The Repsol Annual General Shareholders� Meeting approved a gross dividend of 200 pesetas per share. This is 10.5% more than the dividend for 1996, and represents 47.6% of total net income, which is in line with corporate policy to distribute between 40% and 50% of net income for each financial year. 89 pesetas were paid out as an interim dividend in January, 1998, and the remaining 111 pesetas will be paid from July 14^th, onwards. The Chairman pointed out that this is the highest dividend ever paid by the company, and mentioned that it is one of Repsol�s top priorities to give a high return on shareholder investment. Indeed, Repsol�s share price rose by 31% in comparison to the previous year.

Mr. Cortina analysed the current situation of the oil market, paying special attention to the sector in Spain, and mentioned the new Law on Hydrocarbons. He also remarked on the economic situation world-wide and in Spain, the challenge that access to the Economic Monetary Union (EMU) represents for Spain, and the positive effects that Repsol expects from this process. In fact, he indicated that Spain�s entry in the EMU strengthens the competitive position of Repsol�s refineries and chemical plants, which have 25% lower cost ratios per unit produced than the European average, as a result of important productivity and cost-cutting measures. This is a satisfactory starting point which, according to the Chairman, with the support of further cost cutting programmes and high-technology investments, guarantees Repsol a sound position on the European oil scenario.

Referring to the oil industry in Spain, he stated that this will benefit from full liberalisation under the new Law on Hydrocarbons, currently being discussed in parliament, and considered this a new opportunity to remove the last aspects of the oil market still under government control, particularly price ceilings on fuels. He also expressed his confidence that the new Law would ensure fulfilment of the regulations, eliminate fraud and guarantee business practice in an atmosphere of fair competition. The Chairman emphasized that Repsol is in a good position to compete on a free market, where its competitive advantages will take effect..

In summarising the financial year of 1997, Alfonso Cortina emphasised the large capital expenditure (507,766 million pesetas) made last year, which was 60% more than in 1996, and the good return achieved on this investment. 1997 had been, he claimed, the best year ever for Repsol: net income was almost 6% up, at a record high of 126,098 million pesetas; cash-flow rose by 26.4%, and operating income by 17.7%. In fact, if it had not been for a restatement of assets and the strong effect of a government price freeze on butane and propane gas, Repsol�s net income would have reached 150 billion pesetas.

In his speech to the shareholders, Repsol�s Chairman mentioned the four pillars on which corporate strategy rests: to maintain Repsol�s position as Spain�s top industrial company; grow in exploration and production; further expand in Latin America, and progress towards an integrated gas-electricity chain. The Chairman pointed out that investments made last year have strenghened Repsol�s position to develop these strategic guidelines successfully.

To strengthen Repsol�s position at home, service stations are run according to new criteria, and a large investment has been undertaken in derivative chemicals. Regarding the first of these measures, the Chairman detailed the basic changes in strategy: instead of pricing weekly by regions, prices are set daily and for each sales outlet. Each sales outlet is considered a potential generator of revenue, and ownership and running of the stations by Repsol are preferred to flagging. As part of this new strategy, a new-image service station, designed by Norman Foster, has been launched, and the first six Repsol-Supercor super-stations were opened under a contract with Spain�s largest department stores, El Corte Ingl�s. In derivative chemicals, production capacity has risen by 26% over the past two years, and work has begun on a propylene oxide plant at Tarragona, with a capacity of 150,000 tonnes per year. This project will complete the vertical integration of the chemical business when it goes on stream in the year 2000.

Mr. Cortina explained that the aim of the company�s five-year strategic plan for expansion in Latin America is to consistently increase the businesses obtained there last year, seeking organic growth for all areas in Argentina and Peru as an integrated company, and continuing to develop gas markets in other parts of the region.

Repsol will reinforce its on-going policy of integration in the gas chain, growing in distribution, marketing and power generation in Spain and Latin America. A programme has been set up with Iberdrola, in Spain, to install 3,000 Megawatts over the next few years. The Chairman emphasized the importance of a strong market position to accede to reserves and contracts under favourable terms.

To carry out its global strategy over the next five years, Repsol will invest some 1,700 billion pesetas, of which 35% will be spent on exploration and production, 27% on refining and marketing, 11% on power generation and 7% on petrochemicals. Some 465 billion pesetas of this will be allotted to current and new projects in Latin America. This ambitious investment schedule will be supported by an important cost-reduction programme.

Finally, the Chairman remarked on the company�s good performance over the first quarter of 1998, when net income rose by 23.3% over the same period in 1997, to 38,283 million pesetas. Operating income rose by 34% and cash-flow by 19%. These figures were obtained exclusively on the company�s ordinary operations and were the sign of a better balance in the company�s fund generating base. Based on these strategic guidelines, our company will be substantially larger, considerably more profitable and achieve a more balanced business portfolio.