Caixa d Estalvis i Pensions de Barcelona and Companies composing the la Caixa Group

Transcription

1 - 3 - Caixa d Estalvis i Pensions de Barcelona and Companies composing the la Caixa Group Condensed consolidated midyear financial statements and midyear Directors Report for the six-month period ended 30 June Translation of condensed consolidated midyear financial statements originally issued in Catalan and prepared in accordance with IFRSs as adopted by the European Union (see Notes 1 to 18). In the event of a discrepancy, the Catalan-language version prevails.

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4 CONDENSED CONSOLIDATED MIDYEAR FINANCIAL STATEMENTS OF THE la Caixa GROUP AT 30 JUNE 2010 Condensed consolidated balance sheets at 30 June 2010 and 31 December 2009 Condensed consolidated income statements for the six-month periods ended 30 June 2010 and 2009 Condensed consolidated recognised net income for the six-month periods ended 30 June 2010 and 2009 Condensed consolidated total changes in equity for the six-month periods ended 30 June 2010 and 2009 Condensed consolidated cash flow statements for the six-month periods ended 30 June 2010 and 2009 Notes to the condensed consolidated midyear financial statements of the la Caixa Group at 30 June 2010

5 -1- Condensed consolidated midyear financial statements of the "la Caixa" Group CONDENSED CONSOLIDATED BALANCE SHEETS at 30 June 2010 and 31 December 2009 (Notes 1 to 18), in thousands of euros CAIXA D'ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE "la Caixa" GROUP Assets (*) Cash and deposits with central banks 4,752,679 5,119,371 Financial assets held for trading (Note 6) 3,918,852 6,997,601 Other financial assets at fair value through profit or loss (Note 6) 182, ,711 Availa ble-f or-sale financial assets (Notes 6 and 8) 42,471,016 43,561,476 Loans and receivables (Note 6) 182,012, ,324,896 Held-to-maturity investment (Note 6) 7,319,371 0 Adjustments to financial derivatives - macro-hedging 72,541 51,462 Hedging derivatives 13,483,917 9,329,194 Non-current assets held for sale (Note 7) 2,365,672 2,193,835 Investments (Note 8) 12,320,480 12,019,129 Associates 7,578,009 6,274,611 Jointly controlled entities 4,742,471 5,744,518 Insurance contracts linked to pensions 0 0 Re insura nce assets 25,966 38,121 Tangible assets (Note 9) 5,357,108 5,252,199 Property, plant and equipment 4,326,464 4,270,867 Investment property 1,030, ,332 Intangible assets (Note 10) 2,245,664 1,398,933 Goodwill 1,182, ,470 Other intangible assets 1,063, ,463 Tax assets 2,430,940 2,140,263 Current 477, ,190 Deferred 1,953,038 1,834,073 Other assets (Note 11) 3,074,842 2,260,787 Total Assets 282,034, ,872,978 Memorandum items Contingent liabilities (Note 18) 9,082,951 9,143,084 Contingent commitments (Note 18) 50,682,497 52,485,161 (*) Presented exclusively for comparison purposes only Notes 1 to 18, attached, form a full part of the condensed consolidated balance sheet at 30 June 2010.

6 -2- CONDENSED CONSOLIDATED BALANCE SHEETS at 30 June 2010 and 31 December 2009 (Notes 1 to 18), in thousands of euros CAIXA D'ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE "la Caixa" GROUP Liabilities and Equity (*) Liabilities Financial liabilities held for trading (Note 12) 1,922,982 1,414,525 Other financial liabilities at fair value through profit or loss (Note 12) 185, ,730 Financial liabilities at amortised cost (Note 12) 219,596, ,077,487 Adjustments to financial liabilities - macro-hedging 2,603,136 1,263,733 Hedging derivatives 10,125,224 7,576,687 Liabilities associated with non-current assets held for sale 0 0 Insurance liabilities 20,027,963 19,354,368 Provisions (Note 13) 2,964,357 2,924,915 Tax liabilities 1,226,611 1,575,785 Current 68,486 93,566 Deferred 1,158,125 1,482,219 Welfare fund 1,080, ,466 Other liabilities 1,065,394 1,236,951 Capital repayable on demand 0 0 Total Liabilities 260,797, ,469,647 Equity OWN FUNDS (Note 14) 17,054,752 16,696,055 Endowment fund 3,006 3,006 Issue premium 0 0 Reserves 16,149,498 15,183,405 Other equity instruments 0 0 Less: Own shares 0 0 Profit for the year attributable to the parent 902,248 1,509,644 Less: Dividends and remuneration 0 0 VALUATION ADJUSTMENTS 1,088,199 1,612,736 Available-for-sale financial instruments 996,567 1,886,232 Cash flow hedges (4,153) (9,167) Net investment hedges in foreign transactions 0 0 Exchange differences 183,337 (191,203) Non-current assets held for sale 0 0 Entities accounted for using the equity method (87,552) (73,126) Other valuation adjustments 0 0 EQUITY ATTRIBUTABLE TO THE PARENT 18,142,951 18,308,791 MINORITY INTERESTS 3,094,072 3,094,540 Valuation adjustments 301, ,025 Other (Note 14) 2,792,615 2,696,515 Total Equity 21,237,023 21,403,331 Total Liabilities and Equity 282,034, ,872,978 (*) Presented exclusively for comparison purposes only Notes 1 to 18, attached, form a full part of the condensed consolidated balance sheet at 30 June 2010.

7 -3- CONDENSED CONSOLIDATED INCOME STATEMENTS For the six-month periods ended 30 June 2010 and 2009 (Notes 1 to 18), in thousands of euros CAIXA D'ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE "la Caixa" GROUP (*) Interest and similar income 3,485,983 5,073,210 Interest expense and similar charges (1,739,853) (3,053,872) Re muneration - capital repayable on demand 0 0 NET INTEREST INCOME 1,746,130 2,019,338 Return on capital 377, ,950 Results for entities accounted for using the equity method 542, ,040 Fee and commission income 784, ,974 Fee and commission expense (104,810) (111,225) Gains/losses on financial assets and liabilities (net) (2,250) (24,131) Exchange differences (net) (Note 3) 133,685 85,234 Other operating income 646, ,386 Other operating expenses (426,664) (358,341) GROSS INCOME 3,697,278 3,748,225 Administrative expenses (1,471,127) (1,527,602) Personnel expenses (1,072,644) (1,087,251) Other general administration expenses (398,483) (440,351) Depreciation/amortisation (231,273) (246,064) Provisions (net) (138,398) 230,638 Impairment losses on financial assets (net) (912,849) (1,289,921) OPERATING PROFIT 943, ,276 Other impairment losses (net) (101,049) (76,760) Gains/(losses) on disposal of assets not classified as non-current assets held for sale 191,917 2,640 Consolidation losses 0 0 Gains/(losses) on non-current assets held for sale not classified as discontinued ops. 43, ,226 PROFIT BEFORE TAX 1,077,859 1,260,382 Income tax 80,582 (85,609) Mandatory transfer to welfare fund 0 0 PROFIT FOR THE YEAR FROM ONGOING OPERATIONS 1,158,441 1,174,773 Profit from discontinued operations (net) CONSOLIDATED PROFIT FOR THE YEAR 1,158,441 1,174,773 Attributable to the parent 902, ,023 Attributable to minority interests 256, ,750 (*) Presented exclusively for comparison purposes only Notes 1 to 18, attached, form a full part of the condensed consolidated income statement for the sixmonth period ended 30 June 2010.

8 -4- CONDENSED CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE For the six-month periods ended 30 June 2010 and 2009 (Notes 1 to 18), in thousands of euros CAIXA D'ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE "la Caixa" GROUP (*) Consolidated profit for the year 1,158,441 1,174,773 Other recognised net income/(expenses) (621,104) (117,670) Available-for-sale financial assets (1,516,488) 108,311 Revaluation gains/(losses) (1,397,040) 409,090 Amounts transferred to income statement (119,448) (300,779) Other reclassifications 0 0 Cash flow hedges 12,164 (36,911) Revaluation gains/(losses) 4,927 (48,203) Amounts transferred to income statement 7,237 11,292 Amounts transferred to initial value of hedged items 0 0 Other reclassifications 0 0 Net investment hedges in foreign transactions 0 0 Revaluation gains/(losses) 0 0 Amounts transferred to income statement 0 0 Other reclassifications 0 0 Exchange differences 471,483 (229,871) Revaluation gains/(losses) 471,483 (230,058) Amounts transferred to income statement Other reclassifications 0 0 Non-current assets held for sale 0 0 Revaluation gains/(losses) 0 0 Amounts transferred to income statement 0 0 Other reclassifications 0 0 Actuarial gains/(losses) on pension plans 0 0 Entities accounted for using the equity method (20,355) 129,573 Revaluation gains/(losses) (20,355) 129,573 Amounts transferred to income statement 0 0 Other reclassifications 0 0 Other recognised net income 0 0 Income tax 432,092 (88,772) Total recognised net income/(expenses) 537,337 1,057,103 Attributable to the parent 377, ,942 Attributable to minority interests 159, ,161 (*) Presented exclusively for comparison purposes only Notes 1 to 18, attached, form a full part of the condensed consolidated statement of recognised income and expense for the six-month period ended 30 June 2010.

9 -5- CONDENSED CONSOLIDATED TOTAL CHANGES IN EQUITY For the six-month periods ended 30 June 2010 and 2009 (Notes 1 to 18), in thousands of euros CAIXA D'ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE "la Caixa" GROUP Equity attributable to the parent Own funds CURRENT PERIOD Endowment fund Reserves Profit for the year attributable to the parent Valuation adjustments Minority interests Total equity Final balance at Adjustments due to changes in accounting policies Error adjustments Adjusted initial balance Total recognised net income/(expenses) Other variations in equity Increases/(reductions) in endowment fund Conversion of financial liabilities into capital Increases in other equity instruments Reclassifications from/to financial liabilities Distribution of dividends/remuneration to partners Operations with own equity instruments (net) Transfers between equity items Increases/(reductions) on business combinations Optional provision for welfare projects Payments with equity instruments Other increases/(reductions) in equity 3,006 15,183,405 1,509,644 1,612,736 3,094,540 21,403, ,006 15,183,405 1,509,644 1,612,736 3,094,540 21,403, ,248 (524,537) 159, , ,093 (1,509,644) 0 (160,094) (703,645) (141,086) (141,086) ,509,644 (1,509,644) (425,000) (425,000) (118,551) 0 0 (19,008) (137,559) Final balance at ,006 16,149, ,248 1,088,199 3,094,072 21,237,023 Equity attributable to the parent Own funds PREVIOUS PERIOD (*) Endowment fund Reserves Profit for the year attributable to the parent Valuation adjustments Minority interests Total equity Final balance at Adjustments due to changes in accounting policies Error adjustments Adjusted initial balance Total recognised net income/(expenses) Other variations in equity Increases/(reductions) in endowment fund Conversion of financial liabilities into capital Increases in other equity instruments Reclassifications from/to financial liabilities Distribution of dividends/remuneration to partners Operations with own equity instruments (net) Transfers between equity items Increases/(reductions) on business combinations Optional provision for welfare projects Payments with equity instruments Other increases/(reductions) in equity 3,006 13,813,730 1,802, , ,653,447 18,921, ,006 13,813,730 1,802, ,974 2,653,447 18,921, ,023 (75,081) 157,161 1,057, ,341,971 (1,802,277) 0 (25,825) (486,131) (48,733) (48,733) ,802, (500,000) (1,802,277) , (500,000) ,908 62,602 Final balance at (*) Presented exclusively for comparison purposes only 3,006 15,155, , ,893 2,784,783 19,492,406 Notes 1 to 18, attached, form a full part of the condensed consolidated statement of total changes in equity for the six-month period ended 30 June 2010.

10 -6- CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (INDIRECT METHOD) For the six-month periods ended 30 June 2010 and 2009 (Notes 1 to 18), in thousands of euros CAIXA D'ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE "la Caixa" GROUP (*) A) CASH FLOWS FROM OPERATING ACTIVITIES 5,953,034 (6,468,072) Consolidated profit for the year 1,158,441 1,174,773 Adjustments to obtain cash flows from operating activities 1,920,743 2,151,780 Amortisation/depreciation 231, ,064 Other adjustments 1,689,470 1,905,716 Net increase/(decrease) in operating assets and liabilities 2,954,432 (9,880,234) Operating assets (221,483) (14,323,944) Operating liabilities 3,175,915 4,443,710 Receivables/(payables) - income tax 80,582 (85,609) B) CASH FLOWS FROM INVESTMENT ACTIVITIES (8,762,660) (3,064,240) Payables: 10,442,386 3,380,917 Tangible assets 876, ,030 Intangible assets 41,221 37,417 Investmen ts 419,282 1,365,484 Subsidiaries and other business units 855,303 (73) Associated liabilities and non-current assets for sale 930,570 1,315,059 Held-to-maturity investments 7,319,371 0 Receivables: 1,679, ,677 Tangible assets 104, ,641 Investmen ts 1,012,505 3,819 Associated liabilities and non-current assets for sale 562, ,217 C) CASH FLOWS FROM FINANCING ACTIVITIES 2,439,907 1,594,175 Payables: 2,660,093 2,125,825 Other financing payables 2,660,093 2,125,825 Receivables: 5,100,000 3,720,000 Subordinated liabilities 3,000,000 0 Other financing receivables 2,100,000 3,720,000 D) EFFECT OF EXCHANGE RATE VARIATIONS 3,027 (92) E. NET INCREASE/(REDUCTION) IN CASH AND CASH EQUIVALENTS (A+B+C+D) (366,692) (7,938,229) F) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,119,371 11,793,029 G) CASH AND CASH EQUIVALENTS AT END OF PERIOD (E+F) 4,752,679 3,854,800 COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD Cash 1,199,855 1,394,135 Cash equivalent balances at central banks 3,552,824 2,460,665 TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,752,679 3,854,800 (*) Presented exclusively for comparison purposes only Notes 1 to 18, attached, form a full part of the condensed consolidated cash flow statement for the six-month period ended 30 June 2010.

11 -7- Notes to the condensed consolidated midyear financial statements of the la Caixa Group at 30 June 2010 INDEX OF EXPLANATORY NOTES PAGE 1. Description of the Entity, basis of presentation and other information Principles, accounting policies and measurement bases applied Risk management Solvency management Remuneration and other items for key administration and management employees Financial assets Non-current assets held for sale Business combinations, sales and purchases of holdings in subsidiaries, jointly controlled entities, associates and available-for-sale assets Tangible assets Intangible assets Other assets Financial liabilities Provisions Trends in equity and minority interests Operations with related parties Information by business segments Average number of employees Contingent liabilities and commitments... 57

12 -8- Explanatory notes to the condensed consolidated midyear financial statements for the sixmonth period ended 30 June 2010 CAIXA D ESTALVIS I PENSIONS DE BARCELONA AND COMPANIES COMPOSING THE la Caixa GROUP As required by current legislation governing the content of condensed consolidated midyear financial statements, these notes to the financial statements complete, extend and discuss the balance sheet, income statement, recognised net income, total changes in equity and cash flow statement, condensed and consolidated, in order to provide sufficient information for the purposes of comparison with the consolidated annual financial statements, and also supply the information and explanations required for a sound understanding of significant changes occurring over the six-month period. 1. Description of the Entity, basis of presentation and other information Description of the Entity As a savings bank and in accordance with its Bylaws, Caixa d Estalvis i Pensions de Barcelona (hereinafter la Caixa ) is a private, non-profit financial institution providing beneficent welfare services, and is separate from any other company or entity. Its corporate purpose is to encourage authorised forms of savings, to carry out beneficent welfare projects, and to invest the related funds in safe and profitable assets of general interest. As a credit institution, subject to the rules and regulations issued by the Spanish and European economic and monetary authorities, la Caixa conducts universal banking services, and provides substantial retail banking services. la Caixa is the parent institution of a group of subsidiaries that offer other products and services and with which it forms a single decision-making unit. Therefore la Caixa is obliged to prepare, in addition to its own individual financial statements, the consolidated statements of the Caixa d Estalvis i Pensions de Barcelona Group (hereinafter the la Caixa Group), which also include ownership interests in joint ventures and investments in associates. Criteria CaixaCorp, SA is the subsidiary that manages and controls practically all the Group s equity securities portfolio. Basis of presentation The la Caixa Group s 2009 consolidated annual accounts were drawn up by the Board of Directors at a meeting on 4 February 2010 in accordance with the International Financial Reporting Standards (hereinafter IFRSs) adopted by the European Union through EU Regulations, pursuant to Regulation No 1606/2002 of the European Parliament and of the Council of 19 July 2002, and subsequent amendments, and in due consideration of Circular 4/2004 of 22 December on Public and Confidential Financial Reporting Rules and Formats for Credit Institutions, which constitutes the adaptation of the IFRSs adopted by the European Union to the Spanish credit institution sector. The 2009 consolidated annual accounts were drawn up in accordance with the principles, accounting policies and valuation criteria described in Note 2 to these annual accounts, to provide a true

13 -9- reflection of the equity and consolidated financial situation of the la Caixa Group at 31 December 2009, and also of its operating results, changes in net income and cash flows in consolidation during the financial year ended on the aforementioned date. The attached condensed consolidated midyear financial statements of the la Caixa Group were drawn up by the Board of Directors at a meeting on 22 July 2010 in accordance with the IFRSs and in due consideration of Circular 4/2004, and are presented in accordance with IAS 34 ( Interim financial reporting ) and the Spanish National Securities Market Commission s Circular 1/2008 of 30 January. In accordance with the stipulations of IAS 34, interim financial information is drawn up with the sole purpose of updating the contents of the last consolidated annual accounts published, focusing on any new activities, events and circumstances during the six-month period, with no duplication of information already published. Thus, for a sound understanding of the information provided by the condensed consolidated midyear financial statements, these should be read together with the consolidated annual accounts of the la Caixa Group for The formats of the consolidated balance sheet, income statement, recognised net income, total changes in equity and cash flows, presented in these condensed consolidated midyear financial statements, are as stipulated in the Spanish National Securities Market Commission s Circular 1/2008 of 30 January. Standards and interpretations issued by the IASB which came into force in Review of IFRS 3 Business combinations and amendment to IAS 27 Consolidated and separate financial statements. The amendments introduce significant changes in several matters relating to accounting for business combinations which, in general, place greater emphasis on the use of fair value. By way of example, in step acquisitions, the acquirer re-measures its investment prior to the date on which control is obtained at fair value through profit or loss, and in sales of investments in a subsidiary in which a minority interest is held, the investment is re-measured at fair value through profit or loss. The consequences of adoption of the review of IFRS 3 and the amendment to IAS 27 were amendments to a number of IFRSs, particularly IAS 28 Investments in associates and IAS 31 Interests in joint ventures. For the sake of uniformity within the regulatory framework, it has been established that, in the event of a loss of significant interest or joint control, the investment maintained will be re-measured at fair value through profit or loss. - Amendment to IAS 39 Financial assets designated as hedged items. This amendment clarifies two specific issues in relation to hedge accounting: (a) cases in which inflation may be a hedged risk and (b) when options purchased as hedging items may be applied. - IFRIC 15 Agreements for the construction of real estate. This deals with the accounting record of income and expenditure associated with the construction of real estate, in order to clarify cases in which an agreement for the construction of property comes under IAS 11 Construction contracts, and cases in which IAS 18 Revenue is applicable. - Adoption of IFRIC Interpretation 16 Hedges of a net investment in a foreign operation. This states that only risk between the functional currency of the foreign operation and the functional currency of the parent may be hedged, and also makes clear that hedging instruments of a net investment in a foreign operation may be held by any entity within a group, and stipulates how to determine the amounts to be reclassified from equity to profit or loss when the entity disposes of the investment.

14 IFRIC 17 Distributions of non-cash assets to owners. This interpretation states that the obligation to distribute a dividend in kind must be recognised at the fair value of the asset to be distributed and any difference with regard to its carrying amount must be recognised on the income statement. - IFRIC 18 Transfer of assets from customers. This clarifies the diverging practice in the accounts of an entity that receives transfers of property, plant and equipment from customers with the intention of using them to gain access to supplies (water, gas or electricity, for instance). - Amendment to IFRS 2 Share-based payment. The amendment adds the aspects addressed by IFRIC 8 and IFRIC 11 to IFRS 2, and thus these modifications are derogated since their contents now form part of the IFRS 2 standard. The amendment stipulates that an entity in receipt of services from employees or suppliers must recognise the transaction regardless of whether payment is effected by another entity within the group, or whether it is made in cash or as shares. - Adoption of IFRIC Interpretation 12 Service concession arrangements and consequent amendments to IFRS 1, IFRIC 14 and SIC 29. This addresses how service concession operators should apply existing IFRSs to account for the obligations they undertake and rights they receive in service concession arrangements. Standards and interpretations issued by the IASB but not yet in force At the date on which these condensed consolidated midyear financial statements were drawn up, the following standards and interpretations had been published by the IASB but have not yet come into force, either because their effective date is subsequent to the date of the condensed consolidated midyear financial statements, or because they have not yet been adopted by the European Union. The Group has assessed the effects of these standards and interpretations, and decided not to use the option for early application, where early application is permitted, since the effects would be immaterial. Standards and Interpretations Title Compulsory application for financial years as of: App roved for u se in th e EU Amendment to IAS 32 Financial instruments: Presentation 1 February 2010 Not approved for use in the EU IFRS 9 Financial instruments: Recognition and measurement 1 January 2013 Review of IAS 24 Related party disclosures 1 January 2011 Amendment to IFRIC 14 Prepayments of a minimum funding requirement 1 January 2011 IFRIC 19 Extinguishing financial liabilities with equity instruments 1 July IFRS 9 Financial instruments: recognition and measurement. IFRS 9 will eventually replace the portion of the present IAS 39 addressing recognition and measurement. It features some major differences vis-à-vis the current standard - among which, the adoption of a new recognition model based on only two categories, amortised cost and fair value; withdrawal of the current concepts of Held-to-maturity investments and Available-for-sale financial assets ; impairment analysis solely for assets at amortised cost and an end to the separation of embedded derivatives that have a financial asset host.

15 Amendment to IAS 32 Financial instruments: presentation. The amendment clarifies the recognition of entitlements granted to acquire shares (rights, options or warrants) denominated in a foreign currency. When these rights are granted to acquire a fixed number of shares they are equity instruments, regardless of the currency in which the fixed sum is denominated, provided the requirements set out in the standard are met. - Review of IAS 24 Related party disclosures. This introduces two new features: (a) a partial exemption for certain disclosures when the list of related parties is produced because they are entities either dependent on or related to the government (or an equivalent government agency) and (b) a review of the definition of a related party in order to clarify certain relationships that had previously not been explicit in the standard. - IFRIC 19 Extinguishing financial liabilities with equity instruments. The interpretation addresses accounting treatment from the point of view of the debtor of a financial liability that is fully or partially extinguished by the debtor issuing equity instruments to the creditor. - Amendment to IFRIC 14 Prepayments of a minimum funding requirement. The amendment prevents, in certain circumstances, a company from being unable to recognise certain voluntary prepayments as an asset. Responsibility for the information and for the estimates made The condensed consolidated midyear financial statements were prepared on the basis of judgments and estimates made by the Senior Executives of la Caixa and of the consolidated companies. These judgments and estimates were based on the preparation of the 2009 consolidated annual accounts and relate, inter alia, to the fair value of certain assets and liabilities, impairment losses, valuation of goodwill and intangible assets, the useful life of tangible and intangible assets, actuarial assumptions for the calculation of post-employment benefit commitments, liabilities in relation to early retirements schemes, equity and profit or loss of the companies accounted for using the equity method, and outlay on income tax determined on the basis of the best estimate of the average tax rate envisaged at yearend. The estimates relate to both the amounts recognised on the condensed consolidated balance sheet and on the condensed consolidated income statement for the first six months of the financial year. Although the estimates were made on the basis of the best available information, future events may make it necessary for them to be changed during the six-month period or in coming years. These changes would be applied prospectively, recognising the effects of the change in estimates on the consolidated balance sheet and income statement. Comparison of the information and variations in the scope of consolidation The information in the condensed consolidated midyear financial statements for 2009 is presented exclusively for the purposes of comparison with the information for the six-month period ended 30 June The IFRSs require the information presented between both periods to be homogeneous. During the first six months of 2010 no significant amendments were made to the accounting regulations applicable that could affect comparison of the information (see Note 2).

16 -12- With respect to the major variations in the scope of consolidation, in 2009 a reorganisation was arranged of Port Aventura, SA, a company wholly owned by Criteria CaixaCorp, SA, to divide it into two companies; Port Aventura Entertainment, SA and Mediterranea Beach & Golf Resort, SA. Criteria CaixaCorp, SA drew up an agreement with Investindustrial whereby in December 2009 this investor acquired an ownership interest in the share capital of Port Aventura Entertainment, SA, the company operating the Port Aventura theme park. Thus since December 2009 the 50% holding of the la Caixa Group in Port Aventura Entertainment, SA has been classified as a jointly controlled entity. In November 2009 the la Caixa Group subscribed 36% of the share capital increase carried through by Erste Group Bank, AG (EGB), bringing its ownership interest to 10.1% Following this increase in the holding, the representation of the la Caixa Group in the governing bodies and the agreements signed meant that it held significant influence, and therefore since 31 December 2009 the EGB holding has been accounted for using the equity method and is recognised under Investments Associates on the accompanying condensed consolidated balance sheets. On 30 December 2009, Criteria CaixaCorp, SA signed an agreement with The Bank of East Asia, LTD (BEA) to subscribe a share capital increase in January 2010 and bring its stake up to 14.99%. The changes in 2009 which increased the holding of the la Caixa Group and gave it a presence on the Board of Directors ushered in significant influence, and thus since 31 December 2009 the BEA holding has been accounted for using the equity method and is recognised under Investments Associates on the accompanying condensed consolidated balance sheets. The variations to the scope of consolidation during the first six months of 2010 are set out in Note 8. Seasonal nature of transactions and relative importance The activities carried on by the companies composing the la Caixa Group are not of a significantly cyclical or seasonal nature. Therefore these explanatory notes to the condensed consolidated midyear financial statements for the first six months of 2010 do not contain any specific details. However, during the first six months of 2010 certain operations were carried out that the la Caixa Group considers as non-recurring income, since these operations are of a highly exceptional nature. Specifically, a total of 333 million euros was earned as capital gains from active management of the investee portfolio, with 233 million euros attributed to the Group (see Note 8), which assisted with hedging against the risk associated with the loans portfolio and the assets acquired following credit regularisation processes, mainly property assets, and other risks from Group activity. Moreover, for the purposes of determining the data to be disclosed in these condensed consolidated midyear financial statements, consideration has been taken of their relative importance with respect to the actual interim accounting period. Caixa d Estalvis de Girona Merger Project At a meeting on 17 June 2010, the Entity s Board of Directors approved the Merger Project with the Caixa d Estalvis de Girona savings bank, announced as a Relevant Event to the CNMV National Securities Market Commission on 18 June The Merger Project was likewise approved by the Caixa Girona Board of Directors on 21 June 2010, and also announced as a Relevant Event.

17 -13- The boards of both entities in their respective sessions in July 2010 are expected to call extraordinary general meetings in September 2010 in order to submit the merger agreements for approval. Events subsequent to the closing date There were no events between 30 June 2010 and the date on which these condensed consolidated midyear financial statements were drawn up that had any significant impact on the statements.

18 Principles, accounting policies and measurement bases applied The condensed consolidated midyear financial statements of the la Caixa Group were drawn up in accordance with the same principles, accounting policies and measurement bases that were applied to the 2009 consolidated annual accounts (see Note 2 to the 2009 consolidated annual accounts). Consideration was likewise taken of the new IFRS standards, amendments and interpretations that came into force during the first six months of 2010 (see Note 1). All the principles and measurement bases that could have significant impacts were applied in the preparation of the condensed consolidated midyear financial statements. Comment on the statement of condensed consolidated recognised net income This statement presents the period income and expenses, with a distinction made between profit or loss recognised in the consolidated income statement and the profit or loss recognised directly in equity. The changes in income and expenses recognised in equity comprise revaluation losses, amounts transferred to the income statement, amounts transferred to the initial value of hedged items, and other reclassifications. The la Caixa Group s profit for the first six months of 2010 was 1,158 million euros, less 621 million euros following recognition of income and expenses in equity as the result of: - A decrease of 1,561 million euros in available-for-sale financial assets. This was caused by a fall in equity and fixed-income market listings, generating valuation losses of 1,397 million euros on the available-for-sale assets portfolio, and transfer of capital gains to the income statement of 119 million euros, chiefly through the sale of a 0.16% interest in Telefónica, SA and a 0.86% interest in Repsol-YPF, SA (see Note 8). - Income from exchange differences was primarily due to the translation to euros of the portfolio of foreign currency investments in associates (GF Inbursa and The Bank of East Asia, LTD). The income recognised over the first six months of 2010 was 471 million euros. - Valuation adjustments for entities accounted for using the equity method and cash flow hedges generated recognised expense of 8 million euros. - Lastly, 432 million euros were recognised as income on profits tax from the recognition of valuation losses and gains booked directly to equity. As a result, total recognised income over the first six months of 2010 was 537 million euros, of which 378 million euros were attributed to the parent.

19 -15- Comment on the condensed consolidated statement of total changes to equity This statement shows a reconciliation of the carrying amount at the beginning and end of the first six months of 2010 of all equity items. Movements are grouped in accordance with their nature into adjustments due to changes in accounting policies, error adjustments, recognised net income during the year and other variations in equity. The following movements during the first six months of 2010 accounted for a decrease of 166 million euros in total equity: On total equity for 2009, there were deductions of 425 million euros as a contribution to the Welfare Fund, and 133 million euros in complementary dividends for 2009 to minority partners by the companies composing the la Caixa Group. The positive result of 537 million euros in recognised net income, of which the result for the year is 1,158 million euros (see Comment on the statement of condensed consolidated recognised net income in this Note). During the first six months of the year, the companies composing the la Caixa Group paid out 8 million euros to minority partners as dividends on account. Lastly, there were variations in the reserves of consolidated companies, including the reserves of companies accounted for using the equity method, which reduced total equity by 137 million euros, of which 118 were attributed to the Group, and 19 million euros to minority interests, mainly as the result of adoption of IFRIC Interpretation 12 by these companies with service concession arrangements and the Agbar delisting takeover bid by Criteria and SE (see Note 8). Comment on the condensed consolidated statement of cash flows The concepts used for the presentation of the cash flow statement are as follows: Cash flows: inflows and outflows of cash and cash equivalents; in other words, highly liquid short-term investments with a low risk of any alterations to their value. Operating activities: the typical activities carried on by credit institutions and other activities that cannot be classified as investing or financing activities. Investing activities: activities involving acquisition, transfer or disposal by other means of longterm assets and other investments not classified as cash and cash equivalents. Financing activities: activities causing changes to the composition of equity and liabilities that do not form part of operating activities, such as subordinated financial liabilities. Issues placed on the institutional market by la Caixa have been considered as financing activities, whereas those placed on the retail market among our customers have been considered as operating activities. During the first six months of 2010 the la Caixa Group financed its business activity with 9,175 million euros, obtained from subordinated debt issues, an increase in operating liabilities, and the cash flow generated by profits for the year. With a view to guaranteeing its solvency objectives, the Group boosted its capital with a 3,000 million euro issue of subordinated debt among the retail customers of la Caixa. Operating liabilities increased by 3,176 million euros, mainly due to a combination of two factors: firstly, the reduction of balance sheet customer funds, which chiefly moved to off-balance sheet funds and to subscription of

20 -16- the aforementioned issue of subordinated debt, and secondly increased funding from the European Central Bank and the interbank market. Finally, the cash flow generated by profits for the year was 2,999 million euros. Profits before tax for the year are adjusted with expenses/income that showed no movements in cash flow, mainly amortisation/depreciation, provisions and write-downs. The cash flows generated partially financed the 222 million euro increase in operating assets. It should be noted that loans and advances to customers increased by 4,380 million euros, which was largely offset by a reduction in deposits at banks. Investment activities reduced cash flows by 8,763 million euros, and one of the main features was an increase of 7,319 million euros in the held-to-maturity portfolio. As a result of tension on sovereign debt markets in certain Eurozone countries, mainly due to increases in their risk premium, the decision was taken to modify the investment strategy for assets in which certain long-term savings schemes were invested. The consequence of this change was that this portfolio of assets, initially classified as available-for-sale assets, is classified as held-to-maturity assets on the attached condensed consolidated balance sheet, since la Caixa has the intention and the financial capacity to hold them to maturity. One of the main investment packages was a 331 million euro increase in the share capital of The Bank of East Asia, LTD. Most of the remaining transactions concern investment in foreclosed assets as the result of loan regularisations and changes to the scope of consolidation following the purchase of Adeslas, SA. The net financing secured from the institutional market generated a 410 million euro reduction in cash flows. The first six months of 2010 featured maturities of 2,510 million euros, 1,100 million euros were issued in mortgage bonds, and 1,000 million euros in territorial bonds. Lastly, 150 million euros were paid over to minority interests, mostly as dividends. Cash and cash equivalents overall fell by 370 million euros, or 366 million euros considering exchange differences. The balance of cash and cash equivalents at 30 June 2010 was 4,753 million euros, all of which was posted under Cash and deposits with central banks on the attached balance sheets.

21 Risk management Credit risk Default on payments in the banking sector remained considerable during the first six months of 2010, though much less intense than the same period the previous year. The situation was exacerbated by a sluggish economy and property asset prices. The la Caixa Group default ratio at 30 June 2010 stood at 3.46% (3.42% at 31 December 2009). The latest data available for the sector confirm the sound position of the la Caixa Group in terms of credit risk management. Within this context, over the first six months of 2010 la Caixa continued its careful implementation of measures to instigate claims in relation to problematic debt recovery from the first signs of any deterioration in the creditworthiness of debtors, with constant monitoring of their trends. The general increase in defaults within the economy as a whole, and the lower credit quality this entails, make it essential for rigorous approval criteria to be employed. Without prejudice to the above, la Caixa has continued the measures already implemented in 2009 to mitigate the impact of crisis on its customers, when relations with these customers made it plain that they were experiencing transitory difficulties in paying off their debts, despite an obvious desire to cover such payments. In cases where an in-depth analysis shows it to be possible, la Caixa is adapting short-term payments to the current possibilities of debtors, in the belief that this postponement will assist in bringing the operations to a successful conclusion. Of the range of available options to attain this objective (implementation of grace periods, waiting clauses, unification of debts, or a payment moratorium, among others), an analysis is carried out with the customer of the most suitable process to be followed for his situation. The continuation of these policies during the first six months of 2010 has assisted individual customers requesting the facility to meet their commitments. Likewise, in a bid to minimise the impact of an extremely cyclical adjustment to the property market, the la Caixa Group has continued, albeit less intensely, to purchase property from builders and developers, customers of la Caixa that are experiencing present or future problems in carrying on their business activity or with regard to solvency, in order to cancel their debts with the Entity. Transactions are approved on an individual basis, and prices are based at the very least on an assessment by an appraisal company listed on the Bank of Spain s Official Register in accordance with Ministerial Order ECO/805/2003, with certain adjustments required for the purpose of adaptation to the present conditions of the market. The la Caixa Group buys, develops, administers and sells real estate assets through Servihabitat XXI, SAU, its instrumental Group institution specialising in property services with over 15 years experience in the sector, in order to guarantee more efficient management of the investment, timely recovery, and added value and profitability. As part of the country-risk policy approved in 2009, restrictions have been placed on a number of banking counterparties to assist the opening of branches and delegations abroad, in a bid to boost company business (as per the strategic plan), help encourage exports, and diversify balance sheet risks.

22 -18- Progress in terms of risk management and implementation of the New Basel Capital Accord (NBCA) in management of the Entity The progress made over the first six months of 2010 was as follows: Addition of approval functions on the electronic risk dossier, a tool available to the branch network to manage applications for transactions. Enhancement of the autonomy of branches to set risk-adjusted prices for mortgage guarantee operations for both individuals and companies, in a bid to improve customer service. Creation of lines of risk for the exclusive treatment of derivative products. Improvement of risk policies and circuits in factoring operations (recourse and non-recourse factoring) and commercial discounts to reduce the percentage of return and collection terms and extend the use of this product in the business segment. Intensification of risk analysis training for SME Managers to enable them to secure a broader knowledge of SME specifics and thus provide finance for this segment, one of those most affected by the economic situation. Consolidation of the new risk structure implemented in 2009, a single circuit homogenising analysis and approval of company and universal banking operations with the assistance of the electronic dossier. Moreover, this organisational improvement, which requires dual signature, ensures consensus between commercial areas and risk areas for approval of operations (the risk teams in the Territorial Divisions report hierarchically to the Central Services Risk Areas), and has boosted the unification of criteria and procedures applicable to the various segments (individuals, companies, SMEs and developers) and also cut back customer response times. Liquidity risk The liquidity of the la Caixa Group, materialised in the net balance of interbank deposits and other monetary assets and liabilities, and increased by the balance that can be drawn on the credit facility with the European Central Bank, stood at 17,425 and 21,208 million euros at 30 June 2010 and 31 December 2009 respectively. An extremely prudent management model, which also seeks to maximise profitability, has justified increased investment in maximum-solvency assets with potential for immediate monetisation, while reducing exposure on interbank markets. The Strategic Plan approved by the Board of Directors provides that a level of liquidity must be maintained which exceeds 5% of the assets of the la Caixa Group. The level was comfortably met over the first six months of 2010, and stood at 6.6% on 30 June. This liquidity level provides adequate funding for the Group s growth, future investment and refinancing of debt issues in the years to come. As part of this approach to managing liquidity risk, to enable it to anticipate potential needs for lendable funds, the la Caixa Group operates a number of ordinary financing programmes that cover the various maturity periods to ensure adequate levels of liquidity at all times.

23 -19- In this regard, the Spanish Government authorised the la Caixa Group to issue State-guaranteed bonds on finance markets up to 15,653 million euros (9,459 million on the first programme and 6,194 million on the second), within the framework of its plan to deal with the financial crisis and provide better access to finance for companies and individuals. In January 2009 the la Caixa Group availed itself of the former to introduce a three-year bond issue programme worth 2,000 million euros with the approval of the Spanish State. In March the la Caixa Group concluded a placement of a new issue of mortgage bonds worth 1,000 million euros, redeemable at 6 years, and also issued a further 1,000 million euros in territorial bonds redeemable at 6 years. In February it issued 3,000 million euros in 10-year subordinated debt (see Notes 4 and 12). These issues targeted equity markets and the full range of investors, thus enabling the la Caixa Group to further enhance its liquidity position, and simultaneously help to normalise debt markets. Counterparty risk The interbank market continued in a rather sluggish fashion over the first six months of the year. The timid signs of an opening in the initial months, especially with foreign financial institutions, were curtailed by episodes of market distrust of sovereign debt that led to a bail-out plan for Greece in the first instance, and subsequently to the creation of a European Stabilisation Fund. These events had a harsh effect on CDS quotes (credit default swaps) by entities with exposures in countries experiencing difficulties. The crisis prevailing on sovereign debt markets, particularly in Greece, Portugal and Spain, hampers the access of finance entities to wholesale markets, and a lack of confidence among banks and savings entities to lend each other funds on the interbank market - especially foreign entities with regard to Spain has reduced transactions to a minimum, including sale and repurchase agreements (repos). A policy of maximum prudence is operated with regard to other operations with banking counterparties, and currency sale contracts are only drawn up using CLS (continuous linked settlement), a system of delivery against payment that eliminates settlement risk. OTC derivative transactions are limited to counterparties with a valid cash guarantee contract on the portfolio s market value. Exposure with credit institutions at 30 June 2010 was 10,414 million euros (11,479 million euros in December 2009). Market risk During the first six months of 2010, average VaR (value at risk, or the maximum potential daily loss, with a confidence level of 99%) in treasury activities was 4.5 million euros. The highest levels of market risk, reaching a maximum of 9.3 million euros, were reached during the second quarter, chiefly due to anticipation of VaR with respect to a potentially different trend in the daily market value of sovereign debt positions (Spain and the EU) with respect to the derivatives used to manage interest rate risk. This VaR estimate is the maximum value obtained from the application of two parametric methodologies on historic data for two different time horizons (75 and 250 market days), and a historic simulation methodology on annual data. Monitoring of market risk is completed by an indepth analysis of the impact under extreme conditions (stress test) and verification of the model (back test).