Independent Audit Report

Transcription

1 2015 Independent Audit Report AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated Annual Accounts and Consolidated Management Report corresponding to the year ended 31st December 2015

2 INDEPENDENT AUDIT REPORT OF CONSOLIDADED ANNUAL ACCOUNTS Ernst & Young, S.L. Torre Picasso Plaza Pablo Ruiz Picasso, Madrid Tel.: Fax: To the shareholders of AHORRO CORPORACIÓN, S.A.: REPORT ON THE CONSOLIDATED ANNUAL ACCOUNTS We have audited the attached consolidated Annual Accounts of AHORRO CORPORACIÓN, S.A. (the parent company) and subsidiaries (the Group), which comprise the consolidated balance sheet at December 31, 2015, the consolidated profit and loss account, the consolidated statement of changes in equity, the consolidated statement of cash flow and the consolidated Annual Accounts for the year ended on that date. Liability of directors in relation to the consolidated Annual Accounts The directors of the parent company are responsible for formulating the accompanying consolidated Annual Accounts, so that they show a true reflection of the equity, financial situation and the consolidated results of AHORRO CORPORACIÓN, S.A. and subsidiaries, in accordance with the regulatory framework of financial information applicable to the Group in Spain, which is identified in Note 2 of the accompanying report, and the internal control deemed necessary to enable the preparation of the consolidated Annual Accounts free from substantial inaccuracies due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the accompanying consolidated Annual Accounts based on our audit. We have conducted our audit in accordance with the regulatory standards of the audit practice in force Spain. These regulations require that we comply with ethical requirements and plan and perform the audit in order to obtain reasonable assurance that the consolidated Annual Accounts are free of substantial misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated Annual Accounts. The procedures selected depend on the auditor's opinion, including the assessment of the risks of substantial inaccuracy in the consolidated Annual Accounts due to fraud or error. In making those risk assessments, the auditor considers internal control that is relevant to the formulation by the directors of the parent company of the consolidated Annual Accounts, in order to design audit procedures that are appropriate in terms of the circumstances, and not for the purpose of expressing an opinion on the effectiveness of the internal control of the entity. An audit also includes evaluating the appropriateness of the accounting policies applied and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated Annual Accounts taken as a whole. 1

3 We believe that the audit evidence we have obtained provides a sufficient and adequate basis for our audit opinion. Opinion In our opinion, the consolidated annual accounts attached, express in all significant respects, a true and fair image of the consolidated equity and of the consolidated financial position of AHORRO CORPORACIÓN, S.A. and subsidiaries at December 31, 2015, and of its consolidated results and consolidated cash flow corresponding to the fiscal year ended on that date, pursuant to the regulatory financial reporting framework that is applicable and in particular, to the accounting principles and criteria contained therein. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS The attached consolidated management report for 2015 contains the explanations that the directors of the parent company consider relevant to the situation of the Group, the evolution of its activities and other matters, and are not an integral part of the consolidated Annual Accounts. We have verified that the accounting information contained in the aforementioned management report is consistent with the consolidated annual accounts for the year Our work as auditors is limited to verifying the consolidated management report to the extent mentioned in this paragraph and it does not include the review of information other than that drawn from the accounting records of AHORRO CORPORACIÓN, S.A. and subsidiaries. April 1st, 2016 Francisco J. Fuentes García 2

4 CONSOLIDATED ANNUAL ACCOUNTS CONSOLIDATED BALANCE SHEETS CONSOLIDATED PROFIT AND LOSS ACCOUNTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED REPORT 3

5 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated Balance Sheet at December 31 (Expressed in euros) ASSETS Note Liquid Assets 7 69, ,602, Trading portfolio 8 483,047, ,236, Debt securities ,524, , Capital instruments , , Trading derivatives ,111, ,821, Other financial assets - - Memorandum: Loaned or as collateral - - Other financial assets at fair value with changes in profit and loss - - Debt securities - - Other Capital instruments - - Other financial assets - - Memorandum: Loaned or as collateral - - Financial assets available for sale 9 15,427, ,157, Debt securities - - Capital instruments ,427, ,157, Memorandum: Loaned or as collateral - - Loan investments ,795, ,535, Loans to financial intermediaries ,263, ,580, Loans to individuals ,531, ,954, Other financial assets - - Held-to-maturity investment portfolio - - Memorandum: Loaned or as collateral - - Hedging derivatives - - Non-current assets held for sale ,069, Debt securities - - Capital instruments - 36,581, Material assets - 83,488, Holdings , Jointly controlled entities - 765, Associated companies - - Insurance contracts linked to pensions - - Reinsurance assets - - Tangible assets 13 8,186, ,216, For own use 1,181, ,598, Real Estate investments 7,005, ,617, Intangible assets , ,572, Goodwill - - Other intangible assets 241, ,572, Tax assets 21 15,956, ,450, Current 7,302, ,683, Deferred 8,653, ,767, Other assets 17 8,439, ,013, TOTAL ASSETS 822,164, ,039,620,

6 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated Balance Sheet at December 31 NET LIABILITIES AND EQUITY Note Trading portfolio 8 418,263, ,460, Trading derivatives 418,263, ,460, Short securities - - Other financial liabilities - - Liabilities at fair value with changes in profit and loss - - Financial liabilities at amortised cost ,427, ,191, Debts with financial intermediaries ,918, ,556, Debts with individuals ,509, ,634, Borrowings and subordinated liabilities - - Other financial liabilities - - Hedging derivatives - - Liabilities associated with non-current assets held for sale 10-49,054, Insurance contract liabilities - - Provisions 16 11,856, ,300, Provisions for pensions and similar obligations Provisions for taxes and other legal contingencies Other provisions 11,855, ,300, Tax Liabilities 21 90, Current 90, Deferred Other liabilities 17 2,931, ,186, TOTAL LIABILITIES 675,570, ,193, OWN FUNDS 145,529, ,122, Capital 18 34,929, ,929, Subscribed 34,929, ,929, Less: Uncalled capital: - - Issue premium ,733, ,733, Reserves ,032, ,291, Reserves of companies valued using the equity method ,182, Other capital instruments - - Minus: Own securities (5,806.08) (5,806.08) Results for the year 35,840, (8,007,460.92) Minus: Dividends and remunerations - - VALUATION ADJUSTMENTS , , Financial assets available for sale - 10, Cash flow hedges - - Hedges for net investments in foreign businesses - - Currency exchange differences , , Companies valued using the equity method - - Other valuation adjustments - - EQUITY ATTRIBUTABLE TO THE PARENT COMPANY ,441, ,543, MINORITY INTERESTS , ,883, TOTAL LIABILITIES AND EQUITY 822,164, ,039,620,

7 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated Balance Sheet at December 31 (Expressed in euros) MEMORANDUM Note Guarantees and securities granted 135,691, ,124, Other contingent liabilities - - Purchase commitment for term securities 8.1 2,891, ,326, Own stock given as loan - - Disbursements committed due to underwriting - - Financial derivatives 4,836,530, ,367,749, Other financial risk and commitment accounts 10,855, ,791, TOTAL FINANCIAL RISK AND COMMITMENT ACCOUNTS ,985,968, ,675,992, Deposit of securities 13,568,418, ,709,157, Managed portfolios, UCITS managed assets and ECR managed assets 1,569, ,282,394, Other memoranda accounts 517,365, ,759, TOTAL OTHER MEMORANDA ACCOUNTS ,087,354, ,559,310,

8 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated Profit and Loss Account corresponding to the year ended December 31 (Expressed in euros) Note Interest and similar revenues , ,856, Interest and similar charges 20.2 (1,613,567.26) (3,634,317.86) INTEREST MARGIN (1,074,450.90) (1,777,569.54) Return on capital instruments 3, Result of companies valued using the equity method 53, (740,012.58) Fees received ,238, ,109, Fees paid 20.3 (8,997,157.83) (7,001,037.46) Financial transactions results (net) ,657, , Trading portfolio 8.3 4,409, , Financial assets at fair value with changes in profit and loss - - Financial instruments not measured at fair value with changes in profit and loss , , Other - - Exchange rate differences (net) 65, , Other operating products 1,971, ,655, Other operating expenses 20.5 (676,639.31) (427,677.84) GROSS MARGIN 27,241, ,564, Personnel expenses 20.4 (27,871,265.49) (22,713,782.16) Overheads 20.5 (18,052,862.25) (17,910,434.88) Depreciation 13 and 14 (1,468,544.07) (5,624,180.65) Allocations to provisions (net) 16 (9,259,436.59) (6,982,114.95) Impairment losses on financial assets (net) 6.2 5,046, , Other financial instruments not measured at fair value with changes in profit and loss 54, , Loan investments ,992, , RESULT OF THE OPERATING ACTIVITY (24,364,006.25) (20,632,905.82) Impairment losses on other assets (net) (2,914,167.57) 69, Tangible fixed assets - (112,061.50) Intangible assets (2,418,708.02) (5,168.70) Remainder (495,459.55) 186, Gains/(Losses) in non-current assets held for sale 4,804, ,620, Negative difference on business combinations - - Profits/(Losses) on non-current assets held for sale not classified as discontinued operations ,191, RESULTS BEFORE TAX 33,718, (13,942,800.46) Tax on profits 21 (102,662.54) 283, RESULT FOR THE YEAR FROM CONTINUING OPERATIONS 33,615, (13,659,634.57) Result from discontinued operations (net) ,215, ,187, PROFIT/LOSS FOR THE YEAR 35,831, (6,471,967.65) Profit attributable to the Parent Company 35,840, (8,007,460.92) Profit attributable to minority (8,895.01) 1,535, PROFIT PER SHARE Basic Diluted

9 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated statement of changes in equity I) Statement of Consolidated Recognised Income and Expenses for the fiscal year ended on December A) PROFIT FOR THE YEAR 35,831, (6,471,967.65) B) OTHER RECOGNISED INCOME/EXPENSES 501, , Financial assets available for sale - (37,921.68) a) Gains/(Losses) by valuation 302, , b) Amounts transferred to the profit and loss account (302,121.05) (64,404.08) c) Other reclassifications Cash flow hedges - - a) Gains/(Losses) by valuation - - b) Amounts transferred to the profit and loss account - - c) Amounts transferred to initial value of hedged items - - d) Other reclassifications Hedges for net investments in foreign operations - - a) Gains/(Losses) by valuation - - b) Amounts transferred to the profit and loss account - - c) Other reclassifications Exchange rate differences 501, , a) Gains/(Losses) by valuation 501, , b) Amounts transferred to the profit and loss account - - c) Other reclassifications Non-current assets held for sale - (95,549.53) a) Gains/(Losses) by valuation - (113,785.98) b) Amounts transferred to the profit and loss account - 18, c) Other reclassifications Actuarial Gains/(Losses) on pension schemes Companies valued using the equity method Remainder of recognised income and expenditure - 12, Tax on profits - (3,969.64) TOTAL RECOGNISED INCOME AND EXPENDITURE (A+B) 36,333, (6,078,969.83) A) Attributable to the Parent Company 36,341, (7,614,463.10) b) Attributable to minority interests (8,895.01) 1,535,

10 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES II) Total Consolidated Statement of Changes in Equity for the fiscal years ended on December 31 TOTAL OWN FUNDS Euros Capital Reserves Reserves (Company losses valued using the equity method) Other Capital Instruments Minus: Own Securities Profit for the year attributable to the Parent Company TOTAL OWN FUNDS Valuation adjustments Minority interests TOTAL EQUITY Closing balance ,929, ,585, ,921, (5,806.08) 1,020, ,450, , ,055, ,533, Adjustments for changes in accounting criteria - Adjustments for errors - Adjusted opening balance ,929, ,585, ,921, (5,806.08) 1,020, ,450, , ,055, ,533, Total recognised income/(expenditure) (8,007,460.92) (8,007,460.92) 392, ,535, (6,078,969.83) Other changes in equity - 2,439, (1,739,146.37) - - (1,020,403.43) (320,314.90) - (4,707,619.92) (5,027,934.82) Increase in capital Reductions in capital Conversion of financial liabilities into capital increase of other capital instruments Reclassification of financial liabilities to other capital instruments Reclassification of other capital instruments to financial liabilities Distribution of dividends/remunerations to partners - 2,200, (2,200,000.00) (3,268,476.96) (3,268,476.96) Transactions with own capital instruments (net) Transfers between equity items - (1,129,950.40) 2,271, (1,020,403.43) 121, (121,285.36) - Increase (decrease) due to business combinations Payments with capital instruments Other changes in equity - 1,369, (1,810,785.56) (441,600.26) - (1,317,857.60) (1,759,457.86) Closing balance ,929, ,024, ,182, (5,806.08) (8,007,460.92) 110,122, , ,883, ,426, Adjustments for changes in accounting criteria Adjustments for errors Adjusted opening balance ,929, ,024, ,182, (5,806.08) (8,007,460.92) 110,122, , ,883, ,426, Total recognised income/(expenditure) ,840, ,840, , (8,895.01) 36,333, Other changes in equity - (6,258,787.31) (2,182,105.31) - - 8,007, (433,431.70) (10,207.64) (2,722,031.05) (3,165,670.39) Increase in capital Reductions in capital Conversion of financial liabilities into capital increase of other capital instruments Reclassification of financial liabilities to other capital instruments Reclassification of other capital instruments to financial liabilities Distribution of dividends/remunerations to partners (2,307,412.45) (2,307,412.45) Transactions with own capital instruments (net) Transfers between equity items - (7,267,448.34) (740,012.58) - - 8,007, Increase (decrease) due to business combinations Payments with capital instruments Other changes in equity - 1,008, (1,442,092.73) (433,431.70) (10,207.64) (414,618.60) (858,257.94) Closing balance ,929, ,765, (5,806.08) 35,840, ,529, , , ,594, (1) The Reserves column, for the purposes of this statement, includes the following headings of Equity in the Balance Sheet: Issue premium, Reserves, Other contributions and Minus: Dividends 9

11 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated statement of cash flows corresponding to the fiscal year ended December 31 Note CASH FLOWS FROM OPERATING ACTIVITIES (92,935,931.79) (22,934,672.99) Results for the year 35,831, (6,471,967.65) Adjustments to obtain cash flows from operating activities (54,880,591.00) 6,197, Depreciation 1,468, ,624, Other adjustments (56,349,135.07) 573, Adjusted profit (19,049,334.21) (274,442.53) Net Increase (decrease) in operating assets (+/-) 11,334, ,840, Loan investments 136,674, ,032, Trading portfolio (119,520,642.18) (55,871,927.14) Financial assets at fair value with changes in profit and loss - - Financial assets available for sale 309, ,531, Other operating assets (6,129,225.98) 3,147, Net Increase (decrease) in operating liabilities (+/-) (79,600,843.30) (39,939,164.18) Financial liabilities at amortised cost (64,763,662.28) (162,330,085.49) Trading portfolio (10,486,908.92) 56,915, Other financial liabilities at fair value with changes in profit and loss - - Other operating liabilities (4,350,272.10) 65,475, Proceeds / payments of income tax (5,620,558.12) 438, CASH FLOWS FROM INVESTMENT ACTIVITIES 125,407, (26,275,141.23) Payments (-) (1,115,747.10) (27,775,143.23) Held-to-maturity investment portfolio Holdings - - Material assets 13 (273,662.26) (1,143,168.34) Intangible assets 14 (842,084.84) (2,141,133.22) Other business units - - Non-current assets and associated liabilities for sale - (24,490,841.67) Other payments related to investment activities - - Collections 126,522, ,500, Held-to-maturity investment portfolio Holdings 1,377, ,500, Material assets 16, Intangible assets - - Other business units , Non-current assets and associated liabilities for sale 124,298, Other payments related to investment activities CASH FLOWS FROM FINANCING ACTIVITIES (2,307,412.45) (3,268,476.96) Payments (-) - - Depreciation equity instruments - - Acquisition of own capital instruments - - Return and amortisation of debenture stock and other tradable securities - - Return and amortisation of subordinated liabilities, loans and other financing received - - Collections - - Issuance of equity instruments - - Issuance and sale of own capital instruments - - Issuance of debenture stock and other marketable securities - - Issuance of subordinated liabilities, loans and other forms of financing - - Dividends paid and remuneration of other equity instruments (-) (2,307,412.45) (3,268,476.96) 4. Effect of changes in exchange rates on cash and cash equivalents - - Adjustment by application of the equity method in jointly controlled entities NET INCREASE (DECREASE) IN CASH AND CASH AND CASH EQUIVALENTS ( ) 30,163, (52,478,291.18) Cash and cash equivalents at the beginning of the year 3.u 97,555, ,033, Cash and cash equivalents at the end of the year 3.u 127,718, ,555, Adjustment of balance by applying the equity method 10

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13 CONTENTS 1. ACTIVITY AND GENERAL INFORMATION 2. BASIS OF PRESENTATION FOR THE CONSOLIDATED ANNUAL ACCOUNTS 3. PRINCIPLES AND VALUATION CRITERIA APPLIED 4. DISTRIBUTION OF PROFITS 5. CAPITAL MANAGEMENT 6. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS 7. LIQUID ASSETS 8. TRADING PORTFOLIO 9. FINANCIAL ASSETS AVAILABLE FOR SALE 10. NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE 11. CREDIT INVESTMENT 12. HOLDINGS 13. TANGIBLE ASSETS 14. INTANGIBLE ASSETS 15. FINANCIAL LIABILITIES AT AMORTISED COST 16. PROVISIONS 17. OTHER ASSETS AND LIABILITIES 18. EQUITY 19. RISK AND COMMITMENT ACCOUNTS AND MEMORANDUM ACCOUNTS 20. PROFIT AND LOSS ACCOUNT 21. FINANCIAL SITUATION 22. RELATED PARTIES 23. OTHER INFORMATION 24. EVENTS AFTER THE BALANCE SHEET DATE 25. ANNEX ANNUAL INVESTMENT SERVICES COMPANIES REPORT 12

14 AHORRO CORPORACIÓN, S.A. AND SUBSIDIARIES Consolidated report for the year ended December 31, ACTIVITY AND GENERAL INFORMATION 1.1. Activity of the Parent Company and Scope of Consolidation Ahorro Corporación, S.A. (hereinafter the Parent Company) was established on July 1, 1989, as a result of the merger of Gestión, Estudios e Inversiones de las Cajas de Ahorro, S.A. (Gesinca) and Gestión Monetaria, S.A. (Gesmosa) by dissolution without liquidation thereof and block transfer of the financial assets and liabilities thereof to the new Company, by way of universal succession, the new Company being subrogated in all rights and obligations of the dissolved companies. The corporate purpose of the Parent Company is the realisation, by itself or through investee companies, of activities and services related with the management and counselling in finance and investment, intermediation and involvement with own or third party risk in national and international financial markets, marketing and development of products, services, studies, programmes and works in financial matters, and any other activity directly or indirectly related with the aforementioned. The registered office of the parent company is on the Paseo de la Castellana, 89, Madrid, Spain. The Company is composed of a consolidated group of financial entities (the Group) established under Royal Decree 1332/2005, including the following entities: Ahorro Corporación Financiera, S.V., S.A. ACF International Inc. Ahorro Corporación Inmuebles, S.A. Sistemas de Tesorería, S.L. (previously Indra Sistemas de Tesorería, S.L.) Vehículo de Tenencia y Gestión 3, S.L. Alfa Meldon, S.L.U. Beta Meldon, S.L.U. Meldon Inversiones 2008, S.L.U. Red Plural de Cooperativas, S.L. Ahorro Corporación Coinversión, S.C.R., S.A.U. Ahorro Corporación, S.A. has been appointed by the Comisión Nacional del Mercado de Valores (CNMV) (Spanish Stock Exchange Commission), an entity obliged to comply with the duties listed in Article 8 of said Royal Decree, so the aforementioned Parent Company has been in charge of preparing the consolidated annual accounts. The Subsidiaries included in the consolidation via the global integration method and the percentage shareholdings of the Parent Company are as follows: 13

15 NAME ADDRESS ACTIVITY % HOLDING Ahorro Corporación Financiera, S.V., S.A. MADRID: Paseo de la Castellana, 89 Investment, counselling, portfolio management and financial instruments services (b) ACF International Inc. BOSTON (USA) 50 Congress Street, Suite 6 Stock Exchange Intermediation (a) Ahorro Corporación Inmuebles, S.A. MADRID: Paseo de la Castellana, 89 Acquisition, operation and disposal of buildings, ships and aircraft (b) Sistemas de Tesorería, S.L. (previously Indra Sistemas de Tesorería, S.L.) MADRID: Paseo de la Castellana, 89 Design, development and production of information technology products. Outsourcing services of all type of activities Ahorro Corporación Coinversión, S.C.R., S.A.U. MADRID Paseo de la Castellana, 89 Temporary holdings in the capital of non-financial companies Vehículo de Tenencia y Gestión 3 S.L. MADRID: Paseo de la Castellana, 89 Implementation of economic, financial and commercial studies (a) Meldon Inversiones 2008, S.L.U. MADRID: Paseo de la Castellana, 89 Provision of management and business administration services (c) Alfa Meldon, S.L.U. MADRID: Paseo de la Castellana, 89 Provision of management and business administration services (c) Beta Meldon, S.L.U. MADRID: Paseo de la Castellana, 89 Provision of management and business administration services (c) Red Plural de Cooperativas, S.L. MADRID: Paseo de la Castellana, 89 Provision of services related to the promotion, management, advice and administration of cooperatives (a) Company owned by Ahorro Corporación Financiera, S.V., S.A. (b) Group companies other than the Parent Company hold minority holdings not reaching 0.10%. (c) Companies owned by Ahorro Corporación Real Estate, S.A. At December 31, 2015, there are no jointly controlled companies included in the consolidation. None of these companies are listed, and their FISCAL YEAR ended on December 31. At December 31, 2015 and 2014, the Group companies in which external partners have a percentage of holdings equal to or greater than 10% are as follows: % HOLDING Ahorro Corporación Gestión, S.G.I.I.C., S.A. (a) Sistemas de Tesorería, S.L. (b) (a) Corresponded to non-voting shares held by other shareholders. These non-voting shares, because of their particular characteristics, were considered as current liability instruments. At December 31, 2015, this investee has left the scope of consolidation. (b) The Parent Company has gone to having 100% of the Share Capital in 2015 (note 1.1.1). 14

16 The main accounting data for the year 2015 and 2014 of Subsidiaries and Jointly controlled entities are as follows: SUBSIDIARIES THOUSANDS OF EUROS DECEMBER 31, 2015 BOOK VALUE (1) IMPAIRMENT LOSS (1) SHARE CAPITAL RESERVES NET INCOME FOR THE YEAR (*) Ahorro Corporación Financiera, S.V., S.A. 42,053-28,604 23,763 (2,910) ACF International Inc. 4,220 (3,663) 4,246 (3,354) (335) Ahorro Corporación Inmuebles, S.A (15,273) 15,312 Ahorro Corporación Coinversión, S.C.R., S.A.U. 3,635 (737) 3,635 (1,444) 691 Vehículo de Tenencia y Gestión 3, S.L. 3 (3) 3 (6,234) (425) Meldon Inversiones 2008, S.L.U Alfa Meldon, S.L.U Beta Meldon, S.L.U Sistemas de Tesorería, S.L. 18 (18) (482) Red Plural de Cooperativas, S.L. 1 (1) 3 (2) (1) (*) Net of dividend on account distributed in the year SUBSIDIARIES THOUSANDS OF EUROS DECEMBER 31, 2014 BOOK VALUE (1) IMPAIRMENT LOSS (1) SHARE CAPITAL RESERVES NET INCOME FOR THE YEAR Ahorro Corporación Financiera, S.V., S.A. 42,053-28,604 26,223 (2,461) ACF International Inc. 3,763 (3,385) 3,789 (3,212) (199) Ahorro Corporación Gestión, S.G.I.I.C., S.A. 9,981-7,663 3,013 3,928 Ahorro Corporación Desarrollo, S.G.E.I.C., S.A ,202 Ahorro Corporación Inmuebles, S.A. 60 (60) 60 (13,451) (1,822) Ahorro Corporación Soluciones Inmobiliarias, S.A. 715 (715) 715 (574) (163) Ahorro Corporación Coinversión, S.C.R., S.A.U. 3,635 (1,429) 3,635 (1,502) 39 Vehículo de Tenencia y Gestión 3, S.L. 3 (3) 3 (1,893) (4,341) Meldon Inversiones 2008, S.L.U Alfa Meldon, S.L.U Beta Meldon, S.L.U Indra Sistemas de Tesorería, S.L Red Plural de Cooperativas, S.L. 3-3 (2) - 15

17 JOINTLY CONTROLLED ENTITIES THOUSANDS OF EUROS DECEMBER 31, 2014 BOOK VALUE (1) PROVISION (1) SHARE CAPITAL RESERVES NET INCOME FOR THE YEAR Ahorro y Titulización, S.G.F.T., S.A ,000 3,370 1,984 Españoleto Inmuebles, S.A. 1,000-2, AC Participación en Infraestructuras, S.L. 1,711 (946) 3,423 (1,672) (229) (1) Amounts recorded for these investments included in the accounts of the Holding company Changes in the scope of consolidation At fiscal year 2015, changes in the scope of consolidation were as follows: On April 9, 2015, the Comisión Nacional del Mercado de Valores (CNMV) (Spanish Stock Exchange Commission) did not oppose the sale of shares of the investee Ahorro y Titulización, S.G.F.T., S.A.. This sale, agreed in 2014, was subject to this authorisation as a condition precedent thereto. Once the authorisation was obtained, on April 30, the sales contract was notarised into a Public Deed, and consequently, this jointly controlled company left the scope of consolidation. The effect of this exit was a reduction in the reserves of consolidated companies through the equity method for the amount of million euros, and it represented a profit for the Group of million euros (Note 10.3). On March 12, 2015, the Comisión Nacional del Mercado de Valores (CNMV) (Spanish Stock Exchange Commission) announced that it did not oppose the transfer of shares of the investee Ahorro Corporación Gestión, S.G.I.I.C., S.A.". This sale, as agreed in 2014, was subject to two conditions precedent. Once both conditions were solved, including authorisation by the CNMV, on May 18, 2015, the sales contract was notarised into a public deed, and consequently, this subsidiary left the scope of consolidation. The effect of this exit was a reduction in the reserves of consolidated companies for the amount of 379,000 euros, and it represented a profit for the Group of 599,000 euros (Note 10.3). On May 25, 2015, the Group signed a private contract of sale of the shares held in the subsidiary Ahorro Corporación Desarrollo, S.G.E.I.C. subject to compliance with various conditions precedent, including the Comisión Nacional del Mercado de Valores (CNMV) (Spanish Stock Exchange Commission) not opposing this transfer. On July 24, 2015, the CNMV announced its non-opposition to such a transfer, and in addition, the remaining conditions had been addressed. Therefore, on September 24, 2015, the sales contract of the aforementioned shares was notarised into a Public Deed, this resulting in the exit of the subsidiary from the scope of consolidation. The effect of this exit was a reduction in the reserves of consolidated companies by the amount of million euros, and it represented a loss for the Group of 73,000 euros (Note 10.3). In connection with the above three subsidiaries, at December 31, 2014, considering the sales process in which they were immersed, the Group reclassified the assets and liabilities contributed thereby in the consolidation process under the heading Non-current Assets held for sale and Liabilities associated with non-current assets held for sale", respectively (see note 10). 16

18 The Group also concluded that the management of securitization funds, collective investment and of venture capital companies (core activities of these subsidiaries) constituted discontinued operations in Consequently, revenues and expenses of these activities were recorded under Results from discontinued operations (net) in the consolidated profit and loss account for This reclassification was maintained in 2015 pending the effective de-registration of these subsidiaries in the consolidation scope. On May 5, 2015, the sale of the shares held in Españoleto Inmuebles, S.A. took place. As a result of this sale, there was a positive result for the Group of million euros, recorded under the heading Gains / Losses in non-current assets held for sale. On April 28, 2015, the Liquidation Agreement of the investee Soluciones Inmobiliarias, S.A. was registered as a Public Deed. On July 30, 2015, the resolution passed by the Ordinary and Universal General Shareholders Meeting of the associated company AC Participación en Infraestructuras, S.L. approving the dissolution and simultaneous liquidation of the investee, a Public Deed (Note 9.1) being duly notarised. On November 13, 2015, following the signing of the Transactional Framework Agreement for the resolution of the Escipión Project, defining a new project for outsourcing and sale of shareholdings in Sistemas de Tesorería, S.L. (formerly Indra Sistemas de Tesorería, S.L.), the Parent Company of the Group acquired the shareholdings held by Indra Sistemas, S.A. in the capital of Sistemas de Tesorería, S.L. for the amount of 11,000 euros. As a result of this acquisition, the Group now has a 100% holding in the share capital of that subsidiary. In fiscal year 2014, the following changes occurred in the scope of consolidation: On February 17, 2014, the Parent Company proceeded with the sale of the entire shareholding held in Analistas Financieros Internacionales, S.A. (AFI)" amounting to 4.7 million euros. This sale involved the departure from the scope of consolidation of this investee and of the rest of the associated companies with holdings thereby. These companies contributed to the consolidated balance sheet with assets and liabilities amounting to 6.17 and million euros, respectively. For consolidated purposes, this sale represented a profit for the Group amounting to million euros (note 11.2). This profit is recorded under the heading Gains / (Losses) in non-current assets held for sale in the consolidated profit and loss account of fiscal year On July 25, 2014, the Parent Company acquired a package of 24,999 shares of the investee Ahorro Corporación Desarrollo, S.G.E.I.C., S.A." amounting to 150,000 euros. As a result of this acquisition, the Parent Company now has a 100% holding in the share capital of that investee. At December 31, 2014 this investee was classified as "held for sale" (note 10). On June 26, 2014, the private contract of sale of shares of Gesmosa-GBI, A.V., S.A. granted by the Parent Company in favour of its subsidiary Ahorro Corporación Financiera, S.V., S.A. was notarised into a Public Deed. Subsequently, Ahorro Corporación Financiera, S.V., S.A. proceeded, with accounting effect from January 1, 2014, to the merger of Gesmosa, GBI, A.V., S.A. which consequently disappeared and left the scope of consolidation. As a result of this merger, minority partners of Gesmosa-GBI, A.V., S.A. went on to have 0.30% of the share capital of Ahorro Corporación Financiera, S.V., S.A. as of December 31, On October 2, 2014, the sale of the stake in Xesgalicia S.G.E.C.R. took place, generating a loss for the Group of 582,000 euros. This result is recorded under the heading Gains / (Losses) in non-current assets held for sale in the consolidated profit and loss account of fiscal year

19 1.1.2 Companies excluded from the scope of consolidation On May 11, 2011, the company AC Jessica Andalucía S.A., in which the Group holds 100% of the shareholding and voting rights, was established. This investee was conceived as a vehicle company whose corporate purpose was to take stakes in companies or in venture capital entities and to facilitate any type of loan and provide consulting services on specific urban infrastructure projects carried out in accordance with the content of a Management and Financing Agreement signed between Ahorro Corporación Financiera, S.V., S.A. (holding shares in the investee), AC Jessica Andalucía, S.A. and a financial entity outside the group providing the funds to finance such projects. In this structure, the AC Group acted as mere manager of investments, not taking on the profits or losses produced by this SPV, since the aforementioned Agreement stipulated that all the associated risks and profits were to be undertaken by the financial institution providing the funds to develop the projects. Considering the above, the Group concluded that the consolidation of this company distorted its true and fair view and, therefore, asked the Comisión Nacional del Mercado de Valores (CNMV) (Spanish Stock Exchange Commission), in accordance with the provisions of points a) and d) paragraph 4 of Rule 5 of the Circular 7/2008, to exclude this investee from the Group's scope of consolidation. This authorisation was granted by the CNMV on July 15, In fiscal year 2014, the company AC Jessica Fidae, S.L. was established: an investment vehicle similar to the aforementioned AC Jessica Andalucía, S.A. Based on the arguments stated above, the Group asked the Comisión Nacional del Mercado de Valores (CNMV) (Spanish Stock Exchange Commission), in accordance with the provisions of points a) and d) paragraph 4 of Rule 5 of the Circular 7/2008, to exclude this investee from the Group s scope of consolidation. Consequently, these investments at December 31, 2014 were classified as Financial assets available for sale (Note 9.2). On September 24, 2015, the subsidiaries Ahorro Corporación Financiera, S.V., S.A. and Ahorro Corporación Inmuebles, S.A. sold to a third party, shares and holdings held in the companies AC Jessica Andalucía, S.A. and AC Jessica Fidae, S.L., respectively, representing 100% of the share capital of both companies. In addition to this sale, the buyer in various contracts signed by these investee subrogated, the management of several venture capital entities linked to the infrastructure sector was transferred, and the transfer occurred in favour of the purchaser of the affected employees to the business transferred. The profit for the Group derived from this transaction amounted to 831,000 euros, recorded under Gains / (losses) on non-current assets held for sale in the accompanying consolidated profit and loss account. Upon the completion of these sales, at December 31, 2015, there were no investee companies excluded from the consolidation scope. 18

20 1.2 Preparation of the Consolidated Annual Accounts The consolidated annual accounts for fiscal year 2015 of Grupo Ahorro Corporación, which were prepared by the Board of Directors of the Parent Company at their meeting of March 22, 2016 are pending approval by the General Shareholders Meeting of said Parent Company. However, the Directors believe that these consolidated annual accounts will be approved without any changes. The consolidated annual accounts for 2014 were approved by the General Shareholders Meeting of the Parent Company held on April 29, These accounts were prepared in accordance with the provisions of Circular 7/2008 of November 26, of the CNMV. 1.3 Relevant legislation The activities carried out by some companies of the Group are governed by Law 24/1988, of July 28, of the Securities Market, amended by Law 37/1998, of November 16, by Law 44/2002 of November 22, and by Law 26/2003, of July 17, by Order ECO/734/2004 of March 11, by Royal Decree 217/2008 of February 15, on the legal status of investment services companies. In addition, the management of collective investment schemes is governed by Law 35/2003 of November 4, and by Royal Decree 1082/2012, of July 13, approving the Regulation of the aforementioned Law. The Group is subject to compliance on a consolidated basis of a solvency ratio (see Note 5) and to the maintenance of a minimum level of liquidity, determined in relation to customer balances (see Note 6.4). On June 26, 2013 the European Parliament and Council published Regulation (EU) No. 575/2013, on prudential requirements for credit institutions and investment service companies, of mandatory compliance for member states and applicable as from January 1, BASIS OF PRESENTATION OF THE ANNUAL ACCOUNTS 2.1. Basis of presentation for the annual accounts The consolidated Annual Accounts of the Group are presented following the criteria and formats stipulated in Circular 7/2008 of November 26, of the CNMV, on accounting standards, Annual Accounts and proprietary information statements for investment services companies, management companies of collective investment institutions and management companies of venture capital firms (hereinafter Circular 7/2008) so that they show a fair view of the consolidated financial situation of the Group at December 31, 2015 and of the consolidated results of its operations and of the consolidated changes in equity and of the consolidated cash flows for the year ended on such date. On January 1, 2014, certain amendments to the said Circular 7/2008 concerning consolidation rules came into force. Specifically, the amendment that referred to the application of the equity method in the consolidation process for investments in jointly controlled entities being established. The application of this new criteria had no significant impact. The said consolidated annual accounts were prepared based on the accounting records of the Parent Company and of the companies that have been consolidated, closed on December 31, Circular 7/2008 establishes accounting standards and criteria, which although part of the regulatory legal framework on financial information in force in Spain (General Accounting Plan), adapt this to their own and specific characteristics of investment services companies, management companies of 19

21 collective investment institutions, and management companies of venture capital firms, allowing for an adequate and effective supervision thereof while safeguarding the protection of investors. The accounting principles and standards and assessment criteria set out in Circular 7/2008, summarised in Note 3 have been followed in the preparation of these Consolidated Annual Accounts There are no mandatory accounting policies and valuation that, having a significant effect on the Consolidated Annual Accounts, have not been applied. Changes in accounting policies, either because the rules have changed or because the Directors decide to vary the application criteria retroactively, means adjusting the amounts of the items affected using as a balancing item the corresponding equity in the older opening balance sheet on which comparative information is published, as if the new accounting policy had always been applied. No retroactive application of the new criterion is done when this is impracticable or the regulation which modifies it stipulates the date from which it must be applied. When errors from previous years are detected which are the result of omissions or inaccuracies, or failures to use information available in such periods, these errors are corrected by applying the above mentioned rules in the case that there is a change produced in the accounting criteria applied. The figures included in these Annual Accounts are shown in Euros, unless indicated otherwise Use of opinions and estimations in the preparation of the Financial Statements In preparing the Group s Consolidated Annual Accounts, the Directors of the Parent Company have had to make value judgements, estimations and assumptions that affect the application of accounting policies and the balances of assets, liabilities, income and expenses, in addition to the breakdown of contingent liabilities existing at the date of issue of these Annual Accounts. Value judgements, estimations and assumptions made are based on historical experience and various other factors that are understood to be reasonable under the circumstances and whose results form the basis to establish the book value of assets and liabilities that are not readily available through other sources. Estimations and assumptions are reviewed on an ongoing basis. However, the inherent uncertainty of estimations and assumptions could result in significant adjustments, in the future, to the values of the assets and liabilities affected. Value judgements and the most significant estimations used in the preparation of these Consolidated Annual Accounts relate to: Estimating the recoverability of doubtful debts (Notes 3.i and 6.2) The valuation of financial instruments not traded on organised markets (Notes 3.h and 6.1) The impairment of other intangible assets (Notes 3.l and Note 14) The recovery of deferred tax assets (Note 21) Provisions constituted to cover contingencies arising from the Group's activities (Note 16) 2.3. Comparative information In accordance with commercial legislation, the Directors of the Company present, for comparative purposes, with each of the items of the consolidated balance sheet, of the consolidated profit and loss account, of the consolidated recognised income and expenditure statement, of the consolidated statement of changes in equity, of the consolidated cash flow statement and of the consolidated report, together with the figures for 2015, those figures corresponding to the previous year. In this 20

22 regard the models for the balance sheet, profit and loss account, recognised income and expenditure statement, statement of changes in equity and cash flow statement presented in these Annual Accounts conform to the models contained in Circular 7/2008. According to that established in the single additional provision of the Resolution of January 29, 2016, of the Institute of Accounting and Auditing on the information to be included in the notes to the Consolidated Annual Accounts in relation to the average payment period to suppliers in business operations, the Group provides in Note 23.6 only the information relating to the fiscal year, and no comparative information is submitted. Tthese Annual Accounts, thus qualify as initial, for the sole purpose hereof, as regards the application of the principle of uniformity and the comparability requirement Consolidation process In preparing the consolidated annual accounts of the Group for 2015, the following accounting principles and policies, and valuation criteria were applied: Subsidiaries: Subsidiaries are those in which the Parent Company or another Group company has the capacity to exercise control, a capacity that is generally, but not exclusively, revealed through the direct or indirect ownership of 50% or more of the voting power in the investee companies or, even with a lower or no percentage, if there are other circumstances or agreements granting control. Furthermore, control also means the power to determine the financial and operating policies of an organisation, so as to obtain profit from its activities. The annual accounts of subsidiaries are consolidated with those of the Parent Company using the global integration method as it is defined in Circular 7/2008. Consequently, all balances arising from transactions between companies consolidated through this method that are significant have been removed in the consolidation process. Additionally, third-party holdings in: The Group s equity, appears under "Minority interests" in equity in the consolidated balance sheet (see Note 18.2). The consolidated results of the fiscal year are shown under Profit attributable to minority interests in the consolidated profit and loss account (see Note 18.2). The consolidation of the results generated by subsidiaries acquired in the fiscal year is carried out taking into account only those relating to the period between the date of acquisition and the close of that fiscal year. In parallel, the consolidation of the results generated by subsidiaries disposed of in the fiscal year is carried out taking into account only those relating to the period between the start of the fiscal year and the date of disposal. To consolidate business abroad, financial assets and liabilities have been converted to the currency used for presentation to the Parent Company. Revenues and expenses are translated at the average exchange rate for the period, and the constituent elements of equity are translated at historical exchange rates. All exchange differences arising as a result thereof are recorded under Valuation Adjustments -Translation differences" in equity. At December 31, 2015 and 2014, the only company that is part of the scope of consolidation, and that meets the requirements to be considered for foreign operations is ACF International, Inc., whose functional currency is the US dollar. The effect on the item Translation differences in the equity of the Group due to the consolidation of this subsidiary at December 31, 2015 was a profit of 912,000 euros (in 2014, the recorded profit was 410,000 euros). 21

23 Joint ventures: A joint venture is a contractual arrangement whereby two or more entities, called participants, undertake an economic activity that is subject to joint control, that is, to a contractual agreement to share the power to govern the financial and operating policies of an entity, or another economic activity, in order to benefit from its operations, and in which the unanimous consent of all participants for making strategic decisions, both financial and operational, is required. The annual accounts of investee companies classified as joint ventures are consolidated with those of the Parent Company using the equity method (see note 2.1) Associated entities: Associated entities are those over which the Parent Company or another Subsidiary has the ability to exercise significant influence, without there being a dependency or joint control relationship. Usually, this influence is manifested in a (direct or indirect) holding greater than or equal to 20% of the voting rights of the investee company. At December 31, 2015 and 2014, there were no shareholdings above 20% that were not considered associates. Also, no shareholdings under 20% were considered associates. In the consolidated annual accounts, associated entities are accounted for by the "equity method". If, as a result of the losses incurred by an associate, their accounting equity were negative, on the consolidated balance sheet of the Group they would be zero, unless there is an obligation by the Group for financial support. 3. PRINCIPLES AND VALUATION CRITERIA APPLIED The most important accounting principles and criteria that have been applied in preparing these Consolidated Annual Accounts are summarised below, and meet the requirements of Circular 7/2008: a) Going concern principle The business of the Group has been affected in recent years by the financial crisis and its impact on the current economy, which has mainly resulted in lower levels of activity in the various businesses. In this context, the Group has taken measures in recent years aimed at adapting its capacity to the situation and business prospects, with the support to such end of the shareholders. These measures were supplemented by others aimed at streamlining the Group s structure and balance sheet. This restructuring process has been carried out mainly in two areas. First, a plan was launched to divest in non-strategic assets, and second, a very significant reduction in financing needs and operating expenses was conducted. Within the first group of measures, portfolios were materialised, positions were settled, and divestment took place in companies and assets that were considered non-strategic for the future development of the Group, mainly the sale of the company headquarters that has taken place. Additionally, credit lines were renegotiated and a job reduction programme was launched. All the above was planned and performed in order to allow the Parent Company and its Group to continue trading independently, with a stable capital base. 22

24 All these decisions, including the sale of the building located at Paseo de la Castellana, 89, for a significant profit, allowed the Group to significantly enhance the different magnitudes and economic and financial ratios in Thus, at December 31, 2015, the profit after tax for the Group amounted to million euros (2014: loss of million euros). It should also be noted that the Group maintains higher levels of regulatory capital than the minimum required by the applicable regulations. According to the above, the Directors believe that the continuity of the Group's operations is guaranteed. Consequently, the Directors have prepared these consolidated annual accounts based on the principle of going concern, trusting considering that the Group s management will continue in future. b) Accrual basis These Consolidated Annual Accounts, except with regard to the consolidated statement of cash flows, have been prepared based on the actual flow of goods and services, regardless of the date of payment or collection. c) Principle of prudence For the preparation of the estimations and valuations in conditions of uncertainty, the Group companies account only for profits obtained until the date of close of the year. By contrast, in the preparation of these Consolidated Annual Accounts, all the risks originated in the year or in the previous year are taken into account as soon as they are known, without prejudice to their subsequent reflection in other documents forming part of the Annual Accounts, when the liability or expense is generated. d) Compensation of balances Debit and credit balances are only offset against each other, and, consequently, presented on the consolidated balance sheet at their net amount, when they arise from transactions which, contractually or as required by law, contemplate the possibility of offsetting and there is the intention to settle them on a net basis or to realise the asset and settle the liability simultaneously. e) Principal of materiality The materiality principle has been kept in the preparation of these Consolidated Annual Accounts, so the Group has chosen to group the items or amounts of a similar nature, provided that their materiality is barely significant. In this way the Group s true and air view is not altered. f) Foreign Exchange transactions: For the purposes of these Consolidated Annual Accounts, the euro has been considered as the presentation and functional currency, foreign currency being understood as any currency other than the euro. On initial recognition, receivables and payables in foreign currency balances have been converted into euros using the cash exchange rate. Subsequent to that time, the following rules for converting balances denominated in foreign currencies into euros apply: Assets and liabilities of a monetary nature are converted into euros using the average official exchange rates published by the European Central Bank at the closing date of each year. Non-monetary items valued at historic cost are converted at the exchange rate of the acquisition date. 23

25 Non-monetary items valued at fair value are converted at the exchange rate of the date when the fair value was determined. Income and expenses are converted at the exchange rate on the date of the operation. Amortisations are converted at the exchange rate applied to the corresponding asset. Exchange rate differences arising from the conversion of foreign currency balances are recorded in the consolidated profit and loss account, except for differences arising on non-monetary items valued at fair value whose adjustment at such fair value is recognised in equity up to the time when these are carried out. g) Recognition of income and expenses As a general rule, income is recognised at the fair value of the consideration received or to be received, minus related discounts, rebates and trade discounts. When the cash entry differs in time, the fair value is determined by discounting future cash flows. The recognition of any income in the consolidated profit and loss account or consolidated equity will be subject to compliance with the following assumptions: The amount can be reliably estimated. It is probable that the entity will receive economic benefits. The information can be verified. When there are doubts about being able to collect an amount previously recognised as income, the amount whose collection is no longer probable is recorded as an expense and not as a reduction of income. All debt instruments that are individually classified as impaired by the Group, as well as those for which impairment losses have been calculated collectively, due to having amounts overdue by more than three months, have their interest accrual interrupted. Interest and dividends are recognised in the consolidated profit and loss account based on the following criteria: - Interests use the effective interest rate method for recognition in the consolidated profit and loss account. - Dividends are recognised when the shareholder s right to receive payment is declared. Notwithstanding the foregoing, interest and dividends accrued prior to the date of acquisition of the instrument and pending collection are not part of the acquisition cost and are not recognised as revenue. h) Financial instruments A financial instrument is a contract that gives rise to a financial asset in an entity and, simultaneously, a financial liability or capital instrument in another entity. Financial instruments are recognised in the consolidated balance sheet exclusively when the Group becomes a party to the contract in accordance with its specifications. The Group recognises receivables or payables for credits and debits from the date on which the legal right to receive arises, 24

26 or the legal obligation to pay cash arises, and financial derivatives from the contract date. Additionally, transactions in the foreign exchange market will be registered on the settlement date, and for financial assets traded on secondary markets in Spain, if they are capital instruments they will be recognised on the trade date and, if they are debt securities, on the settlement date. Financial instruments issued by the Group, including their components, are classified as financial liabilities at the date of their initial recognition, in accordance with their economic substance when this does not coincide with their legal form. Remunerations, changes in book value and the results associated with repurchase or refinancing of financial liabilities are recognised in the profit and loss account as a financial expense. Likewise, the issue costs of financial liabilities are recorded in the profit and loss account using the method of effective interest rate. h.1) Financial assets Financial assets are, among others, the balance in cash, loans to financial intermediaries, loans to individuals, debt securities, capital instruments acquired, except those for subsidiaries, jointly controlled entities or associated companies, and derivatives from trading and hedging. The Group classifies its financial assets in the following portfolios for valuation purposes: Financial assets at fair value with changes in profit and loss. - "Trading portfolio" are financial assets originated or acquired with the intention of realising them in the short-term, or that are part of a portfolio of identified financial instruments and managed together so that there is evidence of recent actions to obtain short-term profit. Part of this portfolio also includes derivative instruments not designated as hedging instruments. - Other assets at fair value with changes in profit and loss : The Group includes hybrid financial instruments in this category, when it is mandatory to measure them at fair value according to Circular 7/2008. Held-to-maturity investment portfolio : includes debt securities with fixed maturities, whose future flows are a fixed or determinable amount, and that the Group has the positive intention and proven financial capacity, both initially and at any time thereafter, to hold to maturity. Loan investments : these include financial assets that, as they are not traded on an active market or required to be valued at fair value, their cash flows are a fixed or determinable amount and in which it is estimated to recover the entire disbursement made by the Group, except for reasons related to the debtor's solvency. This category includes investments in the business of loans to financial intermediaries and loans to individuals. Financial assets available for sale : this portfolio includes debt securities not classified as investment at maturity or at fair value with changes in profit and loss, capital instruments of entities other than subsidiaries, associates and jointly controlled entities of the Group, as well as shareholdings in investment funds which have not been included in the category of fair value with changes in profit and loss. Upon initial recognition in the balance sheet, financial assets are recorded at fair value. The fair value of a financial instrument at a certain date is understood as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The most standard and objective reference to fair value of a financial instrument is the price that would be paid for it in an organised, transparent and deep market ("quoted price" or "market price"). 25

27 After their initial recognition, the Group measures all financial assets, including derivatives that are assets, at their fair value, without deducting any transaction costs that might be incurred by their sale or other form of disposal, with the following exceptions: - Financial assets included in the category of "Loan investments" and "Investment portfolio held to maturity", which will be measured at their amortised cost. - Financial assets that are capital instruments whose fair value cannot be estimated reliably and derivatives that have those instruments as underlying asset and are settled by their delivery, which are valued at cost. The amortised cost is the cost of acquisition of a corrected financial asset or liability (plus or minus, as appropriate) by principal repayments and interest payments, plus or minus, as appropriate, the portion allocated to the profit and loss account using the effective interest rate, of the difference between the initial amount and the redemption value of such financial instruments. In the case of financial assets, the amortised cost also includes corrections to their value motivated by any impairment that they may have experienced. The effective interest rate is the rate that exactly matches the initial value of a financial instrument to all its estimated cash flows for all concepts throughout its residual life. For financial instruments with a fixed interest rate, the effective interest rate coincides with the contractual interest rate established at the time of their acquisition plus, where appropriate, the fees which, by their nature, can be equated to an interest rate. In financial instruments with variable interest rates, the effective interest rate coincides with the rate of return prevailing in all concepts until when the first review of the interest rate of reference is to take place. Financial assets are derecognised from the Group s balance sheet when the contractual rights on cash flows have expired, or when they are transferred, as long as in this transfer the risks and benefits are substantially transferred, or even if there is no substantial transfer or retention exists thereof, the control of the financial asset is transferred. In the latter case, when control of the asset is not transferred, these shall continue to be recognised for their continued commitment, i.e. for an amount equal to the Group s exposure to changes in the value of the transferred financial asset. Furthermore, the Group will consider the amount of debt instruments as written off balances, matured or not, when after an individual analysis, their recovery is considered remote and they are derecognised as assets. Unless proven otherwise, this category will include all debts, except the amounts covered by sufficient effective guarantees, of customers that are declared insolvent, of those that have been or will be declared in liquidation phase, or that suffer a significant and irrecoverable deterioration in their solvency and balances of operations classified as doubtful receivables due to arrears older than 2 years. The book value of financial assets is corrected by the Group with a charge to the consolidated profit and loss account when there is objective proof that an impairment loss has been produced. h.2) Financial liabilities Financial liabilities include, among others, debts with financial intermediaries, debts with individuals, trading and hedging derivatives, subordinated liabilities and short positions. Financial liabilities are classified for the purposes of their measurement into the following categories: 26

28 "Financial liabilities at fair value with changes in the profit and loss account." This item reflects primarily financial derivatives in the trading portfolio, in addition to the short sales of securities. Financial liabilities at amortised cost." This category includes financial liabilities not included in the previous category. Upon initial recognition in the balance sheet, financial liabilities are recorded at fair value. After their initial recognition, all financial liabilities of the Group are valued at their amortised cost, except those identified as Liabilities at fair value with changes in profit and loss". Financial liabilities are derecognised from the consolidated balance sheet of the Group when the obligation is extinguished. The difference between the book value of the extinguished financial liabilities and the consideration paid is recognised immediately in the consolidated profit and loss account. The Securities company included in the scope of consolidation, maintains credit balances of an instrumental and transitional nature on behalf of private customers in on demand deposits at financial intermediaries, with express reference to their status as Customer balances in compliance with the Order of the Ministry of Economy and Finance 848/2005. h.3) Profits and losses of the financial instruments Profits and losses of financial instruments are recorded depending on the portfolio in which they are classified according to the following criteria: For financial instruments included in the category of fair value through changes in profit and loss, changes in fair value are recognised directly in the consolidated profit and loss account, distinguishing, for instruments other than derivatives, between the portion attributable to accrued returns on the instrument, which is recorded as interest or dividends according to their nature, and the remainder is recorded as income from financial transactions. Interest on financial instruments classified under this category is calculated using the effective interest rate method. For financial instruments measured at amortised cost, fair value changes are recognised when the financial instrument is withdrawn from the balance sheet and, in the case of financial assets, when they become impaired. Interest on financial instruments classified under this category is calculated using the effective interest rate method. The following criteria apply for financial assets available for sale: (i) Accrued interest is calculated according to the effective interest method, and, where appropriate, accrued dividends are recognised in the profit and loss account, (ii) Impairment losses are recognised as described in this Note, (iii) Exchange rate differences are recognised in the consolidated profit and loss account when dealing with monetary financial assets and temporarily in the consolidated equity as valuation adjustments, in the case of non-monetary financial assets until they are derecognised from the balance sheet, at which time they shall be recognised in the consolidated profit and loss account, (iv) Other changes in value are recognised directly in the consolidated equity of the Group until the derecognition of a financial asset takes place. h.4) Fair value of financial instruments The most objective and common reference for the fair value of a financial instrument is the price that would be paid for it in an active market. When there is no reference price in an active market for a certain financial instrument, its fair value is estimated by using that established in recent transactions involving similar instruments and, failing 27

29 this, using sufficiently verified valuation models, taking into account the specific features of the instrument to be measured and, particularly, the different types of risk associated with the instrument. The Group considers a market as non-active when the trading volume and number of transactions do not exceed a minimum threshold and must, therefore, be considered unrepresentative. At December 31, 2015 and 2014, the Group considered the private fixed-income market as non-active in general. In particular, for debt instruments which are not listed in active markets, the Group has used the information available on AIAF panels and distributed through information sharing platforms (Bloomberg, Reuters, etc.) that communicate reference prices built up on price or quotation bases provided by different contributors. The fair value of financial derivatives traded in organised, transparent and deep markets included in trading portfolios is equal to their daily quoted price and if, for exceptional reasons, their price cannot be provided for a given date, are measured using methods similar to those used to measure derivatives not traded on organised markets. The fair value of derivatives not traded on exchanges or traded in shallow or non-transparent organised markets, is equated to the sum of future cash flows arising from the instrument, discounted to the date of measurement ("present value" or "theoretic closing value"), using methods recognised by the financial markets in the valuation process: Net present value (NPV), models of pricing options, etc. Including those non-collateralised positions, a spread that reflects the counterparty credit risk and liquidity of the product. h.5) Reclassification of financial instruments between categories The reclassifications of financial instruments between categories are permitted under certain exceptional circumstances and under the observation of specific rules. In fiscal years 2015 and 2014, the Group did not make any category reclassifications. i) Impairment of the value of financial assets The book value of financial assets is corrected by the Group with a charge to the consolidated profit and loss account when there is objective proof that an impairment loss has been produced. i.1) Debt instruments There is objective proof of impairment in debt instruments, understood as loans and debt securities, if after their initial recognition, there is an event which has a negative impact on their future cash flows. Objective proof of impairment is determined individually for significant debt instruments and individually and collectively for groups of instruments that are not individually significant. In the case of debt instruments measured at amortised cost, the amount of impairment losses is equal to the difference between their book value and the present value of their estimated future cash flows, although the Group considers, for the listed instruments, their market value as a substitute for the present value of the cash flows, provided that this is sufficiently reliable. The amount of estimated impairment losses is recognised in the profit and loss account using a compensatory item as a counterparty to correct the value of the assets. 28

30 Future cash flows are calculated taking into account guarantees, risk types and circumstances that are expected be produced by the collections. In the case of Financial assets available for sale, the amount of impairment losses is equal to the positive difference between their acquisition cost, net of any principal repayment and their fair value minus any impairment loss previously recognised in the profit and loss account. When there is objective proof that a decline in fair value is due to its impairment, the unrealised losses recognised as Valuation adjustments in Equity are recorded immediately in the consolidated profit and loss account. The recoveries of impairment losses on debt instruments are recognised in the consolidated profit and loss account of the period in which the recovery occurs. To determine impairment losses on these assets, the Group assesses the possible losses as follows: Individually, for all significant assets, and for those which, not being significant, are not included in homogeneous groups with similar characteristics: the age of the overdue amounts, type of guarantee, sector of activity, geographic area, etc. Collectively: the Group classes together those assets that have not been identified individually in homogeneous groups based on the counterparty, sector, transaction status, guarantee, duration of amounts due and sets for each group impairment losses that will be the difference between the book value of all financial assets of the Group and the present value of their estimated future cash flows, which will be estimated based on historical loss experience of the Group or other entities operating in the same market, for debt instruments with similar credit risk characteristics to those of the Group, after making appropriate adjustments to adjust historical data to current market conditions. i.2) Capital instruments There is objective proof that capital instruments have deteriorated when after their recognition the asset experiences a significant or prolonged decrease below its book value in such a way that the Group considers that it will not be able to recover its book value, or significant adverse changes have taken place in the technological, market, economic or legal scope where the issuer of the instrument operates, which can affect the recovery of the investment. In the case of capital instruments measured at fair value and included in the Financial assets available for sale" portfolio, the impairment loss is calculated as the difference between their acquisition cost and fair value, minus any previously recognised impairment losses. The unrealised losses recognised directly as Valuation adjustments in Equity are recorded in the consolidated profit and loss account when it is determined that the decrease in fair value is due to their impairment. If subsequently all or part of the impairment losses is recovered, the amounts will be recognised under the heading Valuation adjustments in Equity". In the case of capital instruments measured at cost in the "Financial assets available for sale" portfolio, the impairment loss is calculated as the difference between its book value and the present value of expected future cash flows, updated to the market rate of return for other similar securities. In order to determine the impairment, the equity of the investee company is taken into account, adjusting it for unrealised gains that existed at the date of valuation. These losses are recorded in the consolidated profit and loss account directly reducing the capital instrument, but the amount cannot later be retrieved except in the case of sale. 29

31 j) Accounting hedges The Group uses financial derivatives as part of its strategy to reduce its exposure, mainly to risks of interest rates, credit and exchange rate, among others. When these transactions meet certain requirements established in 25th rule of Circular 7/2008, they are considered "hedging". The Group designates a hedge transaction from its inception, this transaction being appropriately documented, identifying the hedged instrument or instruments and hedging instrument or instruments, in addition to the nature of the risk being hedged, as well as the criteria or methods followed by the Group to assess the effectiveness of the hedge throughout its duration, dealing with the risk to be hedged. The Group only recognises as hedging transactions those that are considered highly effective throughout their duration. A hedge is considered highly effective if during its expected duration the changes that occur in the fair value or cash flows attributable to the hedged risk in the hedge instrument or financial instruments covered are compensated almost entirely by changes in fair value or in cash flows, as appropriate, of the instrument or hedge instruments. To measure the effectiveness of hedges, defined as such, the Group assesses whether, from the beginning and to the end of the defined hedging period, it can be expected that the changes in fair value, or in the cash flows of the hedged item that are attributable to the hedged risk, will be almost entirely offset by changes in fair value or cash flows, as appropriate, of the instrument or hedge instruments and, retrospectively, the results of coverage have fluctuated within a range of between eighty to one hundred and twenty five percent of the results of the hedged item. In fiscal years 2015 and 2014, the Group did not conduct any hedging transactions. k) Tangible fixed assets Tangible fixed assets include amounts of property, furniture, vehicles, computer equipment and other facilities owned by the Group or acquired under financial leases. Tangible assets are classified according to their assignation: plant and equipment for own use and investment properties, and can be reclassified into another category when their use or destination changes. Tangible fixed assets for internal use includes all assets owned or under financial lease that the Group expects to use over more than one fiscal year for administrative purposes or for the production or supply of goods and services. These assets are initially measured at cost and, subsequently, at cost minus accumulated amortisation, and, if any, minus the aggregate amount of the valuation adjustments due to recognised impairment. Offices and garages that are leased to third parties are classified as real estate investment. Real estate investments are valued using the same criteria as that used for tangible fixed assets. The cost of tangible assets includes payments made, both initially at their acquisition or production, and subsequently for expansion, replacement or improvement occurs when, in both cases, obtaining future economic benefits are considered probable. Also part of the value of property, the initial estimation of the present value of the liabilities assumed arising from decommissioning, removal and restoration costs and the like, when those obligations result in the recognition of provisions in accordance with the standard specified in valuation of provisions in this report. 30

32 The cost of the acquisition or production of tangible assets, net of their residual value, is amortised on a straight-line basis over the estimated useful life of the different assets as follows: YEARS OF USEFUL LIFE AMORTISATION RATES USED Communication equipment % Computer equipment 4 25% Facilities % -10% Furniture and fixtures 10 10% Transport elements % -20% Upkeep and maintenance costs that do not increase the useful life of the asset are charged to the consolidated profit and loss account of the year in which they are incurred. Borrowing costs incurred before the start of operations of tangible fixed assets from borrowed funds, specific or generic, shall be included as greater book value of purchase price, provided they are directly attributable and when the period of time to render them in operating condition exceeds one year. Tangible assets are derecognised from the balance at the time of their disposal, when it is available, or when permanently withdrawn from use and no more future economic benefits are expected of them. The difference between the amount of the sale and its book value is recognised in the consolidated profit and loss account of the period in which the asset is derecognised and is classified as a separate item. The Group periodically reviews the residual values, useful life and depreciation method of the assets, and identifies if there are indications, both internal and external, that a fixed asset may be impaired at the date referred to these Annual Accounts. For those identified assets, the recoverable amount of tangible assets is estimated, understood as the higher amount between: (i) their fair value minus the necessary sales costs and (ii) their value in use. If the recoverable amount, thus determined, were less than the book value, the difference between the two will be recognised in the consolidated profit and loss account, reducing the book value of the asset to its recoverable amount. l) Goodwill and other intangible assets l.1) Goodwill At December 31, 2015 and 2014, the Group had not recorded goodwill. l.2) Intangible Assets The Group classifies as intangible assets those which are non-monetary assets and without physical substance, whose probable economic benefits are estimated and whose cost can be reliably estimated. Each intangible asset is examined to decide whether its useful life is finite or indefinite. Intangible assets are initially recognised at cost and subsequently measured at cost minus accumulated amortisation and any possible impairment losses. An intangible asset is recognised as such only if it is likely to generate future profits to the Group, and if its cost can be measured reliably. 31

33 Intangible fixed assets that have a finite useful life are depreciated systematically according to the estimated useful life of the assets and their residual value. The methods and depreciation periods applied are reviewed at each year-end, and if applicable, adjusted prospectively. At least at year-end, we evaluate if there are any impairment indicators, in which case the recoverable amounts are estimated, carrying out valuation adjustments as necessary Intangible assets with an indefinite useful life are not depreciated, and they are subject to an analysis of their eventual impairment, at least once a year. Consideration of indefinite useful life of these assets is reviewed annually. The useful life and depreciation rates applied to intangible assets are as follows: YEARS OF USEFUL LIFE AMORTISATION RATES USED Software 3 33% The amounts paid for access to the ownership or the right to use software are included in the computer applications. The maintenance costs of these computer applications are recorded directly as expenses in the period in which they occur. m) Non-current assets held for sale The Non-current assets held for sale in the consolidated balance sheet includes the book value of non-current assets whose sale is highly likely to take place under the current conditions of such assets, within one year from the date referred to the consolidated annual accounts. At year-end 2014, reflecting what is stated in Notes 1 and 2, the Group reclassified under this heading all those assets whose realisation was scheduled to occur in less than 12 months (see note 10). In general, assets classified as non-current assets held for sale are measured at the lesser book value at the time they are considered as such and their fair value, net of their estimated selling costs. While they remain classified in this category, tangible and intangible assets which can be depreciated given their nature are not depreciated. Notwithstanding the foregoing, financial assets, assets arising from employee benefits, the deferred tax assets and assets under insurance contracts that are part of a disposal group or of a discontinued transaction are not measured in accordance with the provisions of the above, but in accordance with the principles and rules applicable to these concepts, as explained in the previous sections of Note 3. The results generated in the fiscal year by those components of the Group which have been considered discontinued operations are recorded under Profit from discontinued operations in the consolidated profit and loss account, whether the component of the Group has been derecognised or remains therein, even if they were generated prior to their classification. 32

34 n) Fees and trading losses The Group classifies the fees it charges or pays in the following categories: n.1) Fees for services rendered Fees for investment services, complementary activities and other similar activities are recognised in the consolidated profit and loss account according to the following criteria: Fees for activities and services during a specified period of time (management of customer portfolios, management and administration of UCITS, deposit contracts, registration, custody and administration, etc.), renewable or not, shall be charged to the consolidated profit and loss account over the period of their execution. Fees for activities and services provided over a non-specific period of time (securitization and placement of issuance contracts, design or advice of transactions and similar, etc.) are recognised in the consolidated profit and loss account according to their level of realisation. Fees received for activities and services carried out on a single asset (reception, transfer and settlement of orders, intermediation transactions in the markets, subscription and redemption of UCITS, etc.) are recognised in the consolidated profit and loss account at the time of their execution. n.2) Financial fees These fees, which are an integral part of the effective income or cost of a financial transaction and that are collected or paid in advance, are recognised in the consolidated profit and loss account generally over the expected life of the financing, net of related direct costs, as an adjustment to the cost or effective return of the transaction. n.3) Trading losses The Group assumes as trading losses the losses resulting from trading incidents due to differences between the conditions of the orders received by financial intermediaries and those of trading and settlement transactions carried out. The Group recognises the loss at the time it arises regardless of the time of settlement. o) Personnel costs and remuneration based on capital instruments o.1) Short-term remunerations These remunerations are valued, without updating, for the amount to be paid for services received, recognised in general as personnel expenses for the year and a liability accrual account, for the difference between total expenditure and the amount already paid. o.2) Other long-term remunerations Provisions for pensions and similar obligations The Group promotes various pension schemes assigned to the Employee Pension Fund of Ahorro Corporación, F.P. authorised in The Fund is governed by Royal Decree 304/2004 of February 20, approving the Regulation of Pension Schemes and Pension Funds, with a permanent duration. 33

35 The schemes cover the following contingencies under the defined contribution system: Retirement of the participant. High and Severe Dependency. Additionally, schemes cover the following contingencies under the defined benefit scheme: Death. Permanent disability. Retirement benefits shall be charged to the capitalisation fund, which is made up of contributions made by the developer (net of insurance premium payments) plus yields (net of expenses) generated by these contributions. Disability benefits or those for death will be partly charged to the capitalisation fund and in part to insurance with an insurance company. In accordance with the rules of the aforementioned pension scheme, the Group makes regular contributions for the entire workforce, that is, depending on the seniority of employees being above or under 2 years, equivalent to 2.5% of their annual pensionable salary or equal to the amount required to meet the coverage of the sums insured for their death or disability, respectively. The 2015 contribution amounted to 332,000 euros (2014: 405,000 euros). These amounts are recorded under Personnel expenses in the accompanying consolidated profit and loss account (Note 20.4). On February 24, 2005, new specifications for the pension scheme were set out, through which, in addition to regular contributions, the promoter may make an individual extraordinary contribution for each participant whose amount shall be determined according to productivity criteria and profits in the fiscal year and may not exceed the limits specified in the current regulations. In fiscal years 2015 and 2014, there have been no contributions for this item. For the defined benefits, determining the contribution by each participant will be based on the cost of coverage of obligations accrued each year through an external assurance thereof by the schemes. The schemes do not undertake any risk coverage related to the benefits provided, as benefits are fully insured by an insurance company outside the schemes. o.3) Severance pay Severance pay is recognised as a provision and as a staff cost only when it is proved that the Group is committed to breaking the link it has with an employee or group of employees before the normal retirement date, or to issuing severance pay as a result of an offer made to encourage voluntary redundancy by employees. p) Provisions and contingencies The Group differentiates between provisions and contingent liabilities and assets. The former are credit balances covering present obligations at the balance sheet date that arise as a result of past events which could give rise to monetary losses for entities, which are considered probable in terms of occurrence; certain as to their nature but uncertain as to their amount and/or time of cancellation, while the two latter are possible obligations that arise from past events and whose materialisation depends on the occurrence or otherwise of one or more future events regardless of the will of the Group. Contingent assets are assets whose existence is conditioned on events occurring or not on which the Group cannot influence and which confirm the origin of the asset. 34

36 The Group s Consolidated Annual Accounts include all the significant provisions with respect to which it is estimated that the probability of it having to meet the obligation is greater than otherwise, as long as the amount of the obligation can be reliably estimated and it may have an outflow of resources for the entity that involve economic benefits. Contingent liabilities and assets are not recognised in the annual accounts, but are reported in memorandum accounts. Provisions, which are quantified based on the best information available on the consequences of the event giving rise to them, and are re-estimated at each balance sheet date, are used to meet the specific obligations for which they were originally recognised; they are reversed in whole or in part when such obligations cease to exist or decrease. Under no circumstances are provisions recognised to cover future losses arising from the activities of the entity or to offset future lower profits. In those situations, in which they are to receive compensation from a third party at the time of settling the obligation, and provided there are no doubts that the reimbursement will be received, an asset that does not entail a reduction of the amount of the debt is reported. The amount by which the aforementioned asset is registered may not exceed the amount of the liability that is recorded for accounting purposes. Only in those cases where there is a legal or contractual obligation, for which part of the risk has been externalised, and under which the company is not required to respond, has been taken into account in estimating the amount of the provision. q) Tax on profits The expense for tax on profits is determined by the tax payable on taxable income for the year, after taking into account the changes during the year relating to temporary differences, tax credits for deductions and allowances and for negative tax bases. The tax expense on profits is recognised in the consolidated profit and loss account, except when the transaction is recorded directly in the consolidated equity and in the business combinations in which the deferred tax is recognised as another asset thereof. For tax deductions, rebates and credits due to negative tax bases to be effective they must comply with the requirements of current legislation. The tax effect of temporary differences is included, where appropriate, in the corresponding items of anticipated or deferred taxes recorded under the headings Tax assets and Tax liabilities in the attached consolidated balance sheet. The Group reviews the deferred tax at least at each closing and also therefore the related tax assets and liabilities recorded, making the appropriate valuation adjustments if these deferred taxes are not current or are considered recoverable. Deferred tax assets and liabilities are measured at the effective tax rates that are expected to apply to the fiscal year in which the asset is realised or the liability is settled, based on tax rates (and tax legislation) approved to date of the consolidated balance sheet. r) Customer funds outside the balance sheet The funds entrusted by third parties for investment in companies and investment funds, pension funds, and contracts for the management of discretionary portfolios are shown in the Group s memorandum accounts at their fair value. 35

37 Assets acquired by third parties, capital or debt instruments, derivatives and other financial instruments held on deposit, for which the Group has a responsibility to its customers are also recorded at fair value in the memorandum accounts (see Note 19) or if there were no reliable estimation thereof, at cost. Occasionally, and in accordance with the contracts signed with customers and only when the operation of the market so requires it (international markets), the Group uses global custody accounts (omnibus), where the entity itself appears as holder of positions, keeping the internal records required to know the breakdown by customer. The Group uses quoted market prices obtained from different markets or those supplied by global custodians when it comes to investment fund holdings (net asset value) to determine the fair value of these positions. Fees received for the provisioning of these services are recorded under the heading Fees received in the consolidated profit and loss account and are detailed in Note 20.3 of this Report. s) Investment Guarantee Fund and National Resolution Fund Security Companies must make annual contributions to the Investment Guarantee Fund, in accordance with the provisions of Royal Decree 948/2001, dated August 3, on compensation schemes for investors, as amended by Law 53/2002 of December 30 on fiscal, administrative and social measures and by Royal Decree 1642/2008, of October 10, by which the guaranteed amounts are changed. The amount that the Group has contributed to the said Fund in 2015 amounted to 185,000 euros (199,000 euros in 2014) and is recognised as an expense under Other operating expenses (Note 20.5) in the accompanying consolidated profit and loss account. Law 11/2015, of June 18, along with its regulatory development through Royal Decree 1012/2015, of November 6, undertook the transposition into Spanish law of Directive 2014/59/EU of May 15. This regulation establishes a new framework for the resolution of credit institutions and companies providing investment services, which is, in turn, one of the standards that contribute to the establishment of the Single Resolution Mechanism, established by Regulation (EU) No. 806/2014 of July 15, and laying down uniform standards and procedures for the resolution of credit institutions and certain investment services firms in the context of a Single Resolution Mechanism and a Single Resolution Fund. One of the cornerstones of the new resolution framework is the creation of resolution funds, as financing instruments available to the resolution authorities to effectively undertake the various resolution measures established. At the national level, Law 11/2015 governs the creation of the National Resolution Fund (FRN), whose financial resources must reach, before December 31, 2024, 1% of the amount of guaranteed deposits, by means of contributions made by credit entities and investment services firms established in Spain. The Royal Decree establishes that each year the FROB (Fund for Orderly Bank Restructuring) will determine the financial contributions by entities to FRN, such contributions adjusting to the risk profile of the entity. In 2015, a contribution of 248,000 euros (Note 19.4) was made to the FRN, which was registered under Other operating expenses in the accompanying consolidated profit and loss account. 36

38 t) Related parties The Group considers to be parties linked to its Administration key Management staff and related persons, in addition to the companies of the Grupo Ahorro Corporación. Transactions with related parties are made under normal market conditions. u) Statement of cash flows For the purpose of preparing the consolidated cash flow statement, the Group has considered as cash or cash equivalent the balance held in the liquid assets, the deposits on demand with financial intermediaries and the loans to financial intermediaries for own account transactions pending settlement netted with financial intermediaries debts for own account transactions pending settlement. The breakdown of these items as at December 31, 2015 and 2014 is as follows: THOUSANDS OF EUROS Treasury (Note 7) 70 3,603 Demand Deposits (Note 11.1) 127,649 93,952 Cash and cash equivalents 127,719 97, DISTRIBUTION OF PROFITS There follows the distribution of profit of Ahorro Corporación, S.A. for the year 2015 that the Board of Directors of the Parent Company will propose to the General Shareholders Meeting for approval, in addition to that for the year 2014 approved by the Annual General Meeting of Shareholders of April 28, 2015: THOUSANDS OF EUROS Profit/(Losses) for the year after Corporation Tax 48,033 12,992 Total distributable 48,033 12,992 To voluntary reserve 42,813 12,992 To Dividends 5,220 - Total distributed 48,033 12, CAPITAL MANAGEMENT The Group actively manages its own resources based on covering the main business risks. The adequacy of internal resources is monitored in accordance with the rules set out in Regulation (EU) No. 575/2013, of June 26, on prudential requirements for credit institutions and investment companies, which is mandatory for member states and applicable from January 1,

39 Management of capital The main objectives of the Group s capital management are to ensure that it complies with its own equity requirements and that the Group holds a clean capital ratio for developing its business and maximising its value for the shareholders. The Group manages its equity structure and makes the adjustments needed according to changes in economic conditions and to risks arising from the activities that it develops. To maintain or adjust the equity structure, the Group adjusts the amount of the dividend payable to shareholders, issuing capital instruments, as well as the distribution of reserves. The aforementioned current regulations governing the minimum capital that must be maintained by the Corporate Investment Services, both individually and as a consolidated group, and the way in which such capital should be determined. The consolidated and computable equity and those needed at December 31, 2015, calculated in accordance with Regulation (EU) No 575/2013, is as follows: THOUSANDS OF EUROS Computable Capital 68,656 68,656 Computable reserves 41,132 43,002 Other Capital items 1-7,194 Intangible assets (242) (2,573) Deferred tax assets (2,893) (1,829) Capital instruments in financial sector entities (941) Second tier equity - - Computable equity 105, ,450 Own Funds Resources 23,718 30,259 Surplus of Own Resources 81,994 84, RISK MANAGEMENT OF FINANCIAL INSTRUMENTS The Group has the following control and compliance areas that are common to the Group: Risk control Internal audit Legal Services and Regulatory Compliance Control of Computer Systems In order to carry out their duties the above areas have access to accounting, management and risk control information on each business unit. Overall, their functions are summarised as: To assess the adequacy and effectiveness of control procedures and mechanisms established within the different areas of activity of the Group s companies (including the development of procedures for surprise audits of the business). 38

40 To monitor policies and risk control procedures and compliance with risk limits at the end of each day. To prepare proposals and develop internal control and risk control systems. To provide the companies with advice to ensure compliance with current regulations in the development of investment activities and provision of services. To monitor and evaluate compliance with current regulations. To prepare proposals for the Board of Directors of each company and of the Group, on reporting models and systems on risks incurred. To report to the Board of Directors of the Group company by submitting periodic reports on the level of compliance of control procedures and on compliance with risk limits. 6.1 Market risk Market risk is the exposure to potential loss from adverse movements in the prices of securities that make up the portfolio. Among factors that are the origin of market risk, changes in interest rates and exchange rates, the price of shares and the volatility of options should be highlighted given their impact on the business activity carried out by the Group. As described in Note 3, except for financial assets classified under the headings Loan investments, and those capital instruments whose fair value cannot be reliably measured or derivative instruments which have as the underlying asset such capital instruments, the Group s financial assets are recorded in the accompanying consolidated balance sheet at fair value. Likewise, except for financial liabilities recognised under Financial liabilities at amortised cost, the other financial liabilities are recorded at their fair value in the accompanying consolidated balance sheet. Market risk management, whose main exposure occurs in Ahorro Corporación Financiera, S.V., S.A., is conducted by Grupo Ahorro Corporación through the establishment of limits by the Executive Committee and the Board of Directors of the Parent Company, and the daily calculation of Value at Risk (VaR), supplemented by defining and monitoring other limits (concentration by value and stoploss, mainly). The VaR estimation is made for a confidence level of 99%, a historical observation period of one year (250 sessions) and a time horizon of the investment of one day. The summary of the monthly evolution of the average and maximum daily VaR, incurred in 2015 and 2014, distributed by business areas is as follows (in thousands of euros): 39

41 Monthly VaR evolution for the year 2015 VaR Medio Diario Límite (*) ene-15 feb-15 mar-15 abr-15 may-15 jun-15 jul-15 ago-15 sep-15 oct-15 nov-15 dic-15 Medio 2015 Riesgo Renta Variable Riesgo Renta Fija TOTAL VAR AGREGADO % 19% 15% 15% 15% 16% 22% 24% 20% 20% 24% 22% 18% VaR Máximo Diario Límite (*) ene-15 feb-15 mar-15 abr-15 may-15 jun-15 jul-15 ago-15 sep-15 oct-15 nov-15 dic-15 Medio 2015 Contado de Renta Variable Derivados sobre Renta Variable TOTAL VAR AGREGADO % 24% 19% 17% 19% 18% 25% 26% 26% 35% 30% 28% 24% Monthly VaR evolution for the year 2014 VaR Medio Diario Límite (*) ene-14 feb-14 mar-14 abr-14 may-14 jun-14 jul-14 ago-14 sep-14 oct-14 nov-14 dic-14 Medio 2014 Contado de Renta Variable Derivados sobre Renta Variable Productos sobre Tipos de Interés TOTAL VAR AGREGADO % 27% 25% 21% 21% 17% 8% 11% 13% 16% 14% 9% 16% VaR Máximo Diario Límite (*) ene-14 feb-14 mar-14 abr-14 may-14 jun-14 jul-14 ago-14 sep-14 oct-14 nov-14 dic-14 Medio 2014 Contado de Renta Variable Derivados sobre Renta Variable Productos sobre Tipos de Interés TOTAL VAR AGREGADO % 40% 27% 24% 31% 20% 13% 13% 26% 17% 17% 13% 22% The breakdown of the fair value of financial instruments, classified according to the applied valuation method is as follows. The three classification levels are: Level 1: Financial instruments whose market value has been obtained from their quoted prices in active markets. Level 2: Financial instruments whose fair value has been calculated using valuation techniques which use reference quotations of similar instruments or inputs based on observable data in the market. The main valuation methods, assumptions and inputs used in estimating the fair value of financial instruments classified at Level 2 depending on the type of financial instrument are as follows: Trading derivatives: The fair value of interest rate derivatives has been determined by discounting future cash flows using the implicit curves of the money market and the swap curve. For derivatives on equity instruments or stock indices, the fair value has been obtained using the Montecarlo method or the Black Scholes model. On July 30, 2015, the subsidiary Ahorro Corporación Financiera S.V., S.A. signed an agreement to sell all of its positions in derivatives, subject to compliance with certain conditions. With regard to derivatives whose counterparty is a bank, the buyer applied to the current value thereof, calculated as previously indicated, a discount of 1.5 million euros paid in November 2015 and 40

42 recognised as lower value of the said derivatives. This loss appears under Income from financial operations (net) - Trading portfolio of the accompanying consolidated profit and loss account. Additionally, a number of discounts applicable to corporate IRS are established in the aforementioned contract. -Debt securities: The fair value of debt instruments was determined based on the price in official markets (Central Annotations Office of the bank of Spain), AIAF panels (banks) or applying prices obtained from information services providers who build their prices based on prices reported by contributors, as well as using recently completed sales prices of similar instruments. -Loan investments and financial liabilities at amortised cost. These headings list receivables and payables at fixed or variable rates with short-term maturities, so no significant difference between amortised cost and fair value of these receivables and payables are estimated. Level 3: Financial instruments whose fair value was calculated using valuation techniques or models in which certain significant inputs are not based on observable market data. The models applied in these cases are sufficiently substantiated by the financial markets, are in common use by the operators of these markets, maximise the use of observable inputs and/or recent transactions, and take into account the specific features of the instrument being valued and especially the different types of risks associated with the instrument. For the case of derivatives not traded on organised markets, or traded in organised markets but lacking depth or transparency included in this Level 3, such as Corporate IRS, their fair value is determined by discounting the future cash flows of the derivative, discounted at the date of measurement ("present value") and, additionally, in those derivatives not guaranteed by a collateral contract, an adjustment for risk of their own or another credit (CVA and DVA) reflecting the credit risk of the counterpart and liquidity of the product. At December 31, 2015 and 2014, these non-collateralised transactions correspond to long-term swaps with companies for which there are no observable market data, such as ratings, the price of CDS etc. To determine CVA adjustments fixed income issues of bodies or entities have been used as a reference, which, by their nature, would be equivalent to the counterparts of these transactions. The spreads applied on market interest rates (Euribor) at December 31, 2015, have ranged between 72 and 2,704 basis points (43 and 1,336 basis points in 2014). As noted above, the buyer of corporate IRS has implemented a series of discounts on the current value thereof. In calculating the above-mentioned spreads, the most disadvantageous discount has been considered for the Group. The CVA adjustment at December 31, 2015 and 2014 amounted to and million euros, respectively. The impact on the consolidated income statement of CVA adjustment for 2015 amounted to a profit of million euros (1.486 million euros loss in 2014), an effect resulting from recalculating the CVA adjustment at December 31, 2015 and from the changes in exposures between the two dates. If an increase or decrease in spread levels on a curve of 5% had been taken into account, the CVA adjustment would have been above 497,000 euros, or less than 517,000 euros, respectively. The breakdown of all financial assets and liabilities classified at different levels of valuation at December 31, 2015 and 2014 is as follows: 41

43 DECEMBER 31, 2015 THOUSANDS OF EUROS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE Financial assets 119, , , ,223 43,551 43, , ,270 Trading portfolio 119, , , ,420 28,131 28, , ,047 -Debt instruments 119, , , ,525 -Capital instruments and UCITS Derivatives , ,385 27,726 27, , ,111 Other assets at fair value with changes in profit and loss Loan investments , , , ,795 Financial assets available for sale ,420 15,420 15,428 15,428 -Debt instruments Capital instruments and UCITS ,420 15,420 15,428 15,428 Held-to-maturity investment portfolio Hedging derivatives Financial liabilities , , , ,691 Trading portfolio , , , ,263 - Derivatives , , , ,263 Financial liabilities at amortised cost , , , ,428 Hedging derivatives

44 DECEMBER 31, 2014 THOUSANDS OF EUROS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE Financial assets , ,696 46,225 46, , ,930 Trading portfolio , ,995 32,233 32, , ,237 -Debt instruments Capital instruments and UCITS Derivatives , ,995 31,826 31, , ,821 Other assets at fair value with changes in profit and loss Loan investments , , , ,535 Financial assets available for sale ,992 13,992 14,158 14,158 -Debt instruments Capital instruments and UCITS ,992 13,992 14,158 14,158 Held-to-maturity investment portfolio Hedging derivatives Financial liabilities , , , ,652 Trading portfolio 554, , , ,461 -Short selling of debt instruments Short selling of capital instruments Derivatives , , , ,461 Financial liabilities at amortised cost , , , ,191 Hedging derivatives

45 6.2 CREDIT RISK Objectives, policies and processes for managing credit risk Credit risk arises from the possibility that losses may be incurred due to debtors breaches of their payment obligations, as well as losses in value as a result of their deteriorating credit quality. In the Group, most of the credit risk, also called counterparty risk, arises from market transactions, which are assumed with institutions (mainly credit entities) and comes from financial transactions, both in cash, where the amount of risk is comparable to the nominal value of the transaction, and in derivatives not traded on organised markets whose exposure, in most cases, is less than its nominal value. Management policies for this risk are determined by the Board of Directors through the Risk and Strategy Committee. In this way the Board establishes the general principles that define the Group s risk profile adapted to the activities it carries out. The Group has a procedure for granting and monitoring limits, and also for approving certain specific transactions with non-financial institutions. Credit risk is managed through a series of limits according to the probability of default, with a similar criterion for each rating level. In the case of transactions in financial markets, the Group also has compensation contractual rights and agreements ("netting") with most financial counterparties with which derivatives are traded. It is also common practice in financial markets to set "Collateral Programmes" between entities that arrange OTC derivative products. The main reason is to mitigate the credit risk of the counterparty in such derivatives. Currently, there are various collateral agreements for both derivatives ("Collateral Security Agreement") and for repos ("General Master Repurchase Agreement"). In all these agreements only "cash" is accepted as collateral. This avoids any valuation adjustments for guarantee. To ensure the effectiveness of these guarantees, contracts signed with counterparties use ISMA (International Securities Markets Association), ISDA (International Swaps and Derivatives Association) agreements and the annex to ISDA-CSA (ISDA Credit Support Annex) in the context of contracting supported by ISDA. The calculation of the exposure of each transaction takes into account methods based on the market value of transactions and is determined by their credit risk equivalent (REC), as well as their market value or current exposure. The Risk Control Department performs the daily monitoring of consumption with each counterparty and confirms that they are within authorised limits. Risk measurement and management of collateral is performed on a daily basis, and the information produced is reported weekly to the Risk Committee, which consists of corporate members in charge of risk management. Furthermore, this Committee is also responsible for establishing and approving specific lines and transactions with new counterparties, consonant with the general principles established by the Board of Directors through the Risk and Strategy Committee. 44

46 Financial assets exposed to credit risk are those which are subsequently shown at their carrying amount: EUROS December 31, 2015 EXPOSED TO CREDIT RISK NOT EXPOSED TO CREDIT RISK TOTAL Financial assets: Trading portfolio 482,635, , ,047, Debt instruments 119,524, ,524, Capital instruments and UCITS - 411, , Derivatives 363,111, ,111, Other assets at fair value with changes in profit and loss Loan investments 290,795, ,795, Financial assets available for sale - 15,427, ,427, Debt instruments Capital instruments and UCITS - 15,427, ,427, Hedging derivatives Total financial assets 773,431, ,838, ,269, Guarantees and securities granted 135,691, ,691, Total credit risk 909,122, ,838, ,960, EUROS DECEMBER 31, 2014 EXPOSED TO CREDIT RISK NOT EXPOSED TO CREDIT RISK TOTAL Financial assets: Trading portfolio 488,824, , ,236, Debt instruments 2, , Capital instruments and UCITS - 412, , Derivatives 488,821, ,821, Other assets at fair value with changes in profit and loss Loan investments 387,535, ,535, Financial assets available for sale -Debt instruments Capital instruments and UCITS - 14,157, ,157, Hedging derivatives Total financial assets 876,359, ,570, ,929, Guarantees and securities granted 289,124, ,124, Total credit risk 1,165,484, ,570, ,180,054, Counterparty risks for transactions pending settlement on behalf of customers are managed by following the procedures established for the settlement of transactions. At December 31, 2015 and 2014, the loans and receivables, impaired, had the following breakdown: 45

47 DECEMBER 31, 2015 EUROS COUNTERPARTY DEBT CORRECTION DUE TO IMPAIRMENT NET VALUE Loan investments - Loans to financial intermediaries (Note 11.1) 56, (56,044.73) - - Loans to individuals (Note 11.2) 9,565, (9,565,675.65) - Total 9,621, (9,621,720.38) - DECEMBER 31, 2014 EUROS COUNTERPARTY DEBT CORRECTION DUE TO IMPAIRMENT NET VALUE Loan investments - Loans to financial intermediaries (Note 11.1) 6,148, (6,148,793.02) - - Loans to individuals (Note 11.2) 9,710, (9,710,965.22) - Total 15,859, (15,859,758.24) - The breakdown of impaired risks classified by the age of the debt at December 31, is as follows: DECEMBER 31, 2015 EUROS COUNTERPARTY LESS THAN 3 MONTHS BETWEEN 3 AND 6 MONTHS BETWEEN 6 AND 12 MONTHS BETWEEN 12 AND 18 MONTHS BETWEEN 18 AND 24 MONTHS OVER 24 MONTHS TOTAL Loan investments - Loans to financial intermediaries 19, , , Loans to individuals 159, , ,392, ,565, Total 179, , ,428, ,621, DECEMBER 31, 2014 EUROS COUNTERPARTY LESS THAN 3 MONTHS BETWEE N 3 AND 6 MONTHS BETWEE N 6 AND 12 MONTHS BETWEEN 12 AND 18 MONTHS BETWEEN 18 AND 24 MONTHS OVER 24 MONTHS TOTAL Loan investments - Loans to financial intermediaries 417, , , , ,308, ,251, ,148, Loans to individuals 173, ,554, ,982, ,710, Total 590, , , ,437, ,308, ,234, ,859,

48 The item Loans to individuals impaired, includes at December 31, 2015, the amount of million euros, corresponding to the amount receivable from two customers, due to two financial swaps on interest rates with settlements not served at maturity (Year 2014: million euros relating to two financial swaps with settlements not served at maturity). As stated in Note 11.3 in this report, in 2015, the provision held for outstanding invoices corresponding to two venture capital companies which at December 31, 2014 were recorded as doubtful debtors, and fully provisioned, has been released. The movements for impairment losses for the year 2015 and 2014 are listed in Note Interest rate risk This risk refers to the impact that the changes in the general level of interest rates may have on the profit and loss account (flows of generation of income and expenditure) or on equity. The causes are mismatches in maturities or repricing of assets and liabilities that produce a different response to changes in the interest rate. At December 31, 2015 and 2014, the breakdown of the book value of assets and liabilities, whose fair value or cash flow was subject to interest rate risk (which are those that have a fixed or variable interest rate) and those who are not exposed to that risk, is as follows: 2015 EXPOSED TO INTEREST RISK EUROS NOT EXPOSED TO INTEREST RISK TOTAL Financial assets: Trading portfolio 482,635, , ,047, Debt instruments 119,524, ,524, Capital instruments and UCITS - 411, , Derivatives 363,111, ,111, Other assets at fair value with changes in profit and loss Loan investments 290,795, ,795, Financial assets available for sale - 15,427, ,427, Debt instruments Capital instruments and UCITS - 15,427, ,427, Hedging derivatives Total financial assets 773,431, ,838, ,269, Financial liabilities Trading portfolio 418,263, ,263, Other liabilities at fair value with changes in profit and loss Short selling of debt instruments Short selling of capital instruments Financial liabilities at amortised cost 242,427, ,427, Hedging derivatives Total financial liabilities 660,691, ,691,

49 EUROS 2014 EXPOSED TO INTEREST RISK NOT EXPOSED TO INTEREST RISK TOTAL Financial assets: Trading portfolio 488,824, , ,236, Debt instruments 2, , Capital instruments and UCITS - 412, , Derivatives 488,821, ,821, Other assets at fair value with changes in profit and loss Loan investments 387,535, ,535, Financial assets available for sale 14,157, ,157, Debt instruments Capital instruments and UCITS - 14,157, ,157, Hedging derivatives Total financial assets 876,359, ,570, ,929, Financial liabilities Trading portfolio 554,460, ,460, Other liabilities at fair value with changes in profit and loss Short selling of debt instruments Short selling of capital instruments Financial liabilities at amortised cost 307,191, ,191, Hedging derivatives Total financial liabilities 861,651, ,651, At December 31, 2015 and 2014, the book value of financial assets, grouped according to review dates for interest rate or maturity date, whichever of them is nearer in time, is as follows: THOUSANDS OF EUROS DECEMBER 31, 2015 LESS THAN 1 YEAR BETWEEN 1 AND 2 YEARS BETWEEN 2 AND 3 YEARS BETWEEN 3 AND 4 YEARS MORE THAN 5 YEARS ADJUSTMENT AT AMORTISED COST TOTAL Financial assets: Trading portfolio 463,614 9,263 9, ,636 Other assets at fair value with changes in profit and loss Loan investments 290, ,795 Financial assets available for sale Hedging derivatives Total financial assets 754,409 9,263 9, ,431 Financial liabilities Trading portfolio 400,909 8,069 9, ,263 Financial liabilities at amortised cost 242, ,428 Hedging derivatives Other liabilities (Leasing) Total financial liabilities 643,337 8,069 9, ,691 48

50 THOUSANDS OF EUROS DECEMBER 31, 2014 LESS THAN 1 YEAR BETWEEN 1 AND 2 YEARS BETWEEN 2 AND 3 YEARS BETWEEN 3 AND 4 YEARS MORE THAN 5 YEARS ADJUSTMENT AT AMORTISED COST TOTAL Financial assets: Trading portfolio 459,247 14,242 5,269 10, ,824 Other assets at fair value with changes in profit and loss Loan investments 387, ,535 Financial assets available for sale Hedging derivatives Total financial assets 846,782 14,242 5,269 10, ,359 Financial liabilities Trading portfolio 527,607 11,955 5,269 9, ,461 Financial liabilities at amortised cost 307, ,191 Hedging derivatives Other liabilities (Leasing) Total financial liabilities 834,798 11,955 5,269 9, , Liquidity risk This corresponds to the risk associated with the difficulties that can arise to undo or close a position in the market, or have the cash needed to cover cash overdrafts that can be generated at any given time. Ahorro Corporación Financiera, SV, S.A., which is the company in which the main exposures of the Group are generated, must cover a liquidity coefficient, for which it must maintain at all times an investment volume in low-risk assets with high liquidity to cover a percentage of current liabilities with residual term of less than one year, not including accounts payable of an instrumental and transient nature open to customers. In fiscal years 2015 and 2014, this percentage was 10 per cent, and the calculation made by the said Group company at year-end is as follows: EUROS Liquid Assets 66, ,590, Deposits on demand 96,434, ,432, Net balance securities transactions on own account pending settlement Temporary acquisition of assets on own account - 33,819, Marketable debt securities maturing <18 months 119,489, Available unconditioned on demand in credit institutions 3,000, Minus: Assigned temporarily 119,440, ,819, Transitory balances of customers 63,770, ,798, Assets related to guarantees - - Total computable assets 35,779, ,225, Minimum assets needed 6,972, ,864, Over coverage 28,806, ,361,

51 The Group, through the Risk Committee of Ahorro Corporación Financiera, S.V., S.A. performs daily monitoring of the liquidity position, which is defined as the part of the Equity which exceeds structural investments (tangible assets and investments in associated companies) plus liquid assets (excluding investment of transitory customer balances and including those available in unused credit facilities), less future commitments. Liquidity management is linked to prudent control of business growth in volumes of assets for financial transactions. The key is the ability to meet obligations contracted without this meaning that high costs are incurred or there is a loss of profitability. The classification of assets, liabilities, contingent liabilities and assimilated by contractual maturity at December 31, 2015 and 2014 is as follows: THOUSANDS OF EUROS DECEMBER 31, 2015 ON DEMAND UP TO 1 MONTH BETWEEN 1 AND 3 MONTHS BETWEEN 3 AND 6 MONTHS BETWEEN 6 AND 12 MONTHS OVER 12 MONTHS UNDETERMINED TOTAL Financial assets: Trading portfolio ,785 1, , , ,047 -Debt instruments , ,525 -Capital instruments Derivatives ,785 1,511 29, , ,111 Other assets at fair value with changes in profit and loss Loan investments 290, ,795 Financial assets available for sale ,428 15,428 -Debt securities Capital instruments ,428 15,428 Hedging derivatives Other assets 7, ,440 Total financial assets 298, ,785 1, , ,661 15, ,710 Financial liabilities Trading portfolio ,718 2,223 32, , ,263 Other liabilities at fair value with changes in P&L Short selling of C.I Short selling of D.I Financial liabilities at amortised cost 122, , ,428 Hedging derivatives Other liabilities 2, ,932 Total financial liabilities 125, ,783 22,718 2,223 32, , ,623 Gap period 172,995 (119,444) 1,067 (712) 116,416 (52,074) 15,839 Accumulated gap 172,995 53,551 54,618 53, , , ,087 50

52 THOUSANDS OF EUROS DECEMBER 31, 2014 ON DEMAND UP TO 1 MONTH BETWEEN 1 AND 3 MONTHS BETWEEN 3 AND 6 MONTHS BETWEEN 6 AND 12 MONTHS OVER 12 MONTHS UNDETERMINED TOTAL Financial assets: Trading portfolio - 10,835 9, , , ,237 -Debt instruments Capital instruments Derivatives - 10,835 9, , , ,821 Other assets at fair value with changes in profit and loss Loan investments 353,715 33, ,535 Financial assets available for sale ,158 14,158 -Debt securities Capital instruments ,158 14,158 Hedging derivatives Other assets 2, ,014 Total financial assets 355,729 44,655 9, , ,813 14, ,944 Financial liabilities Trading portfolio - 11,129 10,819 1,757 16, , ,461 Other liabilities at fair value with changes in P&L Short selling of C.I Short selling of D.I Financial liabilities at amortised cost 273,372 33, ,191 Hedging derivatives Other liabilities 6, ,186 Total financial liabilities 279,558 44,948 10,819 1,757 16, , ,838 Gap period 76,171 (293) (1,021) (1,155) (504) (62,666) 14,571 Accumulated gap 76,171 75,878 74,857 73,702 73,198 10,535 25,106 51

53 The Group has a positive gap, mainly as a result of the sale process it has been involved in recent years, which has made it possible to render long-term investments, which were partly financed with short-term resources, immediately available. Furthermore, the Group also has credit lines with several credit institutions. The amount available from these lines amounted to 3 million euros (1,000 euros in 2014), some of which have a tacit renewal clause in their contracts. The breakdown of the balances available on the credit facility, according to their contractual maturity, classified according to whether there is a firm maturity, or if it includes an automatic renewal clause, is as follows: THOUSANDS OF EUROS DECEMBER 31, 2015 UP TO 1 MONTH BETWEEN 1 AND 3 MONTHS BETWEEN 3 AND 6 MONTHS BETWEEN 6 AND 12 MONTHS OVER 12 MONTHS TOTAL Available on credit account Set maturity date Tacit annual renewal - - 3, ,000 Total - - 3, , Operational risk Operational risk arises from the possibility of suffering losses due to inadequacy or failures of processes, internal systems, personal or unforeseen external events. Operational risk includes the socalled technological risk. Detection systems of transactional risk of the Group are based on the creation of a transactional risk scorecard which identifies factors and analyses scenarios reflecting the business environment in the systems of internal control, for which it sets a periodic system reporting to the management of the business units, to Senior Management and to the Board of Directors. 7. LIQUID ASSETS The breakdown of the Liquid Assets heading in the consolidated balance sheet at December 31, 2015 and 2014 is as follows: EUROS CONCEPT Savings 17, , Bank of Spain 52, ,582, Total (Note 3.u.) 69, ,602, The balances included under this heading are freely available and not subject to guarantees. 52

54 8. TRADING PORTFOLIO (ASSETS AND LIABILITIES) The breakdown of the trading portfolio at December 31 is as follows: EUROS CONCEPT ASSETS LIABILITIES ASSETS LIABILITIES Debt securities 119,524, , Holdings in capital instruments 411, , Trading derivatives 363,111, ,263, ,821, ,460, Total 483,047, ,263, ,236, ,460, Debt securities At December 31, 2015 and 2014, the breakdown of these headings, depending on the residence sector of the issuer is as follows: EUROS CONCEPT ASSETS LIABILITIES ASSETS LIABILITIES Internal listed portfolio 119,489, Internal non-listed portfolio 34, External listed portfolio - - 2, Accrued interest receivable Total 119,524, , At December 31, 2015, the item Tradable internal portfolio" basically corresponds to investments in Treasury bills. The Group complements the management of these trading portfolios through the formalisation of forward securities purchase and sale contracts, which are classified in the derivatives trading portfolio. The breakdown of the effective sales and purchase commitments under contract is as follows: EUROS CONCEPT COMMITMENTS FOR PURCHASE SALE OF FORWARD SECURITIES PURCHASES SALES PURCHASES SALES Monetary assets and Public debt 41, , ,296, ,215, Other fixed income securities - 5, , , Holdings and shares - 2,803, ,803, Total 41, ,850, ,302, ,024, At December 31, 2015 and 2014, commitments to purchase and sell monetary assets and public debt securities matched. 53

55 8.2 Holdings in capital instruments The Group holds, at December 31, the following breakdown of holdings in capital instruments classified as trading portfolio: EUROS CONCEPT ASSETS LIABILITIES ASSETS LIABILITIES Internal listed equity portfolio 1, , External listed equity portfolio 4, Internal unlisted equity portfolio 404, , Total 411, , Trading derivatives The Group holds derivative financial instruments, primarily to manage the market risk of trading portfolio positions (active and passive). The breakdown of the positions held in the underlying function and the type of contract at December 31, 2015 and 2014, is as follows: EUROS CONCEPT ASSETS LIABILITIES ASSETS LIABILITIES Underlying interest rate derivatives 326,575, ,764, ,136, ,899, Financial swaps 326,524, ,585, ,703, ,772, Purchased options 50, , , Sold options , Underlying capital instrument and indexes derivatives 36,535, ,499, ,684, ,560, Purchased options 36,535, ,684, Sold options - 36,499, ,560, Total 363,111, ,263, ,821, ,460,

56 The breakdown of the nominals of these positions is detailed in Note 19. The breakdown of the results generated by the trading portfolio is as follows: EUROS CONCEPT Debt instruments portfolio Profit 62,913, ,470, Loss (61,368,711.20) (356,104,397.05) Subtotal 1,544, ,366, Capital instruments portfolio Profit 833, ,186, Loss (840,807.45) (894,453.42) Subtotal (7,402.78) 292, Financial instruments derivatives portfolio Profit 1,436,129, ,065,457, Loss (1,433,257,473.26) (1,066,512,796.44) Subtotal 2,872, (1,005,754.84) Total 4,409, , FINANCIAL ASSETS AVAILABLE FOR SALE The breakdown of this heading of the consolidated balance sheet assets at December 31 is as follows: EUROS CONCEPT Capital instruments portfolio -Listed - - -Not Listed 15,427, ,157, Total 15,427, ,157,

57 9.1 Capital instruments At December 31, 2015 and 2014, the unlisted securities recorded at acquisition cost, given that the Directors believe that their fair value cannot be reliably determined, are as follows: EUROS CONCEPT Unlisted Caja de Seguros Reunidos, S.A. (CASER) 11,511, ,511, Andalucía Capital Desarrollo F.C.R. 151, , A.C. Capital Premier F.C.R. - 93, A.C. Infraestructuras, F.C.R. 2,059, AC Jessica Andalucía, S.A. (Note 1.1.2) - 95, AC Jessica Fidae, S.L. (Note 1.1.2) - 62, Other 1,705, ,199, Total 15,427, ,157, At year-end 2015 and 2014 the Group maintained a 3% stake in Compañía de Seguros y Reaseguros, S.A. (CASER). As a result of the simultaneous dissolution and liquidation of the subsidiary AC Participación en Infraestructuras, S.L. (Note 1.1.1), the Group received a total of 300 shareholdings in AC Infraestructuras, F.C.R. For other investments unlisted and classified as Financial assets available for sale and without there being further evidence in the estimation for recoverable value, the Group took into account the equity adjusted for unrealised gains at the time of valuation, considering this procedure to be sufficient to prove a minimum recoverable value, and thus obtain evidence of the existence or not of impairment or of no impairment, without the need for further analysis. The Group did not record significant additional impairment losses in the fiscal year. 10. NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE The composition of the balance of these assets and liabilities in the accompanying consolidated balance sheet, at December 31, 2014 was as follows: EUROS Capital instruments Ahorro Corporación Desarrollo, S.G.E.I.C., S.A. 1,198, Ahorro Corporación Gestión, S.G.I.I.C., S.A. 32,203, Ahorro y Titulización, S.G.F.T., S.A. 3,179, ,581, Material assets Edificio Castellana, 89 83,488, Financial lease creditors (33,485,185.25) Other liabilities Ahorro Corporación Desarrollo, S.G.E.I.C., S.A. (145,833.98) Ahorro Corporación Gestión, S.G.I.I.C., S.A. (15,423,271.00) (49,054,290.23) 56

58 Following the completion of the sales process of these investees in 2015 (see note 1.1.1) these headings in the consolidated balance sheet show no information at year-end of fiscal year Non-current assets and liabilities held for sale. Capital instruments These headings included basically the amount of assets and liabilities contributed to the consolidation process by the companies Ahorro Corporación Gestión, S.G.I.I.C., S.A. and Ahorro y Titulización, S.G.F.T., S.A., sold at December 31, 2014, but such sales being subject to conditions precedent that had not materialised at that date (see note 1.1.1) Furthermore, it included assets and liabilities that had been added to the consolidation process by Ahorro Corporación Desarrollo, S.G.E.I.C. S.A., the investee for which it had decided to begin the selling process. Upon completion of the requirements for classification as Non-current assets held for sale at December 31, 2014, they were included in the consolidation process globally (in the case of Ahorro Corporación Gestión, S.G.I.I.C., S.A. and Ahorro Corporación Desarrollo, S.G.E.I.C., S.A. ) and by the equity method (Ahorro y Titulización, S.G.F.T., S.A.), respectively, and the assets and liabilities added are presented and measured in accordance with the provisions established for Disposal groups (see note 3.m). The breakdown of the main concepts of assets and liabilities in thousands of euros reclassified under the heading Non-current Assets and Liabilities held for sale" at December 31, 2014, was as follows: CONCEPT AHORRO CORPORACIÓN GESTIÓN, S.G.I.I.C. AHORRO CORPORACIÓN DESARROLLO, S.G.E.I.C. Liquid Assets 2 1 Assets available for sale 4,115 - Loan investments 27, Material assets Intangible assets 1 - Tax assets Other assets 43 8 Total assets 32,203 1,198 CONCEPT AHORRO CORPORACIÓN GESTIÓN, S.G.I.I.C. AHORRO CORPORACIÓN DESARROLLO, S.G.E.I.C. Financial liabilities at amortised cost Debts with financial intermediaries 7,951 - Debts with individuals Borrowings and subordinated liabilities (Note 15.3) 5,944 - Provisions 80 - Tax Liabilities Other liabilities Total liabilities 15,

59 10.2 Non-current assets and liabilities held for sale. Tangible assets and financial leasing At December 31, 2014, this item basically included the balance corresponding to the property located in Madrid, on the Paseo de la Castellana, 89, part of which was previously classified as for the internal use of the Group, and another part as a Real Estate Investment, as it was leased to third parties outside the Group. Among the decisions taken in order to reorganise the Group (see Note 3.a), in December 2014, a sales mandate was signed with a real estate agent to sell this building, establishing an initial term to achieve its sale of 6 months. In response to this mandate, and in accordance with the regulations in force, the Group concluded that the necessary conditions were met for its recognition as non-current assets held for sale. As described in Note 3-m, the Group accounted for these assets at the lower end of their book value and fair value net of selling costs. On June 12, 2015, the sales contract of the aforementioned building signed between the subsidiary Ahorro Corporación Inmuebles, S.A. (owner of the building) and a party outside Grupo Ahorro Corporación, being duly notarised via a Public Deed. The price paid by the purchaser amounted to 147,000,000 euros, and this amount was fully paid thereby. This price includes an amount of 61,647, euros for the cancellation of the financial leasing contracts listed below. Therefore, as a result of this sale, the Group has proceeded with the cancellation of the abovementioned financial liabilities. The materialisation of this sale generated a profit for the Group amounting to 56,191, euros, recorded under Gains / (Losses) on non-current assets held for sale not classified as discontinued operations accompanying consolidated profit and loss account. The building was acquired by Ahorro Corporación Inmuebles, S.A. on January 2, 2004 through a financial leasing contract. The total amount of the purchase of the building amounted to million euros, of which million euros were materialised by direct sale to the financial institution Barclays Bank, S.A. and the remaining million euros, by means of a financial leasing contract, signed with Lico Leasing, S.A., E.F.C. and Caja de Ahorros de Galicia, S.A. (currently Abanca Corporación Bancaria, S.A.). At December 31, 2014, the outstanding balance amounted to million euros, with maturity in January 2029, and it was included under the heading Non-current liabilities held for sale" of which a total of 899,000 euros corresponded to the amortisation made in The interest rate of the financial leasing was variable and tied to 1-year Euribor %. On July 31, 2009, a Sale and lease-back transaction took place, involving the sale and subsequent lease-back of the building through two financial leasing contracts between Lico Leasing, S.A., E.F.C. and Ahorro Corporación Inmuebles, S.A. And between Madrid Leasing Corporación, E.F.C. and Ahorro Corporación Inmuebles, S.A. At December 31, 2014, the outstanding balance amounted to million euros, maturing in January 2029, of which a total of miliion euros corresponds to the amortisation made in fiscal year The interest rate of the financial lease is variable and tied to 1-year Euribor %. On March 28, 2014 the Parent Company and Lico Leasing, S.A.U., E.F.C. signed contracts for the assignment of collection rights that Lico Leasing, S.A.U., E.F.C. holds against Ahorro Corporación Inmuebles, S.A. (Subsidiary), derived from two property leasing contracts that the subsidiary had signed with Lico Leasing, S.A.U., E.F.C. dated January 2, 2004, and July 31, 2009, respectively, intended to acquire part of the building located at Paseo de la Castellana, 89 (see Note 13). The collection rights acquired by the Parent Company amounted to million euros, increasing the purchase price to million euros. For consolidation purposes this transaction involves the cancellation of Financial liabilities from financial leases from the subsidiary Ahorro Corporación Inmuebles, S.A., generating a profit for the Group amounting to million euros recorded in 2014 under Gains / (Losses) on non-current assets held for sale in the accompanying consolidated profit and loss account. 58

60 This balance included the amount pending payment for instalments and purchase option, as follows: FISCAL YEAR 2014 THOUSANDS OF EUROS FEES PURCHASE OPTION ADJUSTMENT AT AMORTISED COST TOTAL NCG Banco, S.A. 1, ,206 Lico Leasing, S.A., E.F.C. (Contract 2004) 11, ,525 Lico Leasing, S.A., E.F.C. (Contract 2009) 3, (653) 2,739 Madrid Leasing Corporación, E.F.C. 19, (1,181) 18,015 Total 34, (1,834) 33, Discontinued operations As a result of previous sales the Group discontinued the activity of asset management (Undertakings for Collective Investments in Transferable Securities, venture capital companies and securitization funds). Therefore, all income and expenses generated in fiscal years 2014 and 2015 up to their effective exclusion from the scope of consolidation due to the shareholding in Ahorro Corporación Gestión, S.G.I.I.C., S.A., Ahorro Corporación Desarrollo, S.G.E.I.C., S.A. and Ahorro y Titulización, S.G.F.T., S.A., whatever its nature and even if they were generated prior to their classification as Noncurrent assets held for sale, are presented, net of tax effect, in the accompanying consolidated profit and loss account, as a single amount in the item "Results from discontinued operations (net)". The breakdown of the main Income and Expenses items reclassified to Results from discontinued operations (net)" is as follows: CONCEPT Fees received 13,775, ,667, Fees paid (8,625,617.37) (16,406,519.24) Personnel expenses (2,272,439.31) (3,318,861.07) Overheads (1,787,176.45) (1,637,851.88) Depreciations (39,292.15) (83,412.93) Other items (Net) 218, (1,032,836.57) 1,269, ,187, Additional sales results 946, Total 2,215, ,187, The additional sales result is the result obtained in the process of disposal of investee companies above its theoretical book value. 59

61 11. CREDIT INVESTMENT The breakdown of this heading of the consolidated balance sheet assets at December 31 is as follows: EUROS CONCEPT Loans to financial intermediaries 289,263, ,580, Loans to individuals 1,531, ,954, Total 290,795, ,535, No transfers of assets included under this heading to other financial asset portfolios took place in fiscal years 2015 and The breakdown by remaining maturity date of these headings can be found in Note 6.4 on liquidity risk Loans to financial intermediaries The breakdown of loans to financial intermediaries at December 31 is as follows: EUROS CONCEPT On Demand Deposits (Note 3.u) 127,648, ,952, Receivables from own transactions pending settlement With the Systems Company - - With other financial intermediaries Forward deposits 358, ,253, Temporary purchase of assets 25,000, ,819, Subject to contribution 25,000, ,819, Other loans 136,237, ,386, Valuation adjustments 18, , Accrued interest receivable 18, , Subtotal 289,263, ,580, Doubtful assets (Note 6.2) 56, ,148, Valuation adjustments Impairment of credit value with financial intermediaries (56,044.73) (6,148,793.02) Total 289,263, ,580, The item Other receivables primarily groups balances given by the Group as collateral required by the counterparties for derivative transactions (see Note 8.3). 60

62 11.2 Loans to individuals The breakdown of loans to individuals at December 31 is as follows: EUROS CONCEPT Loans and advances for securities transactions 1,160, ,649, Other loans and advances 371, ,304, Doubtful assets (Note 6.2) 9,565, ,710, Valuation adjustments (9,565,675.65) (9,710,965.22) Accrued interest receivable - - Valuation adjustments for impairment (9,565,675.65) (9,710,965.22) Total 1,531, ,954, The item Loans and advances for securities transactions includes at December 31, 2015, mainly the amount receivable from the sale of the shareholding held in International Financial Analysts, S.A. (AFI)" (Note 1.1.1). According to the conditions agreed to regarding the payment of the sale price, at December 31, 2014, there were still 2 outstanding payments amounting to million euros each, to be charged before December 31, 2015, and December 31, 2016, respectively Impairment losses The breakdown of impairment losses accounted at closing of the years 2015 and 2014 for their credit investment is as follows: THOUSAND EUROS CONCEPT Opening balance (15,860) (18,477) Allocations charged to results (1,212) (1,990) Recovery of allocations credited to results 6,204 2,021 Applications and uses 1,246 1,714 Other Closing balance (9,622) (15,860) Of which: Depending on the form of its determination: Determined individually (9,622) (15,683) Determined collectively - (177) At December 31, 2014, the Group held receivable invoices on the balance sheet from two venture capital firms classified as doubtful for a total amount of million euros and provisioned at 100%, as it was believed that, according to the terms of the service, this amount would not be recoverable. In fiscal year 2014, the Group recorded an allocation amounting to million euros for said invoices. In fiscal year 2015 the Group recorded the recovery of the entire amount impaired through the establishment of the payment schedule that guarantees the collection of invoices. These amounts are 61

63 recorded under Impairment losses on financial assets in the consolidated profit and loss accounts for the years 2014 and 2015, respectively. Similarly, in fiscal year 2013 a financial swap transaction matured, the offsetting amount of which was not paid. At December 31, 2012, this transaction was valued at zero euros, so the loss derived therefrom was recorded in previous years. Due to the cancellation of this transaction, the Group registered a credit right in favour of this counterparty for the amount of million euros, offsetting the provision account for impairment of the asset in the balance sheet. In fiscal year 2014, the Group recovered 126,000 euros on that amount, recorded under the heading Impairment losses on financial assets (net) Credit Investments, without any further movement in Therefore, at December 31, 2015 and 2014, the amount of million euros was pending to be received for this concept, although fully provisioned. 12. HOLDINGS As stated in Note 1, at December 31, 2015 the Group held no holdings in associated companies. At December 31, 2014 the breakdown of holdings in jointly controlled and associated companies accounted for using the equity method was as follows: % VALUE THOUSANDS OF EUROS THEORETICAL VALUE LOSSES FUND COMPANY HOLDING INVESTMENT ACCOUNTING IMPAIRMENT TRADE TOTAL Jointly controlled entities Españoleto Inmuebles, S.A % 1, AC Participación en Infraestructuras, S.L 50.00% 1, (946) 765 2, (946) 765 As shown in the table above, the Group had valued at zero euros its holding in the investee company Españoleto Inmuebles, S.A. In this regard, see what is indicated in Note 16. In relation to the jointly controlled entities, relevant information thereon can be found in Note 1.1. The amount of capital, reserves and results for fiscal year 2014, and also dividends received from the said associated companies were as follows: DECEMBER 31, 2014 THOUSANDS OF EUROS COMPANY SHARE RESERVES CAPITAL RESULTS DIVIDENDS FOR THE YEAR RECEIVED Españoleto Inmuebles, S.A. 2, AC Participación en Infraestructuras, S.L. 3,423 (1,672) (229) - 62

64 13. TANGIBLE ASSETS The breakdown and movement of this heading in the balance sheet at December 31, 2015 and 2014 is as follows: Own use: BALANCE THOUSANDS OF EUROS BALANCE CONCEPT ADDITIONS DISPOSALS TRANSFERS For own use Cost: Buildings and other structures Computer equipment 17, (6) - 17,215 Furniture and facilities 8, (240) - 8,758 Other fixed assets 2, (300) 2,095 28, (546) - 28,068 Accumulated depreciation (26,650) (545) (26,886) Impairment (92) Net 1,598 1,182 THOUSANDS OF EUROS BALANCE BALANCE CONCEPT 31/12/2013 ADDITIONS DISPOSALS TRANSFERS For own use Cost: Buildings and other structures 44, (44,197) - Computer equipment 18, (1,501) (694) 17,067 Furniture and facilities 19, (885) (10,098) 8,950 Other fixed assets 13, (256) (10,552) 2,323 95, (2,642) (65,541) 28,340 Accumulated depreciation (47,466) (2,356) 2,195 20,977 (26,650) Impairment (112) 20 (92) Net 48,436 1,598 Real Estate investment: THOUSANDS OF EUROS BALANCE BALANCE CONCEPT ADDITIONS DISPOSALS TRANSFERS Buildings and other structures 9, ,319 9, ,319 Accumulated depreciation (441) (117) - - (558) Impairment (1,260) (496) - - (1,756) Net 7,618 7,005 63

65 THOUSANDS OF EUROS BALANCE BALANCE CONCEPT 31/12/2013 ADDITIONS DISPOSALS TRANSFERS Buildings and other structures 58, (49,581) 9,319 58, (49,581) 9,319 Accumulated depreciation (9,787) (1,696) - 11,042 (441) Impairment (1,268) (218) (1,260) Net 47,845 7,618 There are no tangible assets with significant amounts for which there are restrictions on the use or ownership, that are out of service, or that the Group has pledged as collateral for liabilities. At December 31, 2015 and 2014, the Group had no firm commitment to buy or sell significant amounts of tangible assets. At December 31, 2015 and 2014, the tangible assets were adequately insured. The heading Real Estate Investment at December 31, 2015 and 2014, includes investments for a net amount of million euros relating to two buildings, valued at million euros and million euros, respectively (2014: and million euros) on which there are legal disputes relating to the ownership thereof. Considering the possible adverse effects that the conclusion of these law suits could have on the Group, a decision was taken to record a provision for the entire affected investment (Note 16). The fully depreciated fixed assets still in use in the Group at December 31, 2015, amounts to million euros ( million euros in 2014). In 2014, as indicated in Notes 3.a and 10, the Group decided, within its restructuring process, to put up said building for sale. In this respect, the column Transfers for the year 2014 reflected basically its reclassification to Non-current assets held for sale". 14. INTANGIBLE ASSETS The breakdown of this heading in the balance sheet at December 31, 2015 and 2014 is as follows: THOUSANDS OF EUROS CONCEPT COST ACCUMULATED AMORTISATION AND IMPAIRMENT NET VALUE COST ACCUMULATED AMORTISATION AND IMPAIRMENT NET VALUE With a determined useful life Computer applications 9,151 (8,909) ,549 (11,976) 2,573 Total 9,151 (8,909) ,549 (11,976) 2,573 64

66 Computer programs Changes under Computer Programs in the balance sheet of fiscal years 2015 and 2014 were as follows: THOUSANDS OF EUROS CONCEPT Cost value Opening balance 14,549 13,671 Additions 842 1,249 De-registrations (6,240) (371) Closing balance 9,151 14,549 Depreciation Opening balance (11,971) (11,163) Additions (807) (1,572) De-registrations 3, Closing balance (8,909) (11,971) Impairment Opening balance (5) - Additions (2,414) (5) De-registrations 2,419 - Closing balance - (5)) Total Net 242 2,573 The fully depreciated fixed assets still in use in the Group at December 31, 2015, amount to million euros ( million euros in 2014). Allocations for amortization are included under the Amortisation in the accompanying consolidated profit and loss account, and allocations for impairment under "Impairment losses on other assets". On July 1, 2011 Ahorro Corporación S.A. signed a Framework Agreement for the Provisioning of Technological Services with Indra Sistemas S.A., regulating the Transformational Outsourcing of the IT function of Grupo Ahorro Corporación, in addition to the implementation of the Transformational Development of Applications project. However, on November 13, 2015, the Company together with Indra Sistemas, S.A. and Sistema de Tesorería, S.L. (formerly Indra Sistemas Tesorería, S.L.) signed a Transactional Framework Agreement for the resolution of the Escipión Project, defining a new project for outsourcing and selling shareholdings in Sistema de Tesorería, S.L. (Note 1.1.1) As a result of this Agreement, among others, the abandonment of computer developments made to date occurs, which has caused the Group to record an adjustment for impairment loss amounting to million euros, recorded under the heading Impairment losses on other assets (net) - Intangible assets in the accompanying profit and loss account. Since the Group has abandoned the transformational development of the applications project, the associated assets have been derecognised on the date of signing the Agreement. 65

67 15. FINANCIAL LIABILITIES AT AMORTISED COST The breakdown of the heading Liabilities in the consolidated balance sheet at December 31, 2015 and 2014 is as follows: EUROS CONCEPT Debts with financial intermediaries 197,918, ,556, Debts with individuals 44,509, ,634, Total 242,427, ,191, The breakdown by remaining terms to maturity of this heading, is detailed in Note 6.4. on liquidity risk Debts with financial intermediaries The breakdown of debts to financial intermediaries at December 31 is as follows: EUROS CONCEPT Loans and credits 5,679, ,060, Receivables from own transactions pending settlement 1, With the Systems Company 1, With other financial intermediaries Temporary assignment of assets 109,220, ,782, Temporary balances on securities transactions 14,049, ,330, Other debts 60,277, ,154, Cash deposits as guarantee on transactions 8,635, ,022, Valuation adjustments: (accrued interest receivable) 55, , Total 197,918, ,556, The item Loans and credits mainly includes the balances corresponding to credit lines held by the Parent Company balances and its subsidiary Ahorro Corporación Financiera, S.V., S.A. Financial expenses accrued in fiscal years 2015 and 2014 amounted to 717 and million euros, respectively, the variable interest rate being tied to 1-year Euribor plus 3% - 7.5% for the year 2015, and at 1-year Euribor plus 3.50% % for In 2015, 30 million euros of these lines were amortised in the context of policy measures adopted by the Group. The policies expire in 2016 and belong to the subsidiary Ahorro Corporación Financiera, S.V. In addition, the Group has available lines amounting to 3 million euros which are due in 2016 (see Note 6.4). The heading Other debts mainly includes deposits required from counterparties to guarantee derivative transactions. 66

68 15.2 Debts to individuals The breakdown of debts to individuals at December 31 is as follows: EUROS CONCEPT Temporary assignment of assets with individual residents - 50, Temporary balances on securities transactions Residents 40,915, ,387, Non-residents 4, , Other Debits Residents 3,337, ,994, Non-residents 99, , Cash deposits as guarantee on transactions 152, , Valuation adjustments Accrued interest receivable Total 44,509, ,634, PROVISIONS The breakdown of provisions at December 31, 2015 and 2014 is as follows: DECEMBER 31, 2015 THOUSAND EUROS OPENING BALANCE NET ALLOCATIONS USE TRANSFERS (**) CLOSING BALANCE Provision for equity participation 1,678 - (1,678) - - Provisions for termination of employment 2,821 6,140 (2,700) - 6,261 Employee benefit obligations (32) Other provisions 4,427 2,935 (2,623) 138 4,877 9,300 9,259 (7,033) ,856 DECEMBER 31, 2014 THOUSANDS OF EUROS OPENING BALANCE NET ALLOCATIONS USE TRANSFERS(*) CLOSING BALANCE Provision for equity participation 1,950 - (272) - 1,678 Provisions for termination of employment 839 2,645 (663) - 2,821 Employee benefit obligations (80) 374 Other provisions 100 4,337 (10) - 4,427 3,343 6,982 (945) (80) 9,300 (*) Provisions transferred to Liabilities associated with non-current assets held for sale. (**) Provision recorded in "Personnel expenses" and "Other losses". 67

69 Amendments relating to consolidation rules provide for the application of the equity method in the consolidation process for investments in jointly controlled entities. As a result of this modification, the Parent Company restated the figures for the year 2013 by applying this valuation method to the jointly controlled entities. Españoleto Inmuebles, S.A., a jointly controlled entity at that date, was one of the entities involved in this process. The accounting rules on consolidation stipulate that the entire result produced by internal operations of the Group should be removed and deferred until that result is materialised with third parties outside the Group. In 2005, Españoleto Inmuebles, S.A. bought a building from Analistas Financieros Internacionales, S.A., which generated a profit of million euros. As at that date, both companies were part of the consolidated group, the profit is deferred until the sale materialises with third parties outside the Group. With the change in the consolidation method, the Group recorded in fiscal year 2014 a provision amounting to million euros, which has allowed to defer the profit until the property is sold to third parties. In fiscal year 2015, and as a result of the sale of the investee company, the reversal of the provision recorded occurs. In fiscal year 2015, the Group recorded a provision to address additional payments linked to Collective Redundancy procedures performed (Note 20.4) amounting to million euros. Furthermore, for the contract termination processes pending completion at December 31, 2015, the Group has recorded a provision amounting to million euros. The amount of 454,000 euros was recorded under Employee benefit obligations to cover the commitments arising from the Special Agreement signed with the Social Security as part of the staff restructuring plan conducted in In fiscal year 2014, 80,000 euros were transferred to Liabilities associated with non-current assets held for sale corresponding to employees of Ahorro Corporación Gestión S.G.I.I.C., S.A. As a result of the downsizing process carried out in 2015, a new special agreement was signed with the Social Security, allocating a provision of 376,000 euros for coverage. In fiscal year 2014, the Group recognised a provision for downsizing amounting to million euros in order to meet the obligations arising from termination of the employment relationship agreements with senior management and other employees. The materialisation of such agreements and, consequently, the application of the provision has occurred prior to the preparation of the consolidated annual accounts for the year 2014, not revealing the differences between the provisioned amount and the amount paid. The item Other provisions at December 31, 2015 and 2014, includes a provision amounting to and million euros respectively, allocated in fiscal year 2014 to cover the possible effects of the proceedings filed against a subsidiary of the Group, both referred to the ownership of two real estate investments that are recorded under the heading Tangible assets - Real Estate Investment" in the consolidated balance sheet for a net value of (Note 13). One of these disputes was raised prior to year-end 2014, currently pending sentencing; for the second issue, the complaint was admissible dated March 5, However, the Directors of the Group, considering the possible negative effects that an unfavourable resolution thereof would have on the interests of the Group, have decided to establish a provision covering 100% of the value of the real estate investment affected. Finally, in fiscal year 2015, the Group recorded a compensation to Indra Sistemas S.A. amounting to million euros as a result of the breaking off of the Framework Agreement on Provision of Technological Services described in Note 1.1.1, pending payment of 44,000 euros for which the corresponding provision has been recorded. 68

70 17. OTHER ASSETS AND LIABILITIES The breakdown of other assets and liabilities included in the consolidated balance sheet at December 31 is as follows: THOUSANDS OF EUROS CONCEPT ASSETS LIABILITIES ASSETS LIABILITIES Public authorities 6, Fees and expenses paid and not accrued 1, Loans to staff and compensation pending payment 145 1, ,415 Subscribed securities unpaid Other debts non related to securities transactions ,620 Balance on leasing operations Other ,205 Total 8,440 2,932 2,013 6,186 The Loans to employees and outstanding remuneration includes at December 31, 2015, the amount of million euros (2.415 million euros in 2014) corresponding to a provision for variable remuneration. At the date when these Consolidated Annual Accounts were prepared this provision corresponded to the Group Directors best estimation of the amount that will ultimately be paid in EQUITY 18.1 Equity Share capital At December 31, 2015 and 2014 the Parent Company s share capital was represented by 5,811,890 ordinary company shares, registered at a nominal value of 6.01 Euros each, fully subscribed and paid up All capital shares carry the same rights and are not listed on the stock exchange. Shareholders holding a stake of more than 10% of the capital are Cecabank, S.A., with 14.44% of the capital, and Kutxabank, S.A. with 11.01%. Meanwhile, shareholders owning more than a 5% stake are Banco Mare Nostrum, S.A., Bankia, S.A., CaixaBank, S.A., Liberbank S.A., Ibercaja Banco S.A. and Banco Caja España Inversiones, Salamanca y Soria, S.A. At December 31, 2015 and 2014, the Parent Company held own shares amounting to 6,000 euros. Issue premium and Reserves The breakdown of these items at December 31 is as follows: 69

71 EUROS CONCEPT Issue premium 33,733, ,733, Reserves 41,032, ,291, Total 74,765, ,024, The breakdown of the item Reserves is as follows: EUROS CONCEPT Reserves of the Parent Company 47,264, ,484, Reserves of Group Companies (6,231,264.79) (2,192,898.83) Total 41,032, ,291, Reserves of the Parent Company According to the Capital Companies Law, companies must allocate an amount equal to 10% of the profits to the legal reserve until it reaches at least 20% of the share capital. The legal reserve may be used to increase share capital, in the part exceeding 10% of the increased share capital. Except for the purposes mentioned above and whilst the legal reserve does not exceed 20% of the share capital, this legal reserve can only be used to offset losses, and provided that there are no other reserves available for this purpose. In addition, the legal reserve may be distributed only in case of liquidation of the Parent Company. THOUSANDS OF EUROS CONCEPT Legal Reserve 6,986 6,986 Reserves for own shares 6 6 Voluntary reserves 15,441 2,449 Reserves by consolidation 24,831 40,044 Total 47,264 49,485 The balance of reserves for consolidation relates mainly to the adjustment of the reserves of the Parent Company for dividends received during the year charged to income in prior years, as well as the provisions made for Group companies, and deterioration of funds trade made during previous years. 70

72 Reserves of Group companies, jointly controlled entities and associates The contribution of the Group companies to consolidated Reserves at December 31, 2015 and 2014, is as follows: EUROS COMPANY Consolidated companies by full integration: Ahorro Corporación Gestión, S.G.I.I.C., S.A. - 1,133, Ahorro Corporación Financiera, S.V., S.A. 20,348, ,344, ACF International Inc. (4,195,273.76) (3,551,375.39) Ahorro Corporación Desarrollo, S.G.E.I.C., S.A. - 1,569, Ahorro Corporación Inmuebles, S.A. (14,714,939.73) (13,451,211.23) Ahorro Corporación Coinversión, S.C.R., S.A.U. (1,462,354.79) (1,501,569.84) Ahorro Corporación Soluciones Inmobiliarias, S.A. - (2,859,405.04) Vehículo de Tenencia y Gestión 3, S.L. (6,233,988.89) (1,892,589.70) Indra Sistemas de Tesorería, S.L. 8, , Meldon Inversiones 2008, S.L.U. 10, , Alfa Meldon, S.L.U. 4, , Beta Meldon, S.L.U. 6, , Red Plural de Cooperativas, S.L. (2,135.78) (2,083.97) Total (6,231,264.79) (2,192,898.83) The contribution to the Group s reserves of the companies accounted for by the equity method is as follows: EUROS COMPANY Ahorro y Titulización, S.G.F.T., S.A. (1) - 1,743, Españoleto Inmuebles, S.A. (1) - 446, AC Participación en Infraestructuras, S.L. (1) - (7,949.75) Total - 2,182, (1) As a result of sale or liquidation, all these companies have left the scope of consolidation (see note 1.1.1) 71

73 18.2 Minority Interests This section includes the holdings of external shareholders in the own funds of subsidiaries, consolidated by the global integration method. The breakdown of the holdings of those shareholders is as follows at year-end 2015 and 2014: % OF EUROS HOLDING INTEREST INTEREST OF PARTNERS IN CAPITAL IN LOSS DECEMBER 31, 2015 EXTERNAL AND RESERVES AND PROFITS TOTAL Ahorro Corporación Financiera, S.V., S.A. 0.30% 161, (8,895.01) 152, , (8,895.01) 152, % OF EUROS HOLDING INTEREST INTEREST OF PARTNERS IN CAPITAL IN LOSS DECEMBER 31, 2014 EXTERNAL AND RESERVES AND PROFITS TOTAL Ahorro Corporación Financiera, S.V., S.A. 0.30% 165, , , Ahorro Corporación Gestión, S.G.I.I.C., S.A % 1,172, ,528, ,700, Indra Sistemas de Tesorería, S.L % 10, , , ,347, ,535, ,883, Valuation adjustments The breakdown of the adjustments corresponding to measurement adjustments is as follows: EUROS Financial assets available for sale - 10, Exchange rate differences 911, , Total 911, , The item Financial assets available for sale includes the net amount of the tax effect of changes in the fair value of assets classified as available for sale, which, as provided in Note 3, should be classified as an integral part of the consolidated equity of the Group. Such changes are recorded in the consolidated profit and loss account when the sale of assets of origin takes place. In fiscal year 2015, there is no record for this item. The breakdown of these items at December 31, 2014 is as follows: 72

74 EUROS DECEMBER 31, 2014 CAPITAL GAIN CAPITAL LOSS EFFECT TAX TOTAL Debt securities Capital securities 14, (3,969.64) 10, Total 14, (3,969.64) 10, The movements under this heading of the consolidated balance sheet are included in the Statement of Income and Expenses recognised in the Consolidated Equity. 19. RISK AND COMMITMENT ACCOUNTS AND MEMORANDA ACCOUNTS Risk and commitment accounts The breakdown shown in these accounts as at December 31, 2015 and 2014 is as follows: EUROS CONCEPT Guarantees and securities granted 135,691, ,124, Purchase commitment for securities (Note 8.1) 2,891, ,326, Financial derivatives 4,836,530, ,367,749, Other financial risk and commitment accounts 10,855, ,791, Total financial risk and commitment accounts 4,985,968, ,675,992, Guarantees and securities granted The guarantees and securities given are listed as follows: EUROS CONCEPT Shareholding in the collective bond by the market 8,760, ,230, Assets affected by own or third party guarantees 126,565, ,307, Other 365, ,586, Total 135,691, ,124, The heading Shareholding in collective bond market includes mainly the amount of the mandatory guarantee that Securities agencies and companies have to provide by law before the Stock market and Financial Markets, Sociedad Holding de Mercados y Sistemas Financieros, S.A., for their operations on the securities markets. This bond is set monthly by the Comisión Nacional de Mercado 73

75 de Valores (CNMV) depending on the amount of transactions performed by the Company on the Stock Exchange. The item Assets assigned to own and third party guarantees includes mainly balances deposited as collateral as security, mainly for transactions with financial derivatives and with private individuals. The aforementioned assets are collected mainly in the section on Loan investments" on the consolidated balance sheet. Financial derivatives The financial derivative item presents the following breakdown: EUROS CONCEPT Financial futures on securities and interest rates - 749, Other interest rate transactions Financial swaps 4,525,539, ,848,435, Other contracts with options 10,889, ,537, Options on securities and indexes 296,954, ,893, Interest rate options 3,147, ,835, Financial futures on currencies - 299, Total 4,836,530, ,367,749, The balance of "Other interest rate transactions" consists mainly of swaps. The breakdown of these swaps, depending on whether they are managed transactions (collated transactions as a whole) or mediated transactions (transactions that collate with each other), is as follows: EUROS PURCHASES SALES TOTAL PURCHASES SALES TOTAL Managed Swaps 1,554,681, ,599,938, ,154,620, ,107,699, ,070,918, ,178,618, Intermediated Swaps 695,686, ,232, ,370,918, ,766, ,050, ,669,816, Total 2,250,368, ,275,170, ,525,539, ,949,466, ,898,969, ,848,435, At December 31, 2015 and 2014, there were no transactions assigned to hedging relationships. The breakdown of notionals contracted in the rest of transactions with current derivatives at December 31, 2015 and 2014 is as follows: 74

76 THOUSAND EUROS ORGANISED MARKETS OUTSIDE ORGANISED MARKETS (OTC) TOTAL ORGANISED MARKETS OUTSIDE ORGANISED MARKETS (OTC) TOTAL Forward contracts on financial assets purchased sold Forex trading purchased sold Financial futures on securities and interest rates purchased sold Financial futures on currencies purchased sold Options on securities or indices - 296, , , ,893.- purchased - 147, , , ,773.- Issued - 149, , , ,120 Interest rate options - 3,147 3,147-59,835 59,835.- purchased ,177 31,177.- sold - 2,198 2,198-28,658 28, , , , , Other memorandum accounts The breakdown shown in these accounts at December 31 is as follows: EUROS CONCEPT Available unconditioned on demand in credit institutions 3,000, Customer orders to purchase securities pending settlement 35,815, ,752, Customer orders to sell securities pending settlement 36,954, ,454, Deposits of financial instruments (market value) 13,568,418, ,709,157, Own and third party financial instruments held by other entities (market value) 371,736, ,112, Other memoranda accounts - 13,580, Regularised assets in suspense 69,858, ,858, Managed portfolios, Managed assets and ECR administered assets 1,569, ,282,394, Total other memorandum accounts 14,087,354, ,559,310,

77 The item Recovered suspended assets includes mainly the amount of million euros, relating to derivative transactions impaired at 100% by the Group in 2009, and which were written off on the balance sheet in The breakdown of Customer orders pending settlement at December 31, 2015 and 2014, correspond to transactions pending settlement on stock exchanges and other markets, and their breakdown is as follows: EUROS COUNTERPARTY PURCHASES SALES PURCHASES SALES With the Systems Company 1,113, ,107, ,090, ,946, With MEFF 761, , , , With other financial intermediaries 33,940, ,783, ,551, ,505, Total 35,815, ,954, ,752, ,454, Share deposits show the following composition: EUROS CONCEPT Instruments deposited in the entity itself 13,568,418, ,709,157, Own securities 441, ,406, Third party securities 13,567,977, ,698,750, Of which in global custody accounts 1,000,031, ,967, Securities received from another depository entity - - Instruments deposited in other entities 371,736, ,112, Own securities - - Third party securities 371,736, ,112, Total 13,940,155, ,106,269, Here is a breakdown of the managed portfolios: EUROS CONCEPT NO. CUSTOMERS / EQUITY NO. PORTFOLIO / CUSTOMERS / EQUITY ENTITY PORTFOLIO / EQUITY Portfolio management 18 1,569, ,697, Managed equity UCITS ,085,086, Administered Equity ECR ,609, Total 18 1,569, ,282,394,

78 The item Instruments deposited in the Entity itself includes mainly own deposited securities or those of customers held by Ahorro Corporación Financiera, S.V., S.A., as a member of registration and deposit systems (Iberclear, for fixed income and equity transactions and MEFF for derivatives traded on national markets). Thus, the deposit of securities owned by the Fund for Orderly Bank Restructuring (FROB), amounting to billion euros in 2015 ( billion euros in 2014), is included under this heading. In addition to that mentioned in the preceding paragraphs, the aforementioned heading shows at December 31, 2015, unlisted securities in six financial entities and one non-financial institution amounting to billion euros arising from the accounting service provided by the Group throughout 2015; therefore, not being securities deposited in the Group (Year 2014: billion euros). The heading Instruments deposited in other Entities includes the remaining securities that are redeposited in other entities acting as sub-custodians (Euroclear (AA+) for fixed income and international equities, Goldman Sachs International (A), BNP Paribas (AA) and Citibank (A+) for international equities and Credit Suisse Securities (Europe) Limited (Group C. Suisse A+) for derivatives traded in international markets and CECA for domestic equity). In each system or sub-custodian, either individual accounts are held for each holder, or global accounts ( omnibus ) where there is a separation between the own account (when there are positions in the name of companies of the Group) and the third-party global account. In view of the Directors of the Group, the securities listed on global custody accounts, as they are entered in accounts specifically called customer accounts, and these having been informed of their use, are restricted assets for Group customers and will not be part of the assets with which the Group should meet its liabilities or commitments. However, these assets are exposed to counterparty risk of global custodians. 20. PROFIT AND LOSS ACCOUNT 20.1 Contribution of the Group companies to the consolidated result The main adjustments made in the consolidation process on the result provided by the group companies were as follows: THOUSANDS OF EUROS CONCEPT Aggregate result of group companies 82,884 14,524 Adjustments Dividend adjustment (32,486) (24,413) Reversal of impairment losses for the year portfolio 78 1,127 Reversal of impairment losses for the year credits (14,788) 1,826 Contribution of consolidated companies using the equity method-current operations (740) Contribution of consolidated companies using the equity method-discontinued operations Other Total 35,831 (6,472) 77

79 The breakdown of the contributions of each Company, included in the scope of consolidation to consolidated profit, is as follows: THOUSANDS OF EUROS FISCAL YEAR 2015 COMPANY PARENT COMPANY PARTNERS EXTERNAL Ahorro Corporación, S.A. (2,456) - Ahorro Corporación Financiera, S.V., S.A. (2,221) (9) ACF International Incorporated (335) - Ahorro Corporación Inmuebles, S.A. 40,829 - Ahorro Corporación Soluciones Inmobiliarias, S.A Ahorro Corporación Coinversión, S.C.R., S.AU Vehículo de Tenencia y Gestión 3, S.L. (425) - Indra Sistemas de Tesorería, S.L. (414) - Meldon Inversiones 2008, S.L.U. - - Alfa Meldon, S.L.U Beta Meldon, S.L.U Red Plural de Cooperativas, S.L. (1) - Companies consolidated by the equity method in discontinued operations 54-35,840 (9) THOUSANDS OF EUROS FISCAL YEAR 2014 COMPANY PARENT COMPANY PARTNERS EXTERNAL Ahorro Corporación, S.A. (6,093) - Ahorro Corporación Gestión, S.G.I.I.C., S.A. 2,400 1,528 Ahorro Corporación Financiera, S.V., S.A. 1,994 6 ACF International Incorporated (199) - Ahorro Corporación Desarrollo S.G.E.I.C., S.A. (50) - Ahorro Corporación Inmuebles, S.A. (1,822) - Ahorro Corporación Soluciones Inmobiliarias, S.A. (197) - Ahorro Corporación Coinversión, S.C.R., S.AU Vehículo de Tenencia y Gestión 3, S.L. (4,342) - Indra Sistemas de Tesorería, S.L. 2 1 Meldon Inversiones 2008, S.L.U. 1 - Alfa Meldon, S.L.U. 4 - Beta Meldon, S.L.U. 4 - Red Plural de Cooperativas, S.L. - - Companies consolidated by the equity method in current operations (740) - Companies consolidated by the equity method in discontinued operations (8,007) 1,535 78

80 20.2 Interest and similar income, interest expenses and similar charges, income from capital instruments, net trading income and net impairment losses on financial assets The composition of these headings in the consolidated profit and loss account for fiscal years 2015 and 2014 is as follows: EUROS CONCEPT Interest and similar income from financial assets Financial intermediaries: 469, ,794, Forward deposits 1, Temporary acquisition of assets 5, , Remainder 462, ,592, Individuals 67, , Monetary assets and public debt 1, Other fixed income securities , Foreign fixed income portfolio Other - 539, ,856, EUROS CONCEPT Interest and similar expenses from financial liabilities Financial intermediaries: 1,613, ,633, Deposits 1,157, ,882, Temporary assignment of assets 11, , Remainder 444, , Individual residents , Temporary assignment of assets Remainder Total 1,613, ,634, The breakdown of results for portfolio transactions for December 31, 2015 and 2014 is as follows: EUROS FISCAL YEAR 2015 PROFIT LOSS TOTAL Monetary assets and public debt 14,207, (13,204,447.92) 1,003, Other fixed income securities from internal portfolio 1,654, (1,540,724.72) 114, Other fixed income securities from external portfolio 47,122, (45,952,433.87) 1,170, Stocks and shares internal portfolio 959, (815,851.40) 143, Stocks and shares external portfolio 26, (25,392.39) 1, Trading derivatives 1,436,129, (1,433,257,473.26) 2,872, Forward contracts 58, (108,838.01) (50,241.65) Futures 8,087, (8,059,245.72) 28, Financial swaps 1,060,274, (1,057,260,349.82) 3,013, Options 367,709, (367,829,039.71) (119,419.71) Short-selling of shares and borrowed securities 24, (671,137.21) (647,002.07) Correction of earnings due to hedging transactions Other gains Total 1,500,124, (1,495,467,460.77) 4,657,

81 EUROS FISCAL YEAR 2014 PROFIT LOSS TOTAL Monetary assets and public debt 16,802, (15,995,046.54) 806, Other fixed income securities from internal portfolio 4,138, (4,120,265.90) 18, Other fixed income securities from external portfolio 336,503, (335,468,886.11) 1,034, Stocks and shares internal portfolio 1,269, (902,747.62) 366, Stocks and shares external portfolio 17, (30,062.19) (12,183.47) Trading derivatives 1,065,457, (1,066,512,796.44) (1,055,754.84) Forward contracts 122, (65,796.73) 56, Futures 6,317, (6,362,925.38) (45,254.47) Financial swaps 735,853, (736,223,154.05) (369,966.94) Options 323,163, (323,860,920.28) (697,412.67) Short-selling of shares and borrowed securities 26, (520,198.50) (493,309.47) Correction of earnings due to hedging transactions Other gains Total 1,424,215, (1,423,550,003.30) 665, Fee received and paid The composition of these headings in the consolidated profit and loss account for fiscal years 2015 and 2014 is as follows: EUROS CONCEPT Fees received Processing and execution of customer orders for securities trading In official secondary markets 11,480, ,104, In other national markets 51, , In foreign markets 4,374, ,886, Insurance and placement of orders Placement 13, ,764, Insurance - 169, CII marketing 7,274, ,081, Deposit and book entry of securities 189, , Portfolio management Management fee Investment advice 50, ,192, Intermediation in derivative instruments 1,066, ,711, By reporting 277, , Other fees 6,460, ,257, Total fees received 31,238, ,109, Fees paid Transactions with securities 2,205, ,748, Transactions with derivative instruments 273, , Fees paid to markets and clearing and settlement systems 293, , Guarantees relating to a group deposit in the market 109, , Fees paid to representatives and other entities 5,492, ,105, Other fees 623, , Total fees paid 8,997, ,001, Trading losses are included under the heading Other fees. In fiscal year 2015, 12,000 euros were recorded for this item, and in 2014, zero. These losses correspond mainly to incidents with retail customers. 80

82 The Group mainly operates in Spain through its operations in the different markets with domestic and foreign customers. In addition, the Group has a company in the US whose contribution to total business is hardly representative. The heading Fee received - Other fees includes fees of a different nature arising from the various activities of the Group. The decrease occurred in fiscal year 2015 is basically caused by the restructuring process conducted by the Group to adapt to the new market situation Personnel expenses The composition of personnel expenses for 2015 and 2014 is as follows: EUROS CONCEPT Salaries and bonuses 15,135, ,775, Contributions to social security 2,678, ,040, Allocations to external pension funds 332, , Severance pay 9,177, , Training costs 20, , Other personnel expenses 526, , Total 27,871, ,713, On July 30, 2015, the Management of Grupo Ahorro Corporación submitted the document for the Collective Redundancy Procedure, agreed to with the representatives of the workers, to the Directorate General for Employment of the Regional Ministry for Economic Affairs, Finance and Employment of the Community of Madrid. Under the terms of this Procedure, in fiscal year 2015, the Group terminated employment contracts with workers at a cost of million euros, this including 192,000 euros associated with these redundancies. In addition to the aforementioned procedure, other employment contracts were rescinded with a cost to the Group of million euros. The number of employees at year-end is as follows: NUMBER MALES FEMALES Managers and Technical Staff Administrative staff

83 The average number of staff employed in the year was the following: Managers and Technical Staff Administrative staff General expenses and other operating expenses The composition of general expenses and other operating costs for 2015 and 2014 is as follows: EUROS CONCEPT Overheads Rental of property and facilities 1,660, , Communications 3,759, , Computer systems 4,222, ,533, Supplies 403, , Maintenance and repairs 1,402, ,389, Advertising and publicity 197, , Business and travelling 357, , Governing bodies 602, , Outsourced administrative services 22, , Contributions and taxes 1,957, ,339, Other independent professional services 581, , Other expenses 2,884, ,950, Total Overheads 18,052, ,910, Other operating expenses s) Investment Guarantee Fund contributions 185, , Other concepts 491, , Total Other operating expenses 676, , In fiscal year 2015 there was an increase in Overhead, mainly under Lease of property and facilities as a result of the sale of the Headquarters and formalising lease contracts instead. In 2015 the financial information services expenditure under the heading Other expenses was reclassified as "Communications". In 2015 these services amounted to million euros (2014: million euros). The heading Other concepts includes in fiscal year 2015 the annual contribution to the National Resolution Fund, established in 2015 pursuant to Law 11/2015 of June 18, for the amount of 248,000 euros. This heading also includes the fees paid to the CNMV for its supervisory role of the Group. 82

84 21. FINANCIAL SITUATION The Parent Company of Grupo Ahorro Corporación, S.A. is taxed under the tax consolidation regime for Corporation Tax. According to current legislation, tax returns cannot be considered definitive until they have been inspected by the tax authorities or the relevant limitation period has elapsed. Due to different interpretations that can be made to the applicable tax regulations and the results that could arise from other tax inspections, there are contingent tax liabilities that cannot be objectively quantified. However, it is estimated that if the aforementioned possible contingent liabilities were to become effective, they would not significantly affect the view of the equity and financial position of the Group. In general, the Group is open to tax inspection for the last four fiscal years for the concepts of Corporation Tax, Personal Income Tax and Value Added Tax. The General Shareholders Meeting of the Parent Company, at its meeting held on April 26, 2002, agreed to apply the joint tax consolidation regime together with the remaining companies of the Group that meet the specific legal requirements, indefinitely, in fiscal year 2002 and subsequent tax periods, provided the requirements established in the current legislation are met and while their application is not waived. In 2010 the Parent Company operated under the tax consolidation regime for VAT at the basic level, as provided for by Law 36/2006 of November 29, amending Law 37/1992 of December 28, on Value Added Tax. On December 14, 2010, the Board of Directors of the Parent Company approved that the Parent Company, as of January 1, 2011, would be under the special system for advanced level groups entities together with the rest of subsidiaries that meet the specific legal requirements. On November 27, 2014, Corporate Income Tax (LIS) Law 27/2014 was approved, entering into force on January 1, 2015, and repealing the Consolidated Text of the Corporate Income Tax Law approved by Royal Legislative Decree 4/2004 of March 5. The new Law, which applies generally to tax periods beginning on or after its entry into force, approved a change in the tax rate on Corporate Income Tax, setting it at 28% for 2015, and 25% from The impact of recognising all tax assets 25% was not significant for the Group. Meanwhile, Article 26 of the LIS does not establish any time limitation on the use of the tax losses that were pending offsetting in the fiscal year beginning after the entry into force of the standard on January 1, Furthermore, transitory provision twenty-three of the LIS does not establish any time limitation on the use of deductions to avoid double taxation, established in Articles 30, 31 and 32 of the Consolidated Text of the LIS, that were pending application in the fiscal year beginning after the entry into force of the new standard. The conciliation between the accounting profit, before tax, and the Corporation tax taxable base, in addition to the calculations made by the Parent Company in relation to the aforementioned tax, is as follows: DECEMBER 31, 2015 THOUSAND EUROS INCREASE DECREASE BALANCE Accounting profit for the year before Corporation tax 33,718 Permanent differences - (3,409) (3,409) Adjusted accounting profit 30,309 Temporary differences - Incurred in the fiscal year 4,729 (1,395) 3,334 - Incurred in previous years - (5,104) (5,104) Aggregate taxable base for the year 28,539 - Positive taxable base 28,539 - Negative taxable base - 83

85 DECEMBER 31, 2014 THOUSANDS OF EUROS INCREASE DECREASE BALANCE Accounting profit for the year before Corporation tax (13,943) Permanent differences 9,412-9,412 Adjusted accounting profit (4,531) Temporary differences - Incurred in the fiscal year 8,608-8,608 - Incurred in previous years - (4,615) (4,615) Aggregate taxable base for the year (538) - Positive taxable base 4 - Negative taxable base (542) THOUSANDS OF EUROS ACCRUED TAX PAYABLE TAX Payment (28%) - On adjusted accounting profit 8, On taxable base - 7,991 Withholdings - Due to double taxation (3,939) (3,939) - Other (11) (11) Activation of previous year tax-loss carryforwards (5,112) (3,950) Tax effect by change of tax rate Other - - Company tax Withholdings and payments on account 7,303 Total 7,212 Of which Corporation tax refundable 7,303 Corporation tax payable 91 THOUSANDS OF EUROS ACCRUED TAX PAYABLE TAX Payment (30%) - On adjusted accounting profit On taxable base 1 1 Withholdings - Due to double taxation Other - - Activation of previous year tax-loss carryforwards (713) Tax effect by change of tax rate 713 Other(*) (284) - Company tax (283) 1 Withholdings (1,085) Total (1,084) Of which Corporation tax return (1,085) Corporation tax payable 1 (*) 284,000 euros of income tax expense are recorded in discontinued operations. 84

86 The breakdown of both deferred tax assets and liabilities is as follows: EUROS TAX ASSETS TAX LIABILITIES FISCAL YEAR 2015 CURRENT DEFERRED CURRENT DEFERRED Opening balance 1,683, ,767, Additions 7,302, ,162, , De-registrations (1,682,647.72) (12,276,950.62) (686.71) Closing balance 7,302, ,653, , EUROS TAX ASSETS TAX LIABILITIES FISCAL YEAR 2014 CURRENT DEFERRED CURRENT DEFERRED Opening balance 3,121, ,697, , Additions 1,085, ,324, De-registrations (2,523,526.98) (4,253,768.29) (296.29) (14,633.73) Closing balance 1,683, ,767, The breakdown by concept of the deferred tax assets and liabilities is as follows: THOUSANDS OF EUROS CONCEPT TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES Revaluation of financial assets available for sale Advance / deferred tax on profit 5,760-7, Credit due to loss carry forwards 2,893-1,730-8,653-8, At December 31, 2014 the amounts of Deferred tax assets were already included in the consolidated balance sheet at the tax rate at which it is estimated that their reversal will occur, according to the amendments of Law 27/2014. In fiscal year 2015 there are no deferred tax liabilities recorded in equity (2014: 4,000 euros). The breakdown of the tax loss carryforwards pending being offset and their term stated in thousands of euros is as follows: 85

87 CONCEPT BASE PENDING OFFSET OUTSTANDING CONTRIBUTION TO OFFSET AT 25% Generated in 2012 (142,807) 35,702 Consolidated tax group (142,807) 35,702 Generated in 2013 (5,522) 1,381 Consolidated tax group (5,522) 1,381 Total (148,329) 37,083 In fiscal year 2014, the Group, based on the business plan, decided to maintain the amount recorded in its accounts in 2013 for tax credits valued at 1.8 million euros. In 2012, the Directors decided not to register the tax credits and deferred tax assets arising as a result of trading losses, even though the Directors believed that the continuity of operations was assured. The Group also has double taxation deductions unregistered and pending application in future years amounting to 890,000 euros. For the evaluation of the recoverability of net deferred tax assets recorded by the Group at December 31, 2015 amounting to million euros (2014: million euros), the Directors analysed the ability to generate sufficient taxable income in order for them to be offset within the legal period established, having used future business prospects as basis. As a result of divestments in 2015, and of the sale of the head office, the tax loss carryforwards pending being offset were reduced by million euros. As any estimation subject to compliance of a hypothesis is liable to be modified by future events, this could affect prospectively the value of net tax assets recorded by the Group. 22. RELATED PARTIES The Group considers as related parties: its Group companies, Jointly controlled entities and Associates and key personnel of the Management (Directors and Senior Management) of the Parent Company. At December 31, 2015 and 2014 the balances and transactions between the Group and Jointly controlled and Associated companies, which were not removed in the consolidation process, are as follows: THOUSANDS OF EUROS CONCEPT ASSETS LIABILITIES ASSETS LIABILITIES Balances Loans to financial intermediaries Loans to individuals - - 1,299 - Other assets Debts with intermediaries Debts with individuals Other liabilities Total - - 1,312-86

88 THOUSANDS OF EUROS CONCEPT DEBIT CREDIT DEBIT CREDIT Transactions Financial revenue Financial charges Fees paid Fees received Other income Other expenses Leases Total Transactions The breakdown of the remuneration earned by the members of the Board of Directors and senior management of the Parent Company and balances at year-end are as follows: THOUSANDS OF EUROS PROFIT AND LOSS BALANCE CONCEPT Directors and Senior Management Salaries and other remuneration Subsistence allowance Long-term commitments Total 1, ,038 At December 31, 2015 and 2014, the Parent Company had no obligations on pensions and life insurance compared to previous or current members of the Board of Directors, or obligations on their behalf by way of security. At December 31, 2015 and 2014, the Parent Company had no pension commitments with members of Senior management, other than those held with the rest of the staff described in Note 3.o. The contributions amount to 8,000 euros (13,000 euros in 2014). At December 31, 2015 and 2014, there were no advances or loans to members of the Board of Directors or Senior management. The Board of Directors consists of 10 people, of which 10 are men. 87

89 23. OTHER INFORMATION 23.1 Environmental activity Given the activity of the Group, it has no liabilities, expenses, assets, provisions or contingencies of an environmental nature that could be significant in relation to the assets, financial position and results thereof. Therefore, no specific breakdowns are included in this Annual Accounts report with respect to information regarding environmental issues. Furthermore, in fiscal year 2015 and 2014 the Group had no Greenhouse gas emissions allowances Balances and abandoned deposits At December 31, 2015 and 2014 there were no accounts opened by customers which had not been used by any of their holders in exercise of their ownership right, in the last 20 years revealing a state of abandonment in accordance with the provisions of Law 33/ Information on Directors (Article 229) In relation to Article 229 of the Capital Companies Law, the Directors reported that they had no conflicts with the interests of the Group Customer Service Article 17 of Order ECO / 734/2004 of March 11, of the Ministry of Economy, establishes the obligation for customer care departments and services and, where appropriate, ombudsmen of financial institutions, to submit to the Board of Directors an annual report explaining the development of their roles in the previous year. The Board of Directors, at its meeting held on January 22, 2003, appointed the Corporate Legal Department of Grupo Ahorro Corporación as the department responsible for carrying out the functions of the Customer Service for customer complaints in the Group. On December 28, 2004, it proceeded to incorporate the Group s Rules for Customer Satisfaction Service in the Registers of the CNMV. In fiscal year 2015, the Customer Service Department of the Group informed the Board of Directors that in 2015 it had received three claims, which were resolved, of which two were decided against and one was upheld. The CNMV made an inquiry requesting information, which resulted in there not having been any wrongdoing by the Group. In fiscal year 2014, the Customer Service Department of the Group informed the Board of Directors that in fiscal year 2014 it had not received any claims, nor had there been inquiries from the CNMV regarding the claims made by those customers Audit fees The fees paid for the audit of accounts for 2015 and for performing other accounting review tasks amounted to 119,000 and 30,000 euros (148,000 and 40,000 euros in 2014) respectively, regardless of the date of invoice. Additionally, in fiscal year 2015, no further services were provided by the accounts auditor or by other companies that are part of the same international network (2014: 24,000 euros). 88

90 23.6 Information on the average payment period to suppliers. Additional third provision. Duty to inform of Law 15/2010, of July 5 According to that established in the single additional provision of the Resolution of January 29, 2016, of the Institute of Accounting and Auditing, on the information to be included in the notes to the Annual Accounts in relation to the average payment period to suppliers in business operations, no comparative information is submitted, as the Annual Accounts for 2015 qualify as initial for the sole purpose hereof, as regards the application of the principle of uniformity and the comparability requirement. The information relating to the average payment period to suppliers is as follows: 2015 (Days) Average payment period to suppliers 27 Ratio of transactions paid 26 Ratio of transactions pending payment 31 (Thousands of euros) Total payments made 28,813 Total payments pending 1, EVENTS AFTER THE BALANCE SHEET DATE On July 30, 2015 the subsidiary Ahorro Corporación Financiera S.V., S.A. signed an agreement to sell substantially all of its positions in derivatives, subject to compliance with certain conditions (Note 6.1). On the date of preparation of the Annual Accounts, the sale agreement was not fully implemented. On March 3, 2016, the parties have closed the selling price of the shareholding in Ahorro Corporación Desarrollo, S.G.E.I.C., S.A. (Note 10.3) which amounted to 776,000 euros. As a result of this agreement, the Group recorded an additional profit for this sale amounting to 186,000 euros. Except as indicated in the preceding paragraphs, subsequent to year-end 2015 and the date of preparation of these annual accounts, no significant developments which would have to be disclosed in these annual accounts occurred. Madrid, 22 de marzo de

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92 INTRODUCTION This document is prepared in compliance with the obligations set out in paragraph 1 of Article 70 bis.one of Law 24/1988 of July 28, on the Securities Market, where it is established that companies providing investment services, other than those referred to in the second paragraph of Article 70.1.a), shall forward to the Comisión Nacional del Mercado de Valores (CNMV) and shall publish annually, as an annex to the audited financial statements of the company, the following information on a consolidated basis: a) Name, nature and location of the activity b) Business Turnover c) Number of full-time employees d) Gross Profit before tax e) Income tax f) Government subsidies and aid received The twelfth transitory provision of Law 10/2014 of June 26, on the management, supervision and solvency of credit institutions establishes that on July 1, 2014, investment firms resulting from the application of Article 70bis.one will be required to publish, for the first time, the information referred to in Article 70.bis.one a), b) and c). A) NAME, NATURE AND LOCATION OF THE BUSINESS ACTIVITY Ahorro Corporación, S.A. was incorporated on July 1, 1989, as a result of the merger of Gestión, Estudios e Inversiones de las Cajas de Ahorro, S.A. (Gesinca) and Gestión Monetaria, S.A. (Gesmosa), by dissolution without liquidation thereof and block transfer of the assets and liabilities thereof to the new company. In addition to the activities carried out, Ahorro Corporación S.A. heads a Group of subsidiaries (Grupo Ahorro Corporación) engaged in activities and services related to financial and investment management and advice, intermediation and intervention with own or thirdparty risk, in national and international financial markets, product marketing and development, services, studies, programmes and work in financial matters. Below is a brief description of the activities carried out by Group companies in Financial Markets: Intermediation, developed in two different ways: as a broker, working with institutional customers and as a member of the market or channelling other market members, related to trading securities on markets organised by third parties, both institutional and retail, which may involve from the purchase order to the settlement of the transaction and deposit and safekeeping of cash and securities. Interposition, acting by interposing as a buyer or seller to a counterparty (including Chambers and Markets) in a spot or forward transaction (repos and reverse repos). All transactions take place under the Cash on delivery" system. Own account, which is related to taking positions in securities or derivatives, and that, in general, and unless authorised by the governing bodies of the Group, shall be limited to the management of their own liquidity, management of OTC positions and pre-existing structured products, and support activities that are necessary for the proper development of intermediation and counselling 91

93 activities. These include Underwriting and Liquidity activities to fixed income and equity issues in organised markets, such as SEND, MARF and MAB. NAME OF THE COMPANY ACTIVITY % SHAREHOLDING GEOGRAPHIC LOCATION Ahorro Corporación Financiera, SV, SA Securities Company 99.70% Spain ACF International INC. Securities Agency % USA Ahorro Corporación Inmuebles, SA Real estate services % Spain Venture capital company % Spain Ahorro Corporación Coinversión, SCR, SAU AC Soluciones Inmobiliarias, SA (in liquidation) Real estate services % Spain Vehículo de Tenencia y Gestión 3, SL Real estate services % Spain Sistemas de Tesorería, SL IT Services % Spain Meldon Inversiones 2008, SLU Services % Spain Alfa Meldon, SLU Services % Spain Beta Meldon, SLU Services % Spain Red Plural de Cooperativas, SL Real estate services % Spain The breakdown at December 31, 2015 of the subsidiaries that make up the consolidated group, and their main activity and location, is shown as follows: B) BUSINESS TURNOVER The net amount of the annual turnover is regulated in Article 191 of the Revised Text of the Public Limited Companies Law, approved by Royal Legislative Decree 1564/1989, of December 22, stating that this amount shall include amounts from the sale of products and provision of services for ordinary activities of the company, net of rebates and other reductions on sales and value added tax and other taxes directly related to the aforementioned turnover. For this purpose, the fees received represent periodic income of the Group in the development of its regular activity. Below is a summary table with the main items that have yielded this figure in fiscal year 2015: THOUSANDS OF EUROS CONCEPT 2015 Processing and execution of customer orders for securities trading 15,906 Insurance and placement of orders 14 CII marketing 7,275 Deposit and book entry of securities 189 Investment advice 50 Intermediation in derivative instruments 1,066 By reporting 277 Other fees 6,461 Total fees received 31,238 92

94 C) NUMBER OF FULL-TIME EMPLOYEES The following is a breakdown of the number of people employed in the Group at year-end 2015: MALES FEMALES TOTAL Employee Category Managers and Technical Staff Administrative staff Total The average number of employees in fiscal year 2015, compared to the previous year is as follows: Employee Category Managers and Technical Staff Administrative staff Total

95 D) GROSS PROFIT BEFORE TAX The Group s gross profit before tax in fiscal year 2015 amounted to million euros. Below is a summary table with the main items of the profit and loss account: THOUSANDS OF EUROS CONCEPT 2015 Interest and similar revenues 539 Interest and similar charges -1,613 INTEREST MARGIN -1,074 Return on capital instruments 3 Result of companies valued using the equity method 54 Fees received 31,238 Fees paid -8,997 Financial transactions results (net) 4,657 Exchange rate differences (net) 66 Other operating products 1,971 Other operating expenses -677 GROSS MARGIN 27,241 Personnel expenses -27,871 Overheads -18,053 Depreciation -1,469 Allocations to provisions (net) -9,259 Impairment losses on financial assets (net) 5,047 RESULT OF THE OPERATING ACTIVITY -24,364 Impairment losses on other assets (net) -2,914 Gains/(Losses) in non-current assets held for sale 4,805 Negative difference on business combinations - Profits/(Losses) on non-current assets held for sale not classified as discontinued operations 56,191 RESULTS BEFORE TAX 33,718 Tax on profits -103 RESULT FOR THE YEAR FROM CONTINUING OPERATIONS 33,615 Result from discontinued operations (net) 2,216 CONSOLIDATED RESULTS FOR THE YEAR 35,831 The return on assets, calculated as net profit from the total balance sheet is 4.36%. E) TAX ON PROFIT The Parent Company of Grupo Ahorro Corporación, S.A., is taxed under the consolidation tax system in the Corporate Income Tax, by agreement of the General Shareholders Meeting held on April 26, 2002, permanently from that year, provided that the legal requirements established by current legislation are met and that their application is not waived. The calculations made by the consolidated Group in relation to said Corporate Income Tax is as follows: 94

96 THOUSANDS OF EUROS ITEM INCREASE DECREASE BALANCE Accounting profit for the year after Corporation tax 33,718 Permanent differences -3,409-3,409 Adjusted accounting profit 30,309 Temporary differences 4,729-6,499-1,770 - Incurred in the fiscal year 4,729-1,395 3,334 - Incurred in previous years -5,104-5,104 Taxable base of the year 28,539 - Positive taxable base 28,539 - Negative taxable base ITEM TAX TAX ACCRUED PAYABLE Payment (28%) - On adjusted accounting profit 8, On taxable base - 7,991 Withholdings - Due to double taxation -3,939-3,939 - Other Activation of previous year tax-loss carryforwards -5,112-3,950 Tax effect by change of tax rate 678 Other - - Company tax Withholdings and payments on account -7,303 Total -7,212 Of which Corporation tax refundable 7,303 Corporation tax payable 91 F) GOVERNMENT SUBSIDIES AND AID RECEIVED In fiscal year 2015 Grupo Ahorro Corporación received no subsidies or public aid. 95

97

98 ÍNDICE 1. ECONOMIC ENVIRONMENT a. ECONOMIC ENVIRONMENT AND FINANCIAL MARKETS 2015 b. PROSPECTS FOR FISCAL YEAR 2016 c. DEVELOPMENTS OF THE FINANCIAL SECTOR d. REGULATORY ENVIRONMENT 2. KEY FIGURES FOR THE YEAR STRATEGIC BASIS FOR THE PERIOD a. GROUP RESIZING PLAN i. Divestments ii. Corporate structure iii. Steering system iv. Corporate values b. MAIN BUSINESS LINES i. Description of the main business lines ii. Objectives of the strategic plan iii. Progress and results of the period c. ADJUSTMENT PLAN 4. SHAREHOLDER REMUNERATION 5. RISK MANAGEMENT POLICY 6. HUMAN RESOURCES INFORMATION 97

99 1. ECONOMIC ENVIRONMENT a. Economic environment and financial markets 2015 Global economic activity slowed down in 2015 and the most advanced economies, which had still not overcome the effects of the Great Recession, were not able to offset the slowdown in emerging economies (global growth 3.1% vs. 3.4% in 2014). Emerging economies bore the brunt of falling commodity prices, the economic slowdown and change in the production system in China, as well as the appreciation of the US dollar. Russia was one of the hardest hit, given its status as an oil-producing country and due to external financial constraints, while in Latin America the suffering of Brazil can be highlighted, weighed down by commodity prices and the domestic political crisis. Among the most favoured, India stands out, taking advantage of its status as an oil importing country, while China, despite benefiting from the falls in oil prices, slowed its growth, but with a greater contribution by the service sector. Throughout 2015, the economic recovery gathered some steam in the most advanced economies, particlarly in the USA and the UK, which maintained a solid, albeit moderate, pace of growth. The context of economic growth encouraged the Federal Reserve to begin normalising its monetary policy, after years of expansion, and although the appreciation of its currency and market turbulence delayed the schedule, it raised benchmark interest rates by 25 bp by the end of the year. The divergent monetary policy has been one of the main focuses of attention in developed economies, the Federal Reserve seeking the normalisation of interest rates and the European Central Bank being in a monetary expansion phase. In the Eurozone economic growth accelerated, but inflation expectations remained at very low levels. The growth drops in the early stages of 2015 led the ECB to reduce its benchmark interest rates again, and to implement new quantitative easing measures. However, in a context of falling oil prices, weak economic growth, and turmoil in financial markets, inflation expectations remained throughout 2015 at extraordinarily low levels. Spain, in 2015, with economic growth of 3.2%, easily exceeded the average of the Eurozone countries, bolstered by major tailwinds, among them the improvement in financial conditions, tax relief, and the depreciation of the euro, which will continue to bolster exports. Developments in financial markets in enero febrero marzo abril mayo junio julio agosto septiembre octubre noviembre diciembre S&P 500 Euro STOXX Ibex 35 Brent EURUSD Source: FactSet and Estrategia ACF 98

100 Financial markets in 2015 reflected the global economic and monetary divergence, with moderate losses in US equities and sharp falls in Brazil and China, compared to solid increases in the Eurozone, which were forged in the early months of the year. Equities went through very different phases in 2015, with the first three months being globally positive, then consolidating in the next three, followed by a sharp deterioration after the summer. The main adverse references were Greece, oil prices, and fears of global economic slowdown, with China in the spotlight. Spain, after the summer, and despite the strength of its economic growth, stood out for its decline in equities, due to political uncertainty and increased exposure to Latin America, with Brazil being at the epicentre of fears. Greece was another great hindrance, as it brought to the fore the difficulties experienced by the common European project. However, the quantitative expansion of the ECB held much of the impact on sovereign risk premium on the periphery, even in the tensest moments of the renegotiations of the Greek bailout. Another major source of instability for the markets was the price of oil, which fell throughout the year by more than 47% against the average of 2014, ranking for the first time since 2008 below 40USD / barrel. b. Economic and financial outlook for 2016 Global financial markets began 2016 with high volatility, the first weeks showing a remarkable growth in risk aversion. Equities fell sharply, the Ibex to 19% and the Euro Stoxx Banks sectoral (February 11) to no less than 30%. Speculative yields on corporate debt soared (CDS X-Over Europe Index rose from 172 bp to 314 bp), while the higher-quality sovereign bonds were reduced strongly (64 bp in T Bond and 46 bp in the Bund). And the dollar tended to appreciate against emerging currencies, but much more against the euro, and especially against the yen. Several factors favoured such a deterioration of sentiment, among which we can highlight sharp falls in oil prices (the Brent by 25% until January 20) which fuelled the deflationary threat, the fear of a global economic stagnation and deflation, fanned by oil prices, the unexpected depreciation of the Yuan, weak economic data in China and the USA, the growing difficulties of emerging economies (falling commodity prices, depreciation of currencies and risk of default of corporate debt), and fear of insolvency in the banking sector, especially in Europe (exposure to the energy sector, loss of margins in an environment of deflationary threat and negative interest rates), also disrupted by the political difficulties in Spain and Portugal, the threat of British Brexit and the refugee crisis. However, there are reasons to believe that we have seen some overreaction by markets, and not just because since mid-february risky assets have clearly recovered. The main consideration is that the movements of the first weeks of the year seem to have gone far beyond what the fundamentals required. This is partly explained by technical factors, such as the sale of assets by sovereign funds of oil-producing countries or VaR funds, forced to limit their losses at the beginning of the year, but it is important to note that global economic indicators remain compatible with maintaining moderate growth rates in 2015, at least. In the case of the Eurozone, it seems reasonable to trust that the 1.5% growth will be repeated, and in Spain political uncertainty should not prevent growth above 2.5%. It is also important to consider the foreseeable future impacts on the economy and on the markets of moderately favourable developments in oil prices, which will foreseeably have a positive impact on risk assets. Monetary policy and possible alternatives will also be the focus of financial markets. In particular, the divergence is expected to extend to the policies of the Fed and the three major central banks: the ECB, Bank of Japan and Bank of China. Despite the market uncertainty, we believe that the Fed is 99

101 likely to raise rates again at least once or twice, while the other three banks will increase their expansionary measures. Together, and beyond potential political (the electoral process in the US, political uncertainty in Spain, the risk of a Brexit) and geopolitical risks, we are harbouring, for the rest of the year, recovery expectations in equities, more clearly for Europe (and Spain) than for USA, a certain normalisation of yields on public debt, with more pronounced recoveries in the USA and a reduction of peripheral sovereign premiums; and a moderate appreciation of the dollar against most currencies. c. Developments in the financial sector In 2015 the financial system operated in a challenging environment in Europe, with an intense and demanding regulatory and supervisory agenda, and in the context of extraordinarily low interest rates. The turmoil experienced in financial markets after the summer and into the early months of 2016, and weak economic growth, were additional negative factors. On the positive side, despite the adverse scenario, in 2015 financial institutions continued to strengthen their capital ratios and cleaned up their balance sheets, with significant reductions in nonperforming loans and provisions. The creation of the MUS (Single Monitoring Mechanism) in late 2014 has allowed the ECB to assume the overall supervision of European banks (129 most significant groups under direct supervision) encouraging transparency and strengthening integration through greater harmonisation. This work has continued to consolidate in 2015, and in 2016 it launched the single resolution mechanism, following the process towards the Banking Union. Ahorro Corporación Financiera S.V., S.A. is part of this mechanism contributing to the National Resolution Fund. The main challenge for European banks and, in particular, for Spanish banks is now to be able to sustain profitability in a context of weak growth and low interest rates. In particular, the financial market environment has not been conducive to intermediation activity, especially in the field of fixed income. The main determinants were: a) the Greek crisis and its potential contagion to the outskirts of Europe; b) the various elections in Spain; c) the monetary policy of the European Central Bank, which had taken short-term interest rates to negative levels d) the entry into force of the single monitoring mechanism (MUS), with the remaining uncertainty about its treatment for purposes of solvency regulations in public debt positions. Trading on the Spanish Stock Exchange (SIBE) grew by 8.8% in 2015 (although in the last three months of the year there was a near 20% decline over the previous year). In 2015, ACF intermediation in this market grew by 11.2% overall, and 23% year-on-year in the last 3 months. The result is a moderate growth in market share in 2015, up to 1.58% and a two position improvement in the ranking among market members. As regards Fixed Income activity, the trading volume (Source Bank of Spain) in Spanish public debt fell in 2015 by 21.3% in held-to-maturity transactions, and by 42.8% in double transactions. In both types of transactions the ACF market share (between mediators) increased slightly, 5 pp, to 26.4% in held-to-maturity transactions, and 3 pp, to 24.9% in double transactions. Finally, trading in private fixed income in the AIAF market decreased by 53.1% in d. Regulatory environment Probably the most significant regulatory element in 2015, which will continue in force in 2016, is the Reform in the Clearing, Settlement and Registry system, which in the case of the equity market will predictably enter into force in April 2016 (2017 for fixed income). Ahorro Corporación Financiera S.V., S.A. has announced its intention to be an Individual Clearing Member of the Central Counterpart Clearing House of the Spanish market and participant in Iberclear. 100

102 This commitment to create value for our customers, is reinforced by the strong capitalisation and stability of the available liquidity. 2. KEY FIGURES FOR THE YEAR 2015 In fiscal year 2015, the consolidated Grupo Ahorro Corporation has had a profit of million euros. It is also important to highlight that all actions carried out by Grupo Ahorro Corporación have been carried out with the aim of providing for a solid equity base and sufficient liquidity levels, so that we can work on achieving sustainable profitability targets over time. In 2015 the Group cancelled all its long-term debt, and has managed to consolidate a sufficient level of liquidity for the normal operations of a securities company, in addition to having short-term credit lines with first tier banks. Thus, at the end of 2014 the heading loans and credits, which included the Group s amount of debt, stood at 36 million euros. This changed to 5.6 million euros, corresponding exclusively to short-term credit facilities granted to ACF, to contribute with greater operational capacity in the markets. Both as a consolidated group, and as a securities company, the solvency levels are well above regulatory requirements. Thus, at a consolidated level the solvency ratio is, at year-end 2015, 35.7, vs in Computable own resources exceeded by 82 million euros the internal resources required. The solvency ratio of ACF stood at the end of 2015 at 24%, compared to 23.3% in 2014, with an excess of 32.8 million in internal resources over that required. Considering the undistributed profits, according to the proposal of the directors, the level of creditworthiness of the consolidated group would increase to 63.1% after the approval of the accounts by the General Meeting. Finally, it is noteworthy that the divestments have enabled Ahorro Corporación to deal with all the costs arising from a restructuring and resizing plan, and further achieve a positive result of million euros. Thus, the main changes in the consolidated profit and loss account for the year 2015 regarding the consolidated profit and loss account for the year 2014 are as follows: Net interest income, although still negative (-1.1 MM ), shows an improvement in comparison with the year 2014 (-1.8 MM ). This change is linked to the cancellation of external financing held by the Group, which was possible due to the cash obtained from the sale of the building on the Paseo de la Castellana, 89. Net fees fell in 2015 by 29% (from 31.1 million to 22.2 million) due to the decline in activity and loss of net fees provided in 2014 by some of the business lines that were sold in this fiscal year. Significant increase in Trading results, going from 0.6 million in 2014 to 4.6 million euros in 2015, driven by the recovery of the adjustment value by CVA in the derivatives of ACF (3.3 million euros). All this has resulted in the consolidated Gross Margin going from 32.6 million in 2014 to 27.2 million euros in 2015 (16.5% less). Personnel expenses increased by 5.15 million euros, while compensation expenses amounted to 9.17 million euros. So, excluding this exceptional expense, there has been a saving of 4 101

103 million euros, despite the fact that not all improvements resulting from the adjustment were seen, as they materialised in the second half of the year. With regard to overhead, they increased slightly due to the addition of rental costs of offices, located on the Paseo de la Castellana, 89, following the sale of the property, and due to certain expenses related to the restructuring procedure. However, the expenditure figures are expected to improve in the coming year, once we see the improvements resulting from the restructuring. 3. STRATEGIC BASES FOR THE PERIOD a. Group resizing plan The Board of Directors, with the support of the executive team, in mid 2014 launched an action plan aimed at undertaking a resizing of the Group to enable it to achieve a sustainable profit in the best interest of its shareholders, employees, customers and suppliers. This plan consisted of different phases, which should follow one another in time: divestment; strategic definition; adjustment plan. Below is a brief description of each of these phases and their impact on the year i. Divestments 2015 represented a transitional period for the company, characterised until October by a disinvestment and adjustment process. First we identified the businesses and Group companies that were deemed as non-strategic in the new stage, but which could however continue their activity outside the Group. This led to the sale process thereof. As part of this process, all asset management businesses were sold (the management of securitization funds, management of UCITS and management of venture capital companies). In addition, the divestment of real estate assets was undertaken in order to provide sufficient liquidity levels and stable solvency to ensure the continuity of strategic activities. The sale of real estate assets brought, for the year 2015, net income (after advisors and expenses) of 56.2 million euros. The divestment of asset management companies and businesses brought a net profit (after advisors and expenses) of 2.2 million euros. Finally, we are working on the divestment of the trading derivatives portfolio. The first part of assignments or terminations of derivative transactions took place during the last quarter of 2015, and the transfer of most of the transactions that make up the portfolio is expected to take place in the first quarter of This transaction made it possible in 2015 for the number of derivatives in the trading portfolio in the balance to be reduced by 125 million euros, and that of other loans, within loans to financial intermediaries, by an amount of approximately 117 million for the lower contribution of collateral as security. Once completed, it will have a very significant effect on the balance of ACF and on the consolidated balance sheet, which will decrease substantially. In addition, the transfer of these transactions will have a positive effect on liquidity due to the effect of the release of other guarantees. This portfolio also generated a positive result for fiscal year 2015 due to positive valuation adjustment which was calculated according to the same parameters used in previous years and which are explained in note 6.1 of the Report. 102

104 In parallel, we have identified the Core businesses of the company, and we have produced an income statement for those activities separately from those undergoing restructuring and divestiture. Thus, from the second half of 2015, the Group has been able to devote its efforts to relaunching its main business lines. The following paragraph b shows a more detailed description of the Core activities and their development in fiscal year ii. Corporate structure The corporate structure of the Group was simplified in Additionally, in 2016 the structure shuold be even further simplified. This chart reflects the changes performed: The companies marked in red have gone into liquidation, except for Ahorro Corporación Inmuebles, S.A., which will be acquired by Ahorro Corporación, S.A. The companies marked in blue will make up Grupo Ahorro Corporación at the end of 2016 (1) On January 15, 2016, Ahorro Corporación Financiera, S.V., S.A. became 100% the property of Grupo Ahorro Corporación (AC % and ACI %) (2) Following the liquidation of AC Participación en Infraestructuras, S.L., Ahorro Corporación has come a participant in the Venture Capital Fund Ahorro Corporación Infraestructuras, F.C.R. with a percentage of 2.05% of the equity of the fund. iii. Steering system The Board of Directors of Ahorro Corporación, S.A., the parent company of the Group, is responsible for defining a corporate steering system to ensure effective and prudent management for the Group, including an appropriate segregation of duties in the organisation and the prevention of conflicts of interest. The Board of Directors of the Group is the head of the strategic definition and coordination of the Group companies, along with other Committees with information, advice and proposal functions to the Board of Directors. In particular, it will be responsible for providing the Group with the necessary means for the development of its business in compliance with applicable regulations and for establishing the general strategies of the Group, to which the CEO shall subordinate his/her performance at all times, or, where 103