3. BOARD OF DIRECTORS

Except for those issues reserved to the General Meeting of Shareholders, the Board of Directors is the highest decision-making, supervisory and controlling body of the Company, as it is entrusted with its administration, management and representation, delegating as a general rule the management of the day-to-day business of Inditex to its executive bodies and the management team and focusing on the general supervisory function which includes guiding Inditex’s policy, monitoring the management bodies, assessing the management by the senior management, making the most relevant decisions for the Company and liaising with shareholders.

It is also incumbent on the Board of Directors to ensure that the Company enforces its social and ethical duties, and its duty to act in good faith with regard to its relationship with its employees and with third parties, as well as to ensure that no individuals or small groups of individuals have a decision making power within the company which has not been subjected to checks and balances, and that no shareholder receives privileged treatment.

The Board performs its functions in accordance with the corporate interest, understood as the viability and maximisation of the company’s long term value in the interest of all shareholders. This will not prevent appropriate weight being given to other lawful interests, either public or private, that arise in the course of the company’s business activities, and especially for those of the other “shareholders” of the Company (employees, clients, suppliers and civil society in general). Inditex is committed to determining and reviewing its business and financial strategies pursuant to said criterion, seeking to achieve a reasonable balance between the selected proposals and the risks taken.

AUTHORITIES

The Board of Directors shall directly exercise the following powers:

1. Approval of the general policies and strategies of the Company, and namely:
   1. The strategic or business plan as well as the annual management goals and budget;
   2. The investment and financing policy;
   3. The dividends and treasury stock policy and namely, the limits thereof, pursuant to statute;
   4. The design of the structure of the corporate group of which the Company is the controlling company;
   5. The risks control and management policy, including tax risks, and the periodic monitoring of its internal information and control systems;
   6. The definition of the tax strategy of the Company;
   7. The corporate governance policy; and
   8. The corporate social responsibility policy.
2. Approval of the following decisions:
   1. The drafting of the annual accounts, the management report and the proposal for the allocation of income or loss of the Company and the consolidated annual accounts and management report to be submitted to the General Meeting of Shareholders.
   2. The notice calling the General Meeting of Shareholders, determining its agenda and preparing the proposed resolutions to be submitted thereto;
   3. The approval of the financial information that the Company, being a listed company, must periodically release;
   4. The approval of the Annual Corporate Governance Report, the Annual Report on the Remuneration of Directors and the issue of any manner of reports that the Board of Directors should recommend or which it must issue pursuant to statute, provided that the transaction covered by such report is not eligible to be delegated;
   5. The approval of any manner of investments or transactions, which, are considered strategic or deemed to have a special tax risk, unless the approval thereof falls on the General Meeting of Shareholders.
   6. The creation or acquisition of shares in special purpose vehicles or entities resident in countries or territories considered as tax havens, and any other transactions or operations of a comparable nature whose complexity might impair the transparency of the group, and,
   7. The approval, after report of the Audit and Control Committee, of the transactions of the Company or of any of the companies within its Group with directors, shareholders or Related Parties.
3. The following internal proceedings of the Board of Directors:
   1. To decide on the organization and proceedings of the Board of Directors, including namely:
      • The approval and amendment of the Board of Directors’ Regulations;
      • The appointment, on the proposal or after report of the Nomination Committee, as the case may be, of the internal offices within the Board of Directors, and the members and internal offices of its committees;
      • The election, on the proposal or after report of the Nomination Committee, as the case may be, of directors through the co-option procedure to fill any vacancies which may occur within the Board of Directors; and
      • Submitting to the General Meeting of Shareholders motions to elect, re-elect, ratify or remove directors.
   2. The approval of a specific and ascertainable policy for the selection of directors that ensures that proposed election or re-election is duly supported by a prior analysis of the requirements of the Board of Directors and that favours diversity of knowledge, experience and gender;
   3. The proposal of the amount of the remuneration of directors as such to the General Meeting of Shareholders, as well as the approval of the remuneration of executive directors, in both cases, on the proposal of the Remuneration Committee and pursuant to the Articles of Association and the remuneration policy for directors approved by the General Meeting of Shareholders;
   4. The appointment and removal of chief executive officers as well as the prior approval of the contracts to be executed between the Company and the directors to whom executive duties are assigned;
   5. Overseeing and evaluating on an annual basis:
      • The quality and efficiency of the proceedings of the Board of Directors itself and its delegated bodies;
      • The diversity in the composition and skills of the Board of Directors
      • The performance of duties by the Chairman of the Board of Directors and by the chief executive of the company;
      • The performance of its supervisory and control committees based upon the reports furnished by the same; and
      • The performance and contribution of each director, especially that of the chairs of the different Committees of the Board of Directors.
      Where the Chairman of the Board of Directors would discharge executive duties, his assessment shall be led by the Lead Independent Director
      
      To proceed to such evaluation, the Board of Directors may rely on the support of external advisors and on such internal resources which it may, from time to time, deem fit. Notwithstanding the foregoing, the Board of Directors shall be assisted every three years, by an external advisor, once the Nomination Committee has established his/her independence, to proceed to such evaluation. Upon evaluating the independence of the external advisor, the relations that such advisor, or any company within its Group, may have with the Company or with the Group shall be considered. Such relations shall be detailed, as the case may be, in the Annual Corporate Governance Report.
      
      The Board of Directors shall carry out an annual evaluation of its proceedings and of that of its Committees and it will propose an action plan to correct the shortcomings revealed. The result of the evaluation shall be recorded in the minutes of the meeting of the Board of Directors or attached thereto as an annex.
   6. The authorization or release from the obligations stemming from the duty of loyalty of directors, after report of the Nomination Committee, where such responsibility is not incumbent on the General Meeting of Shareholders;
4. The following issues regarding senior executives:
   1. The appointment and dismissal of senior executives after report of the Nomination Committee;
   2. The approval of the basic terms and conditions of the contract with senior executives, including their remuneration and, where appropriate severance clauses, after report of the Remuneration Committee;
   3. Overseeing the proceedings of the senior executives appointed by the Board of Directors.
5. The remaining responsibilities reserved by the Board of Director Regulations and the applicable laws and regulations.

COMPOSITION

9 members sit on the Board of Directors: 4 non-executive independent directors, 3 non-executive proprietary directors, 1 affiliate director and 1 executive director.

As at 31 January 2017 the Board of Directors is comprised of the following members:

PROFILE OF DIRECTORS

- Mr Pablo Isla Álvarez de Tejera

Mr Isla has been the Chairman of the Board of Directors since 2011. He has been Deputy Chairman of the Board of Directors and CEO since 2005. Mr. Isla is a law graduate from Complutense University of Madrid and Abogado del Estado [State lawyer]. From 1992 to 1996, he was Director of Legal Services for Banco Popular. He went on to be appointed General Director of State Assets at the Ministry of Economy and Finances. From July 2000 to 2005 he was Chairman of Altadis Group.

Mr Isla was re-elected to the Board of Directors by the Annual General Meetings held on 13 July 2010 and 14 July 2015.

- Mr Amancio Ortega Gaona

Mr Ortega is the founding and controlling shareholder of Inditex. He began his textile manufacturing operations in 1963. In 1972 he founded Confecciones Goa, S.A., the first garment-making factory of Inditex, and three years later he founded Zara España, S.A., the first distribution and retailing company.
Mr Ortega was re-elected to the Board of Directors by the Annual General Meetings held on 30 June 1990; 13 July 1995; 20 July 2000; 15 July 2005; 13 July 2010 and 14 July 2015.

- Mr José Arnau Sierra

Mr Arnau has been the Deputy Chairman of the Board of Directors since 2012. A law graduate from the University of Santiago de Compostela and State Tax Inspector, Mr Arnau has been the first executive of Grupo Pontegadea since 2001, member of the Board of Directors of Gartler, S.L. from 1997 until the absorption of the company by Pontegadea Inversiones, S.L. in 2015, and a Director at the latter since its incorporation back in 2001; likewise, he has been a member of the Board of Trustees of Fundación Amancio Ortega Gaona since 2001. He was the director of Inditex’s Tax Department and member of its Steering Committee from 1993 through 2001, and he also served on the Board of Directors of the company from 1997 through 2000. He has sat on several Boards of Directors representing Pontegadea. He was Profesor asociado [Part-time instructor] of Tax Law at the University of Corunna from 1993 through 1996.

Mr. Arnau was appointed to the Board of Directors in June 2012 and ratified in such office by the Annual General Meeting held on 17 July 2012.

- Pontegadea Inversiones, S.L.

Pontegade Inversiones, S.L. is represented in the Board of Directors of Inditex by Ms Flora Pérez Marcote, and directly holds 1,558,637,990 shares in the Company, which represents 50.01% in the share capital. This company was appointed to the Board of Directors in December 2015, following the merger by absorption of Gartler, S.L.

Ms. Flora Pérez Marcote is a Legal representative of Pontegadea Inversiones S.L. She began her professional career at the Zara format, where she held various roles related to design and purchase of products. In addition to her job at this subsidiary, she has had broad experience as a company director for upwards of 15 years. Additionally, she has been Deputy Chair of the Board of Trustees of Fundación Amancio Ortega Gaona since October 2005 and a member of such Board since March 2003.

Pontegadea Inversiones S.L. was appointed to the Board of Directors on 9 December 2015 and ratified on 19July 2016.

- Ms. Denise Patricia Kingsmill

Ms Kingsmill has been an independent director since July 2016. Baroness Kingsmill CBE is a member of the House of Lords and of the EU Financial Affairs Sub-Committee. Currently, Baroness Kingsmill CBE is a non-executive director of the Supervisory Board of EON, a non-executive director of International Airlines Group S.A., and a non-executive director of Telecom Italia. She is also a member of the International Advisory Board at the Spanish Business School, IESE.

She was appointed to the Board of Directors of Inditex on 19 July 2016.

- Mr José Luis Durán Schulz

He has been an independent director since July 2015. He holds a degree in Economics and Management from ICADE (Instituto Católico de Administración y Dirección de Empresas). From 1987 through 1990, he was an auditor at Arthur Andersen. In 1991, he joined Carrefour Group, where he held the following positions: Head of Management for Spain, Europe and Latin America (1991-1997); Chief Financial Officer for Spain (1997-2001); Group Chief Financial Officer (2001-2005) and Group Chief Executive Officer (2005-2008). In July 2009, he joined Maus Frères International Group, based in Switzerland, where he held the following positions, until January 2015: Chief Executive Officer of Lacoste, Chairman of Gant and Board member of Aigle. Until 31 December 2015, he was a member of the Governance, Remuneration and Nomination Committee at Unibail-Rodamco, and until 4 October 2016, he was a member of the Board of Directors of such company. At the present time, he is an independent director and member of the Audit Committee of Orange and CEO of Value Retail Management.

Fue designado consejero el 14 de julio de 2015.

- Mr Rodrigo Echenique Gordillo

Mr. Echenique has been an independent director since July 2014. He is a law graduate from Complutense University of Madrid and Abogado del Estado [State lawyer] currently on leave. From 1973 through to 1976 he held various positions in the State Administration. From 1976 through 1983 he was Head of Legal Services and subsequently Deputy General Manager at Banco Exterior de España. From 1984 to 1994 he held different positions at Banco Santander, where he became a member of the Board of Directors in October 1988, being appointed at the same time Chief Executive Officer and member of the Executive Committee where he served until September 1994. From October 1994 through to January 1999, he was a member of the Board of Directors, the Executive Committee and all Board Committees of Banco Santander, chairing the Audit and Control Committee, and was Deputy Chairman of Banco Santander de negocios and Santander Investment. Since January 1999, he has been a member of the Board of Directors, the Executive Committee and the Executive Committee of Risks. He has been Deputy Chairman of Banco Banif, S.A., Chairman of Allfunds Bank, and Chairman of SPREA. He has been a member of the Board of Directors of Banco Santander International and Santander Investment. He has been Ordinary Member of the Board of Directors of different industrial and financial companies such as Ebro Azúcares y Alcoholes, S.A., Industrias Agrícolas, S.A., SABA, S.A. and Lar, S.A. He was also a member and subsequently Chairman of the Advisory Board of Accenture, S.A., Lucent Technologies, and Quercus y Agrolimen, S.A. He has been the Chairman of Vallehermoso, S.A., Vocento, S.A., NH Hotels Group, and Metrovacesa, S.A.

At present, he is Executive Deputy Chairman of Banco Santander, member of the Executive Committee and Chairman of Santander España.

He has chaired the Board of Directors of Merlin Properties SOCIMI, S.A.

He has been Deputy Chairman of the Chamber of Commerce of Spain.

Likewise, he is a member of the Board of Trustees of Fundación Banco Santander, of Plan España, of the Board of Trustees of Fundación Consejo España-EE.UU, of Fundación Empresa y Crecimiento and of Fundación ProCNIC and CNIC. From July 2001 through February 2008, he chaired the Social Advisory Board of Carlos III University of Madrid.

Mr. Echenique was appointed to the Board of Directors on 15 July 2014.

- Mr Carlos Espinosa de los Monteros Bernaldo de Quirós

Mr Espinosa de los Monteros has been a director since May 1997. He is a law and business studies graduate from ICADE, and a Commercial Expert and State Economist. He has been the Chairman of the Board of Directors of Mercedes Benz España, Deputy Chairman of the Instituto Nacional de Industria, Chairman of the Board of Directors of Iberia and Aviaco, member of the Executive Committee of the International Air Transport Association and Chairman of the Círculo de Empresarios, of the Spanish Association of Car and Truck Manufacturers and of the International Organization of Motor-Vehicle Manufacturers. At the present time he chairs Fraternidad-Muprespa. He has been awarded the Grandes Cruces del Mérito Civil and Mérito Aeronáutico. He was appointed Alto Comisionado del Gobierno para la Marca España [High Commissioner for the Brand “Spain”] in July 2012.

Mr Espinosa was appointed to the Board of Directors in May 1997 and re-elected by the Annual General Meetings held on 20 July 2000, 16 July 2004, 14 July 2009 and 15 July 2014.

- Mr Emilio Saracho Rodríguez de Torres

Mr Saracho has been an independent director since June 2010. A graduate in economics from the Complutense University of Madrid, he has an MBA from the University of California in Los Angeles (UCLA), awarded in 1980. He was also a Fulbright scholar. Mr Saracho began his career in 1980 in Chase Manhattan Bank, where he was responsible for operations in different sectors such as Oil and Gas, Telecommunications and Capital Goods. In 1985, he took part in the launching and implementation of Banco Santander de Negocios, where he led the Investment Banking division. In 1989, he was appointed head of the Division of Large Companies of Grupo Santander and Deputy General Director. He has been a director of FISEAT, Santander de Pensiones and Santander de Leasing. In 1990, he worked for Goldman Sachs in London as co-head of Spanish and Portuguese operations. In 1995, he returned to Santander Investment as General Director in charge for the Investment Banking area worldwide. From 1996 to 1998, he was responsible for the Banking operations in Asia. Mr Saracho joined J.P. Morgan in 1998 as Chairman for Spain and Portugal and head of business for the Iberian Peninsula and member of the European Management Committee. From early 2006 through 1 January 2008, he was Chief Executive Officer of J.P. Morgan Private Bank for Europe, the Middle East and Africa, based in London. He also sat on the Operating Committee and on the European Management Committee, while chairing at the same time J.P. Morgan in Spain and Portugal. He is in charge of Investment Banking operations of J.P. Morgan for Europe, the Middle East and Africa. He sits on the Executive Committee of the Investment Bank and on the Executive Committee of JPMorgan Chase. From December 2012 through April 2015, he was Deputy CEO for EMEA. He was Vice Chairman of JPMorgan Chase & Co. At present, he holds the office of director on the Board of International Consolidated Airlines Group, S.A. and chairs the Board of Directors of Banco Popular.

Mr. Saracho was appointed to the Board of Directors on 13 July 2010 and re-elected by the Annual General Meeting held on 14 July 2015.

GENERAL COUNSEL AND SECRETARY OF THE BOARD OF DIRECTORS

Mr. Antonio Abril Abadín is the General Counsel and Secretary of the Board of Directors. Likewise, he is the Secretary of all Inditex’s Board Committees.

The appointment and removal of the Secretary of the Board must be approved by the Board of Directors in plenary session, after report of the Nomination Committee. The Secretary need not be a director.

The Secretary shall support the Chairman in his duties and must provide for the smooth running of the Board taking particular care to provide directors with necessary advice and information, keep the documents of the Company, minute proceedings and certify Board’s resolutions. When directors or the Secretary himself/herself should express concern about some proposal or, in the case of directors, about the company’s performance, and such concerns are not resolved by the Board, they will be acknowledged in the minutes at the request of the person expressing them. Likewise, the Secretary shall devote particular attention to the formal and material legality of the Board’s actions and ensure that the corporate governance principles and the Company’s internal rules and regulations, are observed.

GENDER DIVERSITY

Pursuant to the internal regulations covered in the Board of Directors’ Regulations and in the Nomination Committee’s Regulations, the Nomination Committee must set a representation target for the least represented gender on the Board of Directors and prepare guidelines on how to reach such goal and ensure that, when filling any new vacancies and when appointing new directors, selection processes conform to the prohibition of any manner of discrimination. Pursuant to Inditex’s “Director Selection Policy”, efforts will be made so that by 2020, the number of female directors sitting on the Board will represent at least 30% of the total number of members of the Board of Directors.

Additionally, pursuant to the provisions of section 529 bis 2 of the Companies Act, the Board of Directors shall ensure that gender, experiences and knowledge diversity is fostered in recruitment processes of directors.

As at 31 January 2017 two female directors sat on the Board of Directors: Ms. Flora Pérez Marcote (representing Pontegadea Inversiones, S.L., non-executive proprietary director) and Ms Denise Patricia Kingsmill (non-executive independent director); such presence represents 22.22% on the aggregate number of Directors, Inditex being above the average of IBEX35 companies.

Additionally, Ms. Denise Patricia Kingsmill sits on the Audit and Control Committee, on the Nomination Committee and on the Remuneration Committee, which represents a percentage of 16.7% female directors versus the aggregate number of members of such Board Committees.

Meanwhile, pursuant to the Code of Conduct and Responsible Practices of the Inditex Group, no one who is employed at Inditex shall be discriminated against because of their gender, and all employees shall be bound to interact with other employees, pursuant to criteria of respect, dignity and taking into account the different cultural background of each individual, fair treatment with zero tolerance for any manner of violence, harassment or abuse in the work place, or any manner of discrimination on account of race, religion, age, nationality, gender or any other personal or social circumstances.

MEMBERSHIP OF DIRECTORS ON BOARD OF DIRECTORS OF OTHER LISTED COMPANIES

The Board of Directors may not propose or appoint any persons to fill a vacancy on the Board who already performs the duties of Directors at the same time, in more than four listed companies outside the Company.

As at 31 January 2017, Directors who held offices in listed companies in Spain other than Inditex are shown below:

SELECTION, APPOINTMENT, RE-ELECTION AND REMOVAL OF DIRECTORS

The system for the selection, appointment and re-election of members of the Board of Directors constitutes a formal and transparent procedure, expressly regulated in the Articles of Association, the Board of Directors’ Regulations and the Nomination Committee’s Regulations.

The “Director Selection Policy” was approved by the Board of Directors in the meeting held on 9 December 2015. According to such Policy, selection processes of prospective directors shall be based upon a prior analysis of the needs of the Company and of the Board of Directors itself. Such analysis shall be carried out by the Board of Directors on the advice of the Nomination Committee.

The outcome of such prior analysis shall be recorded in a supporting report issued by the Nomination Committee, which may be posted on the corporate website upon calling the General Meeting to which the nomination, ratification or re-election of each director is submitted.

Prospective directors of the Company shall meet the following requirements:

• Be honest, suitably qualified persons of recognised ability, competence, experience and merits.
• Be trustworthy professionals, whose conduct and career history is in line with the principles laid down in the Code of Conduct and Responsible Practices and with the views and values of the Inditex Group.

In our meeting held on 13 June 2016, the Nomination Committee issued a report covering Board of Directors’ needs regarding the ratification, appointment or re-election of directors. In this report, the Nomination Committee considered that, in order for the Board of Directors to duly perform its supervision duties, its members shall meet, as a whole, the following requirements:

En su sesión de 13 de junio de 2016, la Comisión de Nombramientos formuló un informe en relación con las necesidades del Consejo de Administración relativas a la ratificación, el nombramiento o la reelección de consejeros. En este informe, la Comisión de Nombramientos considera que, para que el Consejo desempeñe un correcto ejercicio de su labor de supervisión debe, en su conjunto, reunir las siguientes competencias:

1. Have knowledge and expertise regarding the retail sector.
2. Be well versed in economic and financial, as well as accounting, audit and risk management matters.
3. Be aware of and committed to regulatory compliance and corporate governance matters.
4. Have international experience as well as experience in different geographical matters.
5. Have experience in management, leadership and business.

In the process of director selection, efforts shall be made to ensure that the Board of Directors reaches an appropriate balance of profiles, knowledge, skills, careers and experiences with a view to fostering diversity within the business and its management team’s decision making.

Those persons who are on legal grounds disqualified from holding the office of director, or who do not meet the requirements laid down by the Company’s corporate governance rules shall not be eligible to be a director.

The Board of Directors may not put forward or appoint, to fill any vacancy as director, anyone who holds the office of director in more than four listed companies out the Company.

The Nomination Committee shall take all necessary measures and make all appropriate enquiries to ensure that candidates are not involved in any of the scenarios described in the foregoing paragraphs.

The Company may rely on external advisors with regard to the prior analysis of the needs of the Company, the search or assessment of potential candidates or the evaluation of their performance.

It is incumbent on the Nomination Committee to establish and ensure the effective independence of the experts referred to in the paragraph above.

Pursuant to the provisions of the Articles of Association, the Board of Directors’ Regulations and the Nomination Committee’s Regulations, directors shall be appointed by the General Meeting of Shareholders or by the Board of Directors, pursuant to statute and the corporate governance regulations of the Company.

The proposals for the election, ratification or re-election of directors that the Board of Directors submits to be considered by the Annual General Meeting, and the election resolutions passed by the Board of Directors by virtue of the powers to co-opt that are legally reserved to it, must be preceded by (i) a motion made by the Nomination Committee with regard to independent directors, or by (ii) a report from the Nomination Committee regarding the remaining categories of directors. The above referred motion and report shall be prepared by the Nomination Committee and include category to which the relevant director belongs, this classification being duly supported.

The proposals for the election of directors that the Board of Directors submits to be considered at the Annual General Meeting shall be accompanied by an explanatory report issued by the Board of Directors assessing the qualifications, experience and merits of the proposed candidate; such report shall be attached to the minutes of the Annual General Meeting or of the Board of Directors itself. Additionally, with regard to the ratification or re-election of directors, the explanatory report shall assess the quality of the director’s work and their dedication to office during their mandate, as well as their observance of the company’s corporate governance rules.

Where the Board of Directors departs from the motions and reports of the Nomination Committee, it must state the reasons for its actions and submit them on the record.

The Board of Directors shall explain to the Annual General Meeting in charge of appointing, ratifying or re-electing directors the class of such directors, and said class shall be confirmed or, where appropriate, reviewed on an annual basis in the Annual Corporate Governance Report, after verification by the Nomination Committee.

The Nomination Committee has set a representation target for the least represented gender on the Board of Directors in addition to guidelines on how to reach a target.

At any rate, efforts shall be made to ensure that by 2020, the number of female directors would represent at least thirty percent of the aggregate number of Board members.

The Nomination Committee shall establish on an annual basis compliance with the Director Selection Policy and inform thereof the Board of Directors, which shall disclose such information in the Annual Corporate Governance Report.

During FY2016, Ms Denise Patricia Kingsmill, a non-executive independent director, Pontegadea Inversiones, S.L., a proprietary director, were appointed to the Board of Directors. Likewise, Ms Flora Pérez Marcote, legal representative of Pontegadea Inversiones, S.L., was also appointed.

RESIGNATION OF DIRECTORS

Directors must resign in such scenarios which could have a negative impact on the proceedings of the Board of Directors or the credit and reputation of Inditex.

Additionally, directors must place their office at the disposal of the Board of Directors and, should the latter deem it appropriate, tender their resignation in the following cases:

1. When they reach a certain age.
2. When they cease to hold such executive positions to which their appointment as director was associated.
3. When they are involved in any of the grounds of incompatibility or prohibition foreseen in the Law, the Articles of Association or in the Board of Directors’ Regulations, including if they suddenly come to hold the office of director in more than four listed companies other than the Company.
4. When they are seriously admonished by the Audit and Control Committee for having breached their duties as directors.
5. When their remaining on the Board might have an impact on the reputation or name of the Company or otherwise jeopardize the interest of the company. For such purposes, they shall report to the Board of Directors any criminal cases in which they are accused as well as any subsequent procedural consequences.
6. When the reasons for their appointment disappear.

For their part, proprietary directors must resign when the shareholders they represent dispose of their ownership interest in its entirety or reduce it up to a limit which requires the reduction of the number of proprietary directors.

PROCEEDINGS OF THE BOARD OF DIRECTORS

QuOrum

Any Board meeting will be validly held when it is attended by at least half plus one of its members, whether in person or by proxy. Should the Board of Directors be comprised of an odd number, it will be validly held when it is attended by the whole number of directors immediately above half.

Directors shall do their best to attend the meetings of the Board of Directors, and, when they cannot do so in person, they shall endeavour to grant a proxy to another member of the Board of Directors, giving instructions as to its use and communicating the same to the Chairman of the Board of Directors. Non-executive directors may be represented exclusively by another non-executive member of the Board of Directors.

ATTENDANCE TO MEETINGS

Directors’ attendance data, both in person or by proxy, to meetings held during FY2016 are shown below:

PASSING OF RESOLUTIONS

Except for a number of cases provided in Inditex’s internal regulations, for resolutions to be passed, an absolute majority of votes by the directors attending the meeting shall be required.

Notwithstanding the above, it shall be necessary that two-thirds of the members of the Board to vote for to permanently delegate any power of the Board of Directors to the Executive Committee or to the Chief Executive Officer, should there be one, and to appoint the directors required to fill such positions.

Likewise, in order to amend the Board of Directors’ Regulations, the resolution must be passed by a majority of two-thirds of the directors present.

The Chairman of the Board of Directors has a casting vote in the event of equality of votes between the directors attending the meeting.

PROXY GRANTING

Any director can grant proxy representation to another director in writing, such proxy having to be granted specifically for each meeting, through prior wirtten communication to the Chairman. Non-executive directors may only grant proxy to other non-executive directors.

EXTERNAL ADVICE

In order to be aided in the performance of their duties, non-executive directors may request that legal, accounting, technical, financial, commercial or other experts be engaged at the Company’s expense. The commissioned task must of necessity deal with problems of a certain magnitude and complexity which may arise in the performance of the office.

The decision to engage external experts must be notified to the Chairman of the Board of Directors and it may be open to veto by the Board of Directors if it proves that: a) such engagement is not necessary for the proper performance of the duties entrusted to the non-executive directors; b) the cost thereof is not reasonable in view of the importance of the problem and of the assets and income of the Company; c) the technical assistance obtained may be adequately provided by in-house experts and technicians or; d) the confidentiality of the information to be provided to the expert may be jeopardized.

INFORMATION

The notice for the ordinary meetings of the Board of Directors shall be given at least three days in advance of the meeting, and the notice shall always include the agenda of the meeting and shall be accompanied by the duly summarized and prepared relevant information.

Likewise, Directors have the widest powers to: obtain information on any issue of the Company (and its subsidiary companies); examine its books, registers, documents and other records of the company’s operations and inspect all its facilities, likewise it is also provided that the exercise of the powers of information shall be channeled through the Chairman, the Deputy Chairman or the Secretary of the Board of Directors, who will attend to the requests of directors by providing them with the information directly, putting appropriate spokespersons at the appropriate level in the organization or establishing such measures so as to enable them to conduct the desired examinations and inspections in situ.

Meanwhile, Directors are bound to diligently gather information on the course of business of the Company and prepare suitably for Board meetings and for any committees they belong to.

ASSESSMENT PROCEEDINGS

It is incumbent on the Nomination Committee to establish and oversee an annual programme for evaluating the performance of the Board of Directors, its Chairman, its delegate bodies and its supervisory and control committees. The assessment system in respect of the Board of Directors, its members, its committees and of the Chairman, is carried out as follows:

1. The Nomination Committee is charged with preparing an annual programme for the evaluation of the performance of the duties of the Board of Directors, the Chairman, and the Committees.
2. Based upon this annual programme, each of the committees will prepare its own report assessing its performance and that of its members. This report shall be sent to the Board of Directors. At the same time, the Nomination Committee shall prepare a report in respect of the Board of Directors.
   
   To carry out this procedure, separate questionnaires are sent to each director, as described below:
   1. An individual self-assessment questionnaire for each director, sent by the Board of Directors (through its Chairman) to all its members.
   2. An assessment questionnaire in respect of the committees, sent by the chair of each committee to all the members sitting on it.
   3. An evaluation questionnaire in respect of the Board of Directors sent to all its members through the Chair of the Nomination Committee.
3. The lead independent director shall be responsible for coordinating the evaluation of the Chairman.
4. Finally, the Board of Directors shall assess – pursuant to statute and to the Board of Directors’ Regulations–, the performance of the Board itself, the Directors and the Committees, as stated in section 2 above.

It should be noted that the company has been assisted by external consultant Spencer Stuart in the formulation of the evaluation process and in the review of the evaluation process in respect of the proceedings of the Board of Directors and of Directors.

The result of the assessment carried out in FY2016 is very positive in respect of the assessed topics. Mention should be made, among others, of the qualifications and structure, the duties, readiness and effectiveness and the planning and organization of the meetings of the Board of Directors, the Audit and Control Committee, the Nomination Committee and Remuneration Committee, as well as the contribution and performance of Independent Directors, and of the Executive Chairman.