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Uría & Menéndez Madrid

As a general rule, any substantial alteration of the characteristics of securities whose primary issue or secondary offering was subject to the prospectus requirements set forth in Law 24/1988, of July 28, on the Securities Market, and related secondary legislation, requires the filing of a notice by the issuer with the National Securities Markets Commission (the CNMV). This must detail the intended alteration to the relevant securities. Once the appropriate corporate resolution has been passed by the issuer, it must also file a reduced prospectus (folleto reducido) describing the modifications approved and the new characteristics of the relevant securities, to be made available to the public, together with other related documentation.

The CNMV has recently developed an official position, in the form of Circular Letter 2/1999, of July 19, describing which modifications to securities issued can be considered non-material for investors and, therefore, be exempted from the burdensome prospectus requirement referred above. These are the following: (i) alterations in capital involving either an increase of the nominal value of all shares issued out of reserves, or a reduction of such nominal value for the purposes of compensating incurred losses or returning capital contributions to shareholders; (ii) share splits and consolidations; (iii) any alterations in capital resulting from the redenomination of a listed company's stock into euros where the increase is made out of reserves or the amount of the reduction is devoted to the creation of a special reserve; and (iv) any other modifications which are deemed not to be material for investors by the CNMV further to a request for a formal opinion on the matter by the relevant issuer.

Non-material modifications to outstanding securities, once approved, only require the immediate release by the issuer of a communication to the CNMV and to the markets detailing the modifications as well as the filing with the CNMV and the Exchange authorities of the pertinent corporate resolutions.

Luis de Carlos/Javier Redonet

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