate, explain any procedures through which Directors may receive external advice:

Yes

Details of procedure

Article 28 of the Regulations of the Board of Directors stipulates that in order to receive assistance in the performance of their duties, the Directors or any of the Committees of the Board may request that legal, accounting, financial or other experts be retained at the Company’s expense. Such engagement must necessarily be related to specific problems of certain significance and complexity that arise in the performance of their duties.

The Chairman of the Company must be informed of the decision to retain such services, which shall be implemented through the Secretary of the Board, unless the Board of Directors does not consider such engagement to be necessary or appropriate.

B.1.42

Indicate whether there are procedures for Directors to receive the information they need in sufficient time to prepare for the meetings of the governing bodies:

Yes

Details of procedure

The Company adopts the measures necessary to ensure that the Directors receive the necessary information, specially drawn up and geared to preparing the sessions of the Board and its Committees, with sufficient time. Under no circumstances shall such requirement not be fulfilled on the grounds of the importance or the confidential nature of the information — except in absolutely exceptional cases.

In this regard, at the beginning of each year the Board of Directors and its Committees shall set the calendar of ordinary meetings to held during the year. The calendar may be amended by resolution of the Board itself, or by decision of the Chairman, in which case the Directors shall be made aware of the amendment as soon as practicable.

Also, and in accordance with Recommendation 19 of the Unified Good Governance Code, at the beginning of the year the Board and its Committees shall prepare an Action Plan detailing the actions to be carried out and their timing for each year, as per their assigned powers and duties.

Likewise, all the meetings of the Board and the Board Committees have a pre-established Agenda, which is communicated at least three days prior to the date scheduled for the meeting together with the call for the session. For the same purpose, Directors are sent the documentation relating to the meetings with sufficient time. Such information is subsequently completed by the written documentation and presentations handed to the Directors during the session itself.

To provide all the information and clarifications necessary in relation to certain points deliberated, the Group’s senior executive officers attend nearly all the Board and committee meetings to explain the matters within their competencies.

Furthermore, and as a general rule, the Regulations of the Board of Directors expressly establish that Directors have the broadest powers to obtain information on any aspect of the Company, to examine its books, records, documents and other background information on corporate transactions. The exercise of the right to receive information shall be channeled through the Chairman or Secretary of the Board of Directors, who shall respond to the requests made by the Directors, providing them with the requested information directly or offering them the proper contacts at the appropriate level of the organization.

B.1.43

Please state whether, and if so provide corresponding details, the company has established rules by which the directors must notify and, if applicable, resign in those cases in which they are at risk of damaging the good name and reputation of the company:

Yes

Explanation of rules

In accordance with Article 12 of the Regulations of the Board of Directors, Directors must tender their resignation to the Board of Directors and formalize such resignation when their remaining on the Board might affect the Company’s credit or reputation in the market or otherwise jeopardizes its interests.

Likewise, Article 32. h) of the Regulations stipulates that Directors must report to the Board any circumstances related to them that might damage the credit and reputation of the Company as soon as possible.

B.1.44

Indicate whether any director has notified the company that he has been indicted or tried for any of the crimes stated in article 124 of the Public Limited Companies Law:

Yes

Name of Director		Criminal proceedings		Comments
César Alierta Izuel		Summary Proceedings 7721/2002 Magistrate’s Court number 32 of Madrid

Please indicate whether the Board of Directors has analyzed the case. If the answer is yes, please explain in a reasoned manner the decision made with regard to whether or not the director should continue holding their post.

Yes

Decision adopted		Reasoned explanation
May continue		There have been no circumstances that merit the adoption of any action or decision to this regard.

B.2.

Board of Directors Committees

B.2.1

List of all Board of Directors Committees and their members:

NOMINATING, COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE

Director		Position		Type
Alfonso Ferrari Herrero		Chairman		Independent
Carlos Colomer Casellas		Member		Independent
Gonzalo Hinojosa Fernández de Angulo		Member		Independent
Pablo Isla Álvarez de Tejera		Member		Independent
Peter Erskine		Member		Other External

AUDIT AND CONTROL COMMITTEE

Director		Position		Type
Alfonso Ferrari Herrero		Member		Independent
Antonio Massanell Lavilla		Member		Proprietary
Gonzalo Hinojosa Fernández de Angulo		Member		Independent
Vitalino Manuel Nafría Aznar		Member		Proprietary

HUMAN RESOURCES, CORPORATE REPUTATION AND RESPONSIBILITY COMMITTEE

Director		Position		Type
Francisco Javier de Paz Mancho		Chairman		Independent
Alfonso Ferrari Herrero		Member		Independent
Antonio Massanell Lavilla		Member		Proprietary
Gonzalo Hinojosa Fernández de Angulo		Member		Independent
Pablo Isla Álvarez de Tejera		Member		Independent
Vitalino Manuel Nafría Aznar		Member		Proprietary

REGULATION COMMITTEE

Director		Position		Type
Pablo Isla Álvarez de Tejera		Chairman		Independent
Alfonso Ferrari Herrero		Member		Independent
David Arculus		Member		Independent
Francisco Javier de Paz Mancho		Member		Independent
José Fernando de Almansa Moreno-Barreda		Member		Other External
Vitalino Manuel Nafría Aznar		Member		Proprietary

SERVICE QUALITY AND CUSTOMER SERVICE COMMITTEE

Director		Position		Type
Gonzalo Hinojosa Fernández de Angulo		Chairman		Independent
Antonio Massanell Lavilla		Member		Proprietary
Carlos Colomer Casellas		Member		Independent
Pablo Isla Álvarez de Tejera		Member		Independent

INTERNATIONAL AFFAIRS COMMITTEE

Director		Position		Type
José Fernando de Almansa Moreno-Barreda		Chairman		Other External
Alfonso Ferrari Herrero		Member		Independent
David Arculus		Member		Independent
Francisco Javier de Paz Mancho		Member		Independent
Gonzalo Hinojosa Fernández de Angulo		Member		Independent
José María Abril Pérez		Member		Proprietary
Luiz Fernando Furlán		Member		Independent
Vitalino Manuel Nafría Aznar		Member		Proprietary

EXECUTIVE COMMITTEE

Director		Position		Type
César Alierta Izuel		Chairman		Executive
Isidro Fainé Casas		Vice Chairman		Proprietary
Alfonso Ferrari Herrero		Member		Independent
Carlos Colomer Casellas		Member		Independent
Francisco Javier de Paz Mancho		Member		Independent
Gonzalo Hinojosa Fernández de Angulo		Member		Independent
José María Abril Pérez		Member		Proprietary
Julio Linares López		Member		Executive
Peter Erskine		Member		Other External

STRATEGIC COMMITTEE

Director		Position		Type
Peter Erskine		Chairman		Other External
Gonzalo Hinojosa Fernández de Angulo		Member		Independent
José Fernando de Almansa Moreno-Barreda		Member		Other External
María Eva Castillo Sanz		Member		Independent

INNOVATION COMMITTEE

Director		Position		Type
Carlos Colomer Casellas		Chairman		Independent
Antonio Massanell Lavilla		Member		Proprietary
Julio Linares López		Member		Executive
Pablo Isla Álvarez de Tejera		Member		Independent
Peter Erskine		Member		Other External

B.2.2

Please state whether any of the following duties are responsibility of the Audit Committee:

To supervise the process of preparation and the integrity of the financial information regarding the company and, if applicable, the group, revising compliance with regulatory requirements, the adequate boundaries of the scope of consolidation and the correct application of the accounting criteria.		Yes
To periodically revise the internal control and risk management systems so that the main risks are identified, managed and notified correctly.		Yes
To safeguard the independence and efficacy of the internal auditing function; to propose the selection, appointment, re-election and removal of the head of internal auditing; to propose the budget of that service; to receive periodic information regarding its activities; and to verify that the senior management bears in mind the conclusions and recommendations of its reports.		Yes
To establish and supervise a mechanism by which the employees may notify, confidentially and, if deemed appropriate, anonymously, any irregularities that are potentially significant, especially financial and accounting irregularities, that they may detect in the company.		Yes
To submit to the Board proposals of selection, appointment, re-election and replacement of the external auditor, as well as the corresponding engagement conditions.		Yes
To receive regularly from the external auditor information regarding the auditing plan and the results of its execution, and to verify that the senior management takes into account its recommendations.		Yes
To ensure the independence of the external auditor.		Yes
In the case of groups, to encourage the group auditor to assume the responsibility for the audits of the companies it comprises.		Yes

B.2.3

Describe the organizational and operational rules and responsibilities attributed to each of the Board Committees.

International Affairs Committee.

a)

Composition.

The International Affairs Committee shall consist of such number of Directors as the Board of Directors determines from time to time, but in no case less than three, and the majority of its members shall be external Directors.

The Chairman of the International Affairs Committee shall be appointed from among its members.

b)

Duties.

Notwithstanding other duties that the Board of Directors may assign thereto, the primary mission of the International Affairs Committee shall be to strengthen and bring relevant international issues to the attention of the Board of Directors for the proper development of the Telefónica Group. In that regard, it shall have the following duties, among others:

	(i)		To pay special attention to institutional relations in the countries companies of the Telefónica Group do business.
	(ii)		To review important issues affecting it at international or economic integration organizations and forums.
	(iii)		To review regulatory and competition issues and alliances.
	(iv)		To evaluate the programs and activities of the Company’s various Foundations and the resources used to promote its image and international social presence.
	c)		Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b) 3. of the Regulations of the Board of Directors, the International Affairs Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the International Affairs Committee in order to properly exercise its duties.

Audit and Control Committee.

Pursuant to the provisions set out in Article 31 bis of the Company By-Laws of Telefónica, S.A., Article 21 of the Regulations of the Board of Directors regulates the Audit and Control Committee in the following terms:

a)

Composition.

The Audit and Control Committee shall consist of not less than three nor more than five Directors appointed by the Board of Directors. All Committee members shall be external Directors. When appointing such members, the Board of Directors shall take into account the appointees’ knowledge and experience in matters of accounting, auditing and risk management.

The Chairman of the Audit and Control Committee, who shall in all events be an independent Director, shall be appointed from among its members, and shall be replaced every four years; he may be re-elected after the passage of one year from the date when he ceased to hold office.

b) Powers and duties.

Without prejudice to any other tasks that the Board of Directors may assign thereto, the primary duty of the Audit and Control Committee shall be to support the Board of Directors in its supervisory duties. Specifically, it shall have at least the following powers and duties:

1)

To report, through its Chairman, at the General Shareholders’ Meeting on matters raised thereat by the shareholders that are within the purview of the Committee;

2)

To propose to the Board of Directors, for submission to the General Shareholders’ Meeting, the appointment of the Auditor mentioned in Article 204 of the Spanish Companies Law, as well as, where appropriate, terms of the hiring thereof, the scope of its professional engagement and the revocation or renewal of such appointment;

3)

To supervise the internal audit services and, in particular:

a)

To ensure the independence and efficiency of the internal audit function;

b)

To propose the selection, appointment and removal of the person responsible for the internal audit;

c)

To propose the budget for such service;

d)

To review the internal audit work plan and its annual activities report;

e)

To receive periodic information of its activities; and

f)

To verify that the senior executive officers take into account the conclusions and recommendations of its reports.

4)

To know the process for gathering financial information and the internal control systems. With respect thereto:

a)

To supervise the process of preparation and the integrity of the financial information relating to the Company and the Group, reviewing compliance with regulatory requirements, the proper determination of the scope of consolidation, and the correct application of accounting standards, informing the Board of Directors thereof.

b)

To propose to the Board of Directors the risk management and control policy.

5)

To establish and supervise a mechanism that allows employees to confidentially communicate and anonymously report potentially significant irregularities particularly any financial or accounting irregularities detected within the Company.

6)

To maintain relations with the Auditor in order to receive information on all matters that could jeopardize the independence thereof, as well as any other matters relating to the audit procedure, and to receive information from and maintain the communications with the Auditor provided for in auditing legislation and in technical auditing regulations.

c)

Operation.

The Audit and Control Committee shall meet at least once every quarter and as often as appropriate, when called by its Chairman.

In the performance of its duties, the Audit and Control Committee may require that the Company’s Auditor and the person responsible for internal audit, and any employee or senior executive officer of the Company, attend its meetings.

d)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Audit and Control Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Audit and Control Committee in order to properly exercise its duties.

Service Quality and Customer Service Committee.

a)

Composition.

The Service Quality and Customer Service Committee shall consist of such number of Directors as the Board of Directors determines from time to time, but in no case less than three, and the majority of its members shall be external Directors.

The Chairman of the Service Quality and Customer Service Committee shall be appointed from among its members.

b)

Duties.

Without prejudice to any other duties that the Board of Directors may assign thereto, the Service Quality and Customer Service Committee shall have at least the following duties:

(i)

To periodically examine, review and monitor the quality indices of the principal services provided by the companies of the Telefónica Group.

(ii)

To evaluate levels of customer service provided by such companies.

c)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Service Quality and Customer Service Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Service Quality and Customer Service Committee in order to properly exercise its duties.

Strategic Committee.

a)

Composition.

The Board of Directors shall determine the number of members of this Committee. The Chairman of the Strategic Committee shall be appointed from amongst its members.

b)

Duties.

Without prejudice to any other duties that the Board of Directors may assign thereto, the primary duty of the Strategic Committee shall be to support the Board of Directors in the analysis and follow-up of the global strategy policy of the Telefónica Group.

c)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Strategic Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Strategic Committee in order to properly exercise its duties.

Innovation Committee.

a)

Composition.

The Board of Directors shall determine the number of members of this Committee.

The Chairman of the Innovation Committee shall be appointed from amongst its members.

b)

Duties.

The Innovation Committee is primarily responsible for advising and assisting in all matters regarding innovation, performing an examination, analysis and periodic monitoring of the Company’s innovation projects, to provide guidance and to help ensure its implementation and development across the Telefónica Group.

c)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Innovation Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Innovation Committee in order to properly exercise its duties.

Nominating, Compensation and Corporate Governance Committee.

a)

Composition.

The Nominating, Compensation and Corporate Governance Committee shall consist of no less than three nor more than five Directors appointed by the Board of Directors. All members of the Committee must be external Directors and the majority thereof must be independent Directors.

The Chairman of the Nominating, Compensation and Corporate Governance Committee, who shall in all events be an independent Director, shall be appointed from among its members.

b)

Powers and duties.

Without prejudice to any other tasks that the Board of Directors may assign thereto, the Nominating, Compensation and Corporate Governance Committee shall have the following powers and duties:

1)

To report, following standards of objectivity and conformity to the corporate interest, on the proposals for the appointment, re-election and removal of Directors and senior executive officers of the Company and its subsidiaries, and evaluate the qualifications, knowledge and experience required of candidates to fill vacancies.

2)

To report on the proposals for appointment of the members of the Executive Commission and of the other Committees of the Board of Directors, as well as the Secretary and, if applicable, the Deputy Secretary.

3)

To organize and coordinate, together with the Chairman of the Board of Directors, a periodic assessment of the Board, pursuant to the provisions of Article 13.3 of the Regulations of the Board.

4)

To report on the periodic assessment of the performance of the Chairman of the Board of Directors.

5)

To examine or organize the succession of the Chairman such that it is properly understood and, if applicable, to make proposals to the Board of Directors so that such succession occurs in an orderly and well-planned manner.

6)

To propose to the Board of Directors, within the framework established in the By-Laws, the compensation for the Directors and review it periodically to ensure that it is in keeping with the tasks performed by them, as provided in Article 35 of these Regulations.

7)

To propose to the Board of Directors, within the framework established in the By-Laws, the extent and amount of the compensation, rights and remuneration of a financial nature, of the Chairman, the executive Directors and the senior executive officers of the Company, including the basic terms of their contracts, for purposes of contractual implementation thereof.

8)

To prepare and propose to the Board of Directors an annual report regarding the Director compensation policy.

9)

To supervise compliance with the Company’s internal rules of conduct and the corporate governance rules thereof in effect from time to time.

10)

To exercise such other powers and perform such other duties as are assigned to such Committee in these Regulations.

c)

Operation.

In addition to the meetings provided for in the annual schedule, the Nominating, Compensation and Corporate Governance Committee shall meet whenever the Board of Directors of the Company or the Chairman thereof requests the issuance of a report or the approval of proposals within the scope of its powers and duties, provided that, in the opinion of the Chairman of the Committee, it is appropriate for the proper implementation of its duties.

d)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Nominating, Compensation and Corporate Governance Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Nominating, Compensation and Corporate Governance Committee in order to properly exercise its duties.

Human Resources, Corporate Reputation and Responsibility Committee.

a)

Composition.

The Human Resources, Corporate Reputation and Responsibility Committee shall consist of such number of Directors as the Board of Directors determines from time to time, but in no case less than three, and the majority of its members shall be external Directors.

The Chairman of the Human Resources, Corporate Reputation and Responsibility Committee shall be appointed from among its members.

b)

Powers and duties.

Without prejudice to any other tasks that the Board of Directors may assign thereto, the Human Resources and Corporate Reputation and Responsibility Committee shall have at least the following duties:

(i)

To analyze, report on and propose to the Board of Directors the adoption of the appropriate resolutions on personnel policy matters.

(ii)

To promote the development of the Telefónica Group’s Corporate Reputation and Responsibility project and the implementation of the core values of such Group.

c)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Human Resources, Corporate Reputation and Responsibility Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Human Resources, Corporate Reputation and Responsibility Committee in order to properly exercise its duties.

Regulation Committee.

a)

Composition.

The Regulation Committee shall consist of such number of Directors as the Board of Directors determines from time to time, but in no case less than three, and the majority of its members shall be external Directors.

The Chairman of the Regulation Committee shall be appointed from among its members.

b)

Powers and duties.

Without prejudice to other duties that the Board of Directors may assign thereto, the Regulation Committee shall have at least the following duties:

(i)

To monitor on a permanent basis the principal regulatory matters and issues affecting the Telefónica Group at any time, through the study, review and discussion thereof.

(ii)

To act as a communication and information channel between the Management Team and the Board of Directors in regulatory matters and, where appropriate, to advise the latter of those matters deemed important or significant to the Company or to any of the companies of its Group in respect of which it is necessary or appropriate to make a decision or adopt a particular strategy.

c)

Action Plan and Report.

As with the Board and its Committees, at the beginning of each year and in accordance with Article 19 b 3) of the Regulations of the Board of Directors, the Regulation Committee shall prepare an Action Plan detailing the actions to be taken and the periods of time in which these actions will be completed.

The Committee also draws up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at its meetings and highlighting certain aspects regarding its powers and duties, composition and operation.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Regulation Committee in order to properly exercise its duties.

Executive Commission

a)

Composition.

The Executive Commission shall consist of the Chairman of the Board, once appointed as a member thereof, and not less than three nor more than ten Directors appointed by the Board of Directors.

In the qualitative composition of the Executive Commission, the Board shall seek to have external or non-executive Directors constitute a majority over the executive Directors.

In all cases, the affirmative vote of at least two-thirds of the members of the Board of Directors shall be required in order for the appointment or re-appointment of the members of the Executive Commission to be valid.

b)

Operation.

The Executive Commission shall meet whenever called by the Chairman, and normally meet every fifteen days.

The Chairman and Secretary of the Board of Directors shall act as the Chairman and Secretary of the Executive Commission. One or more Vice Chairmen and a Deputy Secretary may also be appointed.

A quorum of the Executive Commission shall be validly established with the attendance, in person or by proxy, of one-half plus one of its members.

Resolutions shall be adopted by a majority of the Directors attending the meeting (in person or by proxy), and in the case of a tie, the Chairman shall cast the deciding vote.

c)

Relationship with the Board of Directors.

As per Article 19 b) 3., the Board of Directors is informed of the issues discussed by the Executive Commission in order to properly exercise its duties.

B.2.4

Indicate any advisory and consulting powers and, where applicable, the powers delegated to each of the committees:

Committee Name		Brief description
International Affairs Committee		Advisory and Control Committee
Audit and Control Committee		Advisory and Control Committee
Service Quality and Customer Service Committee		Advisory and Control Committee
Strategic Committee		Advisory and Control Committee
Innovation Committee		Advisory and Control Committee
Nominating, Compensation and Corporate Governance Committee		Advisory and Control Committee
Human Resources, Corporate Reputation and Responsibility Committee		Advisory and Control Committee
Regulation Committee		Advisory and Control Committee
Executive Commission		Corporate Body with general decision-making powers and express delegation of all the powers attributed to the Board of Directors, except those that cannot be delegated by law, bylaws or regulations.

	B.2.5		Indicate, if applicable, any regulations governing the Board committees, where they are made available for consultation and any amendments to the same made during the financial year. Indicate whether any annual report has been voluntarily drawn up on the activities of each committee.
			International Affairs Committee
			The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.
			As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.
			Audit and Control Committee
			The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. Besides this, the Audit and Control Committee is also specifically regulated in Article 31 bis of the By-Laws. These documents are available for consultation on the company website.
			As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.
			Service Quality and Customer Service Committee
			The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.
			As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.
			Strategic Committee
			The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.
			As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.

Innovation Committee

The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.

As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.

Nominating, Compensation and Corporate Governance Committee

The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.

As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.

Human Resources, Corporate Reputation and Responsibility Committee

The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.

As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.

Regulation Committee

The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. This document is available for consultation on the company website.

As mentioned in section B.2.3 above, the Board Committees draw up an internal Report summarizing the main activities and actions taken during the year detailing the issues discussed at the meetings and highlighting certain aspects regarding the powers and duties, composition and operation.

Executive Commission

The organization and operation of the Board of Directors Committees are governed by specific regulations contained in the Regulations of the Board of Directors. The Executive Commission is also regulated by Article 31 of the By-Laws. These documents are available for consultation on the company website.

B.2.6

Indicate whether the composition of the Executive Committee reflects the participation within the Board of the different types of Directors, on the basis of their type:

Yes

C

RELATED-PARTY TRANSACTIONS

C.1

Please state whether the Board in full has reserved the right to approve, upon receipt of a report in favor from the Audit Committee or any other Committee entrusted with doing so, the transactions that the company carried out with directors, significant shareholders or shareholders represented on the Board, or with people related with them:

Yes

C.2

List any relevant transactions entailing a transfer of resources or obligations between the company or its group companies and the significant shareholders in the company:

Name or		Name or corporate
company name of		name of the
significant		company or unit of		Nature of		Type of		Amount
shareholder		its group		relationship		transaction		(thousand euros)
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Finance leases (lessee)			15,349
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Guarantees			359
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Receipt of services			7,952
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Guarantees received			2,917
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Other income			4,245
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Commitments/ Guarantees cancelled			3

Name or		Name or corporate
company name of		name of the
significant		company or unit of		Nature of		Type of		Amount
shareholder		its group		relationship		transaction		(thousand euros)
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Finance leases (lessee)			1,676
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Rendering of services			179,099
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Other expenses			300
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Sale of goods (finished or in progress)			11,598
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Finance revenue			25,179
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Finance agreements: capital contributions and loans (lender)			142,229
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Finance agreements, loans and capital contributions (borrower)			188,504
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Commitments undertaken			159,148
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Financial expenses			33,974
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Leases			632
Banco Bilbao Vizcaya Argentaria, S.A.		Rest of Telefónica Group		Contractual		Amortization or cancellation of loans and finance leases (lessee)			3,962
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Dividends and other benefits paid			278,957
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Finance agreements: capital contributions and loans (lender)			212,905
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Finance revenue			16,862

Name or		Name or corporate
company name of		name of the
significant		company or unit of		Nature of		Type of		Amount
shareholder		its group		relationship		transaction		(thousand euros)
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Guarantees			12,641
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Finance agreements, loans and capital contributions (borrower)			247,900
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Dividends received			33,680
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Financial expenses			14,321
Banco Bilbao Vizcaya Argentaria, S.A.		Telefónica, S.A.		Contractual		Commitments undertaken			6,770,484
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Telefónica, S.A.		Contractual		Finance agreements, loans and capital contributions (borrower)			645,635
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Telefónica, S.A.		Contractual		Finance revenue			43,900
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Telefónica, S.A.		Contractual		Finance agreements: capital contributions and loans (lender)			367,699
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Telefónica, S.A.		Contractual		Dividends and other benefits paid			236,599
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Rest of Telefónica Group		Contractual		Other expenses			17
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Rest of Telefónica Group		Contractual		Leases			7,978
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Rest of Telefónica Group		Contractual		Guarantees received			1,189
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Rest of Telefónica Group		Contractual		Receipt of services			12,145
Caja de Ahorros y Pensiones de Barcelona, “la Caixa”		Rest of Telefónica Group		Contractual		Guarantees			966