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Construcciones y Auxiliar de Ferrocarriles (CAF) - AGM 15 june 2019

In item 4, the Board proposes to re-appoint Deloitte as the external auditor for fiscal years 2019 and 2020. The level of non-audit fees is reasonable, but we have serious concerns over the excessive tenure of Deloitte, which has been the external auditor of the Company for the past 29 years. Hence, we recommend opposition.

In item 6, shareholders are called to an advisory vote on the Annual Report on Directors' Remuneration. We strongly regret that the Board has not proposed any changes to the remuneration policy, despite the high level of opposition of shareholders in 2018 (23%). We also regret that the Company's contribution to the Chairman-CEO's pension plan increased from € 140'000 to € 1'000'000 (equal to 171% of his fixed remuneration), and the fixed fee for non-executive Directors increased by 43% in 2018, without clear justifications provided by the Board. Furthermore, the executive variable remuneration does not include long-term incentive plans or equity-based components, and it is not adequately structured to realize an alignment of interests with shareholders. Also taking into account that the maximum bonus to be paid in 2019 is not disclosed, we recommend opposition.

Underlying
Construcciones & Auxiliar de Ferrocarriles S.A.

Construcciones y Auxiliar de Ferrocarriles SA (CAF) is a Spain-based company engaged in the rolling stock manufacture. The Company's activities are divided into two business segments: Rolling stock, as well as Components and spare parts. The Rolling stock division focuses on the design, production and distribution of rolling stock and equipment for railway systems, such as high-speed vehicles, locomotives, trains for middle-distance transportation, commuter trains and electric motorcars, subway trains, streetcars, traction and signaling systems, as well as energy storage solutions. The Components and spare parts division offers elements and spare parts for rolling stock equipment, such as wheels, axles and gear units. In addition, the Company offers technical assistance, maintenance and after-sale services, as well as development of rail infrastructure, among others. It operates through numerous subsidiaries in Spain, France, Germany, the United States, Brazil and Mexico, among others.

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