1. TERRORISM COVER IN THE CONTEXT OF EXTRAORDINARY INSURANCE RISK

2. TERRORISM COVER GENERAL FRAMEWORK EXTRAORDINARY RISK SYSTEM OF COVER Geological NATURAL RISKS Climatic Terrorism Rebellion Political-socialSedition RisksUprising Popular Disturbance Actions by Armed Services

3. - The risks covered are defined legally. - Cover must be included in ordinary policies for personal accident insurance and certain sectors of property damage. - Subsidiary action by the “Consorcio de Compensación de Seguros”. - Compulsory surcharge collected by the entities issuing the ordinary policy. - Scope: Spanish territory. - Guarantee conditions: as in the ordinary policy (capital insured, etc.). - For property, only direct material damage is indemnified. BASIC FEATURES OF EXTRAORDINARY RISK COVER

4. LEGAL DEFINITIONS TERRORISM POPULAR DISTURBANCE Any violent action intended to destabilise the established political system, or to create fear and insecurity in the social context in which it occurs. Any group action intended to attack public peace, creating a disruption of order and causing personal injury or property damage.

5. TERRORISMTHE SITUATION FOLLOWING 11 SEPT. AIR NAVIGATION: (Civil liability to non-passengers) ECOFIN authorises support measures through reinsurance for the account of the State SPAIN: Reinsurance for the account of the State, administered by the “Consorcio de Compensación de Seguros”

6. TERRORISM THE SITUATION FOLLOWING 11 SEPT. TERRORISM REINSURANCE FOR LOST PROFIT, BY THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” THE CCS-UNESPA AGREEMENT 31-1-2002 COVER FOR ALL POLICIES, AND IN ALL CATEGORIES

7. SUBSIDIARITY SOLIDARITYMUTUALISATION COMPENSATION GEOGRAPHICAL BETWEEN RISKS TIMING COLLABORATION EXTRAORDINARY RISKS COVER FUNDAMENTALS PRINCIPLES

8. EXTRAORDINARY RISKS INDEMNIFICATION REQUISITES TO HOLD DAMAGE INSURANCE IN CERTAIN CLASSES COMPULSORY INCLUSION OF EXTRAORDINARY RISKS PAYMENT OF THE COMPULSORY SURCHARGE

9. FIRES AND NATURAL FORCES, MOTOR VEHICLES (Not Civil Liability), RAILVEHICLES, ROBBERY, BROKEN WINDOWS, BREAKDOWN OF MACHINERY, ELECTRONIC EQUIPMENT AND COMPUTERS, FINISHED CIVIL ENGINEERING WORK, PERSONAL ACCIDENTS CLASSES ACCESSIBLE TO THE “CONSORCIO”

10. EXTRAORDINARY RISKS INSURER PRIVATE COMPANY: If wished, Extraordinary Risks may be covered: - Along with ordinary risk cover. - In a separate policy.

11. EXTRAORDINARY RISKS INSURER THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS”: Covered when: - The private company gives no explicit cover. (SUBSIDIARITY) - The private company does provide cover, but cannot meet its indemnification obligations (bankruptcy, temporary receivership, CLEA) (GUARANTEE FUND) THE “CONSORCIO” DOES NOT DIRECTLY UNDERWRITE THE COVER

12. EXTRAORDINARY RISKS CHARACTERISTICS OF COVER LEGALLY DEFINED QUALITATIVE AND NOT QUANTITATIVE: Not conditioned by territorial extension, by the number of affected parties, or extensive damage. AUTOMATIC: Official declaration as a catastrophic area is not required.

13. EXTRAORDINARY RISKS RISKS COVERED NATURAL PHENOMENA EARTHQUAKE SEAQUAKE FLOOD VOLCANIC ERUPTION ATYPICAL CYCLONIC STORM FALLING SIDEREAL BODIES PHENOMENA WITH POLITICAL-SOCIAL EFFECTS TERRORISM REBELLION SEDITION UPRISING POPULAR DISTURBANCE ACTION BY THE ARMED FORCES

14. EXTRAORDINARY RISKS DAMAGE DIRECT MATERIAL DAMAGE INDEMNIFIABLE LOSSES EXPENSES Salvage Demolition and clearing

15. EXTRAORDINARY RISKS SCOPE OF COVER RISKS COVERED: Extraordinary Risks SUM INSURED : That of the ordinary insurance PROPERTY AND PERSONS COVERED: those under the ordinary cover TERMS INCLUDED OPTIONALLY Included in the ordinary cover: first risks, indemnification limits. Application of the PROPORTIONAL RULE EXCLUSION PERIOD 30 days following the effective date of the policy INDEMNIFICATION FRANCHISE (Property Damage) GENERAL: 10% loss LARGE CAPITALS: 15% NO > 1 % of the insured sum < 150.25 Euros

16. OCCURRENCE DIRECT C.C.S. PAYMENT TO THE INSURED Verification APPRAISALOccurrence Cause covered CLAIM Companies C.C.S. EXTRAORDINARY RISKS CLAIM MANAGEMENT

17. THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” EXTRAORDINARY RISKS: COVER FOR TERRORISM AND POPULAR DISTURBANCE PROPERTY DAMAGE - CONSUMPTION OF PREMIUM. ALL CAUSES - AMOUNTS PAID ACCORDING TO CAUSES - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE, ALL CAUSES - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE BY THE YEAR OF LOSS - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE ACCORDING TO RISK TYPE

18. THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” EXTRAORDINARY RISKS: COVER FOR TERRORISM AND POPULAR DISTURBANCE DAMAGE TO PERSONS - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE, ALL CAUSES - AMOUNTS PAID FOR TERRORISM AND POPULAR DISTURBANCE BY THE YEAR OF LOSS - NUMBER OF VICTIMS OF TERRORISM AND POPULAR DISTURBANCE

19. THE “CONSORCIO DE COMPENSACIÓN DE SEGUROS” EXTRAORDINARY RISKS: COVER FOR TERRORISM AND POPULAR DISTURBANCE THE MOST COSTLY INDIVIDUAL LOSS CAUSED BY TERRORISM Note: - All figures in Euros - All figures updated in Euros to 31-12-2001 PROPERTY AND PERSONAL LOSS - AMOUNTS PAID ACCORDING TO CAUSES

20. EXTRAORDINARY RISKS: PREMIUM CONSUMPTION, PROPERTY DAMAGE SERIES 1971 - 2001 ALL CAUSES EXTRAORDINARY RISKS Updated Premiums and Loss Rate 0 500.000.000 1.000.000.000 1.500.000.000 2.000.000.000 2.500.000.000 3.000.000.000 1971 - 19801981 - 1990 1991 - 20002001 SERIES PremiumsLoss Rate EUROS

21. EXTRAORDINARY RISKS – PROPERTY DAMAGE SERIES 1971 – 2001 (*) Includes former cover for rain, hail, snow and hurricance. (**) Unclassified loss rate for the first years in the series.

22. EXTRAORDINARY RISKS: PROPERTY DAMAGE SERIES 1971 - 2001 EXTRAORDINARY RISKS Property Damage Loss Rate by Cause 9% 91% Terrorism + Popular Disturbance Other causes

23. EXTRAORDINARY RISKS – PROPERTY DAMAGE. SERIES 1971 - 2001 SUMS PAID UPDATED, BY YEAR OF OCCURRENCE EXTRAORDINARY RISKS: PROPERTY Amounts paid (updated), Terrorism and Popular Disturbance 0 10 20 30 40 50 1971197319751977197919811983198519871989199119931995199719992001 Millions of Euros YEARS EUROS

24. EXTRAORDINARY RISKS – PROPERTY DAMAGE SERIES 1994 – 2001 UPDATED SUMS PAID, DISTRIBUTED BY RISK TYPE CAUSE OF LOSS: TERRORISM AND POPULAR DISTURBANCE UPDATED AMOUNTS PAID SERIES: 1994 - 2001. Percentage Distribution 20% 27% 28% 8% 16% 1% Homes and Communities Offices Commerce and Other, Simple Industrial Automobiles Civil Engineering Work

25. EXTRAORDINARY RISKS: PERSONAL DAMAGE. SERIES 1987 - 2001 EXTRAORDINARY RISKS: Personal Damage Loss Rate by Causes 10,8% 89,2% Terrorism + Popular Disturbance Other Causes

26. EXTRAORDINARY DAMAGE – PERSONAL DAMAGE SERIES 1987 - 2001 UPDATED AMOUNTS BY YEAR OF OCCURRENCE EUROS

27. EXTRAORDINARY RISKS – PERSONAL DAMAGE SERIES 1994 - 2001 NUMBER OF VICTIMS BY YEAR OF OCCURRENCE OF LOSS CAUSE OF LOSS: TERRORISM AND POPULAR DISTURBANCE

28. DATE: 18 April 1982 PLACE: Madrid UPDATED SUMS PAID: 37.331.580 Euros INSURED: Telefónica, S.A. THE MOST COSTLY INDIVIDUAL CLAIM CAUSED BY TERRORISM

29. EXTRAORDINARY RISKS – PROPERTY AND PERSONAL DAMAGE - SERIES 1987 - 2001 EXTRAORDINARY RISKS: Property and Personal Damage Loss rate by Causes 85,4 9,7 2,2 2,7 Flood Terrorism Popular Disturbance Rest